Nebraska Legislative Update

Nebraska Legislative Update

Nebraska Legislative Bill 965 amended the Residential Mortgage Licensing Act (the “Act”), effective July 12, 2012.

 

“Nationwide Mortgage Licensing System and Registry” (“NMLSR”) means a licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of mortgage loan originators, mortgage bankers, installment loan companies, and other state-regulated financial services entities and industries.

 

“Purchase-money mortgage” is a mortgage issued to the borrower by the seller of the property as part of the purchase transaction.

 

Exemptions from the Act now include:

  • Any person licensed to practice law in Nebraska in connection with the activities that are considered the practice of law by the Nebraska Supreme Court, carried out within an attorney-client relationship, and accomplished by the attorney in compliance with all applicable rules, laws, ethics, and standards.
  • Any individual who does not repetitively and habitually engage in the business of a mortgage banker, a mortgage loan originator, or a loan processor or underwriter, either inside or outside of Nebraska, who:
    • Makes a residential mortgage loan with his or her own funds for his or her own investment;
    • Makes a purchase-money mortgage; or
    • Finances the sale of a dwelling or residential real estate owned by the individual without the intent to resell the residential mortgage loan.
  • The United States of America, the state of Nebraska, any other state, district, territory, commonwealth, or possession of the U.S., any city, county, or other political subdivision, and any agency or division of the above.
  • The Nebraska Investment Finance Authority.
  • Any individual who is an employee of the U.S., the state of Nebraska, any other state, district, territory, commonwealth, or possession of the U.S., any city, county, or other political subdivision, and any agency or division of the above or the Nebraska Investment Finance Authority and who acts as a mortgage loan originator or loan processor or underwriter only pursuant to his or her official duties as an employee of such entity;
  • A bona fide nonprofit organization which has received a certificate of exemption pursuant to the Act on a form as prescribed by the Department of Banking and Finance (the “Department”).  The Director of the Department (the “Director”) will grant a certificate if the Director finds that the nonprofit organization is a bona fide nonprofit organization.  In order for a nonprofit organization to qualify as a bona fide nonprofit organization, the Director must find that it meets the following:
    • Has the status of a tax exempt organization;
    • 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 assistance programs; and
  • An employee of a bona fide nonprofit organization, which has received a certificate of exemption if the employee acts as a mortgage loan originator or mortgage loan processor or underwriter only with respect to his or her work duties for the nonprofit organization and only with respect to residential mortgage loans with terms that are favorable to the borrower.

 

The exemption from the Act for an individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence has been deleted.

 

For residential mortgage loans to have terms that are favorable to the borrower, the Director will determine that terms are consistent with loan origination in a public or charitable context rather than in a commercial context.

 

If the Director determines that the application for a certificate of exemption should be denied, the Director will notify the applicant in writing of the denial and of the reasons for the denial. The Director’s decision denying an application for a certificate of exemption may be appealed.  The appeal will be in accordance with the Administrative Procedures Act and rules and regulations adopted and promulgated by the Department.

 

The Department has the authority to examine the books and activities of an organization it determines is a bona fide nonprofit organization.  The Director may, following a hearing, revoke the certificate of exemption granted to a  bona fide nonprofit organization if he or she determines that the organization fails to meet the requirements for exemption.

 

In makings it determinations and examinations, the Department may rely on its receipt and review of reports filed with federal, state, or local housing agencies or authorities or reports and attestations required by the Department.

 

The Department may place a mortgage banker licensee that is a sole proprietorship on inactive status for a period of up to 12 months upon receipt of a request from the licensee for inactive status.  The request must include notice that the licensee has temporarily suspended business, is not acting as a mortgage banker in Nebraska, and has no pending customer complaints.  The Department will notify the licensee within 10 business days as to whether the request has been granted and, if granted, of the date of expiration of the inactive status.

 

If a mortgage banker license becomes inactive, the license will remain inactive until the license expires, is cancelled, is surrendered, is suspended, is revoked, or is reactivated.  An inactive mortgage banker licensee may renew the inactive license if the licensee remains otherwise eligible for renewal, except for being covered by a surety body.  The renewal will not reactivate the license.  The Department has the authority to reactivate an inactive mortgage banker license following the Department’s receipt of a request from the inactive licensee that the licensee intends to resume business as a mortgage banker in Nebraska if the inactive mortgage banker licensee meets the conditions for licensing at the time reactivation is requested, including, but not limited to, coverage by a surety bond.

 

The Department will issue a notice of cancellation of an inactive mortgage banker license following the expiration of the period of inactive status set by the Department if the inactive mortgage banker licensee fails to request reactivation of the license prior to the expiration date.

 

The Director will not issue a mortgage loan originator license unless the Director finds that the applicant has not been convicted of, or pled guilty or no contest or its equivalent to, in a domestic, foreign, or military court:

  • A misdemeanor under any state or federal law, which involves dishonesty or fraud or which involves any aspect of the business of a mortgage banker, depository institution, or installment loan company unless the individual has received a pardon for the conviction or the conviction has been expunged, except that the Director may consider the underlying crime, facts, and circumstances of a pardoned or expunged conviction in determining the applicant’s eligibility for a license; or
  • Any felony under state or federal law unless the individual has received a pardon for the conviction or the conviction has been expunged, except that the Director may consider the underlying crime, facts, and circumstances of a pardoned or expunged conviction in determining the applicant’s eligibility for a license.

 

If an applicant for a mortgage loan originator license does not complete his or her license application and fails to respond to a notice or notices from the Department to correct the deficiency or deficiencies for a period of 120 days or more after mailing of the initial notice after initial filing of the application, the Department may deem the application as abandoned and may issue a notice of abandonment of the application to the applicant in lieu of proceedings to deny the application.

 

The Director may enter an emergency order suspending, limiting, or restricting the license of any mortgage banker or mortgage loan originator without notice or hearing if it appears upon grounds satisfactory to the Director that:

  • The licensee has failed to file the report of condition;
  • The licensee has failed to increase its surety bond to the required amount;
  • The licensee has failed to provide any report required by the Director as a condition of issuing the person a mortgage banker or mortgage loan originator license;
  • The licensee is in such financial condition that it cannot continue in business safely with its customer;
  • The licensee has been indicted, charged with, or found guilty of any act involving fraud, deception, theft, or breach of trust;
  • The licensee has had its license suspended or revoked in any state based upon any act involving fraud, deception, theft, or breach of trust; or
  • The licensee has refused to permit an examination by the Director of the licensee’s books and affairs or has refused or failed to comply with investigation requirements.

 

An emergency order becomes effective when signed by the Director.  Upon entry of an emergency order, the Director will promptly notify the affected person that the order has been entered, the reasons for the order, and the right to request an emergency hearing.  A party aggrieved by an emergency order issued by the Director may request an emergency hearing.  The request for hearing must be filed with the Director within 10 business days after the date of the emergency order. Upon receipt of a written request for emergency hearing, the Director will conduct the emergency hearing within 10 business days after the date of receipt of the request for hearing unless the parties agree to a later date or a hearing officer sets a later date for good cause shown.

 

A person aggrieved by an emergency order of the Director may obtain judicial review of the order.

 

The Director may obtain an order from the district court of Lancaster County for enforcement of the emergency order.  The Director may vacate or modify an emergency order if he or she finds that the conditions that caused its entry have changed or that it is otherwise in the public interest to do so.

 

If an emergency hearing has not been requested and the emergency order remains in effect 60 days after issuance, the Director will initiate proceedings revoking or suspending a license unless the license was surrendered or expired during the 60-day time period after issuance of the emergency order.  An emergency order will remain in effect until it is vacated, modified, or superseded by an order of the Director, superseded by a voluntary consent or compliance agreement between the Director and the licensee, or until it is terminated by a court order.