Hawaii Legislative Update

Hawaii Legislative Update

Hawaii Senate Bill 2817 amended the Hawaii Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”), effective July 1, 2014.

 

Definitions

 

  • “Branch office” means any location in Hawaii that is identified by any means to the public or customers as a location at which the licensee holds itself out as a mortgage loan originator company.  The requirement that the branch office be a location separate from the principal place of business of the mortgage loan originator company and the provision indicating that a branch office may be the principal place of business for mortgage loan originator companies headquartered out of state have been removed.

 

“Elder” means an individual who is sixty-two years of age or older.

 

“Mortgage loan originator” means:

  • An individual who for compensation or gain or in the expectation of compensation or gain

o                   Takes a residential mortgage loan application; or

o                   Offers or negotiates terms of a residential mortgage loan;

·        An independent contractor.

 

An individual who offers or negotiates the terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence, including a vacation home, or inherited property that served as the deceased’s dwelling is no longer considered a mortgage loan originator.

 

“Mortgage servicer company” means a mortgage servicer company licensed, or required to be licensed that conducts mortgage loan origination activity.

 

“Offers or negotiates terms of a residential mortgage loan” means:

 

·        Presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms;

·        Communicates directly or indirectly with a borrower or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms; or

·        Takes or gathers information from a borrower or prospective borrower for the purpose of recommending, referring, or steering that borrower or prospective borrower to a particular lender or set of residential mortgage loan terms.

 

“Principal place of business” means a mortgage loan originator company’s main office location in Hawaii that is identified by any means to the public or customers as a location at which the licensee holds itself out as a mortgage loan originator company.

 

“Principal office” means the office location where the company’s core executive and administrative functions are primarily carried out.

 

“Regular business hours” means Monday through Friday, between the hours of 8:00 a.m. and 4:30 p.m., excluding state holidays.

 

“Sole proprietorship” means a mortgage loan originator business that is solely and personally owned and operated by an individual mortgage loan originator, and where there is no legal distinction between the individual business owner and the business.

 

A mortgage servicer company that is one of the following is also exempt from this law:

  • Any persons chartered or authorized under the laws of any state or federal law to engage in the activity of an insured depository institution as defined by federal law, including banks or savings associations, and operating subsidiaries of an insured depository institution;
  • Trust companies, credit unions, insurance companies, and financial service loan companies licensed by Hawaii;
  • The Federal Deposit Insurance Corporation, in connection with assets acquired, assigned, sold, or transferred pursuant to the Federal Deposit Insurance Act or as receiver or conservator of an insured depository institution;
  • The Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation; the Federal Deposit Insurance Corporation; the United States Department of Housing and Urban Development, and the Government National Mortgage Association and the Federal Housing Administration, and cases in which a mortgage insured under the National Housing Act, is assigned to the United States Department of Housing and Urban Development; the National Credit Union Administration; the Farmers Home Administration or its successor agency; and the Department of Veterans Affairs, in any case in which the assignment, sale, or transfer of the servicing of the mortgage loan is preceded by termination of the contract for servicing the loan for cause, commencement of proceedings for bankruptcy of the servicer, or commencement of proceedings by the Federal Deposit Insurance Corporation for conservatorship or receivership of the servicer or an entity by which the servicer is owned or controlled; and
  • Any person making or acquiring contemporaneously no more than five residential mortgage loans with that person’s own funds for that person’s own investment.

 

In addition to the prior requirements, the minimum standards for license renewal for a mortgage loan originator company and mortgage servicer company will include the requirement that they be registered with the business registration Division of the Department of Commerce and Consumer affairs (the “Division”).

 

Every mortgage loan originator company licensed under the SAFE Act must have and maintain a principal place of business in Hawaii and will designate a qualified individual to fulfill the duties and responsibilities of a qualified individual.  Previously a qualified individual was required to be a licensed mortgage loan originator.

 

A mortgage loan originator company must not maintain any branch offices in Hawaii in addition to its principal place of business without the prior written approval of the Commissioner of Financial Institutions (“Commissioner”).  An application to establish a branch office must be submitted through Nationwide Mortgage Licensing System and Registry (“NMLS”) with a nonrefundable application fee as required.  A mortgage loan originator company must designate a branch manager for each branch office who is physically present in the branch office to oversee that branch office and fulfill the duties and responsibilities of a branch manager.  At no time will a branch manager oversee more than one branch office or principal place of business.

 

A mortgage loan originator company that maintains its principal office (previously referred to as “headquarters”) outside of Hawaii must designate a qualified individual; that qualified individual may be the same person designated as the branch manager of a branch office where the qualified individual is physically present.

 

A mortgage loan originator company that maintains its principal office in Hawaii must designate a qualified individual who is physically present in the principal place of business as its branch manager to oversee and manage that principal place of business.  Such principal place of business will not be considered a branch office.

 

The principal place of business and each branch office of the mortgage loan originator company must be identified in NMLS to borrowers as a location at which the licensee holds itself out as a mortgage loan originator company.  Each such location must be open for business to the public during posted business hours which will be during regular business hours.  If a location is in a commercial building, then the business hours must be posted on or adjacent to the main office door of the mortgage loan originator company’s location, and visible to the public from outside the location.  If a location is not in a commercial building, or such posting is not permitted by the commercial building, then the business hours must be posted on the home page of the mortgage loan originator company’s website, along with the address and phone number of the location.  Business hours, whether posted at a location or on a mortgage loan originator company website, must be displayed in a clear, conspicuous, and accurate manner to inform the consumer when the location will be open.

 

The Commissioner or the Commissioner’s authorized representatives must be able to conduct an examination or investigation during regular business hours.  If the Commissioner or the Commissioner’s authorized representatives are denied access to any office, record, or file for any reason, the denial may be considered a violation of the SAFE Act.

 

The confidentiality provisions contained in the SAFE Act do not apply to information or material relating to the employment history of, and public adjudicated disciplinary and enforcement actions against, mortgage loan originators, mortgage loan originator companies, and mortgage servicer companies that are included in NMLS for access by the public.

 

Each licensee and exempt sponsoring mortgage loan originator company, as may be required by federal law, must submit quarterly to NMLS reports of condition, using the form entitled “Financial Condition” (Previously referred to as “Report of Financial Condition”) or “Residential Mortgage Loan Activity,” which must be in the form and contain the information as NMLS may require.

 

The unique identifier of any person originating a residential mortgage loan, except a person who is exempt, must be clearly shown on all residential mortgage loan application forms, solicitations, and advertisements, including business cards or websites, and any other documents as established by rule or order of the Commissioner.

 

A mortgage servicer company must pay for a principal office the required fees to maintain a valid mortgage loan servicer loan modification license.

 

The Division will no longer reimburse sole proprietorships for the fees paid for the state mortgage loan originator’s initial application and annual license renewal fees.