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The July 2021 DFPI Bulletin focuses on California Financing Law (CFL) proposed regulation modifications, the deadline for escrow advisory committee openings, and cyberware and ransomware threats to financial institutions.

Editor’s note — The California Department of Financial Protection and Innovation (DFPI, formerly the Department of Business Oversight), supervises, licenses and regulates a variety of financial institutions, including some real estate mortgage loan originators (MLOs) holding a Nationwide Multistate (or Mortgage) Licensing System and Registry (NMLS) license. Alongside the California Department of Real Estate (DRE), the DFPI shares the responsibility for overseeing MLOs depending on their license use.

Licensees, read up on July 2021’s MLO news and events below.

California Financing Law proposed regulations modifications

The DFPI released their fifth public comments notice on July 7, 2021, regarding amendments and additions to proposed regulations under the CFL. These amendments and additions are related to the transition of licensees onto the NMLS and oversight of Property Assessed Clean Energy (PACE) program administrators.

July 22, 2021 is the last day to submit comments on the proposed modifications. The Fifth Notice of Modifications and the Fifth Proposed Modified Text are both on the DFPI website.

Comments may be submitted by email to regulations@dfpi.ca.gov or by post at:

Department of Financial Protection and Innovation

Attn: Sandra Sandoval

300 S. Spring Street, Suite 15513, Los Angeles, CA 90013

Escrow reports due

For escrow agents whose fiscal year ended on March 31, 2021, annual reports are due July 14, 2021. Have your certified public account (CPA) or independent public accountant email your report to ESCAnnualReportFiling@dfpi.ca.gov using a secured encrypted delivery system or a secured dropbox. If your CPA is unable to submit the annual report electronically, mail it to:

Sultanna Wan, Senior Financial Institutions Examiner, Escrow Law

Department of Financial Protection and Innovation

320 West Fourth Street, Suite 750

Los Angeles, CA 90013

For questions about the annual reports, call Sultanna Wan at (213) 576-7647.

The penalties for failure to file the annual report by the due date or to include required information are $100 per day for the first five days a report is late and $500 per day thereafter. Failure to file a report or to include any required information may also result in the suspension or revocation of an escrow agent’s license and/or prompt an immediate examination.

Cybersecurity and Ransomware Threats

A disruptive spike in ransomware attacks has prompted Deputy National Security Advisor for Cyber and Emerging Technology Anne Neuberger to issue an open letter to U.S. business leaders. The letter urges specific actions to protect against the threat of ransomware and warns corporate executives and business leaders to step up security measures to protect against them.

Neuberger’s open letter follows a May 12, 2021 White House Executive Order on improving the nation’s cybersecurity. The executive order cites cybersecurity as a national priority and sets standards and requirements for cybersecurity for the federal government.

Resources available to financial institutions include:

Financial institutions are not immune to cyber threats regardless of their cybersecurity track record. One recent study estimated a 520% increase in ransomware and phishing attempts in the banking sector between March and June of 2020. CISA recommends that victims of ransomware should report it immediately to CISA at www.us-cert.gov/report, to a local field office of the Federal Bureau of Investigation (FBI) or to a field office of the U.S. Secret Service.

Escrow Advisory Committee openings deadline

The three vacancies on the DFPI Escrow Advisory Committee remain open for application. The application deadline is July 21, 2021. The DFPI is still seeking representatives from a medium-size escrow company, an escrow company that has a business specialization, and an attorney who has escrow agent clients.

Qualifying business specialization examples include, but are not limited to, joint control companies, companies that specialize in business bulk sale transfers, and internet escrow companies. Managers or corporate officers of independent escrow companies are eligible to serve on the committee.

Financial Code 17214 established the committee to assist the Commissioner in carrying out their duties under Escrow Law. The Commissioner appoints the 11 committee members, who serve for two years terms without compensation and meet quarterly at the DFPI’s Los Angeles office or by telephone.

Qualified escrow agents and attorneys are encouraged to apply by email with a letter of qualifications and/or resumé to Paul Liang at Paul.Liang@dfpi.ca.gov or by mail at:

Department of Financial Protection and Innovation

320 West 4th Street Suite 750

Los Angeles, CA 90013

Questions may be submitted to Paul Liang’s email or by phone at (213) 576 – 7535.

Debt collection license rules updated

On June 23, 2021, the DFPI Commissioner modified the rules for the license application and procedures to obtain a debt collection license under the Debt Collection Licensing Act.

The modifications include additional requirements for language translations and other technical amendments. The 17-day public comment period regarding them ends on July 12, 2021. The Notice of Modifications and the Proposed Modified Text are both on the DFPI website.

Beginning September 1, 2021, the application is expected to be available on the NMLS website. More information for debt collectors can be found on the FAQ page.

Note that persons licensed under the California Financing Law, Residential Mortgage Lending Act (RMLA), or Real Estate Law are exempt from the DCLA’s licensing requirements.

That’s a wrap on July’s DFPI Bulletin. Find out more about the topics mentioned here by reading the full bulletin on the DFPI website.