BILL NUMBER: AB 34 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 2, 2009
INTRODUCED BY Assembly Member Nava
( Principal coauthor: Senator
Calderon )
DECEMBER 1, 2008
An act to amend Sections 10140.6, 10150, 10232.1, 10235.5,
and 10236.4 of, to add Article 2.1 (commencing with Section 101
66.01) to Chapter 3 of Division 4 of, and to repeal Section
10131.8 of, the Business and Professions Code, and to amend Sections
22101, 22101.5, 22102, 22104, 22107, 22108, 22109, 22112, 22153,
22165, 22166, 22170, 50002, 50003, 50121, 50122, 50124, 50125, 50126,
50130, 50204, 50205, 50309, 50314, 50320, 50700, and 50701 of, to
add Sections 22012, 22013, 22014, 22015, 22016, 22017, 22018, 22019,
22020, 22021, 22022, 22023, 22166.5, 22180, 22181, 22182, 22183,
22184, 22185, 22186, 22187, 22188, 22189, 22190, 22191, 22192, 22193,
22194, 50110, 50110.1, 50110.2, 50110.3, 50110.4, 50110.5, 50110.6,
50110.7, 50110.8, 50110.9, 50110.10, 50110.11, 50110.12, 50110.16,
50209, and 50309.1 to, and to repeal Section 50705 of, the Financial
Code, relating to mortgage lending.
LEGISLATIVE COUNSEL'S DIGEST
AB 34, as amended, Nava. Residential mortgage lending.
Real estate, finance lender, and residential mortgage
lender licenses: mortgage loan originators.
(1) Existing law, the Real Estate Law, governs the licensing and
regulation of real estate licensees, as defined, as administered by
the Real Estate Commissioner. Existing law imposes specified
requirements on real estate brokers who solicit borrowers or lenders
or negotiate loans or collect payments or perform services for
borrowers or lenders relative to loans secured by real property. A
willful violation of the Real Estate Law is a crime.
This bill would require a real estate license endorsement from the
commissioner in order to engage in the business of a mortgage loan
originator, as defined. The bill would establish penalties if a real
estate licensee fails to obtain a license endorsement before
conducting business as a mortgage loan originator and would authorize
the commissioner to suspend or revoke a real estate license for a
failure to pay these penalties. The bill would require applicants for
a license endorsement as a mortgage loan originator to furnish
specified background information to the Nationwide Mortgage Licensing
System and Registry. The bill would establish standards for issuance
and renewal of a license endorsement to act as a mortgage loan
originator, including satisfying specified educational requirements.
The bill would require these real estate licensees to annually submit
business activities reports, and other reports that may be required,
to the commissioner. The bill would authorize the commissioner to
examine the affairs of real estate brokers, including those that
obtain license endorsement as a mortgage loan originator. The bill
would require the commissioner to report violations of the provisions
regulating real estate brokers and mortgage loan originators to the
Nationwide Mortgage Licensing System and Registry. The bill would
require recipients of a license endorsement as a mortgage loan
originator to use or disclose a specified unique identifier provided
by the Nationwide Mortgage Licensing System and Registry in
advertisements and solicitations of the mortgage loan originator. The
bill would enact other related provisions.
(2) Existing law provides for the licensure and regulation of
finance lenders and brokers and residential mortgage lenders and
servicers by the Department of Corporations. A willful violation of
the laws regulating these licensees is a crime.
This bill would require the licensure and regulation of mortgage
loan originators, as defined, under the California Finance Lenders
Law and the California Residential Mortgage Lending Act. The bill
would require mortgage loan originators to also be licensed and
registered through the Nationwide Mortgage Licensing System and
Registry. The bill would require applicants for licensure as a
mortgage loan originator to furnish specified background information
to the Nationwide Mortgage Licensing System and Registry and would
require applicants for licensure or license renewal to satisfy
certain requirements, including educational requirements. The bill
would require finance lenders and brokers engaged in the business of
making or brokering residential mortgage loans to maintain a minimum
net worth of $250,000. The bill would require mortgage loan
originators to submit reports of condition to the Nationwide Mortgage
Licensing System and Registry and would authorize the commissioner
to adopt regulations requiring finance lenders and brokers, and
residential mortgage lenders or servicers, that employ mortgage loan
originators to submit reports of condition to the Nationwide Mortgage
Licensing System and Registry. The bill would require a person
originating residential mortgage loans to use or disclose a specified
unique identifier on all mortgage loan applications, solicitations,
or advertisements. The bill would enact other related provisions.
(3) Because a willful violation of these provisions would be a
crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Existing law provides for licensing and regulation of real estate
brokers by the Real Estate Commissioner. Real estate brokers, among
other things, are persons who solicit borrowers or lenders in
connection with loans secured by liens on real property.
Existing law also provides for licensing and regulation of
residential mortgage lenders by the Commissioner of Corporations.
This bill would state the intent of the Legislature to enact
legislation relative to an effective system of supervision and
enforcement of the mortgage lending industry, and would make
legislative findings and declarations regarding recently enacted
federal legislation and related matters.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no
yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Congress recently passed H.R. 3221, the Housing and Economic
Recovery Act of 2008, which was signed into law by the President on
July 30, 2008, and became Public Law 110-289.
(b) H.R. 3221 includes, as Title V of Division A of that act, the
Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the
SAFE ACT).
(c) The activities of mortgage loan originators and the
origination or offering of financing for residential real property
have a direct, valuable, and immediate impact upon California's
consumers, the California economy, California's communities and
neighborhoods, and the housing and real estate industry.
(d) Accessibility to mortgage credit is vital to California
residents.
(e) It is essential for the protection of California residents and
the stability of the economy that reasonable standards for licensing
and regulation of the business practices of mortgage loan
originators be imposed.
(f) The obligations of mortgage loan originators to consumers in
connection with originating or making of residential mortgage loans
warrant the regulation of the mortgage lending process.
(g) The purpose of the SAFE Act is to protect consumers seeking
mortgage loans and to ensure that the mortgage lending industry is
operating without unfair, deceptive, or fraudulent practices on the
part of mortgage loan originators.
SEC. 2. It is the intent of the Legislature to
establish in this act an effective system of supervision, regulation,
and enforcement of the mortgage lending industry, including the
following:
(a) The authority to issue licenses to conduct business under this
act, including the authority on the part of the administering agency
to promulgate rules and regulations or adopt procedures necessary to
the licensing of persons covered under this act.
(b) The authority to deny, suspend, condition, or revoke licenses
under this act.
(c) The authority to examine, investigate, and conduct enforcement
actions as necessary to carry out the intended purposes of this act,
including the authority to subpoena witnesses and documents, enter
orders, including cease and desist orders, order restitution and
monetary penalties, and order the removal and ban of individuals from
office or employment.
(d) Participation by the Department of Corporations and the
Department of Real Estate in the Nationwide Mortgage Licensing System
and Registry.
SEC. 2. Section 10131.8 of the Business
and Professions Code is repealed.
10131.8. (a) A real estate broker who acts pursuant to
subdivision (d) of Section 10131 and who meets all of the following
requirements shall notify the department annually in writing on a
form that is acceptable to the commissioner:
(1) The real estate broker is an approved lender for the Federal
Housing Administration, Veterans Administration, Farmers Home
Administration, Government National Mortgage Association, Federal
National Mortgage Administration, or the Federal Home Loan Mortgage
Corporation.
(2) The real estate broker makes residential mortgage loans to a
loan applicant for a residential mortgage loan by using or advancing
the broker's own funds, or by making a commitment to advance the
broker's own funds.
(3) The real estate broker makes the credit decision in the loan
transaction.
(4) The real estate broker at all times maintains a tangible net
worth, computed in accordance with generally accepted accounting
standards, of a minimum of two hundred fifty thousand dollars
($250,000).
(b) As used in paragraph (2) of subdivision (a), "own funds" means
(1) cash, corporate capital, or warehouse credit lines at commercial
banks, savings banks, savings and loan associations, industrial loan
companies, or other sources that are liability items on the real
estate broker's financial statements, whether secured or unsecured,
or (2) cash, corporate capital, or warehouse credit lines at
commercial banks, savings banks, savings and loan associations,
industrial loan companies, or other sources that are liability items
on the financial statements of an affiliate of the real estate
broker, whether secured or unsecured. "Own funds" does not include
funds provided by a third party to fund a loan on condition that the
third party will subsequently purchase or accept an assignment of the
loan.
SEC. 3. Section 10140.6 of the Business
and Professions Code is amended to read:
10140.6. (a) A real estate licensee shall
not publish, circulate, distribute, nor or
cause to be published, circulated, or distributed in any
newspaper or periodical, or by mail , any matter
pertaining to any activity for which a real estate license is
required which that does not contain a
designation disclosing that he or she is performing acts
for which a real estate license is required.
(b) (1) A real estate licensee shall disclose his or her license
identification number and, if that licensee is a mortgage loan
originator, the unique identifier assigned to that licensee by the
Nationwide Mortgage Licensing System and Registry, on all
solicitation materials intended to be the first point of contact with
consumers and on real property purchase agreements when acting as an
agent in those transactions. The commissioner may adopt regulations
identifying the materials in which a licensee must disclose a license
identification number and, if that licensee is a mortgage loan
originator, the unique identifier assigned to that licensee by the
Nationwide Mortgage Licensing System and Registry.
(2) For purposes of this section, "solicitation materials intended
to be the first point of contact with consumers" includes business
cards, stationery, advertising fliers, and other materials designed
to solicit the creation of a professional relationship between the
licensee and a consumer, and excludes an advertisement in print or
electronic media and "for sale" signs.
(3) Nothing in this section shall be construed to limit or change
the requirement described in Section 10236.4 as applicable to real
estate brokers.
The
(c) The provisions of this
section shall not apply to classified rental advertisements reciting
the telephone number at the premises of the property offered for rent
or the address of the property offered for rent.
(d) "Mortgage loan originator," "unique identifier," and
"Nationwide Mortgage Licensing System and Registry" have the same
meanings set forth in Section 10166.01.
SEC. 4. Section 10150 of the Business
and Professions Code is amended to read:
10150. (a) Application for the real estate broker license
examination shall be made in writing to the commissioner. The
commissioner may prescribe the format and content of the broker
examination application. The application for the broker examination
shall be accompanied by the real estate broker license examination
fee.
(b) Persons who have been notified by the commissioner that they
passed the real estate broker license examination may apply for a
real estate broker license. A person applying for the broker
examination may also apply for a real estate broker license. However,
a license shall not be issued until the applicant passes the real
estate broker license examination. If there is any change to the
information contained in a real estate broker license application
after the application has been submitted and before the license has
been issued, the commissioner may require the applicant to submit a
supplement to the application listing the changed information.
(c) Application for the real estate broker license shall be made
in writing to the commissioner. The commissioner may prescribe the
format and content of the broker license application. The application
for the real estate broker license shall be accompanied by the
appropriate fee.
(d) Application for an endorsement to act as a mortgage loan
originator, as defined in Section 10166.01, shall be made either
electronically or in writing to the commissioner. The commissioner
may prescribe the format and content of the mortgage loan originator
endorsement application, which shall meet the minimum requirements
for licensing of a mortgage loan originator, pursuant to the Secure
and Fair Enforcement for Mortgage Licensing Act of 2008 (Public Law
110-289).
SEC. 5. Article 2.1 (commencing with Section
10166.01) is added to Chapter 3 of Division 4 of the
Business and Professions Code , to read:
Article 2.1. Secure and Fair Enforcement for Mortgage Licenses
10166.01. For purposes of this article, the following definitions
shall apply:
(a) "SAFE Act" means the Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 (Public Law 110-289).
(b) (1) "Mortgage loan originator" means an individual who takes a
residential mortgage loan application or offers or negotiates terms
of a residential mortgage loan for compensation or gain. An
individual real estate licensee acting within the meaning of
paragraph (d) of Section 10131 is a mortgage loan originator for
purposes of this article with respect to activities involving
residential mortgage loans.
(2) Mortgage loan originator does not include any of the
following:
(A) An individual who performs purely administrative or clerical
tasks on behalf of a person meeting the definition of a mortgage loan
originator, except as otherwise provided in subdivision (d) of
Section 10166.03. The term "administrative or clerical tasks" means
the receipt, collection, and distribution of information common for
the processing or underwriting of a loan in the mortgage industry and
communication with a consumer to obtain information necessary for
the processing or underwriting of a residential mortgage loan.
(B) An individual that is not compensated by a lender, other
mortgage loan originator, or by any agent of any lender or other
mortgage loan originator.
(C) An individual that is solely involved in extensions of credit
relating to timeshare plans, as that term is defined in Section 101
(53D) of Title 11 of the United States Code.
(D) An individual licensed or registered as a mortgage loan
originator pursuant to the provisions of the Financial Code and the
SAFE Act.
(c) "Nationwide Mortgage Licensing System and Registry" means a
mortgage licensing system developed and maintained by the Conference
of State Bank Supervisors and the American Association of Residential
Mortgage Regulators for the licensing and registration of mortgage
loan originators.
(d) "Residential mortgage loan" means 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, or residential real estate upon which is constructed or
intended to be constructed a dwelling. "Dwelling" means a residential
structure that contains one to four units, whether or not that
structure is attached to real property. The term includes an
individual condominium unit, cooperative unit, mobile home, or
trailer, if it is used as a residence.
(e) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
(f) "Loan processor or underwriter" means an individual who
performs clerical or support duties as an employee at the direction
of, and subject to the supervision and instruction of, a mortgage
loan originator.
10166.02. (a) A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131, and who makes,
arranges, or services loans secured by real property containing one
to four residential units, shall notify the department within 30 days
of the effective date of this section or upon commencing that
activity, whichever is later. The notification shall be made in
writing on a form that is acceptable to the commissioner.
(b) No individual may engage in business as a mortgage loan
originator under this article without first doing both of the
following:
(1) Obtaining and maintaining a real estate license pursuant to
Article 2 (commencing with Section 10150).
(2) Obtaining and maintaining a real estate license endorsement
identifying that individual as a licensed mortgage loan originator.
(c) License endorsements shall be valid for a period of one year
and shall expire on the 31st of December each year.
(d) Applicants for a mortgage loan originator license endorsement
shall apply in a form prescribed by the commissioner. Each form shall
contain content as set forth by rule, regulation, instruction, or
procedure of the commissioner.
(e) In order to fulfill the purposes of this article, the
commissioner may establish relationships or contracts with the
Nationwide Mortgage Licensing System and Registry or other entities
designated by the Nationwide Mortgage Licensing System and Registry
to collect and maintain records and process transaction fees or other
fees related to licensees or other persons subject to this article.
(f) A real estate broker who fails to notify the department
pursuant to subdivision (a), or who fails to obtain a license
endorsement required pursuant to subdivision (b), shall be assessed a
penalty of fifty dollars ($50) per day for each day written
notification has not been received or a license endorsement has not
been obtained, up to and including the 30th day after the first day
of the assessment penalty. On and after the 31st day, the penalty is
one hundred dollars ($100) per day, not to exceed a total penalty of
ten thousand dollars ($10,000), regardless of the number of days,
until the department receives the written notification or the
licensee obtains the license endorsement. Penalties for violations of
subdivisions (a) and (b) shall be additive.
(g) The commissioner may suspend or revoke the license of a real
estate broker who fails to pay a penalty imposed pursuant to this
section. In addition, the commissioner may bring an action in an
appropriate court of this state to collect payment of that penalty.
(h) All penalties paid or collected under this section shall be
deposited into the Recovery Account of the Real Estate Fund and
shall, upon appropriation by the Legislature, be available for
expenditure for the purposes specified in Chapter 6.5 (commencing
with Section 10470).
10166.03. (a) A loan processor or underwriter who does not
represent to the public, through advertising or other means of
communicating or providing information, including the use of business
cards, stationery, brochures, signs, rate lists, or other
promotional items, that the individual can or will perform any of the
activities of a mortgage loan originator shall not be required to
obtain a license endorsement as a mortgage loan originator.
(b) An individual engaging solely in loan processor or underwriter
activities shall not represent to the public, through advertising or
other means of communicating or providing information including the
use of business cards, stationery, brochures, signs, rate lists, or
other promotional items, that the individual can or will perform any
of the activities of a mortgage loan originator.
(c) An independent contractor who is employed by a mortgage loan
originator may not engage in the activities of a loan processor or
underwriter for a residential mortgage loan unless the independent
contractor loan processor or underwriter obtains and maintains an
endorsement as a mortgage loan originator under this article. Each
independent contractor loan processor or underwriter who obtains and
maintains an endorsement as a mortgage loan originator under this
article shall have and maintain a valid unique identifier issued by
the Nationwide Mortgage Licensing System and Registry.
10166.04. (a) In connection with an application to the
commissioner for a license endorsement as a mortgage loan originator,
every applicant shall furnish to the Nationwide Mortgage Licensing
System and Registry information concerning the applicant's identity,
including the following:
(1) Fingerprints or fingerprint images, for purposes of performing
a state and federal criminal history background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain both of the
following:
(A) An independent credit report from a consumer reporting agency.
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(b) If the Nationwide Mortgage Licensing System and Registry
electronically submits fingerprint images and related information, as
required by the Department of Justice, for an applicant for a
mortgage loan originator license endorsement, to the Department of
Justice for the purposes of obtaining information as to the existence
and content of a record of state convictions and state arrests, and
as to the existence and content of a record of state arrests for
which the Department of Justice establishes that the person is free
on bail or on his or her recognizance pending trial or appeal, the
Department of Justice shall provide an electronic response to the
Nationwide Mortgage Licensing System and Registry pursuant to
paragraph (1) of subdivision (p) of Section 11105 of the Penal Code,
and shall provide the same electronic response to the department.
(c) The Nationwide Mortgage Licensing System and Registry may
request from the Department of Justice subsequent arrest notification
service, as provided pursuant to Section 11105.2 of the Penal Code,
for persons described in subdivision (a). If requested by the
department, the Department of Justice shall provide the same
electronic response to the department.
(d) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the requests described in this section.
10166.05. Notwithstanding any other provision of law, the
commissioner shall not issue a license endorsement to act as a
mortgage loan originator to an applicant unless the commissioner
makes all of the following findings:
(a) The applicant has never had a mortgage loan originator license
revoked in any other governmental jurisdiction.
(b) The applicant has not been convicted of, or pled guilty or
nolo contendere to, a felony in a domestic, foreign, or military
court, under either of the following conditions, however, any
conviction expunged from the applicant's record shall not be
considered a conviction for purposes of this subdivision:
(1) During the seven year period preceding the date of the
application for licensing.
(2) At any time preceding the date of application, if the felony
involved an act of fraud, dishonesty, a breach of trust, or money
laundering.
(c) The applicant has demonstrated such financial responsibility,
character, and general fitness as to command the confidence of the
community and warrant a determination that the mortgage loan
originator will operate honestly, fairly, and efficiently within the
purposes of the article.
(d) The applicant has complied with the education and written
testing requirements in Section 10166.06.
10166.06. (a) In addition to the requirements of Section 10153,
an applicant for a license endorsement as a mortgage loan originator
shall complete at least 20 hours of education courses, which shall
include at least the following:
(1) Three hours of federal law and regulations.
(2) Three hours of ethics, which shall include instruction on
fraud, consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of this section, education courses are only
acceptable if they have been reviewed and approved, or otherwise
deemed acceptable, by the Nationwide Mortgage Licensing System and
Registry, in accordance with the SAFE Act, and by the commissioner.
Education may be offered in a classroom, online, or by any other
means approved by the Nationwide Mortgage Licensing System and
Registry, in accordance with the SAFE Act, and by the commissioner.
The commissioner may substitute any of the courses described in
subdivision (a) for the course requirements of Section 10153.2,
10153.3, 10153.4, or 10153.5, subject to a finding that the course
requirements in subdivision (a) are substantially equivalent to, and
meet the intent of, Section 10153.2, 10153.3, 10153.4, or 10153.5, as
applicable.
(c) A person who successfully completes the education requirements
approved by the Nationwide Mortgage Licensing System and Registry in
any state other than California shall be granted credit by the
commissioner toward completion of the education requirements of this
section.
(d) Before being issued a license endorsement to act as a mortgage
loan originator, an individual shall pass a qualified written test
developed or otherwise deemed acceptable by the Nationwide Mortgage
Licensing System and Registry and administered by a test provider
approved or otherwise deemed acceptable by the Nationwide Mortgage
Licensing System and Registry.
(e) A written test shall not be treated as a qualified written
test for purposes of this section, unless the test adequately
measures the applicant's knowledge and comprehension in the following
subject areas: ethics, federal law and regulation pertaining to
mortgage origination, state law and regulation pertaining to mortgage
origination, and federal and state law and regulation relating to
fraud, consumer protection, the nontraditional mortgage marketplace,
and fair lending issues.
(f) Nothing in this section shall prohibit a test provider
approved by the Nationwide Mortgage Licensing System and Registry
from providing a test at the location of the employer of the
applicant or any subsidiary or affiliate of the employer of the
applicant, or any entity with which the applicant holds an exclusive
arrangement to conduct the business of a mortgage loan originator.
(g) An individual shall not be considered to have passed a
qualified written test administered pursuant to this section unless
the individual achieves a test score of not less than 75 percent
correct answers to questions.
(h) An individual who fails the qualified written test may retake
the test up to three consecutive times, although at least 30 days
must pass between each retesting.
(i) An applicant who fails three consecutive retests must wait at
least six months before retesting.
(j) A mortgage loan originator who fails to maintain a valid
license endorsement for a period of five years or longer or who fails
to register as a mortgage loan originator in accordance with
applicable California law shall retake the qualified written test.
10166.07. (a) A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131, and who makes,
arranges, or services one or more loans in a calendar year that are
secured by real property containing one to four residential units,
shall annually file a business activities report, within 90 days
after the end of the broker's fiscal year or within any additional
time as the commissioner may allow for filing for good cause. The
report shall contain within its scope all of the following
information for the fiscal year, relative to the business activities
of the broker and those of any other brokers and real estate
salespersons acting under that broker's supervision:
(1) Name and license number of the
supervising broker and names and license numbers of the real estate
brokers and salespersons under that broker's supervision. The report
shall include brokers and salespersons who were under the supervising
broker's supervision for all or part of the year.
(2) A list of the real estate-related activities in which the
supervising broker and the brokers and salespersons under his or her
supervision engaged during the prior year. This listing shall
identify all of the following:
(A) Activities relating to mortgages, including arranging, making,
or servicing.
(B) Other activities performed under the real estate broker's or
salesperson's license.
(C) Activities performed under related licenses, including, but
not limited to, a license to engage as a finance lender or a finance
broker under the California Finance Lenders Law (Division 9
(commencing with Section 22000) of the Financial Code), or a license
to engage as a residential mortgage lender or residential mortgage
loan servicer under the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000) of the Financial Code).
(3) A list of the forms of media used by the broker and those
under his or her supervision to advertise to the public, including
print, radio, television, the Internet, or other means.
(4) For fixed rate loans made, brokered, or serviced, all of the
following:
(A) The total number, aggregate principal amount, lowest interest
rate, highest interest rate, and a list of the institutional lenders
of record. If the loan was funded by any lender other than an
institutional lender, the broker shall categorize the loan as
privately funded.
(B) The total number and aggregate principal amount of covered
loans, as defined in Section 4970 of the Financial Code.
(C) The total number and aggregate principal amount of loans for
which Department of Real Estate form RE Form 885 or an equivalent is
required.
(5) For adjustable rate loans made, brokered, or serviced, all of
the following:
(A) The total number, aggregate principal amount, lowest beginning
interest rate, highest beginning interest rate, highest margin, and
a list of the institutional lenders of record. If the loan was funded
by any lender other than an institutional lender, the broker shall
categorize the loan as privately funded.
(B) The total number and aggregate principal amount of covered
loans, as defined in Section 4970 of the Financial Code.
(C) The total number and aggregate principal amount of loans for
which Department of Real Estate form RE Form 885 or an equivalent is
required.
(6) For all loans made, brokered, or serviced, the total number
and aggregate principal amount of loans funded by institutional
lenders, and the total number and aggregate principal amount of loans
funded by private lenders.
(7) For all loans made, brokered, or serviced, the total number
and aggregate principal amount of loans that included a prepayment
penalty, the minimum prepayment penalty length, the maximum
prepayment penalty length, and the number of loans with prepayment
penalties whose length exceeded the length of time before the
borrower's loan payment amount could increase.
(8) For all loans brokered, the total compensation received by the
broker, including yield spread premiums, commissions, and rebates,
but excluding compensation used to pay fees for third-party services
on behalf of the borrower.
(9) For all mortgage loans made or brokered, the total number of
loans for which a mortgage loan disclosure statement was provided in
a language other than English, and the number of forms provided per
language other than English.
(10) For all mortgage loans serviced, the total amount of funds
advanced to be applied toward a payment to protect the security of
the note being serviced.
(11) For purposes of this section, an institutional lender has the
meaning specified in paragraph (1) of subdivision (c) of Section
10232.
(b) A broker subject to this section and Section 10232.2 may file
consolidated reports that include all of the information required
under this section and Section 10232.2. Those consolidated reports
shall clearly indicate that they are intended to satisfy the
requirements of both sections.
(c) If a broker subject to this section fails to timely file the
report required under this section, the commissioner may cause an
examination and report to be made and may charge the broker one and
one-half times the cost of making the examination and report. In
determining the hourly cost incurred by the commissioner for
conducting an examination and preparing the report, the commissioner
may use the estimated average hourly cost for all department audit
staff performing audits of real estate brokers. If a broker fails to
pay the commissioner's cost within 60 days of the mailing of a notice
of billing, the commissioner may suspend the broker's license or
deny renewal of that license. The suspension or denial shall remain
in effect until the billed amount is paid or the broker's right to
renew a license has expired. The commissioner may maintain an action
for the recovery of the billed amount in any court of competent
jurisdiction.
(d) The report described in this section is exempted from any
requirement of public disclosure by paragraph (2) of subdivision (d)
of Section 6254 of the Government Code.
10166.08. Each mortgage loan originator shall submit reports of
condition to the Nationwide Mortgage Licensing System and Registry
reports of condition, and those reports shall be in the form and
shall contain information as the Nationwide Mortgage Licensing System
and Registry may require.
10166.09. The minimum standards for renewal of an endorsement as
a mortgage loan originator shall include the following:
(a) The mortgage loan originator continues to meet the minimum
standards for obtaining an endorsement as a mortgage loan originator.
(b) The mortgage loan originator satisfies the annual continuing
education requirements described in Section 10166.10.
10166.10. (a) A mortgage loan originator shall complete at least
eight hours of continuing education annually, which shall include at
least three hours relating to federal law and regulations, two hours
of ethics, which shall include instruction on fraud, consumer
protection, and fair lending issues, and two hours related to lending
standards for the nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), continuing education courses
and course providers shall be reviewed and approved by the
commissioner and the Nationwide Mortgage Licensing System and
Registry.
(c) The commissioner shall have the authority to substitute any of
the courses described in subdivision (a) for the course requirements
of Section 10170.5, subject to a finding that the course
requirements in subdivision (a) are substantially equivalent to, and
meet the intent of, Section 10170.5.
(d) Nothing in this section shall preclude any education course,
as approved by the commissioner and the Nationwide Mortgage Licensing
System and Registry, that is provided by the employer of the
mortgage loan originator or an entity that is affiliated with the
mortgage loan originator by an agency contract, or any subsidiary or
affiliate of the employer or entity.
(e) Continuing education may be offered either in a classroom,
online, or by any other means approved by the commissioner and the
Nationwide Mortgage Licensing System and Registry.
(f) A mortgage loan originator may only receive credit for a
continuing education course in the year in which the course is taken.
(g) A mortgage loan originator may not take the same approved
course in the same or successive years to meet the requirements of
this section for continuing education.
(h) A mortgage loan originator who is an instructor of an approved
continuing education course may receive credit for his or her own
annual continuing education requirement at the rate of two hours
credit for every one hour taught.
(i) A person who successfully completes the education requirements
approved by the Nationwide Mortgage Licensing System and Registry in
any state other than California shall be granted credit by the
commissioner towards completion of continuing education requirements
in this state.
(j) A mortgage loan originator whose license endorsement lapses,
expires, or is suspended or revoked, and who wishes to regain his or
her license endorsement, shall complete continuing education
requirements for the last year in which the endorsement was held,
prior to issuance of a new or renewed endorsement.
10166.11. (a) A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131 and who makes,
arranges, or services loans secured by real property containing one
to four residential units, shall keep documents and records that will
properly enable the commissioner to determine whether the
residential mortgage brokerage, servicing, and lending functions
performed by the broker comply with this division and with all
applicable rules and orders made by the commissioner. These documents
shall include, at a minimum, the documents described in Section
10148. Upon request of the commissioner, a real estate broker shall
file an authorization for disclosure to the commissioner of financial
records of his or her licensed business pursuant to Section 7473 of
the Government Code.
(b) Notwithstanding subdivision (a) of Section 10148, the business
documents and records of real estate brokers described in
subdivision (a) and real estate salespersons acting under those
brokers are subject to inspection and examination or audit by the
commissioner, at his or her discretion, after reasonable notice. That
real estate broker or salesperson shall, upon request by the
commissioner and within the time period specified in that request,
allow the commissioner, or his or her authorized representative, to
inspect and copy any business documents and records. The commissioner
may suspend or revoke the license of the broker or salesperson if he
or she fails to produce documents or records within the time period
specified in the request.
(c) Inspection and examination or audit reports prepared by the
commissioner's duly designated representatives pursuant to this
section are not public records. Those reports may be disclosed to the
officers or directors of a licensee that is the subject of the
report for the purpose of corrective action. That disclosure shall
not operate as a waiver of the exemption specified in subdivision (d)
of Section 6254 of the Government Code.
10166.12. (a) As often as the commissioner deems necessary and
appropriate, the commissioner shall examine the affairs of each real
estate broker who is required to notify the commissioner or obtain a
license endorsement pursuant to Section 10166.02 for compliance with
this part. These examinations shall also include a review of the
affairs of all real estate brokers and real estate salespersons
acting under the supervision of each real estate broker who is
required to file reports with the department pursuant to Section
10166.07. The commissioner shall appoint suitable persons to perform
these examinations. The commissioner and his or her appointees may
examine the books, records, and documents of the licensee, and may
examine the licensee's officers, directors, employees, or agents
under oath regarding the licensee's operations. The commissioner may
cooperate with any agency of the state or federal government, other
states, agencies, the Federal National Mortgage Association, or the
Federal Home Loan Mortgage Corporation. The commissioner may accept
an examination conducted by one of these entities in place of an
examination by the commissioner under this section, unless the
commissioner determines that the examination does not provide
information necessary to enable the commissioner to fulfill his or
her responsibilities under this division.
(b) The commissioner may impose a penalty against a real estate
broker or real estate salesperson whose affairs are examined or
reviewed pursuant to subdivision (a) based on the findings of the
examination or review. The commissioner may suspend or revoke the
license or license endorsement of a real estate broker or real estate
salesperson who fails to pay that penalty. In addition, the
commissioner may bring an action in an appropriate court of this
state to collect payment of the penalty.
(c) Penalties collected pursuant to subdivision (b) shall be
deposited into the Recovery Account of the Real Estate Fund and
shall, upon appropriation by the Legislature, be available for
expenditure for the purposes specified in Chapter 6.5 (commencing
with Section 10470).
(d) The statement of the findings of an examination conducted
pursuant to this section shall belong to the commissioner and shall
not be disclosed to anyone other than the licensee, law enforcement
officials, or other state or federal regulatory agencies for further
investigation and enforcement. Reports required of licensees by the
commissioner under this division and results of examinations
performed by the commissioner under this division are the property of
the commissioner.
10166.13. A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131 and who makes,
arranges, or services loans secured by real property containing one
to four residential units shall make any special reports to the
commissioner that the commissioner may, from time to time, require.
10166.14. A real estate broker shall notify the department when
he or she is no longer subject to this part. If a broker has already
made reports required by Sections 10166.07 and 10166.08 within the
year, he or she shall continue reports for that year, but shall
notify the department prior to the expiration of that year that he or
she will no longer be subject to this part in the succeeding year.
10166.15. (a) The commissioner shall regularly report violations
of this article, as well as enforcement actions taken against any
mortgage loan originator to whom an endorsement has been issued, and
enforcement actions taken against any individual for failure to
obtain an endorsement as a mortgage loan originator, to the
Nationwide Mortgage Licensing System and Registry.
(b) The commissioner shall establish a process that may be used by
mortgage loan originators to challenge information entered into the
Nationwide Mortgage Licensing System and Registry by the
commissioner.
(c) The commissioner is authorized to promulgate regulations
specifying (1) the recordkeeping requirements that mortgage loan
originators shall satisfy and (2) the penalties that shall apply to
mortgage loan originators for violations of this article.
10166.16. (a) Except as otherwise provided in Section 1512 of the
SAFE Act, the requirements under any federal or state law regarding
the privacy or confidentiality of any information or material
provided to the Nationwide Mortgage Licensing System and Registry,
and any privilege arising under federal or state law, including the
rules of any federal or state court, with respect to that information
or material, shall continue to apply to the information or material
after the information or material has been disclosed to the
Nationwide Mortgage Licensing System and Registry. The information
and material may be shared with all state and federal regulatory
officials with mortgage industry oversight authority without the loss
of privilege or the loss of confidentiality protections provided by
federal or state law.
(b) For these purposes, the commissioner is authorized to enter
agreements or sharing arrangements with other governmental agencies,
the Conference of State Bank Supervisors, the American Association of
Residential Mortgage Regulators, or other associations representing
governmental agencies as established by rule, regulation or order of
the commissioner.
(c) Information or material that is subject to a privilege or
confidentiality under subdivision (a) shall not be subject to either
of the following:
(1) Disclosure under any state law governing the disclosure to the
public of information held by an officer or an agency of the state.
(2) Subpoena or discovery, or admission into evidence, in any
private civil action or administrative process, unless with respect
to any privilege held by the Nationwide Mortgage Licensing System and
Registry with respect to the information or material, the person to
whom the information or material pertains waives, in whole or in
part, in the discretion of the person, that privilege.
(d) This section shall not apply with respect to the information
or material relating to the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, mortgage
loan originators that is included in the Nationwide Mortgage
Licensing System and Registry for access by the public.
10166.17. In addition to any other duties imposed upon the
commissioner by law, the commissioner shall require mortgage loan
originators to be licensed and registered through the Nationwide
Mortgage Licensing System and Registry. In order to carry out this
requirement the commissioner is authorized to participate in the
Nationwide Mortgage Licensing System and Registry. For this purpose,
the commissioner may establish by rule, regulation, or order,
requirements as necessary, including, but not limited to, the
following:
(a) Background checks for the following:
(1) Criminal history through fingerprint or other databases.
(2) Civil or administrative records.
(3) Credit history.
(4) Any other information as deemed necessary by the Nationwide
Mortgage Licensing System and Registry.
(b) The payment of fees to apply for or renew licenses through the
Nationwide Mortgage Licensing System and Registry.
(c) The setting or resetting as necessary of renewal or reporting
dates.
(d) Requirements for amending or surrendering a license or any
other activities as the commissioner deems necessary for
participation in the Nationwide Mortgage Licensing System and
Registry.
SEC. 6. Section 10232.1 of the Business
and Professions Code is amended to read:
10232.1. (a) A real estate broker, prior to the use of any
proposed advertisement in connection with the conduct of activities
described in subdivisions (d) and (e) of Section 10131 and Section
10131.1, may shall submit a true copy
thereof to the Department of Real Estate for approval. The submission
shall be accompanied by a fee of not more than forty dollars ($40).
The commissioner shall by regulation prescribe the amount of the fee.
If disapproval of the proposed advertisement is not communicated by
the department to the broker within 15 calendar days after receipt of
the copy of the proposed advertisement by the department, the
proposed advertisement shall be deemed approved, but the department
shall not be precluded from disapproving a later publication or other
use of the same or similar advertising.
The commissioner shall adopt regulations pertaining to the
submittal and clearance of that advertising and establishing criteria
for approval to ensure that the public will be protected against
false or misleading representations.
Except as provided in subdivision (b), "advertisement" includes
dissemination in any newspaper, circular, form letter, brochure or
similar publication, display, sign, radio broadcast or telecast,
which concerns (1) the use, terms, rates, conditions, or the amount
of any loan or sale referred to in subdivisions (d) and (e) of
Section 10131 or Section 10131.1 or (2) the security, solvency, or
stability of any person carrying on the activities described in those
sections.
(b) "Advertisement" does not include a letter or brochure that
meets both of the following criteria:
(1) It is restricted in distribution to other real estate brokers
and to persons for whom the broker has previously acted as an agent
in arranging a loan secured by real property or in the purchase,
sale, or exchange of a deed of trust or real property sales contract.
(2) It is restricted in content to the identification and a
description of the terms of loans, mortgages, deeds of trust, real
property sales contracts, or any combination thereof offered for
funding or purchase through the broker as agent.
(c) Subdivision (a) is not applicable to advertising that is used
exclusively in connection with an offering authorized by permit
issued pursuant to the applicable provisions of the Corporate
Securities Law of 1968 (Division 1 (commencing with Section 25000 of
Title 4 of the Corporations Code).
(d) All advertising approvals shall be for a period of five years
after the date of approval. The approval period applies to all
advertising, including that which was previously submitted on a
mandatory basis.
SEC. 7. Section 10235.5 of the Business
and Professions Code is amended to read:
10235.5. (a) No real estate licensee
or mortgage loan originator shall place an advertisement
disseminated primarily in this state for a loan unless there is
disclosed within the printed text of that advertisement, or the oral
text in the case of a radio or television advertisement, the
license Department of Real Estate license number and
the unique identifier assigned to that licensee by the Nationwide
Mortgage Licensing System and Registry under which the loan
would be made or arranged , and that the advertisement has been
approved by the commissioner .
(b) "Mortgage loan originator," "unique identifier," and
"Nationwide Mortgage Licensing System and Registry" have the same
meanings set forth in Section 10166.01.
SEC. 8. Section 10236.4 of the Business
and Professions Code is amended to read:
10236.4. (a) In compliance with Section 10235.5, every licensed
real estate broker shall also display his or her license number on
all advertisements where there is a solicitation for borrowers or
potential investors. Every mortgage loan originator, as defined
in Section 1016 6.01, shall also display the unique
identifier assigned to that individual by the Nationwide Mortgage
Licensing System and Registry on all advertisements where there is a
solicitation for borrowers.
(b) The disclosures required by Sections 10232.4 and 10240 shall
include the licensee's license number , the mortgage originator'
s unique identifier, if applicable, and the
department's license information telephone number.
(c) This section shall become operative July 1, 1998
"Mortgage loan originator," "unique identifier," and
"Nationwide Mortgage Licensing System and Registry" have the same
meanings set forth in Section 10166.01 .
SEC. 9. Section 22012 is added to the
Financial Code , to read:
22012. "Depository institution" has the same meaning as in
Section 3 of the Federal Deposit Insurance Act, and includes any
credit union.
SEC. 10. Section 22013 is added to the
Financial Code , to read:
22013. "Federal banking agencies" means the Board of Governors of
the Federal Reserve System, the Comptroller of the Currency, the
Director of the Office of Thrift Supervision, the National Credit
Union Administration, and the Federal Deposit Insurance Corporation.
SEC. 11. Section 22014 is added to the
Financial Code , to read:
22014. "Immediate family member" means a spouse, child, sibling,
parent, grandparent, or grandchild. This includes stepparents,
stepchildren, stepsiblings, and adoptive relationships.
SEC. 12. Section 22015 is added to the
Financial Code , to read:
22015. "Individual" means a natural person.
SEC. 13. Section 22016 is added to the
Financial Code , to read:
22016. (a) "Loan processor or underwriter" means an individual
who performs clerical or support duties as an employee at the
direction of and subject to the supervision and instruction of a
person licensed, or exempt from licensing under Section 22194 of the
Financial Code.
(b) For purposes of subdivision (a), the term "clerical or support
duties" may include the following, subsequent to the receipt of an
application:
(1) The receipt, collection, distribution, and analysis of
information common for the processing or underwriting of a
residential mortgage loan.
(2) Communicating with a consumer to obtain the information
necessary for the processing or underwriting of a loan, to the extent
that communication does not include offering or negotiating loan
rates or terms, or counseling consumers about residential mortgage
loan rates or terms.
(c) An individual engaging solely in loan processor or underwriter
activities shall not represent to the public, through advertising or
other means of communicating or providing information including the
use of business cards, stationery, brochures, signs, rate lists, or
other promotional items, that the individual can or will perform any
of the activities of a mortgage loan originator.
SEC. 14. Section 22017 is added to the
Financial Code , to read:
22017. (a) "Mortgage loan originator" means an individual who for
compensation or gain or in the expectation of compensation or gain
does any of the following:
(1) Takes a residential mortgage loan application.
(2) Offers or negotiates terms of a residential mortgage loan.
(b) "Mortgage loan originator" does not include any of the
following:
(1) An individual engaged solely as a loan processor or
underwriter, except as otherwise provided in subdivision (d) of
Section 22194.
(2) A person or entity that only performs real estate brokerage
activities and is licensed or registered in accordance with
California law, unless the person or entity is compensated by a
lender, a mortgage broker, or other mortgage loan originator or by
any agent of that lender, mortgage broker, or other mortgage loan
originator.
(3) A person or entity solely involved in extensions of credit
relating to timeshare plans, as that term is defined in Section 101
(53D) of Title 11 of the United States Code.
SEC. 15. Section 22018 is added to the
Financial Code , to read:
22018. "Nationwide Mortgage Licensing System and Registry" means
a mortgage licensing system developed and maintained by the
Conference of State Bank Supervisors and the American Association of
Residential Mortgage Regulators for the licensing and registration of
licensed mortgage loan originators.
SEC. 16. Section 22019 is added to the
Financial Code , to read:
22019. "Nontraditional mortgage product" means any mortgage
product other than a 30-year fixed rate mortgage, except as provided
in Section 22171 and the regulations adopted thereunder.
SEC. 17. Section 22020 is added to the
Financial Code , to read:
22020. "Registered mortgage loan originator" means any individual
who:
(a) Meets the definition of a mortgage loan originater under
Section 22017 and is an employee of either:
(1) A depository institution.
(2) A subsidiary that is owned and controlled by a depository
institution and regulated by a federal banking agency.
(3) An institution regulated by the Farm Credit Administration.
(b) Is registered with, and maintains a unique identifier through,
the Nationwide Mortgage Licensing System and Registry.
SEC. 18. Section 22021 is added to the
Financial Code , to read:
22021. "Residential mortgage loan" means 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 Section 103(v) of the Truth in Lending Act,
or residential real estate upon which is constructed or intended to
be constructed a dwelling. "Dwelling" means a residential structure
that contains one to four units, whether or not that structure is
attached to real property. The term includes an individual
condominium unit, cooperative unit, mobile home, or trailer, if it is
used as a residence.
SEC. 19. Section 22022 is added to the
Financial Code , to read:
22022. "Residential real estate" means any real property located
in this state, upon which is constructed or intended to be
constructed a dwelling.
SEC. 20. Section 22023 is added to the
Financial Code , to read:
22023. "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
SEC. 21. Section 22101 of the Financial
Code is amended to read:
22101. (a) An application for a finance lender or broker
license under this division shall be in the form and contain
the information that the commissioner may by rule require and shall
be filed upon payment of the fee specified in Section 22103.
(b) Notwithstanding any other provision of law, an applicant who
does not currently hold a license as a finance lender or broker
under this division shall furnish with his or her application,
a full set of fingerprints and related information for purposes of
the commissioner conducting a criminal history record check. The
commissioner shall obtain and receive criminal history information
from the Department of Justice and the Federal Bureau of
Investigation pursuant to Section 22101.5.
(c) Nothing in this section shall be construed to prevent a
licensee from engaging in the business of a finance lender through a
subsidiary corporation if the subsidiary corporation is licensed
pursuant to this division.
(d) For purposes of this section, "subsidiary corporation" means a
corporation that is wholly owned by a licensee.
(e) A new application shall not be required for a change in the
address of an existing location previously licensed under this
division. However, the licensee shall comply with the requirements of
Section 22153.
(f) Notwithstanding any other provision of this section, the
commissioner may by rule require an application to be made through
the Nationwide Mortgage Licensing System and Registry, and may
require fees, fingerprints, financial statements, supporting
documents, changes of address, any other information, and amendments
or modifications thereto, to be submitted in the same manner.
SEC. 22. Section 22101.5 of the
Financial Code is amended to read:
22101.5. (a) The commissioner shall submit to the Department of
Justice fingerprint images and related information required by the
Department of Justice of all license candidates, as defined by
subdivision (a) of Section 22101, for purposes of obtaining
information as to the existence and content of a record of state or
federal convictions, state or federal arrests, and information as to
the existence and content of a record of state or federal arrests for
which the Department of Justice establishes that the person is free
on bail or on his or her own recognizance pending trial or appeal.
(b) When received, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary criminal
history information received pursuant to this section. The
Department of Justice shall review the information returned from the
Federal Bureau of Investigation and compile and disseminate a
response to the commissioner.
(c) The Department of Justice shall provide a response to the
commissioner pursuant to paragraph (1) of subdivision (p) of Section
11105 of the Penal Code.
(d) The commissioner shall request from the Department of Justice
subsequent arrest notification service, as provided pursuant to
Section 11105.2 of the Penal Code, for license candidates described
in subdivision (a).
(e) The Department of Justice shall charge a fee sufficient to
cover the costs of processing the requests pursuant to this section.
(f) This section shall become operative on July 1, 2006.
Notwithstanding any other provision in this
section, the commissioner may by rule require fingerprints submitted
by an applicant to be submitted to the Nationwide Mortgage Licensing
System and Registry in addition to the Department of Justice.
SEC. 23. Section 22102 of the Financial
Code is amended to read:
22102. (a) A licensee seeking to engage in business at a new
location shall submit an application to the commissioner by certified
mail, return receipt requested, at least 10 days before engaging in
business at a new location and pay the fee required by Section 22103.
(b) The commissioner, by regulation, shall adopt a form for the
application required by this section. The application shall contain
the following information:
(1) The address of the new location.
(2) Information on the person responsible for the lending activity
at the new location.
(3) Any additional information required by the commissioner.
(c) The licensee may engage in business at the new location 10
days after the date of mailing the application to engage in business
at that location.
(d) (1) The commissioner shall approve or deny the person
responsible for the lending activity at the new location in
accordance with Section 22109, and shall notify the licensee of this
decision within 90 days of the date of receipt of the application.
(2) If the commissioner denies the application, the licensee
shall, within 10 days of the date of receipt of notification of the
commissioner's denial, submit a new application to the commissioner
designating a different person responsible for the lending activity
at the new location. The commissioner shall approve or deny the
different person as provided in paragraph (1).
(e) A licensee shall not engage in business at a new location in a
name other than a name approved by the commissioner.
(f) The commissioner may adopt regulations to implement the
requirements of this section.
(g) A license to engage in business at a new location shall be
issued in accordance with this section. A change of street address of
a place of business designated in a license shall be made in
accordance with Section 22153 and shall not constitute a new location
subject to the requirements of this section.
(h) Notwithstanding any other provision in this section, the
commissioner may by rule require a licensee to submit applications to
engage in business at a new location through the Nationwide Mortgage
Licensing System and Registry.
SEC. 24. Section 22104 of the Financial
Code is amended to read:
22104. The applicant shall file with the application financial
statements prepared in accordance with generally accepted accounting
principles and acceptable to the commissioner that indicate a net
worth of at least twenty-five thousand dollars ($25,000). A licensee
shall maintain a net worth of at least twenty-five thousand dollars
($25,000) at all times. A finance lender or broker engaged in
the business of making or brokering residential mortgage loans shall
maintain a net worth of at least two hundred fifty thousand dollars
($250,000).
SEC. 25. Section 22107 of the Financial
Code is amended to read:
22107. (a) Each licensee shall pay to the commissioner its pro
rata share of all costs and expenses reasonably incurred in the
administration of this division, as estimated by the commissioner,
for the ensuing year and any deficit actually incurred or anticipated
in the administration of the program in the year in which the
assessment is made. The pro rata share shall be the proportion that a
licensee's gross income bears to the aggregate gross income of all
licensees as shown by the annual financial reports to the
commissioner, for the costs and expenses remaining after the amount
assessed pursuant to subdivision (c).
(b) On or before the 30th day of May in each year, the
commissioner shall notify each licensee by mail of the amount
assessed and levied against it and that amount shall be paid within
20 days thereafter. If payment is not made within 20 days, the
commissioner shall assess and collect a penalty, in addition to the
assessment, of 1 percent of the assessment for each month or part of
a month that the payment is delayed or withheld.
(c) In the levying and collection of the assessment, a licensee
shall neither be assessed for nor be permitted to pay less than two
hundred fifty dollars ($250) per licensed location per year.
(d) If a licensee fails to pay the assessment on or before the
30th day of June following the day upon which payment is due, the
commissioner may by order summarily suspend or revoke the certificate
issued to the licensee. If, after an order is made, a request for
hearing is filed in writing within 30 days, and a hearing is not held
within 60 days thereafter, the order is deemed rescinded as of its
effective date. During any period when its certificate is revoked or
suspended, a licensee shall not conduct business pursuant to this
division except as may be permitted by order of the commissioner.
However, the revocation, suspension, or surrender of a certificate
shall not affect the powers of the commissioner as provided in this
division.
(e) Notwithstanding any other provision in this section, the
commissioner may by rule require a licensee to submit applications to
engage in business at a new location through the Nationwide Mortgage
Licensing System and Registry.
SEC. 26. Section 22108 of the Financial
Code is amended to read:
22108. (a) The commissioner may by
regulation require licensees to file, at the times that he or she may
specify, the information that he or she may reasonably require
regarding any changes in the information provided in any application
filed pursuant to this division.
(b) The commissioner may, by regulation, require a licensee to
file information through the Nationwide Mortgage Licensing System and
Registry.
SEC. 27. Section 22109 of the Financial
Code is amended to read:
22109. (a) Upon reasonable notice and opportunity to be heard,
the commissioner may deny the application for any of the following
reasons:
(1) A false statement of a material fact has been made in the
application.
(2) The applicant or an officer, director, general partner, person
responsible for the applicant's lending activities in this state, or
person owning or controlling, directly or indirectly, 10 percent or
more of the outstanding interests or equity securities of the
applicant has, within the last 10 years, been convicted of or pleaded
nolo contendere to a crime, or committed an act involving
dishonesty, fraud, or deceit, if the crime or act is substantially
related to the qualifications, functions, or duties of a person
engaged in business in accordance with this division.
(3) The applicant or an officer, director, general partner, person
responsible for the applicant's lending activities in this state, or
person owning or controlling, directly or indirectly, 10 percent or
more of the outstanding interests or equity securities of the
applicant has violated any provision of this division or the rules
thereunder or any similar regulatory scheme of the State of
California or a foreign jurisdiction.
(4) The applicant employs a mortgage loan originator who is not
licensed in this state.
(b) The application shall be considered withdrawn within the
meaning of this section if the applicant fails to respond to a
written notification of a deficiency in the application within 90
days of the date of the notification.
(c) The commissioner shall, within 60 days from the filing of a
full and complete application for a license with the fees, either
issue a license or file a statement of issues prepared in accordance
with Chapter 5 (commencing with Section 11500) of Part 1 of Division
3 of Title 2 of the Government Code.
SEC. 28. Section 22112 of the Financial
Code is amended to read:
22112. (a) A licensee shall maintain a surety bond in accordance
with this subdivision in the a minimum
amount of twenty-five thousand dollars ($25,000). The bond shall be
payable to the commissioner and issued by an insurer authorized to do
business in this state. An original surety bond, including any and
all riders and endorsements executed subsequent to the effective date
of the bond, shall be filed with the commissioner within 10 days of
execution. For licensees with multiple licensed locations, only one
surety bond is required. The bond shall be used for the recovery of
expenses, fines, and fees levied by the commissioner in accordance
with this division or for losses or damages incurred by borrowers or
consumers as the result of a licensee's noncompliance with the
requirements of this division.
(b) When an action is commenced on a licensee's bond, the
commissioner may require the filing of a new bond. Immediately upon
recovery of any action on the bond, the licensee shall file a new
bond. Failure to file a new bond within 10 days of the recovery on a
bond, or within 10 days after notification by the commissioner that a
new bond is required, constitutes sufficient grounds for the
suspension or revocation of the license.
(c) The commissioner shall by regulation require a higher bond
amount for a licensee employing one or more mortgage loan
originators, based upon the dollar amount of residential mortgage
loans originated by that licensee and any mortgage loan originators
employed by the licensee. Every mortgage loan originator employed by
the licensee shall be covered by the surety bond, unless another bond
or recovery fund is in place that covers the activities of a
mortgage loan originator employed by the licensee.
SEC. 29. Section 22153 of the Financial
Code is amended to read:
22153. (a) If a licensee desires to change its place of business
to a street address other than that designated in its license, the
licensee shall give written notice to the commissioner on a form
provided by the commissioner at least 10 days prior to the change.
The commissioner shall then provide a written approval of the change
and the date of the approval.
(b) If notice is not given at least 10 days prior to the change of
a street address of a place of business, as required by subdivision
(a), or notice is not given at least 10 days prior to engaging in
business at a new location, as required by Section 22102, the
commissioner may assess a civil or administrative penalty on the
licensee not to exceed five hundred dollars ($500).
(c) The commissioner may by regulation require a licensee to
provide notice of the change through the Nationwide Mortgage
Licensing System and Registry.
SEC. 30. Section 22165 of the Financial
Code is amended to read:
22165. No advertising copy shall be used until after
its use has been disapproved approved
by the commissioner and the licensee is notified in writing of the
disapproval approval .
SEC. 31. Section 22166 of the Financial
Code is amended to read:
22166. The commissioner may shall
require licensees to maintain a file of all advertising copy for a
period of 90 days from the date of its use. The file shall be
available to the commissioner upon request.
SEC. 32. Section 22166.5 is added to the
Financial Code , to read:
22166.5. (a) Each licensee, prior to the use of any proposed
advertisements with regard to the business subject to this division
shall submit a true copy thereof to the commissioner for approval.
(b) If the commissioner, within 10 business days of receipt of the
advertising copy, determines that the advertising does not comply
with the requirements of this chapter or appropriate regulations, the
commissioner shall notify the licensee in writing that the
advertising is disapproved.
SEC. 33. Section 22170 of the Financial
Code is amended to read:
22170. (a) It is unlawful for any person to knowingly alter,
destroy, mutilate, conceal, cover up, falsify, or make a false entry
in any record, document, or tangible object with the intent to
impede, obstruct, or influence the administration or enforcement of
any provision of this division.
(b) It is unlawful for any person to knowingly make an untrue
statement to the commissioner or the Nationwide Mortgage
Licensing System and Registry during the course of licensing,
investigation, or examination, with the intent to impede, obstruct,
or influence the administration or enforcement of any provision of
this division.
SEC. 34. Section 22180 is added to the
Financial Code , to read:
22180. (a) Every licensee engaged in the business of making or
brokering residential mortgage loans shall establish a record with
the Nationwide Mortgage Licensing System and Registry.
(b) Every licensee engaging in the business of making or brokering
residential mortgage loans shall require and ensure that every
mortgage loan originator employed or compensated by the licensee is
licensed or registered as a mortgage loan originator under this
division or another provision of law in this state that meets the
requirements of Section 1508(d) of Title V of the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008 (Public Law 110-289),
and is licensed or registered through the Nationwide Mortgage
Licensing System and Registry.
(c) A licensee engaged in the business of making or brokering
residential mortgage loans may not make or broker a loan that was
offered by, negotiated by, or applied for through, a mortgage loan
originator not licensed or registered through the Nationwide Mortgage
Licensing System and Registry.
SEC. 35. Section 22181 is added to the
Financial Code , to read:
22181. (a) An individual shall not engage in the business of a
mortgage loan originator with respect to any dwelling located in this
state without first obtaining and maintaining annually a mortgage
loan originator license. Each licensed mortgage loan originator shall
register with and maintain a valid unique identifier issued by the
Nationwide Mortgage Licensing System and Registry.
(b) The following are exempt from the provisions of subdivision
(a):
(1) Registered mortgage loan originators, when acting for an
entity described in paragraph (1), (2), or (3) of subdivision (a) of
Section 22020.
(2) Any individual who offers or negotiates terms of a residential
mortgage loan with or on behalf of an immediate family member of the
individual.
(3) Any individual who offers or negotiates terms of a residential
mortgage loan secured by a dwelling that served as the individual's
residence.
(4) A licensed attorney who negotiates the terms of a residential
mortgage loan on behalf of a client as an ancillary matter to the
attorney's representation of the client, unless the attorney is
compensated by a lender, a mortgage broker, or other mortgage loan
originator, or by any agent of the lender, mortgage broker, or other
mortgage loan originator.
(5) A residential mortgage lender licensed by the Department of
Corporations under the California Residential Mortgage Lending Act,
and every licensed mortgage loan originator employed by that licensee
who is registered with the Nationwide Mortgage Licensing System and
Registry.
(c) A loan processor or underwriter who is an independent
contractor shall not engage in the activities of a loan processor or
underwriter unless the independent contractor loan processor or
underwriter obtains and maintains a license under Section 22181. Each
independent contractor loan processor or underwriter licensed as a
mortgage loan originator shall have and maintain a valid unique
identifier issued by the Nationwide Mortgage Licensing System and
Registry.
(d) The commissioner may establish licensing rules or regulations
and interim procedures for licensing and acceptance of applications.
SEC. 36. Section 22182 is added to the
Financial Code , to read:
22182. (a) An applicant for a license as a mortgage loan
originator shall apply through the submission of the uniform form
prescribed by the Nationwide Mortgage Licensing System and Registry.
The commissioner may require the submission of additional information
or supporting documentation.
(b) At the time of filing the application, the applicant shall pay
to the commissioner the sum of one hundred dollars ($100) as an
application fee for processing the application and investing the
applicant. The application and investigation fee are not refundable
if an application is denied or
withdrawn.
(c) The commissioner may establish relationships or contracts with
the Nationwide Mortgage Licensing System and Registry or other
entities designated by the Nationwide Mortgage Licensing System and
Registry to collect and maintain records and process transaction fees
or other fees related to licensees or other persons subject to the
Secure and Fair Enforcement for Mortgage Licensing Act of 2008
(Public Law 110-289).
(d) For the purpose of participating in the Nationwide Mortgage
Licensing System and Registry, the commissioner may modify, in whole
or in part, by rule, regulation, or order, any or all of the
requirements of this division and to establish new requirements as
reasonably necessary to participate in the Nationwide Mortgage
Licensing System and Registry.
(e) In connection with an application for licensing as a mortgage
loan originator, an applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including the following:
(1) Fingerprints for submission to the Federal Bureau of
Investigation, and any governmental agency or entity authorized to
receive that information for a state, national, and international
criminal history background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain the following:
(A) An independent credit report obtained from a consumer
reporting agency described in Section 603(p) of the federal Fair
Credit Reporting Act (Public Law 91-900).
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(f) The commissioner may use the Nationwide Mortgage Licensing
System and Registry as a channeling agent for requesting information
from, and distributing information to, the Department of Justice or
any governmental agency, and for requesting and distributing
information to and from any source so directed by the commissioner.
SEC. 37. Section 22183 is added to the
Financial Code , to read:
22183. The commissioner shall not issue a mortgage loan
originator license unless the commissioner makes at a minimum the
following findings:
(a) The applicant has never had a mortgage loan originator license
revoked in any governmental jurisdiction, except that a subsequent
formal rescission of the revocation shall not be deemed a revocation.
(b) The applicant has not been convicted of, or pled guilty or
nolo contendere to, a felony in a domestic, foreign, or military
court during the seven-year period preceding the date of the
application for licensing and registration, or at any time preceding
the date of application, if the felony involved an act of fraud,
dishonesty, a breach of trust, or money laundering. For purposes of
this subdivision, any pardon of a conviction shall not be a
conviction.
(c) (1) The applicant has demonstrated financial responsibility,
character, and general fitness such as to command the confidence of
the community and to warrant a determination that the mortgage loan
originator will operate honestly, fairly, and efficiently within the
purposes of the Secure and Fair Enforcement for Mortgage Licensing
Act of 2008 (Public Law 110-289).
(2) For purposes of this subdivision, a person has shown that he
or she is not financially responsible when he or she has shown a
disregard in the management of his or her own financial condition. A
determination that an individual has not shown financial
responsibility may include, but not be limited to, the following:
(A) Current outstanding judgments, except judgments solely as a
result of medical expenses.
(B) Current outstanding tax liens or other government liens and
filings.
(C) Foreclosures within the past three years.
(D) A pattern of seriously delinquent accounts within the past
three years.
(d) The applicant has completed the prelicensing education
requirement described in Section 22184.
(e) The applicant has passed a written test that meets the test
requirement described in Section 22185.
(f) The surety bond of the finance lender or broker employing or
intending to employ the applicant covers the activities of the
applicant, or the applicant is otherwise covered by a bond or
recovery fund.
SEC. 38. Section 22184 is added to the
Financial Code , to read:
22184. (a) In order to meet the prelicensing education
requirement referred to in subdivision (d) of Section 22183, an
individual shall complete at least 20 hours of education approved in
accordance with subdivision (b) of this section, which shall include
at least the following:
(1) Three hours of education relating to relevant federal law and
regulations.
(2) Three hours of education relating to relevant state law and
regulations.
(3) Three hours of education on ethics, which shall include
instruction on fraud, consumer protection, and fair lending issues.
(4) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), prelicensing education
courses shall be reviewed and approved by the Nationwide Mortgage
Licensing System and Registry. Review and approval of a prelicensing
education course shall include review and approval of the course
provider.
(c) Nothing in this section shall preclude any prelicensing
education course, as approved by the Nationwide Mortgage Licensing
System and Registry, that is provided by the employer of the
applicant or an entity that is affiliated with the applicant by an
agency contract or any subsidiary or affiliate of the employer or
entity.
(d) Prelicensing education may be offered either in a classroom,
online, or by any other means approved by the Nationwide Mortgage
Licensing System and Registry.
(e) The completion in another state of prelicensing education
requirements set forth in paragraphs (1), (2), and (3) of subdivision
(a), that have been approved by the Nationwide Mortgage Licensing
System and Registry, shall be accepted as credit towards completion
of prelicensing education requirements in this state.
SEC. 39. Section 22185 is added to the
Financial Code , to read:
22185. (a) In order to meet the written test requirement referred
to in subdivision (e) of Section 22183, an individual shall pass, in
accordance with the standards established under this section, a
qualified written test developed by the Nationwide Mortgage Licensing
System and Registry and administered by a test provider approved by
the Nationwide Mortgage Licensing System and Registry.
(b) A written test shall not be treated as a qualified written
test for purposes of subdivision (a) unless the test adequately
measures the applicant's knowledge and comprehension in appropriate
subject areas, including the following:
(1) Ethics.
(2) Federal law and regulation relating to mortgage origination.
(3) State law and regulation relating to mortgage origination.
(4) Federal and state law and regulation, including instruction on
fraud, consumer protection, the nontraditional mortgage marketplace,
and fair lending issues.
(c) Nothing in this section shall prohibit a test provider
approved by the Nationwide Mortgage Licensing System and Registry
from providing a test at the location of the employer of the
applicant or the location of any subsidiary or affiliate of the
employer of the applicant, or the location of any entity with which
the applicant holds an exclusive arrangement to conduct the business
of a mortgage loan originator.
(d) The following shall apply to the test described in this
section:
(1) An individual shall not be considered to have passed a
qualified written test unless the individual achieves a test score of
not less than 75 percent correct answers to questions.
(2) An individual may retake a test three consecutive times with
each consecutive taking occurring at least 30 days after the
preceding test.
(3) After failing three consecutive tests, an individual shall
wait at least six months before taking the test again.
(4) A licensed mortgage loan originator who fails to maintain a
valid license for a period of five years or longer shall retake the
test, not taking into account any time during which the individual is
a registered mortgage loan originator.
SEC. 40. Section 22186 is added to the
Financial Code , to read:
22186. Each mortgage loan originator shall submit to the
Nationwide Mortgage Licensing System and Registry reports of
condition, which shall be in the form and shall contain that
information as the Nationwide Mortgage Licensing System and Registry
may require. The commissioner may by regulation require a finance
lender or broker engaged in the business of making or brokering
residential mortgage loans to submit the reports to the Nationwide
Mortgage Licensing System and Registry on behalf of the mortgage loan
originators employed by the lender or broker.
SEC. 41. Section 22187 is added to the
Financial Code , to read:
22187. (a) The minimum standards for license renewal for mortgage
loan originators shall include the following:
(1) The mortgage loan originator continues to meet the minimum
standards for license issuance under Section 22183.
(2) The mortgage loan originator has satisfied the annual
continuing education requirements described in Section 22188.
(3) The mortgage loan originator has paid all required fees for
renewal of the license.
(b) The license of a mortgage loan originator failing to satisfy
the minimum standards for license renewal shall expire. The
commissioner may adopt procedures for the reinstatement of expired
licenses consistent with the standards established by the Nationwide
Mortgage Licensing System and Registry.
SEC. 42. Section 22188 is added to the
Financial Code , to read:
22188. (a) In order to meet the annual continuing education
requirements referred to in paragraph (2) of subdivision (a) of
Section 22187, a licensed mortgage loan originator shall complete at
least eight hours of education approved in accordance with
subdivision (b), which shall include at least the following:
(1) Three hours of federal law and regulations.
(2) One hour of state law and regulations.
(3) Two hours of ethics, which shall include instruction on fraud,
consumer protection, and fair lending issues.
(4) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), continuing education courses
shall be reviewed and approved by the Nationwide Mortgage Licensing
System and Registry. Review and approval of a continuing education
course shall include review and approval of the course provider.
(c) Nothing in this section shall preclude any education course,
as approved by the Nationwide Mortgage Licensing System and Registry,
that is provided by the employer of the mortgage loan originator or
an entity which is affiliated with the mortgage loan originator by an
agency contract, or any subsidiary or affiliate of that employer or
entity.
(d) Continuing education may be offered either in a classroom,
online, or by any other means approved by the Nationwide Mortgage
Licensing System and Registry.
(e) Except as provided in Section 22187 and subdivision (i), a
mortgage loan originator may only receive credit for a continuing
education course in the year in which the course is taken, and a
mortgage loan originator may not take the same approved course in the
same or successive years to meet the annual requirements for
continuing education.
(f) A licensed mortgage loan originator who is an approved
instructor of an approved continuing education course may receive
credit for the licensed mortgage loan originator's own annual
continuing education requirement at the rate of two hours credit for
every one hour taught.
(g) The successful completion of the education requirements
approved by the Nationwide Mortgage Licensing System and Registry
under paragraphs (1), (2), and (3) of subdivision (a) in another
state shall be accepted as credit towards completion of continuing
education requirements in this state.
(h) A licensed mortgage loan originator who subsequently becomes
unlicensed shall complete the continuing education requirements for
the last year in which the license was held prior to issuance of a
new or renewed license.
(i) An individual meeting the requirements of paragraphs (1) and
(3) of subdivision (a) of Section 22187 may correct any deficiency in
continuing education as established by rule or regulation of the
commissioner.
SEC. 43. Section 22189 is added to the
Financial Code , to read:
22189. The commissioner shall participate in the Nationwide
Mortgage Licensing System and Registry, and may establish, by
regulation or order, requirements as necessary for participation,
including, but not limited to, the following:
(a) Background checks for any of the following:
(1) Criminal history through fingerprints or other databases.
(2) Civil or administrative records.
(3) Credit history.
(4) Any other information as deemed necessary by the Nationwide
Mortgage Licensing System and Registry.
(b) The payment of fees to apply for or renew licenses through the
Nationwide Mortgage Licensing System and Registry.
(c) The setting or resetting as necessary of renewal or reporting
dates.
(d) Requirements for amending or surrendering a license or any
other activities as the commissioner deems necessary for
participation in the Nationwide Mortgage Licensing System and
Registry.
SEC. 44. Section 22190 is added to the
Financial Code , to read:
22190. The commissioner shall regularly report violations of this
division by persons engaged in the business of making or brokering
residential mortgage loans, or by mortgage loan originators, as well
as enforcement actions and other relevant information, to the
Nationwide Mortgage Licensing System and Registry.
SEC. 45. Section 22191 is added to the
Financial Code , to read:
22191. The commissioner shall establish a process whereby
mortgage loan originators may challenge information entered into the
Nationwide Mortgage Licensing System and Registry by the
commissioner.
SEC. 46. Section 22192 is added to the
Financial Code , to read:
22192. (a) The commissioner may do any of the following:
(1) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license for a violation of this division, or
any rules or regulations adopted under this division.
(2) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license if an applicant or licensee fails at
any time to meet the requirements of Section 22183 or 22187, or
withholds information or makes a material misstatement in an
application for a license or renewal of a license.
(3) Order restitution against a mortgage loan originator or any
finance lender or broker licensee employing a mortgage loan
originator for violations of this division.
(4) Impose fines on a mortgage loan originator or any finance
lender or broker licensee employing a mortgage loan originator
pursuant to subdivisions (b), (c), and (d).
(5) Issue orders or directives under this division as follows:
(A) Order or direct a mortgage loan originator or any finance
lender or broker licensee employing a mortgage loan originator to
cease and desist from conducting business, including immediate
temporary orders to cease and desist.
(B) Order or direct a mortgage loan originator or any finance
lender or broker licensee employing a mortgage loan originator to
cease any harmful activities or violations of this division,
including immediate temporary orders to cease and desist.
(C) Enter immediate temporary orders to cease business under a
license issued pursuant to the authority granted under Section 22181
if the commissioner determines that the license was erroneously
granted or the licensee is currently in violation of this division.
(D) Order or direct any other affirmative action as the
commissioner deems necessary.
(b) The commissioner may impose a civil penalty on a mortgage loan
originator or any finance lender or broker licensee employing a
mortgage loan originator, if the commissioner finds, on the record
after notice and opportunity for hearing, that the mortgage loan
originator or any finance lender or broker licensee employing a
mortgage loan originator has violated or failed to comply with any
requirement of this division or any regulation prescribed by the
commissioner under this division or order issued under authority of
this division.
(c) The maximum amount of penalty for each act or omission
described in subdivision (b) shall be twenty-five thousand dollars
($25,000).
(d) Each violation or failure to comply with any directive or
order of the commissioner is a separate and distinct violation or
failure.
SEC. 47. Section 22193 is added to the
Financial Code , to read:
22193. (a) Except as otherwise provided in Section 1512 of the
Secure and Fair Enforcement for Mortgage Licensing Act of 2008
(Public Law 110-289), any requirement under federal or state law
regarding the privacy or confidentiality of any information or
material provided to the Nationwide Mortgage Licensing System and
Registry, and any privilege arising under federal or state law,
including the rules of any federal or state court with respect to the
information or material, shall continue to apply to the information
or material after the information or material has been disclosed to
the Nationwide Mortgage Licensing System and Registry. The
information and material may be shared with all state and federal
regulatory officials with mortgage industry oversight authority
without the loss of privilege or the loss of confidentiality
protections provided by federal or state law.
(b) To promote more effective regulation and reduce regulatory
burden through supervisory information sharing, the commissioner may
enter into agreements or sharing arrangements with other governmental
agencies, the Conference of State Bank Supervisors, the American
Association of Residential Mortgage Regulators, or other associations
representing governmental agencies as established by rule,
regulation, or order of the commissioner.
(c) Information or material that is subject to a privilege or
confidentiality under subdivision (a) shall not be subject to the
following:
(1) Disclosure under any state law governing the disclosure to the
public of information held by an officer or an agency of the state.
(2) Subpoena or discovery, or admission into evidence, in any
private civil action or administrative process, unless with respect
to any privilege held by the Nationwide Mortgage Licensing System and
Registry with respect to that information or material, the person to
whom the information or material pertains waives, in whole or in
part, in the discretion of the person, that privilege.
(d) Any state law relating to the disclosure of confidential
supervisory information or any information or material provided to
the Nationwide Mortgage Licensing System and Registry that is
inconsistent with subdivision (a) shall be superseded by the
requirements of this section.
(e) This section shall not be applicable to the information or
material relating to the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, mortgage
loan originators that is included in the Nationwide Mortgage
Licensing System and Registry for access by the public.
SEC. 48. Section 22194 is added to the
Financial Code , to read:
22194. The unique identifier of any person originating a
residential mortgage loan shall be clearly shown on all residential
mortgage loan application forms, solicitations or advertisements,
including business cards or Internet Web sites, and any other
documents as established by rule, regulation, or order of the
commissioner.
SEC. 49. Section 50002 of the Financial
Code is amended to read:
50002. (a) No person shall engage in the business of making
residential mortgage loans or servicing residential mortgage loans,
in this state, without first obtaining a license from the
commissioner in accordance with the requirements of Chapter 2
(commencing with Section 50120) or Chapter 3 (commencing with Section
50130), and any rules promulgated by the commissioner under this
law, unless a person or transaction is excepted from a definition or
exempt from licensure by a provision of this law or a rule of the
commissioner.
(b) An employee of a licensee or of a person exempt from licensure
is not required to be licensed when acting within the scope of his
or her employment and shall be exempt from any other law from which
his or her employer is exempt , unless he or she
meets the definition of a mortgage loan originator under subdivision
(u) of Section 50003 .
SEC. 50. Section 50003 of the Financial
Code is amended to read:
50003. (a) "Annual audit" means a certified audit of the licensee'
s books, records, and systems of internal control performed by an
independent certified public accountant in accordance with generally
accepted accounting principles and generally accepted auditing
standards.
(b) "Borrower" means the loan applicant.
(c) "Buy" includes exchange, offer to buy, or solicitation to buy.
(d) "Commissioner" means the Commissioner of Corporations.
(e) "Control" means the possession, directly or indirectly, of the
power to direct, or cause the direction of, the management and
policies of a licensee under this division, whether through voting or
through the ownership of voting power of an entity that possesses
voting power of the licensee, or otherwise. Control is presumed to
exist if a person, directly or indirectly, owns, controls, or holds
10 percent or more of the voting power of a licensee or of an entity
that owns, controls, or holds, with power to vote, 10 percent or more
of the voting power of a licensee. No person shall be deemed to
control a licensee solely by reason of his or her status as an
officer or director of the licensee.
(f) "Depository institution" has the same meaning as in Section 3
of the Federal Deposit Insurance Act, and includes any credit union.
(f)
(g) "Engage in the business" means the dissemination to
the public, or any part of the public, by means of written, printed,
or electronic communication or any communication by means of
recorded telephone messages or spoken on radio, television, or
similar communications media, of any information relating to the
making of residential mortgage loans, the servicing of residential
mortgage loans, or both. "Engage in the business" also means, without
limitation, making residential mortgage loans or servicing
residential mortgage loans, or both.
(g)
(h) "Exempt person" means any of the
following:
(1) Any bank, trust company, insurance company, or industrial loan
company doing business under the authority of or in accordance with
a license, certificate, or charter issued by the United States or any
state, district, territory, or commonwealth of the United States
that is authorized to transact business in this state.
(2) A federally chartered savings and loan association, federal
savings bank, or federal credit union that is authorized to transact
business in this
state.
(3) A savings and loan association, savings bank, or credit union
organized under the laws of this or any other state that is
authorized to transact business in this state.
(4) A person engaged solely in business, commercial, or
agricultural mortgage lending.
(5) A wholly owned service corporation of a savings and loan
association or savings bank organized under the laws of this state or
the wholly owned service corporation of a federally chartered
savings and loan association or savings bank that is authorized to
transact business in this state.
(6) Any person making residential mortgage loans with his, her, or
its own funds for his, her, or its own investment without intent to
resell more than eight residential loans in any one calendar year.
(7)
(6) An agency, or other instrumentality of
the federal government, or state or municipal government.
(8)
(7) An employee or employer pension plan making
residential mortgage loans only to its participants, or a person
making those loans only to its employees or the employees of a
holding company, owner who controls that person, affiliate, or
subsidiary of that person.
(9)
(8) A person acting in a fiduciary capacity conferred
by the authority of a court.
(10)
(9) A real estate broker licensed as a mortgage
loan originator under California law and registered with
the Nationwide Mortgage Licensing System , when making,
arranging, selling, or servicing a residential loan.
(11)
(10) A California finance lender licensed under
Division 9 (commencing with Section 22000), when acting under the
authority of that license.
(12)
(11) A trustee under a deed of trust pursuant to the
Civil Code, when collecting delinquent loan payments, interest, or
other loan amounts, or performing other acts in a judicial or
nonjudicial foreclosure proceeding.
(i) "Federal banking agencies" means the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the
Director of the Office of Thrift Supervision, the National Credit
Union Administration, and the Federal Deposit Insurance Corporation.
(j) "Immediate family member" means a spouse, child, sibling,
parent, grandparent, or grandchild. This includes stepparents,
stepchildren, stepsiblings, and adoptive relationships.
(k) "Individual" means a natural person.
(h)
(l) "In this state" means any activity of a person
relating to making or servicing a residential mortgage loan that
originates from this state and is directed to persons outside this
state, or that originates from outside this state and is directed to
persons inside this state, or that originates inside this state and
is directed to persons inside this state, or that leads to the
formation of a contract and the offer or acceptance thereof is
directed to a person in this state (whether from inside or outside
this state and whether the offer was made inside or outside the
state).
(i)
(m) "Institutional investor" means the following:
(1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
(2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial bank or industrial loan
company, personal property broker, consumer finance lender,
commercial finance lender, or insurance company, or subsidiary or
affiliate of one of the preceding entities, doing business under the
authority of or in accordance with a license, certificate, or charter
issued by the United States or any state, district, territory, or
commonwealth of the United States.
(3) Trustees of pension, profit-sharing, or welfare funds, if the
pension, profit-sharing, or welfare fund has a net worth of not less
than fifteen million dollars ($15,000,000), except pension,
profit-sharing, or welfare funds of a licensee or its affiliate,
self-employed individual retirement plans, or individual retirement
accounts.
(4) A corporation or other entity with outstanding securities
registered under Section 12 of the Securities Exchange Act of 1934 or
a wholly owned subsidiary of that corporation or entity, provided
that the purchaser represents either of the following:
(A) That it is purchasing for its own account for investment and
not with a view to, or for sale in connection with, any distribution
of a promissory note.
(B) That it is purchasing for resale pursuant to an exemption
under Rule 144A (17 C.F.R. 230.144A) of the Securities and Exchange
Commission.
(5) An investment company registered under the Investment Company
Act of 1940; or a wholly owned and controlled subsidiary of that
company, provided that the purchaser makes either of the
representations provided in paragraph (4).
(6) A person licensed to make residential mortgage loans under
this law or an affiliate or subsidiary of that person.
(7) Any person who is licensed as a securities broker or
securities dealer under any law of this state, or of the United
States, or any employee, officer or agent of that person, if that
person is acting within the scope of authority granted by that
license or an affiliate or subsidiary controlled by that broker or
dealer, in connection with a transaction involving the offer, sale,
purchase, or exchange of one or more promissory notes secured
directly or indirectly by liens on real property or a security
representing an ownership interest in a pool of promissory notes
secured directly or indirectly by liens on real property, and the
offer and sale of those securities is qualified under the California
Corporate Securities Law of 1968 or registered under federal
securities laws, or exempt from qualification or registration.
(8) A licensed real estate broker selling the loan to an
institutional investor specified in paragraphs (1) to (7), inclusive,
or paragraph (9) or (10).
(9) A business development company as defined in Section 2(a)(48)
of the Investment Company Act of 1940 or a Small Business Investment
Company licensed by the United States Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of
1958.
(10) A syndication or other combination of any of the foregoing
entities that is organized to purchase a promissory note.
(11) A trust or other business entity established by an
institutional investor for the purpose of issuing or facilitating the
issuance of securities representing undivided interests in, or
rights to receive payments from or to receive payments primarily
from, a pool of financial assets held by the trust or business
entity, provided that all of the following apply:
(A) The business entity is not a sole proprietorship.
(B) The pool of assets consists of one or more of the following:
(i) Interest-bearing obligations.
(ii) Other contractual obligations representing the right to
receive payments from the assets.
(iii) Surety bonds, insurance policies, letters of credit, or
other instruments providing credit enhancement for the assets.
(C) The securities will be either one of the following:
(i) Rated as "investment grade" by Standard and Poor's Corporation
or Moody's Investors Service, Inc. "Investment grade" means that the
securities will be rated by Standard and Poor's Corporation as AAA,
AA, A, or BBB or by Moody's Investors Service, Inc. as Aaa, Aa, A, or
Baa, including any of those ratings with "+" or "--" designation or
other variations that occur within those ratings.
(ii) Sold to an institutional investor.
(D) The offer and sale of the securities is qualified under the
California Corporate Securities Law of 1968 or registered under
federal securities laws, or exempt from qualification or
registration.
(j)
(n) "Institutional lender" means the following:
(1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
(2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial loan company, or insurance
company, or service or investment company that is wholly owned and
controlled by one of the preceding entities, doing business under the
authority of and in accordance with a license, certificate, or
charter issued by the United States or any state, district,
territory, or commonwealth of the United States.
(3) Any corporation with outstanding securities registered under
Section 12 of the Securities Exchange Act of 1934 or any wholly owned
subsidiary of that corporation.
(4) A person licensed to make residential mortgage loans under
this law.
(k)
(o) "Law" means the California Residential Mortgage
Lending Act.
(l)
(p) "Lender" means a person that (1) is an approved
lender for the Federal Housing Administration, Veterans
Administration, Farmers Home Administration, Government National
Mortgage Association, Federal National Mortgage Association, or
Federal Home Loan Mortgage Corporation, (2) directly makes
residential mortgage loans, and (3) makes the credit decision in the
loan transactions.
(m)
(q) "Licensee" means, depending on the context, a
person licensed under either Chapter 2 (commencing with Section
50120) or Chapter 3 (commencing with Section 50130).
(r) "Loan processor or underwriter" means either of the following:
(1) An individual who performs clerical or support duties as an
employee at the direction of and subject to the supervision and
instruction of a person licensed, or exempt from licensing under
Sections 50110 to 50110.6, inclusive. For purposes of this paragraph,
"clerical or support duties" may include the following, subsequent
to the receipt of an application:
(A) The receipt, collection, distribution, and analysis of
information common for the processing or underwriting of a
residential mortgage loan.
(B) Communicating with a consumer to obtain the information
necessary for the processing or underwriting of a loan, to the extent
that the communication does not include offering or negotiating loan
rates or terms, or counseling consumers about residential mortgage
loan rates or terms.
(2) An individual engaging solely in loan processor or underwriter
activities, shall not represent to the public, through advertising
or other means of communicating or providing information including
the use of business cards, stationery, brochures, signs, rate lists,
or other promotional items, that the individual can or will perform
any of the activities of a mortgage loan originator.
(s) "Makes or making residential mortgage loans" or "mortgage
lending" means processing, underwriting, or as a lender using or
advancing one's own funds, or making a commitment to advance one's
own funds, to a loan applicant for a residential mortgage loan.
(n)
(t) "Makes or making residential mortgage
loans" or "mortgage lending" means processing, underwriting, or as a
lender using or advancing one's own funds, or making a commitment to
advance one's own funds, to a loan applicant for a residential
mortgage loan.
(e)
(u) "Mortgage loan," "residential mortgage loan," or
"home mortgage loan" means a federally regulated mortgage loan as
defined in Section 3500.2 of Title 24 of the Code of Federal
Regulations, or a loan made to finance construction of a one to four
family dwelling. The terms also mean 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 Section 103(v) of the Truth in Lending Act,
or residential real estate upon which is constructed or intended to
be constructed a dwelling.
(v) "Mortgage loan originator" means an individual who for
compensation or gain, or in the expectation of compensation or gain,
takes a residential mortgage loan application or offers or negotiates
terms of a residential mortgage loan. A mortgage loan originator
does not include any of the following:
(1) An individual engaged solely as a loan processor or
underwriter except as otherwise provided in subdivision (r).
(2) A person or entity that only performs real estate brokerage
activities and is licensed or registered in accordance with
California law, unless the person or entity is compensated by a
lender, a mortgage broker, or other mortgage loan originator, or by
any agent of the lender, mortgage broker, or other mortgage loan
originator.
(3) A person or entity solely involved
in extensions of credit relating to timeshare plans, as that term is
defined in Section 101(53D) of Title 11 of the United States Code.
(p)
(w) "Mortgage servicer" or "residential mortgage loan
servicer" means a person that (1) is an approved servicer for the
Federal Housing Administration, Veterans Administration, Farmers Home
Administration, Government National Mortgage Association, Federal
National Mortgage Association, or Federal Home Loan Mortgage
Corporation, and (2) directly services or offers to service mortgage
loans.
(x) "Nationwide Mortgage Licensing System and Registry" means a
mortgage licensing system developed and maintained by the Conference
of State Bank Supervisors and the American Association of Residential
Mortgage Regulators for the licensing and registration of licensed
mortgage loan originators.
(q)
(y) "Net worth" has the meaning set forth in Section
50201.
(z) "Nontraditional mortgage product" means any mortgage product
other than a 30-year fixed rate mortgage.
(r)
(aa) "Own funds" means (1) cash, corporate capital, or
warehouse credit lines at commercial banks, savings banks, savings
and loan associations, industrial loan companies, or other sources
that are liability items on a lender's financial statements, whether
secured or unsecured, or (2) a lender's affiliate's cash, corporate
capital, or warehouse credit lines at commercial banks or other
sources that are liability items on the affiliate's financial
statements, whether secured or unsecured. "Own funds" does not
include funds provided by a third party to fund a loan on condition
that the third party will subsequently purchase or accept an
assignment of that loan.
(s)
(ab) "Person" means a natural person, a sole
proprietorship, a corporation, a partnership, a limited liability
company, an association, a trust, a joint venture, an unincorporated
organization, a joint stock company, a government or a political
subdivision of a government, and any other entity.
(ac) "Registered mortgage loan originator" means an individual who
meets both of the following:
(1) The individual meets the definition of a mortgage loan
originator and is an employee of (A) a depository institution, (B) a
subsidiary that is owned and controlled by a depository institution
and regulated by a federal banking agency, or (C) an institution
regulated by the Farm Credit Administration.
(2) The individual is registered with, and maintains a unique
identifier through, the Nationwide Mortgage Licensing System and
Registry.
(t)
(ad) "Residential real property" or "residential real
estate" means real property located in this state that is
improved by a one-to-four family , upon which is
constructed or intended to be constructed a dwelling.
(u)
(ae) "Service" or "servicing" means receiving more than
three installment payments of principal, interest, or other amounts
placed in escrow, pursuant to the terms of a mortgage loan and
performing services by a licensee relating to that receipt or the
enforcement of its receipt, on behalf of the holder of the note
evidencing that loan.
(v)
(af) "Sell" includes exchange, offer to sell, or
solicitation to sell.
(ag) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
SEC. 51. Section 50110 is added to the
Financial Code , to read:
50110. (a) An individual, unless specifically exempted under
subdivision (b), shall not engage in the business of a mortgage loan
originator with respect to any dwelling located in this state without
first obtaining and maintaining annually a mortgage loan originator
license. Each licensed mortgage loan originator must register with
and maintain a valid unique identifier issued by the Nationwide
Mortgage Licensing System and Registry.
(b) The following are exempt from mortgage loan originator
licensing requirements in this section:
(1) Registered mortgage loan originators, when acting for an
entity described in subdivision (ac) of Section 50003.
(2) Any individual who offers or negotiates terms of a residential
mortgage loan with or on behalf of an immediate family member of the
individual.
(3) Any individual who offers or negotiates terms of a residential
mortgage loan secured by a dwelling that served as the individual's
residence.
(4) A licensed attorney who negotiates the terms of a residential
mortgage loan on behalf of a client as an ancillary matter to the
attorney's representation of the client, unless the attorney is
compensated by a lender, a mortgage broker, or other mortgage loan
originator or by any agent of the lender, mortgage broker, or other
mortgage loan originator.
(5) A finance lender or broker licensed by the Department of
Corporations under the California Finance Lenders Law, and every
licensed mortgage loan originator employed by the finance lender or
broker who is registered with the Nationwide Mortgage Licensing
System and Registry.
(c) A loan processor or underwriter who is an independent
contractor may not engage in the activities of a loan processor or
underwriter unless the independent contractor loan processor or
underwriter obtains and maintains a license under subdivision (a).
Each independent contractor loan processor or underwriter licensed as
a mortgage loan originator shall have and maintain a valid unique
identifier issued by the Nationwide Mortgage Licensing System and
Registry.
(d) The commissioner may establish licensing rules or regulations
and interim procedures for licensing and acceptance of applications.
SEC. 52. Section 50110.1 is added to the
Financial Code , to read:
50110.1. (a) An applicant for a license as a mortgage loan
originator shall apply through the submission of the uniform form
prescribed by the Nationwide Mortgage Licensing System and Registry.
The commissioner may require the submission of additional information
or supporting documentation to the department.
(b) At the time of filing the application, the applicant shall pay
to the commissioner a sum to be determined by the commissioner as an
application fee for processing the application and investigating the
applicant. The application and investigating fee are not refundable
if an application is denied or withdrawn.
(c) The commissioner may establish relationships or contracts with
the Nationwide Mortgage Licensing System and Registry or other
entities designated by the Nationwide Mortgage Licensing System and
Registry to collect and maintain records and process transaction fees
or other fees related to mortgage loan originators, licensees, or
other persons subject to the Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 (Public Law 110-289).
(d) For the purpose of participating in the Nationwide Mortgage
Licensing System and Registry, the commissioner may modify, in whole
or in part, by rule, regulation, or order, any or all of the
requirements of this division and may establish new requirements as
reasonably necessary to participate in the Nationwide Mortgage
Licensing System and Registry.
(e) In connection with an application for licensing as a mortgage
loan originator, the applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including the following:
(1) Fingerprints for submission to the Federal Bureau of
Investigation, and any governmental agency or entity authorized to
receive such information for a state, national, and international
criminal history background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain the following:
(A) An independent credit report obtained from a consumer
reporting agency described in Section 603(p) of the federal Fair
Credit Reporting Act.
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(f) The commissioner may use the Nationwide Mortgage Licensing
System and Registry as a channeling agent for requesting information
from and distributing information to the Department of Justice or any
governmental agency, and for requesting and distributing information
to and from any source so directed by the commissioner.
SEC. 53. Section 50110.2 is added to the
Financial Code , to read:
50110.2. The commissioner shall not issue a mortgage loan
originator license unless the commissioner makes, at a minimum, the
following findings:
(a) The applicant has never had a mortgage loan originator license
revoked in any governmental jurisdiction, except that a subsequent
formal rescission of the revocation shall not be deemed a revocation.
(b) The applicant has not been convicted of, or pled guilty or
nolo contendere to, a felony in a domestic, foreign, or military
court during the seven-year period preceding the date of the
application for licensing and registration, or at any time preceding
the date of application, if the felony involved an act of fraud,
dishonesty, or a breach of trust, or money laundering. For purposes
of this subdivision, any pardon of a conviction shall not be a
conviction.
(c) (1) The applicant has demonstrated financial responsibility,
character, and general fitness such as to command the confidence of
the community and to warrant a determination that the mortgage loan
originator will operate honestly, fairly, and efficiently within the
purposes of the Secure and Fair Enforcement for Mortgage Licensing
Act of 2008 (Public Law 110-289).
(2) For purposes of this subdivision a person has shown that he or
she is not financially responsible when he or she has shown a
disregard in the management of his or her own financial condition. A
determination that an individual has not shown financial
responsibility may include, but not be limited to, the following:
(A) Current outstanding judgments, except judgments solely as a
result of medical expenses.
(B) Current outstanding tax liens or other government liens and
filings.
(C) Foreclosures within the past three years.
(D) A pattern of seriously delinquent accounts within the past
three years.
(d) The applicant has completed the prelicensing education
requirement described in Section 50110.3.
(e) The applicant has passed a written test that meets the test
requirement described in Section 50110.4.
(f) The surety bond of the residential mortgage lender or servicer
employing or intending to employ the applicant covers the activities
of the applicant, or the applicant is otherwise covered by a bond or
recovery fund.
SEC. 54. Section 50110.3 is added to the
Financial Code , to read:
50110.3. (a) In order to meet the prelicensing education
requirements referred to in subdivision (d) of Section 50110.2, an
individual shall complete at least 20 hours of education approved in
accordance with subdivision (b), which shall include at least the
following:
(1) Three hours of federal law and regulations.
(2) Two hours of state law and regulations.
(3) Three hours of ethics, which shall include instruction on
fraud, consumer protection, and fair lending issues.
(4) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), prelicensing education
courses shall be reviewed and approved by the Nationwide Mortgage
Licensing System and Registry. Review and approval of a prelicensing
education course shall include review and approval of the course
provider.
(c) Nothing in this section shall preclude any education course,
as approved by the Nationwide Mortgage Licensing System and Registry,
that is provided by the employer of the mortgage loan originator or
an entity which is affiliated with the mortgage loan originator by an
agency contract, or any subsidiary or affiliate of that employer or
entity.
(d) Prelicensing education may be offered either in a classroom,
online, or by any other means approved by the Nationwide Mortgage
Licensing System and Registry.
(e) The completion in another state of prelicensing education
requirements set forth in paragraphs (1), (2), and (3) of subdivision
(a), that have been approved by the Nationwide Mortgage Licensing
System and Registry, shall be accepted as credit towards completion
of prelicensing education requirements in this state.
SEC. 55. Section 50110.4 is added to the
Financial Code , to read:
50110.4. (a) In order to meet the written test requirement
referred to in subdivision (e) of Section 50110.2, an individual
shall pass, in accordance with the standards established under this
section, a qualified written test developed by the Nationwide
Mortgage Licensing System and Registry and administered by a test
provider approved by the Nationwide Mortgage Licensing System and
Registry.
(b) A written test shall not be treated as a qualified written
test for purposes of subdivision (a) unless the test adequately
measures the applicant's knowledge and comprehension in appropriate
subject areas, including the following:
(1) Ethics.
(2) Federal law and regulation relating to mortgage origination.
(3) State law and regulation relating to mortgage origination.
(4) Federal and state law and regulation, including instruction on
fraud, consumer protection, the nontraditional mortgage marketplace,
and fair lending issues.
(c) Nothing in this section shall prohibit a test provider
approved by the Nationwide Mortgage Licensing System and Registry
from providing a test at the location of the employer of the
applicant or the location of any subsidiary or affiliate of the
employer of the applicant, or the location of any entity with which
the applicant holds an exclusive arrangement to conduct the business
of a mortgage loan originator.
(d) The following shall apply to the test described in this
section:
(1) An individual shall not be considered to have passed a
qualified written test unless the individual achieves a test score of
not less than 75 percent correct answers to questions.
(2) An individual may retake a test three consecutive times with
each consecutive taking occurring at least 30 days after the
preceding test.
(3) After failing three consecutive tests, an individual shall
wait at least six months before taking the test again.
(4) A licensed mortgage loan originator who fails to maintain a
valid license for a period of five years or longer shall retake the
test, not taking into account any time during which the individual is
a registered mortgage loan originator.
SEC. 56. Section 50110.5 is added to the
Financial Code , to read:
50110.5. Each mortgage loan originator shall submit to the
Nationwide Mortgage Licensing System and Registry reports of
condition, which shall be in the form and shall contain that
information as the Nationwide Mortgage Licensing System and Registry
may require. The commissioner may by regulation require a residential
mortgage lender or servicer to submit the reports to the Nationwide
Mortgage Licensing System and Registry on behalf of the mortgage loan
originators employed by the residential mortgage lender or servicer.
SEC. 57. Section 50110.6 is added to the
Financial Code , to read:
50110.6. (a) The minimum standards for license renewal for
mortgage loan originators shall include the following:
(1) The mortgage loan originator continues to meet the minimum
standards for license issuance under Section 50110.2.
(2) The mortgage loan originator has satisfied the annual
continuing education requirements described in Section 50110.7.
(3) The mortgage loan originator has paid all required fees for
renewal of the license.
(b) The license of a mortgage loan originator failing to satisfy
the minimum standards for license renewal shall expire. The
commissioner may adopt procedures for the reinstatement of expired
licenses consistent with the standards established by the Nationwide
Mortgage Licensing System and Registry.
SEC. 58. Section 50110.7 is added to the
Financial Code , to read:
50110.7. (a) In order to meet the annual continuing education
requirements referred to in paragraph (2) of subdivision (a) of
Section 50110.6, a licensed mortgage loan originator shall complete
at least eight hours of education approved in accordance with
subdivision (b), which shall include at least the following:
(1) Three hours of federal law and regulations.
(2) One hour of state law and regulations.
(3) Two hours of ethics, which shall include instruction on fraud,
consumer protection, and fair lending issues.
(4) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), continuing education courses
shall be reviewed and approved by the Nationwide Mortgage Licensing
System and Registry. Review and approval of a continuing education
course shall include review and approval of the course provider.
(c) Nothing in this section shall preclude any education course,
as approved by the Nationwide Mortgage Licensing System and Registry,
that is provided by the employer of the mortgage loan originator or
an entity which is affiliated with the mortgage loan originator by an
agency contract, or any subsidiary or affiliate of the employer or
entity.
(d) Continuing education may be offered either in a classroom,
online, or by any other means approved by the Nationwide Mortgage
Licensing System and Registry.
(e) Except as provided in Section 50110.6 and subdivision (i), a
mortgage loan originator may only receive credit for a continuing
education course in the year in which the course is taken, and a
mortgage loan originator may not take the same approved course in the
same or successive years to meet the annual requirements for
continuing education.
(f) A licensed mortgage loan originator who is an approved
instructor of an approved continuing education course may receive
credit for the licensed mortgage loan originator's own annual
continuing education requirement at the rate of two hours credit for
every one hour taught.
(g) The successful completion of the education requirements
approved by the Nationwide Mortgage Licensing System and Registry
under paragraphs (1), (2), and (3) of subdivision (a) in another
state shall be accepted as credit towards completion of continuing
education requirements in this state.
(h) A licensed mortgage loan originator who subsequently becomes
unlicensed shall complete the continuing education requirements for
the last year in which the license was held prior to issuance of a
new or renewed license.
(i) An individual meeting the requirements of paragraphs (1) and
(3) of subdivision (a) of Section 50110.6 may correct any deficiency
in continuing education as established by rule or regulation of the
commissioner.
SEC. 59. Section 50110.8 is added to the
Financial Code , to read:
50110.8. Every mortgage loan originator shall be licensed through
the Nationwide Mortgage Licensing System and Registry. The
commissioner shall participate in the Nationwide Mortgage Licensing
System and Registry, and may establish, by regulation or order,
requirements as necessary for participation, including, but not
limited to, the following:
(a) Background checks for any of the following:
(1) Criminal history through fingerprints or other databases.
(2) Civil or administrative records.
(3) Credit history.
(4) Any other information as deemed necessary by the Nationwide
Mortgage Licensing System and Registry.
(b) The payment of fees to apply for or renew licenses through the
Nationwide Mortgage Licensing System and Registry.
(c) The setting or resetting as necessary of renewal or reporting
dates.
(d) Requirements for amending or surrendering a license or any
other activities as the commissioner deems necessary for
participation in the Nationwide Mortgage Licensing System and
Registry.
SEC. 60. Section 50110.9 is added to the
Financial Code , to read:
50110.9. The commissioner shall report regularly violations of
this division by persons engaged in the business of making,
brokering, or servicing residential mortgage loans, or by mortgage
loan originators, as well as enforcement actions and other relevant
information, to the Nationwide Mortgage Licensing System and
Registry.
SEC. 61. Section 50110.10 is added to the
Financial Code , to read:
50110.10. The commissioner shall establish a process whereby
mortgage loan originators may challenge information entered into the
Nationwide Mortgage Licensing System and Registry by the
commissioner.
SEC. 62. Section 50110.11 is added to the
Financial Code , to read:
50110.11. (a) The commissioner may do any of the following:
(1) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license for a violation of this division, or
any rules or regulations adopted under this division.
(2) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license if an applicant or mortgage loan
originator fails at any time to meet the requirements of Section
50110.2 or 50110.6, or withholds information or makes a material
misstatement in an application for a license or renewal of a license.
(3) Order restitution against a person subject to this division
for a violation of this division.
(4) Impose fines on any person subject to this division pursuant
to subdivisions (b), (c), and (d).
(5) Issue orders or directives under this division as follows:
(A) Order or direct persons subject to this division to cease and
desist from conducting business, including immediate temporary orders
to cease and desist.
(B) Order or direct persons subject to this division to cease any
harmful activities or violations of this division, including
immediate temporary orders to cease and desist.
(C) Enter immediate temporary orders to cease business under a
license issued pursuant to the authority granted under Section 50110
if the commissioner determines that the license was erroneously
granted or the person is currently in violation of this division.
(D) Order or direct any other affirmative action as the
commissioner deems necessary.
(b) The commissioner may impose a civil penalty on a mortgage loan
originator or person subject to this division, if the commissioner
finds, on the record after notice and opportunity for hearing, that
the mortgage loan originator or person subject to this division has
violated or failed to comply with any requirement of this division or
any regulation prescribed by the commissioner under this division or
order issued under authority of this division.
(c) The maximum amount of penalty for each act or omission
described in subdivision (b) shall be twenty-five thousand dollars
($25,000).
(d) Each violation or failure to comply with any directive or
order of the commissioner is a separate and distinct violation or
failure.
SEC. 63. Section 50110.12 is added to the
Financial Code , to read:
50110.12. (a) Except as otherwise provided in Section 1512 of
Public Law 110-289 (the Secure and Fair Enforcement for Mortgage
Licensing Act of 2008), any requirement under federal or state law
regarding the privacy or confidentiality of any information or
material provided to the Nationwide Mortgage Licensing System and
Registry, and any privilege arising under federal or state law,
including the rules of any federal or state court with respect to the
information or material, shall continue to apply to the information
or material after the information or material has been disclosed to
the Nationwide Mortgage Licensing System and Registry. The
information and material may be shared with all state and federal
regulatory officials with mortgage industry oversight authority
without the loss of privilege or the loss of confidentiality
protections provided by federal or state law.
(b) To promote more effective regulation and reduce regulatory
burden through supervisory information sharing, the commissioner may
enter into agreements or sharing arrangements with other governmental
agencies, the Conference of State Bank Supervisors, the American
Association of Residential Mortgage Regulators, or other associations
representing governmental agencies as established by rule,
regulation, or order of the commissioner.
(c) Information or material that is subject to a privilege or
confidentiality under subdivision (a) shall not be subject to the
following:
(1) Disclosure under any state law governing the disclosure to the
public of information held by an officer or an agency of the state.
(2) Subpoena or discovery, or admission into evidence, in any
private civil action or administrative process, unless with respect
to any privilege held by the Nationwide Mortgage Licensing System and
Registry with respect to that information or material, the person to
whom the information or material pertains waives, in whole or in
part, in the discretion of the person, that privilege.
(d) Any state law relating to the disclosure of confidential
supervisory information or any information or material provided to
the Nationwide Mortgage Licensing System and Registry that is
inconsistent with subdivision (a) shall be superseded by the
requirements of this section.
(e) This section shall not be applicable to the information or
material relating to the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, mortgage
loan originators that is included in the Nationwide Mortgage
Licensing System and Registry for access by the public.
SEC. 64. Section 50110.16 is added to the
Financial Code , to read:
50110.16. The unique identifier of any person originating a
residential mortgage loan shall be clearly shown on all residential
mortgage loan application forms, solicitations or advertisements,
including business cards or Internet Web sites, and any other
documents as established by rule, regulation, or order of the
commissioner.
SEC. 65. Section 50121 of the Financial
Code is amended to read:
50121. The commissioner shall issue a residential mortgage
loan license upon the satisfaction of all of the following:
(a) The filing with the commissioner of a complete and verified
application for licensure.
(b) The filing as an exhibit to the application of a listing of
material judgments filed against, and bankruptcy petitions filed by,
the applicant for the preceding five years, and the disposition
thereof.
(c) The payment of a nonrefundable investigation fee of one
hundred dollars ($100), plus the cost of fingerprint processing and
clearance, and an application filing fee of nine hundred dollars
($900).
(d) An investigation of the statements required by Section 50124
based upon which the commissioner is able to issue findings that the
financial responsibility, criminal records (verified by fingerprint,
at the discretion of the commissioner), experience, character, and
general fitness of the applicant and of the partners or members
thereof, if the applicant is a partnership or association, and of the
principal officers and directors thereof, if the license applicant
is a corporation, support a finding that the business will be
operated honestly, fairly, and in accordance with the requirements of
this division.
SEC. 66. Section 50122 of the Financial
Code is amended to read:
50122. (a) The application for a residential mortgage lender
license shall be in writing, executed under penalty of perjury, and
verified on a form prescribed by the commissioner. If an applicant
proposes to engage in business as a residential mortgage loan
servicer as well as a residential mortgage lender, this information
shall be set forth in the application. The commissioner may issue a
license under this chapter to engage in business as a residential
mortgage lender or to engage in business as a residential mortgage
lender and residential mortgage loan servicer. A person filing an
application under this chapter to engage in business as a residential
mortgage lender and a residential mortgage loan servicer is not
required to file an application under Chapter 3 (commencing with
Section 50130).
(b) The application shall contain the name and complete business
and residential address or addresses of the applicant. If the
applicant is a partnership, association, corporation, or other
entity, the application shall contain the names and complete business
and residential addresses of each member, director, and principal
officer. The application also shall include a description of the
activities of the applicant in the detail and for the periods that
the commissioner may require, including all of the following:
(1) A statement of financial solvency, noting the net worth
requirements and supported by an audited financial statement prepared
by an independent certified public accountant, and access to the
supporting credit information as required by this division.
(2) A statement that the applicant or its members, directors, or
principals, as appropriate, are at least 18 years of age.
(3) Information as to the character, fitness, financial and
business responsibility, background, experience, and criminal
convictions of any of the following:
(A) Any person that owns or controls, directly or indirectly, 10
percent or more of any class of stock of the applicant.
(B) Any person that controls, directly or indirectly, the election
of 25 percent or more of the members of the board of directors of an
applicant.
(C) Any person or entity that significantly influences or controls
the management of the applicant.
(4) A description of any disciplinary action filed under any other
license through which the person conducts its business.
(5) A description of any adverse judgments entered in court
actions filed by borrowers based upon allegations of fraud,
misrepresentation, or dishonesty in the conduct of the person's
business.
(6) A copy of the fidelity bond currently in effect.
(7) Other information as required by rule of the commissioner.
(c) The commissioner may, by rule, require an applicant for a
residential mortgage loan license to apply through the Nationwide
Mortgage Licensing System and Registry, and may adopt regulations to
accommodate the uniform forms of that registry.
SEC. 67. Section 50124 of the Financial
Code is amended to read:
50124. (a) A license application must be accompanied by an
exhibit containing statements that the applicant agrees to do the
following:
(1) To maintain staff adequate to meet the requirements of this
division, as prescribed by rule or order of the commissioner.
(2) To keep and maintain for 36 months from the date of final
entry the business records and other information required by law or
rules of the commissioner regarding any mortgage loan made or
serviced in the course of the conduct of its business.
(3) To file with the commissioner any report required under law or
by rule or order of the commissioner.
(4) To disburse funds in accordance with its agreements and to
make a good faith and reasonable effort to effect closing in a timely
manner.
(5) To account or deliver to a person any personal property such
as money, funds, deposit, check, draft, mortgage, other document, or
thing of value, that has come into its possession and is not its
property, or that it is not in law or equity entitled to retain under
the circumstances, at the time that has been agreed upon or is
required by law, or, in the absence of a fixed time, upon demand of
the person entitled to the accounting or delivery.
(6) To file with the commissioner an amendment to its application
prior to any material change in the information contained in the
application for licensure, including, without limitation, the plan of
operation. The commissioner shall, within 20 business days of
receiving a completed amendment to the application, or within a
longer time if agreed to by the licensee, issue an order approving or
disapproving the effectiveness of the proposed amendment.
(7) To comply with the provisions of this division, and with any
order or rule of the commissioner.
(8) To submit to periodic examination by the commissioner as
required by this division.
(9) To advise the commissioner by amendment to its application of
any material judgment filed against, or bankruptcy petition filed by,
the licensee within five days of the filing.
(10) To notify the commissioner, in writing, by certified mail,
return receipt requested, prior to opening a branch office in this
state or changing the business location or locations of the applicant
or the branch offices of the applicant from which activities subject
to this division are conducted.
(11) To refrain from employing, or paying a commission or other
fee, to a mortgage loan originator who is not licensed or registered
in this state.
(b) The exhibit also shall contain a space for the applicant to
attest that the applicant:
(1) Has complied with all applicable state and federal tax return
filing requirements for the past three years or has filed with the
commissioner an accountant's or attorney's statement as to why no
return was filed.
(2) Has not committed a crime against the laws of any state or the
United States, involving moral turpitude, misrepresentation,
fraudulent or dishonest dealing, or fraud, and has disclosed to the
commissioner any final judgment entered against it in a civil action
upon grounds or allegations of fraud, misrepresentation, or deceit.
(3) Has not engaged in conduct that would be cause for denial of a
license.
(4) Is not insolvent.
(5) Has acted with due care and competence in performing any act
for which it is required to hold a license under this division.
(6) Any other matter as required by rule of the commissioner.
(7) The commissioner may adopt regulations to accommodate the
uniform forms of the Nationwide Mortgage Licensing System and
Registry.
SEC. 68. Section 50125 of the Financial
Code is amended to read:
50125. The commissioner may refuse to issue a residential
mortgage loan license if any of the following apply:
(a) The applicant is not in material compliance with a provision
of this division or an order or rule of the commissioner.
(b) The commissioner cannot make the findings specified in
subdivision (d) of Section 50121.
(c) A material requirement for issuance of a license has not been
met.
SEC. 69. Section 50126 of the Financial
Code is amended to read:
50126. (a) Upon reasonable notice and opportunity to be heard,
the commissioner may deny an application for any of the following
reasons:
(1) A false statement of a material fact has been made in the
application.
(2) Any officer, director, general partner, or person owning or
controlling, directly or indirectly, 10 percent or more of the
outstanding interests or equity securities of the applicant has,
within the last 10 years, (A) been convicted of, or pleaded nolo
contendere to, a crime or (B) committed any act involving dishonesty,
fraud, or deceit, if the crime or act is substantially related to
the qualifications, functions, or duties of a person engaged in
business in accordance with this division.
(3) The applicant or any officer, director, general partner, or
person owning or controlling, directly or indirectly, 10 percent or
more of the outstanding interests or equity securities of the
applicant, has violated any provision of
this division or the rules thereunder or any similar
regulatory scheme of the State of California or a foreign
jurisdiction.
(4) The applicant employs a mortgage loan originator who is not
licensed in this state.
(b) The application shall be considered withdrawn within the
meaning of this section if the applicant fails to respond to a
written notification of a deficiency in the application within 90
days of the date of the notification.
(c) The commissioner shall, within 60 days from the filing of a
full and complete application for a license, including the receipt of
background and investigative reports from the Department of Justice
or other government agencies, and the payment of the fees required by
Section 50121, issue either a license or a statement of issues
prepared in accordance with Chapter 5 (commencing with Section 11500)
of Part 1 of Division 3 of Title 2 of the Government Code.
SEC. 70. Section 50130 of the Financial
Code is amended to read:
50130. (a) A mortgage servicer shall file an application for
licensure under this chapter with the commissioner to service
mortgage loans in this state by satisfying the requirements of this
chapter and the applicable provisions, as determined by the
commissioner, of Chapter 2 (commencing with Section 50120).
(b) A mortgage servicer may apply for licensure by doing all of
the following:
(1) Filing with the commissioner an application containing the
information required by Section 50122, and any additional information
the commissioner may require by rule.
(2) Paying the investigation and application fees required by
Section 50121.
(3) Submitting the statements required by Section 50124.
(4) Complying with the applicable provisions of Chapter 2
(commencing with Section 50120).
(c) A licensee may not make or service loans secured by real
property pursuant to the authority of a license, or exemption from
licensure, under the Real Estate Law.
(d) The commissioner may, pursuant to Section 50321, order a
licensee to cease any other business conducted at any location where
the licensee operates under the authority of a residential mortgage
servicer license, if the commissioner finds that the conduct of that
business has facilitated evasions of this division or the rules
adopted pursuant to this division, or that the conduct of that
business is in violation of any law to which that business is
subject.
(e) A license for a business location outside this state may be
issued if the licensee agrees in writing, and subject to the sole
discretion of the commissioner, to either (1) make the licensee's
books, accounts, papers, records, and files available to the
commissioner or the commissioner's representatives in this state
within 10 calendar days of a request from the commissioner or, (2)
pay the reasonable expenses for travel, meals, and lodging of the
commissioner or the commissioner's representatives incurred during an
investigation or examination made at the licensee's location outside
this state.
(f) The commissioner shall license a mortgage servicer upon
completion of the investigation and issuance of the findings required
by Section 50121, subject to Sections 50123, 50125, 50126, and
50127.
(g) A mortgage servicer licensed to service mortgage loans shall
comply with all applicable requirements of California and federal
law, including the Civil Code and Section 2609 of the Real Estate
Settlement Procedures Act of 1974, as amended (12 U.S.C.A. Sec. 2601
et seq.).
(h) A license shall remain in effect until suspended, surrendered,
or revoked.
(i) The commissioner may, by rule, require an applicant for a
mortgage servicer license to apply through the Nationwide Mortgage
Licensing System and Registry, and may adopt regulations to
accommodate the uniform forms of that registry.
SEC. 71. Section 50204 of the Financial
Code is amended to read:
50204. A licensee may not do any of the following:
(a) Disburse the mortgage loan proceeds in a form other than
direct deposit to the borrower's or borrower's designee's account,
wire, bank or certified check, ACH funds transfer, or attorney's
check drawn on a trust account. An entity may apply to the
commissioner for a waiver of the requirements of this subdivision by
demonstrating, in a letter application, that it has adopted or will
adopt another method of disbursement of loan proceeds that will
satisfy the purposes of this subdivision.
(b) Fail to disburse funds in accordance with a commitment to make
a mortgage loan that is accepted by the applicant.
(c) Accept fees at closing that are not disclosed to the borrower
on the federal HUD-1 Settlement Statement.
(d) Commit an act in violation of Section 2941 of the Civil Code.
(e) Obtain or induce an agreement or other instrument in which
blanks are left to be filled in after execution.
(f) Intentionally delay closing of a mortgage loan for the sole
purpose of increasing interest, costs, fees, or charges payable by
the borrower.
(g) Engage in fraudulent home mortgage underwriting practices.
(h) Make payment of any kind, whether directly or indirectly, to
an in-house or fee appraiser of a government or private money lending
agency, with which an application for a home mortgage has been
filed, for the purpose of influencing the independent judgment of the
appraiser with respect to the value of real estate that is to be
covered by the home mortgage.
(i) Engage in any acts in violation of Section 17200 or 17500 of
the Business and Professions Code.
(j) Knowingly misrepresent, circumvent, or conceal, through
subterfuge or device, any material aspect or information regarding a
transaction to which it is a party.
(k) Do an act, whether of the same or a different character than
specified in this section, that constitutes fraud or dishonest
dealings.
() Sell more than eight loans in a calendar year made under the
authority of this license to a person who is not an institutional
investor.
(m) Commit an act in violation of Section 1695.13 of the Civil
Code.
(n) Make or service a loan that is not a residential mortgage loan
under the authority of the license.
(o) Commit an act in violation of Section 2948.5 of the Civil
Code. Evidence of compliance with Section 2948.5 of the Civil Code
may be evidenced by (1) a certification executed by the licensee, at
no cost to the borrower, pursuant to Section 2015.5 of the Code of
Civil Procedure, or (2) other evidence in the loan file acceptable to
the commissioner.
(p) Make or broker a loan that was offered by, negotiated by, or
applied for through, a mortgage loan originator not licensed or
registered through the Nationwide Mortgage Licensing System and
Registry.
SEC. 72. Section 50205 of the Financial
Code is amended to read:
50205. (a) A licensee shall maintain a surety bond in accordance
with this subdivision. The bond shall be used for the recovery of
expenses, fines, and fees levied by the commissioner in accordance
with this division or for losses or damages incurred by borrowers or
consumers as the result of a licensee's noncompliance with the
requirements of this division. The penal sum of the surety bond
shall be maintained in an amount that reflects the dollar amount of
loans originated as determined by the commissioner based on loan
volume. The surety bond shall provide coverage for each mortgage loan
originator in an amount established by the commissioner, and may not
be less than fifty thousand dollars ($50,000). The surety bond shall
include the origination activities of the mortgage loan
originators, pursuant to Section 50110.12. The bond shall be
payable when the licensee fails to comply with a provision of this
division and shall be in the amount of fifty thousand
dollars ($50,000), and may be increased by order of the commissioner
to one hundred thousand dollars ($100,000) upon a determination by
the commissioner that the licensee is not in compliance with any
provision of this chapter or any rule or order adopted or issued by
the commissioner to implement or enforce provisions of this chapter
. The bond shall be payable to the commissioner and issued
by an insurance company authorized to do business in this state. An
original surety bond, including any and all riders and endorsements
executed subsequent to the effective date of the bond, shall be filed
with the commissioner within 10 days of its execution.
(b) When an action is commenced on a licensee's bond, the
commissioner may require the filing of a new bond. Immediately upon
the recovery of an action on the bond, the licensee shall file a new
bond. Failure to file a new bond within 10 days of the recovery on a
bond, or within 10 days after notification by the commissioner that a
new bond is required, constitutes sufficient grounds for the
suspension or revocation of the license.
SEC. 73. Section 50209 is added to the
Financial Code , to read:
50209. (a) Every licensee shall establish a record with the
Nationwide Mortgage Licensing System and Registry.
(b) A licensee shall require and ensure that every mortgage loan
originator employed or compensated by the licensee is licensed or
registered as a mortgage loan originator under this division or
another provision of law in this state that meets the requirements of
Section 1508(d) of Title V of the Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289). A licensee shall
ensure that every mortgage loan originator employed or compensated
by the licensee is licensed or registered through the Nationwide
Mortgage Licensing System and Registry and maintains a unique
identifier through that system.
SEC. 74. Section 50309 of the Financial
Code is amended to read:
50309. The commissioner may shall
require licensees to maintain a file of all advertising copy for a
period of 90 days from the date of its use. The file shall be
available to the commissioner upon request.
SEC. 75. Section 50309.1 is added to the
Financial Code , to read:
50309.1. (a) Each licensee, prior to the first use of any
proposed advertisement with regard to the business subject to this
division, shall submit a true copy thereof to the commissioner for
approval.
(b) If the commissioner, within 15 business days of receipt of the
advertising copy, determines that the advertising does not comply
with the requirements of this chapter or appropriate regulations, the
commissioner shall notify the licensee in writing that the
advertising is disapproved.
SEC. 76. Section 50314 of the Financial
Code is amended to read:
50314. (a) Every person subject to this division shall keep
documents and records that will properly enable the commissioner to
determine whether the residential mortgage lending or residential
mortgage loan servicing functions performed by that person comply
with the provisions of this division and with all rules and orders
made by the commissioner under this division. Upon request of the
commissioner, residential mortgage lenders and residential mortgage
loan servicers shall file an authorization for disclosure to the
commissioner of financial records of the licensed business pursuant
to Section 7473 of the Government Code.
(b) The business documents and records of every residential
mortgage lender or residential mortgage loan servicer, whether
required to be licensed under this division or not, are subject to
inspection and examination by the commissioner at any time without
prior notice. The provisions of this subdivision shall not apply to
persons specified in subdivision (g) (h)
of Section 50003.
Any person subject to this division shall, upon request and within
the time specified in the request, allow inspection and copying of
any documents and records by the commissioner or his or her
authorized representative.
(c) The cost of every inspection and examination of a licensee or
other person subject to this division shall be paid to the
commissioner by the licensee or person examined, and the commissioner
may maintain an action for the recovery of these costs in any court
of competent jurisdiction. In determining the cost of any inspection
or examination, the commissioner may use the estimated average hourly
cost, including overhead, for all persons performing inspections or
examinations of licensees or other persons subject to this division
for the fiscal year.
For the purpose of this subdivision only, no person other than a
licensee shall be deemed to be a person subject to this division
unless and until the person is determined to be a person subject to
this division by an administrative hearing in accordance with Chapter
5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2
of the Government Code, or by a judicial hearing in any court of
competent jurisdiction.
(d) Investigation and examination reports prepared by the
commissioner's duly designated representatives are not public
reports. Those reports may be disclosed to the officers or directors
of a licensee that is the subject of the report for the purpose of
corrective action by the officers or directors. Such a disclosure
shall not operate as a waiver of the exemption specified in
subdivision (d) of Section 6254 of the Government Code.
SEC. 77. Section 50320 of the Financial
Code is amended to read:
50320. Whenever, in the opinion of the commissioner, a person is
engaged, either actually or through subterfuge, in the business of
making residential mortgage loans , acting as a mortgage loan
originator, or servicing residential mortgage loans without a
license from the commissioner, the commissioner may order that person
to desist and refrain. If, within 30 days after an order is served,
a request for a hearing is filed in writing and the hearing is not
held within 60 days of the filing, the order is rescinded. This
section does not apply to persons exempted under subdivision (g) of
Section 50003.
SEC. 78. Section 50700 of the Financial
Code is amended to read:
50700. (a) A residential mortgage lender, or a person ,
mortgage loan originator, or employee acting under the
authority of a residential mortgage lender's license, shall not
provide brokerage services to a borrower, except as provided in
subdivision (c).
(b) "Brokerage services" means either of the following:
(1) Obtaining or attempting to obtain, on behalf of a borrower, a
residential mortgage loan, as defined in subdivision (o) of Section
50003, secured by residential real estate, as defined in subdivision
(t) of Section 50003, made with the funds of another institutional
lender, as defined in paragraphs (1), (2), and (4) of subdivision (j)
of Section 50003, and closed in the name of that lender, for a fee
paid by the borrower or the institutional lender.
(2) Obtaining or attempting to obtain, on behalf of a borrower, a
residential mortgage loan, as defined in subdivision (o) of Section
50003, secured by residential real estate, as defined in subdivision
(t) of Section 50003, made with the funds of another institutional
lender, as defined in paragraphs (1), (2), and (4) of subdivision (j)
of Section 50003, but closed in the name of the licensee, for a fee
paid by the borrower or the institutional lender.
(c) A residential mortgage lender may provide brokerage services
under the authority of its license, if the lender first enters into a
written brokerage agreement with the borrower that satisfies the
requirements of Section 50701.
(d) This chapter does not authorize a licensee to do any of the
following:
(1) Provide brokerage services through independent contractors.
(2) Provide brokerage services through an employee not licensed as
a mortgage loan originator.
(2)
(3) Obtain or attempt to obtain for a borrower a
residential mortgage loan that is a "high cost mortgage," referred to
in Section 152(aa)(1) of the Home Ownership and Equity Protection
Act of 1994, as amended (15 U.S.C. Sec. 1602 (aa)).
(3)
(4) Hold itself out to borrowers, through advertising,
as a mortgage broker, rather than a residential mortgage lender.
However, a licensee shall disclose its status as a broker or agent
when that disclosure is required by law.
(4)
(5) Perform activity subject to Section 10131 of the
Business and Professions Code, except activities authorized by this
division.
SEC. 79. Section 50701 of the Financial
Code is amended to read:
50701. (a) As soon as practical after a borrower requests that
the licensee arrange a loan to be made by another institutional
lender, and before the licensee performs brokerage services for the
borrower, the licensee and borrower shall enter into a written loan
brokerage agreement that satisfies the requirements of this section.
(b) Both the licensee's authorized representative and the borrower
shall sign and date the loan brokerage agreement, and the licensee
shall deliver a copy of the fully executed loan brokerage agreement
to the borrower either upon execution, if the documents are signed in
the licensee's office, or within three business days after
execution. The loan brokerage agreement shall include the
mortgage loan originator's unique identifier.
(c) The loan brokerage agreement shall contain an explicit
statement that (1) the licensee is acting as the agent of the
borrower in providing brokerage services to the borrower, and (2)
when acting as agent for the borrower, it owes to that borrower a
fiduciary duty of utmost care, honesty, and loyalty in the
transaction, including the duty of full disclosure of all material
facts. If the licensee is authorized to act as an agent for any other
person, the brokerage agreement shall contain a statement of that
fact and identification of that person.
(d) The loan brokerage agreement shall contain a detailed
description of the services the licensee agrees to perform for the
borrower, and a good faith estimate of any fees the licensee will
receive for those services, whether paid by the borrower, the
institutional lender, or both.
(e) The loan brokerage agreement shall carry a clear and
conspicuous statement of the conditions under which the borrower is
obligated to pay the licensee for brokerage services rendered under
the agreement.
(f) The loan brokerage agreement shall provide that, if the
licensee makes a materially false or misleading statement or omission
in the inducement or implementation of the agreement, the borrower
may, in addition to any other legal rights or remedies, upon written
notice, do any of the following:
(1) Rescind the brokerage agreement.
(2) Recover fees paid by the borrower to the licensee for
brokerage services rendered by the licensee pursuant to the
agreement.
(3) Recover actual costs, including attorney's fees, for enforcing
the borrower's rights under the loan brokerage agreement.
(g) If the loan brokerage agreement fails to set forth the rights
in subdivision (f), these rights shall be implied by operation of
law.
(h) The loan brokerage agreement shall be the only agreement
between the borrower and the licensee with respect to a single loan.
(i) A licensee whose services to a borrower are limited to
providing brokerage services may not require a borrower to pay fees
or charges before the residential mortgage loan closing, other than
either of the following:
(1) Actual charges to be incurred by the licensee on behalf of the
borrower for services from third parties necessary to process the
application, such as credit reports, appraisals, inspections, flood
certification, and tax service, and, in transactions where those
services are provided by the licensee, a charge not to exceed the fee
customarily charged for the same or comparable service in the
community in which the service was rendered.
(2) An application fee.
A licensee may not accept a fee under Section 50203(a)(1) or (2)
and subsequently require a borrower to pay additional fees or charges
under this paragraph for the borrower's loan transaction.
(j) Any loan brokerage agreement that provides for the collection
of an application fee shall be approved as to form by the
commissioner before its use by a licensee, if the agreement meets the
following requirements:
(1) The agreement specifies the services to be rendered for the
application fee.
(2) The agreement sets forth the amount of the application fee and
the date the fee becomes due and payable.
(3) The agreement does not contain a provision that purports to
except or relieve the licensee from the responsibility to fulfill
verbal commitments and representations made by employees or agents of
the licensee when contracting for the application fee, or guarantee
that a loan will be obtained.
(4) The agreement sets forth a definite date for full performance
of the services promised in exchange for the application fee.
SEC. 80. Section 50705 of the Financial
Code is repealed.
50705. Prior to providing brokerage services for a borrower under
this chapter, and thereafter once every four years, every
residential mortgage lender employee who provides brokerage services
shall complete educational courses equivalent to those described in
paragraphs (1) and (2) of subdivision (a) of Section 10170.5 of the
Business and Professions Code. This section does not impose an
additional requirement upon an employee who holds a valid real estate
license.
SEC. 81. The Legislature finds and declares that
Sections 5, 47, and 63 of this act imposes a limitation on the public'
s right of access to the meetings of public bodies or the writings of
public officials and agencies within the meaning of Section 3 of
Article I of the California Constitution. Pursuant to that
constitutional provision, the Legislature makes the following
findings to demonstrate the interest protected by this limitation and
the need for protecting that interest:
In order to allow the Department of Real Estate and the Department
of Corporations to fully accomplish their goals, it is imperative to
protect the interests of those persons submitting information to the
departments to ensure that any personal or sensitive business
information that this act requires those persons to submit is
protected as confidential information.
SEC. 82. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.