Oklahoma Regulatory Update

Oklahoma Regulatory Update

OKLAHOMA SAFE ACT RULES TITLE 160

 

Our September 30, 2013 Compliance Memorandum discussed Oklahoma House Bill 1828, which amended the Oklahoma Secure and Fair Enforcement for Mortgage Licensing Act (the “Act”), making it applicable to mortgage lenders.  The Department of Consumer Credit (the “Department”) recently amended its Rules under the Act to implement the changes from House Bill 1828, including making the Rules applicable to mortgage lenders.  These rules were effective September 12, 2014.

 

“Mortgage business” means activity that satisfies the definition of a mortgage broker, mortgage lender, or mortgage loan originator as defined by the Act (previously the business of taking residential mortgage loan applications or offering, negotiating or modifying the terms of residential mortgage loans in the state of Oklahoma).

 

An applicant for a mortgage loan originator license is required to pass a qualified written test developed by the Nationwide Mortgage Licensing System and Registry (“NMLSR”) in accordance with the standards established under the Act.  The test is administered by a test provider approved by the NMLSR based upon reasonable standards.  (previously: An applicant is required to pass a test.  The test consists of 2 parts, a national part and an Oklahoma part.  A score of 75% correct answers to questions is required on both parts to pass the test. The testing providers are selected by NMLSR.  The test is developed by testing providers selected by NMLSR.)

 

The Administrator of Consumer Credit (the “Administrator”) is authorized to require additional information from a mortgage loan originator applicant, a mortgage broker applicant, a mortgage broker office license applicant, a mortgage lender license applicant, and a mortgage lender branch office license applicant.  Any additional information required by the Administrator must be submitted to the Administrator.  An applicant that fails to provide information as requested by the Administrator will be deemed a withdrawal of the application.

 

The payment of all required mortgage broker applicant, mortgage lender applicant, and mortgage lender branch office applicant fees must be submitted through the NMLSR. Information regarding acceptable methods of payment is available on the NMLSR website.

 

The requirements for obtaining a mortgage lender and a mortgage branch lender license include the following:

  • The application must be submitted through the NMLSR website.  The Department website will include a link to the NMLSR website.
  • The applicant must file a $100,000 bond that satisfies the requirements of the Act.  The bond will secure the faithful performance of all duties and responsibilities of any branch office of the mortgage lender.
  • The applicant must have a minimum net worth of $25,000 that is verified as required by the Act.
  • The applicant must designate a licensed mortgage loan originator to oversee mortgage loan origination activities if the applicant engages in activity that satisfies the definition of a mortgage broker as defined by the Act.  An individual designated as the mortgage loan originator for a mortgage lender must not serve as the designated mortgage loan originator for any other mortgage lender, mortgage broker, or any branch office of the mortgage lender.
  • Officers, owners, directors, and partners, as applicable, must submit fingerprints through the NMLSR for purposes of obtaining a criminal background check.  Any officer, owner, director, or partner of a mortgage lender applicant with a felony conviction or that has pled guilty or no contest to a felony crime must submit a certified copy of the indictment or other official court document indicating the criminal charges against the applicant and a certified copy of the final judgment and sentence of the court.  Whether a particular crime is classified as a felony is determined by the law of the domestic, military, or foreign court in which the officer, owner, director, or partner was convicted or in which the officer, owner, director, or partner pled guilty or no contest to the felony crime.  Domestic court includes the courts of any state, territory, district, commonwealth, or possession of the United States or any federal court of the United States.
  • Each officer, owner, director, and partner, as applicable, must demonstrate financial responsibility.  Each officer, owner, director, and partner, as applicable, must submit personal information to the NMLSR for purposes of obtaining a credit report.  The credit report will be utilized to determine the financial responsibility of each officer, owner, director, and partner of the mortgage lender applicant, as applicable.

 

A mortgage lender applicant must also meet the following requirements:

  • The applicant must file a $100,000 bond that satisfies the requirements of the Act.  The bond will secure the faithful performance of all duties and responsibilities of any branch office of the mortgage lender.
  • The applicant must have a minimum net worth of $25,000 that is verified as required by the Act.
  • Officers, owners, directors, and partners, as applicable, must submit fingerprints through the NMLSR for purposes of obtaining a criminal background check.  Any officer, owner, director, or partner of a mortgage lender applicant with a felony conviction or that has pled guilty or no contest to a felony crime must submit a certified copy of the indictment or other official court document indicating the criminal charges against the applicant and a certified copy of the final judgment and sentence of the court.  Whether a particular crime is classified as a felony is determined by the law of the domestic, military, or foreign court in which the officer, owner, director, or partner was convicted or in which the officer, owner, director, or partner pled guilty or no contest to the felony crime.  Domestic court includes the courts of any state, territory, district, commonwealth, or possession of the United States or any federal court of the United States.
  • Each officer, owner, director, and partner, as applicable, must demonstrate financial responsibility.  Each officer, owner, director, and partner, as applicable, must submit personal information to the NMLSR for purposes of obtaining a credit report.  The credit report will be utilized to determine the financial responsibility of each officer, owner, director, and partner of the mortgage lender applicant, as applicable.

 

A mortgage lender applicant that maintains more than one location for the transaction of business must obtain a branch office license for each location.

 

A licensee that wishes to be placed on inactive status in accordance with the Act must renew the applicable license through the NMLSR and pay the required license renewal fees.  After renewing the applicable license through the NMLSR, a licensee must notify the Administrator in writing of the inactive license status request.  The Administrator will place the applicable license on an inactive license status upon a request in writing and issue a refund for any license renewal fees paid in excess of the inactive license status fee.

 

A new license issued prior to November 1 will be effective through December 31 of that year (previously any license issued during a year will run only to December 31 of that year).  A new license issued on or after November 1 will be effective through December 31 of the following calendar year.

 

At least 30 days before any proposed change in ownership or any change in the officers, owners, directors, partners or the designated mortgage loan originator of a mortgage broker or mortgage lender, the mortgage broker or mortgage lender must notify the Administrator of the proposed change by regular United States mail, electronic mail, facsimile, or courier service.  The mortgage broker or mortgage lender must also contact the Administrator for instructions regarding the completion of necessary documentation to process the proposed change.

 

A mortgage broker or mortgage lender with a proposed change of ownership or a proposed change of any officers, directors or partners shall submit the following information for each new proposed owner, officer, director or partner:

  • Fingerprints.
  • Personal information for obtaining credit reports.
  • Any proposed officer, owner, director, or partner that has a felony conviction or has pled guilty or no contest to a felony must submit a certified copy of the indictment or other official court document indicating the criminal charges against the applicant and a certified copy of the final judgment and sentence of the court.  Whether a particular crime is classified as a felony is determined by the law of the domestic, military or foreign court in which the officer, owner, director or partner was convicted or in which the officer, owner, director or partner pled guilty or no contest to the felony.  Domestic court includes the courts of any state, territory, district, commonwealth, or possession of the United States or any federal court of the United States.
  • Any additional documentation required by the Administrator.

 

A mortgage broker or a mortgage lender with a proposed change for the designated mortgage loan originator must submit to NMLSR the name and license number or unique identifier issued by NMLSR for the proposed, designated mortgage loan originator.

 

A mortgage broker or mortgage lender with a 50% or more proposed change in ownership, officers, directors, or partners must submit a new license application in accordance with the Act and rules promulgated by the Administrator.

 

At least 30 days before the address of the principal place of business or the address of a branch office is changed, the mortgage broker or mortgage lender must notify the Administrator through the NMLSR and pay the appropriate fee for an amended license.  The provision requiring the mortgage broker to return the license to the Administrator has been deleted.

 

At least 30 days before a location is to be closed, the mortgage broker or mortgage lender must notify the Administrator through the NMLSR.  The provision requiring the mortgage broker to return the license to the Administrator has been deleted.

 

A mortgage loan originator must notify the Administrator through the NMLSR of any address change at least 30 days prior to the change of their address of record and pay the appropriate fee for an amended license.  The provision requiring the mortgage loan originator to return the license to the Administrator has been deleted.

 

Mortgage loan originator applicants and the owners, officers, directors, and partners of mortgage broker and mortgage lender applicants must demonstrate financial responsibility pursuant to the Act and this rule.  The Act authorizes the Administrator to deny license applications if an applicant for a mortgage loan originator license or if any owner, officer, director, or partner of a mortgage broker or mortgage lender applicant has not demonstrated financial responsibility.  The Act provides general guidelines for determining a failure to demonstrate financial responsibility, such as outstanding judgments, foreclosures, tax liens, and a pattern of seriously delinquent accounts.  The purpose of this rule is to establish specific criteria for determining when an applicant for a mortgage loan originator license or when any owners, officers, directors, or partners of a mortgage broker or mortgage lender applicant have failed to demonstrate financial responsibility pursuant to the Act and this rule.

 

A credit score for a mortgage loan originator applicant or an owner, officer, director, and partner of an applicable mortgage broker or mortgage lender applicant is provided by the credit reporting bureau utilized by the NMLSR.  The Administrator will set a threshold credit score to assist in the determination of the financial responsibility.  Previously, the threshold credit score was the combined average credit score of the applicant from 3 major credit reporting bureaus.

 

If the credit score of all of the owners, officers, directors or partners of the mortgage broker or mortgage lender applicant equals or exceeds the threshold credit score, the applicant will be deemed to have demonstrated financial responsibility pursuant to the Act and this rule.  If the credit score of any of the owners, officers, directors, or partners of the mortgage broker or mortgage lender applicant is less than the threshold credit score, the Administrator will review the credit reports of the owners, officers, directors, or partners of the mortgage broker or mortgage lender applicant with a credit score that is less than the threshold credit score for any current outstanding judgments, excluding judgments solely as a result of medical expenses, current outstanding tax liens, or other government liens and filings, foreclosures within the past 3 years, and seriously delinquent accounts within the past 3 years of such owner, officer, director, or partner to determine if the mortgage broker or mortgage lender applicant demonstrates financial responsibility pursuant to the Act and this rule.

 

This rule establishes a process for mortgage brokers, mortgage lenders, and mortgage loan originators to challenge information entered into NMLSR by the Administrator.  A process for challenging information entered into NMLSR is required by the Act.

 

A mortgage broker, mortgage lender, or mortgage loan originator must comply with the following procedures to challenge information entered into NMLSR by the Administrator:

  • A mortgage broker, mortgage lender, or mortgage loan originator must submit written notification to the Administrator indicating the mortgage broker, mortgage lender, or mortgage loan originator is challenging information entered into NMLSR by the Administrator concerning the mortgage broker, mortgage lender, or mortgage loan originator.
  • The written notification may be submitted by electronic mail, facsimile, United States mail, or courier service.  The Administrator may require a different method of notification if the method of notification utilized by a mortgage broker, mortgage lender, or mortgage loan originator is illegible or is unable to be viewed by the Administrator.  The Administrator may notify a mortgage broker, mortgage lender, or mortgage loan originator that a different method of notification must be utilized via electronic mail, facsimile, United States mail, or courier service.
  • Written notification must indicate the information being challenged.
  • Written notification must include documentation substantiating the challenge.
  • Written notification must include the unique identifier of the mortgage broker, mortgage lender, or mortgage loan originator.

 

The Administrator will notify the mortgage broker, mortgage lender, or mortgage loan originator of the decision concerning the challenge.  The decision of the Administrator will be in writing and will state the action taken by the Administrator in response to the challenge of the mortgage broker, mortgage lender, or mortgage loan originator.  The decision of the Administrator may be submitted to the mortgage broker, mortgage lender, or mortgage loan originator by certified United States mail, return receipt requested, electronic mail, facsimile, courier service, or regular United States mail.

 

Within 30 days after notification of the decision is sent, the mortgage broker, mortgage lender, or mortgage loan originator may request a hearing concerning an adverse decision of the Administrator regarding the challenge of the mortgage broker, mortgage lender, or mortgage loan originator.  A mortgage broker, mortgage lender, or mortgage loan originator must request a hearing in writing via electronic mail, facsimile, United States mail, or courier service.  The request must be directed to the Administrator.  A hearing will be conducted in accordance with Article II of the Administrative Procedures Act (“APA”) and the Act.  The Administrator will issue a final order concerning the challenge as required by the APA.

 

Mortgage brokers, mortgage lenders, and mortgage loan originators must preserve and make available such books and records related to their mortgage business for 4 years from the date of the initial transaction between the licensee and each borrower, or for 2 years from the date of the final entry into such records is made thereon, whichever is later.  Trust account records must be preserved and made available for at least 3 years after the date of final entries therein.  The records must be maintained for such time periods whether the person is currently licensed or previously licensed.

 

A licensee may surrender any license by submitting notification to the NMLSR and delivering the license to the Administrator (previously required written notice of its surrender).

 

The Administrator will issue an order from the rehearing, reopening, or reconsideration within a reasonable period of time (previously 60 days) from the last day of the hearing unless the period is extended by written agreement between the party and the Administrator.

 

Any person aggrieved by a final agency order of the Administrator may obtain judicial review in accordance with the Oklahoma APA.  The venue of any such action will be in the district court of Oklahoma County.

 

The following provisions were deleted:

 

The Act authorizes the Administrator to deny a mortgage broker or mortgage loan originator license or decline to renew a mortgage broker or mortgage loan originator license, after notice and hearing pursuant to Article II of the APA, for failing to meet the requirements of the Act or for withholding information in an application for a license or renewal of a license.  The purpose of this rule is to provide procedures for processing and denying applications for mortgage broker or mortgage loan originator licenses if an applicant fails to meet the requirements of the Act or withholds information in an application for a license or renewal of a license.

 

The Department will notify an applicant if the applicant fails to meet the requirements of the Act or if the applicant has withheld information regarding an application.  The notification will indicate the requirements of the Act the applicant has failed to meet or indicate the information that has been withheld from the application.  The notification may be sent via certified mail, return receipt requested, courier service, electronic mail, facsimile or regular United States Mail.  The applicant will have 30 days from the date notification is sent to respond to the notification.

 

If an applicant has failed to meet the requirements of the Act for licensure, the applicant may withdraw an application by notification in writing to the Department within 30 days from the date notification is sent from the Department.  The applicant may request a refund of the license fee, which will be refundable to the licensee upon request.  If the applicant fails to request a withdrawal of the application within the required period of time, a Notice of Hearing will be filed in accordance with Article II of the APA for denial of the license.  License fees shall not be refundable if an application is denied after notice and hearing in accordance with Article II of the APA.

 

Applicants that have withheld information regarding an application shall have 30 days from the date notification is sent from the Department to provide the withheld information.  A Notice of Hearing will be filed in accordance with Article II of the APA for denial of the license if an applicant fails to provide withheld information within the required period of time.  License fees will not be refundable if an application is denied after notice and hearing in accordance with Article II of the APA.

 

For purposes of this section, license fee will mean the initial and renewal license fee and will not include an application fee or the fee paid into the Oklahoma Mortgage Broker and Mortgage Loan Originator Recovery Fund.