Bill Text: IA HF2392 | 2023-2024 | 90th General Assembly | Enrolled

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Bill Title: A bill for an act relating to mortgage administration and mortgage servicers. (Formerly HSB 609.) Effective date: 07/01/2024.

Spectrum: Committee Bill

Status: (Passed) 2024-04-10 - Signed by Governor. H.J. 773. [HF2392 Detail]

Download: Iowa-2023-HF2392-Enrolled.html

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House File 2392 - Enrolled
House File 2392
AN ACT
RELATING TO MORTGAGE ADMINISTRATION AND MORTGAGE SERVICERS.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
Section 1. Section 535B.1, Code 2024, is amended by adding
the following new subsections:
NEW SUBSECTION . 1A. “Branch office” means any location,
other than a licensee’s principal place of business or a remote
location, where the licensee, the licensee’s employees, or the
licensee’s independent contractors maintain a physical presence
to engage in business as a mortgage banker or a mortgage
broker.
NEW SUBSECTION . 8A. “Principal place of business” means
a licensee’s primary business office as designated on the
licensee’s application for licensure.
NEW SUBSECTION . 11A. “Remote location” means a physical
location in the United States, other than a licensee’s
principal place of business or a branch office, where a
licensee’s employee or an independent contractor of the
licensee is authorized by the licensee to engage in business as
a mortgage banker or mortgage broker.
Sec. 2. Section 535B.4, subsection 2, paragraph a, Code
2024, is amended to read as follows:
a. License applicants shall submit to the administrator
an application on forms provided by the administrator. The
forms shall include, at a minimum, all addresses the address of
the principal place of business and of all branch offices at

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which business is to be conducted, the names and titles of each
director and principal officers officer of the business, and a
description of the activities of the applicant in such detail
as the administrator may require.
Sec. 3. Section 535B.4, subsections 9 and 10, Code 2024, are
amended to read as follows:
9. A licensee may shall not establish a branch locations
office outside of the United States.
10. In addition to the application and renewal fees provided
for in subsections 4 and 7 , the administrator may assess
application and renewal fees for each branch location office of
the licensee, sponsor fees, and change of sponsor fees.
Sec. 4. Section 535B.11, subsection 3, paragraph a, Code
2024, is amended by striking the paragraph and inserting in
lieu thereof the following:
a. Perform an annual escrow analysis for each escrow
account. A clear and legible copy of the annual escrow
analysis shall be delivered to the mortgagor within thirty
calendar days of the end of the escrow account computation
year, as defined in 12 C.F.R. §1024.17, to which disclosure
relates, and shall include the information required for annual
escrow account statements under 12 C.F.R. §1024.17.
Sec. 5. Section 535B.11, subsection 4, Code 2024, is amended
to read as follows:
4. Answer As required by 12 C.F.R. §1026.36, answer in
writing , within ten business days of receipt, any written
request for payoff information received from a mortgagor or the
mortgagor’s designated representative.
Sec. 6. Section 535B.16, Code 2024, is amended to read as
follows:
535B.16 Notice to administrator.
A licensee or registrant maintaining an a branch office in
the state shall notify the administrator in writing at least
thirty days before closing or otherwise ceasing operations at
any branch office in the state.
Sec. 7. NEW SECTION . 535B.21 Remote work.
A licensee may authorize work at a remote location provided
all of the following requirements are met:
1. In-person customer interaction does not occur at the

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residence of an employee or an independent contractor.
2. The licensee’s physical records are not maintained at a
remote location.
3. The licensee establishes, supervises, and enforces
written policies and procedures to ensure that all employees
and independent contractors working from a remote location
comply with all applicable state and federal laws and rules.
4. The licensee maintains the computer system used to
enable employees and independent contractors to work from a
remote location, and all customer information is maintained in
accordance with the licensee’s written information technology
security plan and all applicable state and federal laws and
rules.
5. Employees and independent contractors who work from
a remote location only access the licensee’s secure systems
directly from an out-of-office device using a virtual private
network or comparable system that requires a password or
other form of authentication to access, and ensures a secure
connection.
6. The licensee has the ability to remotely lock or erase
the licensee-related contents of any out-of-office device,
or otherwise remotely limit access to the licensee’s secure
systems.
7. The licensee ensures the installation and maintenance of
all appropriate security updates, patches, or other alterations
to the security of all devices used at remote locations to
access the licensee’s computer system.
8. The licensee ensures that all customer interactions
and communications regarding customers comply with federal
and state information security requirements, including but
not limited to the federal Gramm-Leach-Bliley Act of 1999,
15 U.S.C. §6801 et seq., and the federal standards for
safeguarding customer information in 16 C.F.R. pt. 314.
9. The licensee annually certifies that all employees
and independent contractors working from a remote location
comply with this section. The licensee shall make written
documentation of the certification available to the
administrator upon request.
10. The record of a mortgage loan originator working from a

House File 2392, p. 4
remote location that is contained in the nationwide mortgage
licensing system and registry designates a licensed location as
the mortgage loan originator’s official work location.
Sec. 8. NEW SECTION . 535B.22 Definitions.
As used in this subchapter unless the context otherwise
provides:
1. “Administrator” means the superintendent of the division
of banking of the department of insurance and financial
services.
2. “Allowable assets for liquidity” means any of the
following assets that may be used to satisfy the liquidity
requirements under section 535B.24:
a. Unrestricted cash and cash equivalents.
b. Unencumbered investment grade assets held for sale or
trade, including agency mortgage-backed securities, obligations
of government-sponsored enterprises, and United States treasury
obligations.
3. “Board of directors” means the formal body established
by a covered institution that is responsible for corporate
governance and compliance with sections 535B.24 and 535B.25.
4. “Corporate governance” means the structure of a covered
institution and how the covered institution is managed,
including but not limited to the corporate rules, policies,
processes, and practices used to oversee and manage the covered
institution.
5. “Covered institution” means a mortgage servicer that
services, or subservices for others, two thousand or more
residential mortgage loans, excluding whole loans owned and
loans being interim serviced prior to sale, as of the most
recent calendar year end as reported on the nationwide mortgage
licensing system mortgage call report.
6. “External audit” means a formal report prepared by an
independent certified public accountant expressing an opinion
on whether a company’s financial statements are presented
fairly, in all material respects, in accordance with the
applicable financial reporting framework, and includes an
evaluation of the company’s internal control structure.
7. “Government-sponsored enterprise” means the federal
national mortgage association or the federal home loan mortgage

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corporation.
8. “Interim serviced prior to sale” means the activity of
collecting a limited number of contractual mortgage payments
immediately after origination on loans held for sale, but no
longer than a period of ninety days prior to the loans being
sold into the secondary market.
9. “Internal audit” means independent and objective
assurance and consulting performed internally by a company
to evaluate and improve the effectiveness of the company’s
operations, risk management, internal controls, and governance
processes.
10. “Mortgage-backed security” means a financial instrument,
including but not limited to a debt security, collateralized by
residential mortgages.
11. “Mortgage call report” means the quarterly or annual
report of residential real estate loan origination, servicing,
and financial information filed by companies licensed in the
nationwide mortgage licensing system and registry.
12. “Mortgage servicer” or “servicer” means a person that
performs, under the terms of a servicing contract, the routine
administration of residential mortgage loans on behalf of the
owner or owners of the related mortgages.
13. “Mortgage servicing rights” means the contractual right
to service a residential mortgage loan on behalf of the owner
of the associated mortgage in exchange for the compensation
specified in the applicable servicing contract.
14. “Mortgage servicing rights investor” means a person
that invests in and owns mortgage servicing rights and relies
on subservicers to administer mortgage loans on behalf of the
person.
15. “Nationwide mortgage licensing system and registry” means
the same as defined in section 535D.3.
16. “Operating liquidity” means the financial resources
necessary for a person to perform the person’s normal business
operations, including but not limited to payment of rent,
salaries, interest expenses, and other typical expenses
associated with operating the business.
17. “Person” means a natural person, an association,
joint venture or joint stock company, partnership, limited

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partnership, business corporation, nonprofit corporation, or
any other group of individuals however organized.
18. “Reverse annuity mortgage loan” means the same as
defined in section 528.2.
19. “Risk management assessment” means a functional
evaluation performed under a risk management program, and the
report provided to the covered institution’s board of directors
under the relevant governance protocol.
20. “Risk management program” means written policies and
procedures commensurate with a covered institution’s size and
complexity designed to identify, measure, monitor, and mitigate
risk.
21. “Servicing liquidity” or “liquidity” means the financial
resources necessary to manage the liquidity risk arising
from servicing functions required in acquiring and financing
mortgage servicing rights; hedging costs, including margin
calls, associated with the mortgage servicing rights asset
and financing facilities; and advances or costs of advance
financing for principal, interest, taxes, insurance, and any
other servicing related advances.
22. “Subservicer” means a person that performs, under the
terms of a subservicing contract, routine administration of
residential mortgage loans as the agent of a servicer or of a
mortgage servicing rights investor.
23. “Tangible net worth” means total equity less the
receivables due from related entities, and less goodwill and
other intangibles, and less pledged assets.
24. “Whole loan” means a loan where a mortgage and the
underlying credit risk is owned and held on a balance sheet of
the person possessing all ownership rights of the mortgage.
Sec. 9. NEW SECTION . 535B.23 Applicability.
1. This subchapter shall apply to covered institutions.
For entities within a holding company or an affiliated group
of companies, this subchapter shall apply at the covered
institution level.
2. This subchapter shall not apply to persons exempt from
licensing under section 535B.2.
Sec. 10. NEW SECTION . 535B.24 Financial condition.
1. This section shall not apply to servicers that solely

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own or conduct servicing on reverse annuity mortgage loans, or
to the reverse annuity mortgage loan portfolio administered by
a covered institution.
2. A covered institution shall maintain capital and
liquidity in compliance with this section, and all financial
data shall be determined in accordance with generally accepted
accounting principles.
3. A covered institution may satisfy subsection 2 by
complying with the capital, net worth ratio, and liquidity
standards of the federal housing finance agency’s eligibility
requirements for enterprise single-family sellers or
servicers, regardless of whether the servicer is approved for
government-sponsored enterprise servicing.
4. A covered institution shall maintain the written
policies and procedures necessary to implement the capital,
operating liquidity, and servicing liquidity requirements under
this section. The policies and procedures must include a
sustainable written methodology to comply with subsection 3,
and shall be made available to the administrator upon request.
5. a. A covered institution shall maintain sufficient
allowable assets for operating liquidity, in addition to the
amounts required for servicing liquidity, to sustain normal
business operations.
b. The covered institution shall develop, establish, and
implement written plans, policies, and procedures, using
sustainable documented methodologies, to maintain operating
liquidity. The policies and procedures shall be made available
to the administrator upon request.
6. A covered institution shall have a sound written cash
management plan and a sound written business operating plan
commensurate with the complexity of the covered institution
that ensures normal business operations.
Sec. 11. NEW SECTION . 535B.25 Corporate governance.
1. A covered institution shall establish and maintain a
board of directors that is responsible for oversight of the
covered institution. If a government-sponsored enterprise
or government national mortgage association has not approved
a covered institution to service loans, or has approved an
alternative to a board of directors, the covered institution

House File 2392, p. 8
may establish a similar oversight committee for purposes of
exercising oversight and fulfilling the responsibilities under
subsection 2.
2. The board of directors, or a similar oversight committee
approved under subsection 1, shall do all of the following:
a. Establish a written corporate governance framework that
includes appropriate internal controls to monitor and assess
compliance with the corporate governance framework.
b. Make a copy of the corporate governance framework
available to the administrator upon request.
c. Monitor and ensure that the covered institution
complies with the corporate governance framework and with this
subchapter.
d. Perform accurate and timely regulatory reporting,
including filing the covered institution’s mortgage call
report.
e. Establish internal audit requirements that are
appropriate for the size, complexity, and risk profile of the
covered institution, and ensure appropriate independence to
provide an unbiased evaluation of the covered institution’s
internal control structure, risk management, and corporate
governance. The established internal audit requirements and
the results of internal audits shall be made available to the
administrator upon request.
f. Ensure the covered institution establishes and maintains
a risk management program that identifies, measures, monitors,
and controls risk commensurate with the covered institution’s
size and complexity. The risk management program must
include appropriate processes and models to measure, monitor,
and mitigate financial risks and changes to the covered
institution’s risk profile and assets being serviced. The risk
management program shall address all of the following:
(1) The potential that a borrower or counterparty fails to
perform on an obligation.
(2) The potential that the covered institution is unable to
meet the covered institution’s obligations as the obligations
come due as a result of an inability to liquidate assets or to
obtain adequate funding.
(3) The potential that the covered institution cannot

House File 2392, p. 9
easily unwind or offset specific exposures.
(4) The risk resulting from inadequate or failed internal
processes, people, or systems; or from external events.
(5) The risk to the covered institution’s condition
resulting from adverse movements in market rates or prices.
(6) The risk of regulatory sanctions, fines, penalties,
or losses resulting from the covered institution’s failure to
comply with applicable laws and rules or other supervisory
requirements that apply to the covered institution.
(7) The potential that legal proceedings against the
covered institution may result in unenforceable contracts,
lawsuits, legal sanctions, or adverse judgements that
may disrupt or otherwise negatively affect the covered
institution’s operations or condition.
(8) The risk to earnings and capital arising from negative
publicity regarding the covered institution’s business
practices.
3. A covered institution shall undergo an annual external
audit and shall make the external audit available to the
administrator upon request. An external audit shall include,
at a minimum, all of the following:
a. An evaluation of the company’s internal control
structure.
b. A review of the company’s annual financial statements,
including the balance sheet, income statement, and cash
flows, including notes and supplemental schedules prepared in
accordance with generally accepted accounting principles.
c. A computation of the company’s tangible net worth.
d. Validation of the company’s mortgage servicing rights
valuation and reserve methodology, if applicable.
e. Verification the company has adequate fidelity and errors
and omissions insurance.
f. Testing of the company’s controls related to risk
management activities, including compliance and stress testing,
if applicable.
4. A covered institution shall conduct an annual risk
management assessment that shall conclude with a formal report
to the board of directors, and shall make the risk management
assessment available to the administrator upon request. A

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risk management assessment shall include issue findings and
the response or action taken to address each issue. A covered
institution shall maintain ongoing documentation of risk
management activities and shall include the documentation in
the risk management assessment.
Sec. 12. CODE EDITOR DIRECTIVE. The Code editor shall
divide chapter 535B into subchapters and shall designate
sections 535B.1 through 535B.21, including sections amended
or enacted in this Act, as subchapter I entitled “Mortgage
Banking, Mortgage Brokers, and Closing Agents”, and sections
535B.22 through 535B.25, as enacted in this Act, as subchapter
II entitled “Prudential Standards”.
______________________________ ______________________________
PAT GRASSLEY AMY SINCLAIR
Speaker of the House President of the Senate
I hereby certify that this bill originated in the House and
is known as House File 2392, Ninetieth General Assembly.
______________________________
MEGHAN NELSON
Chief Clerk of the House
Approved _______________, 2024 ______________________________
KIM REYNOLDS
Governor