ENGROSSED
Senate Bill No. 313
(By Senator Minard)
____________
[Introduced January 29, 2004; referred to the Committee on
Banking and Insurance; and then to the Committee on the
Judiciary.]
____________
A BILL to amend and reenact §31-17-5, §31-17-8 and §31-17-14 of the
code of West Virginia, 1931, as amended, all relating to
mortgage license provisional approval; disclosure of fees in
a mortgage loan; and administrative hearing, appeal and
scheduling procedure.
Be it enacted by the Legislature of West Virginia:
That §31-17-5, §31-17-8 and §31-17-14 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.
§31-17-5. Refusal or issuance of license.
(a) Upon an applicant's full compliance with the provisions of
section four of this article, the commissioner shall investigate
the relevant facts with regard to the applicant and his or her application for a lender's, broker's or loan originator's license,
as the case may be. Upon the basis of the application and all other
information before him or her, the commissioner shall make and
enter an order denying the application and refusing the license
sought if the commissioner finds that:
(1) The applicant does not have available the net worth
required by the provisions of section four of this article, if
applicable;
(2) The financial responsibility, character, reputation,
experience or general fitness of the applicant, including its
officers, directors, principals and employees, reasonably warrants
the belief that the business will not be operated lawfully and
properly in accordance with the provisions of this article;
(3) The applicant has done any act or has failed or refused to
perform any duty or obligation for which the license sought could
be suspended or revoked were it then issued and outstanding.
Otherwise, the commissioner shall issue to the applicant a
lender's, broker's or loan originator's license which shall entitle
the applicant to engage in the business of lender, broker or loan
originator, as the case may be, during the period, unless sooner
suspended or revoked, for which the license is issued.
(b) Every application for a lender's, broker's or loan
originator's license shall be passed upon and the license issued or
refused within ninety days after the applicant therefor has fully
complied with the provisions of section four of this article.
The
commissioner may grant a provisional license to an applicant pending the outcome of a final background investigation. If the
results of the investigation reveal information that would have
been grounds for a license denial or revocation, then the
commissioner shall suspend or revoke the provisional license.
Under no circumstances whatever shall a person or licensee act as
a broker and lender in the same transaction. Whenever an
application for a lender's, broker's or loan originator's license
is denied and the license sought is refused, which refusal has
become final, the commissioner shall retain all fees to cover
administrative costs of processing the broker, lender or loan
originator application.
§31-17-8. Maximum interest rate on subordinate loans; prepayment
rebate; maximum points, fees and charges; overriding of
federal limitations; limitations on lien documents;
prohibitions on primary and subordinate mortgage loans; civil
remedy.
(a) The maximum rate of finance charges on or in connection
with any subordinate mortgage loan may not exceed eighteen percent
per year on the unpaid balance of the amount financed.
(b) A borrower shall have the right to prepay his or her debt,
in whole or in part, at any time and shall receive a rebate for any
unearned finance charge, exclusive of any points, investigation
fees and loan origination fees, which rebate shall be computed
under the actuarial method.
(c) Except as provided by section one hundred nine, article
three, chapter forty-six-a of this code and by subsection (g) of this section, no additional charges may be made nor may any charge
permitted by this section be assessed unless the loan is made.
(d) Where loan origination fees, investigation fees or points
have been charged by the licensee, the charges may not be imposed
again in any refinancing of that loan or any additional loan on
that property made within twenty-four months thereof, unless the
new loan has a reasonable, tangible net benefit to the borrower
considering all of the circumstances, including the terms of both
the new and the refinanced loans, the cost of the new loan and the
borrower's circumstances. The licensee shall document this benefit
in writing on a form prescribed by the commissioner and maintain
such documentation in the loan file. To the extent this
subdivision 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.
(e) Notwithstanding other provisions of this section, a
delinquent charge or "late charge" may be charged on any
installment made ten or more days after the regularly scheduled due
date in accordance with section one hundred twelve or one hundred
thirteen, article three, chapter forty-six-a of this code,
whichever is applicable. The charge may be made only once on any
one installment during the term of the primary or subordinate
mortgage loan.
(f) Hazard insurance may be required by the lender. The charges for any insurance shall not exceed the standard rate
approved by the insurance commissioner for the insurance. Proof of
all insurance in connection with primary and subordinate mortgage
loans subject to this article shall be furnished to the borrower
within thirty days from and after the date of application therefor
by the borrower.
(g) Except for fees for services provided by unrelated third
parties for appraisals, inspections, title searches and credit
reports, no application fee may be allowed whether or not the
mortgage loan is consummated; however, the borrower may be required
to reimburse the licensee for actual expenses incurred by the
licensee in a purchase money transaction after acceptance and
approval of a mortgage loan proposal made in accordance with the
provisions of this article which is not consummated because of:
(1) The borrower's willful failure to close the loan; or
(2) The borrower's false or fraudulent representation of a
material fact which prevents closing of the loan as proposed.
(h) No licensee shall make, offer to make, accept or offer to
accept any primary or subordinate mortgage loan except on the terms
and conditions authorized in this article.
(i) No licensee shall induce or permit any borrower to become
obligated to the licensee under this article, directly or
contingently, or both, under more than one subordinate mortgage
loan at the same time for the purpose or with the result of
obtaining greater charges than would otherwise be permitted under
the provisions of this article.
(j) No instrument evidencing or securing a primary or
subordinate mortgage loan shall contain:
(1) Any power of attorney to confess judgment;
(2) Any provision whereby the borrower waives any rights
accruing to him or her under the provisions of this article;
(3) Any requirement that more than one installment be payable
in any one installment period, or that the amount of any
installment be greater or less than that of any other installment,
except for the final installment which may be in a lesser amount,
or unless the loan is structured as a revolving line of credit
having no set final payment date;
(4) Any assignment of or order for the payment of any salary,
wages, commissions or other compensation for services, or any part
thereof, earned or to be earned;
(5) A requirement for compulsory arbitration which does not
comply with federal law; or
(6) Blank or blanks to be filled in after the consummation of
the loan. A borrower must be given a copy of every signed document
executed by the borrower at the time of closing.
(k) No licensee shall charge a borrower or receive from a
borrower money or other valuable consideration as compensation
before completing performance of all services the licensee has
agreed to perform for the borrower unless the licensee also
registers and complies with all requirements set forth for credit
service organizations in article six-c, chapter forty-six-a of this
code, including all additional bonding requirements as may be established therein.
(l) No licensee shall make or broker revolving loans secured
by a primary or subordinate mortgage lien for the retail purchase
of consumer goods and services by use of a lender credit card.
(m) In making any primary or subordinate mortgage loan, no
licensee may, and no primary or subordinate mortgage lending
transaction may, contain terms which:
(1) Collect a fee not
contained in a good faith estimate
disclosed to the borrower
at least five business days prior to
closing; collect any attorney fee at closing in excess of the fee
that has been or will be remitted to the attorney; collect a fee
for a product or service where the product or service is not
actually provided; misrepresent the amount charged by or paid to a
third party for a product or service; or collect duplicate fee or
points to act as both broker and lender for the same mortgage loan,
however, fees and points may be divided between the broker and the
lender as they agree, but may not exceed the total charges
otherwise permitted under this article:
Provided, That the fact of
any fee, point or compensation is disclosed to the borrower
consistent with the solicitation representation made to the
borrower;
(2) 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 deed of trust or is being
offered as security according to an application for a primary or subordinate mortgage loan;
(3) Make or assist in making any primary or subordinate
mortgage loan with the intent that the loan will not be repaid and
that the 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;
(4) Require the borrower to pay, in addition to any periodic
interest, combined fees, compensation, or points of any kind to the
lender and broker to arrange, originate, evaluate, maintain or
service a loan secured by any encumbrance on residential property
that exceed, in the aggregate, six percent of the loan amount
financed, including any yield spread premium paid by the lender to
the broker:
Provided, That reasonable closing costs, as defined in
section one hundred two, article one, chapter forty-six-a of this
code, payable to unrelated third parties may not be included within
this limitation:
Provided, however, That no yield spread premium
is permitted for any loan for which the annual percentage rate
exceeds eighteen percent per year on the unpaid balance of the
amount financed:
Provided further, That if no yield spread premium
is charged, the aggregate of fees, compensation or points can be no
greater than five percent of the loan amount financed. The
financing of the fees and points are 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 applies;
(5) Secure a primary or subordinate mortgage loan by any
security interest in personal property unless the personal property
is affixed to the residential dwelling or real estate;
(6) Allow or require a primary or subordinate mortgage loan to
be accelerated because of a decrease in the market value of the
residential dwelling that is securing the loan;
(7) Require terms of repayment which do not result in
continuous monthly reduction of the original principal amount of
the loan:
Provided, That the provisions of this subdivision may
not apply to reverse mortgage loans obtained under article
twenty-four, chapter forty-seven of this code, home equity,
open-end lines of credit, bridge loans used in connection with the
purchase or construction of a new residential dwelling or
commercial loans for multiple residential purchases;
(8) Secure a primary or subordinate mortgage loan in a
principal amount that, when added to the aggregate total of the
outstanding principal balances of all other primary or subordinate
mortgage loans secured by the same property, exceeds the fair
market value of the property on the date that the latest mortgage
loan is made. For purposes of this paragraph, a broker or lender
may rely upon a bona fide written appraisal of the property made by
an independent third-party appraiser, duly licensed or certified by the West Virginia real estate appraiser licensing and certification
board and prepared in compliance with the uniform standards of
professional appraisal practice;
(9) Advise or recommend that the consumer not make timely
payments on an existing loan preceding loan closure of a
refinancing transaction; or
(10) Knowingly violate any provision of any other applicable
state or federal law regulating primary or subordinate mortgage
loans, including, without limitation, chapter forty-six-a of this
code.
§31-17-14. Hearing before commissioner; provisions pertaining to
hearing.
(a) Any applicant or licensee, as the case may be, adversely
affected by an order made and entered by the commissioner in
accordance with the provisions of section thirteen of this article,
if not previously provided the opportunity to a hearing on the
matter, may in writing demand a hearing before the commissioner.
The commissioner may appoint a hearing examiner to conduct the
hearing and prepare a recommended decision. The written demand for
a hearing must be filed with the commissioner within
thirty ten
days after the date upon which the applicant or licensee was served
with a copy of the order. The timely filing of a written demand
for hearing shall stay or suspend execution of the order in
question, pending a final determination, except for an order
suspending a license for failure of the licensee to maintain the
bond required by section four of this article in full force and effect. If a written demand is timely filed as aforesaid, the
aggrieved party is entitled to a hearing as a matter of right.
(b) All of the pertinent provisions of article five, chapter
twenty-nine-a of this code shall apply to and govern the hearing
and the administrative procedures in connection with and following
such hearing, with like effect as if the provisions of the article
were set forth in extenso in this subsection.
(c) For the purpose of conducting any such hearing hereunder,
the commissioner or appointed hearing examiner shall have the power
and authority to issue subpoenas and subpoenas duces tecum in
accordance with the provisions of section one, article five,
chapter twenty-nine-a of this code. All subpoenas and subpoenas
duces tecum
are shall be issued and served in the manner, within
the time and for the fees and shall be enforced, as specified in
the said section.
and all of the section provisions The provisions
of such section dealing with subpoenas and subpoenas duces tecum
shall apply to subpoenas and subpoenas duces tecum issued for the
purpose of a hearing hereunder.
(d) Any hearing shall be held within
twenty thirty days after
the date upon which the commissioner received the timely written
demand therefor unless there is a postponement or continuance. The
commissioner or hearing examiner may postpone or continue any
hearing on his or her own motion or for good cause shown upon the
application of the aggrieved party. At any hearing, the aggrieved
party may represent himself or herself or be represented by any
attorney-at-law admitted to practice before any circuit court of this state.
(e) After the hearing and consideration of all of the
testimony, evidence and record in the case, the commissioner shall
make and enter an order affirming, modifying or vacating his or her
earlier order, or shall make and enter an order as is considered
appropriate, meet and proper. If the commissioner appoints a
hearing examiner, then the commissioner must issue his or her final
order within fifteen days of receiving the recommended decision of
the hearing examiner. The order shall be accompanied by findings
of fact and conclusions of law as specified in section three,
article five, chapter twenty-nine-a of this code and a copy of the
order and accompanying findings and conclusions shall be served
upon the aggrieved party and his or her attorney of record, if any,
in person or by certified mail, return receipt requested, or in any
other manner in which process in a civil action in this state may
be served. The order of the commissioner is final unless vacated
or modified on judicial review thereof in accordance with the
provisions of section fifteen of this article.