Virginia Regulatory Update

Virginia Regulatory Update

The Virginia Bureau of Financial Institutions (the “Bureau”) recently amended the State Corporation Commission’s (the “Commission”) regulations governing licensed mortgage loan originators, effective August 15, 2012.

 

 

Virginia Rules 10 VAC 5-161-10 to 10 VAC 5-161-80

 

“License application” means a written request for a mortgage loan originator license.

 

 

Unless exempt from licensure, the following individuals who engage in the business of taking applications for residential mortgage loans, or offering or negotiating the terms of residential mortgage loans, must obtain and maintain annually a license:

  • Individuals who are employees or exclusive agents of a person licensed under the mortgage lenders and mortgage brokers laws (previously individuals acting as mortgage loan originators).  This includes individuals who are employees of professional employment organizations or staffing services who will become and remain exclusive agents of a person licensed under the mortgage lenders and mortgage brokers laws.
  • Individuals, other than registered mortgage loan originators, who are employees or exclusive agents of a person exempt from licensure under the mortgage lenders and mortgage brokers laws.
  • Individuals who are not employees or exclusive agents of a person licensed under the mortgage lenders and mortgage brokers laws or a person exempt from such licensure.

 

The following provision has been deleted: Individuals who are co-employees of professional employer organizations or staffing services will be deemed to be employees of the client company.

 

 

For purposes of the mortgage lenders and mortgage brokers law and mortgage loan originators laws:

  • An individual takes an application for a residential mortgage loan if the individual receives a residential mortgage loan application for the purpose of facilitating a decision whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower, or to accept the terms offered by a borrower or prospective borrower in response to a solicitation.
  • An individual offers or negotiates the terms of a residential mortgage loan if the individual:
    • Presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms;
    • Communicates directly or indirectly with a borrower or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms; or
    • Recommends, refers, or steers a borrower or prospective borrower to a particular lender or set of residential mortgage loan terms, in accordance with a duty to or incentive from any person other than the borrower or prospective borrower.

 

If the Bureau requests information to complete a deficient license application and the information is not received within 60 days of the Bureau’s request, the license application will be deemed abandoned unless a request for an extension of time is received and approved by the Bureau prior to the expiration of the 60-day period.  However, this does not prohibit the Commission from denying a license application that does not meet the requirements of the mortgage loan originators laws.

 

 

Licenses expire at the end of each calendar year unless renewed by the Commission on or after November 1 of the same calendar year (previously licenses expired if not renewed within 90 days before the end of the calendar year).  In addition to the prior requirements for license renewal, a licensee must obtain the required continuing education and comply with any other renewal requirements imposed by the Nationwide Mortgage Licensing System and Registry (“NMLSR”).

 

 

An applicant will have been found to have the financial responsibility required by the mortgage loan originators laws unless the Commission finds that applicant has one or more of the following:

  • One or more outstanding judgments or collection accounts that in the aggregate exceed $2,000;
  • One or more outstanding tax liens or other governmental liens that in the aggregate exceed $1,000;
  • One or more delinquent accounts, including any charged-off accounts, but excluding any items described above, that in the aggregate exceed $3,000;
  • One or more foreclosures within the past 7 years; or
  • Such other debts as the Commission deems relevant.

 

An applicant will be found to have the required financial responsibility if the Commission determines that:

  • The applicant has demonstrated good faith efforts to satisfy all of the outstanding debts enumerated above; and
  • One or more of the following substantially impeded the applicant’s ability to his satisfy his or her outstanding debts:
    • Loss of income;
    • Divorce;
    • Medical expenses;
    • Natural disaster; or
    • Such other unanticipated events or circumstances that the Commission deems relevant.

 

An applicant will be found to have the required character and general fitness unless one or more of the following are applicable:

  • The applicant has been convicted of, or pled guilty or no contest to, a crime involving financial services or a financial services-related business, fraud, a false statement or omission, felony theft or wrongful taking of property, bribery, perjury, forgery, counterfeiting, extortion, breach of trust, money laundering, or dishonesty.  However, in evaluating any of these crimes, the Commissioner may take into account, among other things, the length of time elapsed since the offense was committed, the age of the applicant at the time of the offense, and the nature of the offense.
  • The Commission finds that the applicant made a material misrepresentation or omission in either his or her license application or any other information furnished by the applicant in conjunction with the license application or a third party made a material misrepresentation or omission in support of the applicant’s request for a mortgage loan originator license and the applicant failed to promptly notify the Bureau after becoming aware of the misrepresentation or omission.  However, in evaluating a misrepresentation or omission, the Commission may take into account, among other things, any explanation given for the misrepresentation of omission.
  • The Commission possesses other information that demonstrates that the applicant lacks the character or general fitness required under the mortgage loan originators laws.

 

The Commission may suspend or revoke any mortgage loan originator license at any time following the issuance of a license if the Commission finds that a licensee no longer possesses the financial responsibility, character, or general fitness to warrant the belief that the person will act as a mortgage loan originator efficiently and fairly, in the public interest, and in accordance with law.

 

 

Each licensee must give notice to the Bureau after the occurrence of either of the following events:

  • Termination of, or separation from, employment or exclusive agency as a mortgage loan originator for a person licensed or exempt from licensing under the mortgage lenders and mortgage brokers laws.  A licensee who is no longer an employee or exclusive agent of a person licensed or exempt from licensing under the mortgage lenders and mortgage brokers laws must not engage in activities requiring licensure under the mortgage lenders and mortgage brokers laws until such time as:
    • The individual obtains a mortgage broker license or the individual becomes a bona fide employee or exclusive agent of a person who is licensed or exempt from licensing under the mortgage lenders and mortgage brokers laws; and
    • The person licensed or exempt from licensing has complied with the surety bond filing requirements, and the Bureau has received a sponsorship request through the NMLSR
  • Commencement of employment or exclusive agency as a mortgage loan originator for a person licensed or exempt from licensing under the mortgage lenders and mortgage brokers laws.  A licensee who becomes an employee or exclusive agent of a person licensed or exempt from licensing under the mortgage lenders and mortgage brokers laws must not engage in activities requiring licensure until:
    • The person licensed or exempt from licensing has complied with the surety bond filing requirements; and
    • The Bureau has received a sponsorship request through the NMLSR

 

Each licensee must notify the Commissioner through the NMLSR within 10 days of any change of residential or business address.  A licensee will be deemed to have complied with this requirement if a person licensed or exempt from licensing under the mortgage lenders and mortgage brokers laws timely submits such notice on behalf of its employee or exclusive agent.

 

 

When the Bureau requests a written response, books, records, documentation, or other information from a licensee, the licensee must deliver a written response as well as any requested books, records, documentation, or information within the time period specified in the Bureau’s request.  If no time period is specified, a written response as well as any requested books, records, documentation, or information must be delivered by the licensee to the Bureau not later than 30 days from the date of the request.  In determining the specified period for responding to the Bureau and when considering a request for an extension of time to respond, the Bureau will take into consideration the volume and complexity of the requested written response, books, records, documentation, or information and such other factors as the Bureau determines to be relevant under the circumstances.  Requests made by the Bureau are deemed to be in furtherance of the investigation and examination provided in the mortgage loan originators laws.

 

 

If a licensee disposes of records containing a consumer’s personal financial information following the expiration of any applicable record retention periods, the records must be shredded, incinerated, or otherwise disposed of in a secure manner.

 

 

Failure to comply with any provision of the mortgage loan originators laws or the rules may result in civil penalties, license suspension, license revocation, the entry of a cease and desist order, or other appropriate enforcement action.  An individual required to be licensed under the mortgage loan originators laws will be subject to a separate civil penalty of up to $2,500 for every violation of the mortgage loan originators laws, the rules, or other law or regulation applicable to the conduct of the individual’s business.  If an individual violates any provision of the mortgage loan originators laws, the rules, or other law or regulation applicable to the conduct of the individual’s business in connection with multiple borrowers, loans, or prospective loans, the individual will be subject to a separate civil penalty for each borrower, loan, or prospective loan.  For example, if an individual originates 5 loans and the individual violates 2 applicable laws in connection with each of the 5 loans, the individual will be subject to a maximum civil penalty of $25,000.