September 2008 Mortgage Licensing Update

September 2008 Mortgage Licensing Update

With the mortgage crisis nevertheless in complete force, many states are looking for a way to increase regulation on the mortgage industry. The first step to regulating mortgage companies is to license the companies and their sales people. Many new states have passed regulations this month requiring additional licensing.

North Carolina Passes New Mortgage Laws, Banning YSP and Requiring Licensing for Servicers

Effective October 1, 2008, House Bill 2188 amends the Rate Spread Home Loan Law to prohibit the payment of a provide spread premium on rate spread home loans. Make sure to look at the definition of a rate spread home loan. Effective January 1, 2009, House Bill 2463 amends the Mortgage Lending Act to require the licensure of mortgage loan servicers.

Delaware Requires Loan Originator Licensing

Effective January 1, 2009, Loan Originators will be required to be licensed in Delaware. HB 508 defines a mortgage loan originator as an employee or independent contractor of a licensed Delaware Mortgage Broker or Lender. The legislation requires a mortgage loan originator to apply to the Office of the State Bank Commissioner for a mortgage loan originator license, establishes initial and continuing education requirements for licensees, and authorizes the Commissioner to adopt regulations to ease participation in the Nationwide Mortgage Licensing System. Delaware House Bill 508 becomes effective on January 1, 2009, but mortgage loan originators will not be required to acquire a license until the State Bank Commissioner adopts regulations implementing the new licensing laws. The bill requires that loan originator licensees have at the minimum 18 hours of education courses within the five years prior to licensure, or within one year following licensure. Applicants may work as mortgage loan originators upon initial employment on a permanent basis until the person is either licensed or the application is denied. Applicants must submit a $250 investigation fee and a $250 annual license fee.

Virginia Amends Regulations to Require Initial and Continuing Education

The Virginia State Corporation Commission recently issued amendments to regulations implementing the Mortgage Lender and Broker Act. The new regulations:

(i) require licensees to conduct background checks;

(ii) prohibit licensees from hiring an individual who has been convicted of a felony or a misdemeanor involving fraud, misrepresentation, or deceit, without obtaining prior approval from the Commission of the Bureau of Financial Institutions; and

(iii) make licensees responsible for providing initial and continuing education, as stated in the amendments, to “covered employees.”

The new regulations became effective on August 10, 2008. Under the new regulation, mortgage licensees are responsible for providing initial training and continuing education to their covered employees on at the minimum an annual basis with respect to all laws and regulations applicable to the licensees’ business.

Initial education must consist of at the minimum twelve (12) hours relating to applicable federal laws and regulations, at the minimum four (4) hours of which must relate to applicable Virginia laws and regulations, and two (2) hours must relate to mortgage fraud prevention, including penalties for participating in mortgage fraud. Initial education shall be provided to individuals who were covered employees as of July 1, 2008 on or before May 1, 2009, and to individuals who become covered employees after July 1, 2008, within 90 days of their date of hire. Continuing education must consist of at the minimum four (4) hours related to applicable federal laws and regulations, at the minimum two (2) hours related to applicable Virginia laws and regulations, and at the minimum one (1) hour relating to mortgage fraud prevention, including penalties for participating in mortgage fraud.

Additionally, the regulation prohibits licensees from hiring any individual for a position of employment who may have access to personal identifying information or financial information to any customer, without first obtaining a criminal history record from the Central Criminal Records Exchange that shows the prospective employee has not been convicted in any court of any felony, or any misdemeanor involving fraud, misrepresentation, or deceit under the laws of any state or the United States.

Florida Bars Criminals from Mortgage Licensing

Florida approved an emergency rule change to ban individuals with criminal histories from obtaining licenses to work in the mortgage industry. The rule prohibits the Florida Office of Financial Regulation from issuing a Florida mortgage broker, mortgage lender, correspondent lender or mortgage brokerage business license to an applicant for a stated period (ranging between 5 to 15 years) if the applicant or “applicable persons” of the applicant (i.e., officers, directors, members, partners, control persons and joint venturers) have been found or pled guilty or no contest to various felonies or misdemeanors. The rule allows for mitigating factors that could lengthen or shorten the periods of ineligibility. The emergency rule will keep in effect until regular rulemaking is completed.

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