12 Apr Utah Legislative Update
The Utah legislature recently amended certain provisions of its Mortgage Lending and Servicing Act (the “Act”) and various provisions of the law relating to real estate. Both bills discussed in this memorandum are effective May 9, 2016.
UTAH HOUSE BILL 177
The term “Lender” is now specifically defined to include a mortgage lender.
“Mortgage Lender” means an entity that performs each of the following related to originating a mortgage loan:
- Taking and processing an application;
- Providing a required disclosure;
- In some circumstances, underwriting the mortgage loan and making the final credit approval decision;
- Closing the mortgage loan in its name;
- Funding the mortgage loan; and
- Selling the mortgage loan to an investor.
A person who is required to be licensed with the Division of Real Estate pursuant to the Utah Residential Mortgage Practices and Licensing Act and is either not a servicer or a Mortgage Lender is exempt from the requirement to register with the Nationwide Mortgage Licensing System and Registry (“NMLS”).
A Mortgage Lender who is required to be registered under the Act is not exempt from the provisions of the Utah Residential Mortgage Practices and Licensing Act
UTAH HOUSE BILL 402
The Utah Division of Real Estate (“Division”) of the Department of Commerce is responsible for administration and enforcement of, among other things, the Residential Mortgage Practices and Licensing Act (the “RMPLA”). The Division must comply with the Utah Administrative Procedures Act in an adjudicative proceeding and may initiate an adjudicative proceeding through:
- A citation;
- A notice of agency action; or
- A notice of formal or informal proceeding.
In addition to any other statutory penalty for a violation related to an occupation or profession regulated under the RMPLA, the Division may issue a citation to a person who, upon inspection or investigation, the Division concludes has violated the following existing requirements of the RMPLA:
- To obtain a license to transact the business of residential mortgage loans, unless exempt under the law, for both:
- The individual who directly transacts the business of residential mortgage loans; and
- If the individual transacts business as an employee or agent of an entity or individual, the entity or individual for whom the employee transacts the business of residential mortgage loans;
- To notify the Division within 10 days of the date on which there is a change in name, address or other specified information regarding a license to transact the business of residential mortgage loans;
- To notify the Division within 10 business days of the occurrence of specified legal actions as set forth in the RMPLA (e.g. conviction, filing bankruptcy, suspension of professional license or registration in any jurisdiction, or injunction);
- To fail to respond within the required time period to a notice, complaint, or request for information from the Division;
- To make false representations to the Division;
- To engage in the business of residential mortgage loans and also act in any of the following capacities in the same transaction:
- Escrow agent;
- Real estate agent;
- General contractor; or
- Insurance producer;
- To engage in false or misleading advertising; and
- To represent that the person can/will perform any act of a mortgage loan originator if that person is not licensed, including through:
- Business card;
- Rate list; or
- Other promotional item.
The Division may assess a fine against a person for a violation of the provisions listed above, as evidenced by:
- An uncontested citation;
- A stipulated settlement; or
- A finding of a violation in an adjudicative proceeding.
The Division may, in addition to or in lieu of the fine above, order the person to cease and desist from an activity that is a violation.
The Division may not use a citation to effect a license denial, probation, suspension or revocation.
A citation issued by the Division must be:
- In writing;
- Describe with particularity the nature of the violation, including a reference to the statute, rule or order alleged to have been violated;
- Clearly state that the recipient must notify the Division in writing within 20 calendar days of service of the citation if the recipient wishes to contest the citation at a hearing; and
- Clearly explain the consequences of failure to timely contest the citation or to make payment of a fine assessed by the citation within the time period specified.
A citation becomes final if:
- Within 20 calendar days from the service of the citation, the person to whom the citation was issued fails to request a hearing to contest (the 20-day period to contest may be extended by the Division for cause); or
- The director of the Division conducts a hearing pursuant to a timely request for a hearing and issues an order finding that a violation has occurred.
The Division may refuse to issue, refuse to renew, suspend, revoke, or place on probation the license of a licensee who fails to comply with a citation after it becomes final.
The Division may not issue a citation after the expiration of 6 months following the occurrence of a violation, but may issue a notice to address such violation.
The director of the Division may assess a fine with a citation in an amount that is no more than:
- For a 1st offense, $1,000;
- For a 2nd offense, $2,000; and
- For each offense thereafter, $2,000 for each day of continued offense.
The definition of mortgage loan originator in the RMPLA has been amended to also include: an individual who, for compensation or in expectation of compensation, directly or indirectly solicits a residential mortgage loan for another person.
Prohibited conduct under the RMPLA now includes:
- To act incompetently in the transaction of the business of residential mortgage loans such that the person fails to:
- Safeguard the interest of the public; or
- Conform to acceptable standards of the residential mortgage loan industry;
- To sign or initial a document on behalf of another person, except for in a circumstance allowed by the Division by rule.
As currently provided in the RMPLA, the Division may investigate actions related to the requirements of the RMPLA. A new section requires the Division to pay any witness fee, travel expense, mileage, or any other fee required by the service statutes of the state where the witness or evidence is located.
The RMPLA is amended to allow the Division to impose a sanction against a person if the person was previously licensed under the RMPLA for an action the person committed while licensed.