Louisiana Office of Financial Institutions Orientation to the Louisiana Secure and Fair Enforcement of Mortgage Licensing Act of 2009 Or Louisiana S.A.F.E. Residential Mortgage Lending Act Updated08-10
SAFE Residential Mortgage Lending Act • LSA-R.S. 6:1081 through 6:1099 • Enacted effective July 31, 2009 • Provides for licensure of mortgage originators, brokers, and lenders • Amended effective August 15, 2010
Residential Mortgage Lending Act • Subdivided into three parts • PART I. GENERAL PROVISIONS • Definitions • Prohibitions • Promulgation of Rules • PART II. LICENSURE, REGISTRATION, & CERTIFICATION • Licensure Requirements • Applications • Recordkeeping – OFI Rule RML 01-01 • Examination and Investigation of Complaints • Suspension and Revocation of Licenses and Registrations • PART III. RESIDENTIAL MORTGAGELOANS • Fees and Charges • Mortgage Loan Origination Agreements • Criminal Penalties • Part IV. Reverse Mortgage Loans • Requirements • Counseling • Commitment and cooling off period • Duties to elders
Residential Mortgage Lending Act • Who must be licensed • Originators • (including contract processors and underwriters) • Brokers • Lenders • Wholesale Lenders • which are not otherwise exempt
Definitions • “Mortgage Loan Originator” means an individual who for compensation or gain or with the expectation of compensation or gain takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan.
Definitions • Mortgage Broker or Residential 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
Definitions • Mortgage Lender or Residential Mortgage Lender • any person who, directly or indirectly, originates or makes, or offers to originate or make, a residential mortgage loan for another person
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 fund a residential mortgage loan for a person
Definitions • Residential Mortgage Loan • 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 as defined in Reg Z or residential immovable property upon which is constructed or intended to be constructed a dwelling as defined in Reg Z
Residential Mortgage Loan • Now covers all loans secured by a persons dwelling including: • Mobile home loans without a security interest in the land • Motor homes used as the person’s dwelling • Boats if used as the person’s dwelling • Vacant land if to be used to construct or move a person’s residence on it
Definitions • Registered Mortgage Loan Originator • An individual who meets the definition of a mortgage loan originator and is an employee of a depository institution or a subsidiary that is either owned and controlled by a depository institution and regulated by a federal banking agency or an institution regulated by the Farm Credit Administration and is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System & registry.
R.S. 6:1084 • No person, directly or indirectly, shall engage in a residential mortgage lending activity without complying with the Louisiana S.A.F.E. Residential Mortgage Lending Act or rules and regulations promulgated pursuant to thereof
R.S. 6:1086 • Beginning July 31, 2009, unless otherwise exempt, no person shall engage in residential mortgage lending activity without first obtaining and maintaining annually: • A license and registration as a mortgage loan originator, or a license as a mortgage lender or broker • A unique identifier in the NMLS&R
R.S. 6:1086 • The following persons shall have until July 31, 2010 to obtain a license in compliance with the Act: • A person whose activities were not subject to the licensing provisions of this Act on July 30, 2009 • A person engaged in residential mortgage lending activities which was subject to an exemption provided by this Chapter on July 30, 2009
Originator Exemptions • Registered mortgage loan originators, when acting for a depository institution • An individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member • A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the representation of the client unless the attorney is compensated by a lender, a mortgage broker, or other mortgage originator including any agents of such
Originator Exemptions • Any individual who performs only real estate brokerage activities and is licensed provided they are not compensated by a lender, mortgage broker, or other mortgage originator or any of their agents • Any individual engaged solely in extensions of credit involving timeshares • Individuals who are employees of a retailer of manufactured or modular homes performing only clerical duties which receive no compensation or gain from a mortgage broker or lender • An individual who offers or negotiates terms of a mortgage loan secured by a dwelling that is owned by and serves as the individual’s residence
Originator ExemptionsLoan Processor or Underwriter • An individual engaging solely in loan processor or underwriting activities, who does not represent to the public, through advertising or other means including the use of business cards, stationary, brochures, signs, rate lists, or other promotional items, that such individual can or sill perform any of the activities of a mortgage originator. • Defined as a person who performs clerical or support duties as an employee at the direction of and subject to the supervision of a person license or exempt from the Act.
Originator ExemptionsLoan Processor or Underwriter • Clerical or Support Duties include subsequent to receipt of an application: • Receipt, collection, distribution, and analysis or information common for the processing or underwriting of a residential mortgage loan • Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential loan rates or terms
Originator ExemptionsLoan Processor or Underwriter • DO NOT APPLY TO: • Independent contractor loan processors or underwriters • They must obtain an originator license and a unique identifier issued by the NMLS&R
Mortgage Broker/Lender Exemptions • Depository Institutions or direct or indirect subsidiaries including their employees • Exempt from licensure • Still subject to requirement of Part III
Direct & Indirect Subsidiaries Depository Institutions • Proposed definitions: • Direct Subsidiary - any firm, corporation, association, trust, or legal entity which is 100 percent owned by a bank, savings bank, savings and loan association, or credit union. • Indirect Subsidiary - any firm, corporation, association, trust, or legal entity which is 100 percent owned by a direct subsidiary as defined above, and any firm, corporation, association, trust, legal entity, partnership, or limited liability company which is 100 percent owned by a bank, savings bank, savings and loan association, or credit union, and one or more direct subsidiaries as defined above.
Mortgage Broker/LenderExemptions • Mortgagees which are the former owner of the dwelling or residential immovable property • Insurance company or agent which holds a current producer license and brokers loans exclusively to an insurer • Both still subject to Part III of Act
Mortgage Broker/LenderExemptions • Licensed Attorneys • When activity is incidental to providing legal services • Exempt from licensure • Still subject to Part III
Mortgage Broker/LenderExemptions • Any not for profit 501(c) corporation making loans to promote home ownership or improvements for the disadvantaged • Exempt from licensure • Still subject to Part III
Mortgage Broker/LenderExemptions • Any Real Estate Investment Trust • Small Business investment Companies licensed by SBA • Both Still subject to Part III
Requirements for Licensing • Fingerprints and fee for background check • Personal history and experience submitted through the NMLS&R • Authorization and fee for obtaining a credit report • Information required for owners, members, or partners • For corporation each 10% or greater shareholder
Requirements for Licensing • Demonstrate financial responsibility, character, and general fitness to warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of this Chapter. • Complete 20 hours of pre-licensing education approved by NMLS&R also a minimum of each of the following • 3 hours of federal law and regulations • 3 hours of ethics including fraud, consumer protection, and fair lending • 2 hours of training relating to non-traditional mortgage marketplace • Pass a written examination with both national and state components • Obtain and maintain a surety bond • Originators may be covered by a Surety Bond obtained by their employer
Restrictions on granting Licenses • Paid all fees due to OFI • Never had a mortgage related license revoked in any governmental jurisdiction • Never convicted, pled guilty, or nolo contendere to a felony involving fraud, dishonesty, breach of trust, or money laundering • Not convicted, pled guilty, or nolo contendere to any felony within the last seven years
Surety Bond / Deposit • Each applicant for licensure must provide one of the following in amount which determined by loan volume: • Surety Bond based upon loan volume from the previous year: • $0 to $99,999,999 bond amount of $25,000 • $100,000,000 or greater bond amount of $50,000 • Employer may obtain coverage for employees • Pledged deposit in federally insured institution located in Louisiana in the amount of Surety Bond otherwise required • * For initial license bond or deposit must be at least $25,000
Nationwide Mortgage Licensing System and Registry (NMLSR) • Effective June 18, 2007 Act 36 of the 2007 legislature authorized the Office of Financial Institution’s participation in a nationwide online licensing system. • The licensing system collects application data from individuals and companies and submit it to each jurisdiction (state) where they are licensed or applying for a license.
Nationwide Mortgage Licensing System and Registry (NMLSR) • Office of Financial Institutions began utilizing the system on August 1, 2008. • Beginning August 1, 2008, all application filings and notifications with OFI were required to be made through the licensing system.
Nationwide Mortgage Licensing System and Registry (NMLSR) • All persons utilizing the nationwide licensing system shall be required to pay user fees in addition to any applicable license, renewal, notification, or late fees. • The Commissioner may share any information disclosed to the system with any state or federal regulatory agencies having authority over residential mortgage lending activities
Application Fees • Mortgage Broker, Lender $400 • Each Branch (other than main office) $100 • Renewal Fee $300 • Originators $100 • Renewal Fee $100
RENEWALS • Renewals in the NMLS&R begin November 1st each year. Licensees must attest to the accuracy of their records. • Late after December 31st and before March 1st • Broker/Lender late fee $200 • Originator late fee $50 • Licenses Expire January 1 unless all requirements satisfied before March 1
Requirements for Renewal • Must continue to meet all requirements for obtaining a license • Must satisfy the continuing educational requirements • Must be in compliance with all uncontested orders or consent agreements including payment of fees, penalties, or refunds NOTE failing to meet requirements will result in license expiring on December 31
LSA-R.S. 6:1089 • No residential mortgage lender or originator may conduct lending activities under any name other than in their current record on the NMLS&R • Commissioner must be notified prior to changes in name or location and pay $100 fee • Must notify Commissioner of office closure within 30 days • A late notification results in an additional $100 late fee
LSA-R.S. 6:1089 B. • Whenever employment of an originator changes, Commissioner must be notified within 30 days • Employer and Employee must give notification through NMLS&R • Employee must pay $50 transfer fee to change sponsorship of their license to another broker or lender • Failure to notify within 30 days results in a $100 late notification fee per occurrence • Upon leaving employment remove relationship and sponsorship through NMLS&R
R.S. 6:1090 • No license may be sold or transferred • No person shall acquire control (51%) of licensee without obtaining prior written approval of OFI after submitting an application and $300 fee • Failure to obtain approval constitutes operating without a license and subjects the acquirer to the associated penalties
R.S. 6:1090 • A mortgage broker can only broker loans to a mortgage lender • Brokering to a Broker is prohibited
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 exempt from Part II
NET BRANCHING • Prohibited by LSA-R.S. 6:1090 G. • Except as 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 • employer indemnification agreements not permissible
Restrictions on Employment after denial or revocation • No person who has been denied a license or had a license revoked whether they failed to request an administrative hearing or the decision was affirmed in an administrative hearing, may be employed as a processor of mortgage loans or hold a position responsible for the operation of the principal place of business or any branch
R.S. 6:1090 (I) • No person licensed pursuant to the Residential Mortgage Lending Act, R.S. 6:1081 et seq., shall engage in or be financially compensated for any loan transaction in which such person, for a fee, commission, or other valuable consideration, is acting as a licensee under the Louisiana Real Estate License Law, R.S. 37:1430 et seq., in connection with the same residential loan transaction.
RECORD RETENTION • Requirements set forth by Rule and Policy • See http://www.ofi.louisiana.gov
EXAMINATIONS FEES • Fee not to exceed $400 per location visited • Due within 30 days of assessment • Late fee of up to $50 per day not paid timely • Other expenses may apply where records must be reviewed at an out-of-state location.
Suspension & Revocation of License • After an opportunity to be heard in Administrative hearing, Commissioner may revoke or suspend license of person who: • Violates any of the provisions of this Chapter or any Rule or Regulation promulgated, or any order, including but not limited to a cease and desist order or subpoena • 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
Suspension & Revocation • Fails to maintain records required after given written notice • Continues in office any individual with power to direct management or policies of a licensee upon conviction of any felony • 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 • Knowingly engages in any transaction, practice, or course of business which perpetrates a fraud upon any person in connection with the making, purchasing, sale or brokering of any mortgage loan.
Suspension & Revocation • 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 • 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 • Commissioner discovers any fact or condition that currently exists which if it had existed at the time of the original application, would have warranted denial of the application
Reapplication upon revocation • A person whose license has been revoked for any reason may not reapply for a license until at least five years have elapsed from the date of the order of revocation, unless the commissioner, in his sole discretion, prescribes an earlier or later date
Immediate Suspension • The Commissioner may order an immediate suspension of the license of any person who: • Fails to maintain bond or pledged deposit • Commits serious violations of the Act such that, in the opinion of the Commissioner, the public safety and welfare demand emergency action • Submits a check covering the fee for any application, notification, examination, late fee, or penalty which is returned by the licensee’s depository institution