BILL NUMBER: AB 2666	INTRODUCED
	BILL TEXT


INTRODUCED BY   Committee on Banking and Finance (Assembly Members
Eng (Chair), Achadjian (Vice Chair), Fletcher, Fuentes, Gatto, Roger
Hernández, and Torres)

                        MARCH 5, 2012

   An act to amend Sections 22012, 22013, 22065, 22100, 22712, 50002,
50003, 50003.5, and 50327 of, and to add Sections 22712.5, 22756,
and 50316.5 to, the Financial Code, relating to mortgage loan
originators.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2666, as introduced, Committee on Banking and Finance. Mortgage
loan originators.
   (1) Existing law, the California Finance Lenders Law, provides for
the licensure and regulation of finance lenders and brokers by the
Commissioner of Corporations. Existing law, the California
Residential Mortgage Lending Act, prohibits a person from engaging in
the business of making residential mortgage loans or servicing
residential mortgage loans in the state without a license from the
commissioner. Existing law defines a "mortgage loan originator" and
specifies individuals who are not mortgage loan originators, and
defines other terms for purposes of the law and the act. The willful
violation of the law or the act is a crime.
   This bill would provide that a government employee and an employee
of a nonprofit organization who originate loans exclusively in their
capacity as an employee, under certain conditions as specified, are
not mortgage loan originators under the California Finance Lenders
Law or the California Residential Mortgage Lending Act.
   (2) Existing law prohibits a person from engaging in the business
of a finance lender or broker without obtaining a license from the
commissioner.
   This bill would prohibit an individual from engaging in the
business of a mortgage loan originator with respect to any dwelling
in this state without obtaining and maintaining annually a license
from the commissioner. The bill would exempt a registered mortgage
loan originator, as defined, from this licensure requirement when he
or she is employed by a depository institution or an affiliated
company, as specified, or an institution regulated by the Farm Credit
Administration.
   (3) Existing law authorizes the commissioner to order an
unlicensed person who is engaged in business as a broker or finance
lender, or a licensee who is violating the Finance Lenders Law, to
desist from engaging in that business or violating the law, as
specified.
   The bill would also authorize the commissioner to order an
unlicensed person engaged in the business of a mortgage loan
originator or a licensed mortgage loan originator to desist from
violating these provisions. The bill would prohibit a person engaged
in the business of making or brokering residential mortgage loans or
the business of a mortgage loan originator from paying, receiving any
compensation, as specified, for performing services in violation of
these provisions.
   (4) Under existing law an employee of a licensed residual mortgage
lender or licensed mortgage loan originator or of an exempt person
is not required to be licensed when acting within the scope of his or
her employment.
   This bill would allow a person not subject to the licensure
provisions to apply to the commissioner for an exempt company
registration for the purpose of sponsoring one or more individuals
required to be licensed as mortgage loan originators, provided that
the person applying complies with all rules and orders that the
commissioner deems necessary, as specified.
   (5) Existing law authorizes the commissioner, after notice and a
reasonable opportunity to be heard, to suspend or revoke a
residential mortgage lender or mortgage loan originator license if
the licensee has, among other things, violated any provision of the
California Residential Mortgage Lending Act, or rule order of the
commissioner under the act, and provides that the commissioner's
power of investigation and examination is not terminated by the
surrender, suspension, or revocation of a license.
   This bill would authorize the commissioner to also deny or decline
to renew a license under those circumstances, and would provide that
the commissioner's power of investigation and examination is not
terminated by the denial or nonrenewal of a license.
   (6) Because this bill would create new crimes under the California
Finance Lenders Law and the California Residential Mortgage Lending
Act, the bill would create 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 22012 of the Financial Code is amended to read:

   22012.  (a) "Branch office license" means a license to engage in
business as a finance lender or broker at a location other than the
location identified in a finance lender or broker license application
or amended application.
   (b) "Depository institution" has the same meaning as in Section 3
of the Federal Deposit Insurance Act, and includes any credit union.
   (c) "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.
   (d) "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.
   (e) "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 federal 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, mobilehome, or
trailer, if it is used as a residence.
   (f) "SAFE Act" means the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289).
   (g) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
   (h) For purposes of Sections 22109.2, 22109.3, and 22109.5,
"nontraditional mortgage product" means any mortgage product other
than a 30-year fixed rate mortgage. 
   (i) For purposes of Section 22109.1, "expungement" means the
subsequent order under the provisions of Section 1203.4 of the Penal
Code allowing such individual to withdraw his or her plea of guilty
and to enter a plea of not guilty, or setting aside the verdict of
guilty or dismissing the accusation, information, or indictment. With
respect to criminal convictions in another state, that state's
definition of expungement will apply. 
  SEC. 2.  Section 22013 of the Financial Code is amended to read:
   22013.  (a) "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.
   (b) Mortgage loan originator does not include any of the
following:
   (1) An individual who performs purely administrative or clerical
tasks on behalf of a person meeting the definition of a mortgage loan
originator, except as provided in subdivision (c) of Section 22014.
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, 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 who solely renegotiates terms for existing
mortgage loans held or serviced by his or her employer and who does
not otherwise act as a mortgage loan originator, unless the United
States Department of Housing and Urban Development or a court of
competent jurisdiction determines that the SAFE Act requires such an
employee to be licensed as a mortgage loan originator under state
laws implementing the SAFE Act.
   (3) 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.
   (4) An individual licensed as a mortgage loan originator pursuant
to the provisions of Article 2.1 (commencing with Section 10166.01)
of Chapter 3 of Part 1 of Division 4 of the Business and Professions
Code and the SAFE Act. 
   (5) An individual who is an employee of a federal, state, or local
government agency or housing finance agency and who acts as a loan
originator only pursuant to his or her official duties as an employee
of the federal, state, or local government agency or housing finance
agency.  
   (A) For purposes of this paragraph, the term "employee" means an
individual whose manner and means of performance of work are subject
to the right of control of, or are controlled by, a person, and whose
compensation for federal income tax purposes is reported, or
required to be reported, on a W-2 form issued by the controlling
person.  
   (B) For purposes of this paragraph, the term "housing finance
agency" means any authority:  
   (i) That is chartered by a state to help meet the affordable
housing needs of the residents of the state.  
   (ii) That is supervised directly or indirectly by the state
government.  
   (iii) That is subject to audit and review by the state in which it
operates.  
   (6) (A) An employee of a bona fide nonprofit organization who
exclusively originates residential mortgage loans for a bona fide
nonprofit organization, and who acts as a mortgage loan originator
only with respect to residential mortgage loans with terms that are
favorable to the borrower.  
   (B) To qualify for the exemption under this paragraph, the bona
fide nonprofit organization under this paragraph must register with
the department on a form prescribed by the commissioner, along with
documentation of all of the following by December 31 of each year:
 
   (i) Status of a tax-exempt organization under Section 501(c)(3) of
the Internal Revenue Code of 1986.  
   (ii) That the organization promotes affordable housing or provides
home ownership education or similar services.  
   (iii) That the organization conducts its activities in a manner
that serves public or charitable purposes, rather than commercial
purposes.  
   (iv) That the organization receives funding and revenue, and
charges fees in a manner that does not incentivize the organization
or its employees to act other than in the best interests of its
clients.  
   (v) That the organization compensates employees in a manner that
does not incentivize employees to act other than in the best
interests of its clients.  
   (vi) That the organization provides to, or identifies for, the
borrower residential mortgage loans with terms favorable to the
borrower and comparable to mortgage loans and housing assistance
provided under government housing assistance programs.  
   (vii) That the organization is certified by the United States
Department of Housing and Urban Development as a housing counselor
who engages solely in traditional housing counseling services, if
applicable.  
   (C) The commissioner may periodically require reports regarding
the activities of the bona fide nonprofit organization, and shall
examine the nonprofit organization's books and records in accordance
with the regulations of the United States Department of Housing and
Urban Development, or any successor guidance or requirement by the
Consumer Financial Protection Bureau. If the nonprofit organization
fails to provide documentation as required by subparagraph (B), or if
it does not continue to meet the criteria under subparagraph (B),
the commissioner may revoke the nonprofit organization's status as a
registered bona fide nonprofit organization.  
   (D) For residential mortgage loans to have terms that are
favorable to the borrower, the terms shall be consistent with loan
origination in a public or charitable context, rather than a
commercial context.  
   (E) In making its determinations and examinations, the
commissioner may rely on the receipt and review of:  
   (i) Reports filed with federal, state, or local housing agencies
and authorities.  
   (ii) Reports and attestations prescribed by the commissioner by
rule or order. 
   (c) "Registered mortgage loan originator" means any individual who
is all of the following:
   (1) Meets the definition of mortgage loan originator.
   (2) Is an employee of a depository institution, a subsidiary that
is owned and controlled by a depository institution and regulated by
a federal banking agency, or an institution regulated by the Farm
Credit Administration.
   (3) Is registered with, and maintains a unique identifier through,
the Nationwide Mortgage Licensing System and Registry.
   (d) "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 licensed by the state or a registered mortgage loan
originator.
  SEC. 3.  Section 22065 of the Financial Code is amended to read:
   22065.  (a) Persons not subject to this division may apply to the
commissioner for an exempt company registration for the purpose of
sponsoring one or more individuals required to be licensed as
mortgage loan originators pursuant to the federal SAFE Act. 
A 
    (b)     A  mortgage loan originator
 who is an insurance producer  eligible for licensure
pursuant to this section shall meet all of the following
requirements:
   (1) Be covered under an exclusive written contract with, and
originate mortgage loans solely on behalf of, that exempt person.
   (2) Hold a current insurance producer license under Article 3
(commencing with Section 1631) of Chapter 5 of Part 2 of Division 1
of the Insurance Code that is not suspended or revoked.
   (3) Have a current notice of appointment under Article 9
(commencing with Section 1702) of Chapter 5 of Part 2 of Division 1
of the Insurance Code from an insurer that controls, is controlled
by, or is under common control with that exempt person. 
   (b) 
    (c)  An exempt person  applying under the exemption
company registration procedure  shall comply with all rules and
orders that the commissioner deems necessary to ensure compliance
with the federal SAFE Act and shall pay an annual registration fee
established by the commissioner. 
   (c) 
    (d)  A licensed mortgage loan originator who is an
insurance producer for an insurer authorized to do business in this
state may originate loans on behalf of a person registered pursuant
to subdivision  (a)   (b)  or on behalf of
a licensed finance lender that originates loans exclusively for a
single person that is not subject to licensure pursuant to
subdivision (a) of Section 22050.
  SEC. 4.  Section 22100 of the Financial Code is amended to read:
   22100.  (a) No person shall engage in the business of a finance
lender or broker without obtaining a license from the commissioner.
   (b) Every licensee engaging in the business of making or brokering
residential mortgage loans shall require that every mortgage loan
originator employed or compensated by that licensee obtains and
maintains a mortgage loan originator license from the commissioner
under this division or Division 20 (commencing with Section 50000),
or has first obtained a license endorsement from the Commissioner of
Real Estate pursuant to Article 2.1 (commencing with Section
10166.01) of Chapter 3 of Part 1 of Division 4 of the Business and
Professions Code.
   (c) A finance lender or broker shall not employ a mortgage loan
originator whose license or license endorsement has lapsed.
   (d) A finance lender or broker may not make or broker a
residential mortgage loan unless that loan is offered by, negotiated
by, or applied for through a licensed mortgage loan originator.
   (e) Every licensee engaged in the business of making or brokering
residential mortgage loans and every mortgage loan originator
licensed under this division shall register with and maintain a valid
unique identifier issued by the Nationwide Mortgage Licensing System
and Registry. 
   (f) 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 license in
accordance with the requirements of this division and any rules
promulgated by the commissioner under this chapter.  
   (g) A registered mortgage loan originator, as defined in
subdivision (c) of Section 22013, is exempt from licensure under this
section when he or she is employed by:  
    (1) A depository institution.  
    (2) A subsidiary of a depository institution 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.

  SEC. 5.  Section 22712 of the Financial Code is amended to read:
   22712.  Whenever, in the opinion of the commissioner, any person
is engaged in  the  business as a broker or finance lender,
 or a mortgage loan originator,  as defined in this
division, without a license from the commissioner, or any licensee is
violating any provision of this division, the commissioner may order
that person or licensee to desist and to refrain from engaging in
the business or further violating this division. If, within 30 days
after the order is served, a written request for a hearing is filed
and no hearing is held within 30 days thereafter, the order is
rescinded.  For purposes of this section, "licensee" includes a
mortgage loan originator. 
  SEC. 6.  Section 22712.5 is added to the Financial Code, to read:
   22712.5.  A person engaged in the business of making or brokering
residential mortgage loans or engaged in the business of a mortgage
loan originator shall not pay, receive, or collect in whole or in
part any commission, fee, or other compensation for brokering,
originating, or servicing a mortgage loan in violation of this
division, including a mortgage loan brokered, originated, or serviced
by any unlicensed person other than an exempt person.
  SEC. 7.  Section 22756 is added to the Financial Code, to read:
   22756.  Notwithstanding any other law, any application for
licensure, amendment to the application or registration document or
notice filed under any of the laws administered by the Department of
Corporations, or record otherwise required to be filed in this state
as an electronic record pursuant to a nationwide central depository
for information regarding licensees, including mortgage loan
originators, or any electronic record filed through the Nationwide
Mortgage Licensing System and Registry, shall be deemed to be a valid
original document upon reproduction to paper form by the Department
of Corporations.
  SEC. 8.  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)  (1)    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, except
that an individual who meets the definition of a mortgage loan
originator in Section 50003.5 shall be subject to this division. 

   (2) A person not subject to this division may apply to the
commissioner for an exempt company registration for the purpose of
sponsoring one or more individuals required to be licensed as
mortgage loan originators as defined in Section 50003.5 and pursuant
to the SAFE Act.  
   (3) An exempt person applying under the exempt company
registration procedure shall comply with all rules and orders that
the commissioner deems necessary to ensure compliance with the SAFE
Act and shall pay an annual registration fee established by the
commissioner. 
   (c) The following persons are exempt from subdivision (a):
   (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) An agency or other instrumentality of the federal government,
or state or municipal government.
   (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, or
an owner who controls that person, affiliate, or subsidiary of that
person.
   (8) A person acting in a fiduciary capacity conferred by the
authority of a court.
   (9) A real estate broker licensed under California law, when
making, arranging, selling, or servicing a residential loan.
   (10) A California finance lender or broker licensed under Division
9 (commencing with Section 22000), when acting under the authority
of that license.
   (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.
   (12) A mortgage loan originator who has obtained a license under
Chapter 3.5 (commencing with Section 50140), provided that the
mortgage loan originator is employed by a residential mortgage lender
or servicer.
   (13) A registered mortgage loan originator described in
subdivision (e).
   (d) An individual, unless specifically exempted under subdivision
(e), 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 license in accordance with the
requirements of Chapter 3.5 (commencing with Section 50140) and any
rules promulgated by the commissioner under that chapter. Each
licensed mortgage loan originator shall register with and maintain a
valid unique identifier issued by the Nationwide Mortgage Licensing
System and Registry.
   (e) A registered mortgage loan originator is exempt from licensure
under subdivisions (a) and (d), when he or she is employed by a
depository institution, a subsidiary of a depository institution that
is owned and controlled by a depository institution and regulated by
a federal banking agency, or an institution regulated by the Farm
Credit Administration.
   (f) A loan processor or underwriter who is an independent
contractor employed by a residential mortgage lender or servicer may
not perform the activities of a loan processor or underwriter under
this division unless the independent contractor loan processor or
underwriter obtains and maintains a license under Section 50120.
  SEC. 9.  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.
   (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.
   (h) "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.
   (i) "In this state" includes 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).
   (j) "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 federal 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 residential mortgage lender or servicer 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.
   (k) "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 residential mortgage lender or servicer licensed to make
residential mortgage loans under this law.
   (l) "Law" means the California Residential Mortgage Lending Act.
   (m) "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.
   (n) "Licensee" means, depending on the context, a person licensed
under Chapter 2 (commencing with Section 50120), Chapter 3
(commencing with Section 50130), or Chapter 3.5 (commencing with
Section 50140).
   (o) "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.
   (p) "Mortgage loan," "residential mortgage loan," or "home
mortgage loan" means a federally related 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.
   (q) "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.
   (r) "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.
   (s) "Net worth" has the meaning set forth in Section 50201.
   (t) "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.
   (u) "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.
   (v) "Residential real property" or "residential real estate" means
real property located in this state that is improved by a
one-to-four family dwelling.
   (w) "SAFE Act" means the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289).
   (x) "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.
   (y) "Sell" includes exchange, offer to sell, or solicitation to
sell.
   (z) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
   (aa) For purposes of Sections 50142, 50143, and 50145,
"nontraditional mortgage product" means any mortgage product other
than a 30-year fixed rate mortgage. 
   (ab) For purposes of Section 50141, "expungement" means the
subsequent order under the provisions of Section 1203.4 of the Penal
Code allowing such individual to withdraw his or her plea of guilty
and to enter a plea of not guilty, or setting aside the verdict of
guilty or dismissing the accusation, information, or indictment. With
respect to criminal convictions in another state, that state's
definition of expungement will apply. 
  SEC. 10.  Section 50003.5 of the Financial Code is amended to read:

   50003.5.  (a) "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.
   (b) Mortgage loan originator does not include any of the
following:
   (1) An individual who performs purely administrative or clerical
tasks on behalf of a person meeting the definition of a mortgage loan
originator, except as provided in subdivision (c) of Section
50003.6. 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, 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 who solely renegotiates terms for existing
mortgage loans held or serviced by his or her employer and who does
not otherwise act as a mortgage loan originator, unless the United
States Department of Housing and Urban Development or a court of
competent jurisdiction determines that the SAFE Act requires that
employee to be licensed as a mortgage loan originator under state
laws implementing the SAFE Act.
   (3) 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.
   (4) An individual licensed as a mortgage loan originator pursuant
to Article 2.1 (commencing with Section 10166.01) of Chapter 3 of
Part 1 of Division 4 of the Business and Professions Code and the
SAFE Act. 
   (5) An individual who is an employee of a federal, state, or local
government agency or housing finance agency and who acts as a loan
originator only pursuant to his or her official duties as an employee
of the federal, state, or local government agency or housing finance
agency.  
   (A) For purposes of this paragraph, the term "employee" means an
individual whose manner and means of performance of work are subject
to the right of control of, or are controlled by, a person, and whose
compensation for federal income tax purposes is reported, or
required to be reported, on a W-2 form issued by the controlling
person.  
   (B) For purposes of this paragraph, the term "housing finance
agency" means any authority:  
   (i) That is chartered by a state to help meet the affordable
housing needs of the residents of the state.  
   (ii) That is supervised directly or indirectly by the state
government.  
   (iii) That is subject to audit and review by the state in which it
operates.  
   (6) (A) An employee of a bona fide nonprofit organization who
exclusively originates residential mortgage loans for a bona fide
nonprofit organization, and who acts as a mortgage loan originator
only with respect to residential mortgage loans with terms that are
favorable to the borrower.  
   (B) To qualify for the exemption under this paragraph, the bona
fide nonprofit organization under this paragraph must register with
the department on a form prescribed by the commissioner, along with
documentation of all of the following by December 31 of each year:
 
   (i) Status of a tax-exempt organization under Section 501(c)(3) of
the Internal Revenue Code of 1986.  
   (ii) That the organization promotes affordable housing or provides
home ownership education or similar services.  
   (iii) That the organization conducts its activities in a manner
that serves public or charitable purposes, rather than commercial
purposes.  
   (iv) That the organization receives funding and revenue, and
charges fees in a manner that does not incentivize the organization
or its employees to act other than in the best interests of its
clients.  
   (v) That the organization compensates employees in a manner that
does not incentivize employees to act other than in the best
interests of its clients.  
   (vi) That the organization provides to, or identifies for, the
borrower residential mortgage loans with terms favorable to the
borrower and comparable to mortgage loans and housing assistance
provided under government housing assistance programs.  
   (vii) That the organization is certified by the United States
Department of Housing and Urban Development as a housing counselor
who engages solely in traditional housing counseling services, if
applicable.  
   (C) The commissioner may periodically require reports regarding
the activities of the bona fide nonprofit organization, and shall
examine the nonprofit organization's books and records in accordance
with the regulations of the United States Department of Housing and
Urban Development, or any successor guidance or requirement by the
Consumer Financial Protection Bureau. If the nonprofit organization
fails to provide documentation as required by subparagraph (B), or if
it does not continue to meet the criteria under subparagraph (B),
the commissioner may revoke the nonprofit organization's status as a
registered bona fide nonprofit organization.  
   (D) For residential mortgage loans to have terms that are
favorable to the borrower, the terms shall be consistent with loan
origination in a public or charitable context, rather than a
commercial context.  
   (E) In making its determinations and examinations, the
commissioner may rely on the receipt and review of:  
   (i) Reports filed with federal, state, or local housing agencies
and authorities.  
   (ii) Reports and attestations prescribed by the commissioner by
rule or order. 
   (c) "Registered mortgage loan originator" means any individual who
is all of the following:
   (1) Meets the definition of mortgage loan originator.
   (2) Is an employee of a depository institution, a subsidiary that
is owned and controlled by a depository institution and regulated by
a federal banking agency, or an institution regulated by the Farm
Credit Administration.
   (3) Is registered with, and maintains a unique identifier through,
the Nationwide Mortgage Licensing System and Registry.
   (d) "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 licensed by the state or a registered mortgage loan
originator.
  SEC. 11.  Section 50316.5 is added to the Financial Code, to read:
   50316.5.  Notwithstanding any other law, any application for
licensure, amendment to the application or registration document or
notice filed under any of the laws administered by the Department of
Corporations, or record otherwise required to be filed in this state
as an electronic record pursuant to a nationwide central depository
for information regarding licensees, including mortgage loan
originators, or any electronic record filed through the Nationwide
Mortgage Licensing System and Registry, shall be deemed to be a valid
original document upon reproduction to paper form by the Department
of Corporations.
  SEC. 12.  Section 50327 of the Financial Code is amended to read:
   50327.  (a) The commissioner may, after notice and a reasonable
opportunity to be heard,  deny, decline to renew,  suspend
 ,  or revoke any license if the commissioner finds that:
 (1) the 
    (1)     The  licensee has violated any
provision of this division or any rule or order of the commissioner
thereunder  ; or (2) any   . 
    (2)     Any  fact or condition exists
that, if it had existed at the time of the original application for
the license, reasonably would have warranted the commissioner in
refusing to issue the license originally.
   (b) The power of investigation and examination by the commissioner
is not terminated by the  denial, nonrenewal,  surrender,
suspension, or revocation of any license issued by him or her.
  SEC. 13.  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.