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The owner of a California-based mortgage education course provider has agreed to cooperate with state agencies investigating loan originators who allegedly avoided taking required classes to maintain their mortgage licenses.

Danny Yen, owner of Real Estate Educational Services, has settled with three agencies investigating his company’s role in a fraudulent scheme involving education classes for mortgage loan originators. The settlement is part of an ongoing investigation undertaken by financial regulators from 42 states looking into the actions of hundreds of mortgage loan originators across the United States.

The three agencies – 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 – handled the consent order involving Yen’s company. Yen and his family agreed to administrative actions for providing false certificates and taking courses on behalf of mortgage loan originators through other education providers, according to a Feb. 10 statement from the Conference of State Bank Supervisors, an association representing state banking agencies.

The schemes violated the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), according to the CSBS. Created in 2008 to reduce fraud and protect consumers, the SAFE Act set minimum standards for state licensing and registering of mortgage loan originators, including requirements for at least 20 hours of pre-licensing education and eight hours of continuing education each year.

Yen, who was authorized to offer one eight-hour SAFE Act course, allegedly conducted two education fraud schemes from 2017 to 2020. In one scheme, Yen completed online education on behalf of mortgage loan originators. The other scheme involved Yen granting course credit to loan originators who did not attend the course.

The schemes were uncovered in December 2020 through a tool the CSBS uses to monitor online courses. The tool found that mortgage loan originators across the nation had not taken the courses they claimed to have completed.

The loan originators were all tied to Real Estate Educational Services, which was based in based in Carlsbad, California.

Agencies from 42 states, including the Massachusetts Division of Banks, reached settlements in January with 441 of the mortgage loan originators involved in the scheme.

The Yen family agreed on Feb. 2 to fully cooperate and provide testimony against implicated mortgage loan originators, according to the CSBS. The Yen family also agreed to a lifetime restriction from direct and indirect involvement in businesses that provide mortgage lending education.

If they do not fully cooperate with the investigation, the Yen family will pay a non-compliance penalty of $15 million. The settlement also calls for a $75,000 administrative penalty.

“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,” DFPI Commissioner Clothilde V. Hewlett said in the CSBS statement. “We will continue collaborating with peer agencies to ensure that consumers are protected and that safeguards in the mortgage industry are maintained.”

According to information the CSBS provided in January, an investigation taskforce found 608 loan originators involved with REES. Consent orders were offered to 452 loan originators, and 441 agreed to settle.

The CSBS said in January that loan originators who did not sign a consent order would be referred to state financial regulators for further disciplinary action.