Danny Yen, who masterminded a fraudulent continuing education scheme involving hundreds of loan officers, has agreed to settle with state financial regulators for $75,000.
In a settlement with the California Department of Financial Protection and Innovation (DFPI), Maryland’s Office of the Commissioner of Financial Regulation and the Oregon Division of Financial Regulation, Danny Yen, the owner of Carlsbad, California-based mortgage education course provider Real Estate Educational Services, also agreed to a lifetime ban on teaching any mortgage-related content.
Additionally, the Yen family will fully cooperate in any state investigations — including by giving depositions — of mortgage loan originators. Yen also agreed to provide signed declarations “reciting the facts relating to their interactions with MLOs, completion of PE and CE courses, and provision of banked credit hours,” the suit said.
According to the settlement, Yen’s family must pay a civil monetary penalty of $75,000, divided between state financial regulators in California, Maryland and Oregon. Previously, state regulators had said the fines would be as much as $3.4 million.
If the Yen family violates the terms of the settlement, the family would have to pay a $15 million non-compliance penalty that will be distributed equally among the participating states, the settlement said.
In mid-January, a 26-state investigation led by DFPI picked up on discrepancies while using a tool to investigate fulfillment of National Mortgage Licensing System requirements. (The NMLS requires that every LO spends an average of eight hours on an annual basis to recertify their national license.)
The investigation found that over 600 LOs, that all paid for education programs from REES, failed to fulfill the CE requirement to recertify.
Regulators accused Yen and his family members of taking classes for LOs in exchange for compensation or giving LOs class credit without requiring them to show up to class. Part of the penalty stems from REES offering online courses — like a three-hour one on fair housing and discrimination laws — but only being licensed to give in-person classes.
LOs in 42 states who settled with state regulators will have to pay an average of about $2,700 each — $1,000 for each state they are licensed in — for skipping the annual eight-hour course. They must also surrender their licenses for three months and take additional educational programs.
For now, only 441 LOs have entered into a settlement with state regulators out of the 608 LOs found to not have completed their requirements. However, state regulators are still pursuing actions against 167 LOs who have not settled.
“This settlement will allow California and other regulators to discipline the remaining loan originators, while the lifetime teaching restrictions send a strong message that we will not allow fraud,” said Clothilde Hewlett, commissioner at DFPI, in a statement.
The settlement also said that Yen is fighting a separate Jan. 14 administrative action from California, which seeks injunctive relief as well as money penalties for violations of alw stemming from the education fraud schemes. Yen filed his request for an administrative hearing to contest the action and the five-day trial began in the Los Angeles Office of Administrative Hearings this week.
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