05 Mar Virginia and Washington Regulatory Update
The Virginia Bureau of Financial Institutions (the “Bureau”) has amended its rules governing mortgage lenders and mortgage brokers effective January 28, 2013. The Washington Department of Financial Institutions recently amended the pre-licensing education and testing requirements under the Mortgage Broker Practices Act rules effective April 1, 2013.
VIRGINIA ADMINISTRATIVE CODE 10 VAC 5-160-10 TO 5-160-110
“Loan processor or underwriter” means a person who, with respect to the origination of a residential mortgage loan, performs the following duties at the direction of and subject to the supervision and instruction of a licensed or exempt mortgage lender or mortgage broker:
- Receiving, collecting, distributing, or analyzing information common for the processing or underwriting of a residential mortgage loan; or
- Communicating with a borrower to obtain the information necessary for the processing or underwriting of a residential mortgage loan.
A “loan processor or underwriter” does not include a person who:
· Communicates with a borrower regarding a prospective residential mortgage loan prior to the borrower submitting a residential mortgage loan application;
· Takes an application for or offers or negotiates the terms of a residential mortgage loan; or
· Counsels borrowers about residential mortgage loan terms.
The term “mortgage broker” does not include a person engaged in the business of a loan processor or underwriter if the person is not engaged in any other activities for which a mortgage broker license is required.
“Refinancing” means an exchange of an old debt for a new debt, such as by negotiating a different interest rate or term or by repaying an existing loan with money acquired from a new loan. Refinancing includes any loan modification.
Mortgage lenders and mortgage brokers licensed by the Virginia State Corporation Commission (the “Commission”) must not provide any information to a borrower or prospective borrower that is false, misleading, or deceptive.
If a licensee or any of its employees, officers, directors, principals, or exclusive agents is convicted of a misdemeanor involving fraud, misrepresentation, or deceit, then a written report describing such an event and its expected impact must be filed with the Commissioner of the Bureau (the “Commissioner”). Such reports may be filed through the Nationwide Mortgage Licensing System and Registry (“NMLS”) if the NMLS allows such submission.
A licensee must not allow any individual to take an application for or offer or negotiate the terms of a residential mortgage loan on behalf of the licensee unless:
- The individual is licensed as a mortgage loan originator;
- The individual is covered by the licensee’s surety bond;
- The licensee has submitted a sponsorship request for such individual through the NMLS; and
- The individual is either a bona fide employee of the licensee or an exclusive agent of the licensee according to a written agreement with the licensee, and the licensee has agreed to such conditions relating to its use of exclusive agents as may be prescribed by the Bureau.
Every licensed mortgage lender or mortgage broker must disclose on any application provided to the borrower associated with a Virginia residential mortgage loan the unique identifier assigned by the NMLS to the licensed mortgage lender or mortgage broker and the unique identifier assigned by the NMLS to the licensed mortgage loan originator that took the initial mortgage loan application.
A licensee may outsource its loan processing or underwriting activities to a third party loan processor or underwriter according to a written agreement with the loan processor or underwriter. Prior to entering into an agreement, the licensee must conduct a due diligence review of the third party loan processor or underwriter. The agreement must:
- Require the loan processor or underwriter to comply with all applicable Virginia and federal laws and regulations;
- Require the loan processor or underwriter to permit the Commission to investigate or examine its business; and
- Prohibit the loan processor or underwriter from subcontracting to another person, other than its bona fide employees, any of the services specified in the agreement to be performed on behalf of the licensee.
A copy of the written agreement must be retained by the licensee for at least three years after the agreement has been terminated by either party. The licensee will be responsible for starting and maintaining a reasonable program to monitor any third party loan processor or underwriter performing services on its behalf.
If a licensee discards records containing a borrower’s personal financial information following the end of any applicable record retention periods, the records must be shredded, incinerated, or otherwise disposed of in a secure manner. Licensees may arrange for service from a business record destruction vendor.
Every licensee must comply with all Virginia and federal laws and regulations applicable to the conduct of its business.
If the Bureau requests information from an applicant to complete a deficient licensee application and the information is not received within 60 days of the request, the application will be considered abandoned unless a request for an extension of time is received and approved by the Bureau before the end of the 60-day period.
A licensee must not provide any information to the Bureau, either directly or through the NMLS, that is false, misleading, or deceptive.
A licensee must maintain in its licensed offices all books, accounts, and records required by Virginia mortgage lender and mortgage broker laws and regulations.
Every advertisement used by, or published on behalf of, a licensee must clearly and conspicuously disclose the abbreviation “NMLS ID #” followed immediately by both the unique identifier assigned by the NMLS to the licensee and the address for the NMLS Consumer Access website in parenthesis. For example: NMLS ID # 999999 (www.nmlsconsumeraccess.org).
A licensee must update its sponsorship information with the NMLS within five days after the occurrence of either of the following events:
- A mortgage loan originator becomes a bona fide employee or exclusive agent of the licensee; or
- A mortgage loan originator ceases to be a bona fide employee or exclusive agent of the licensee.
If a licensee is required to provide the Bureau or Commissioner with a written notice and the NMLS enables licensees to submit such notice through the NMLS, then a licensee will be considered to have complied with the written notice requirement if the licensee timely submits the required notice through the NMLS.
Failure to comply with the mortgage lender and mortgage broker laws and regulations may result in the entry of a cease and desist order or other appropriate enforcement action.
The Commission may, at its discretion, waive or grant exceptions to any provision of the regulations for good cause shown.
The following provision has been deleted:
Every advertisement used by, or published on behalf of, a licensee must clearly and conspicuously disclose a statement that the licensee is licensed by the Virginia State Corporation Commission.
WASHINGTON RULES 208-660-355 and 208-660-360
A mortgage loan originator must complete at least 22 hours (previously 20 hours) of pre-licensing education from a Nationwide Mortgage Licensing System and Registry (“NMLS”) approved provider. Four hours (previously 2 hours) of such education must be specifically related to Washington law.
The mortgage loan originator will receive credit for having completed the federal Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”) required pre-licensing education for every state once the loan originator has successfully completed the SAFE Act required pre-licensing education requirements approved by the NMLS for any state.
Previously, the NMLS licensing test consisted of a national test and a state test. Now, the NMLS licensing test has two parts, one on federal law and regulation and one on uniform state law and regulation.