16 Jul Hawaii, Pennsylvania and Rhode Island Legislative Update
The Hawaii legislature recently enacted legislation governing the unlawful use of personal information, and amending the Mortgage Rescue Fraud Prevention Act, the Hawaii Secure and Fair Enforcement for Mortgage Licensing Act (the “S.A.F.E. Act”) and the Mortgage Servicers laws (the “laws”). The Pennsylvania legislature recently enacted the Uniform Real Property Electronic Recording Act. The Rhode Island legislature recently enacted legislation prohibiting transfer fees and amended its homestead exemption laws.
Hawaii Senate Bill 2419 (effective June 29, 2012)
A business may not scan the machine-readable zone of an individual’s Hawaii identification card or driver’s license, except for the following purposes:
- To establish or maintain a contractual relationship. The identifying information will be limited to the following:
- Date of birth; and
- Driver’s license number or identification card number;
- To record, retain, or transmit information as required by state or federal law; and
- To transmit information to a consumer reporting agency, financial institution, or debt collector as permitted by the federal Fair Credit Reporting Act, Gramm-Leach-Bliley Act, or the Fair Debt Collection Practices Act.
Any waiver of the above provisions is contrary to public policy and is void and unenforceable.
Hawaii House Bill 2375 (effective July 1, 2012)
The Office of Consumer Protection will educate consumers about fraudulent activities that may be committed against homeowners who face property foreclosures, liens, or encumbrances, as appropriate.
Any person who violates the provisions of the Mortgage Rescue Fraud Prevention Act governing distressed property consultants or distressed property purchasers is guilty of a class C felony and, in addition to any other penalty, will be fined $10,000.
The above provisions do not affect any rights and duties that matured, penalties that were incurred, and proceedings that were begun prior to July 1, 2012.
Hawaii Senate Bill 2763 (effective July 1, 2012)
Hawaii Secure and Fair Enforcement for Mortgage Licensing Act
An employee who performs mortgage loan originator activities for a mortgage servicer company 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 company; and
- The employee only provides mortgage loan originator services with respect to a residential mortgage loan modification.
An employee who performs mortgage loan originator activities for a nonprofit organization 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 nonprofit organization;
- The employee only provides mortgage loan originator services with respect to residential mortgage loans with terms favorable to the borrower; and
- The nonprofit organization registers with the Nationwide Mortgage Licensing System and Registry (“NMLSR”).
The Commissioner of Financial Institutions (the “Commissioner”) will periodically examine the books and activities on nonprofit organizations and will revoke an organization’s registration as a nonprofit organization with the NMLSR if the nonprofit organization fails to meet the requirements to be a nonprofit organization.
In determining whether a residential mortgage loan has terms favorable to the borrower, the Commissioner will examine:
- The interest rate that the home loan would carry;
- The charges that are imposed on the borrower for origination, application, closing, and other costs;
- Whether the mortgage includes any predatory characteristics;
- The borrower’s ability to repay the loan; and
- The term of the mortgage.
Every mortgage loan originator company that consists of a single individual not exempt from the S.A.F.E. Act who engages in the business of a mortgage loan originator as a sole proprietorship will be reimbursed by the Division of Financial Institutions of the Department of Commerce and Consumer Affairs (the “Division”) for the fees paid for the state mortgage loan originator’s initial application and annual license renewal fees.
“Housing finance agency” means any authority, including any nonprofit organization:
- That helps meet the affordable housing needs of the residents of Hawaii;
- That is supervised directly or indirectly by the State;
- That is subject to audit and review by the State; and
- Whose activities make it eligible to be a member of the National Council of State Housing Agencies.
“Mortgage servicer company” means a mortgage servicer company licensed under the laws.
“Nonprofit organization” means an organization that:
- Has the status of a tax-exempt organization 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, rather than commercial purposes;
- Receives funding and revenue and charges fees in a manner that does not incentivize it or its employees to act other than in the best interests of its clients;
- Compensates its employees in a manner that does not incentivize employees to act other than in the best interests of its clients; and
- Provides, or identifies for the borrower, residential mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance provided under government housing assistance programs.
“Residential mortgage loan modification” means:
- Modification of existing residential mortgage loans, which generally includes a change in interest, principal, or term of loan; or
- The processing of the approval of loan assumptions.
“Residential mortgage loan modification” does not include origination of mortgage loans.
Nonprofit organizations and mortgage servicer companies must now register with the NMLSR.
A branch manager for a branch office will be responsible for supervising:
- The maintenance of all records, contracts, and documents of the mortgage loan originator company branch office;
- All mortgage loan originator agreements and mortgage loan documents and the handling of these documents by the licensed mortgage loan originators or independent contractors located at or working out of the mortgage loan originator company branch office; and
- All licensed mortgage loan originators who are employed by, or are independent contractors of, the mortgage loan originator company and who are located at or working out of the mortgage loan originator company branch office.
A mortgage loan originator must not be sponsored by more than one Hawaii licensed mortgage loan originator company, exempt sponsoring mortgage loan originator company, or nonprofit organization.
An exempt registered mortgage loan originator who acts for a subsidiary of an insured depository institution regulated by a federal banking agency is now subject to the S.A.F.E. Act.
The following are not subject to the S.A.F.E. Act:
- An institution regulated by the Farm Credit Administration; and
- Employees of government agencies or of housing finance agencies who act as mortgage loan originators.
An application for licensure pursuant to the S.A.F.E. Act will be considered abandoned if the applicant fails to provide evidence of continued efforts to complete the licensing application process for 30 days (previously 6 consecutive months). The 30-day period will begin on the last day of contact with the Division by the applicant. The Commissioner may extend this period for good cause.
A nonprofit organization must pay the following fees to maintain a valid registration as a nonprofit organization in the NMLSR:
- Initial registration fee of $200;
- Annual registration renewal fee of $150; and
- Late fee of $25 per day.
A licensee must also pay a $50 fee to the Commissioner for the following amendments to information provided to the NMLSR that require review of the Commissioner:
- Change of mortgage loan originator’s sponsor;
- Change of qualified individual;
- Change of branch manager; and
- Change of mortgage loan originator company’s legal name.
Hawaii House Bill 2502 (effective July 10, 2012)
Mortgage Servicer Laws
The Commissioner may require all mortgage servicers to register with the NMLSR.
A person licensed as a mortgage servicer must not provide mortgage loan modifications or any other services that would require licensing pursuant to the Act without first complying with the licensure requirements under the S.A.F.E. Act.
An applicant for licensure must file an application on a form prescribed by the NMLSR or by the Commissioner and must pay a $500 application fee.
To fulfill the purposes of the laws, the Commissioner may establish relationships or contracts with the NMLSR or other entities designated by the NMLSR to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to the laws.
To the extent reasonably necessary to participate in the NMLSR, the Commissioner may modify any or all of the requirements of the laws.
The Commissioner may use the NMLSR as an agent for requesting information from and distributing information to the United States Department of Justice, any governmental agency, or any other source, as directed by the Commissioner.
It is unlawful for any mortgage servicer to provide any mortgage loan modifications or other services that would require licensing under the Act, unless the mortgage servicer is licensed under the S.A.F.E. Act.
The above provisions do not affects rights and duties that matured, penalties that were incurred, and proceedings that were begun before July 10, 2012.
Pennsylvania House Bill 970 (effective July 5, 2012)
“Document” means information that is:
- Inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form; and
- Eligible to be recorded in the land records maintained by the recorder.
“Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
“Electronic document” means a document that is received by the recorder in electronic form.
“Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a document and executed or adopted by a person with the intent to sign the document.
Electronic documents satisfying the Uniform Real Property Recording Act are valid as a condition of recording if:
- The document is an original, on paper or another tangible medium, or in writing;
- The document is signed; and
- The document or a signature associated with a document that is notarized, acknowledged, verified, witnessed, or made under oath includes the electronic signature of the person authorized to perform that act, and all other information required to be included is attached to or logically associated with the document or signature. A physical or electronic image of a stamp, impression, or seal need not accompany an electronic signature.
Rhode Island House Bill 7082 (effective June 19, 2012)
A person or entity who sells real property must not charge, collect, receive, or be entitled to a fee based solely on the subsequent resale or transfer of the property. This prohibition includes, but is not limited to, fees or charges imposed by a real estate developer based upon the subsequent resale or transfer of the real property.
The following are exempt from the above requirements:
- Any low or moderate housing development;
- A fee or charge connected with the transfer of properties with a conservation restriction; and
- Community associations, including, but not limited to, condominium associations, homeowners associations, and cooperative associations.
Any covenant recorded on or after July 1, 2012, imposing any prohibited charge or fee will be void and unenforceable against any subsequent owner, purchaser, or lender.
Rhode Island House Bill 7662 (effective June 21, 2012)
A homestead estate to the extent of $500,000 (previously $300,000) in the land and buildings may be acquired by an owner of a home or an individual who rightfully possesses premises by lease, as life tenant, as a beneficiary of a revocable or irrevocable trust or otherwise, and who occupies or intends to occupy the home as his or her principal residence.