H. B. 2345
(By Delegates Johnson, Fleischauer, Hutchins,
Rowe, Tillis, Riggs and Trump)
[Introduced January 22, 1999; referred
to the Committee on Banking and Insurance then Finance.]
A BILL to amend and reenact article seventeen, chapter thirty- one of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; and to amend and reenact
sections one hundred seven and one hundred ten-a, article
four, chapter forty-six-a of said code, all relating to
the regulation of residential mortgage lenders, brokers
and servicers; creating the West Virginia residential
mortgage lender, broker and servicer act; setting forth
legislative findings; defining terms; providing licensure
classes and application deadlines; establishing licensure
requirements and exemptions therefrom; setting forth
registration and examination requirements for associate
and principal residential mortgage brokers; requiring the
licensing of residential mortgage services and exempting
certain persons therefrom; requiring licensure for the
conduct of business; setting forth applicability of article; when a certificate of exemption required;
setting forth licensing application, net worth and bond
requirements; establishing licensure terms and
prohibiting transfer thereof; providing for license fees,
renewal and cancellation thereof; authorizing
commissioner to take enforcement actions; setting forth
standards of conduct for licensees; establishing
additional standards for brokers; setting forth
recordkeeping requirements; requiring notification of
material changes to commissioner; providing for the
confidentiality of certain information; exempting certain
persons who report or exchange information with
commissioner from liability; permitting employees and
officials of division to receive loans from licensees;
authorizing electronic transmission and telephonic loan
applications and setting forth requirements thereof;
establishing scope of article; empowering commissioner to
administer law; permitting commissioner to examine
licensee's records; requiring display of license;
requiring licensees to report annually; prohibiting
certain terms, points and fees; exempting licensees from
other registration and bonding requirements; providing
for the voidability of certain loans; declaring
severability of provisions; and clarifying the
permissible finance charges of regulated consumer
lenders.
Be it enacted by the Legislature of West Virginia:
That article seventeen, chapter thirty-one of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted; and that sections one
hundred seven and one hundred ten-a, article four, chapter
forty six-a of said code be amended and reenacted, all to read
as follows:
CHAPTER 31. CORPORATIONS.
ARTICLE 17. WEST VIRGINIA RESIDENTIAL MORTGAGE LENDER, BROKER
AND SERVICER ACT.
§31-17-1. Short title.
This article shall be known and may be cited as the "West
Virginia Residential Mortgage Lender, Broker and Servicer
Act."
§31-17-2. Legislative findings; purpose.
(a) The Legislature finds that residential home ownership
is an important element in the quality of life in the
neighborhoods and communities of this state. The Legislature
further finds that the activities of residential mortgage
brokers, lenders and servicers greatly impact what is in many
cases the most significant financial decision citizens will
make. Consequently, these activities have a direct and
immediate impact on the wealth, stability and comfort of the
homeowners and potential homeowners in this state. The
Legislature further finds that due to the recent trend toward deregulation in the financial services industry, there has
been rapid growth in the mortgage lending and services
industries outside of traditional, regulated depository
institutions. Further, there has been explosive growth in the
sub-prime mortgage lending industry and, additionally,
mortgage lenders of all types increasingly rely upon
nonfinancial intermediaries, such as mortgage brokers, to find
customers. These developments raise questions and concerns as
to whether all entities engaging in residential mortgage
activities within this state operate under appropriate
regulations. Consequently, the Legislature finds that
reasonable standards governing the business practices of
residential mortgage brokers, lenders and servicers are
essential for the protection of the citizens of this state.
(b) The purpose of this act is to protect consumers
conducting residential mortgage loan transactions secured by
real estate located in this state by ensuring, with special
attention to those consumers obtaining sub-prime loans, that
the residential mortgage brokering, lending and servicing
industries operate in a manner that is fair, honest and free
from deceptive practices.
§31-17-3. Definitions.
As used in this article:
(1) "Act" means the West Virginia residential mortgage
lender, broker and servicer act.
(2) "Advance fee" means a commission, fee, charge or compensation of any kind paid to a residential mortgage lender
or broker before the closing of a loan, that is intended in
whole or in part as payment for the lender's or broker's
services in finding or attempting to find or making a loan for
a borrower. Advance fee does not include pass-through fees to
third parties or commitment or extended lock fees or other
fees as determined by the commissioner.
(3) "Borrower" means a person or persons applying for a
residential mortgage loan, a mortgagor or the person or
persons on whose behalf the activities in subdivisions twelve,
fourteen, twenty-two and twenty-three of this section are
conducted.
(4) "Closing" means either or both of the following: (1)
The process whereby the finance transaction between a buyer
and seller is consummated; or (2) the process whereby the
documents creating a loan obligation and a security interest
in residential real property become effective between the
borrower and the lender.
(5) "Commissioner" means the commissioner of banking of
West Virginia.
(6) "Depository institution" means a depository
institution the deposits of which are insured by the federal
deposit insurance corporation or the national credit union
share insurance fund.
(7) "Electronically transmitted" shall mean any
transmission via diskette, wire or tape including but not limited to an intranet (interactive or otherwise), the
internet, any other computer network, electronic mail or any
other similar method of transmission.
(8) "Electronic signature" shall mean any generally
accepted electronic authentication method, as defined by
section two, article five, chapter thirty-nine of this code,
that provides the same assurance as a signature in a paper- based system.
(9) "Employee" means an individual who is treated as an
employee by the residential mortgage lender, broker or
servicer for purposes of compliance with federal income tax
laws.
(10) "Escrow account" means a trust account that is
established and maintained to hold funds received from a
borrower, such as real estate taxes and insurance premiums,
incurred in connection with the servicing of the deed of
trust.
(11) "Exempt person" means a person exempt from sections
five or seven of this article, as applicable.
(12) "Making a residential mortgage loan" means for
compensation or gain, or the expectation of compensation or
gain, advancing funds, or extending credit or making a
commitment to advance funds or extend credit in connection
with a residential mortgage loan secured by real estate
located in West Virginia.
(13) "Mortgage broker" or "broker" means a person who performs the activities described in subdivisions fourteen and
twenty-three of this section. A person acting within his or
her capacity as an employee of a residential mortgage lender
is not included within this definition. A person who
originates a table-funded residential mortgage loan, but does
not provide or advance the funds for such a loan, is a
"broker" under this article.
(14) "Mortgage brokering" or "brokering" means helping to
obtain from another person, for a borrower, a residential
mortgage loan or assisting a borrower in obtaining a
residential mortgage loan in return for consideration to be
paid by the borrower or lender or both. Mortgage brokering or
brokering includes, but is not limited to, soliciting,
placing, or negotiating a residential mortgage loan.
(15) "Net worth" has the meaning given it in section
twelve of this article.
(16) "Person" means a natural person, firm, partnership,
limited liability partnership, corporation, association,
limited liability company or other form of business
organization and the officers, directors, employees or agents
of that person.
(17) "Person in control" means a licensee's owner,
president, senior officer responsible for the licensee's
business, chief financial officer or any other person who
performs similar functions or who otherwise controls the
conduct of the affairs of the licensee. A person controlling ten percent or more of the voting stock of any corporate
applicant is a "person in control" under this subsection. A
person who serves as a limited partner in a partnership does
not constitute a "person in control" under this subsection.
(18) "Residential mortgage loan" means a loan or credit
sale made primarily for personal, family or household use and
secured primarily by either: (1) A deed of trust on
residential real property located in West Virginia; or (2)
certificates of stock or other evidence of ownership interest
in and proprietary lease from corporations, partnerships or
other forms of business organizations formed for the purpose
of cooperative ownership of residential real property located
in West Virginia.
(19) "Residential mortgage lender" or "lender" means a
person who makes, takes assignment of, or accepts a
residential mortgage loan including a person who provides or
advances the funds in a table funding transaction.
(20) "Residential mortgage servicer" or "servicer" means
a person who engages in the activity of servicing a
residential mortgage loan as defined in subdivision twenty-two
of this section.
(21) "Residential real property" or "residential real
estate" means real property improved or intended to be
improved by a structure designed principally for the occupancy
of from one to four families.
(22) "Servicing" or "servicing a residential mortgage loan" means through any medium or mode of communication the
collection or remittance for, or the right or obligation to
collect or remit for, another lender, note owner, noteholder,
payments of principal, interest (including sales finance
charges in a consumer credit sale) and escrow items such as
insurance and taxes for property subject to a residential
mortgage loan.
(23) "Soliciting, placing, or negotiating a residential
mortgage loan" means for compensation or gain or expectation
of compensation or gain, whether directly or indirectly,
accepting or offering to accept an application for a
residential mortgage loan, assisting or offering to assist a
borrower in applying for a residential mortgage loan, or
negotiating or offering to negotiate the terms or conditions
of a residential mortgage loan with a lender on behalf of a
borrower.
(24) "Table funding" means a closing or settlement at
which a residential mortgage loan is funded by a lender by way
of a contemporaneous advance of residential mortgage loan
funds and an assignment of the residential mortgage loan to
the lender advancing the funds.
(25) "Trust account" means a negotiable order of
withdrawal account, demand deposit or checking account
maintained for the purpose of segregating trust funds from
other funds. A "trust account" must not allow the financial
institution a right of set-off against the money owed it by the account holder.
(26) "Trust funds" means funds received by a residential
mortgage lender, broker or servicer in a fiduciary capacity
for later distribution, such as appraisal or credit report
fees, taxes, or insurance premiums. Trust funds include, but
are not limited to commitment, lock, extended lock and advance
fees.
§31-17-4. Classes of license; transition to licensing.
(a) The commissioner may issue the following classes of
license under this article:
(1) A residential mortgage lender license;
(2) A residential mortgage broker license; and
(3) A residential mortgage servicer license.
(b) In order to allow reasonable time for a transition to
the licensing requirements imposed by this article, persons
engaged in residential mortgage brokering, lending or
servicing on the first day of June, one thousand nine hundred
ninety-nine who file an application for a license or a
certificate of exemption by the fifteenth day of August, one
thousand nine hundred ninety-nine shall be permitted to
continue their activities until the commissioner formally
approves or denies their license application or issues an
exemption certificate.
§31-17-5. Licensing requirement for residential mortgage
lenders and brokers; exemptions.
(a) Beginning the first day of October, one thousand nine hundred ninety-nine, no person shall act as a residential
mortgage lender or broker, or make, take assignment of, or
accept residential mortgage loans in this state without first
obtaining a license from the commissioner according to the
licensing procedures provided in this article.
(b) The following persons are exempt from the residential
mortgage lender or broker licensing requirements:
(1) An employee of a mortgage lender licensee acting
only in the capacity of a lender:
Provided, That such an
employee may refer a loan to another licensed or exempt lender
without receiving individual compensation; and an employee of
a residential mortgage broker licensee who solicits or
originates residential mortgages only on behalf of that
licensee and who first registers as either an associate or
principal residential mortgage broker under section six of
this article;
(2) A person engaged solely in non-residential mortgage
activities;
(3) A person licensed as a real estate broker under
article twelve, chapter forty-seven of this code, and an
associate real estate broker or real estate sales person if:
(A) The individual associate broker or real estate
salesperson acts only under the name, authority and
supervision of the real estate broker to whom this exemption
applies;
(B) The real estate broker does not collect an advance fee for its residential mortgage-related activities; and
(C) The residential mortgage lending activities are
incidental to the real estate broker's primary activities as
a real estate broker or salesperson;
(4) A person acting as a lender for
no more than five
residential mortgage loans, during any calendar year;
(5) The federal government, a state or municipal
government, or any agency or instrumentality thereof;
(6) An employee or employer pension, profit-sharing, or
retirement plan making loans only to its participants;
(7) A person acting in a fiduciary capacity, such as a
trustee or receiver, as a result of a specific order issued by
a court of competent jurisdiction;
(8) The West Virginia housing development fund and
community based non-profit housing providers originating loans
solely for purchase by the fund;
(9) A non-profit organization that provides loans for
low to moderate income housing if such organization is
regularly examined by a federal agency or entity:
Provided,
That a non-profit foundation that provides funding for low to
moderate income housing need not be examined by a federal
agency or entity to qualify for an exemption under this
subdivision;
(10) Regulated consumer lenders licensed under article
four, chapter forty-six-a of this code;
(11) A trust or other entity which holds residential mortgage loans in order to securities and create financial
instruments or securities that are traded on an exchange
registered with the securities exchange commission or
privately placed in accordance with securities exchange
commission or national association of securities dealers rules
or guidelines;
(12) Habitat for humanity international, inc. and its
affiliates providing low-income housing within West Virginia;
and
(13) A person exempted by order of the commissioner.
§31-17-6. Associate and principal residential mortgage
brokers; registration and examination requirements.
(a) A residential mortgage broker licensee shall have, as
a managing principal, a residential mortgage broker who shall:
(1) Have at least three years of experience in the field
of residential mortgage lending or brokering or a four year
degree from an accredited university or college in a business
field including, but not limited to, marketing, finance or
accounting;
(2) Meet the examination requirements for residential
mortgage brokers established by this section:
Provided, That
a residential mortgage broker who was doing business in this
state on the first day of January, one thousand nine-hundred
ninety-nine may act as a principal broker and shall have until
the first day of September, two thousand, to meet the
examination requirements established by this section; and
(3) Register with the commissioner of banking by filing
a form, containing such information as the commissioner may
require, accompanied by a registration fee of fifty dollars.
(b) A residential mortgage broker licensee may employ an
associate broker under this article only if the associate
broker hired under this subsection:
(1) Is subject to the supervision and control of a
principal residential mortgage broker who is responsible for
his or her performance and actions;
(2) Meets the examination requirements for residential
mortgage brokers established by this section within twelve
months of his or her employment with the residential mortgage
broker licensee; and
(3) Registers, within sixty days of his or her
employment, with the commissioner of banking by filing a form,
containing such information as the commissioner may require,
accompanied by a registration fee of fifty dollars.
(c) Unless otherwise exempt under the provisions of
section five of this article, no person may act as a
residential mortgage broker unless he or she is first properly
registered with the commissioner under this section and is
employed by a residential mortgage broker licensee.
(d) No person may act as a residential mortgage broker in
this state unless he or she has first passed an examination
testing knowledge of state and federal laws and regulations
regarding residential mortgage lending and consumer protection. The examination shall be created, administered
and graded by the commissioner or his or her designee. The
examination shall be given at least twice each year at a date
and time chosen by the commissioner.
(e) In order to obtain a passing grade on the
examination, the applicant for a residential mortgage broker
license must:
(1) Have the ability to prepare, explain and execute
written and oral communications which relate to the mortgage
origination process;
(2) Have the ability to explain and compute the
mathematical calculations necessary to a residential mortgage
transaction, including calculation of an annual percentage
rate and computation of a mortgage payment;
(3) Identify and explain federal and state laws and
regulations in regards to mortgage brokerage and lending
procedures;
(4) Have the ability to explain the loan closing process;
and
(5) Identify and explain applicable portions of chapter
forty-six-a of this code, the Federal Truth In Lending Act, 15
U.S.C. §§1601 et seq., the Real Estate Settlement Procedures
Act, 12 U.S.C. §§2601 et seq., the Equal Credit Opportunity
Act, 15 U.S.C. §§1691-1691f, the Fair Credit Reporting Act,
the Home Mortgage Disclosure Act, 12 U.S.C. §2801, and other
federal regulations that are or may become applicable to the residential mortgage brokering and lending business.
(f) Each year, applicants shall be given an opportunity
to enroll in a course of instruction, not to exceed sixty
hours of classroom time, designed to prepare applicants for
the examination. The course of instruction shall be designed
and administered by the commissioner, or his or her designee,
and shall cover those topics described in subsection (e) of
this section. The commissioner shall charge a fee for
enrollment in the course to defray the costs associated with
developing and presenting the instruction.
(g) A residential mortgage broker shall only be required
to pass the examination once. However, upon determining
significant substantive changes in law or the mortgage
industry have occurred, the commissioner may require such
brokers to attend continuing education.
§31-17-7. Licensing requirement for residential mortgage
servicers; exemptions.
(a) Beginning the first day of October, one thousand nine
hundred ninety-nine, no person shall engage in activities or
practices that are within the definition of "servicing a
residential mortgage loan" under subdivision twenty-two,
section three of this article without first obtaining a
license from the commissioner as provided in this article.
(b) The following persons are exempt from the residential
mortgage servicer licensing requirements:
(1) A person licensed as a residential mortgage lender servicing only its own loan portfolio or loans it originated
and subsequently sold or transferred to another person;
(2) An employee of a residential mortgage servicer
licensed under this article;
(3) A person engaged solely in non-residential mortgage
activities;
(4) A person servicing loans that person has purchased
from another lender or made with its own funds;
(5) The federal government, or a state or municipal
government, or any agency or instrumentality thereof;
(6) An employee or employer pension, profit-sharing or
retirement plan making loans only to its participants;
(7) A person acting in a fiduciary capacity, such as a
trustee or receiver, as a result of a specific order issued by
a court of competent jurisdiction;
(8) The West Virginia housing development fund and
community based non-profit housing providers servicing loans
solely for the fund;
(9) A non-profit organization that provides loans for low
to moderate income housing if such organization is regularly
examined by a federal agency or entity;
(10) A person approved by the federal national mortgage
association (Fanniemae), the federal home loan mortgage
corporation, or the government national mortgage association
to provide residential mortgage servicing:
Provided, That
such person shall provide the commissioner with the name, address, and telephone number of a representative authorized
to respond to and resolve complaints by borrowers relating to
the servicing of their residential mortgage loans:
Provided,
however, That this exemption shall expire forty-eight hours
after suspension or termination of the servicer's status as an
approved servicer by the aforementioned entities;
(11) An attorney acting in his or her professional
capacity attempting to collect or enforce a residential
mortgage loan transaction; and
(12) A person exempted by order of the commissioner.
§31-17-8. Conducting business under license.
No person required to be licensed under this article may,
without a license, conduct business under a name or title or
circulate or use advertising or make representations or give
information to a person, that indicates or reasonably implies
activity within the scope of this article.
§31-17-9. Applicability to federally insured depository
institutions and regulated consumer lenders.
(a) This article does not apply to depository
institutions or individuals acting in their capacity as
employees of such institutions, the deposits of which are
insured by the federal deposit insurance corporation or the
national credit union share insurance fund.
(b) The provisions of sections thirteen, nineteen,
twenty-three, thirty and thirty-two of this article apply to any regulated consumer lender licensed under article four,
chapter forty-six-a of this code who is engaged in the
business of making residential mortgage loans.
§31-17-10. Certificates of exemption.
Any person desiring to qualify as an exempt person under
subdivision (4), (9), (12) or (13), subsection (b), section
five or under subdivision (9), (10) or (12), subsection (b),
section seven of this article must obtain a certificate of
exemption from the commissioner. A certificate of exemption
will be issued upon the person's filing, on a form provided by
the commissioner and accompanied by the appropriate fee, a
statement indicating the basis on which the exemption is
claimed and, if applicable, the name and address of the state
or federal regulatory agency or body to which complaints
regarding the person's residential mortgage originating or
servicing activities may be directed and other information
which may be required by the commissioner.
§31-17-11. Application requirements for residential mortgage
lenders, brokers and servicers; time for approval.
(a) An application for a residential mortgage lender,
broker or servicer license must be in writing, under oath, and
on a form prescribed by the commissioner.
(b) The application must contain the name and complete
business address or addresses of the license applicant. If
the license applicant is a partnership, limited liability
partnership, association, limited liability company, corporation or other form of business organization, the
application must contain the names and complete business
addresses of each partner, member, director and principal.
The application must also include a description of the
activities of the license applicant, in the detail and for the
time periods the commissioner may require. The application
must also include, but not be limited to, all of the
following:
(1) An affirmation under oath that the applicant:
(A) Will maintain competent staff and adequate staffing
levels, through direct employees or otherwise, to meet the
requirements of this article;
(B) Will advise the commissioner of any material changes
to the information submitted in the most recent application
within thirty days of the change;
(C) Will advise the commissioner in writing within
fifteen days of any bankruptcy petitions filed against or by
the applicant or licensee;
(D) Is financially solvent and in compliance with net
worth requirements;
(E) Complies with federal and state tax laws;
(F) Is, or that a person in control of the applicant is,
at least eighteen years of age;
(G) Complies with all applicable provisions of chapter
forty-six-a of this code; and
(H) Is qualified to hold property and transact business in this state.
(2) Information as to the mortgage lending, servicing, or
brokering experience of the applicant and persons in control
of the applicant;
(3) Information as to criminal convictions, excluding
traffic violations, of persons in control of the applicant;
(4) Whether a court or state or federal regulator with
jurisdiction has found that applicant or persons in control of
the applicant have engaged in conduct evidencing gross
negligence, fraud, misrepresentation, or deceit in performing
an act for which a license is required under this article;
(5) Whether the applicant or persons in control of the
applicant have been the subject of an order of suspension or
revocation, cease and desist order, or injunctive order, or
order barring involvement in an industry or profession issued
by this or any other state or federal regulatory agency or by
the secretary of the United States department of housing and
urban development within the ten-year period immediately
preceding submission of the application; and
(6) Other information required by the commissioner.
(c) The commissioner shall issue a license if he or she
finds that the applicant meets the requirements of this
article and any rules adopted under this article. The
commissioner shall approve or deny every application for an
original license within one hundred twenty days from the date
a complete application is submitted, unless the commissioner extends the period for good cause.
(d) Only one license shall be required of a residential
mortgage lender or servicer, regardless of the number of
branch offices maintained by each licensee. However, every
person receiving a license under this article shall, before
opening a branch office, provide the commissioner with written
notice of its intent to open a branch stating the address of
the branch office and the date on which it will open.
§31-17-12. Net worth requirements for residential mortgage
brokers, lenders and servicers.
(a) A licensee who is issued a residential mortgage
broker license shall maintain a minimum net worth of twenty
five thousand dollars. A licensee who is issued a residential
mortgage lender license shall maintain a minimum net worth of
two hundred fifty thousand dollars. A licensee who is issued
a residential mortgage servicer's license shall maintain a
minimum net worth of one million dollars.
(b) Net worth must be computed according to generally
accepted accounting principles and must reflect any adjustment
to net worth required by the government national mortgage
association:
Provided, That the commissioner may accept
personal financial statements from residential mortgage
brokers in a form he or she deems appropriate.
(c) The commissioner shall require the submission of
financial data audited by an independent certified public
accountant for applicants for a license for residential mortgage lending or servicing. A consolidated audit with an
affiliated parent company is acceptable under this subsection.
§31-17-13. Bond requirement of residential mortgage brokers,
lenders and servicers.
(a) A residential mortgage broker licensee shall
continuously maintain a surety bond in an amount not less than
twenty-five thousand dollars if it employs up to ten
registered residential mortgage brokers. This surety bond
shall be increased an additional twenty-five thousand dollars
for each increase of up to ten additional registered brokers
employed by the licensee.
(b) A residential mortgage lender licensee shall
continuously maintain a surety bond in an amount not less than
two hundred fifty thousand dollars.
(c) A residential mortgage servicer licensee shall
continuously maintain a surety bond in an amount not less than
five hundred thousand dollars.
(d) All bonds required by this section shall be in a form
and manner approved by the commissioner, issued by an
insurance company authorized to do so in this state. The
commissioner is authorized to obtain a blanket bond for all
licensees, if feasible, and require participation under the
blanket bond by all licensees. If the commissioner determines
that a blanket bond is not feasible, the individual licensees
must obtain and submit their bond with the appropriate license
application, and evidence of continued coverage must be submitted with each license renewal. Any change in the bond
must be submitted for approval by the commissioner, within ten
days of its execution.
(e) A bond posted by the licensee under this section
shall be conditioned upon compliance with all law related to
activities conducted under the provisions of this article and
any rules thereunder. The bond shall be made to the favor of
the commissioner
for the benefit and protection of any
claimant against the applicant or licensee with respect to
residential mortgage brokering, lending or servicing in
connection with the licensed operations in this state. A
claimant damaged by a breach of the conditions of the bond
shall, upon the assent of the commissioner, have a right of
action against the bond for compensatory damages suffered
thereby and may bring suit directly thereon, or the
commissioner may bring suit on behalf of the claimant. The
aggregate liability of the surety in no event shall exceed the
principal sum of the bond.
(f) No bond shall be acceptable unless it provides that
in the event of cancellation the surety shall, within thirty
days, file written notice of such cancellation with the
commissioner. No surety filing such notice of cancellation
shall be discharged from any liability already accrued under
the bond or which shall accrue before the expiration of the
thirty day period. All sureties shall remain liable for all
payments resulting from violations occurring or fees due during the term of the bond and prior to the date of
cancellation.
§31-17-14. Term of license; non-transferability.
Licenses for residential mortgage lenders, brokers and
servicers issued under this article expire on the thirtieth
day of September, two thousand, and are renewable annually on
forms prescribed by the commissioner. No license shall be
transferable or assignable by the licensee unless the
commissioner consents to such transfer or assignment.
§31-17-15. Fees; nonrefundability.
(a) The following fees must be paid to the commissioner
for deposit into the special revenue account in the state
treasury for the division of banking established in section
eight, article two, chapter thirty-one-a of this code:
(1) For a residential mortgage broker license, five
hundred dollars;
(2) For a residential mortgage lender license, one
thousand two hundred fifty dollars;
(3) For a residential mortgage servicer's license, one
thousand two hundred fifty dollars;
(4) For a certificate of exemption, one hundred dollars;
(5) For reissuing any license due to a change of address
or name, one hundred dollars; and
(6) For registering as a principal or associate
residential mortgage broker, fifty dollars.
(b) All fees are nonrefundable except that an overpayment of a fee must be refunded upon proper application.
§31-17-16. License renewal.
(a) Licenses are renewable annually on or before the
first day of October.
(b) A person whose application is properly and timely
filed who has not received notice of denial of renewal is
considered approved for renewal and the person may continue to
transact business as a residential mortgage broker, lender or
servicer whether or not the renewed license has been received
on or before the first day of October of the renewal year.
Application for renewal of a license is considered timely
filed if received by the commissioner, or mailed with proper
postage and postmarked by the fifteenth day of August of the
renewal year. An application for renewal is considered
properly filed if made upon forms duly executed and sworn to,
accompanied by fees prescribed by this article, and containing
any information that the commissioner requires.
(c) A person who fails to make a timely application for
renewal of a license and who has not received the renewal
license as of the first day of October of the renewal year is
unlicensed until the renewal license has been issued by the
commissioner and is received by the person.
§31-17-17. Cancellation of licenses.
A licensee ceasing an activity or activities regulated by
this article and desiring to no longer be licensed shall so
inform the commissioner in writing and, at the same time, surrender the license and all other symbols or indicia of
licensure. The licensee shall include a plan for the
withdrawal from the regulated business, including a timetable
for the disposition of the business. The licensee's surety
bond shall remain in effect unless the commissioner approves,
in writing, a cancellation or reduction of such bond.
31-17-18. Enforcement actions.
(a) The commissioner may, by order, take any or all of
the following actions:
(1) Bar a person from engaging in residential mortgage
brokering, lending or servicing;
(2) Deny, suspend or revoke a residential mortgage
broker, lender or servicer license;
(3) Publicly reprimand a licensee for actions involving
the brokering, lending or servicing of a residential mortgage
loan in this state;
(4) Impose a civil penalty as provided for in subdivision
sixteen, subsection (c), section four, article two, chapter
thirty-one-a of this code for actions involving the brokering,
lending or servicing of a residential mortgage loan in this
state; or
(5) Revoke an exemption or certificate of exemption.
(b) In order to take the actions contained in subsection
(a) of this section, the commissioner must find:
(1) That the order is in the public interest; and
(2) That the residential mortgage lender, broker, servicer, license-applicant, or other person, officer,
director, partner, employee, or agent or any person occupying
a similar status or performing similar functions, or a person
in control of the lender, broker, servicer, license-applicant,
has:
(A) Violated any provision of this article or rule or
order under this article; or
(B) Filed an application for a license that is incomplete
in any material respect or contains a statement that, in light
of the circumstances under which it is made, is false or
misleading with respect to a material fact; or
(C) Failed to maintain compliance with the affirmations
made under subdivision (1), subsection (b) section eleven of
this article; or
(D) Engaged in an act or practice, whether or not the act
or practice involves the business of making a residential
mortgage loan, that demonstrates untrustworthiness, financial
irresponsibility or incompetence; or
(E) Pled guilty, with or without explicitly admitting
guilt, pled nolo contendere, or been convicted of a felony or
a misdemeanor involving moral turpitude, personal dishonesty
or failure to fulfill a fiduciary obligation; or
(F) Been the subject of an order of suspension or
revocation, a cease and desist order or an injunction order
barring involvement in an industry or profession issued by any
other state or federal regulatory agency or by the secretary of housing and urban development; or
(G) Been found by a court of competent jurisdiction to
have engaged in conduct evidencing gross negligence, fraud,
misrepresentation, or deceit; or
(H) Refused to cooperate with an investigation or
examination by the commissioner; or
(I) Failed to pay any fee or assessment imposed by the
commissioner; or
(J) Failed to comply with state tax obligations; or
(K) Failed to provide, in a timely manner, information
requested by the commissioner.
(c) To begin a proceeding under this section, the
commissioner shall issue an order requiring the subject of the
proceeding to show cause why action should not be taken
against the person according to this section. The order must
be calculated to give reasonable notice of the time and place
for the hearing and must state the reasons for entry of the
order. If the commissioner determines that there is an
immediate danger to the public, he or she may, by order,
summarily suspend a license or exemption or summarily bar a
person from engaging in residential mortgage loan brokering,
lending or servicing, pending a final determination of an
order to show cause. If a license or exemption is summarily
suspended or if the person is summarily barred from any
involvement in the residential mortgage loan business, pending
final determination of an order to show cause, a hearing on the merits must be held within thirty days of the issuance of
the order of summary suspension or bar. All hearings must be
conducted under article five, chapter twenty-nine-a of this
code. The commissioner may appoint a hearing examiner to
preside at the taking of evidence and make a recommended
decision for consideration by the commissioner. After the
hearing, the commissioner shall, within fifteen days of the
conclusion of the hearing or within fifteen days of receiving
a recommended decision from the hearing examiner, whichever is
later, enter an order disposing of the matter as the facts
require. If the subject of the order fails to appear at the
hearing after having been duly notified thereof, the person is
considered in default, and the proceeding may be determined
against the subject of the order upon consideration of the
order to show cause, the allegations of which may be
considered by the commissioner to be true.
(d) The commissioner may institute a proceeding under
this section within two years of the date the commissioner
discovers the activity which gives rise to the enforcement
action.
§31-17-19. General standards of conduct.
(a) Neither regulated consumer lenders, nor persons
licensed or registered under this article shall:
(1) Fail to maintain a trust account to hold trust funds
received in connection with a residential mortgage loan if
trust funds are held or collected;
(2) Fail to deposit all trust funds into a trust account
within three business days of receipt; commingle trust funds
with funds belonging to the licensee; or use trust account
funds for any purpose other than that for which they are
received;
(3) Unreasonably delay the proper servicing of a
residential mortgage loan. For purposes of this subdivision,
evidence of unreasonable delay includes, but is not limited
to: (i) Failure of the servicer to respond reasonably to the
borrower's inquiries concerning the status of the loan; or
(ii) failure by the servicer to take actions appropriate under
the terms of the loan within a reasonable period of time.
(4) Fail to disburse funds according to its contractual
or statutory obligations in a manner which constitutes a
material breach of those obligations;
(5) Fail to perform in conformance with its written
agreements with borrowers, investors or other licensees in a
manner which constitutes a material violation of those
agreements;
(6) Charge a fee for a product or service where the
product or service is not actually provided, or misrepresent
the amount charged by or paid to a third party for a product
or service;
(7) Knowingly violate any provision of any other
applicable state or federal law regulating residential
mortgage loans including, without limitation, chapter forty-six-a of this code;
(8) Knowingly make or cause to be made, directly or
indirectly, any false, deceptive or misleading statement or
representation in connection with a residential mortgage loan
transaction including, without limitation, a false, deceptive
or misleading statement or representation regarding the
borrower's ability to qualify for any mortgage product;
(9) Conduct a residential mortgage lending or servicing
business under any name other than that under which the
license or certificate of exemption was issued unless such
person uses a trade name which has been submitted to and
approved by the commissioner;
(10) Compensate, whether directly or indirectly, coerce
or intimidate an appraiser for the purpose of influencing the
independent judgment of the appraiser with respect to the
value of real estate that is to be covered by a residential
deed of trust or is being offered as security according to an
application for a residential mortgage loan;
(11) Issue any document indicating conditional
qualification or conditional approval for a residential
mortgage loan, unless the document also clearly indicates the
final qualification or approval is not guaranteed, and may be
subject to additional review;
(12) Make or assist in making any residential mortgage
loan with the intent that the loan will not be repaid and that
the residential mortgage lender will obtain title to the property through foreclosure:
Provided, That this subdivision
shall not apply to reverse mortgages obtained under the
provisions of article twenty-four, chapter forty-seven of this
code. A monthly aggregate personal, family or household debt
service to gross income ratio of the borrower on a nonpurchase
money residential mortgage loan which exceeds fifty-five
percent, including the residential mortgage loan, shall
constitute a rebuttable presumption of such intent unless the
loan is originated through programs or under the guidelines
established by the West Virginia housing development fund, the
federal national mortgage association (Fanniemae), the federal
home loan mortgage corporation, or the government national
mortgage association ;
(13) Provide or offer to provide for a borrower, any
brokering or lending services under an arrangement with a
person other than a licensee or exempt person, provided that
a person may rely upon a written representation by the
residential mortgage lender or broker that it is in compliance
with the licensing requirements of this article;
(14) Claim to represent a licensee, unless the person is
an employee of the licensee;
(15) Fail to comply with the recordkeeping and
notification requirements set forth in section twenty-one of
this article or fail to abide by the affirmations made on the
application for licensure;
(16) If a servicer, fail to notify the commissioner within forty-eight hours of loss of approved status as a
servicer for the government national mortgage association, the
federal national mortgage association (Fanniemae) or the
federal home loan mortgage corporation;
(17) Make, provide or arrange for a residential mortgage
loan that is of a lower investment grade if the borrower's
credit score or, if the broker or lender does not utilize
credit scoring or if a credit score is unavailable, then
comparable underwriting data, indicates that the borrower may
qualify for a residential mortgage loan, available from or
through the broker or lender, that is of a higher investment
grade, unless the borrower is informed that the borrower may
qualify for a higher investment grade loan with a lower
interest rate and/or lower discount points, and consents in
writing to receipt of the lower investment grade loan.
For purposes of this subdivision, "investment grade"
refers to a system of categorizing residential mortgage loans
in which the loans are: (i) Commonly referred to as "prime"
or "subprime"; (ii) commonly designated by an alphabetical
character with "A" being the prime or highest quality
investment grade; and (iii) are distinguished by interest rate
or discount points or both charged to the borrower, which vary
according to the degree of perceived risk of default based on
factors such as the borrower's credit, including credit score
and credit patterns, income and employment history, debt
ratio, loan-to-value ratio, and prior bankruptcy or foreclosure;
(18) Make, publish, disseminate, circulate, place before
the public, or cause to be made, directly or indirectly, any
advertisement or marketing material of any type, or any
statement or representation relating to the business of
residential mortgage loans that is false, deceptive, or
misleading or fails to disclose the license number of the
licensee;
(19) Advertise loan types or terms that are not available
from or through the licensee or exempt person on the date
submitted for advertisement. For purposes of this clause,
advertisement includes, but is not limited to, a list of
sample residential mortgage loan terms, including interest
rates, discount points, and closing costs provided by
licensees or exempt persons to a print or electronic medium
that presents the information to the public;
(20) Use or employ phrases, pictures, return addresses,
geographic designations or other means that create the
impression, directly or indirectly, that a licensee or other
person is a governmental agency, or is associated with,
sponsored by, or in any manner connected to, related to, or
endorsed by a governmental agency, if that is not the case;
(21) If a lender or servicer, fail to provide either a
timely release of a deed of trust when the borrower has
satisfied the debt secured by that deed of trust as required
by section one, article twelve, chapter thirty-eight of this code or a timely disclosure of the amount of a pay off of an
existing loan when requested by the borrower;
(22) Accept any fees at closing which were not disclosed
to the borrower;
(23) Accept attorney's fees at closing in excess of the
fees that have been or will be remitted to its attorneys;
(24) Obtain any agreement or instrument in which blanks
are left to be filled in after execution;
(25) Collect a fee as both broker and lender for the same
residential mortgage loan; or
(26) Fail to provide to the borrower a copy of all
documents signed by the borrower related to the loan at the
time the loan is made.
(b) For purposes of this section, a statement,
representation, or advertisement is deceptive or misleading if
it has the capacity or tendency to deceive or mislead a
borrower or potential borrower. The commissioner shall
consider the following factors in deciding whether a
statement, representation or advertisement is deceptive or
misleading: the overall impression that the statement,
representation, or advertisement reasonably creates; the
particular type of audience to which it is directed; and
whether it may be reasonably comprehended by the segment of
the public to which it is directed.
§31-17-20. Additional standards for residential mortgage
brokers.
(a) A residential mortgage broker who offers to obtain a
loan secured by a deed of trust on residential real estate
located in this state shall enter into a written contract with
each proposed borrower and shall provide a copy of the written
contract to each borrower at or before the time of receipt of
any fee or valuable consideration paid for residential
mortgage loan origination services. Residential mortgage
brokers who offer their services exclusively through
electronic communication over the internet may comply with
this section by providing, in lieu of a written contract, the
same information in the form of electronic communication that
can be downloaded and printed by the borrower. In addition to
other requirements of law, the contract must:
(1) Specifically identify whether the residential
mortgage broker may receive compensation from sources other
than the borrower in connection with the loan transaction; and
(2) State the total amount of commission or compensation
that the borrower agrees to pay for the residential mortgage
broker's services, and the basis on which the compensation
will be computed.
(b) If an advance fee is solicited or received, by the
broker, the contract must also:
(1) Identify the trust account into which the fees or
consideration will be deposited;
(2) Set forth the circumstances under which the
residential mortgage broker will be entitled to disbursement from the trust account; and
(3) Set forth the circumstances under which the borrower
will be entitled to a refund of all or part of the fee.
(c) The residential mortgage broker shall deposit in a
trust account within three business days all fees received
before the time a loan is actually funded.
(d) The residential mortgage broker shall maintain a
separate record of all fees received for services performed or
to be performed as a residential mortgage broker. Each record
must set forth the date the funds are received, the person
from whom the funds are received; the amount received, the
date of deposit in the escrow account, the account number, the
date the funds are disbursed and the check number of the
disbursement, and a description of each disbursement and the
justification for the disbursement.
(e) The residential mortgage broker shall provide, upon
the request of the borrower or applicant, at the expiration of
the contract, a list of the lenders or loan sources to whom
loan applications were submitted on behalf of the borrower.
§31-17-21. Recordkeeping and notification requirements.
(a) A licensee must advise the commissioner of any
material changes to the information submitted in the most
recent license application within thirty days of the change.
(b) A licensee must advise the commissioner in writing
within fifteen days of any bankruptcy petitions filed against
or by the licensee.
(c) A licensee must investigate and attempt to resolve
complaints made regarding acts or practices subject to the
provisions of this article. If a complaint is received in
writing, the licensee must maintain a file containing all
materials relating to the complaint and subsequent
investigation for a period of twenty-four months.
(d) A residential mortgage lender or broker shall keep
and maintain for twenty-four months after the date of final
entry a record of all trust funds, sufficient to identify the
transaction, date and source of receipt, and date and
identification of disbursement.
(e) A licensee must keep and maintain for twenty-four
months after the date of final entry the business records
regarding residential mortgage loans applied for, originated,
or serviced in the course of its business.
(f) A licensee shall comply with the requirements of this
section to keep and maintain records by using methods which
comply with the provisions of section one hundred eight,
article one, chapter forty-six-a of this code. Records may be
stored in any locality provided the licensee ensures that the
records will be available to the division of banking within
three business days of a request by the commissioner.
§31-17-22. Confidentiality of information.
(a) Reports of investigation and examination, together with
related documents and financial information not normally
available to the public that is submitted in confidence by a person regulated under this article, including but not limited
to information regarding pending litigation and expected
outcomes, are confidential and may not be disclosed to the
public by the commissioner or employees of the division of
banking, and are exempt from disclosure under the provisions
of article one, chapter twenty-nine-b of this code.
(b) Nothing in this section prevents release to the
public of any list of licensees or aggregated financial data
for the licensees, or prevents disclosure of information the
presiding officer deems relevant to the proper adjudication or
administration of justice at public administrative or judicial
hearings, or prevents disclosure of information relevant to
supporting the issuance of any administrative or judicial
order.
31-17-23. Safe harbor provisions.
(a) A person who files a complaint with the division of
banking alleging in good faith that another person has
violated a provision of this article may not be held liable
for damages by the person who is the subject of that
complaint. The commissioner shall not make public the name or
identity of the person accused in such a complaint unless he
or she brings an enforcement proceeding under section eighteen
of this article.
(b) The director of the West Virginia housing development
fund may disclose to the commissioner the identity of any
person suspended from participating in residential housing programs administered by the fund. Neither the director nor
any other employee or official of the fund may be held liable
for such disclosure. Such information shall not be disclosed
by the commissioner and shall remain confidential unless he or
she brings an enforcement proceeding under section eighteen of
this article.
(c) A residential mortgage broker, lender or servicer
licensee who becomes aware that an employee has engaged in a
pattern of behavior that may be a violation of any provision
of this article or applicable federal law shall promptly
report to the commissioner the identity of the employee and
the facts and circumstances constitution such behavior.
Neither the licensee nor any other official or employee of the
licensee may be held liable for such report to the
commissioner. The information in such report shall not be
disclosed by the commissioner and shall remain confidential
unless he or she brings an enforcement proceeding under
section eighteen of this article. The commissioner may,
however, refer matters of possible criminal violations to
appropriate law enforcement officials.
(d) Notwithstanding any other provision of law, employees
and officials of the West Virginia division of banking may
apply for and receive residential mortgage loans from
licensees and persons holding certificates of exemption under
this article as long as the loans are offered under the same
terms and conditions available to the general public at that time. Any division of banking employee or official who enters
into negotiations for a residential mortgage loan with a
regulated consumer lender or a person licensed under this
article shall notify the commissioner within three business
days and may not take official action regarding that licensee
during negotiations and the term of any outstanding loan with
a licensee or regulated consumer lender. If the commissioner
enters into negotiations with a regulated consumer lender or
a licensee under this article, he or she must notify the
appropriate cabinet secretary for the division of banking and
defer any official action regarding that licensee to such
cabinet secretary during negotiations and throughout the term
of any outstanding loan with that regulated consumer lender or
licensee.
§31-17-24. Electronic transmission and telephone applications
permitted; requirements.
(a) Nothing in this article shall be construed to
prohibit residential mortgage brokers or lenders from
providing pre-application disclosures, taking residential
mortgage loan applications, or accepting other commitments
from borrowers including, but not limited to, rate lock-in
agreements, by means of electronic transmission, provided:
(1) With regard to all electronically transmitted pre- application disclosures, no residential mortgage broker or
lender shall take an application for a residential mortgage
loan unless the applicant for the loan, through electronic signature, accepts the pre-application disclosures he or she
has received electronically or acknowledges electronic receipt
of the pre-application disclosures through the use of a
"required confirm button" without which the transaction may
not proceed further;
(2) With regard to all electronically transmitted
residential mortgage loan pre-application disclosures, loan
applications or other commitments obtained from a residential
mortgage loan applicant, the broker or lender shall mail a
hard copy of such document or documents, within three business
days of their receipt by the broker or lender, to each
applicant who indicates that he or she does not have the
technological capacity to down-load and print such
disclosures, applications, or commitments; and
(3) Every electronically transmitted disclosure,
application or commitment form used by a residential mortgage
lender or broker shall include the e-mail address of the
lender or broker who transmitted said form.
(b) Nothing in this article shall be construed to
prohibit the taking of residential mortgage loan applications
by telephone. However, within three days of the taking of
such application or filling out other required forms, and in
any event prior to the taking of any fee, the applicant must
be given two copies of the application or the forms and of the
appropriate disclosures for review by the applicant. The
applicant must also be provided with a stamped, self-addressed return envelope and a written request that the applicant sign
and return one copy of the application and the disclosures to
the residential mortgage broker or lender.
§31-17-25. Scope of article.
(a) This article applies when an offer of residential
mortgage broker services or lender services is made for the
purpose of obtaining a residential mortgage loan secured by
property located in this state. For purposes of this
subsection, an "offer" means any advertisement or solicitation
of any type, including an advertisement or solicitation in
newspapers and magazines, by mail, by telephone, on
television, on radio, or via the internet or any other
electronic medium of any kind, for residential mortgage
brokering or lending services. The term "offer" excludes an
advertisement or solicitation that specifically states that
the services are not available to borrowers seeking
residential mortgage loans that will be secured with real
property located in West Virginia.
(b) The provisions of this article regarding residential
mortgage servicing apply when the residential mortgage loan
being serviced is secured by a deed of trust on residential
real estate located in this state.
§31-17-26. Powers of the commissioner.
In addition to the authority granted elsewhere in this
article and in this code, the commissioner shall have the
authority to:
(a) Keep records of all licensees issued under this
article;
(b) Receive, consider, investigate, and act upon
complaints made by any person in connection with any
residential mortgage licensee doing business in this state;
(c) Propose rules for legislative approval in accordance
with the provisions of article three, chapter twenty-nine-a of
this code and promulgated emergency rules pursuant to section
fifteen of said article, as the commissioner deems necessary
and proper to effectuate the purposes of this article, to
prevent circumvention or evasion thereof and to facilitate
compliance therewith;
(d) Subpoena documents and witnesses and compel their
attendance and production, to administer oaths, and to require
the production of any books, papers, or other materials
relevant to any inquiry authorized by this article;
(e) Periodically examine the books and records of every
licensee under this article at intervals set by the
commissioner;
(f) Appoint examiners, supervisors, experts, and special
assistants needed to effectively and efficiently administer
this article;
(g) Define by proposed rules for legislative approval,
in accordance with the provisions of article three, chapter
twenty-nine-a of this code, any terms used in this article for
the efficient and clear administration of this article.
§31-17-27. Examinations of licensees.
(a) Each licensee is subject to a periodic examination of
the licensee's business records by the commissioner at the
expense of the licensee. For the purpose of enforcing this
article, the commissioner may examine all books, records,
papers or other objects that the commissioner determines are
necessary for conducting a complete examination and may also
examine under oath any person associated with the license
holder, including an officer, director or employee of the
license holder or authorized representative. If a person
required by the commissioner to submit to an examination
refuses to permit the examination or to answer any question
authorized by this article, the commissioner may suspend the
person's license until the examination is completed.
(b) The commissioner may require the licensee to bear the
cost of any examination made pursuant to this section, at a
rate of fifty dollars for each examiner hour expended,
together with all reasonable and necessary travel expenses
incurred in connection with the examination.
§31-17-28. Posting and availability of licenses.
Licensed residential mortgage lenders, brokers and
servicers with an office in West Virginia, shall prominently
post and display their original license, or a photocopy
thereof in their office. Original licenses shall be
maintained at the licensee's main office and shall be made
available for examination and inspection by representatives of the commissioner.
§31-17-29. Reports of licensees.
Each licensee shall file with the commissioner, on or
before the fifteenth day of March of each year, a report
under oath or affirmation concerning the licensee's business
and operations in this state in the preceding license year on
a form prescribed by the commissioner.
§31-17-30. Prohibited terms; points and fees.
(a) Residential mortgage loans made, arranged, or offered
to be made under this article may not:
(1) Be secured by any personal property unless such
property is affixed to the residence;
(2) Be accelerated because of a decrease in the market
value of the residence that is securing the loan;
(3) Unless preempted by federal law, contain any
scheduled balloon payment:
Provided, That this subdivision
does not apply to bridge loans used in connection with the
purchase or construction of another residence;
(4) Contain terms of repayment which do not result in
continuous reduction of principal:
Provided, That the
provisions of this subdivision shall not apply to mortgage
loans obtained under article twenty-four, chapter forty-seven
of this code, home equity, open-end lines of credit, or
bridge loans used in connection with the purchase or
construction of another residence;
(5) No residential mortgage broker or lender may solicit
a borrower to refinance a residential mortgage loan if that
broker or lender provided, within the previous twenty-four
months, broker or lender services to that borrower:
Provided,
That a broker or lender may assist in the refinancing of a
residential mortgage loan for such borrower if, within that
twenty-four month period: (I) The borrower seeks such
refinancing without direct solicitation by the broker or
lender; and (ii) the borrower is required to pay combined fees
and points, as permitted and described in subdivision (6) of
this subsection, totaling no more than two percent of the loan
amount financed in lieu of the five percent allowed by
subdivision (6). To the extent this subdivision overrides the
preemption on limiting points and other such charges on first
lien residential mortgage loans contained in Section 501 of
the United States Depository Institutions Deregulation and
Monetary Control Act of 1980, 12 U.S.C. §1735f-7a, the state
law limitations contained in this section shall apply.
(6) Require the borrower to pay, in addition to any
periodic interest, combined fees and points of any kind to the
residential mortgage lender and broker to arrange, originate,
evaluate, maintain or service the residential mortgage loan
that exceed, in the aggregate, five percent of the loan amount
financed:
Provided, That reasonable closing costs payable to
unrelated third parties as permitted under section one hundred
nine, article three, chapter forty-six-a of this code shall not be included within this limitation; however, yield spread
premiums paid to the broker or lender shall be included in
this limitation. The financing of such fees and points shall
be permissible and, where included as part of the finance
charge, shall not constitute charging interest on interest.
To the extent that this section overrides the preemption on
limiting points and other such charges on first lien
residential mortgage loans contained in Section 501 of the
United States Depository Institutions Deregulation and
Monetary Control Act of 1980, 12 U.S.C. §1735-7a, the state
law limitations contained in this section shall apply.
(b) Nothing in this section should be construed to
prohibit a residential mortgage lender from agreeing, in
connection with a loan, to compensate a broker with a portion
of the lender's fees or points:
Provided, That the fact of
such compensation is disclosed to the borrower consistent with
the solicitation representation made to the borrower, and
would be of the type permitted by the Real Estate Settlement
Procedures Act, 12 U.S.C. §§2601 et seq., for services
rendered by the broker, as the federal law is in effect on the
effective date of this article.
(c) Any instrument evidencing a residential mortgage loan
made or arranged under this article which contains any
provision in violation of this section shall be per se
unconscionable and a violation of section one hundred twenty- one, article two, chapter forty-six-a of this code.
§31-17-31. Residential mortgage brokers, lenders and
servicers licensed under this article are exempt from
registration under other law.
(a) Residential mortgage brokers who are licensed under
this article are not subject to the registration and bonding
requirements of sections four and five, article six-c, chapter
forty-six-a of this code.
(b) Residential mortgage lenders and servicers who are
licensed under this article are not subject to the
registration, bonding or other requirements of article
sixteen, chapter forty-seven of this code.
§31-17-32. Loans made in violation of this article voidable
as to lien, interest and other fees.
(a) If any residential mortgage loan is made in violation
of the licensing or registration provisions of this article,
except as a result of a bona fide error, a lien securing such
a loan shall be void and neither the lender nor any holder of
the obligation shall have the right to collect or receive any
interest or charges whatsoever, and the lender or any holder
shall refund all interest payments and all fees with respect
to such loan which have been paid by the borrower.
(b) If any residential mortgage loan is made in violation
of any provision of sections nineteen or twenty of this
article, and it can be established by a preponderance of the
evidence that the lender willfully engaged in a pattern of violations of those sections, a lien securing such loan shall
be void and neither the lender nor any holder of the
obligation shall have the right to collect or receive any
interest or charges whatsoever, and the lender or any holder
shall refund all interest payments and all fees with respect
to such loan which have ben paid by the borrower.
§31-17-33. Severability.
If any provision of this article or its application to
any person or circumstance is held unconstitutional or
invalid, such unconstitutionality or invalidity shall not
affect other provisions or applications of the article, and to
this end the provisions of this article are hereby declared to
be severable.
CHAPTER 46A. WEST VIRGINIA CONSUMER CREDIT AND
PROTECTION ACT.
ARTICLE 4. REGULATED CONSUMER LENDERS.
§46A-4-107. Loan finance charge for regulated consumer
lenders.
(1) With respect to a regulated consumer loan, including
a revolving loan account, a regulated consumer lender may
contract for and receive a loan finance charge not exceeding
that permitted by this section.
(2) On a loan of two thousand dollars or less, which is
unsecured by real property, the loan finance charge,
calculated according to the actuarial method, may not exceed thirty-one percent per year on the unpaid balance of the
principal amount.
(3) On a loan of greater than two thousand dollars or
which is secured by real property, the loan finance charge,
calculated according to the actuarial method, may not exceed
twenty-seven percent per year on the unpaid balance of the
principal amount:
Provided, That the loan finance charge on
any loan greater than ten thousand dollars may not exceed
eighteen percent per year on the unpaid balance of the
principal amount. Loans made by regulated consumer lenders
shall be subject to the restrictions and supervision set forth
in this article irrespective of their rate of finance charges.
(4) Where the loan is nonrevolving and is greater than
two thousand dollars, the permitted finance charge may include
a charge of not more than a total of two percent of the amount
financed for any origination fee, points or investigation fee:
Provided, That where any loan, revolving or nonrevolving, is
secured by
residential real estate, the permitted finance
charge
may include a charge of not more than a total of five
percent of the amount financed for any origination fee, points
or investigation fee. In any loan secured by real estate, such
charges may not be imposed again by the same or affiliated
lender in any refinancing of that loan made within twenty-four
months thereof, unless these earlier charges have been rebated
by payment or credit to the consumer under the actuarial
method, or the total of the earlier and proposed charges does not exceed five percent of the amount financed. Charges
permitted under this subsection shall be included in the
calculation of the loan finance charge. The financing of such
charges shall be permissible and shall not constitute charging
interest on interest. In a revolving home equity loan, the
amount of the credit line extended shall, for purposes of this
subsection, constitute the amount financed. Other than herein
provided, no points, origination fee, investigation fee or
other similar prepaid finance charges attributable to the
lender or its affiliates may be levied. Except as provided for
by section one hundred nine [§ 46A-3-109], article three of
this chapter, no additional charges may be made; nor may any
charge permitted by this section be assessed unless the loan
is made. To the extent that this section overrides the
preemption on limiting points and other such charges on first
lien residential mortgages contained in Section 501 of the
United States Depository Institutions Deregulation and
Monetary Control Act of 1980 [12 U.S.C. § 3501 et seq.], the
state law limitations contained in this section shall apply.
must comply with the provisions of section thirty, article
seventeen, chapter thirty-one of this code. If the loan is
precomputed:
(a) The loan finance charge may be calculated on the
assumption that all scheduled payments will be made when due;
and
(b) The effect of prepayment, refinancing or consolidation is governed by the provisions on rebate upon
prepayment, refinancing or consolidation contained in section
one hundred eleven, article three of this chapter.
(5) For the purposes of this section, the term of a loan
commences on the date the loan is made. Differences in the
lengths of months are disregarded and a day may be counted as
one thirtieth of a month. Subject to classifications and
differentiations the licensee may reasonably establish, a part
of a month in excess of fifteen days may be treated as a full
month if periods of fifteen days or less are disregarded and
if that procedure is not consistently used to obtain a greater
yield than would otherwise be permitted.
(6) With respect to a revolving loan account:
(a) A charge may be made by a regulated consumer lender
in each monthly billing cycle which is one twelfth of the
maximum annual rates permitted by this section computed on an
amount not exceeding the greatest of:
(I) The average daily balance of the debt; or
(ii) The balance of the debt at the beginning of the
first day of the billing cycle, less all payments on and
credits to such debt during such billing cycle and excluding
all additional borrowings during such billing cycle. For the
purpose of this subdivision a billing cycle is monthly if the
billing statement dates are on the same day each month or do
not vary by more than four days therefrom.
(b) If the billing cycle is not monthly, the maximum loan finance charge which may be made by a regulated consumer
lender is that percentage which bears the same relation to an
applicable monthly percentage as the number of days in the
billing cycle bears to thirty.
(c) Notwithstanding subdivisions (a) and (b) of this
subsection, if there is an unpaid balance on the date as of
which the loan finance charge is applied, the licensee may
contract for and receive a charge not exceeding fifty cents if
the billing cycle is monthly or longer, or the pro rata part
of fifty cents which bears the same relation to fifty cents as
the number of days in the billing cycle bears to thirty if the
billing cycle is shorter than monthly, but no charge may be
made pursuant to this subdivision if the lender has made an
annual charge for the same period as permitted by the
provisions on additional charges.
(7) As an alternative to the loan finance charges
allowed by subsections (2) and (4) of this section, a
regulated consumer lender may on a loan of one thousand two
hundred dollars or less contract for and receive interest at
a rate of up to thirty-one percent per year on the unpaid
balance of the principal amount, together with a nonrefundable
loan processing fee of not more than two percent of the amount
financed:
Provided, That no other finance charges are imposed
on the loan. The processing fee permitted under this
subsection shall be included in the calculation of the loan
finance charge and the financing of the fee shall be permissible and shall not constitute charging interest on
interest.
(8) Notwithstanding any
contrary provision in this
section
to the contrary, a licensed regulated consumer lender
who is the assignee of a nonrevolving consumer loan unsecured
by real property located in this state, which loan contract
was applied for by the consumer when he or she was in another
state, and which was executed and had its proceeds distributed
in that other state, may collect, receive and enforce the loan
finance charge and other charges, including late fees,
provided in said contract under the laws of the state where
executed:
Provided, That the consumer was not induced by the
assignee or its in-state affiliates to apply and obtain the
loan from an out-of-state source affiliated with the assignee
in an effort to evade the consumer protections afforded by
this article. Such charges shall not be deemed to be usurious
or in violation of the provisions of this article or any other
provisions of this code.
46A-4-110a. Prohibited conduct.
(1) A regulated consumer lender shall not:
(a) Accept or receive deposits or sell or offer for sale
its secured or unsecured evidences or certificates of
indebtedness; or
(b) Pay any fees, bonuses, commissions, rewards or other
consideration to any person, firm or corporation for the
privilege of using any plan of operation, scheme or device for the organization or carrying on of business under this
article, or the use of any name, trademark or copyright to be
so used:
Provided, That nothing herein prevents a regulated
consumer lender from agreeing in connection with a loan to pay
a broker fee, finders fee or dealer participation fee, or to
split the origination fee or points paid: Provided, however,
That the fee or fee split is disclosed to the borrower and
where proper is included in the finance charge. Provided,
That reasonable closing costs as permitted under section one
hundred nine, article three of this chapter shall not be
included within this limitation and: Provided, however, That
the financing of such fees and points as permitted under
section one hundred seven of this article shall be permissible
and, where included as part of the finance charge, shall not
constitute charging interest on interest.
(2) Unless preempted by federal law, no consumer loan by
a regulated consumer lender may contain any scheduled balloon
payment as set forth in this chapter. Nor may any regulated
consumer lender loan contain terms of repayment which result
in negative amortization:
Provided, That nothing herein
prevents unequal payment schedules resulting from a variable
rate loan or a revolving line of credit.
(3) A regulated consumer lender may not make revolving
loans for the retail purchase of consumer goods and services
by use of a lender credit card.
NOTE: The purpose of this bill is to amend the current law governing the licensing and regulation of secondary
mortgage lenders and brokers by establishing licensing and
regulation requirements which apply to all persons engaged in
mortgage brokering, lending and servicing regardless of the
loan's lien priority, unless otherwise exempted. This bill
would regulate all persons engaged in the residential mortgage
business in which a loan is secured by real estate in West
Virginia with the exception of federally insured depositions
and credit unions (which are otherwise regulated by federal
law).
This bill was recommended by the Joint Standing
Committee on the Judiciary for introduction and passage during
the 1999 legislative session.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
Article 17 has been substantially rewritten; therefore,
strike-throughs and underscoring have been omitted.