BILL NUMBER: SB 491	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Maldonado

                        FEBRUARY 26, 2009

   An act to add Section 10166 to the Business and Professions Code,
and to add Sections 403.5, 5505.5, 14157, 22113, and 50131 to, and to
add Division 1.9 (commencing with Section 4992) to, the Financial
Code, relating to mortgage loan originators.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 491, as introduced, Maldonado. Mortgage loan originators:
Nationwide Mortgage Licensing System and Registry.
   The Real Estate Law provides for the regulation and licensure of
real estate brokers and real estate salespersons by the Real Estate
Commissioner. The California Finance Lenders Law provides for the
regulation and licensure of finance lenders and brokers by the
Commissioner of Corporations. The California Residential Mortgage
Lending Act provides for the regulation and licensure of residential
mortgage lenders and servicers by the Commissioner of Corporations.
The Banking Law provides for the regulation of state commercial and
industrial banks by the Commissioner of Financial Institutions. The
Savings Association Law provides for the regulation of state savings
associations by the Commissioner of Financial Institutions. The
California Credit Union Law provides for the regulation of state
credit unions by the Commissioner of Financial Institutions. A
willful violation of specified provisions of those acts is a crime.
   Existing federal law, the Secure and Fair Enforcement for Mortgage
Licensing Act of 2008, provides for a Nationwide Mortgage Licensing
System and Registry for the state licensing and registration of
state-licensed loan originators, as defined, and the registration of
registered loan originators, as defined. The act requires state
compliance with the requirements of the act, as specified, and sets
forth, among others, minimum testing and education standards.
   This bill would provide for state compliance with the federal
Secure and Fair Enforcement for Mortgage Licensing Act of 2008, and
would require the state-registration of mortgage loan originators, as
defined. The bill would require the Department of Real Estate, the
Department of Corporations, and the Department of Financial
Institutions to implement that registration in accordance with the
above-described federal standards, and would impose registrant
examination and education requirements, including continuing
education requirements. The bill would implement specified
recordkeeping and reporting requirements, and would set forth penalty
provisions for the violation thereof.
   Because a violation of those provisions by certain licensees may
be punished as crimes under their respective licensing laws, 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.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 10166 is added to the Business and Professions
Code, to read:
   10166.  An individual licensee and each employee of a licensee, if
acting as a mortgage loan originator, as defined in Section 4992 of
the Financial Code, shall apply, either electronically or in writing
to the commissioner, for a registration to act as a mortgage loan
originator. The commissioner may prescribe the format and content of
the mortgage loan originator registration application, which shall
meet the minimum requirements for licensing of a mortgage loan
originator pursuant to the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (12 U.S.C. Sec. 5101 et seq.).
  SEC. 2.  Section 403.5 is added to the Financial Code, to read:
   403.5.  Each employee of a bank organized under this division, if
acting as a mortgage loan originator, as defined in Section 4992,
shall apply, either electronically or in writing to the commissioner,
for a registration to act as a mortgage loan originator. The
commissioner may prescribe the format and content of the mortgage
loan originator registration application, which shall meet the
minimum requirements for licensing of a mortgage loan originator
pursuant to the federal Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 (12 U.S.C. Sec. 5101 et seq.).
  SEC. 3.  Division 1.9 (commencing with Section 4992) is added to
the Financial Code, to read:

      DIVISION 1.9.  Secure and Fair Enforcement for Mortgage
Licensing


   4992.  For purposes of this division, the following definitions
shall apply:
   (a) (1) "Licensing agency" means the Department of Real Estate for
licensed real estate brokers and salespersons, and their employees,
the Department of Corporations for licensed finance lenders and
brokers and licensed residential mortgage lenders and servicers, and
their employees, and the Department of Financial Institutions for
employees of commercial and industrial banks and savings associations
and credit unions organized in this state, when acting as mortgage
loan originators.
   (2) "Licensing agency's fund" means either the Real Estate Fund
pursuant to Section 10450 of the Business and Professions Code, the
State Corporations Fund pursuant to Section 13978.6 of the Government
Code, the Financial Institutions Fund pursuant to Section 265, or
the Credit Union Fund pursuant to Section 14354, as applicable.
   (3) "Licensing law" means the Real Estate Law (Part 1 (commencing
with Section 10000) of Division 4 of the Business and Professions
Code), the California Finance Lenders Law (Division 9 (commencing
with Section 22000)), the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000)), a commercial or
industrial bank organized under the Banking Law (Division 1
(commencing with Section 99)), a savings association organized under
the Savings Association Law (Division 2 (commencing with Section
5000)), or a credit union organized under the California Credit Union
Law (Division 5 (commencing with Section 14000)), as applicable.
   (b) (1) "Mortgage loan originator" means any individual who takes
a residential mortgage loan application and offers or negotiates
terms of a residential mortgage loan for compensation or gain, as
defined in paragraphs (3), (7), and (11) of Section 5102 of the SAFE
Mortgage Licensing Act of 2008.
   (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 mortgage loan originator. 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) A person or entity that only performs real estate brokerage
activities and is licensed or registered in accordance with
applicable state 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. The term "real estate brokerage activities" has the same
meaning as set forth in subparagraph (D) of paragraph (3) of Section
5102 of the SAFE Mortgage Licensing Act of 2008.
   (C) A person 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.
   (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) "SAFE Mortgage Licensing Act of 2008" means the federal Secure
and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C.
Sec. 5101 et seq.).
   (f) "Unique identifier" means a number or other identifier that
permanently identifies a mortgage loan originator and that is
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
   4992.1.  (a) An individual may not engage in the business of a
mortgage loan originator without doing both of the following:
   (1) Obtaining and maintaining annually, a registration as a
mortgage loan originator from the licensing agency, as described in
subdivision (b).
   (2) Obtaining a unique identifier, as described in subdivision
(b).
   (b) Upon the effective date of this act or upon commencing
activity as a mortgage loan originator, a mortgage loan originator
shall apply for his or her registration and unique identifier from
the licensing agency in a form prescribed by the licensing agency.
   (c) In accordance with the SAFE Mortgage Licensing Act of 2008,
the licensing agency shall register each state mortgage loan
originator with the Nationwide Mortgage Licensing System and
Registry, and provide each mortgage loan originator with a unique
identifier.
   (d) In order to fulfill the purposes of subdivision (c), the
licensing agency may establish relationships or contract with the
Nationwide Mortgage Licensing System and Registry or any other entity
designated by the Nationwide Mortgage Licensing System and Registry
to collect and maintain registration and unique identifier records or
files.
   (e) (1) An individual who fails to comply with this section may be
subject to a civil penalty in the amount of ____ dollars ($____).
The licensing agency may bring an action in an appropriate court of
this state to collect payment of that penalty.
   (2) The licensing agency may suspend or revoke the license of a
licensed individual who fails to pay a penalty imposed pursuant to
this section.
   (3) All penalties paid or collected under this section shall be
deposited into the licensing agency's fund and shall, upon
appropriation by the Legislature, be available for expenditure for
expenses related to the administration of this division and in
accordance with federal law.
   4992.2.  (a) In connection with an application to the licensing
agency for registration as a mortgage loan originator, every
applicant shall furnish to the licensing agency, for submission 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 licensing agency 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) The requirements of subdivision (a) are satisfied if the
applicant has previously complied with similar provisions to the
satisfaction of the licensing agency.
   (c) The licensing agency shall request subsequent arrest
notification service from the Department of Justice, as provided
pursuant to Section 11105.2 of the Penal Code, in connection with an
applicant for registration as a mortgage loan originator.
   4992.3.  Notwithstanding any other provision of law, and in
accordance with subsection (b) of Section 5104 of the SAFE Mortgage
Licensing Act of 2008, the licensing agency shall not issue a
registration to act as a mortgage loan originator to an applicant
unless the licensing agency 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 financial responsibility,
character, and general fitness such 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 division.
   (d) The applicant has complied with the education and written
testing requirements in Section 4992.4, and any net worth or surety
bond requirements, if applicable.
   4992.4.  (a) In addition to any requirements under his or her
licensing law, as applicable, an applicant for registration as a
mortgage loan originator shall complete at least 20 hours of
education courses, which shall include 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 Mortgage Licensing Act of 2008,
and by the licensing agency. 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
Mortgage Licensing Act of 2008, and by the licensing agency. The
licensing agency may substitute any of the courses described in
subdivision (a) for the course requirements under the licensing law,
subject to a finding that the course requirements in subdivision (a)
are substantially equivalent to, and meet the intent of, the
provisions of the SAFE Mortgage Licensing Act of 2008, as applicable.

   (c) Before being issued a registration 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.
   (d) 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.
   (e) 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.
   (f) An applicant 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 the questions.
   (g) An applicant 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.
   (h) An applicant who fails three consecutive retests shall wait at
least six months before retesting.
   (i) A mortgage loan originator who fails to maintain a valid
registration for a period of five years or longer or who fails to
register as a mortgage loan originator in accordance with applicable
state law shall retake the qualified written test.
   4992.5.  The licensing agency shall prescribe the form for
registrant compliance with the reporting requirements described under
subsection (e) of Section 1505 of the SAFE Mortgage Licensing Act of
2008, pursuant to Nationwide Mortgage Licensing System and Registry
standards.
   4992.6.  The minimum standards for annual renewal of registration
as a mortgage loan originator shall include the following:
   (a) The mortgage loan originator continues to meet the minimum
standards for obtaining registration as a mortgage loan originator.
   (b) The mortgage loan originator satisfies the annual continuing
education requirements described in Section 4992.7.
   4992.7.  (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 licensing
agency and the Nationwide Mortgage Licensing System and Registry.
   (c) The licensing agency shall have the authority to substitute
any of the courses described in subdivision (a) for the course
requirements of provisions under the licensing law, subject to a
finding that the course requirements in subdivision (a) are
substantially equivalent to, and meet the intent of, those
provisions.
   (d) Nothing in this section shall preclude any education course,
as approved by the licensing agency 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 licensing agency 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) An individual 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 licensing agency towards completion of continuing education
requirements in this state.
   4992.75.  (a) As often as the licensing agency deems necessary and
appropriate, the licensing agency shall examine the affairs of each
individual who is required to register pursuant to Section 4992.1 for
compliance with this division. The licensing agency shall appoint
suitable persons to perform these examinations. The licensing agency
may examine the books, records, and documents of those individuals,
and may examine the individual's employees or agents under oath
regarding his or her operations. The licensing agency 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 licensing agency may accept an
examination conducted by one of these entities in place of an
examination by the licensing agency under this division, unless the
licensing agency determines that the examination does not provide
information necessary to enable the licensing agency to fulfill its
responsibilities under this division.
   (b) The licensing agency may impose a penalty against an
individual whose affairs are examined or reviewed pursuant to
subdivision (a) based on the findings of the examination or review.
The licensing agency may suspend or revoke the license or
registration, or both, of a licensed individual who fails to pay that
penalty, subject to existing procedures related to suspension or
revocation of a license. In addition, the licensing agency 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 licensing agency's fund, and shall, upon
appropriation by the Legislature, be available for expenditure for
expenses related to the administration of this division and in
accordance with federal law.
   (d) The statement of the findings of an examination conducted
pursuant to this section shall belong to the licensing agency and
shall not be disclosed to anyone other than the examined person, law
enforcement officials, or other state or federal regulatory agencies
for further investigation and enforcement. Reports required of those
persons by the licensing agency under this division and results of
examinations performed by the licensing agency under this division
are the property of the licensing agency.
   4992.8.  A mortgage loan originator shall make any special reports
to the licensing agency that the licensing agency may, from time to
time, require.
   4992.85.  (a) The licensing agency shall regularly report
violations of this division, as well as enforcement actions taken
against a mortgage loan originator to whom a registration has been
issued, and enforcement actions taken against any individual for
failure to obtain a registration as a mortgage loan originator, to
the Nationwide Mortgage Licensing System and Registry.
   (b) The licensing agency 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
licensing agency.
   (c) The licensing agency is authorized to promulgate regulations
specifying the recordkeeping requirements that mortgage loan
originators shall satisfy.
  SEC. 4.  Section 5505.5 is added to the Financial Code, to read:
   5505.5.  Each employee of a savings association organized under
this division, if acting as a mortgage loan originator, as defined in
Section 4992, shall apply, either electronically or in writing to
the commissioner, for a registration to act as a mortgage loan
originator. The commissioner may prescribe the format and content of
the mortgage loan originator registration application, which shall
meet the minimum requirements for licensing of a mortgage loan
originator pursuant to the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (12 U.S.C. Sec. 5101 et seq.).
  SEC. 5.  Section 14157 is added to the Financial Code, to read:
   14157.  Each employee of a credit union organized under this
division, if acting as a mortgage loan originator, as defined in
Section 4992, shall apply, either electronically or in writing to the
commissioner, for a registration to act as a mortgage loan
originator. The commissioner may prescribe the format and content of
the mortgage loan originator registration application, which shall
meet the minimum requirements for licensing of a mortgage loan
originator pursuant to the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (12 U.S.C. Sec. 5101 et seq.).
  SEC. 6.  Section 22113 is added to the Financial Code, to read:
   22113.  An individual licensee and each employee of a licensee, if
acting as a mortgage loan originator, as defined in Section 4992,
shall apply, either electronically or in writing to the commissioner,
for a registration to act as a mortgage loan originator. The
commissioner may prescribe the format and content of the mortgage
loan originator registration application, which shall meet the
minimum requirements for licensing of a mortgage loan originator
pursuant to the federal Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 (12 U.S.C. Sec. 5101 et seq.).
  SEC. 7.  Section 50131 is added to the Financial Code, to read:
   50131.  An individual licensee and each employee of a licensee, if
acting as a mortgage loan originator, as defined in Section 4992,
shall apply, either electronically or in writing to the commissioner,
for a registration to act as a mortgage loan originator. The
commissioner may prescribe the format and content of the mortgage
loan originator registration application, which shall meet the
minimum requirements for licensing of a mortgage loan originator
pursuant to the federal Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 (12 U.S.C. Sec. 5101 et seq.).
  SEC. 8.  The provisions of this act shall be construed in
conformity with the requirements imposed by the federal Secure and
Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. Sec.
5101 et seq.). The appropriate licensing agency, as defined in
subdivision (a) of Section 4992 of the Financial Code, shall ensure
compliance with those standards, and may adopt regulations to
implement Division 1.9 (commencing with Section 4992) of the
Financial Code.
  SEC. 9.  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.