BILL NUMBER: SB 217 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 8, 2011
PASSED THE ASSEMBLY SEPTEMBER 7, 2011
AMENDED IN ASSEMBLY SEPTEMBER 1, 2011
AMENDED IN ASSEMBLY AUGUST 25, 2011
AMENDED IN ASSEMBLY AUGUST 15, 2011
AMENDED IN ASSEMBLY JUNE 29, 2011
AMENDED IN ASSEMBLY JUNE 16, 2011
INTRODUCED BY Senator Vargas
FEBRUARY 9, 2011
An act to amend Section 10166.05 of the Business and Professions
Code, and to amend Sections 22109.1 and 50141 of, and to add Section
22065 to, the Financial Code, relating to mortgage loan originators.
LEGISLATIVE COUNSEL'S DIGEST
SB 217, Vargas. Mortgage loan originators: licensure.
(1) Existing law provides for the licensure and regulation of
mortgage loan originators, as defined, by the Commissioner of
Corporations under the California Finance Lenders Law and the
California Residential Mortgage Lending Act. Existing law requires a
real estate license endorsement by the Real Estate Commissioner under
the Real Estate Law for a real estate licensee to engage in the
business of a mortgage loan originator. Existing law prohibits the
issuance of a mortgage loan originator license or a license
endorsement to act as a mortgage loan originator if the applicant for
a license or license endorsement has been convicted of, or pled
guilty or nolo contendere to, a felony during the 7-year period
preceding the date of the application for licensing 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.
This bill would provide that an expunged or pardoned felony
conviction does not require denial of a license or license
endorsement but would authorize the consideration of the underlying
crime, facts, or circumstances of the expunged or pardoned felony
conviction when determining whether to issue a license or license
endorsement, as specified.
(2) Existing law exempts from the provisions of the California
Finance Lenders Law specified persons and entities, including any
person doing business under any law of any state or of the United
States relating to banks, trust companies, savings and loan
associations, and insurance premium finance agencies. A willful
violation of the California Finance Lenders Law is a crime.
This bill would authorize a person exempt from the provisions of
the California Finance Lenders Law to apply to the Commissioner of
Corporations for an exempt company registration for the purpose of
sponsoring one or more individuals required to be licensed as
mortgage loan originators under the federal Secure and Fair
Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) if
specified requirements are met, including that the mortgage loan
originator is covered under an exclusive written contract with, and
originates mortgage loans solely on behalf of, the exempt person. The
bill would require an exempt person to comply with all rules and
orders that the commissioner deems necessary to ensure compliance
with the federal SAFE Act and would require an exempt person to pay
an annual registration fee established by the commissioner. The bill
would authorize a licensed mortgage loan originator who is an
insurance producer to originate loans on behalf of an exempt person
or on behalf of a licensed finance lender that originates loans for
an exempt person, as specified.
Because a willful violation of these requirements under the
California Finance Lenders Law would be a crime, this bill would
impose a state-mandated local program.
(3) 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.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10166.05 of the Business and Professions Code
is amended to read:
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 governmental jurisdiction, except that a subsequent
formal vacation of a revocation shall not be deemed a revocation.
(b) (1) 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, 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. Whether a particular crime is
classified as a felony shall be determined by the law of the
jurisdiction in which an individual is convicted.
(2) For purposes of this subdivision, an expunged or pardoned
felony conviction shall not require denial of an application.
However, the commissioner may consider the underlying crime, facts,
or circumstances of an expunged or pardoned felony conviction when
determining the eligibility of an applicant for licensure under this
subdivision or subdivision (c).
(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.
SEC. 2. Section 22065 is added to the Financial Code, 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
mortgage loan originator 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) An exempt person 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) 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) 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. 3. Section 22109.1 of the Financial Code is amended to read:
22109.1. (a) The commissioner shall deny an application for a
mortgage loan originator license unless the commissioner makes, at a
minimum, the following findings:
(1) The applicant has never had a mortgage loan originator license
revoked in any governmental jurisdiction, except that a subsequent
formal vacation of a revocation shall not be deemed a revocation.
(2) (A) 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. Whether a
particular crime is classified as a felony shall be determined by the
law of the jurisdiction in which an individual is convicted.
(B) For purposes of this paragraph, an expunged or pardoned felony
conviction shall not require denial of an application. However, the
commissioner may consider the underlying crime, facts, or
circumstances of an expunged or pardoned felony conviction when
determining the eligibility of an applicant for licensure under this
paragraph or paragraph (3).
(3) The applicant has demonstrated such financial responsibility,
character, and general fitness 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 this division.
(4) The applicant has completed the prelicensing education
requirement described in Section 22109.2.
(5) The applicant has passed a written test that meets the test
requirement described in Section 22109.3.
(6) The applicant is employed by, and subject to the supervision
of, a finance lender or broker that has obtained a license from the
commissioner pursuant to this division.
(b) Before denying a license under this section, the commissioner
shall proceed as prescribed by Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code and
shall have all the powers granted under that chapter.
SEC. 4. Section 50141 of the Financial Code is amended to read:
50141. (a) The commissioner shall deny an application for a
mortgage loan originator license unless the commissioner makes at a
minimum the following findings:
(1) The applicant has never had a mortgage loan originator license
revoked in any governmental jurisdiction, except that a subsequent
formal vacation or set aside of such revocation shall not be deemed a
revocation.
(2) (A) 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 such felony involved an act of fraud,
dishonesty, a breach of trust, or money laundering. Whether a
particular crime is classified as a felony shall be determined by the
law of the jurisdiction in which an individual is convicted.
(B) For purposes of this paragraph, an expunged or pardoned felony
conviction shall not require denial of an application. However, the
commissioner may consider the underlying crime, facts, or
circumstances of an expunged or pardoned felony conviction when
determining the eligibility of an applicant for licensure under this
paragraph or paragraph (3).
(3) The applicant has demonstrated such financial responsibility,
character, and general fitness 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 this division.
(4) The applicant has completed the prelicensing education
requirement described in Section 50142.
(5) The applicant has passed a written test that meets the test
requirements described in Section 50143.
(6) The applicant is employed by, and subject to the supervision
of, a residential mortgage lender or servicer that has obtained a
license from the commissioner pursuant to this division.
(7) The surety bond of the residential mortgage lender or servicer
employing the applicant covers the activities of the applicant and
meets the requirements of Section 50205.
(b) Before denying a license under this section, the commissioner
shall proceed as prescribed by Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code and
shall have all the powers granted under that chapter.
SEC. 5. 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.