DFI Examination Unit initiates a Supervisory Watch Examination for its Consumer Loan and Mortgage Broker licensees.
Historically examinations of mortgage companies were performed every three to five years depending on ratings and resources. When we returned after a previous examination, there were a number of instances where we found that licensees had failed to remedy problems or violations identified in the Report of Examination (Report). DFI has decided to verify that companies are taking the proper corrective action, so licensees can continue to provide services to consumers without harm or misrepresentation.
The Supervisory Watch Examination (SWE) is an separate examination that is designed to verify if your company has taken the corrective action stated in your response to the Report. It is typically completed within 6 months of DFI receiving your response.
Not all licensees will be subjected to an SWE. Since DFI’s core mission is consumer protection, the SWE will be focused on violations that pose a heightened risk to consumers. The level of consumer risk will be determined by analyzing the number of violations, the severity of the violations, the frequency at which violations occur, the number of consumer complaints, and the response to the Report.
The SWE may be on-site or an off-site billable examination for Consumer Loan Act Licensees and an non-billable examination for Mortgage Broker Practices Act licensees. Any subsequent SWE may be on-site billable.
Examiners will focus on the corrective action taken. During the SWE review period the examiner will perform limited scope reviews to verify deficiencies in the Report have been corrected.
For example, if the licensee was cited in the Report for advertising violations, then the examiner would review any recently created advertising material or websites to ensure it did not contain repeated violations.
It is important to realize that the purpose of the SWE is solely to ensure that previously cited violations have been corrected. If the violations are reoccurring, another SWE will be performed. The SWE process may occur every 60 to 90 days and require response from the principals of the company. Failure to correct violations may result in a referral to enforcement.