Louisiana S.A.F.E. Residential Mortgage Lending Act

Louisiana S.A.F.E.Residential Mortgage Lending Act

Changes as a result of Act 522 of the 2009 Legislature

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

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. 6:1086

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.


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


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


Licensed Attorneys When activity is incidental to providing

legal services Exempt from licensure Still subject to Part III


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


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 24 hours of pre-licensing education approved by NMLS&R (4 hours must also be approved by either NAMB or MBA) 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 (NMLS&R)

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.


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.


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

RENEWALS

Renewals are due by December 1st each year

Late after December 31 and before March 1,

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

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

Immediate Suspension

Is convicted of a felony which would have prohibited issuance or renewal of the license

Has license suspended or revoked in another jurisdiction

Appeal of Immediate Suspension

A person for whom a license has been suspended shall have thirty days from the date of the order to request a hearing in accordance with the Administrative Procedure Act

Failure to timely request a hearing shall constitute a waiver of appeal rights regarding the suspension

Fines & Penalties

Upon being found guilty of violating any provision of the RMLA or Rule brokers, and/or originators may be fined: Up to $1,000 per violation & Up to $1,000 per day the person acts as a

residential mortgage broker, lender, or originator without complying with the RMLA or any rules promulgated thereunder

Refunds may also be ordered for any unauthorized fee or charge

Prohibitions

It shall be a violation for any person engaged in residential mortgage lending activity subject to this Chapter to: Directly or indirectly employ any scheme,

device, or artifice to defraud or mislead borrowers, lenders, or any person, when such person or individual knew or should have known that such was defrauding or misleading

Engage in any unfair or deceptive practice toward any person

Obtain property by fraud or misrepresentation

Prohibitions

With intent to defraud, solicit or enter into a contract with a consumer providing for payment of an unlawful fee or commission to a person subject to this Chapter even though no loan is actually obtained for the consumer

Solicit, advertise, or enter into a contract for specific interest rates, points, or other terms when the person or individual knew or should have known that such terms are not actually available at the time of soliciting, advertising, or contracting.

Prohibitions

Conduct any business covered by this Chapter without holding a license or knowingly assist or aid and abet any person in the conduct of business under this Chapter without a valid license as required

As determined by the commissioner, structure a residential loan transaction in such a manner as to circumvent the provisions of this Chapter

Fail to comply with this Chapter or rules or regulations promulgated under it, or fail to comply with any other state or federal law, including rules and regulations issued thereunder, applicable to any residential mortgage lending activity

Prohibitions

Make in any manner, any false or deceptive statement or representation with regard to the rates, points, or terms or conditions for a residential mortgage loan when such person or individual knew or should have known that such was false or deceptive, or engage in bait and switch advertising

Negligently make any false statement, or knowingly and willfully make any omission of material fact, in connection with any information or reports filed with a governmental agency or the NMLS&R, or in connection with any investigation conducted by the commissioner or any other governmental agency

Prohibitions

Make any payment, threat, or promise, directly, to any person or appraiser of a property for the purpose of influencing the independent judgment of the person in connection with a residential mortgage loan, or influencing the independent judgment of the appraiser with respect to the value of the property

Collect, charge, or attempt to collect or charge, or use or propose any agreement purporting to collect or charge any fee prohibited by this Chapter

Engage in loan processing or underwriting activities as an independent contractor without obtaining a license to act as a residential mortgage loan originator

Prohibitions

Fail to truthfully account for monies belonging to a party to a residential mortgage loan transaction

Represent to the public through advertising or other means of communicating or providing information including the use of business cards, stationary, brochures, signs, rate lists, or other promotional items, that such an individual can or will perform any activities of a mortgage loan originator, while such individual engages in activities solely as a loan processor or underwriter

Continuing Education

Each licensed originator must take 10 hours of NMLS&R approved continuing education each year prior to renewal 3 hours of education pertaining to federal laws and

regulations 2 hours of ethics, which shall include instruction on

fraud, consumer protection, and fair lending issues 2 hours related to lending standards for the

nontraditional mortgage product marketplace 2 hours of the remaining required in addition to

being approved by the NMLS&R must also be approved by either NAMB or MBA

Continuing Education for 2009

Specific content will not be required until Commissioner determines that NMLS&R is adequately available for all Louisiana licensees to become compliant Anticipated in early 2010 Any 10 hours of education approved by

OFI will be sufficient for renewal of an originator license for 2010

Testing Requirements

All licensed originators must obtain a passing grade on both the National and State Components of the test developed by the NMLS&R

All new applicants on or after July 31, 2009 must obtain a passing grade on both components of the test before obtaining a license

Originators which were licensed on or before July 30, 2009 must obtain a passing grade on both components by December 31, 2010

Testing RequirementsState Component Exemption

Originators which obtained a passing grade on or after January 1, 2004 on the Louisiana pre-licensing test previously administered by PSI Exams Will be exempt from taking the state

component of the test but must obtain a passing grade on the national component by December 31, 2010

A passing score is 75% correct answers

Testing RequirementsFailing Grades

An individual may retake one or both of the components of the test up to three consecutive times after waiting at least thirty days between tests

After failing three consecutive tests the individual must wait at least six months before taking a test again

Requirement toRetake Examinations

An originator who fails to maintain a license for a period of five years or longer will be required to obtain a passing grade on both components prior to obtaining a license

AllowableUp Front Fees By Brokers

Appraisal Title Search Credit Report Actual cost of Loan Prospector or Desktop

Underwriter fees not to exceed $25 Licensed brokers may collect up to a $500

application fee provided: Prior to collecting the consumer is provided a

written disclosure of the amount of the fee and The application fee shall be refundable at any

time prior to ordering any service required by the lender or is the lender is unable to approve the loan after all requested documentation has been provided

AllowableUp Front Fees By Brokers (cont)

amount collected cannot exceed good faith estimate of actual cost

any portion which exceeds actual cost must be refunded to borrower or credited to their account at closing

Originator Requirements

Originator is required to sign the initial application and include their NMLS&R unique identifier

Originator may only originate loans for one employer

Lender Fees

Lenders prohibited from collecting advance expense fees for third party settlement services that exceed Good Faith Estimate of actual cost

Any portion of excess collected over actual cost must be refunded or credited to borrower at closing

Lender Fees (cont)

Licensed lenders may collect up to a $500 application fee provided: Prior to collecting the consumer is

provided a written disclosure of the amount of the fee and

The application fee shall be refundable at any time prior to ordering any service required by the lender or is the lender is unable to approve the loan after all requested documentation has been provided

Mortgage Loan Origination Agreement

Must be provided by broker within 3 days of the initial application

Must describe the nature of broker’s relationship with borrower and the manner in which they will be compensated name, address, phone number, and NMLS&R

unique identifier of originator name, address, phone number, and unique

identifier of mortgage lender (mortgage broker)

Louisiana S.A.F.E. Residential Mortgage Lending Act

Documents

Transcript of Louisiana S.A.F.E. Residential Mortgage Lending Act