Hawaii Legislative Update

Hawaii Legislative Update

The Hawaii legislature recently amended its laws relating to mortgage loan originators and mortgage servicers, effective July 1, 2016.

 

HAWAII SENATE BILL 2850

 

Revisions to the Hawaii Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act)

 

“Dwelling” means a residential structure or mobile home that contains one to four family housing units or individual units of condominiums or cooperatives.

 

“Mortgage Servicer” means a person licensed or required to be licensed as a mortgage servicer in Hawaii.

 

“Borrower” means the obligor, maker, cosigner, or guarantor under a residential mortgage loan agreement.  For purposes of this law, borrower is included in the term “consumer.”

 

The Office of Thrift Supervision is no longer included in the definition of “Federal Banking Agencies.”

 

In addition to those already licensed, the term “Licensee” now also includes a person required to be licensed as a mortgage loan originator or mortgage servicer.

 

“Residential Mortgage Loan” or “Mortgage Loan” means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling, and includes refinancings, reverse mortgages, home equity lines of credit, and other first and additional lien loans that meet the qualifications listed in this definition.

 

“Residential Loan Modification” or “Loan Modification” means a temporary or permanent change to the terms of a borrower’s existing residential mortgage loan agreement, mutually agreed to between a borrower and a lender.

 

All references to “Mortgage Servicer Company” were removed from the mortgage loan originators law.

 

All mortgage loan originators, mortgage loan originator companies, exempt registered mortgage loan originators, exempt sponsoring mortgage loan originator companies, nonprofit organizations, and every other person in Hawaii that originates a residential mortgage loan, unless exempt under state law, must register with Nationwide Multistate Licensing System and Registry (“NMLS”).

 

An individual is presumed to control a mortgage loan originator company if that individual is a director, general partner, managing member, or executive officer who directly or indirectly has the right to vote 10% or more of a class of voting securities or has the power to sell or direct the sale of 10% or more of a class of voting securities of that licensee or applicant.

It is now a prohibited practice for a licensee to solicit or enter into any contract with a borrower or an applicant for a residential mortgage loan that provides in substance that the person or individual may earn a fee or commission through “best efforts” to obtain a residential mortgage loan even though no loan is actually obtained for the borrower or applicant for a residential mortgage loan.  (This provision previously only protected borrowers, but not applicants.)

 

An employee who performs mortgage loan originator activities for a mortgage servicer is exempt from registration and licensure as a mortgage loan originator; provided that:

  • The employee’s actions are part of the employee’s duties as an employee of the mortgage servicer; and
  • The employee’s mortgage loan originator services are limited to residential loan modifications and processing the approval of loan assumptions.

 

Revisions to the Mortgage Servicer Licensing Law

 

“Dwelling” means a residential structure or mobile home that contains one to four family housing units or individual units of condominiums or cooperatives.

 

“Residential Real Estate” means any property located in Hawaii, upon which a dwelling is constructed or intended to be constructed.

 

“Borrower” means the obligor, maker, cosigner, or guarantor under a residential mortgage loan agreement.  For purposes of this law, borrower is included in the term “consumer.”

 

“Residential Loan Modification” or “Loan Modification” means a temporary or permanent change to the terms of a borrower’s existing residential mortgage loan agreement, mutually agreed to between a borrower and a lender.

 

“Person” means an individual, sole proprietorship, partnership, corporation, limited liability company, limited liability partnership, or other association of individuals, however organized.

 

“Residential Mortgage Loan” or “Mortgage Loan” means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling, and includes refinancings, reverse mortgages, home equity lines of credit, and other first and additional lien loans that meet the qualifications listed in this definition.

 

A licensee may apply for license renewal of a mortgage servicer license by filing a renewal statement on a form prescribed by NMLS or by the Hawaii Commissioner of Financial Institutions (“Commissioner”) and paying a renewal fee of $600 (previously $425), at least four weeks prior to December 31.  The minimum standards for license renewal include the following:

  • The licensee continues to meet the minimum standards for licensure as prescribed by law;
  • The licensee has paid all required fees for renewal of the license; and
  • The licensee is registered with the Business Registration Division of the Department of Commerce and Consumer Affairs.

 

A mortgage servicer licensee may change the licensee’s name or the address of any of the licensee’s offices specified on the most recent filing with NMLS if:

  • The licensee files the change with NMLS and, in the case of the principal office or a branch office, provides directly to the Commissioner a bond rider or endorsement, or addendum, as applicable, to any bond on file with the Commissioner that reflects the new name or address of the principal office or branch office;
  • The Commissioner approves the change in writing; and
  • The mortgage servicer pays to the Commissioner a fee of $100 and any fees charged by NMLS.

 

Before a mortgage servicer’s license becomes effective, the applicant or licensee must file with the Commissioner a surety bond written by a surety authorized to write surety bonds in Hawaii, covering the applicant or licensee in a penal sum of $100,000.

 

Each mortgage servicer licensee must maintain adequate records of each residential mortgage loan transaction at the office named in the mortgage servicer license for seven years. (Previously no time period was specified.)

 

Where this law requires a person to comply with procedures, actions, standards, disclosures, notices, format, content, or other requirements of the Real Estate Settlement Procedures Act (“RESPA”), the required compliance applies to any person subject to this law, whether or not RESPA applies to that person or transaction.

 

Any person who violates any of these provisions may be subject to an administrative fine of not more than $7,000 for each violation; provided that if the aggregate fine amount exceeds $7,000, $1,000 of the aggregate fine amount must be deposited into the mortgage foreclosure dispute resolution special fund.