Amended in Senate April 21, 2014

Amended in Senate March 28, 2014

Senate BillNo. 1459


Introduced by Committee on Banking and Financial Institutions (Senators Evans (Chair), Berryhill, Block, Correa, Hill, Hueso, Roth, Torres, and Vidak)

February 25, 2014


An act to amend Sections 22109.2, 22109.3, 22109.5, 50142, 50143, and 50145 of the Financial Code, relating to mortgage loan originators.

LEGISLATIVE COUNSEL’S DIGEST

SB 1459, as amended, Committee on Banking and Financial Institutions. Mortgage loan originators: educational requirements.

The California Finance Lenders Law and the California Residential Mortgage Lending Act define a mortgage loan originator as an individual who takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan for compensation or gain. These laws require that mortgage loan originators be appropriately licensed and fulfill certain educational and other requirements.

This bill would require, for the purpose of obtaining a mortgage loan originator license, that an applicant complete 2 hours of approved education related to relevant California law and regulation. The bill would require, for purposes of continuing educational requirements for mortgage loan originators, that a licensee complete one hour of continuing education related to relevant California law and regulation. The bill would specifybegin insert thatend insert a testbegin insert developed orend insert deemed acceptable by the Nationwide Mortgage Licensing System and Registry meets the requirement for a written test that an applicant for a mortgage loan originator must pass.

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

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

P2    1

SECTION 1.  

Section 22109.2 of the Financial Code is amended
2to read:

3

22109.2.  

(a) An applicant for a mortgage loan originator
4license shall complete at least 20 hours of education approved in
5accordance with subdivision (b). The education shall include at
6least the following:

7(1) Three hours of instruction on federal law and regulations.

8(2) Three hours of ethics, which shall include instruction on
9fraud, consumer protection, and fair lending issues.

10(3) Two hours of training related to lending standards for the
11 nontraditional mortgage product marketplace.

12(4) Two hours of training related to relevant California law and
13regulations.

14(b) For purposes of subdivision (a), prelicensing education
15courses shall be reviewed and approved by the Nationwide
16Mortgage Licensing System and Registry. Review and approval
17of a prelicensing education course shall include review and
18approval of the course provider.

19(c) Nothing in this section shall preclude any prelicensing
20education course, as approved by the Nationwide Mortgage
21Licensing System and Registry, that is provided by the employer
22of the applicant or an entity that is affiliated with the applicant by
23an agency contract, or any subsidiary or affiliate of the employer
24or entity.

25(d) Prelicensing education may be offered either in a classroom,
26online, or by any other means approved by the Nationwide
27Mortgage Licensing System and Registry.

28(e) The prelicensing education requirements approved by the
29Nationwide Mortgage Licensing System and Registry for any state
30other than California shall be accepted as credit toward completion
31of prelicensing education requirements in California.

32(f) An individual previously licensed under this division as a
33mortgage loan originator, applying to be licensed again, shall prove
34that he or she has completed all of the continuing education
35requirements for the year in which the license was last held.

P3    1

SEC. 2.  

Section 22109.3 of the Financial Code is amended to
2read:

3

22109.3.  

(a) An applicant for a mortgage loan originator
4license shall pass a qualified written test developedbegin insert or otherwise
5deemed acceptableend insert
by the Nationwide Mortgage Licensing System
6and Registry and administered by a test provider approvedbegin delete or
7otherwise deemed acceptableend delete
by the Nationwide Mortgage
8Licensing System and Registry.

9(b) A written test shall not be treated as a qualified written test
10for purposes of subdivision (a) unless the test adequately measures
11the applicant’s knowledge and comprehension in appropriate
12 subject areas, including all of the following:

13(1) Ethics.

14(2) Federal law and regulation relating to mortgage origination.

15(3) State law and regulation relating to mortgage origination.

16(4) Federal and state law and regulation, including instruction
17on fraud, consumer protection, the nontraditional mortgage
18marketplace, and fair lending issues.

19(c) Nothing in this section shall prohibit a test provider approved
20by the Nationwide Mortgage Licensing System and Registry from
21providing a test at the location of the employer of the applicant or
22the location of any subsidiary or affiliate of the employer of the
23applicant, or the location of any entity with which the applicant
24holds an exclusive arrangement to conduct the business of a
25mortgage loan originator.

26(d) An individual shall not be considered to have passed a
27qualified written test administered pursuant to this section unless
28the individual achieves a test score of not less than 75 percent of
29correct answers to questions.

30(e) An individual who fails the qualified written test may retake
31the test up to three consecutive times, although at least 30 days
32shall pass between each retesting.

33(f) An applicant who fails three consecutive retests shall wait
34at least six months before retesting.

35(g) A licensed mortgage loan originator who fails to maintain
36a valid license for a period of five years or longer shall retake the
37test, not taking into account any time during which the individual
38is a registered mortgage loan originator.

39

SEC. 3.  

Section 22109.5 of the Financial Code is amended to
40read:

P4    1

22109.5.  

(a) A licensed mortgage loan originator shall
2complete at least eight hours of continuing education approved in
3accordance with subdivision (b). The continuing education shall
4include at least the following:

5(1) Three hours of instruction on federal law and regulations.

6(2) Two hours of ethics, which shall include instruction on fraud,
7consumer protection, and fair lending issues.

8(3) Two hours of training related to lending standards for the
9 nontraditional mortgage product marketplace.

10(4) One hour of training related to relevant California law and
11regulations.

12(b) For purposes of this section, continuing education courses
13shall be reviewed and approved by the Nationwide Mortgage
14Licensing System and Registry. Review and approval of a
15continuing education course shall include review and approval of
16the course provider.

17(c) Nothing in this section shall preclude any education course,
18as approved by the Nationwide Mortgage Licensing System and
19Registry, that is provided by the employer of the mortgage loan
20originator or an entity which is affiliated with the mortgage loan
21originator by an agency contract, or any subsidiary or affiliate of
22the employer or entity.

23(d) Continuing education may be offered in a classroom, online,
24and by any other means approved by the Nationwide Mortgage
25Licensing System and Registry.

26(e) Except as provided in subdivision (i), a licensed mortgage
27loan originator:

28(1) May only receive credit for a continuing education course
29in the year in which the course is taken.

30(2) May not take the same approved course in the same or
31successive years to meet the annual requirements for continuing
32education.

33(f) A licensed mortgage loan originator who is an approved
34instructor of an approved continuing education course may receive
35credit for the licensed mortgage loan originator’s own annual
36continuing education requirement at the rate of two hours credit
37for every one hour taught.

38(g) A person who has successfully completed continuing
39education requirements approved by the Nationwide Mortgage
40Licensing System and Registry for any state other than California
P5    1shall be granted credit toward completion of continuing education
2requirements in California.

3(h) A licensed mortgage loan originator who subsequently
4becomes unlicensed shall complete the continuing education
5requirements for the last year in which the license was held prior
6to issuance of a new or renewed license.

7(i) A person meeting the requirements of paragraphs (1) and (3)
8of subdivision (b) of Section 22109.4 may correct any deficiency
9in continuing education as established by rule or regulation of the
10commissioner.

11

SEC. 4.  

Section 50142 of the Financial Code is amended to
12read:

13

50142.  

(a) An applicant for a mortgage loan originator license
14shall complete at least 20 hours of education approved in
15accordance with subdivision (b). The education shall include at
16least the following:

17(1) Three hours of instruction on federal law and regulations.

18(2) Three hours of ethics, which shall include instruction on
19fraud, consumer protection, and fair lending issues.

20(3) Two hours of training related to lending standards for the
21 nontraditional mortgage product marketplace.

22(4) Two hours of training related to relevant California law and
23regulations.

24(b) For purposes of subdivision (a), prelicensing education
25courses shall be reviewed and approved by the Nationwide
26Mortgage Licensing System and Registry. Review and approval
27of a prelicensing education course shall include review and
28approval of the course provider.

29(c) Nothing in this section shall preclude any prelicensing
30education course approved by the Nationwide Mortgage Licensing
31System and Registry that is provided by the employer of the
32applicant or an entity that is affiliated with the applicant by an
33agency contract, or any subsidiary or affiliate of the employer or
34 entity.

35(d) Prelicensing education may be offered either in a classroom,
36online, or by any other means approved by the Nationwide
37Mortgage Licensing System and Registry.

38(e) The prelicensing education requirements approved by the
39Nationwide Mortgage Licensing System and Registry for any state
P6    1other than California shall be accepted as credit toward completion
2of prelicensing education requirements in California.

3(f) An individual previously licensed under this chapter applying
4to be licensed again must prove that he or she has completed all
5of the continuing education requirements for the year in which
6that individual last held the license.

7

SEC. 5.  

Section 50143 of the Financial Code is amended to
8read:

9

50143.  

(a) An applicant for a mortgage loan originator license
10shall pass a qualified written test developedbegin insert or otherwise deemed
11acceptableend insert
by the Nationwide Mortgage Licensing System and
12Registry and administered by a test provider approvedbegin delete or otherwise
13deemed acceptableend delete
by the Nationwide Mortgage Licensing System
14and Registry.

15(b) A written test shall not be treated as a qualified written test
16for purposes of subdivision (a) unless the test adequately measures
17the applicant’s knowledge and comprehension in appropriate
18 subject areas, including the following:

19(1) Ethics.

20(2) Federal law and regulation relating to mortgage origination.

21(3) State law and regulation relating to mortgage origination.

22(4) Federal and state law and regulation, including instruction
23on fraud, consumer protection, the nontraditional mortgage
24marketplace, and fair lending issues.

25(c) Nothing in this section shall prohibit a test provider approved
26by the Nationwide Mortgage Licensing System and Registry from
27providing a test at the location of the employer of the applicant or
28the location of any subsidiary or affiliate of the employer of the
29applicant, or the location of any entity with which the applicant
30holds an exclusive arrangement to conduct the business of a
31mortgage loan originator.

32(d) (1) An individual shall not be considered to have passed a
33qualified written test unless the individual achieves a test score of
34not less than 75 percent of correct answers to questions.

35(2) An individual who fails the qualified written test may retake
36the test up to three consecutive times, although at least 30 days
37shall pass between each retesting.

38(3) An applicant who fails three consecutive retests shall wait
39at least six months before retesting.

P7    1(4) A licensed mortgage loan originator who fails to maintain
2a valid license for a period of five years or longer shall retake the
3test, not taking into account any time during which the individual
4is a registered mortgage loan originator.

5

SEC. 6.  

Section 50145 of the Financial Code is amended to
6read:

7

50145.  

(a) A licensed mortgage loan originator shall complete
8at least eight hours of continuing education approved in accordance
9with subdivision (b). The continuing education shall include at
10least the following:

11(1) Three hours of instruction on federal law and regulations.

12(2) Two hours of ethics, which shall include instruction on fraud,
13consumer protection, and fair lending issues.

14(3) Two hours of training related to lending standards for the
15 nontraditional mortgage product marketplace.

16(4) One hour of training related to relevant California law and
17regulations.

18(b) For purposes of subdivision (a), continuing education courses
19shall be reviewed and approved by the Nationwide Mortgage
20Licensing System and Registry. Review and approval of a
21continuing education course shall include review and approval of
22the course provider.

23(c) Nothing in this section shall preclude any education course
24approved by the Nationwide Mortgage Licensing System and
25Registry that is provided by the employer of the mortgage loan
26originator or an entity that is affiliated with the mortgage loan
27originator by an agency contract, or any subsidiary or affiliate of
28the employer or entity.

29(d) Continuing education may be offered either in a classroom,
30online, or by any other means approved by the Nationwide
31Mortgage Licensing System and Registry.

32(e) Except as provided in subdivision (i), a licensed mortgage
33loan originator:

34(1) May only receive credit for a continuing education course
35in the year in which the course is taken.

36(2) May not take the same approved course in the same or
37successive years to meet the annual requirements for continuing
38education.

39(f) A licensed mortgage loan originator who is an approved
40instructor of an approved continuing education course may receive
P8    1credit for the licensed mortgage loan originator’s own annual
2continuing education requirement at the rate of two hours credit
3for every one hour taught.

4(g) A person who has successfully completed continuing
5education requirements approved by the Nationwide Mortgage
6Licensing System and Registry for any state other than California
7shall be granted credit toward completion of continuing education
8requirements in California.

9(h) A licensed mortgage loan originator who subsequently
10becomes unlicensed shall complete the continuing education
11requirements for the last year in which the license was held prior
12to issuance of a new or renewed license.

13(i) A person meeting the requirements of paragraphs (1) and (3)
14of subdivision (b) of Section 50144 may correct any deficiency in
15continuing education as established by rule or regulation of the
16commissioner.



O

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