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Virginia Enacts Banking, Consumer Finance Bills
Over the past week, Virginia Governor Terry McAuliffe signed several bills impacting banks and certain consumer finance providers. The first bill, HB 358 repealed a state law that that barred out-of-state banks from opening de novo branches in Virginia unless the bank's home state provided reciprocal access to Virginia banks. The change will allow out-of-state banks to establish branches in Virginia on the same basis as state-chartered banks. A second banking bill, HB 1062, provides that an existing statutory provision requiring the Virginia State Corporation Commission to ascertain that certain minimum capital stock requirements are met prior to issuing a certificate of authority to a bank does not apply to the Commission’s issuance of such a certificate to a bank holding company or to a resulting bank in connection with certain types of mergers involving the holding company and its subsidiary bank. A third bill, HB 69, amends state law to expand the types of services that may be provided under an extended motor vehicle service contract and to authorize the Board of Agriculture and Consumer Services to designate additional services that may be provided under an extended service contract. The bill also provides that extended service contracts are not insurance subject to state regulation as such. The above approved bills will take effect on July 1, 2014. Finally, the Governor approved a bill passed by the General Assembly, HB 954, which would permit the State Corporation Commission to issue transitional mortgage loan originator licenses.
Washington Clarifies Mortgage Loan Originator Rule
On January 24, the Washington State Department of Financial Institutions issued a clarification regarding an aspect of its mortgage originator rules and guidance. The Department previously advised that managers, including branch managers, must license individually as mortgage loan originators if they (i) take residential mortgage loan applications, negotiate the terms or conditions of residential mortgage loans, or hold themselves out as being able to conduct these activities; (ii) supervise loan processors or underwriting employees; or (iii) supervise licensed mortgage loan originators. The Department now states that (i) any manager or any person who takes a residential mortgage loan application in Washington, negotiates the terms or conditions of a residential mortgage loan on Washington property, or holds themselves out as being able to conduct those activities, must have a Washington MLO license, and that Washington licensed MLOs must work from a licensed location; (ii) any manager who directly supervises loan processor or underwriting employees must hold an MLO license, which can be from any state, and Washington licensed MLOs must work from a licensed location; and (iii) any manager who directly supervises Washington licensed MLOs must themselves hold a Washington MLO license and must work from a licensed location. For items (ii) and (iii) the Department states that it is looking for licensure of the day to day operational supervisors. Supervisory plans must be written and maintained as part of business books and records, and must include consideration of the location of the supervisor and employees supervised, the number of employees supervised, and the volume of work performed by the supervised employees.
CSBS Announces Four More State Agencies Transitioning To Uniform Mortgage Test
On January 7, the CSBS announced that, as of January 1, four additional state or U.S. territorial agencies began using the National SAFE MLO test. With the addition of these four agencies—the Nevada Department of Business & Industry, the New Mexico Financial Institutions Division, the Puerto Rico Office of the Commissioner of Financial Institutions, and the U.S. Virgin Islands Division of Banking & Insurance—a total of 39 agencies are now using the test, which was announced last January and launched in April 2013. The test includes a uniform state component to replace the state-specific component in adopting states.
Georgia Amends Mortgage Loan Origination, Licensing Regulations
Recently, Georgia amended certain regulations related to mortgage loan originations, originators, and brokers. Effective November 29, 2013, borrowers are required to pay to the Department of Banking a $10 per loan fee if a loan is secured by a deed to secure debt, security deed, mortgage, security instrument, deed of trust, modification of a security deed, or other form or modification of a security interest. Further, any person who acts as the collecting agent at a closing of a mortgage loan transaction is liable for payment of the $10 fee, and the remittance of any such fees after the date on which they are due will subject the person to a late payment fee of $100 for each due date missed. The filing of a fee statement after the date on which it is due, even if no $10 fees were collected by the collecting agent during the applicable reporting period, will subject the person to a late filing fee of $100 for each due date missed. If the Department finds that a person has not, through negligence or otherwise, submitted $10 fees within six months of the due date, it may impose an additional $100 fine for failure to remit fees. Repeated failures to submit $10 fees may be grounds for revocation of license. In addition, the regulation amends the definition of "branch manager to require that an individual be a licensed mortgage loan originator to be approved as a branch manager, and requires an affidavit verifying the lawful presence of every natural person that submits an application for a license as a mortgage broker or mortgage lender or a registration on behalf of an individual or company. Among other things, the rules also require applicants, registrants, and licensed mortgage brokers and mortgage lenders to keep the information on the NMLSR current and to make amendments within 10 days of the events necessitating change and adds an administrative fine of $1,000 per occurrence for failing to timely update information on the NMLSR.
New York Announces Mortgage Discount Fees Enforcement Action
On October 23, New York Governor Andrew Cuomo announced a $3 million penalty against a mortgage lender that the New York State Department of Financial Services (DFS) determined engaged in deceptive practices concerning interest rate charges and related conduct. The DFS identified the violations during a 2010 examination. The consent order states that the lender (i) collected loan discount fees from certain borrowers to reduce the initial rate but failed to provide the discounted rates, (ii) facilitated originations through unlicensed originators, (iii) conducted business with unlicensed entities and through unauthorized websites and unlicensed branches, (iv) conducted business through improper “affiliated business arrangements,” (v) failed to disclose loan origination information, (vi) failed to issue commitment agreements to certain borrowers, and (vii) failed to properly maintain books and records. The lender consented to the penalty, agreed to refund $427,155 of unearned loan discount fees to 270 borrowers, and agreed to submit a written compliance program within 120 days, submit quarterly compliance progress reports over a three-year period, and take other corrective actions. The consent order noted that in 2011 the company entered into a $3.1M settlement with HUD over similar alleged conduct.
State Regulators Proposes Changes to Uniform Licensing Forms and Mortgage Call Report
On October 11, the State Regulatory Registry (SRR) proposed changes to (i) the uniform NMLS company, branch, and individual licensing forms developed by state regulators and used by all states through NMLS and (ii) the NMLS Mortgage Call Report (MCR). The proposal incorporates public comments received following an initial April 2013 proposal. The proposed licensing form changes would, among other things, (i) allow a company to designate more than one branch manager within an industry, (ii) revise business activity on company and branch forms, and (iii) collect other trade names on company and branch forms by agency and not by state. Changes to the NMLS licensing forms and certain changes to the format of the MCR are expected to be implemented in March 2014. The proposal notes that given expected changes to HMDA reporting requirements, the SRR will propose substantive changes to the MCR in 2014 with an expected implementation timeframe in 2015. Comments on the proposed changes are due by November 11, 2013.
Thirty-Five State Agencies Now Using Uniform Mortgage Test
On October 1, the Conference of State Bank Supervisors announced that five additional state agencies have implemented the new national SAFE MLO test, bringing the total number of participating state agencies to 35. The new test, which was announced in January and launched in April, includes a uniform state component to replace the state-specific component in adopting states.
Utah Amends Residential Mortgage Practices and Licensing Rules
The Utah Division of Real Estate recently published amendments to provisions of the Residential Mortgage Practices and Licensing Rules. The changes (i) remove the term “principal” from references to “principal lending manager” in conformity with the description used by the National Mortgage Licensing System, (ii) modify certain requirements for schools providing licensure-related courses, and (iii) impose a requirement that licensees annually complete a division-approved course on Utah law.
Washington Announces Enforcement Action Against Mortgage Transmitter
On August 26, the Washington State Department of Financial Institutions announced that it issued a statement of charges against a company that accepts and transmits mortgage payments on behalf of homeowners in the state, alleging that the company (i) violated state licensing requirements by failing to obtain the required license as a money transmitter, (ii) misled consumers about the company’s affiliation with their lender, servicer, or a government agency and how often payments would be transmitted, and (iii) falsely represented the amount of interest borrowers would save by having the company make payments.
Ten More States Adopt Uniform MLO Test
On July 1, the CSBS announced that ten additional state agencies will use the new National SAFE MLO test. Twenty state agencies adopted the test when it initially was introduced in April 2013. The uniform test combines both the national and state testing requirements of the SAFE Act, replaces the separate, state-specific tests for the states that adopt it, and streamlines the license application process for mortgage loan originators (MLOs) seeking licenses in multiple states. The CSBS reports that an additional five state agencies are scheduled to adopt the test by the start of 2014.