Bill Text: VA SB75 | 2012 | Regular Session | Prefiled

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Mortgage loan originators; exempts from licensing employees of bona fide nonprofit organizations.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Passed) 2012-03-08 - Governor: Acts of Assembly Chapter text (CHAP0187) [SB75 Detail]

Download: Virginia-2012-SB75-Prefiled.html

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12101450D
SENATE BILL NO. 75 Offered January 11, 2012 Prefiled January 5, 2012 A BILL to amend and reenact §§ 6.2-1700, 6.2-1701, 6.2-1709, 6.2-1711, 6.2-1715, 6.2-1719, and 6.2-1720 of the Code of Virginia, relating to mortgage loan originators. ---------- Patron-- Watkins ---------- Referred to Committee on Commerce and Labor ----------

Be it enacted by the General Assembly of Virginia:

1.  That §§ 6.2-1700, 6.2-1701, 6.2-1709, 6.2-1711, 6.2-1715, 6.2-1719, and 6.2-1720 of the Code of Virginia is amended and reenacted as follows:

§6.2-1700. Definitions.

As used in this chapter:

"Act" means the federal Secure and Fair Enforcement for Mortgage Licensing Act, Title V (§1501 et seq.) of the Housing and Economic Recovery Act of 2008, P.L. 110-289.

"Administrative or clerical tasks" means the receipt, collection, and distribution of information common for the processing or underwriting of a residential mortgage loan in the mortgage industry and communication with the consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.

"Depository institution" has the same meaning as in §3 of the Federal Deposit Insurance Act (12 U.S.C. §1811 et seq.), and includes any credit union.

"Dwelling" means a residential structure or mobile home that contains one to four family housing units, or individual units of condominiums or cooperatives.

"Federal banking agencies" means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.

"Immediate family member" means a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.

"Individual loan servicer" means any person who, on behalf of the note holder, collects or receives payments, including payments of principal, interest, escrow amounts, and other amounts due, on obligations due and owing to the note holder pursuant to a residential mortgage loan, or who, when the borrower is in default or in foreseeable likelihood of default, works on behalf of the note holder with the borrower to modify or refinance, either temporarily or permanently, the obligations in order to avoid foreclosure or otherwise to finalize collection through the foreclosure process.

"Licensee" means an individual licensed under this chapter.

"Loan processor or underwriter" means an individual who, with respect to the origination of a residential mortgage loan, performs clerical or support duties at the direction of and subject to the supervision and instruction of a licensee or a person exempt from licensing under this chapter. For the purposes of this definition, clerical or support duties may include (i) the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan and (ii) communication with a consumer to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.

"Mortgage loan originator" means an individual who takes an application for or offers or negotiates the terms of a residential mortgage loan, as defined in §1503(8) of the Act, in which the dwelling is or will be located in the Commonwealth. "Mortgage loan originator" does not include (i) any individual who only performs administrative or clerical tasks on behalf of a person licensed or exempt pursuant to Chapter 16 (§6.2-1600 et seq.) or on behalf of any individual licensed pursuant to this chapter; (ii) any individual who only performs real estate brokerage activities and is licensed or registered in accordance with applicable law, unless the individual is compensated by the lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; (iii) any individual solely involved in extensions of credit relating to timeshare plans, as that term is defined in 11 U.S.C. §101(53D); (iv) a registered mortgage loan originator; (v) any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual; (vi) any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that serves as the individual's residence; (vii) a licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; (viii) any individual acting as an individual loan servicer; or (ix) any individual who is employed by a housing counseling organization certified or approved by the U.S. Department of Housing and Urban Development, assists borrowers who are in default or in foreseeable likelihood of default on a residential mortgage loan by offering or negotiating the terms of such loan, and does not otherwise engage in any activities for which a license is required by this chapter.

"Nationwide Mortgage Licensing System and Registry" or "Registry" means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of mortgage loan originators.

"Nontraditional mortgage product" means any mortgage product other than a 30-year fixed rate mortgage.

"Real estate brokerage activities" means any activity governed by Chapter 21 (§54.1-2100 et seq.) of Title 54.1 that involves offering or providing real estate brokerage services to the public, including (i) acting as a real estate broker, real estate agent, or real estate salesperson for a buyer, seller, lessor, or lessee of real property; (ii) bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property; (iii) negotiating any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to any such transaction; (iv) engaging in any activity for which a person is required to be licensed or registered as a real estate broker, real estate agent, or real estate salesperson; and (v) offering to engage in any activity, or act in any capacity, described in clauses (i) through (iv).

"Registered mortgage loan originator" means any individual who (i) takes an application for or offers or negotiates the terms of a residential mortgage loan, as defined in §1503(8) of the Act, in which the dwelling is or will be located in the Commonwealth and is an employee of (a) a depository institution, (b) a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency, or (c) an institution regulated by the Farm Credit Administration, and (ii) is registered with, and maintains a unique identifier through, the Registry.

"Residential mortgage loan" means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling.

"Unique identifier" means a number or other identifier assigned by protocols established by the Registry that permanently identifies a mortgage loan originator.

§6.2-1701. License requirement.

On or after July 1, 2010, noA. No individual shall act as engage in the business of a mortgage loan originator, or hold himself out to the general public as a mortgage loan originator, unless such individual has first obtained and maintains annually a license under this chapter. An0

B. The following shall be exempt from licensing and other provisions of this chapter:

1. Any individual engaged solely as a loan processor or underwriter, who does not represent to the public, through advertising or other means of communicating or providing information including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator, shall not be required to obtain a mortgage loan originator license. An individual acting as an independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless such individual obtains a mortgage loan originator license.;

2. Any individual who only performs administrative or clerical tasks on behalf of a person licensed or exempt pursuant to Chapter 16 (§6.2-1600 et seq.) or on behalf of any individual licensed pursuant to this chapter;

3. Any individual who only performs real estate brokerage activities and is licensed or registered in accordance with applicable law, unless the individual is compensated by the lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator;

4. Any individual solely involved in extensions of credit relating to timeshare plans, as that term is defined in 11 U.S.C. §101(53D);

5. A registered mortgage loan originator;

6. Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual;

7. Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that serves as the individual's residence;

8. A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator;

9. Any individual acting as an individual loan servicer;

10. Any employee of federal, state, or local government, or a housing finance agency, who acts as a mortgage loan originator only pursuant to his official duties of employment. For the purposes of this subdivision, "local government" means any county, city, or town, or other local or regional political subdivision; and

11. Any employee of a bona fide nonprofit organization, as determined by the Commission in accordance with this subdivision, who acts as a mortgage loan originator only (i) pursuant to his official duties of employment and (ii) with respect to residential mortgage loans with terms that are favorable to a borrower.

a. The Commission shall prescribe by regulation (i) the procedures and criteria that it will use to determine whether an organization is a bona fide nonprofit organization and (ii) the information and fees that must be submitted by an organization to the Commission in connection with a request for a determination under this subsection. In establishing the criteria for a bona fide nonprofit organization, the Commission shall give consideration to the criteria that have been adopted by the Consumer Financial Protection Bureau or any other federal agency with rulemaking authority under the Act.

b. The Commission shall, as often as it deems necessary, investigate and periodically examine the business activities, books, and records of any bona fide nonprofit organization insofar as they pertain to the criteria that the Commission has established. In the course of such investigations and examinations, the organization being investigated or examined shall, upon demand of the person making such investigation or examination, affo

rd full access to all books, records, and information that the person making such investigation or examination deems necessary.

c. The Commission may, after providing notice and an opportunity for a hearing, revoke its determination that an organization is a bona fide nonprofit organization if it finds that the organization no longer meets the criteria that it has established.

§6.2-1709. Testing of mortgage loan originator applicants.

A. In order to meet the written test requirement referred to in subdivision 4 of §6.2-1707, an individual shall pass, in accordance with reasonable standards established under this subsection section, a qualified written test that has been developed by the Registry and administered by a test provider approved by the Registry.

B. A written test shall not be a qualified written test for purposes of subsection A unless the test adequately measures the applicant's knowledge and comprehension in appropriate subject areas, including: (i) ethics; (ii) federal law and regulation pertaining to mortgage loan origination; (iii) state law pertaining to mortgage loan origination; and (iv) federal and state law and regulation pertaining to fraud, consumer protection, the nontraditional mortgage product marketplace, and fair lending issues.

C. Nothing in this section shall prohibit a test provider approved by the Registry from providing a test at a location of: (i) the employer of the applicant; (ii) any subsidiary or affiliate of the employer; or (iii) any entity with which the applicant maintains an exclusive arrangement to act as a mortgage loan originator.

D. An individual shall not be considered to have passed a qualified written test unless he has correctly answered at least 75 percent of the test questions. An individual may retake take a test three consecutive times with each consecutive taking occurring at least 30 days after the preceding test. After failing three consecutive tests, an individual shall wait at least six months before retaking the test. A licensed mortgage loan originator who fails to maintain a valid license for a period of five years or longer, exclusive of any period during which such individual is a registered mortgage loan originator, shall retake the test and correctly answer at least 75 percent of the test questions.

E. An applicant who has successfully completed pre-licensing education and testing that is mandated by the Act and approved by the Registry for any state shall be deemed to have completed Virginia's pre-licensing education and testing requirements, other than any limited or separate state testing requirements relating to Virginia law and regulation as described in subsection B.

§6.2-1711. Licenses; places of business; changes.

A. Each license shall state fully the name and address of record of the licensee. Each licensee shall be required to display proof of licensing upon request, and to prominently display at any location where he acts as a mortgage loan originator the telephone numbers and Internet addresses for the Registry and the Commission where consumers and other interested parties may confirm the status of his license. Licenses shall not be transferable or assignable, by operation of law or otherwise. No Except as otherwise provided by the Commission, no licensee shall use any name, in acting as a mortgage loan originator, other than the name set forth on the license issued by the Commission.

B. Every licensee shall within 10 days notify the Commissioner, in writing, of any change of residential or business address and provide such other information with respect to any such change as the Commissioner may reasonably require.

C. Every license shall remain in force until it expires or has been surrendered, revoked, or suspended. The expiration, surrender, revocation, or suspension of a license shall not affect any preexisting legal right or obligation of the licensee. Licenses

1. Except as otherwise provided by the Commission, licenses shall expire at the end of each calendar year unless renewed by prior payment of the annual license renewal fee. A licensee may request renewal by (i) filing a license renewal application through the Registry, (ii) paying the annual license renewal fee prescribed in §6.2-1714, (iii) obtaining the continuing education prescribed in §6.2-1710, and (iv) furnishing such other information as may be required by the Commission.

2. The Commission shall renew an individual's license if the Commission finds that the individual has complied with the requirements of this chapter and continues to meet the conditions for initial licensure. If the Commission fails to make the findings required by this subdivision, the Commission shall not renew the individual's license. In determining whether to renew a license, the Commission shall consider whether the licensee has violated state or federal law.

3. Notwithstanding any other provision of this chapter, the Commission may by regulation permit a former licensee to seek license reinstatement after the license expiration date by requesting renewal in accordance with subdivision 1 and paying a reinstatement fee as prescribed by the Commission.

§6.2-1715. Advertising; use of a unique identifier.

A. No individual required to be licensed under this chapter shall use or cause to be published any advertisement that:

1. Contains any false, misleading, or deceptive statement or representation; or

2. Identifies Except as otherwise provided by the Commission, identifies a licensee by any name other than the name set forth on the license issued by the Commission.

B. No licensee shall use the unique identifier obtained from the Registry for any purpose other than the purposes of the Act and this chapter.

§6.2-1719. Civil penalties.

The Commission may impose a civil penalty not exceeding $2,500 upon any individual required to be licensed under this chapter who it determines, in proceedings commenced in accordance with the Commission's Rules, has violated any of the provisions of this chapter or any other law or regulation applicable to the licensee's activities. For the purposes of this section, each separate violation shall be subject to the civil penalty herein prescribed, and each day that an unlicensed individual acts as or holds himself out to the general public as, engages in the business of a mortgage loan originator shall constitute a separate violation.

§6.2-1720. Regulations; agreements between Commission and Registry.

A. The Commission shall adopt such regulations as it deems appropriate to effect the purposes of this chapter. Before adopting any such regulations, the Commission shall give reasonable notice of their content and shall afford interested parties an opportunity to present evidence and be heard, in accordance with the Commission's Rules.

B. The Commission shall, to the extent practicable, include in any written memorandum of understanding or other written agreement between the Commission and the Registry provisions substantially similar to the following:

1. Any organization serving as the administrator of the Registry or any officer or employee of any such entity shall implement and maintain an information security program that meets or exceeds federal and state standards pursuant to §18.2-186.6 and that complies with the regulation guidelines promulgated under the Gramm-Leach-Bliley Act (15 U.S.C. §6801 et seq.) for safeguarding personal information of mortgage loan originators and applicants;

2. The Registry shall not under any circumstances disclose to any third party any information pertaining to any pending or incompletely adjudicated regulatory matters;

3. The Registry shall develop, as requested by the Commission, a mortgage loan originator licensing test that may be limited to specific products and services;

4. The Registry shall provide to the Commission summary statistical information by March 31 of each year relating to loan originator examinations taken by applicants for a mortgage loan originator license in the Commonwealth during the preceding calendar year;

5C. Except as otherwise provided in §1512 of the Act, the requirements or this chapter, any requirement under any federal or state law regarding the privacy or confidentiality of any information or material provided to the Registry, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, shall continue to apply to such information or material after the information or material has been disclosed to the Registry. Such information and material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law; and.

61. Information or material that is subject to privilege or confidentiality under §6.2-101 this subsection shall not be subject to: (i) disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the Commonwealth; or (ii) subpoena or discovery, or admission into evidence, in any private civil action or administrative process, unless with respect to any privilege held by the Registry with respect to such information or material, the individual to whom such information or material pertains waives, in whole or in part, in the discretion of such individual, that privilege.

C2. Any provision of the laws of the Commonwealth relating to the disclosure of confidential supervisory information or any information or material described in §6.2-101 this subsection that is inconsistent with such provision this subsection shall be superseded by the requirements of this chapter subsection to the extent that such provision provides less confidentiality or a weaker privilege.

D3. This chapter subsection shall not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, mortgage loan originators that is included in the Registry for access by the public.

ED. The Commission shall:

1. Annually review the proposed budget, fees, and audited financial statements of the Registry;

2. Annually, to the extent practicable, report to the House and Senate Committees on Commerce and Labor on the operations of the Registry, including compliance with its established protocols for securing and safeguarding personal information in the Registry; and

3. To the extent practicable, prepare, publicly announce, and publish a report, by no later than May 1 July 1 of each year, that summarizes statistical test results and demographic information to be prepared by the Registry or its test administrator.; and

4. Report violations of this chapter, any enforcement actions thereunder, and other relevant information to the Registry on a regular basis.