The Indiana Department of Financial Institutions (the “Department”) recently adopted Emergency Rules effective December 15, 2011, amending its Mortgage Lenders and Originators Regulations (the “Regulations”), which were originally adopted July 23, 2009.
Indiana Emergency Rules 750 IAC 9-1-1 to 9-4-2
Definitions
“American Association of Residential Mortgage Regulators” (“AARMR”) is the national association of executives and employees of the various states who are charged with the responsibility for administration and regulation of residential mortgage lending, servicing, and brokering, and dedicated to the goals described at www.aarmr.org.
“Bona fide nonprofit organization” means an organization determined by the Director of the Department of Financial Institutions (the “Director”) under criteria and pursuant to processes established by the Director that meet the following criteria:
- Maintains tax-exempt status under the Internal Revenue Code.
- Promotes affordable housing or provides homeownership education, or similar services.
- Conducts its activities in a manner that serves public or charitable purposes.
- Receives funding and revenue and charges fees in a manner that does not provide the organization or its employees with incentives to act other than in the best interests of its clients.
- Compensates employees in a manner that does not provide employees with incentives to act other than in the best interests of its clients.
- Provides to or identifies for the borrower residential mortgage loans with terms that are favorable to the borrowers and are comparable to mortgage loans and housing assistance provided under government housing assistance programs.
- Is certified by the Department of Housing and Urban Development (“HUD”) or is approved as an Indiana Foreclosure Prevention Network agency by the Indiana Housing and Community Development Association (“IHCDA”) or employs one or more housing counselors certified by the IHCDA.
“Conference of State Bank Supervisors” (“CSBS”) is the national organization composed of state bank supervisors dedicated to maintaining the state banking system and state regulation of financial services in accordance with the CSBS statement of principles described at www.csbs.org.
“Consumer Financial Protection Bureau” (“CFPB”) is the federal agency whose stated central mission is to make markets for consumer financial products and services for Americans.
“Employee” means an individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person and whose compensation is reported on a W-2 form issued by the controlling person.
“Expungement” with respect to a record of criminal conviction entered in Indiana means that no one, including law enforcement, can be permitted access to the record even by court order. With respect to criminal convictions entered in another state that state’s definition of expungement will apply.
“Farm Credit Administration” means the independent federal agency, authorized by the Farm Credit Act, to examine and regulate the Farm Credit System.
“Housing finance agency” means any authority that is:
- Chartered by a state to help meet the affordable housing needs of the residents of the state;
- Supervised directly or indirectly by the state government; and
- Subject to audit and review by the state in which it operates.
“Independent contractor” means an individual who performs his or her duties other than at the direction of and subject to the supervision and instruction of a person licensed as a mortgage loan originator.
“Land contract” means a contract for the sale of real estate in which the seller of the real estate retains legal title to the real estate until the total contract price is paid by the buyer.
“Clerical or support duties” do not include taking a residential mortgage loan application or offering or negotiating terms of a mortgage transaction.
The following provision has been deleted: An individual engaging solely in loan processor or underwriter activities must not represent to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that the individual can or will perform any of the activities of a mortgage loan originator.
A “mortgage loan originator” now includes an individual who engages in a commercial context and habitually or repeatedly represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such individual can or will perform the activities of a mortgage loan originator.
An individual who is an employee of a federal, state, or local government agency or housing finance agency and who acts as a loan originator only pursuant to his or her official duties as an employee of the federal, state, or local government agency or housing finance agency is not a mortgage loan originator.
A “mortgage transaction” is now defined as a consumer loan.
“Regularly engaged” means a person who:
- Engaged in the business of a mortgage loan originator on more than 5 mortgage transactions in the previous calendar year, or who expects to engage in the business of a mortgage loan originator on more than 5 mortgage transactions in the current calendar year; or
- Serves as the prospective source of financing on more than 5 mortgage transactions in the previous calendar year, or who expects to serve as the prospective source of financing, or perform other phases of originations, on more than 5 mortgage transactions in the current calendar year.
“State” means:
- Any state of the United States;
- The District of Columbia;
- Any territory of the United States;
- Puerto Rico;
- Guam;
- America Samoa;
- The Virgin Islands; and
- The Commonwealth of the Northern Mariana Islands.
“Unique Identifier” means a number or other identifier that:
- Permanently identifies a loan originator;
- Is assigned by protocols established by the NMLSR and the federal banking agencies to facilitate electronic tracking of loan originators and uniform identification of, and public access to, the employment history of and publicly adjudicated disciplinary and enforcement actions against loan originators; and
- Must not be used for purposes other than those set forth under the Federal SAFE Act.
The CFPB has replaced HUD in issuing guidelines, rules, regulations, or interpretive letters.
Licensing of Mortgage Loan Originators
An individual may not regularly engage in the business of a mortgage loan originator and must not engage in the origination of mortgage transactions on behalf of any person who regularly engages in serving as the prospective source of financing with respect to any dwelling located in Indiana without obtaining a mortgage loan originator license issued by the Department and annually maintaining the license.
An individual who exclusively originates mortgage transactions as an employee of a bona fide nonprofit organization exempt from licensing need not meet the education, testing, background, and licensing standards and requirements under the Regulations unless this exclusion is denied by any guidance, rule, regulation, or interpretive letter issued by the CFPB.
Licensing Qualifications
If the information or record contained in an application is or becomes inaccurate or incomplete in a material respect, the applicant must promptly file a correcting amendment.
Criminal Background Checks
The Department may consider the underlying crime, facts, or circumstances of a pardoned or expunged conviction when determining the eligibility of an applicant for licensure.
The level of offense of the crime and the status of any conviction, pardon, or expungement will be determined by reference to the law of the jurisdiction where the case was prosecuted.
Pre-Licensing Testing
An individual may retake a test two consecutive times (previously three consecutive times) with each consecutive test taken at least 30 days after the preceding test.
NMLSR
Notwithstanding any other provision of law, any applications, renewals, or other forms of documents relating to licenses issued pursuant to the Regulations, or documents that are filed as an electronic record pursuant to a nationwide central repository for licensing or registration of mortgage lenders, brokers, or loan originators, or any electronic record filed through the NMLSR, will be deemed to be a valid original document upon reproduction to paper form by the Department.
License Renewal
In order to renew a mortgage loan originator license, the mortgage loan originator must now certify to the Department that he or she continues to meet the minimum standards for licensure. Additionally, the mortgage loan originator must provide in the renewal application any information describing material changes in the information contained in the original license application or any previous application and such other information the Director may require in order to evaluate the renewal of the license.
Suspension or Revocation of License
An order to show cause issued by the Department to a mortgage loan originator of why the person’s license should not be revoked or suspended must now state a description of the contemplated action and be accompanied by a notice to the licensee that the licensee will have a reasonable opportunity to be heard and to show at the meeting the licensee’s compliance with the lawful requirements for retention of the license.
After the meeting, the Department may (previously shall) revoke or suspend the license if the Department makes certain findings. These findings now include that:
- The licensee obtained the license for the benefit of, or on behalf of, a person who does not qualify for a license.
- The licensee knowingly or intentionally made material misrepresentations to, or concealed material information from the Department.
The following provisions have been deleted:
A suspension or revocation of a license is not authorized under the Regulation unless before instituting proceedings to suspend or revoke the license:
· The Department gives notice to the licensee of the conduct or facts that warrant the intended suspension or revocation; and
· The licensee is given an opportunity to show compliance with all lawful requirements for retention of the license.
If the Department finds that probable cause for revocation of a license exists and that enforcement of the Regulation requires immediate suspension of the license pending investigation, the Department may, after a hearing with the licensee upon 5 days written notice to the licensee, enter an order suspending the license for not more than 30 days.
The Department may reinstate a license to or terminate a suspension of a license of a person whose license has been suspended if the Director determines that, at the time the determination is made, there is no fact or condition that exists that clearly would justify the Department in refusing to reinstate a license.
Regulatory Reporting
If the mortgage loan originator’s employer submits reports of condition on his or her behalf, the mortgage loan originator must timely and accurately report all required information in his or her possession to his or her employer for purposes of enabling his or her employer to fulfill its reporting obligation. Failure of a mortgage loan originator to timely and accurately report this required information to his or her employer will constitute a violation of the reporting requirements.