California Legislature—2013–14 Regular Session

Assembly Bill No. 1641

Introduced by Assembly Member Beth Gaines

February 11, 2014

An act to amend Section 22013 of the Financial Code, relating to mortgage loan originators.

LEGISLATIVE COUNSEL’S DIGEST

AB 1641, as introduced, Beth Gaines. Mortgage loan originators.

Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight. 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. Existing law provides that an employee of a bona fide nonprofit organization who exclusively originates loans for a bona fide nonprofit organization, under certain conditions as specified, is not a mortgage loan originator under the California Finance Lenders Law.

This bill would make nonsubstantive changes to that provision.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

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 begin delete under this paragraph end delete 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 begin delete of end delete begin insert as end insert 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.