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State Law Update: Vermont and Nebraska Address Mortgage Licensing
Vermont Adjusts Mortgage Licensing Law. On April 20, Vermont enacted H 565, which, in relevant part, amends definitions and exceptions related to the licensing of mortgage loan originators, mortgage brokers, and other consumer lenders to (i) permit owner financing without obtaining a license, (ii) expand the types of properties that can be sold and financed by the owner without having to obtain a license, and (iii) expand exceptions applicable to practicing attorneys.
Nebraska Issues Interpretation of Mortgage Originator, Processor, and Underwriter Licensing Rules. Recently, the Nebraska Department of Banking and Finance issued several interpretive opinions relating to mortgage loan originator, processor, and underwriter licensing. For mortgage loan originator licensing, one opinion provides examples of activities or situations that would and would not require licensure as a mortgage loan originator. A separate opinion identifies the factors and documentation the Department will consider when evaluating the “financial responsibility” of a person seeking a mortgage loan originator license. Additional separate guidance (i) clarifies the licensing responsibilities of clerical employees of licensed or registered mortgage bankers or installment loan companies, (ii) asserts that loan processing and underwriting activities are essential to origination and therefore entities performing those services must register as mortgage bankers, and (iii) establishes requirements pertaining to the use of the NMLS unique identifier on solicitations and advertisements. All of the interpretive opinions took effect April 16, 2012.
CFPB Clarifies Transitional Licensing for Mortgage Loan Originators
On April 19, the CFPB issued Bulletin 2012-05 to clarify issues related to the transitional licensing of mortgage loan originators under the SAFE Act and Regulation H. According to the Bulletin, (i) states are allowed to provide a transitional license to an individual with a valid license from another state, but (ii) states are prohibited from providing a transitional license for a registered loan originator who leaves a federally regulated financial institution to act as a loan originator while pursuing a state license.
State Law Update: Several States Alter Mortgage and Other Consumer Finance Laws
CSBS and NMLS Issue New Forms for Expanded Use of Registry. On April 16, the Conference of State Bank Supervisors and the National Mortgage License and Registry System (NMLS) issued new licensing forms to support the CSBSs previously announced plans to expand the use of NMLS to include nonbank, non-mortgage financial service providers. With the issuance of the new forms, the NMLS announced that 11 states have committed to requiring non-mortgage financial services institutions to begin using the NMLS this year, with Washington, Vermont, and Rhode Island as the most recent to provide transition plans. The other states include theDistrict of Columbia,Idaho,Louisiana,Maryland,Massachusetts,New Hampshire,Oklahoma,Tennessee, andPennsylvania. Nebraska Expands NMLS Use and Alters Mortgage Licensing. On April 5, Nebraska enacted Legislative Bill 965 to require and provide for the transition of the states manual licensing of installment loan companies to licensing through the NMLS. This change will take effect beginning January 2013. The law also amends the Residential Mortgage Licensing Act to, among other things (i) update and add certain exemptions for mortgage banker and mortgage loan originator licensing requirements, and (ii) adjust the powers of the Department of Banking and Finance to administer the mortgage banker and loan originator licensing process. Kentucky Enacts Numerous Bills Impacting Mortgages and Vehicle Finance. On April 11, Kentucky Governor Steve Beshear signed several bills impacting consumer lending. House Bill 417 makes a variety of amendments impacting motor vehicle installment contracts, including, among other things, (i) altering the form and required content of retail installment contracts, (ii) adjusting the permissible delinquency and collection charge on an installment in arrears for a period of 10 or more days, (iii) creating a safe harbor for retail installment contracts that satisfy the requirements of the Truth in Lending Act, and (iv) making various amendments regarding retail installment sales that are precomputed. House Bill 62 and House Bill 396 relate to foreclosures. The former requires a mortgage holder to file a deed in lieu of foreclosure with the county clerk within 45 days of the instrument's execution and allows for a penalty in the form of a violation of law for any mortgage holder who fails to do so. The bill also exempts filing deeds in lieu of foreclosures from the states transfer tax on property as well as the voluntary surrender under a mortgage in lieu of a foreclosure proceeding. The latter relates to an expedited sale mechanism for foreclosures involving vacant and abandoned real property and amends the offense of defrauding a secured creditor to add situations where collateral is intentionally damaged. Finally, House Bill 409, among other things, exempts from most laws and regulations applicable to mortgage loan companies and brokers persons other than natural persons that originate four or fewer mortgage loans per year and do not hold themselves out to be primarily in the mortgage loan business, while House Bill 533 prohibits private transfer fees. Oregon Establishes Foreclosure Mediation Process. On April 11, Oregon established a foreclosure mediation process when it enacted Senate Bill 1552. The law requires that a beneficiary (i) enter into mediation with a grantor for the purpose of negotiating a foreclosure avoidance measure and (ii) notify a grantor if they are not eligible for any foreclosure avoidance measure or if the grantor has not complied with the terms of a foreclosure avoidance measure. The new law details the form for notices required under the new process and establishes potential penalties for a beneficiary failing to comply with the new procedures. The bill took effect on April 11, with most of the new requirements becoming operative 91 days after the effective date. Maryland Alters Mortgage Licensing Exemptions, Expands Commissioners Enforcement Power. On April 10, Maryland enacted Senate Bill 302, which removes the mortgage licensing exemption for a person who makes three or fewer mortgage loans per calendar year and brokers no more than one mortgage loan per calendar year. The law also expands the authority of the Commissioner of Financial Regulation to investigate and enforce state law with regard to a subsidiary or affiliate of an institution over which the Commissioner has jurisdiction. The law becomes effective on January 1, 2013. Colorado Amends Foreclosure Law. On April 12, Colorado passed a law amending administrative procedures under its foreclosure law. Pursuant to Senate Bill 30, effective September 1, 2012 counties must (i) notify a homeowner during the foreclosure process that they may be due money if excess funds are obtained through the sale of their foreclosed property, (ii) attempt to locate the homeowner and notify them of excess funds obtained from the public auction of their foreclosed property, and (iii) turn excess funds over to the state treasurer if the homeowner cannot be located. The state will hold the funds in perpetuity, allowing a homeowner to claim the funds at any time. Under existing law, counties are not required to conduct any initial outreach and can retain for themselves any money not claimed within five years of the sale.
West Virginia Revises Mortgage and Consumer Lending Statutes
West Virginia recently enacted several bills to amend statutes related to mortgage licensing and servicing and consumer lender licensing. House Bill 4271 was enacted March 30 and takes effect June 8, 2012. It amends existing reporting requirements for licensed residential mortgage lenders and brokers to direct lenders and brokers to submit reports through the Nationwide Mortgage Licensing System and Registry (NMLS) for periods established by the NMLS. The law allows the Commissioner of the Division of Banking to require direct reporting, preserves the confidentiality of the reports, and alters certain public reporting obligations of the Commissioner. Also enacted on March 30, House Bill 4274, authorizes the Commissioner of the Division of Banking to fine regulated consumer lenders required to be licensed up to $2,000 for violating applicable statutory and regulatory requirements. Each day that a consumer lender engages in covered conduct without being licensed is considered a separate violation subject to a separate fine. This change takes effect June 7, 2012. On April 2, effectively retroactive to January 1, 2012, Senate Bill 551 creates an exemption to mortgage loan limitations to allow for modification or refinancing loans made between January 1, 2012 and January 15, 2015 as part of the federal Home Affordable Modification Program or any other federal or state program or litigation settlement.
West Virginia Removes Mortgage Licensing Exemption, Creates Procedure for Abandoned Personal Property Following Foreclosure
On April 2, West Virginia Governor Tomblin signed into law Senate Bill 336 and Senate Bill 360, both effective June 8, 2012. Senate Bill 336 eliminates an exemption under the states residential mortgage licensing requirement. Prior to the change, mortgage lenders and brokers operating under the regular supervision and examination for consumer compliance by an agency of the federal government were exempt from having to obtain a state license. Those entities now must obtain a license and comply with related state laws. Federally insured depository institutions remain exempt from the licensing requirements. Senate Bill 360 creates a procedure to deem personal property abandoned following the transfer of real property by tax sale or foreclosure. The law requires the purchaser of the real property to provide 30 days notice to the former owner, after which unclaimed personal property will be deemed abandoned.
Utah Enacts Multiple Bills Related to Mortgages and Default Servicing
Recently, Utah enacted several bills to amend the state’s mortgage licensing and servicing requirements, and to support enforcement of mortgage fraud. On March 19, the state enacted House Bill 191, the majority of which takes effect May 8, 2012. The bill makes numerous adjustments to the state’s mortgage and real estate practices and licensing statutes, including revisions to certain definitions, licensing and renewal requirements, prohibited conduct, and record keeping and reporting requirements. House Bill 164, enacted on March 19, establishes new servicing requirements, including (i) requiring servicers to appoint a single contact person for residential properties in default and establishing responsibilities for the contact person, (ii) requiring notice to a default trustor before a notice of default is filed, and (iii) allowing a default trustor to seek foreclosure relief. Enacted on March 22, House Bill 280, extends for two years, through the end of 2014, an existing provision requiring a notice for residential rental property that is being foreclosed. Also enacted on March 22 was Senate Bill 281. That bill creates a mortgage and financial fraud unit within the state’s Attorney General’s office. Beginning July 1, 2012, the Attorney General’s office will have a $2 million appropriation to establish the new unit to work with other state and local agencies to prevent, investigate, and prosecute mortgage and other financial fraud.
New York Extends Emergency Rules Regarding Mortgage Originator Licensing
On March 7, the New York Department of Financial Services extended through May 16, 2012 existing emergency rules regarding the licensing of mortgage loan originators. New York intends to adopt the rules as permanent at some future date.
CFPB Releases SAFE Act Exam Procedures
On March 7, the CFPB updated its Supervision and Examination Manual with SAFE Act examination procedures. The procedures set forth the background and requirements of the SAFE Act, and its federal implementing regulations, for use in examining federally regulated depository institutions for compliance with the SAFE Act.
Virginia Enacts Two Mortgage-Related Bills
On March 1, Virginia enacted two mortgage-related bills, both effective July 1, 2012. HB 570 exempts employees of bona fide nonprofit organizations from licensing and registration requirements applicable to mortgage loan originators. It also, among other things, (i) adds definitions for dwelling and residential mortgage loan, (ii) revises the definitions for loan processor or underwriter, mortgage loan originator, real estate brokerage activities, registered mortgage loan originator, and unique identifier, (iii) revises the licensing requirement for mortgage loan originators and adds exemptions for certain individuals, and (iv) prohibits licensees from using unique identifiers for any purpose other than the SAFE Act and the Virginia Mortgage Loan Originators law. HB 572 exempts from licensure under the NMLS persons who make loans or extend credit for any part of the purchase price of real property that the person owns.
South Dakota Adds Mortgage Licensing Exemption, Adjusts Register of Deeds Fees
On March 2, South Dakota enacted HB 1229, which exempts certain individuals from the requirement of obtaining a mortgage loan originator license, including attorneys under specified circumstances. On the same day, the state enacted HB 1130, which, among other things, (i) sets a new schedule of fees to be charged by the register of deeds for various services, and (ii) allows an assignment of a mortgage to be recorded as a mortgage under specified conditions. Both bills take effect July 1, 2012.