09 Nov North Carolina Legislative Update
NORTH CAROLINA HOUSE BILL 126
The North Carolina legislature recently enacted legislation to authorize the Office of the Commissioner of Banks (“Commissioner”) to implement a registration system for persons engaged exclusively in the processing or underwriting of residential mortgage loans and not engaged in the mortgage business, effective November 1, 2015.
A “Mortgage Lender” means a person engaged in the mortgage business as defined by state law. However, the definition does not include a person who acts as a mortgage lender only in a tablefunding transaction.
A “Mortgage Origination Support Registrant” or “Registrant” means a person engaged exclusively in the processing or underwriting of residential mortgage loans and not engaged in the mortgage business.
A Registrant operating in the state of North Carolina must register with the Commissioner. Upon issuance of the registration, a Registrant is authorized to sponsor and employ licensed mortgage loan originators or transitional mortgage loan originators to control and supervise the Registrant’s loan processors or underwriters in accordance with state and federal law. This should not be construed as authorizing a Registrant to engage in the mortgage business.
“Engaging in the mortgage business” means:
· For compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, to accept or offer to accept an application for a residential mortgage loan from prospective borrowers, solicit or offer to solicit a residential mortgage loan from prospective borrowers, negotiate the terms or conditions of a residential mortgage loan with prospective borrowers, issue residential mortgage loan commitments or interest rate guarantee agreements to prospective borrowers, or engage in tablefunding of residential mortgage loans, whether any such acts are done through contact by telephone, by electronic means, by mail, or in person with the borrowers or prospective borrowers.
· To make or fund, or offer to make or fund, or advance funds on residential mortgage loans for compensation or gain, or in the expectation of compensation or gain.
· To engage, whether for compensation or gain from another or on one’s own behalf, in the business of receiving any scheduled periodic payments from a borrower pursuant to the terms of any residential mortgage loan, including amounts for escrow accounts, and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the residential mortgage loan, the residential mortgage loan servicing documents, or servicing contract, or otherwise to meet the definition of the term “servicer” with respect to residential mortgage loans.
Each Registrant must:
· Have a qualifying individual who operates the business under that person’s full charge, control, and supervision;
· File through the Nationwide Mortgage Licensing System and Registry (“NMLS”) a form acceptable to the Commissioner indicating the licensee’s designation of a qualifying individual and each qualifying individual’s acceptance of the responsibility; and
· Notify the Commissioner within 15 days of any change in its designated qualifying individual.
Each applicant for registration as a Registrant, at the time of application must comply with the following requirements:
· If the applicant is a sole proprietor, the applicant must have at least three years of experience in residential mortgage lending or other experience or meet competency requirements as the Commissioner may impose.
· If the applicant is a corporation, limited liability company, general or limited partnership, association, or other group engaged in a joint enterprise, however organized, at least one of its principal officers, managers, or general partners must have three years of experience in residential mortgage lending or other experience or meet competency requirements as the Commissioner may impose.
· If the applicant will be a qualifying individual or branch manager, the applicant must have at least three years of experience in residential mortgage lending or other experience or meet competency requirements as the Commissioner may impose.
In connection with an application for registration as a Registrant, the applicant and its owners, qualifying individual, and controlling persons must furnish to the Nationwide Mortgage Licensing System and Registry information concerning the applicant’s identity, including:
· Fingerprints for submission to the Federal Bureau of Investigation and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check.
· Personal history and experience in a form prescribed by the Nationwide Mortgage Licensing System and Registry and the Commissioner to obtain:
o Independent credit reports obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
o Information related to any administrative, civil, or criminal findings by any governmental jurisdiction.
· The personal history may be obtained by the Commissioner at any time and the fingerprint information must be furnished upon the Commissioner’s request.
· An authorization for the Commissioner to obtain personal history or fingerprint information at any time.
Every applicant for initial registration as a mortgage origination support registrant must pay a nonrefundable filing fee of:
· $250 for applicants who employ or contract with fewer than a total of five individuals engaged solely as loan processors or underwriters,
· $1,000 for applicants who employ or contract with between a total of five and 30 individuals engaged solely as loan processors or underwriters, or
· $2,000 for applicants who employ or contract with more than a total of 30 individuals engaged solely as loan processors or underwriters.
In addition, every applicant for initial registration must pay the actual cost of obtaining a credit report, State and national criminal history record checks, and the processing fees required by the NMLS.
The license of a mortgage loan originator or transitional mortgage loan originator is not effective during any period when that person is not employed by either a licensed mortgage lender, mortgage broker, or mortgage servicer or a mortgage origination support registrant, but only for the purpose of supervising and controlling loan processors or underwriters. When a mortgage loan originator or transitional mortgage loan originator ceases to be employed by a licensed mortgage lender, mortgage broker, or mortgage servicer or a mortgage origination support registrant, the mortgage loan originator or transitional mortgage loan originator and the licensed mortgage lender, mortgage broker, or mortgage servicer or the mortgage origination support registrant, by whom that person was employed must promptly notify the Commissioner in writing. The mortgage lender, mortgage broker, mortgage servicer, or mortgage origination support registrant must include a statement of the specific reason for the termination of the mortgage loan originator’s or transitional mortgage loan originator’s employment. A mortgage loan originator or transitional mortgage loan originator may not be employed simultaneously by more than one licensed mortgage lender, mortgage broker, mortgage servicer, or mortgage support registrant.
Each Registrant must maintain on file with the Commissioner a list of all mortgage loan originators and transitional mortgage loan originators they employ.
No person, other than an exempt person, must hold himself or herself out as a Registrant unless the person is licensed or registered as indicated above.
Registrations issued are not assignable. Control of a Registrant may not be acquired through a stock purchase, merger, or other device without the prior written consent of the Commissioner. The Commissioner may not give written consent if the Commissioner finds that any of the grounds for denial, revocation, or suspension of a license or registration are applicable to the acquiring person.
All registrations issued by the Commissioner will expire annually on the 31st day of December following issuance or on any other date that the Commissioner may determine.
A registration may be renewed on or after November 1 of each year by complying with the requirements provided below. A mortgage origination support registrant must pay a nonrefundable renewal fee.
In addition to the nonrefundable renewal fee, a Registrant must pay the actual cost of obtaining credit reports and State and national criminal history record checks and processing fees for the NMLS as the Commissioner will require.
Registrants may apply to renew for renewal and must demonstrate that all of the following applicable requirements are met:
· The registrant continues to meet the initial minimum standards for registration.
· The registrant has paid all required fees and assessments.
If a registration is not renewed prior to the expiration date, in addition to the renewal fees set forth above, the registrant must pay an additional nonrefundable late fee.
In the event a registrant fails to obtain a reinstatement of the registration prior to March 1, the Commissioner must require the registrant to comply with the requirements for the initial issuance of a registration.
A mortgage loan originator or transitional mortgage loan originator employed only by a Registrant for the sole purpose of supervising and controlling loan processors or underwriters are not required to obtain a surety bond.
Every registrant must make and keep the accounts, correspondence, memoranda, papers, books, and other records as prescribed in rules adopted by the Commissioner. All records must be preserved for three years unless the Commissioner, by rule, prescribes otherwise for particular types of records.
No person may make any false statement or knowingly and willfully make any omission of a material fact in connection with any information or reports filed with the Commissioner, a governmental agency, or the NMLS or in connection with any oral or written communication with the Commissioner or another governmental agency. If the information contained in any document filed with the Commissioner or the NMLS is or becomes inaccurate or incomplete in any material respect, the registrant must within 30 days file a correcting amendment to the information contained in the document.
The Commissioner may, by rule, impose terms and conditions under which the records and files of a Registrant may be maintained outside of the state of North Carolina. The principal place of business for a Registrant may be located at an individual’s home or residence. A Registrant must maintain a record of the principal place of business with the Commissioner and report any change of address of the principal place of business or any branch office within 15 days after the change.
Each Registrant must submit to the Commissioner and to the NMLS, in the form required, reports of condition and any other reports requested by the Commissioner.
The Commissioner may, by order, deny, suspend, revoke, or refuse to issue or renew a registration of a Registrant or may restrict or limit the manner in which a Registrant engages in the business of a Registrant if the Commissioner finds both of the following:
· That the order is in the public interest; and
· That any of the following circumstances apply to the applicant, registrant, or any partner, member, manager, officer, director, loan originator, qualifying individual, or any person occupying a similar status or performing similar functions or any person directly or indirectly controlling the applicant or registrant. The person:
o Has filed an application for registration, report, or other document to the Commissioner that, as of its effective date or as of any date after filing, contained any statement that, in light of the circumstances under which it was made, is false or misleading with respect to any material fact;
o Has violated or failed to comply with any provision of the applicable law, rule adopted by the Commissioner, or order of the Commissioner;
o Is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the mortgage business;
o Is the subject of an order of the Commissioner denying or suspending that person’s registration as a registrant or its equivalent.
o Is the subject of an order entered within the past five years by the authority of any state or federal agency with jurisdiction over the mortgage brokerage, mortgage lending, or mortgage servicing industry;
o Fails at any time to meet applicable statutory requirements;
o Controls or has controlled any mortgage broker, mortgage lender, mortgage servicer, or registrant or its equivalent who has been subject to an order or injunction described above;
o Has been the qualifying individual, branch manager, mortgage loan originator, or transitional mortgage loan originator of a registrant who had knowledge of or reasonably should have had knowledge of, or participated in, any activity that resulted in the entry of an order suspending or withdrawing the registration of a registrant.
o Has failed to respond to inquiries from the Commissioner or the Commissioner’s designee regarding any complaints filed against the registrant which allege or appear to involve violation of any law or rule affecting the mortgage lending business;
o Has failed to respond to and cooperate fully with notices from the Commissioner or the Commissioner’s designee relating to the scheduling and conducting of an examination or investigation.
In addition to the summary suspension procedures authorized by law, the Commissioner may, in the event they have reason to believe that a registrant, individual, or person subject to this law may have violated or failed to comply with any provision of this law, take either of the following actions:
· Summarily order the registrant, individual, or person to cease and desist from any harmful activities or violations; or
· Summarily suspend the registration of a registrant.
Registrants are subject to the same disciplinary authority as licensed mortgage brokers, mortgage lenders and mortgage servicers.