Mortgage education fraud “is probably not very common,” says the Conference of State Bank Supervisors (CSBS), an organization representing state financial regulators.
But that does not mean regulators are not “always on the lookout for it and have strong mechanisms to do so,” a spokesperson for the group told Scotsman Guide.
In a multi-state settlement announced Monday, Patrick Donlon, a mortgage loan originator (MLO) previously licensed with Trusted American Mortgage LLC, was sanctioned by 21 states for claiming to have attended required mortgage education classes. Regulators say he directed another individual to attend in his place.
Investigators determined that Donlon violated the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act, enacted by Congress in the wake of the 2008 financial crisis. The law requires MLOs to complete at least 20 hours of pre-licensing education (PE) and eight hours of continuing education (CE) annually for license renewal.
The CSBS spokesperson told Scotsman Guide that the classes for which Donlon falsely claimed credit were taken via an online platform. The spokesperson said that “there is no evidence” that the NMLS-approved education provider had any role in the deception.
No penalties have been enacted against the education provider or Trusted American Mortgage, a mortgage brokerage licensed in 20 states and headquartered in Colorado.
Every state has enacted its own version of the SAFE Act. False reporting of required education violates both state and federal mortgage licensing rules.
According to the settlement and consent order against Donlon, “in early 2025, CSBS received information alleging that at least twenty-two (PE) and three (CE) courses claimed by Respondent in 2024 and 2025 and for which Respondent received credit in NMLS were taken by someone other than Respondent.”
That information prompted an investigation by the Mortgage Testing and Education Board of the State Regulatory Registry (SRR), a subsidiary of CSBS. CSBS also owns and operates the Nationwide Multi-State Licensing System (NMLS), through which consumers can verify the licensing and registration of mortgage lenders and originators.
MLOs attest to their compliance with the NMLS Roles of Conduct when taking NMLS-approved education courses. The investigative committee’s findings resulted in the retraction of 73 hours of education credits from Donlon’s NMLS record.
The consent order notes that Donlon “disputes” the findings and enters into the agreement “for the purpose of resolving State Mortgage Regulators’ regulatory concerns without the time, expense and uncertainty of contesting the findings in separate administrative actions or other legal proceedings.”
Donlon must pay an administrative penalty of $31,000 and is permanently barred from obtaining a mortgage license — and therefore originating any mortgages — in all the states that participated in the settlement except Florida and Colorado.
Donlon was licensed in 19 of the 21 states that sanctioned him, and was pursuing licenses in Maryland and New Mexico, according to the consent order. He can apply for a new license in Florida and Colorado after a period of two years and completion of the settlement terms.
For five years, Donlon is required to take mortgage education classes “in a format that verifies the identify of the person taking the course.” If completing and claiming credit for any online courses, Donlon will have to take a course “that includes biometric authentication protocols.”
States that entered into the agreement include Arizona, Arkansas, California, Colorado, Florida, Idaho, Illinois, Iowa, Kansas, Maryland, Michigan, Minnesota, Montana, New Mexico, Oklahoma, Ohio, Oregon, South Carolina, South Dakota and Texas.
