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Minnesota adds mortgage originator licensing exemption
On May 22, the Minnesota governor signed HF 990, which exempts manufactured home dealers and salespersons from the state’s licensing requirements for residential mortgage originators. Under the bill, manufactured home dealers or salespersons qualify for the exemption if they (i) perform only clerical or support duties in connection with assisting a consumer in filling out a loan application; (ii) do not receive any direct or indirect compensation from any individual or company, in excess of the customary salary or commission, for assisting consumers with loan applications; and (iii) provide specified disclosures. The bill takes effect on August 1.
Illinois amends Residential Mortgage License Act
On May 10, the Office of the Illinois Secretary of State published in the Illinois Register a notice by the Department of Financial and Professional Regulation of adopted amendments to certain parts of its Residential Mortgage License Act. In general, the amendments impact independent loan processor licensing as well as residential mortgage loan bond and advertising requirements. Specifically, an independent loan processing entity must employ one or more licensed mortgage loan originators (MLO) to be in compliance with the Act’s supervision and instruction requirements. In addition, any advertisement appearing in the state by a licensee concerning residential mortgage loans must clearly and conspicuously include the following: (i) the Nationwide Multistate Licensing System and Registry (NMLS) Consumer Access homepage; and (ii) a licensee’s unique NMLS identifier. If a MLO is advertised, licensees are also required to include the MLO employee’s individual NMLS unique identifier, in addition to listing the licensee’s NMLS unique identifier. Furthermore, licensees are prohibited from including a NMLS unique identifier in any advertisement related to “activities other than residential mortgage lending or brokering” unless certain criteria are met. The amendments became effective immediately.
New Hampshire amends licensing requirements for nondepository mortgage bankers, pawnbrokers
On May 15, the New Hampshire governor signed HB 649 to, among other things, amend the state licensing requirements for nondepository mortgage bankers, brokers, and servicers, as well as pawnbrokers and moneylenders. Specifically, licensing applicants must file with the banking commissioner a written verified application through the Nationwide Multistate Licensing System and Registry (NMLS) using the NMLS form, or by providing all the same information required on the application using the NMLS. Applicants must also file a statement of net worth. Finally, HB 649 defines what constitutes a “significant event” pertaining to a licensee’s practices with respect to consumer credit, small loans, debt adjustments, and money lending. The act became effective immediately.
Georgia amends mortgage lender licensing laws
On May 7, the Georgia governor signed HB 185, which amends various state laws related to financial institutions, including the licensing requirements for mortgage lenders and mortgage loan originators. The bill specifies that any licensed mortgage lender is authorized to engage in all activities that are authorized for a mortgage broker and therefore, is not required to obtain a mortgage broker license. Additionally, the bill specifies that a mortgage loan originator license shall become inactive in the event that a mortgage loan originator is no longer sponsored by a mortgage lender or mortgage broker that is licensed. The bill becomes effective July 1.
Colorado enacts student loan servicer act
On May 13, the Colorado governor signed SB19-002, the “Colorado Student Loan Servicers Act,” which requires an entity that services a student education loan owned by a Colorado resident to be licensed by the state. Under the bill, “student loan servicer” is generally defined as a person that receives a scheduled periodic payment from a student loan borrower and applies the payments of principal and interest with respect to the amounts received from such a borrower, and provides other similar administrative services. The bill requires any person seeking to act as a student loan servicer to be licensed through the state on or after January 31, 2020, and specifies the procedures for obtaining and renewing the license. Federal student loan servicers are automatically issued the license under the bill.
Among other things, the bill also specifies particular acts that are required of the student loan servicer, including (i) providing substantive responses within 30 days of receiving a written inquiry from a borrower; (ii) inquiring of borrowers as to how to apply overpayments; and (iii) applying partial payments in a manner that minimizes late fees and negative credit reporting. Additionally, the bill specifies prohibited acts, including (i) engaging in an unfair or deceptive practice toward any person or misrepresenting or omitting any material information in connection with servicing student loans; (ii) misapplying payments to the loan balance; and (iii) failing to report both favorable and unfavorable payment history to a consumer reporting agency. A violation of the bill is considered a deceptive trade practice, and the bill provides a private right of action for borrowers to seek punitive damages for violations. The bill is expected to take effect on August 2.
Kansas updates GAP waiver guidance
On May 19, the Office of the State Bank Commissioner of Kansas published in the Kansas Register an amended Administrative Interpretation No. 1004 covering Guaranteed Asset Protection (GAP). In general, the interpretation provides guidance for creditors to follow to exclude the cost of GAP waiver agreements from the calculation of the finance charge with consumer credit sales and closed-end consumer loans pursuant to the Uniform Consumer Credit Code. The revision amends paragraph 3(g) of the interpretation, which requires clear disclosure on how to contact the GAP provider in connection with claims for GAP coverage. Paragraph 3(g) states that the information must be written in bold font and the word “claims” must be bolded and underlined. Additionally, the form must also advise Kansas consumers that they can contact the Kansas Office of State Bank Commissioner with complaints about their GAP waiver agreement. The revised interpretation was effective on May 15.
Iowa amends licensing requirements for service companies
On May 16, the Iowa governor signed SF 619, which, among other things, amends the state’s service contract provider provisions to require any provider that issues, offers for sale, or sells motor vehicle service contracts in the state to be licensed as a service company. Persons who provide support services or work under the direction of a licensed service company, including those who provide marketing, administrative, or technical support, are not subject to the licensure requirements. In addition, SF 619 also prohibits a licensed service company that offers motor vehicle service contracts from making certain false, deceptive, or misleading statements regarding (i) the service company’s affiliations with a manufacturer or importer; (ii) a warranty’s validity or expiration date; or (iii) whether a contract holder must obtain a new service contract in order to maintain coverage under an existing contract or warranty. Furthermore, SF 619 prohibits a lending institution from requiring “the purchase of a motor vehicle service contract or residential service contract as a condition of a loan or the sale of any property or motor vehicle.” The amendments are effective immediately.
Vermont streamlines mortgage licensing
On May 14, the Vermont governor signed S.154, which, among other things, amends the state’s mortgage licensing statute. Specifically, the legislation repeals various provisions of the state’s licensing process for mortgage lenders and servicers and replaces the provisions with a new chapter (8 V.S.A. Chapter 72) intended to streamline the law and bring more clarity and cohesion to the licensing process. The bill is effective July 1.
NMLS issues “temporary authority” licensing guidelines for MLOs
On April 4, the Nationwide Multistate Licensing System (NMLS) issued a set of guidelines and FAQs clarifying federal SAFE Act amendments created by the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), to establish “temporary authority” provisions for mortgage loan originators (MLOs). According to the guidelines, temporary authority to act as a loan originator while completing state-specific licensing requirements is granted to: (i) qualified MLOs who are changing employment from a depository institution to a state-licensed mortgage company; and (ii) qualified state-licensed MLOs seeking to be licensed in another state. The guidance expands upon temporary authority eligibility requirements; disqualification criteria; and the length of time MLOs may operate under temporary authority.
The guidelines also emphasize that “any MLO operating under temporary authority is subject to the requirements of the federal SAFE Act, and all applicable laws of the application state, to the same extent as if that MLO was a state-licensed loan originator licensed by the state.” MLOs will be able to apply for a license and become eligible for temporary authority on November 24.
New Jersey approves mortgage lending bill package
On April 29, the New Jersey governor approved several bills related to mortgage lending in the state. According to a press release issued by the governor, the package of nine bills addresses the state’s foreclosure crisis and includes the following:
- A 4997, known as the Mortgage Services Licensing Act, requires persons who act as mortgage servicers—either directly or indirectly—to obtain a license from the New Jersey Commissioner of Banking and Insurance for each office where business is conducted. The Act provides certain licensing exemptions, including federally insured banks and credit unions and their wholly-owned subsidiaries, those already licensed under the state’s Residential Mortgage Lending Act (the Act) who meet certain criteria, and the New Jersey Housing and Mortgage Finance Agency. However, the Act stipulates that sections 9 – 12, which discuss, among other things, record-keeping requirements, late fee restrictions, and required disclosures, apply to all persons, including exempt persons, acting as mortgage servicers in the state. Among other provisions, the Act (i) outlines licensing application requirements, procedures, and expiration terms; (ii) requires licensed mortgage servicers to file annual reports about loan servicing in the state; (iii) stipulates that licenses are non-transferable; (iv) mandates mortgage servicers to file a surety bond, fidelity bond, and evidence of coverage with the Commissioner; (v) requires compliance with all applicable federal laws including RESPA and TILA; (vi) requires mortgage servicers to keep a current schedule of service-related activity fees; and (vii) prohibits mortgage servicers from engaging in unfair or deceptive practices in connection with loan servicing. Moreover, the Act grants the Commission with supervision, investigation, and examination authority. The Act takes effect in 90 days.
- A 5001 “reduces the statute of limitations in residential mortgage foreclosures from 20 years to six years from the date on which the debtor defaulted, in situations in which the date of default is used as the method to determine when the statute of limitations has expired.” A 5001 takes effect immediately and applies to all residential mortgages executed on or after the effective date.
- S 3416 states that provisions of the New Jersey Residential Mortgage Lending Act now apply to certain out-of-state persons involved in residential mortgage lending in the state “provided they are otherwise required to be licensed pursuant to the provisions of the [A]ct. . . .” S 3416 takes effect immediately.
- S 3411, among other things, (i) requires a notice of intention to foreclose on a residential mortgage to be filed within 180 days prior to commencing foreclosure, stating that if a foreclosure proceeding has not yet commenced, “the lender shall send a new written notice at least 30 days, but not more than 180 days, in advance of that action”; and (ii) limits the number of permitted reinstatements of dismissed mortgage foreclosure actions to three, with certain exceptions. S 3411 takes effect August 1, which is the first day of the fourth month following enactment.