Montana Legislative Update

Montana Legislative Update

The Montana legislature recently made various amendments to the Montana Mortgage Act (the “Act”) and amended its laws governing the disposition of proceeds from a trustee sale, effective October 1, 2015.

 

MONTANA SENATE BILL 98

 

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“Clerical or Support Duties” includes:

  • The receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and
  • Communicating with a borrower to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that the communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms.

 

The “Clerical or Support Duties” term does not include:

  • Taking a residential mortgage loan application; or
  • Offering or negotiating the terms of a residential mortgage loan.

 

“Independent Contractor Entity” means an entity that offers or provides clerical or support duties for another person.

 

“Mortgage Broker,” “Mortgage Lender,” “Mortgage Loan Originator,” and “Mortgage Servicer” now include an individual or entity that holds itself out as being able to perform the functions of a mortgage broker, mortgage lender, mortgage loan originator or mortgage servicer.

 

“Regularly engage” means that a person:

  • Has engaged in the business of a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator on more than 5 (previously 12) residential mortgage loans in the previous calendar year or expects to engage in the business of a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator on more than 5 (previously 12) residential mortgage loans in the current calendar year; or
  • Has served as the prospective source of financing or performed other phases of loan originations on more than 5 (previously 12) residential mortgage loans in the previous calendar year or expects to serve as the prospective source of financing or perform some other phases of loan origination on more than 5 (previously 12) residential mortgage loans in the current calendar year.

 

“Responsible Individual” means a Montana-licensed mortgage loan originator with at least 1 1/2 years of experience as a mortgage loan originator or registered mortgage loan originator who is designated by an independent contractor entity as the individual responsible for the operation of a particular location that is under the responsible individual’s full management, supervision, and control.

 

An individual may not act as a responsible individual without a minimum of 1 1/2 years of experience working as a mortgage loan originator or in a related field.

 

For the Department of Administration Division of Banking and Financial Institutions (“Department”) to consider an entity for a state license or license renewal, each person with control is required to independently meet the standards set forth in the licensing requirements.

 

“Control” means the power, directly or indirectly, to direct the management or policies of an entity, whether through ownership of securities, by contract, or otherwise.  A person is presumed to control an entity if that person:

  • Is a director, general partner, or executive officer or is an individual that occupies a similar position or performs a similar function;
  • Directly or indirectly has the right to vote 10% or more of a class of a voting security or has the power to sell or direct the sale of 10% or more of a class of voting securities;
  • In the case of a limited liability company, is a managing member; or
  • In the case of a partnership, has the right to receive upon dissolution or has contributed 10% or more of the capital.

 

(Previously, only control persons who were individuals with ultimate equity ownership of 25% or more of the applicant and that controlled, directly or indirectly, the election of 25% or more of the members of the board of directors of the entity were required to meet the standards set forth in the licensing requirements.)

 

All main office and branch locations must be within the United States or a territory, including Puerto Rico and the U.S. Virgin Islands.

 

A mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator may now give required notices or reports to the Department through Nationwide Mortgage Licensing System (“NMLS”).

 

The Department is no longer required to prescribe forms for licensee applications.

 

In addition to any duties imposed by federal law or regulations or the common law and to duties previously imposed by Montana law, a mortgage servicer must comply with the servicing standards set by the Department by rule.

 

The following provisions were deleted:

 

A person regularly engaging in the business of a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator under this part is required to be licensed through, registered with, and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry (“NMLS”).

 

A person who is exempt from licensure or is not required to be licensed or registered under this part may register on the NMLS as an exempt registrant for purposes of sponsoring a mortgage loan originator and for purposes of satisfying the mortgage loan originator bonding requirements.

 

The Department may establish requirements through rulemaking as necessary to comply with the NMLS, including requirements for procedures to amend or to surrender a license.

 

An independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter with respect to any dwelling or residential real estate in this state unless the individual first registers as a mortgage loan originator through and obtains a unique identifier from the NMLS and obtains and maintains a valid mortgage loan originator license.  “Residential Mortgage Loan Origination Activities” means all activities related to residential mortgage loans from the taking of a residential mortgage loan application through the completion of all required loan closing documents and funding of the residential mortgage loan.

 

The Department may, if the Consumer Financial Protection Bureau (“CFPB”) determines that a provision does not meet the requirements of the Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”) or other federal laws, or that additional persons are subject to this law, refrain from enforcing the provision that is determined to be noncompliant and will by rule invalidate any noncompliant exemption or require that additional persons be temporarily subject to this law to be compliant with federal law, including the provisions for licensure and registration with and maintenance of a valid unique identifier with the NMLS.

 

The Department must propose to the regular session of the legislature that follows the determination by CFPB legislation to address the incompatibility with federal law.  The provisions that the CFPB determines to not be in compliance with the requirements of the Secure and Fair Enforcement for Mortgage Licensing Act or other federal law must be amended in the correcting legislation.

 

The Department may be approved by the NMLS as a provider of educational courses.  If the Department chooses to become an approved provider of educational courses, it may charge fees to attendees.  The amount of the fees must be set by rule and must be commensurate with the total course costs, including the costs of becoming an approved provider.  All fees collected must be deposited in the Department’s account in the state special revenue fund to be used by the Department to cover the Department’s cost of presenting education courses.

 

MONTANA HOUSE BILL 164

 

The trustee must apply the proceeds of the trustee’s sale as follows:

  • To the costs and expenses of exercising the power of sale and of the sale, including reasonable trustee’s fees and attorney fees; and
  • To the obligation secured by the trust indenture that is the subject of the sale.

 

Any surplus funds must be deposited with the clerk and recorder of the county in which the sale took place, along with written notice of the amount of the surplus funds and a copy of the notice of the trustee’s sale.  The trustee must mail copies of the notice of the surplus funds, the notice of the trustee’s sale, and the required affidavit of mailing to each party who was sent notice of surplus funds.

 

A party seeking disbursement of the surplus funds must file a petition to request an order for disbursement in the district court for the county in which the surplus funds are deposited. The district court will determine the order of priority of any interests in or liens or claims of liens against the surplus and will issue a written order directing the county treasurer to disburse the surplus funds in accordance with the order.

 

A party with an interest, lien, or claim that was junior to the interest that was the subject of the sale has an interest in the surplus funds in the same order of priority that existed in the property at the time of the sale.

 

Not less than 20 days prior to the hearing, notice of the petition must be served upon any party who was sent notice of the surplus funds and any other party who has entered an appearance in the proceeding.

 

A party who is awarded any portion of the surplus funds because of an existing interest in or lien or claim of lien against the property is entitled to seek costs and attorney fees from the surplus funds.  The costs and attorney fees must be allowed to each claimant whose lien is established, and the reasonable attorney fees must be allowed to the defendant against whose property a lien is claimed if a lien is not established.