28 May Vermont Legislative and Colorado Regulatory Update
The Vermont legislature recently amended the Licensed Lenders laws effective May 13, 2013. The Colorado Division of Real Estate (the “Division”) issued and repealed rules governing mortgage loan originators and mortgage companies effective May 15, 2013.
VERMONT HOUSE BILL 513
A lender license or a mortgage broker license will not be required of a financial institution, which includes any Vermont financial institution, state financial institution, or national financial institution.
The mortgage loan originator pre-licensing education requirement now includes 2 hours of Vermont law and regulations.
The license or a copy of an electronic license need no longer be kept conspicuously posted in the licensee’s place of business.
A mortgage broker who acts as an independent contractor loan processor or an underwriter who performs loan processing or underwriting activities for a licensed or exempt mortgage broker or lender need not provide a mortgage broker agreement to the prospective borrower, provided:
- The mortgage broker is acting as an independent contractor loan processor or underwriter;
- The mortgage broker’s activities are limited to loan processor or underwriting activities;
- The mortgage broker is paid a fee only by the licensed or exempt mortgage broker or lender, is not paid by the prospective borrower, and is not paid a commission based upon the dollar amount of the loan; and
- If the mortgage broker is acting as an independent contractor loan processor or underwriter on behalf of a mortgage broker, such mortgage broker has already entered into a written mortgage broker agreement with the prospective borrower.
The unique identifier issued by the Nationwide Mortgage Licensing System and Registry (“NMLSR”) of any person engaging in the business of lending or acting as a mortgage broker must be clearly shown on all loan application forms, solicitations, or advertisements, including business cards and website, and other documents as established by rule or order of the Vermont Commissioner of Financial Regulation.
COLORADO RULES 4 CCR 725-3
Chapter 1: Definitions
An organization is a bona fide nonprofit organization if it:
- Is tax-exempt as a charitable organization;
- Promotes affordable housing or provides homeownership education or similar services;
- Conducts activities in a manner that serves public and 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 the government housing assistance programs.
An organization claiming bona fide nonprofit status will be subject to examination by the Board of Mortgage Loan Originators (the “Board”) upon receipt of a complaint against the organization. The purpose of the examination will be to determine whether the organization is exempt from licensure as a bona fide nonprofit organization.
“Employee” means an individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person, and whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by the controlling person.
“Housing finance agency” means any authority:
- Chartered by Colorado to help meet the affordable housing needs of Colorado residents and which is supervised directly or indirectly by the Colorado government;
- Subject to audit and review by Colorado; and
- Whose activities make it eligible to be a member of the National Council of State Housing Agencies.
“Independent contractor” means an individual who performs his or her duties other than at the direction of and subject to the supervision and instruction of an individual who is licensed by the Board or is not required to be licensed based on one of the following:
- The individual is lawfully registered with, and maintains a unique identifier through, the NMLSR, and is an employee of:
- A depository institution;
- A subsidiary that is:
- Owned and controlled by a depository institution; and
- Regulated by a federal banking agency; or
- An institution regulated by the Farm Credit Administration;
- The individual is an employee of a federal, state, or local government agency or housing finance agency and acts as a loan originator only according to his or her official duties as an employee of a federal, state, or local government agency or housing finance agency; or
- The individual is an employee of a bona fide nonprofit organization who acts as a loan originator only with respect to his or her work duties to the bona fide nonprofit organization, and who acts as a loan originator only with respect to residential mortgage loans with terms that are favorable to the borrower.
“Offering or negotiating terms of a residential mortgage loan” means to present for consideration to a borrower or prospective borrower particular residential mortgage loan terms, or to communicate directly or indirectly with a borrower or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms. An individual’s generic referral to or recommendation of a particular lender, in and of itself, is not offering or negotiating the terms of a residential mortgage loan.
“Residential mortgage loan application” means a request, in any form, for an offer, or a response to a solicitation of an offer, of residential mortgage loan terms, and the information about the borrower or prospective borrower that is customary and necessary in a decision on whether to make the offer.
“Taking a residential mortgage loan application” means the receipt of a residential mortgage loan application by an individual for the purpose of making a decision whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower, whether the application is received directly or indirectly from the borrower or prospective borrower. An individual’s generic referral to or recommendation of a particular lender, in and of itself, is not taking a residential loan application.
Chapter 8: National Mortgage Licensing System and Registry
A mortgage loan originator may challenge information entered into the NMLSR by the Division. A challenge must be in writing and must set forth the specific information being challenged and include supporting evidence. The grounds for a challenge are limited to the factual accuracy of the information pertaining to the mortgage loan originator’s own license record. A challenge submitted to appeal the underlying grounds for a disciplinary action will not be considered by the Director of the Division (the “Director”).
The Director, or an authorized representative of the Director, will review all information submitted by the mortgage loan originator and will determine the merits of the challenge. If the Director, or the Director’s authorized representative, determines that the information submitted to the NMLSR by the Division is factually incorrect, the Division will promptly submit the correct information to the NMLSR.
A mortgage loan originator may appeal the Director’s, or the Director’s authorized representative’s decision regarding the challenge to the Board within 30 days of the decision being rendered. The decision of the Board regarding a NMLSR challenge is subject to judicial review by the court of appeals by appropriate proceedings.
Chapter 5: Professional Standards
Any advertisement of a residential mortgage loan product or rate offered by a mortgage loan originator or mortgage company must conform to the following requirements:
- An advertisement must be made only for the products and terms that are actually available at the time they are offered and, if their availability is subject to any material requirements or limitations, the advertisement must specify those requirements or limitations;
- The advertisement must not appear to be offered by a government agency, a quasi government agency or the prospective borrower’s current lender and/or loan servicer;
- An advertisement must not make or omit any statement the result of which would be to present a misleading or deceptive impression to borrowers;
- An advertisement must otherwise comply with all applicable state and federal disclosure requirements;
- Advertisements must incorporate applicable provisions of the final Interagency Guidance on Nontraditional Mortgage Product Risks released on September 29, 2006; and
- The responsible party must retain copies of all advertisements for a period of four years, and provide the copies for inspection by an authorized representative of the Board upon request.
An advertisement of a residential mortgage loan product or rate offered by a mortgage loan originator or mortgage company must contain the following, each of which must be clearly and conspicuously included in the advertisement:
- At least one responsible party. The responsible party must be an individual person or a mortgage company and must include their registration number that is approved on the NMLSR;
- The mortgage company name;
- The business phone number of the responsible party; and
- The statement “regulated by the Division of Real Estate.”
The requirements in the paragraph above do not apply to:
- Any advertisement which indirectly promotes a credit transaction and which contains only the name of the mortgage company, the name and title of the mortgage loan originator, the contact information for the mortgage company or the mortgage loan originator, a mortgage company logo, or any license or registration numbers, such as the inscription on a coffee mug, pen, pencil, youth league jersey, sign, business card, or other promotional item; or
- Any rate sheet, pricing sheet, or similar proprietary information provided to real estate brokers, builders, and other commercial entities that is not intended for distribution to borrowers.
COLORADO RULES 4 CCR 725-3
The Colorado Division of Real Estate recently repealed the mortgage loan originator advertising rules and the Colorado Secure and Fair Enforcement for Mortgage Licensing Act of 2008 compliance rules.