Texas Regulatory Update

Texas Regulatory Update

The Finance Commission of Texas recently adopted new rules for the Office of Consumer Credit Commissioner (“OCCC”) related to residential mortgage loan originator licensing, effective September 10, 2015.

 

7 TAC 2.106

 

After an applicant submits a complete application to Nationwide Mortgage Licensing System (“NMLS”), including a set of fingerprints, and pays the required fees, the OCCC will investigate the applicant.  The OCCC will obtain criminal history record information from the Texas Department of Public Safety and the Federal Bureau of Investigation based on the applicant’s fingerprint submission.  The OCCC will continue to receive information on new criminal activity reported after the fingerprint information has been initially processed.

 

The applicant must disclose all criminal history information required to file a complete application with NMLS.  Failure to provide any information required by NMLS or requested by the OCCC reflects negatively on the applicant’s character and general fitness to hold a license.  The OCCC may request additional criminal history information from the applicant, including the following:

·        Information about arrests, charges, indictments, and convictions;

·        Reliable documents or testimony necessary to determine whether crimes are related to the duties and responsibilities of a licensed residential mortgage loan originator, including letters of recommendation from prosecution, law enforcement, and correctional authorities;

·        Proof that the applicant has maintained a record of steady employment, has supported the applicant’s dependents, and has otherwise maintained a record of good conduct; and

·        Proof that all outstanding court costs, supervision fees, fines, and restitution as may have been ordered have been paid.

 

The OCCC may deny a license application, or suspend or revoke a license, if the applicant or licensee has been convicted of an offense that directly relates to the duties and responsibilities of a licensed residential mortgage loan originator.

 

Originating residential mortgage loans involves making representations to borrowers regarding the terms of the loan and collecting charges in a legal manner.  Consequently, crimes involving the misrepresentation of costs or benefits of a product or service, the improper handling of money or property entrusted to the person, failure to file a governmental report or filing a false report, or the use or threat of force against another person are directly related to the duties and responsibilities of a licensee and may be grounds for denial, suspension, or revocation.

 

In determining whether a criminal offense directly relates to the duties and responsibilities of holding a license, the OCCC will consider the following factors:

·        The nature and seriousness of the crime;

·        The relationship of the crime to the purposes for requiring a license to engage in the occupation;

·        The extent to which a license might offer an opportunity to engage in further criminal activity of the same type as that in which the person previously had been involved; and

·        The relationship of the crime to the ability, capacity, or fitness required to perform the duties and discharge the responsibilities of a licensee.

 

In determining whether a conviction for a crime renders an applicant or a licensee unfit to hold a license, the OCCC will consider the following factors:

·        The extent and nature of the person’s past criminal activity;

·        The age of the person when the crime was committed;

·        The amount of time that has elapsed since the person’s last criminal activity;

·        The conduct and work activity of the person before and after the criminal activity;

·        Evidence of the person’s rehabilitation or rehabilitative effort while incarcerated or after release, or following the criminal activity if no time was served; and

·        Evidence of the person’s current circumstances relating to fitness to hold a license, which may include letters of recommendation from one or more of the following:

o       Prosecution, law enforcement, and correctional officers who prosecuted, arrested, or had custodial responsibility for the person;

o       The sheriff or chief of police in the community where the person resides; and

o       Other persons in contact with the convicted person.

 

The OCCC may deny a license application, or suspend or revoke a license, if the applicant or licensee has been convicted of an offense that relates to financial responsibility, character, or general fitness to hold a license.  Crimes that relate to financial responsibility, character, or general fitness include the following:

·        Fraud, misrepresentation, deception, or forgery;

·        Breach of trust or other fiduciary duty;

·        Dishonesty or theft;

·        Money laundering;

·        Assault;

·        Violation of a statute governing lending of this or another state;

·        Failure to file a required report with a governmental body, or filing a false report; or

·        Attempt, preparation, or conspiracy to commit one of the preceding crimes.

 

A license will be revoked on the licensee’s imprisonment following a felony conviction, felony community supervision revocation, revocation of parole, or revocation of mandatory supervision.

 

The OCCC may deny a license application, or suspend or revoke a license, based on any other ground authorized by statute, including the following:

·        A conviction for an offense that does not directly relate to the duties and responsibilities of the licensed occupation and that was committed less than five years before the date of application;

·        A conviction for certain criminal offenses;

·        A conviction for, or plea of guilty or nolo contendere to, a felony during the preceding seven years or a felony involving an act of fraud, dishonesty, breach of trust, or money laundering;

·        A material misstatement or failure to provide information in a license application; and

·        Any other information indicating that the financial responsibility, character, or general fitness of the applicant or licensee do not command the confidence of the public or do not warrant the determination that the applicant or licensee will operate honestly, fairly, and efficiently within the purposes of Texas Finance Code and other appropriate regulatory laws of the state of Texas.