Senate Bill No. 392
(By Senator Helmick, Ross and Fanning)
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[Introduced February 3, 2000; referred to the Committee
on the Judiciary.]
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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
lenders, brokers 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 brokers; requiring the licensing of residential mortgage
servicers 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 record-keeping 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
licensees' 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; 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 fee, or charge paid to a
residential mortgage lender or broker before the closing of a
loan, that is intended as payment for specific identifiable
services necessary to evaluate a loan application including a
credit check and appraisal of real estate. Advance fees are not
compensation paid to the broker prior to the closing of a
residential mortgage loan.
(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 (12), (14), (22)
and (23) of this section are conducted.
(4) "Closing" means either or both of the following: (A)
The process whereby the finance transaction between a buyer and
seller is consummated; or (B) 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" means 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" means 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 section 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 (14) and (23)
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
or nontable-funded residential mortgage loan, but does not
provide or advance the funds for the loan is a "broker" under this article. A broker may be designated a "managing principal"
if he or she meets the requirements of subsection (a) of section
six of this article. A broker may be designated an "associate
broker" if he or she meets the requirements of subsection (b) of
section six of 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: (A) A deed of trust on residential real
property located in West Virginia; or (B) 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: Provided, That a person
who takes assignment of a residential mortgage loan from an
affiliate for the purpose of securitization shall not be included
in this definition.
(20) "Residential mortgage servicer" or "servicer" means a
person who engages in the activity of servicing a residential
mortgage loan as defined in subdivision (23) 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 or 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 and which is
not subject to set-off by any financial institution for money
owed to the financial institution 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, two thousand, who file an application
for a license or a certificate of exemption by the fifteenth day
of August, two thousand, 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, two thousand, 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 the 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 nonresidential 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 a 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 or broker 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 nonprofit housing providers originating loans
solely for purchase by the fund;
(9) A nonprofit organization that provides loans for low to
moderate income housing if the organization is regularly subject
to review, oversight, monitoring or examination by an agency or
entity of this state or by a federal agency or entity: Provided,
That a nonprofit foundation that provides funding for low to
moderate income housing need not be subject to review, oversight,
monitoring or examination by an agency or entity of this state or
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 and any trustee or administrator of the trust
or other entity which holds residential mortgage loans in order
to securitize 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 or applicable state laws, 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 for
good cause shown.
§31-17-6. Associate and principal residential mortgage brokers;
registration 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; and
(2) 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 managing
principal residential mortgage broker who is responsible for his
or her performance and actions;
(2) Is not an independent contractor and for tax purposes
is considered an employee of the 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.
§31-17-7. Licensing requirement for residential mortgage
servicers; exemptions.
(a) Beginning the first day of October, two thousand, no person shall engage in activities or practices that are within
the definition of "servicing a residential mortgage loan" under
subdivision (22), 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 nonresidential mortgage
activities;
(4) A person servicing loans originated by an affiliate, or
which that person has made with its own funds or 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 nonprofit housing providers servicing loans
solely for the fund;
(9) A nonprofit organization that provides loans for low to
moderate income housing if the organization is regularly subject
to review, oversight, monitoring or examination by an agency or
entity of this state or by a federal agency or entity;
(10) A person approved by the federal national mortgage
association, the federal home loan mortgage corporation, or the
government national mortgage association to provide residential
mortgage servicing: Provided, That the 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 any of those
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 for
good cause shown.
§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 the
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, thirty-one and thirty-two of this article
are applicable to regulated consumer lenders licensed under article four, chapter forty-six-a of this code only when the
regulated consumer lender is engaged in making a residential
mortgage loan. Any regulated consumer lender licensed under
article four, chapter forty-six-a of this code who holds the
license on the first day of January, two thousand, shall not be
subject to section thirteen of this article.
§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 transact business in this state through
proper registration with the secretary of state and the state tax
division, as required.
(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
sixty days from the date a complete application is submitted.
(d) Only one license shall be required of a residential
mortgage lender, servicer or broker, 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
unaudited financial statements from residential mortgage brokers
in a form he or she determines 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.
(d) If a licensee performs more than one activity requiring
a license under this article, the licensee shall maintain the
higher of any applicable net worth minimums required by this
section.
§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. Applicants shall
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 laws 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 the cancellation with the commissioner.
No surety filing the 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.
(g) If a licensee performs more than one activity requiring
a license under this article, the licensee shall maintain the
higher of any applicable bonds required by this section.
§31-17-14. Term of license; nontransferability.
Licenses for residential mortgage lenders, brokers and
servicers issued under this article expire on the thirtieth day
of September, 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 the transfer
or assignment. No licensee may engage in the franchising of its
license or in any other activity that attempts to transfer authority for activities under the license to another party.
§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, fifty 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 the 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 or registration;
(3) Publicly reprimand a licensee or registered broker 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
(16), 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 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 registration 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 registration 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.
(d) All hearings conducted pursuant to this section shall
be conducted pursuant to the provisions of 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.
(e) 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.
(f) If any person who is subject to the provisions of this
article fails to appear at a hearing after having been duly
notified thereof, the person is considered in default, and the
proceeding may be determined against the person upon
consideration of the order to show cause, the allegations of
which may be considered by the commissioner to be true.
(g) The commissioner may institute a proceeding under this
section within two years of the date the commissioner discovers
the activity that gives rise to the enforcement action.
§31-17-19. General standards of conduct.
(a) Neither regulated consumer lenders, nor persons
required to be 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 twenty-four hours 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:
(A) Failure of the servicer to respond reasonably to the
borrower's inquiries concerning the status of the loan; or (B)
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 that 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 that 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 or encouraging a
borrower to make a false or misleading statement regarding the
borrower's credit worthiness, credit standing or credit capacity;
(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 the 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 the 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, 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 record keeping 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, fails 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 or the federal home loan mortgage
corporation;
(17) 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;
(18) 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;
(19) 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;
(20) If a lender or servicer, fails 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
disclosure within three business days of the amount of a payoff of an existing loan when requested by the borrower or agent of
the borrower;
(21) Accept any fees at closing that were not disclosed to
the borrower;
(22) Accept attorney's fees at closing in excess of the
fees that have been or will be remitted to its attorneys;
(23) Obtain any agreement or instrument in which blank
sections are to be completed after execution;
(24) Collect a fee as both broker and lender for the same
residential mortgage loan;
(25) 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 executed; or
(26) Fail to include the license number issued by the
commissioner of banking in all print, broadcast or internet
advertising.
(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 truth in
advertising guidelines and regulations of the federal trade commission when deciding whether a statement, representation or
advertisement is deceptive or misleading.
(c) Any residential mortgage loan transaction in violation
of this section shall be subject to an action by the borrower
seeking the civil remedies available under article five, chapter
forty-six-a of this code.
§31-17-20. Additional standards for residential mortgage
brokers.
(a) A residential mortgage broker licensed or registered
under this article who offers to obtain a loan secured by a deed
of trust on residential real estate located in this state shall
enter into a retention agreement with each proposed borrower and
shall provide a copy of the written retention agreement to each
borrower at or before the time of receipt of any fee. The
retention agreement must be signed by both the broker and the
proposed borrower and provide notice in boldface conspicuous
print that the borrower may cancel the agreement at any time
prior to closing of the residential mortgage loan. No broker may
receive compensation for services prior to the closing of a
residential mortgage loan. The only fees that may be collected
by a broker prior to the closing of a loan are advance fees as defined in this article. 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 retention agreement, 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;
(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;
(3) Provide the borrower with a complete and accurate
statement of the availability of nonprofit credit counseling
services; and
(4) Provide notice to the borrower that he or she has a
right to proceed under the bond posted by the broker pursuant to
section thirteen of this article.
(b) If an advance fee is solicited or received, by the broker, the agreement 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 may make 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 and
include a notice that if the loan is not approved the borrower
shall be entitled to the original of all items for which the
borrower paid including, but not limited to, a credit report,
appraisal and flood report.
(c) The residential mortgage broker shall deposit in a
trust account within twenty-four hours 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
broker's contract, a list of the lenders or loan sources to whom
loan applications were submitted or which were consulted on
behalf of the applicant or borrower.
(f) Any violation of this section shall be subject to an
action by the proposed borrower seeking the civil remedies
available under article five, chapter forty-six-a of this code.
§31-17-21. Record keeping 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 licensed 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 and reports
from licensees, 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.
The commissioner may disclose information contained in an
application for a license under this article.
(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 determines 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 written 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 may disclose the complaint to the person accused
but shall not make public the name or identity of the person
accused in the 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 the
disclosure. The 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 in writing the identity of the employee and the
facts and circumstances constituting the behavior. Neither the
licensee nor any other official or employee of the licensee may
be held liable for the report to the commissioner. The information in the 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. Notwithstanding any provision of this section, the
commissioner may refer matters of possible criminal or civil
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
the 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
preapplication 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
preapplication disclosures, no residential mortgage broker or
lender licensee shall take an application for a residential
mortgage loan unless the applicant for the loan, through
electronic signature, accepts the preapplication disclosures he
or she has received electronically or acknowledges electronic
receipt of the preapplication 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 preapplication disclosures, loan
applications or other commitments obtained from a residential
mortgage loan applicant, the broker or lender shall mail a hard
copy of the 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 download and print the disclosures, applications, or
commitments; and
(3) Every electronically transmitted disclosure,
application or commitment form used by a licensed residential
mortgage lender or broker shall include the e-mail address,
physical address and telephone number 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 the
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
lender, broker or servicer not exempt from the provisions of this
article 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 promulgate 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 may be subject to a periodic examination
of the licensee's business records by the commissioner at the
expense of the licensee: Provided, That no licensee shall be
subject to audit more than once in a biannual period unless the
commissioner has good cause for the examination. 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 up to 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 by regulated consumer lenders or other persons
licensed or registered under this article may not:
(1) Be secured by any personal property unless the property
is affixed to the residence or real estate;
(2) Be accelerated solely because of a decrease in the
market value of the residence that is securing the loan;
(3) 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;
(4) 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 the borrower if, within that twenty-four month
period: (A) The borrower seeks the refinancing without direct
solicitation by the broker or lender; and (B) the borrower is
required to pay combined fees and points, as permitted and
described in subdivision (5) of this subsection, totaling no more
than two percent of the loan amount financed in lieu of the five
percent allowed by subdivision (5). To the extent this
subdivision overrides the preemption on limiting points and other
the charges on first lien residential mortgage loans contained in
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.
(5) 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 a nonpurchase money residential
mortgage loan that exceeds, 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: Provided, however,
That yield spread premiums paid to the broker shall be included
in this limitation. The financing of the fees and points shall
be permissible and, where included as part of the finance charge,
does not constitute charging interest on interest. To the extent
that this section overrides the preemption on limiting points and
other charges on first lien residential mortgage loans contained
in 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) No residential mortgage loan contract regulated by this
article may finance the sale of insurance products unless those
products are listed in subsection (b), section one hundred nine,
article three, chapter forty-six-a of this code.
(b) The combined fees and points allowed by this section
may be paid to either the broker or the lender: Provided, That
the fact of the 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 a violation of section one
hundred twenty-one, article two, chapter forty-six-a of this
code.
§31-17-31. Use of credit scoring standards and systems;
disclosure.
(a) Regulated consumer lenders and persons required to be
licensed or registered under this article shall disclose the use
of credit scoring systems in the process of underwriting
residential mortgage loan applications.
(b) The disclosure must include:
(1) The credit score assigned by the credit bureau to the
applicant;
(2) Whether the system is one created by the lender through
internal procedures or whether it has been provided through a
third party vendor of the credit scoring systems, which vendor
shall be named; and
(3) Whether or not the applicant is being offered a loan with interest rate and fees within the range indicated by the
assigned credit score.
(c) If the loan being offered to the applicant contains a
higher interest rate or higher comparable fees than those
indicated by the credit scoring system used by the lender, the
applicant must be informed in writing of the reason why he or she
was not offered an interest rate or comparable fees within the
scoring range unless the higher rate or fees result from a lower
appraisal amount or other underwriting information that shall be
disclosed to the borrower prior to the time the loan is executed.
(d) For purposes of this subdivision, "credit scoring"
refers to a system of rating or categorizing borrowers which
varies according to the degree of perceived risk of borrower
default based on factors as the borrower's income, employment
history, credit history, including the level of debt and debt
service patterns, loan to collateral value ratio, prior
bankruptcy, foreclosure experiences and other characteristics of
the borrower.
(e) Nothing contained in this section shall prohibit a
borrower from accepting or negotiating a loan outside his or her
credit score range.
§31-17-32. 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 article six-c, chapter forty-six-
a of this code.
(b) Residential mortgage lenders and servicers who are
licensed or exempt from licensing under this article are not
subject to the requirements of article sixteen, chapter
forty-seven of this code.
§31-17-33. 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 the 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
the loan which have been paid by the borrower.
(b) If any residential mortgage loan is made in violation of any provision of section 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 the 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 the loan which have been paid by the
borrower.
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) (a) 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) (b) 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) (c) 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) (d) 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, the
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 the 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, 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 the
charges on first lien residential mortgages contained in Section
501 of the United States Depository Institutions Deregulation and
Monetary Control Act of 1980, 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) (1) The loan finance charge may be calculated on the
assumption that all scheduled payments will be made when due; and
(b) (2) 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) (e) 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) (f) With respect to a revolving loan account:
(a) (1) 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) (A) The average daily balance of the debt; or
(ii) (B) The balance of the debt at the beginning of the
first day of the billing cycle, less all payments on and credits
to the debt during the billing cycle and excluding all additional
borrowings during the 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) (2) 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) (3) Notwithstanding subdivisions (1) and (2) 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) (g) As an alternative to the loan finance charges
allowed by subsections (2) (b) and (4) (d) 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) (h) 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. The charges shall
not be deemed considered 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) A regulated consumer lender shall not:
(a) (1) Accept or receive deposits or sell or offer for
sale its secured or unsecured evidences or certificates of
indebtedness; or
(b) (2) 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 not be included within this limitation and:
Provided, however, That the financing of the 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,
not constitute charging interest on interest; or
(c) (3) Fail to disclose the amount of a payoff of an
existing loan within three business days of receiving a request
for the information from either the borrower or an agent acting
on behalf of the borrower.
(2) (b) 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) (c) 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 licensure and regulation of secondary mortgage
lenders and brokers by establishing licensure 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.
§§31-17 has been substantially rewritten; therefore,
strike-throughs and underscoring have been omitted.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.