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Financial Services Law Insights and Observations

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  • Hawaii Amends Provisions Relating To Mortgage Loan Originators

    State Issues

    On July 7, 2011, Hawaii Senate Bill 1519, which amended Chapter 454F, a statute that relates to mortgage loan originators, became effective. Among other provisions, the bill (i) authorizes certain persons exempt from licensing to register with the Nationwide Mortgage Licensing System (Licensing System) to sponsor certain mortgage loan originators, (ii) requires all mortgage loan originators to be sponsored by an exempt or non-exempt sponsoring mortgage loan originator company, (iii) provides for an administrative hearing in connection with a denied license application, (iv) provides for certain license applications to be considered abandoned, (v) sets forth the duties of a "qualified individual" and a "branch manager," (vi) requires certain exempt sponsoring mortgage loan originator companies to register with the Licensing System and pay related fees, (vii) provides for automatic secondary review of license applications, and (viii) prohibits unfair or deceptive practices related to mortgage loan origination activities. 

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  • Maine Consumer Credit Code Amended

    State Issues

    On July 6, Maine enacted Senate Paper 415, which amended the Maine Consumer Credit Code To Conform with Federal Law (the Act). The Act incorporates consumer protections provided by federal law and regulation, including restrictions on credit card lending provided by the Credit CARD Act of 2009 and the implementing provisions of Regulation Z. It also amends the Maine Consumer Credit Code’s truth in lending provisions, based on authority granted by the Dodd-Frank Act, and sections of the Maine Consumer Credit Code relating to the registration of loan officers.

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  • New Hampshire Amends Definition of "Mortgage Loan Originator"

    State Issues

    On July 5, New Hampshire enacted Senate Bill 189, which amended the definition of "mortgage loan originator" for purposes of the state’s mortgage banker and mortgage broker licensing statute. Under the bill, "mortgage loan originator" has been redefined so as to exclude any individual "who performs purely administrative or clerical tasks as an employee at the direction of and subject to the supervision and instruction of a licensed person who is described in subparagraph (a)" and who is not otherwise described in subparagraph (a). The change will be effective as of September 3, 2011.

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  • Rhode Island Eliminates Minimum Net Worth Requirement for Mortgage Loan Originators

    State Issues

    On June 29, the Rhode Island General Assembly enacted Senate Bill 507, which amended the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2009. Among other provisions, the bill (i) exempts certain mortgage loan originators from the requirement to obtain and maintain annually a state license to originate mortgage loans, and (ii) eliminates the minimum net worth requirement for mortgage loan originators, while retaining the surety bond requirement.

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  • Supreme Court Strikes Down Vermont Prescription Data Law

    State Issues

    On June 23, the United States Supreme Court held that the Vermont Prescription Confidentiality Law (PCL) improperly restrains speech in violation of the First Amendment to the United States Constitution, which is likely to have impact on similar restrictions on use of financial information. Sorrell v. IMS Health Inc., No. 10-779 (June 23, 2011). The PCL, absent a prescriber’s consent, prohibits prescriber-identifying information from being (i) sold by pharmacies and similar entities, (ii) disclosed by pharmacies and similar entities for marketing purposes, or (iii) used for marketing purposes by pharmaceutical manufacturers. However, the PCL sets forth a number of exceptions to these prohibitions-for example, if the information is to be used for "health care research." Vermont enacted the PCL to, among other things, address pharmaceutical manufacturers’ use of prescriber-identifying information to more effectively promote brand name drugs through sales representatives that meet with prescribers. The Court found that the provisions of the PCL under examination impose content- and speaker-based restrictions on the sale, disclosure, and use of prescriber-identifying information. In doing so, the Court emphasized that the law disfavors speech with a particular content (i.e., marketing) and particular speakers (i.e., the sales representatives), while allowing prescriber-identifying information to be purchased, acquired, and used for other types of speech and by other types of speakers. Therefore, the Court found that the PCL provisions are subject to heightened judicial scrutiny. Under such a standard, the PCL, in order to sustain its restriction on protected expression, would need to advance a substantial government interest and be drawn to achieve that interest. The Court found that while the PCL possibly advances a proper interest (e.g., lowering healthcare costs and improving public health), it does not permissibly achieve such an interest, making the selling, sharing, and use limitations of the PCL unconstitutional. The decision, authored by Justice Kennedy and joined by five others, affirmed the Second Circuit’s judgment.

    State Issues

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  • North Carolina Amends Methods for Recording Satisfaction of a Security Instrument

    State Issues

    On June 23, North Carolina House Bill 312 (Bill) was approved, which amends the methods for recording a satisfaction of a security instrument with the register of deeds, clarifies the requirements for electronically registering plats with the register of deeds, and amends restrictions on access to military discharge documents recorded with the register of deeds. The section of the Bill regarding access to military discharge documents became effective when the Bill became law, and the remainder of the Bill will become effective October 1, 2011.

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  • Louisiana Provides Additional Exemptions from Mortgage Loan Originator Licensing Requirement

    State Issues

    On June 21, Louisiana Governor Bobby Jindal signed into law H.B. 492, which exempts certain individuals that originate residential mortgage loans exclusively for one federally chartered depository institution from the mortgage loan originator licensing requirement set forth under the Louisiana S.A.F.E. Residential Mortgage Lending Act (the Act). To be eligible for the exemption, such individuals must also, among other things, (i) originate no more than five residential mortgage loans per calendar year, (ii) be contractually prohibited from soliciting, processing, negotiating, or placing a residential mortgage loan with a person other than the single federally chartered depository institution, (iii) enroll with the Louisiana Office of Financial Institutions as an individual who originates exclusively with a single federal depository institution until the time federal law or regulation requires such individuals to register with the Nationwide Mortgage Licensing System and Registry, and (iv) be sponsored by a life insurance company or an affiliate of the company which is authorized to engage in business in Louisiana and which is licensed as a Louisiana mortgage loan broker or originator. The bill also exempts individuals employed by certain non-profit organizations approved by the Department of Housing and Urban Development from the Act’s mortgage loan originator licensing requirement. Finally, the bill removes from the Act eligibility and filing requirements previously applicable to persons meeting the definition of registered mortgage loan originator. These provisions are effective immediately.

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  • Texas Amends Requirements under Mortgage Broker License Act and Texas SAFE Act

    State Issues

    On June 17, Texas Governor Rick Perry signed into law S.B. 1124, which amends the Texas Mortgage Broker License Act (now referred to as the Texas Residential Mortgage Loan Company and Residential Mortgage Loan Originator Licensing and Registration Act) to, among other things, replace the mortgage broker and loan officer licensing requirements with a residential mortgage loan company and residential mortgage loan originator licensing requirement, respectively. The bill defines "residential mortgage loan company" to include a credit union subsidiary organization, independent contractor loan processor or underwriter company, and financial services company, among others. Additionally, the bill amends the Act’s exemption provisions, changes the period of time for which a license is valid, and revises reporting requirements triggered by certain licensee changes (e.g., change of qualified individual). Finally, the bill amends the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 to exempt certain individuals that originate residential mortgage loans exclusively for one federally chartered depository institution from the mortgage loan originator licensing requirement set forth under the Act. To be eligible for the exemption, such individuals must also, among other things, (i) originate no more than five residential mortgage loans in any 12-consecutive-month period, (ii) be contractually prohibited from soliciting, processing, negotiating, or placing a residential mortgage loan with a person other than the single federally chartered depository institution, (iii) enroll with the Texas Department of Savings and Mortgage Lending as a financial exclusive agent until the time federal law or regulation requires such individuals to register with the Nationwide Mortgage Licensing System and Registry, and (iv) be sponsored by a life insurance company or an affiliate of the company which is authorized to engage in business in Texas.

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  • Texas Governor Signs Residential Mortgage Loan Servicer Registration Act Into Law

    State Issues

    On June 17, Texas Governor Rick Perry signed into law S.B. 17, the Residential Mortgage Loan Servicer Registration Act, which requires all residential mortgage loan servicers in Texas to register with the Commissioner of the Texas Department of Savings and Mortgage Lending (Commissioner). The registration requirement applies to both companies acting purely in a servicing capacity, as well as mortgage bankers acting as residential mortgage loan servicers. In addition to setting forth registration requirements, the law allows the Commissioner to investigate consumer complaints against registrants, impose an investigation fee to cover costs incurred in any such investigation, and order a non-compliant registrant to cease and desist and/or pay a consumer for damages. Additionally, no later than 30 days after commencing the servicing of a loan, registrants are required to provide borrowers with a specific notice that sets forth the Texas Department of Savings and Mortgage Lending’s contact information for reference in registering complaints. S.B. 17 takes effect on September 1, 2011.

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  • Oregon Provides Confidential Status to Mortgage Loan Documents Obtained During Licensee Examinations

    State Issues

    On June 17, Oregon Governor John Kitzhaber signed into law H.B. 2083, which amends the Oregon Mortgage Lender Law to provide confidential status to mortgage loan documents obtained by the Director of the Oregon Department of Consumer and Business Services as part of an examination. Effective immediately, any mortgage loan documents that the Director obtains during an examination of a mortgage banker, mortgage broker, or mortgage loan originator is not admissible as evidence in a private civil action or subject to (i) public inspection as a public record, (ii) subpoena, or (iii) discovery. However, the amendment permits the Director to disclose an individual’s mortgage loan documents obtained during an examination to that individual, so long as the Director authenticates the individual’s identity before disclosure.

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