Arizona-2011-HB2296-Engrossed

Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 6, chapter 9, article 1, Arizona Revised Statutes, is amended by adding section 6-912, to read:

START_STATUTE6-912. Certificate of exemption

A. A person who is exempt from licensure pursuant to this article as a federally chartered savings bank that is registered with the nationwide mortgage licensing system and registry may file a written application with the department for a certificate of exemption for the following purposes:

1. Registering with the department except that the registration shall not affect the exempt status of the applicant.

2. Sponsoring one or more mortgage loan originators.

3. Fulfilling any reporting requirements.

4. Reasonably supervising the activities of a mortgage loan originator who is licensed pursuant to article 4 of this chapter and who is employed by or under exclusive contract with the applicant.

B. A person shall make an application for a certificate of exemption or renewal of a certificate of exemption in writing on the forms, in the manner and accompanied by the information prescribed by the superintendent.� The superintendent may require additional information on the experience, background, honesty, truthfulness, integrity and competency of the applicant and the responsible individual designated by the applicant.

C. The department may charge a fee for processing the original or renewal application for a certificate of exemption and for other costs incurred by the department.

D. An exempt person shall notify the superintendent that it has designated a responsible individual to actively manage the activities of the mortgage loan originator licensees.� The responsible individual may be located in this state or in the state where the primary business of the bank is conducted and shall have at least three years of experience in the business of making mortgage loans or equivalent experience in a related business.� The responsible individual may supervise one or more licensed mortgage loan originators in this state.

E. Within ten days after learning that a responsible individual will cease managing the licensees' activities, an exempt person must notify the superintendent.� Within ninety days after the notification is received by the superintendent, the exempt person must replace the responsible individual with a person who meets the qualifications prescribed by subsection C of this section and must notify the superintendent of the replacement.� A certificate of exemption expires if either of the following occurs:

1. The exempt person is not placed under active management of a qualified responsible individual.

2. The exempt person does not provide notice of replacement of the responsible individual to the superintendent as prescribed by this section.

F. After reviewing the application for a certificate of exemption and after verifying the submitted information, the department shall issue the certificate of exemption.

G. An exempt person who sponsors a loan originator on an exclusive contract shall comply with section 6‑991.03.

H. The superintendent may deny a certificate of exemption to a person or suspend or revoke a certificate of exemption if the superintendent finds that an applicant or certificate holder has done any of the following:

1. Shown that the applicant or certificate holder is not a person of honesty, truthfulness and good character.

2. Violated any applicable law, rule or order.

3. Refused or failed to furnish, within a reasonable time, any information or make any report that may be required by the superintendent.

4. Had a final judgment entered against the applicant or certificate holder in a civil action on grounds of fraud, deceit or misrepresentation and the conduct on which the judgment is based indicates that it would be contrary to the interest of the public to permit the applicant or certificate holder to manage a loan originator.

5. had an order entered against the applicant or certificate holder involving fraud, deceit or misrepresentation by an administrative agency of this state, the federal government or any other state or territory of the United States and the facts relating to the order indicate that it would be contrary to the interest of the public to permit the applicant or certificate holder to manage a loan originator.

6. Made a material misstatement or suppressed or withheld information on the application for a certificate of exemption or any document required to be filed with the superintendent.

I. If a person to whom a certificate of exemption is issued or who has applied for a certificate of exemption under this article is indicted or informed against for forgery, embezzlement, obtaining money under false pretenses, extortion, criminal conspiracy to defraud or a like offense, and a certified copy of the indictment or information or other proper evidence of the indictment or information is filed with the superintendent, the superintendent may suspend the certificate of exemption issued to the exempt person or refuse to grant a certificate of exemption to an applicant pending trial on the indictment. END_STATUTE

Sec. 2. Section 6-991.02, Arizona Revised Statutes, is amended to read:

START_STATUTE6-991.02. Prohibited acts

Beginning July 1, 2010:

1. A. A loan originator acting on the loan originator's own behalf shall not accept any monies or documents in connection with an application for a mortgage loan.

2. B. An individual is not entitled to receive compensation in connection with arranging for or negotiating a mortgage loan if the individual is not licensed pursuant to this chapter.� An individual who is not specifically exempted from licensure pursuant to this article shall not engage in the business of a loan originator with respect to any dwelling in this state without first obtaining and maintaining annually a license pursuant to this article.� Each licensed loan originator must register with and maintain a valid unique identifier issued by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110‑289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.

3. C. A loan originator acting on the loan originator's own behalf shall not advertise, display, distribute, broadcast or televise, or cause or permit to be advertised, displayed, distributed, broadcast or televised, in any manner, any solicitation of mortgage business.

4. D. A loan originator shall not make, negotiate or offer to make or negotiate for compensation, either directly or indirectly, a loan that is either:

(a) 1. Less than the minimum amount that the loan originator's employer is allowed to make.

(b) 2. Not secured by a mortgage or deed of trust or other lien interest in real property unless employed by a consumer lender.

5. E. A loan originator who is employed by a mortgage broker or mortgage banker to act in the capacity of the mortgage broker or mortgage banker shall not be employed concurrently by any other mortgage broker or mortgage banker.

6. F. A loan originator shall not collect compensation for rendering services as a real estate broker or real estate salesperson licensed pursuant to title 32, chapter 20 unless both of the following apply:

(a) 1. The loan originator is licensed pursuant to title 32, chapter 20.

(b) 2. The employing mortgage broker or mortgage banker has disclosed to the person from whom the compensation is collected at the time a mortgage loan application is received that the loan originator is receiving compensation both for mortgage broker or mortgage banker services, if applicable, and for real estate broker or real estate salesperson services.

7. G. A loan originator shall not accept any assignment of the borrower's wages or salary in connection with activities governed by this article.

8. H. A loan originator shall not receive or disburse monies in servicing or arranging a mortgage loan.

9. I. A loan originator shall not make a false promise or misrepresentation or conceal an essential or material fact in the course of the mortgage broker or mortgage banker business.

10. J. A loan originator shall not fail to truthfully account for the monies belonging to a party to a mortgage loan transaction or fail to disburse monies in accordance with the employing mortgage broker or mortgage banker agreements.

11. K. A loan originator shall not engage in illegal or improper business practices.

12. L. A loan originator shall not require a person seeking a loan secured by real property to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer.

13. M. A loan originator shall not originate a mortgage loan unless employed by a mortgage broker, mortgage banker or consumer lender or under an exclusive contract with an exempt person who is registered pursuant to section 6‑912.

14. N. A loan originator shall not advertise for or solicit mortgage business in any manner without all of the following:

(a) 1. The name and license number as issued on the employing mortgage broker's, mortgage banker's or consumer lender's or the registered exempt person's principal place of business license.

(b) 2. Approval of the employing mortgage broker, mortgage banker or consumer lender or the registered exempt person.

(c) 3. The unique identifier the loan originator maintains with the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110‑289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.

15. O. On request, a loan originator shall make available to the superintendent the books and records relating to the loan originator's operations.� The superintendent may have access to the books and records and interview the officers, principals, employees, independent contractors, agents and customers of the loan originator concerning their business.� In connection with a request pursuant to this paragraph subsection, a person may not knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records or other information.

16. P. A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless the loan processor or underwriter obtains and maintains a license pursuant to section 6‑991.03.� Each independent contractor loan processor or underwriter licensed as a loan originator must have and maintain a valid unique identifier.

17. Q. An individual engaging solely in loan processor or underwriter activities shall not represent to the public through advertising or other means of communicating that the individual can or will perform any of the activities of a loan originator. END_STATUTE

Sec. 3. Section 6-991.03, Arizona Revised Statutes, is amended to read:

START_STATUTE6-991.03. Licensing; renewal; qualifications; application; fees

A. Beginning July 1, 2010, A natural person shall not act as a loan originator unless licensed under this article.

B. Beginning July 1, 2010, The superintendent shall not grant a loan originator license to a person, other than a natural person.� An applicant for an original loan originator's license shall have done all of the following:

1. Satisfactorily completed a course of study, including at least twenty hours of education, for loan originators approved by the superintendent during the two year period immediately preceding the time of application.� The twenty hours of education must include at least all of the following:

(a) Three hours of federal law.

(b) Three hours of ethics, which shall include instruction on fraud, consumer protection and fair lending issues.

2. Passed a loan originator's examination pursuant to section 6‑991.07 not more than one year before the granting of the license demonstrating knowledge and understanding of the following:

(a) Federal laws.

(b) Laws of this state.

3. Obtained a unique identifier through the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110‑289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.

4. Deposited with the superintendent a bond executed by the applicant's employer as principal and a surety company licensed to do business in this state as a surety pursuant to section 6‑903 or 6‑943.

5. Submitted fingerprints to the department for the purpose of a background investigation.

6. Paid an amount to be determined by the superintendent for deposit in the mortgage recovery fund established pursuant to section 6‑991.09 or deposited with the superintendent a bond executed by the applicant's employer or registered exempt person as principal and a surety company licensed or approved to do business in this state for the benefit of any person aggrieved by any act, representation, transaction or conduct of a licensed loan originator that violates this title or the rules adopted pursuant to this title.� Notwithstanding section 6‑903 or 6‑943, the amount of the bond shall be in an amount of not less than two hundred thousand dollars.� Loan originators working under the employer or registered exempt person bond described in this paragraph do not have to contribute to the mortgage recovery fund.

C. A person shall make an application for a license or renewal of a license in writing in the manner prescribed by the superintendent and accompanied by the information prescribed by the superintendent.

D. Before submitting a renewal application, an applicant for renewal of a loan originator license shall have satisfactorily completed eight approved continuing education units that include at least:

1. Three hours of federal law.

2. Two hours of ethics, including instruction on fraud, consumer protection and fair lending issues.

3. Two hours of training related to lending standards for the nontraditional mortgage product marketplace.

E. Education courses taken before licensure shall be reviewed and approved by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110‑289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.

F. Continuing education courses shall be reviewed and approved by the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110‑289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor.� A licensed loan originator:

1. May only receive credit for a continuing education course in the year in which the course is taken.

2. May not take the same approved course in the same year or successive years to meet the annual requirements for continuing education.

G. The nonrefundable application fee shall accompany each application for an original loan originator license.

H. A license issued pursuant to this article is not transferable or assignable.

I. At the superintendent's discretion, application fees may be waived if the applicant is a housing counselor certified by the United States department of housing and urban development and employed by a nonprofit agency.

J. Each mortgage broker, or mortgage banker or registered exempt person shall submit to the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110‑289; 122 Stat. 2810; 12 United States Code sections 1501 through 5116) or its successor reports of condition that are in a form and that contain information required by the nationwide mortgage licensing system.

K. The superintendent shall establish a process for loan originators to challenge information that the superintendent enters into the nationwide mortgage licensing system and registry. END_STATUTE

Sec. 4. Section 6-991.04, Arizona Revised Statutes, is amended to read:

START_STATUTE6-991.04. Issuance of license; notice from employing mortgage broker, mortgage banker or consumer lender or registered exempt person; renewal; inactive status; address change; fee

A. The superintendent, on determining that an applicant is qualified and has paid the required fees, shall issue a loan originator's license to the applicant evidenced by a continuous certificate.� The superintendent shall grant or deny a license within one hundred twenty days after receiving the completed application and fees.� An applicant who has been denied a license may not reapply for a license before one year from the date of the previous application.

B. On issuance of the license, the superintendent shall keep the loan originator's license until a mortgage broker or mortgage banker licensed pursuant to this chapter or a consumer lender employs the loan originator and the employer provides a written notice that the employer has hired the loan originator or until an exempt person who is registered pursuant to section 6‑912 provides a written notice that the exempt person has engaged the loan originator on an exclusive contract with the exempt person. The employer shall provide the notice before the loan originator begins working for the employer.� Exempt persons who are registered pursuant to section 6‑912 shall provide the notice before the loan originator begins work under the exclusive contract with the exempt person.� The notice shall be from an officer or other person authorized by the employer or registered exempt person.� The notice shall contain a request for the loan originator's license and shall be dated, signed and notarized. On receipt of the request, the superintendent shall forward the loan originator's license to the employing mortgage broker, mortgage banker or consumer lender or the registered exempt person.

C. Licenses shall be issued for a one year period.

D. A loan originator shall make application for renewal on forms prescribed by the superintendent.� The application shall include original certificates evidencing the loan originator's successful completion of eight continuing education units during the preceding one year period by a continuing education provider approved by the superintendent.

E. A loan originator shall pay the renewal fee every year on or before December 31.� Licenses not renewed by December 31 are suspended and the licensee shall not act as a loan originator until the license is renewed or a new license is issued pursuant to this article.� A person may renew a suspended license by paying the renewal fee plus a dollar amount to be determined by the superintendent for each day after December 31 that a license renewal fee is not received by the superintendent.

F. Licenses that are not renewed by January 31 of each year expire.� A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.

G. From December 1 through December 31 of each renewal period, a licensee may request inactive status for the following license period.� The license shall be placed on inactive status after the licensee pays to the superintendent the inactive status renewal fee and surrenders the license to the superintendent.� During inactive status, an inactive licensee shall not act as a loan originator.� A licensee may not be on inactive status for more than two consecutive renewal periods in any ten year period.� The license expires if the licensee violates this subsection.

H. At renewal an inactive licensee may return to active status by doing all of the following:

1. Providing the superintendent with evidence that the licensee has met the requirements of section 6‑991.03, subsection B.

2. Making a written request to the superintendent for reactivation.

3. Paying the annual licensing fee.

4. Providing the superintendent with proof that the licensee meets all other requirements for acting as a loan originator.

I. The employing mortgage broker, mortgage banker, or consumer lender or registered exempt person shall keep and maintain at the principal place of business in this state the loan originator's license during the loan originator's employment or exclusive contract term.� A copy of the loan originator's license shall be available for public inspection during regular business hours.

J. A loan originator shall immediately notify the superintendent of a change in the loan originator's residence address.� The superintendent shall endorse the change of address on the license for a fee to be determined by the superintendent.

K. Within five business days after any licensee's employment termination, the employing mortgage broker, mortgage banker or consumer lender or the registered exempt person shall do both of the following:

1. Notify the superintendent of the licensee's termination.

2. Return the license to the superintendent.

L. An applicant for a loan originator license who is currently registered with the nationwide mortgage licensing system and registry established by the secure and fair enforcement for mortgage licensing act of 2008 (P.L. 110‑289; 122 Stat. 2810; 12 United States Code sections 5101 through 5116) or its successor may be granted a temporary license for a period not to exceed one hundred eighty days.

M. The superintendent shall establish a process for loan originators to challenge information that the superintendent enters into the nationwide mortgage licensing system and registry. END_STATUTE