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Residential Mortgage Lending Act

Residential Mortgage Lending Act

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Residential Mortgage Lending Act

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  1. Residential Mortgage Lending Act • LSA-R.S. 6:1081 through 6:1099 • Enacted effective July 9, 1999 • Revised April 14, 2000 Special Session • Revised effective June 22, 2001 • Provides for licensure and registration of mortgage originators, brokers, and lenders

  2. Residential Mortgage Lending Act • Subdivided into three parts • PART I. GENERAL PROVISIONS • Definitions • Prohibitions • PART II. LICENSURE, REGISTRATION, & CERTIFICATION • Licensure Requirements • Applications • Recordkeeping • Suspension and Revocation of Licenses and Registrations • PART III. RESIDENTIAL MORTGAGELOANS • Fees and Charges • Mortgage Loan Origination Agreements • Criminal Penalties

  3. Residential Mortgage Lending Act • Who must be licensed • Originators • Brokers • Lenders • Wholesale Lenders • which are not otherwise exempt

  4. Definitions • Originator • a natural person employed by a mortgage broker or lender who interviews the consumer in connection with a residential mortgage loan. This persons must sign the application (1003) • does not include clerical people

  5. Definitions • Mortgage Broker • any person who, directly or indirectly, for compensation or expectation of compensation, negotiates, places, or finds, or offers to negotiate, place or find a residential mortgage loan for another person • includes FHA loan correspondents and lenders who table fund loans

  6. Definitions • Mortgage Lender • any person who, directly or indirectly, originates or makes, or offers to originate or make, a residential mortgage loan for another person

  7. Definitions • Residential Mortgage Lending Activity • any activity, including electronic activity, engaged in for compensation or with the expectation of compensation in connection with a residential loan transaction including origination or funding, negotiation or placement, or offering to negotiate,place or find a residential mortgage loan for a person

  8. R.S. 6:1084 • No person, directly or indirectly, shall engage in a residential mortgage lending activity without complying with the RMLA or rules and regulations promulgated pursuant to thereof

  9. Exemptions • Credit Unions • Totally exempt from all provisions of the RMLA

  10. Exemptions • Banks, Savings Banks, S&Ls, and subsidiaries of theirs, their parent companies and their employees including originators and exclusive agents • Exempt from licensure and registration • Still subject to requirement of Part III

  11. Exemptions • Licensed Attorneys • When activity is incidental to practice • Exempt from licensure and registration • Still subject to Part III

  12. Exemptions • Any not for profit 501 c corporation making loans to promote home ownership or improvements for the disadvantaged • Exempt from licensure and registration • Still subject to Part III

  13. Other Exemptions • Mortgagees which are the former owner • Licensed Lenders • must meet 50% gross revenue test • Insurance company or agent who brokers exclusively to an insurer • Any person who invests or contracts for no more than 4 transactions in a calendar year • must file application and pay $100 fee

  14. Exempt Registrants • Company Registers/Employees Exempt • approved seller, servicer, seller/servicer, or issuer approved by FNMA, GNMA, or FHLMC including their HUD approved subsidiaries • out of state insurance companies

  15. Exempt Registrants • Companies Exempt/Originators Licensed • HUD Mortgagees excluding loan correspondents • private investors who utilize licensed or exempt individuals • Loan correspondents and originators must be licensed

  16. Exempt Registrants • May only engage in residential lending activity through natural persons who are licensed, registered, or exempt

  17. Financial Responsibility • Each applicant for licensure must provide evidence of financial responsibility • audited financial statement showing net worth of at least $50,000 (no more than 18 mos old) • pledged $50,000 deposit in federally insured institution • $50,000 securities SCM’s or US Govt pledged to commissioner • Surety Bond in amount of $50,000

  18. Financial Responsibility • Employees of Brokers and Lenders including Originators • May demonstrate financial responsibility by submitting evidence that employer satisfies requirements

  19. Application Fees • Mortgage Broker, Lender $400 • Renewal Fee $300 • Originators $100 • Renewal Fee $100

  20. Registration Fees • Exempt Registrations $400 • Renewal $300

  21. RENEWALS • Renewals are due by November 1st each year • Late after December 1 • Licenses and Registrations Expire January 1

  22. Late Fees and Reinstatement Penalties • Licensed Brokers and Lenders • After December 1 $ 200 • After December 31 up to $ 1,000 • must show good cause for reinstatement • $100 late fee for exempt brokers & lenders • Originators • After December 1 $ 50 • After December 31 up to $1,000 • must show good cause for reinstatement

  23. LSA-R.S. 6:1089 • No residential mortgage lender may conduct lending activities under any name other than stated on its license • Commissioner must be notified of changes in location and pay $100 fee • Must notify Commissioner of office closure

  24. LSA-R.S. 6:1089 B. • Whenever identity of broker or lender by whom an originator is employed is changed, Commissioner must be notified within 30 days • Employer and Employee must give notification • Failure to notify within 30 days results in a $100 late notification fee

  25. EXAMINATIONS FEES • Fee not to exceed $400 • Due within 30 days of assessment • Late fee of up to $50 per day not paid timely

  26. R.S. 6:1090 • No license may be sold or transferred • No person shall acquire control of licensee without obtaining prior written approval of OFI after submitting an application and $300 fee

  27. R.S. 6:1090 • A mortgage broker can only broker loans to a mortgage lender • Brokering to a Broker is prohibited

  28. R.S. 6:1090 • Licensees may only engage in residential mortgage lending through natural persons licensed as a mortgage broker, mortgage lender, or originator, or who are registered in accordance with the RMLA or who are exempt from Part II

  29. NET BRANCHING • Prohibited by LSA-R.S. 6:1090 G. • Except at provided by Rule • OFI in process of drafting rule & currently allowing : • net compensation of branch employees only • all contracts, leases, & accounts must be in name of licensed or exempt company • employer indemnification agreements not permissible

  30. RECORD RETENTION • Requirements set forth by Rule and Policy

  31. Suspension & Revocation of License • After an opportunity to be heard in Administrative hearing, Commissioner may revoke or suspend license of any Lender, Broker, or Originator who: • Violates any of the provisions of this Chapter or any Rule or Regulation promulgated,or any order, including a cease and desist order • Violates any provision of a voluntary consent agreement • Has knowingly provided or caused to be provided false or fraudulent information or financial statements or withheld information which would have resulted in denial of license • Refuses to permit examination of books and records or fails to furnish required information

  32. Suspension & Revocation • Fails to maintain records required after given written notice • Continues in office upon conviction of any felony involving moral turpitude • Violates any provision of a regulatory or prohibitory statute and has been found to have violated such by the governmental agency responsible for determining such • Misrepresents or conceals material facts or makes false promises to influence an applicant or mortgagor • Misrepresents or conceals material facts terms, conditions, etc. of a transaction to which he is a party, pertinent to an applicant or mortgagor • Failure to account for or deliver personal property which has come into their hands which is not their property or which they are not entitled to retain

  33. Suspension & Revocation • Fails to disburse without cause any funds in accordance with any agreements with a residential mortgage loan • Fails to pay any fee or assessment imposed by the Chapter or Rule • Violates written restriction or conditions of license • Fails, after notice without lawful excuse, to obey any order or subpoena issued by the Commissioner

  34. Fines & Penalties • Upon being found guilty of violating any provision of the RMLA or Rule brokers and/or originators may be fined: • Up to $1,000 per violation & • Up to $1,000 per day the person acts as a residential mortgage broker, lender, or originator without complying with the RMLA or any rules promulgated thereunder

  35. Forfeiture of Compensation • R.S. 6:1092 G. - added by Act 617 • Any person who acts as a mortgage broker or originator without complying with licensing provisions shall be subject to forfeiture of compensation attributable to residential mortgage lending activity conducted after August 15, 2001 • This shall not impair the validity of note or mortgage

  36. TESTING REQUIREMENTS • Beginning July 1, 2001, each new applicant for licensure as an originator is required to pass a professional licensing examination • Test administered by PSI Exams, Inc. • www.psiexams.com

  37. Continuing Education • Each licensed originator must take 10 hours of continuing education each year prior to renewal • must include at least 2 hours of RMLA education • if licensed as a result of a test, continuing education not required until December of the following year

  38. USURY • APR is limited to the greater of 21% or Federal Reserve Discount Rate + 15% • Applies to both open and closed end credit secured by a mortgage • Preempted by Alternative Mortgage Transaction Parity Act for variable rate and balloon loans

  39. Prepayment Penalties • Are limited as follows: • 5% of unpaid principal during first year • 4% of unpaid principal during second year • 3% of unpaid principal during third year • 2% of unpaid principal during fourth year • 1% of unpaid principal during fifth year • No prepayment penalty allowed after fifth year

  40. Up Front Fees By Brokers • Appraisal • Title Search • Credit Report • amount collected cannot exceed good faith estimate of actual cost • any portion which exceeds actual cost must be refunded to borrower or credited to their account at closing

  41. Request for Payoff Amount • Must be provided with 5 days of written request of consumer • Consumer entitled to one statement per year at no charge • thereafter, lender may charge a reasonable fee provided that the fee is disclosed to the consumer before furnishing the statement

  42. Limits on Fees and Charges • Late Fees limited to 5% of unpaid amount • Collection fees limited to 25% when referred to an attorney • NSF the greater of 5% of the amount of check or $25

  43. Mortgage Loan Origination Agreement • Must be provided by broker within 3 days of the initial application • Must describe the nature of broker’s relationship with borrower and the manner in which they will be compensated • name, address, and phone number of originator • name, address, and phone number of mortgage lender (mortgage broker)

  44. Mortgage Loan Origination Agreement • Failure to provide a copy of the agreement subjects broker to a refund of any brokerage fees collected

  45. Criminal Penalties • Broker knowingly collects excessive advance expense deposits • Any person who knowingly provides false or misleading information on an application • Any licensee or registrant who fails to disburse funds belonging a borrower • Any lender, broker, or originator knowingly operating without a license

  46. Criminal Penalties • Upon Conviction for these person may be sentenced to: • a fine of not less than $500 nor more than $1,000, imprisonment not exceeding one year, or both