Introduced Version
Senate Bill 385 History
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Senate Bill No. 385
(By Senators Minard and Kessler)
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[Introduced January 31, 2007; referred to the Committee on
Banking and Insurance.]
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A BILL to amend and reenact §31-17-1, §31-17-4 and §31-17-11 of the
Code of West Virginia, 1931, as amended, all relating to
defining "loan originator" to include individuals working for
licensees, the majority of whose business consists of
brokering; permitting bond claims by the Commissioner of
Banking to collect unpaid civil administrative penalties and
unpaid examination invoices while allowing priority for
pending consumer claims; allowing the commissioner to publish
aggregate annual report data; and permitting the commissioner
to enter into information-sharing agreements with other
mortgage regulators.
Be it enacted by the Legislature of West Virginia:
That §31-17-1, §31-17-4 and §31-17-11 of the Code of West
Virginia, 1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 17. WEST VIRGINIA RESIDENTIAL MORTGAGE LENDER, BROKER AND
SERVICER ACT.
§31-17-1. Definitions and general provisions.
As used in this article:
(1) "Primary mortgage loan" means a consumer loan made to an
individual which is secured, in whole or in part, by a primary
mortgage or deed of trust upon any interest in real property used
as an owner-occupied residential dwelling with accommodations for
not more than four families;
(2) "Subordinate mortgage loan" means a consumer loan made to
an individual which is secured, in whole or in part, by a mortgage
or deed of trust upon any interest in real property used as an
owner-occupied residential dwelling with accommodations for not
more than four families, which property is subject to the lien of
one or more prior recorded mortgages or deeds of trust;
(3) "Person" means an individual, partnership, association,
trust, corporation or any other legal entity, or any combination
thereof;
(4) "Lender" means any person who makes or offers to make or
accepts or offers to accept or purchases or services any primary or
subordinate mortgage loan in the regular course of business. A
person is considered to be acting in the regular course of business if he or she makes or accepts, or offers to make or accept, more
than five primary or subordinate mortgage loans in any one calendar
year;
(5) "Broker" means any person acting in the regular course of
business who, for a fee or commission or other consideration,
negotiates or arranges, or who offers to negotiate or arrange, or
originates, processes or assigns a primary or subordinate mortgage
loan between a lender and a borrower. A person is considered to be
acting in the regular course of business if he or she negotiates or
arranges, or offers to negotiate or arrange, or originates,
processes or assigns any primary or subordinate mortgage loans in
any one calendar year; or if he or she seeks to charge a borrower
or receive from a borrower money or other valuable consideration in
any primary or subordinate mortgage transaction before completing
performance of all broker services that he or she has agreed to
perform for the borrower;
(6) "Brokerage fee" means the fee or commission or other
consideration charged by a broker or loan originator for the
services described in subdivision (5) of this section;
(7) "Additional charges" means every type of charge arising
out of the making or acceptance of a primary or subordinate
mortgage loan, except finance charges, including, but not limited
to, official fees and taxes, reasonable closing costs and certain documentary charges and insurance premiums and other charges which
definition is to be read in conjunction with and permitted by
section one hundred nine, article three, chapter forty-six-a of
this code;
(8) "Finance charge" means the sum of all interest and similar
charges payable directly or indirectly by the debtor imposed or
collected by the lender incident to the extension of credit as
coextensive with the definition of "loan finance charge" set forth
in section one hundred two, article one, chapter forty-six-a of
this code;
(9) "Commissioner" means the Commissioner of Banking of this
state;
(10) "Applicant" means a person who has applied for a
lender's, broker's or loan originator's license;
(11) "Licensee" means any person duly licensed by the
commissioner under the provisions of this article as a lender,
broker or loan originator;
(12) "Amount financed" means the total of the following items
to the extent that payment is deferred:
(a) The cash price of the goods, services or interest in land,
less the amount of any down payment, whether made in cash or in
property traded in;
(b) The amount actually paid or to be paid by the seller pursuant to an agreement with the buyer to discharge a security
interest in or a lien on property traded in; and
(c) If not included in the cash price:
(i) Any applicable sales, use, privilege, excise or
documentary stamp taxes;
(ii) Amounts actually paid or to be paid by the seller for
registration, certificate of title or license fees; and
(iii) Additional charges permitted by this article;
(13) "Affiliated" means persons under the same ownership or
management control. As to corporations, limited liability
companies or partnerships, where common owners manage or control a
majority of the stock, membership interests or general partnership
interests of one or more such corporations, limited liability
companies or partnerships, those persons are considered affiliated.
In addition, persons under the ownership or management control of
the members of an immediate family shall be considered affiliated.
For purposes of this section, "immediate family" means mother,
stepmother, father, stepfather, sister, stepsister, brother,
stepbrother, spouse, child and grandchildren;
(14) "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 or noteholder, payments of principal, interest, including sales finance charges in a consumer credit
sale, and escrow items as insurance and taxes for property subject
to a residential mortgage loan; and
(15) "Loan originator" means an individual who, on behalf of
a single licensed mortgage broker, under the direct supervision and
control of a licensee who is engaged in brokering activity, such
mortgage broker and in exchange for compensation by that broker,
performs any of the services described in subsection (5) of this
section. For the purposes of this subsection, an entity applying
for or holding both a lender and broker license shall license all
of its individual loan originators if that entity brokers a
majority of its residential mortgage loans. The determination of
whether it brokers the majority of its residential mortgage loans
shall be based upon the annual report filed with the division for
current licensees. New applicants for both a lender and broker
license shall obtain loan originator licenses unless it can
demonstrate, through data compiled for other state regulators, that
it acts as a lender for a majority of its residential mortgage
loans made.
§31-17-4. Applications for licenses; requirements; bonds; fees;
renewals; waivers and reductions; per loan fee.
(a) Application for a lender's or broker's license shall each
year be submitted in writing under oath, in the form prescribed by the commissioner, and shall contain the full name and address of
the applicant and, if the applicant is a partnership, limited
liability company or association, of every member thereof, and, if
a corporation, of each officer, director and owner of ten percent
or more of the capital stock thereof and further information as the
commissioner may reasonably require. Any application shall also
disclose the location at which the business of lender or broker is
to be conducted. Application for a loan originator's license shall
be initially submitted prior to the first day of September, two
thousand two, and thereafter in every fifth year beginning in two
thousand five. If the loan originator changes sponsoring mortgage
brokers, a new application must be submitted in accordance with
this article.
(b) At the time of making application for a lender's license,
the applicant therefor shall:
(1) If a foreign corporation, submit a certificate from the
Secretary of State certifying that the applicant is registered with
the Secretary of State to transact business in this state;
(2) Submit proof that he or she has available for the
operation of the business at the location specified in the
application net worth of at least two hundred fifty thousand
dollars;
(3) File with the commissioner a bond in favor of the state for the benefit of consumers or for a claim by the commissioner for
an unpaid civil administrative penalty or an unpaid examination
invoice in the amount of one hundred thousand dollars, in a form
and with conditions as the commissioner may prescribe, and executed
by a surety company authorized to do business in this state;
(4) Pay to the commissioner a license fee of one thousand two
hundred fifty dollars plus the actual cost of fingerprint
processing. If the commissioner shall determine that an
investigation outside this state is required to ascertain facts or
information relative to the applicant or information set forth in
the application, the applicant may be required to advance
sufficient funds to pay the estimated cost of the investigation.
An itemized statement of the actual cost of the investigation
outside this state shall be furnished to the applicant by the
commissioner and the applicant shall pay or shall have returned to
him or her, as the case may be, the difference between his or her
payment in advance of the estimated cost and the actual cost of the
investigation; and
(5) Submit proof that the applicant is a business in good
standing in its state of incorporation, or if not a corporation,
its state of business registration, and a full and complete
disclosure of any litigation or unresolved complaint filed by a
governmental authority or class action lawsuit on behalf of consumers relating to the operation of the license applicant.
(c) At the time of making application for a broker's license,
the applicant therefor shall:
(1) If a foreign corporation, submit a certificate from the
Secretary of State certifying that the applicant is registered with
the Secretary of State to transact business in this state;
(2) Submit proof that he or she has available for the
operation of the business at the location specified in the
application net worth of at least ten thousand dollars;
(3) File with the commissioner a bond in favor of the state
for the benefit of consumers or for a claim by the commissioner for
an unpaid civil administrative penalty or an unpaid examination
invoice in the amount of fifty thousand dollars, in a form and with
conditions as the commissioner may prescribe, and executed by a
surety company authorized to do business in this state: Provided,
That the bond must be in the amount of one hundred thousand dollars
before a broker may participate in a table-funded residential
mortgage loan;
(4) Pay to the commissioner a license fee of three hundred
fifty dollars plus the actual cost of fingerprint processing; and
(5) Submit proof that the applicant is a business in good
standing in its state of incorporation, or if not a corporation,
its state of business registration, and a full and complete disclosure of any litigation or unresolved complaint filed by a
governmental authority or class action lawsuit on behalf of
consumers relating to the operation of the license applicant.
(d) Application for a loan originator license shall be
submitted by the sponsoring mortgage broker prior to the loan
originator engaging in mortgage activity, in writing under oath, on
a form prescribed by the commissioner. At the time of making
application for a loan originator license, the loan originator
therefor shall:
(1) Submit a statement under oath that he or she originates
loans exclusively for one broker, together with an acknowledgment
of employment by the sponsoring mortgage broker;
(2) Pay to the commissioner a license fee of one hundred fifty
dollars plus the actual cost of fingerprint processing;
(3) Disclose the location at which the business of the
sponsoring mortgage broker is to be conducted by the licensed loan
originator; and
(4) If at any time a loan originator ceases working for the
sponsoring mortgage broker indicated on the license application,
such loan originator and sponsoring mortgage broker shall notify
the commissioner within fifteen business days and return the
original loan originator license to the Division of Banking. The
license of a loan originator is not effective during any period when that person is not employed by a sponsoring mortgage broker
licensed under this article, and a loan originator shall not be
employed simultaneously by more than one sponsoring mortgage
broker.
(e) The aggregate liability of the surety on any bond given
pursuant to the provisions of this section shall in no event exceed
the amount of the bond.
(f) Nonresident lenders and brokers licensed under this
article by their acceptance of the license acknowledge that they
are subject to the jurisdiction of the courts of West Virginia and
the service of process pursuant to section one hundred
thirty-seven, article two, chapter forty-six-a of this code and
section thirty-three, article three, chapter fifty-six of this
code.
(g) The commissioner may elect to reduce or waive the
application fees, bond amounts and net worth requirements imposed
by this section for nonprofit corporations whose residential
mortgage lending or brokering activities provide housing primarily
to households or persons below the HUD-established median income
for their area of residence.
(h) Every broker and lender licensee shall pay a fee of five
dollars for each residential mortgage loan originated, made or
brokered in a calendar year. This fee shall be paid semiannually to the Division of Banking and remitted with the report required
pursuant to subsection (b), section eleven of this article for
loans made, brokered or originated during the last six months of
the previous calendar year and with the lender or broker license
renewal application required pursuant to subsection (b), section
seven of this article for the loans made, brokered or originated in
the first six months of that calendar year. In the event a
licensee ceases operation, it shall remit any fees due since the
last reporting period when it relinquishes its license.
(i) If a claim for consumer restitution is pending on a bond
required pursuant to this section when the commissioner makes a
claim for a civil administrative penalty or an unpaid examination
invoice, the consumer claim shall be resolved before any payments
from the bond may be made to the commissioner for an unpaid penalty
or examination invoice.
§31-17-11. Records and reports; examination of records; analysis.
(a) Every lender and broker licensee shall maintain at his or
her place of business in this state, if any, or if he or she has no
place of business in this state at his or her principal place of
business outside this state, such books, accounts and records
relating to all transactions within this article as are necessary
to enable the commissioner to enforce the provisions of this
article. All the books, accounts and records shall be preserved, exhibited to the commissioner and kept available as provided herein
for the reasonable period of time as the commissioner may by rules
require. The commissioner is hereby authorized to prescribe by
rules the minimum information to be shown in the books, accounts
and records.
(b) 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 his or her business and operations in
this state for the preceding license year in the form prescribed by
the commissioner.
(c) The commissioner may, at his or her discretion, make or
cause to be made an examination of the books, accounts and records
of every lender or broker licensee pertaining to primary and
subordinate mortgage loans made in this state under the provisions
of this article, for the purpose of determining whether each lender
and broker licensee is complying with the provisions hereof and for
the purpose of verifying each lender or broker licensee's annual
report. If the examination is made outside this state, the
licensee shall pay the cost thereof in like manner as applicants
are required to pay the cost of investigations outside this state.
(d) The commissioner shall may publish annually an aggregate
analysis of the information furnished in accordance with the
provisions of subsection (b) or (c) of this section, but the individual reports shall not be public records and shall not be
open to public inspection.
(e) The commissioner may enter into cooperative and
information sharing agreements with regulators in other states or
with federal authorities to discharge his or her responsibilities
under this article.
NOTE: The purpose of this bill is to require loan originators
for all licensees primarily engaged in brokering activity, to
permit the division to make a claim on a licensee's bond for unpaid
penalties and invoices while giving consumer claims priority, and
to permit the commissioner to publish aggregate data from annual
reports and to enter into information sharing agreements with other
mortgage regulators.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
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