Bill Text: CA AB34 | 2009-2010 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Reports of missing persons: Violent Crime Information
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Passed) 2010-09-24 - Chaptered by Secretary of State - Chapter 225, Statutes of 2010. [AB34 Detail]
Download: California-2009-AB34-Amended.html
Bill Title: Reports of missing persons: Violent Crime Information
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Passed) 2010-09-24 - Chaptered by Secretary of State - Chapter 225, Statutes of 2010. [AB34 Detail]
Download: California-2009-AB34-Amended.html
BILL NUMBER: AB 34 AMENDED
BILL TEXT
AMENDED IN SENATE SEPTEMBER 3, 2009
AMENDED IN SENATE JULY 23, 2009
AMENDED IN ASSEMBLY JUNE 1, 2009
AMENDED IN ASSEMBLY APRIL 2, 2009
INTRODUCED BY Assembly Member Nava
(Principal coauthor: Senator Calderon)
DECEMBER 1, 2008
An act to amend Sections 10100, 10140.6, 10150, 10151, 10235.5,
and 10236.4 of, to add Article 2.1 (commencing with Section 10166.01)
to Chapter 3 of Part 1 of Division 4 of, and to repeal Section
10131.8 of, the Business and Professions Code, to amend Sections
22100, 22101, 22101.5, 22102, 22103, 22104, 22106, 22107, 22108,
22109, 22112, 22151, 22152, 22153, 22154, 22155, 22156, 22157, 22159,
22168, 22169, 22170, 22171, 22700, 50002, 50003, 50120, 50121,
50122, 50123, 50124, 50125, 50126, 50128, 50129, 50130, 50200, 50201,
50202, 50204, 50205, 50206, 50208, 50302, 50307, 50310, 50317,
50318, 50320, 50325, 50328, 50333, 50401, 50700,
and 50701 of, to add Sections 22012, 22013, 22014, 22105.1, 22105.2,
22105.3, 22105.4, 22109.1, 22109.2, 22109.3, 22109.4, 22109.5,
22109.6, 22172, 22347, 22755, 50002.5, 50003.5, 50003.6, 50209,
50307.2, and 50513 to, to add Chapter 3.5 (commencing with Section
50140) and Chapter 3.6 (commencing with Section 50150) to Division 20
of, and to repeal Sections 50601, 50602, and 50705 of, the Financial
Code, and to add Section 18034 to the Health and Safety Code,
relating to mortgages, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 34, as amended, Nava. Real estate, finance lender, and
residential mortgage lender licenses: mortgage loan originators.
(1) Existing law, the Real Estate Law, governs the licensing and
regulation of real estate licensees, as defined, as administered by
the Real Estate Commissioner. Existing law imposes specified
requirements on real estate brokers who solicit borrowers or lenders
or negotiate loans or collect payments or perform services for
borrowers or lenders relative to loans secured by real property. A
willful violation of the Real Estate Law is a crime.
This bill would require a real estate license endorsement from the
commissioner in order to engage in the business of a mortgage loan
originator, as defined. The bill would establish penalties if a real
estate licensee fails to obtain a license endorsement before
conducting business as a mortgage loan originator and would authorize
the commissioner to suspend or revoke a real estate license for a
failure to pay these penalties. The bill would require applicants for
a license endorsement as a mortgage loan originator to furnish
specified background information to the Nationwide Mortgage Licensing
System and Registry. The bill would establish standards for issuance
and renewal of a license endorsement to act as a mortgage loan
originator, including satisfying specified educational requirements.
The bill would require these real estate licensees to annually submit
business activities reports, and other reports that may be required,
to the commissioner. The bill would authorize the commissioner to
examine the affairs of real estate brokers, including those that
obtain license endorsement as a mortgage loan originator. The bill
would require the commissioner to report violations of the provisions
regulating real estate brokers and mortgage loan originators to the
Nationwide Mortgage Licensing System and Registry. The bill would
require recipients of a license endorsement as a mortgage loan
originator to use or disclose a specified unique identifier provided
by the Nationwide Mortgage Licensing System and Registry in
advertisements and solicitations of the mortgage loan originator. The
bill would enact other related provisions.
(2) Existing law provides for the licensure and regulation of
finance lenders and brokers and residential mortgage lenders and
servicers by the Department of Corporations. A willful violation of
the laws regulating these licensees is a crime.
This bill would require the licensure and regulation of mortgage
loan originators, as defined, under the California Finance Lenders
Law and the California Residential Mortgage Lending Act. The bill
would require mortgage loan originators to also be licensed and
registered through the Nationwide Mortgage Licensing System and
Registry. The bill would require applicants for licensure as a
mortgage loan originator to furnish specified background information
to the Nationwide Mortgage Licensing System and Registry and would
require applicants for licensure or license renewal to satisfy
certain requirements, including educational requirements. The bill
would require finance lenders and brokers, and residential mortgage
lenders and servicers, that employ a mortgage loan originator to
maintain a minimum net worth of $250,000. The bill would authorize
the commissioner to require finance lenders and brokers, and
residential mortgage lenders and servicers, that employ a mortgage
loan originator to submit reports of condition to the Nationwide
Mortgage Licensing System and Registry. The bill would authorize the
commissioner to establish relationships or contracts with the
Nationwide Mortgage Licensing System and Registry, as specified, for
the purposes of implementing these provisions of the bill. The bill
would require a mortgage loan originator to use or disclose a
specified unique identifier on all mortgage loan applications,
solicitations, or advertisements. The bill would enact other related
provisions.
(3) This bill would provide that no person is required to have a
mortgage loan originator license under the California Finance Lenders
Law or the California Residential Mortgage Lending Act before July
31, 2010, nor a mortgage loan originator license endorsement under
the Real Estate Law, as set forth in the bill, before December 31,
2010.
(4) Because a willful violation of these provisions would be a
crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(5) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10100 of the Business and Professions Code is
amended to read:
10100. Before denying, suspending or revoking any license or
license endorsement issuable or issued under the provisions of this
part, the department shall proceed as prescribed by Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, and the department shall have all the powers
granted therein.
SEC. 2. Section 10131.8 of the Business and Professions Code is
repealed.
SEC. 3. Section 10140.6 of the Business and Professions Code is
amended to read:
10140.6. (a) A real estate licensee shall not publish, circulate,
distribute, or cause to be published, circulated, or distributed in
any newspaper or periodical, or by mail, any matter pertaining to any
activity for which a real estate license is required that does not
contain a designation disclosing that he or she is performing acts
for which a real estate license is required.
(b) (1) A real estate licensee shall disclose his or her license
identification number and, if that licensee is a mortgage loan
originator, the unique identifier assigned to that licensee by the
Nationwide Mortgage Licensing System and Registry, on all
solicitation materials intended to be the first point of contact with
consumers and on real property purchase agreements when acting as an
agent in those transactions. The commissioner may adopt regulations
identifying the materials in which a licensee must disclose a license
identification number and, if that licensee is a mortgage loan
originator, the unique identifier assigned to that licensee by the
Nationwide Mortgage Licensing System and Registry.
(2) For purposes of this section, "solicitation materials intended
to be the first point of contact with consumers" includes business
cards, stationery, advertising fliers, and other materials designed
to solicit the creation of a professional relationship between the
licensee and a consumer, and excludes an advertisement in print or
electronic media and "for sale" signs.
(3) Nothing in this section shall be construed to limit or change
the requirement described in Section 10236.4 as applicable to real
estate brokers.
(c) The provisions of this section shall not apply to classified
rental advertisements reciting the telephone number at the premises
of the property offered for rent or the address of the property
offered for rent.
(d) "Mortgage loan originator," "unique identifier," and
"Nationwide Mortgage Licensing System and Registry" have the meanings
set forth in Section 10166.01.
SEC. 4. Section 10150 of the Business and Professions Code is
amended to read:
10150. (a) Application for the real estate broker license
examination shall be made in writing to the commissioner. The
commissioner may prescribe the format and content of the broker
examination application. The application for the broker examination
shall be accompanied by the real estate broker license examination
fee.
(b) Persons who have been notified by the commissioner that they
passed the real estate broker license examination may apply for a
real estate broker license. A person applying for the broker
examination may also apply for a real estate broker license. However,
a license shall not be issued until the applicant passes the real
estate broker license examination. If there is any change to the
information contained in a real estate broker license application
after the application has been submitted and before the license has
been issued, the commissioner may require the applicant to submit a
supplement to the application listing the changed information.
(c) Application for the real estate broker license shall be made
in writing to the commissioner. The commissioner may prescribe the
format and content of the broker license application. The application
for the real estate broker license shall be accompanied by the
appropriate fee.
(d) Application for an endorsement to act as a mortgage loan
originator, as defined in Section 10166.01, shall be made either
electronically or in writing as directed by the commissioner. The
commissioner may prescribe the format and content of the mortgage
loan originator endorsement application, which shall meet the minimum
requirements for licensing of a mortgage loan originator, pursuant
to the Secure and Fair Enforcement for Mortgage Licensing Act of 2008
(Public Law 110-289).
SEC. 5. Section 10151 of the Business and Professions Code is
amended to read:
10151. (a) Application for the real estate salesperson license
examination shall be made in writing to the commissioner. The
commissioner may prescribe the format and content of the salesperson
examination application. The application for the salesperson
examination shall be accompanied by the real estate salesperson
license examination fee.
(b) Persons who have been notified by the commissioner that they
passed the real estate salesperson license examination may apply for
a real estate salesperson license. A person applying for the
salesperson examination may also apply for a real estate salesperson
license. However, a license shall not be issued until the applicant
passes the real estate salesperson license examination. If there is
any change to the information contained in a real estate salesperson
license application after the application has been submitted and
before the license has been issued, the commissioner may require the
applicant to submit a supplement to the application listing the
changed information.
(c) An application for the real estate salesperson license
examination or for both the examination and license that is received
by the commissioner on or after October 1, 2007, shall include
evidence or certification, satisfactory to the commissioner, of
successful completion at an accredited institution of a
three-semester unit course, or the quarter equivalent thereof, or
successful completion of an equivalent course of study as defined in
Section 10153.5, in real estate principles as well as the successful
completion at an accredited institution of a course in real estate
practice and one additional course set forth in Section 10153.2,
other than real estate principles, real estate practice, advanced
legal aspects of real estate, advanced real estate finance, or
advanced real estate appraisal. The applicant shall provide this
evidence or certification to the commissioner prior to taking the
real estate salesperson license examination.
(d) The commissioner shall waive the requirements of this section
for the following applicants:
(1) An applicant who is a member of the State Bar of California.
(2) An applicant who has qualified to take the examination for an
original real estate broker license by satisfying the requirements of
Section 10153.2.
(e) Application for endorsement to act as a mortgage loan
originator, as defined in Section 10166.01, shall be made either
electronically or in writing as directed by the commissioner. The
commissioner may prescribe the format and the content of the mortgage
loan originator endorsement application, which shall meet the
minimum requirements for licensing of a mortgage loan originator,
pursuant to the Secure and Fair Enforcement for Mortgage Licensing
Act of 2008 (Public Law 110.289).
SEC. 6. Article 2.1 (commencing with Section 10166.01) is added to
Chapter 3 of Part 1 of Division 4 of the Business and Professions
Code, to read:
Article 2.1. Secure and Fair Enforcement for Mortgage Licenses
10166.01. For purposes of this article, the following definitions
shall apply:
(a) "SAFE Act" means the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289).
(b) (1) "Mortgage loan originator" means an individual who takes a
residential mortgage loan application or offers or negotiates terms
of a residential mortgage loan for compensation or gain. An
individual real estate licensee acting within the meaning of
paragraph (d) of Section 10131 is a mortgage loan originator for
purposes of this article with respect to activities involving
residential mortgage loans.
(2) Mortgage loan originator does not include any of the
following:
(A) An individual who performs purely administrative or clerical
tasks on behalf of a person meeting the definition of a mortgage loan
originator, except as otherwise provided in subdivision (c) of
Section 10166.03. The term "administrative or clerical tasks" means
the receipt, collection, and distribution of information common for
the processing or underwriting of a loan in the mortgage industry and
communication with a consumer to obtain information necessary for
the processing or underwriting of a residential mortgage loan.
(B) An individual that only performs real estate brokerage
services, as defined in subdivision (a) or (b) of Section 10131,
unless that person is compensated by a lender, other mortgage loan
originator, or by any agent of any lender or other mortgage loan
originator.
(C) An individual who solely renegotiates terms for existing
mortgage loans held or serviced by his or her employer and who does
not otherwise act as a mortgage loan originator, unless the United
States Department of Housing and Urban Development or a court of
competent jurisdiction determines that the SAFE Act requires such an
employee to be licensed as a mortgage loan originator under state
laws implementing the SAFE Act.
(D) An individual that is solely involved in extensions of credit
relating to timeshare plans, as that term is defined in Section 101
(53D) of Title 11 of the United States Code.
(E) An individual licensed or registered as a mortgage loan
originator pursuant to the provisions of the Financial Code and the
SAFE Act.
(c) "Nationwide Mortgage Licensing System and Registry" means a
mortgage licensing system developed and maintained by the Conference
of State Bank Supervisors and the American Association of Residential
Mortgage Regulators for the licensing and registration of mortgage
loan originators.
(d) "Residential mortgage loan" means any loan primarily for
personal, family, or household use that is secured by a mortgage,
deed of trust, or other equivalent consensual security interest on a
dwelling, or residential real estate upon which is constructed or
intended to be constructed a dwelling. "Dwelling" means a residential
structure that contains one to four units, whether or not that
structure is attached to real property. The term includes an
individual condominium unit, cooperative unit, mobilehome, or
trailer, if it is used as a residence.
(e) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
(f) "Loan processor or underwriter" means an individual who
performs clerical or support duties as an employee at the direction
of, and subject to the supervision and instruction of, a mortgage
loan originator.
10166.02. (a) A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131, and who makes,
arranges, or services loans secured by real property containing one
to four residential units, and any salesperson who acts in a similar
capacity under the supervision of that broker, shall notify the
department within 30 days of the effective date of this
section or upon by January 31, 2010, or within 30 days
of commencing that activity, whichever is later. The
notification shall be made in writing, as directed, on a form that is
acceptable to the commissioner.
(b) No individual may engage in business as a mortgage loan
originator under this article without first doing both of the
following:
(1) Obtaining and maintaining a real estate license pursuant to
Article 2 (commencing with Section 10150).
(2) Obtaining and maintaining a real estate license endorsement
pursuant to this article identifying that individual as a licensed
mortgage loan originator.
(c) License endorsements shall be valid for a period of one year
and shall expire on the 31st of December each year.
(d) Applicants for a mortgage loan originator license endorsement
shall apply in a form prescribed by the commissioner. Each form shall
contain content as set forth by rule, regulation, instruction, or
procedure of the commissioner.
(e) In order to fulfill the purposes of this article, the
commissioner may establish relationships or contracts with the
Nationwide Mortgage Licensing System and Registry or other entities
designated by the Nationwide Mortgage Licensing System and Registry
to collect and maintain records and process transaction fees or other
fees related to licensees or other persons subject to this article.
(f) A real estate broker who fails to notify the department
pursuant to subdivision (a), or who fails to obtain a license
endorsement required pursuant to paragraph (2) of subdivision (b),
shall be assessed a penalty of fifty dollars ($50) per day for each
day written notification has not been received or a license
endorsement has not been obtained, up to and including the 30th day
after the first day of the assessment penalty. On and after the 31st
day, the penalty is one hundred dollars ($100) per day, not to exceed
a total penalty of ten thousand dollars ($10,000), regardless of the
number of days, until the department receives the written
notification or the licensee obtains the license endorsement.
Penalties for violations of subdivisions (a) and (b) shall be
additive.
(g) The commissioner may suspend or revoke the license of a real
estate broker who fails to pay a penalty imposed pursuant to this
section. In addition, the commissioner may bring an action in an
appropriate court of this state to collect payment of that penalty.
(h) All penalties paid or collected under this section shall be
deposited into the Recovery Account of the Real Estate Fund and
shall, upon appropriation by the Legislature, be available for
expenditure for the purposes specified in Chapter 6.5 (commencing
with Section 10470).
10166.03. (a) A loan processor or underwriter who does not
represent to the public, through advertising or other means of
communicating or providing information, including the use of business
cards, stationery, brochures, signs, rate lists, or other
promotional items, that the individual can or will perform any of the
activities of a mortgage loan originator shall not be required to
obtain a license endorsement as a mortgage loan originator.
(b) An individual engaging solely in loan processor or underwriter
activities shall not represent to the public, through advertising or
other means of communicating or providing information including the
use of business cards, stationery, brochures, signs, rate lists, or
other promotional items, that the individual can or will perform any
of the activities of a mortgage loan originator.
(c) An independent contractor who is employed by a mortgage loan
originator may not engage in the activities of a loan processor or
underwriter for a residential mortgage loan unless the independent
contractor loan processor or underwriter obtains and maintains an
endorsement as a mortgage loan originator under this article. Each
independent contractor loan processor or underwriter who obtains and
maintains an endorsement as a mortgage loan originator under this
article shall have and maintain a valid unique identifier issued by
the Nationwide Mortgage Licensing System and Registry.
10166.04. (a) In connection with an application to the
commissioner for a license endorsement as a mortgage loan originator,
every applicant shall furnish to the Nationwide Mortgage Licensing
System and Registry information concerning the applicant's identity,
including the following:
(1) Fingerprint images and related information, for purposes of
performing a federal, or both a state and federal, criminal history
background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain both of the
following:
(A) An independent credit report from a consumer reporting agency.
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(b) The commissioner may ask the Nationwide Mortgage Licensing
System and Registry to obtain state criminal history background check
information on applicants described in subdivision (a) using the
procedures set forth in subdivisions (c) and (d).
(c) If the Nationwide Mortgage Licensing System and Registry
electronically submits fingerprint images and related information, as
required by the Department of Justice, for an applicant for a
mortgage loan originator license endorsement, to the Department of
Justice for the purposes of obtaining information as to the existence
and content of a record of state convictions and state arrests, and
as to the existence and content of a record of state arrests for
which the Department of Justice establishes that the person is free
on bail or on his or her recognizance pending trial or appeal, the
Department of Justice shall provide an electronic response to the
Nationwide Mortgage Licensing System and Registry pursuant to
paragraph (1) of subdivision (p) of Section 11105 of the Penal Code,
and shall provide the same electronic response to the department.
(d) The Nationwide Mortgage Licensing System and Registry may
request from the Department of Justice subsequent arrest notification
service, as provided pursuant to Section 11105.2 of the Penal Code,
for persons described in subdivision (a). The Department of Justice
shall provide the same electronic response to the department.
(e) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the requests described in this section.
10166.05. Notwithstanding any other provision of law, the
commissioner shall not issue a license endorsement to act as a
mortgage loan originator to an applicant unless the commissioner
makes all of the following findings:
(a) The applicant has never had a mortgage loan originator license
revoked in any governmental jurisdiction, except that a subsequent
formal vacation of a revocation shall not be deemed a revocation.
(b) The applicant has not been convicted of, or pled guilty or
nolo contendere to, a felony in a domestic, foreign, or military
court, under either of the following conditions, however, any pardon
of a conviction shall not be considered a conviction for purposes of
this subdivision:
(1) During the seven-year period preceding the date of the
application for licensing.
(2) At any time preceding the date of application, if the felony
involved an act of fraud, dishonesty, a breach of trust, or money
laundering.
(c) The applicant has demonstrated such financial responsibility,
character, and general fitness as to command the confidence of the
community and warrant a determination that the mortgage loan
originator will operate honestly, fairly, and efficiently within the
purposes of the article.
(d) The applicant has complied with the education and written
testing requirements in Section 10166.06.
10166.06. (a) In addition to the requirements of Section 10153,
an applicant for a license endorsement as a mortgage loan originator
shall complete at least 20 hours of education courses, which shall
include at least the following:
(1) Three hours of federal law and regulations.
(2) Three hours of ethics, which shall include instruction on
fraud, consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of this section, education courses are only
acceptable if they have been reviewed and approved, or otherwise
deemed acceptable, by the Nationwide Mortgage Licensing System and
Registry, in accordance with the SAFE Act. Education may be offered
in a classroom, online, or by any other means approved by the
Nationwide Mortgage Licensing System and Registry, in accordance with
the SAFE Act.
(c) A person who successfully completes the education requirements
approved by the Nationwide Mortgage Licensing System and Registry in
any state other than California shall be granted credit by the
commissioner toward completion of the education requirements of this
section.
(d) Before being issued a license endorsement to act as a mortgage
loan originator, an individual shall pass a qualified written test
developed or otherwise deemed acceptable by the Nationwide Mortgage
Licensing System and Registry and administered by a test provider
approved or otherwise deemed acceptable by the Nationwide Mortgage
Licensing System and Registry.
(e) A written test shall not be treated as a qualified written
test for purposes of this section, unless the test adequately
measures the applicant's knowledge and comprehension in the following
subject areas: ethics, federal law and regulation pertaining to
mortgage origination, state law and regulation pertaining to mortgage
origination, and federal and state law and regulation relating to
fraud, consumer protection, the nontraditional mortgage marketplace,
and fair lending issues.
(f) Nothing in this section shall prohibit a test provider
approved by the Nationwide Mortgage Licensing System and Registry
from providing a test at the location of the employer of the
applicant or any subsidiary or affiliate of the employer of the
applicant, or any entity with which the applicant holds an exclusive
arrangement to conduct the business of a mortgage loan originator.
(g) An individual shall not be considered to have passed a
qualified written test administered pursuant to this section unless
the individual achieves a test score of not less than 75 percent
correct answers to questions.
(h) An individual who fails the qualified written test may retake
the test up to three consecutive times, although at least 30 days
must pass between each retesting.
(i) An applicant who fails three consecutive retests must wait at
least six months before retesting.
(j) A mortgage loan originator who fails to maintain a valid
license endorsement for a period of five years or longer or who fails
to register as a mortgage loan originator in accordance with
applicable California law shall retake the qualified written test.
10166.07. (a) A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131, and who makes,
arranges, or services one or more loans in a calendar year that are
secured by real property containing one to four residential units,
shall annually file a business activities report, within 90 days
after the end of the broker's fiscal year or within any additional
time as the commissioner may allow for filing for good cause. The
report shall contain within its scope all of the following
information for the fiscal year, relative to the business activities
of the broker and those of any other brokers and real estate
salespersons acting under that broker's supervision:
(1) Name and license number of the supervising broker and names
and license numbers of the real estate brokers and salespersons under
that broker's supervision. The report shall include brokers and
salespersons who were under the supervising broker's supervision for
all or part of the year.
(2) A list of the real estate-related activities in which the
supervising broker and the brokers and salespersons under his or her
supervision engaged during the prior year. This listing shall
identify all of the following:
(A) Activities relating to mortgages, including arranging, making,
or servicing.
(B) Other activities performed under the real estate broker's or
salesperson's license.
(C) Activities performed under related licenses, including, but
not limited to, a license to engage as a finance lender or a finance
broker under the California Finance Lenders Law (Division 9
(commencing with Section 22000) of the Financial Code), or a license
to engage as a residential mortgage lender or residential mortgage
loan servicer under the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000) of the Financial Code).
(3) A list of the forms of media used by the broker and those
under his or her supervision to advertise to the public, including
print, radio, television, the Internet, or other means.
(4) For fixed rate loans made, brokered, or serviced, all of the
following:
(A) The total number, aggregate principal amount, lowest interest
rate, highest interest rate, and a list of the institutional lenders
of record. If the loan was funded by any lender other than an
institutional lender, the broker shall categorize the loan as
privately funded.
(B) The total number and aggregate principal amount of covered
loans, as defined in Section 4970 of the Financial Code.
(C) The total number and aggregate principal amount of loans for
which Department of Real Estate form RE Form 885 or an equivalent is
required.
(5) For adjustable rate loans made, brokered, or serviced, all of
the following:
(A) The total number, aggregate principal amount, lowest beginning
interest rate, highest beginning interest rate, highest margin, and
a list of the institutional lenders of record. If the loan was funded
by any lender other than an institutional lender, the broker shall
categorize the loan as privately funded.
(B) The total number and aggregate principal amount of covered
loans, as defined in Section 4970 of the Financial Code.
(C) The total number and aggregate principal amount of loans for
which Department of Real Estate form RE Form 885 or an equivalent is
required.
(6) For all loans made, brokered, or serviced, the total number
and aggregate principal amount of loans funded by institutional
lenders, and the total number and aggregate principal amount of loans
funded by private lenders.
(7) For all loans made, brokered, or serviced, the total number
and aggregate principal amount of loans that included a prepayment
penalty, the minimum prepayment penalty length, the maximum
prepayment penalty length, and the number of loans with prepayment
penalties whose length exceeded the length of time before the
borrower's loan payment amount could increase.
(8) For all loans brokered, the total compensation received by the
broker, including yield spread premiums, commissions, and rebates,
but excluding compensation used to pay fees for third-party services
on behalf of the borrower.
(9) For all mortgage loans made or brokered,
the total number of loans for which a mortgage loan disclosure
statement was provided in a language other than English, and the
number of forms provided per language other than English.
(10) For all mortgage loans serviced, the total amount of funds
advanced to be applied toward a payment to protect the security of
the note being serviced.
(11) For purposes of this section, an institutional lender has the
meaning specified in paragraph (1) of subdivision (c) of Section
10232.
(b) A broker subject to this section and Section 10232.2 may file
consolidated reports that include all of the information required
under this section and Section 10232.2. Those consolidated reports
shall clearly indicate that they are intended to satisfy the
requirements of both sections.
(c) If a broker subject to this section fails to timely file the
report required under this section, the commissioner may cause an
examination and report to be made and may charge the broker one and
one-half times the cost of making the examination and report. In
determining the hourly cost incurred by the commissioner for
conducting an examination and preparing the report, the commissioner
may use the estimated average hourly cost for all department audit
staff performing audits of real estate brokers. If a broker fails to
pay the commissioner's cost within 60 days of the mailing of a notice
of billing, the commissioner may suspend the broker's license or
deny renewal of that license. The suspension or denial shall remain
in effect until the billed amount is paid or the broker's right to
renew a license has expired. The commissioner may maintain an action
for the recovery of the billed amount in any court of competent
jurisdiction.
(d) The report described in this section is exempted from any
requirement of public disclosure by paragraph (2) of subdivision (d)
of Section 6254 of the Government Code.
(e) The commissioner may waive the requirement to submit certain
information described in paragraphs (1) to (10), inclusive, of
subdivision (a) if the commissioner determines that this information
is duplicative of information required by the Nationwide Mortgage
Licensing System and Registry, pursuant to Section 10166.08.
10166.08. Each mortgage loan originator shall submit reports of
condition to the Nationwide Mortgage Licensing System and Registry
reports of condition, and those reports shall be in the form and
shall contain information as the Nationwide Mortgage Licensing System
and Registry may require.
10166.09. The minimum standards for renewal of an endorsement as
a mortgage loan originator shall include the following:
(a) The mortgage loan originator continues to meet the minimum
standards for obtaining an endorsement as a mortgage loan originator.
(b) The mortgage loan originator satisfies the annual continuing
education requirements described in Section 10166.10.
10166.10. (a) A mortgage loan originator shall complete at least
eight hours of continuing education annually, which shall include at
least three hours relating to federal law and regulations, two hours
of ethics, which shall include instruction on fraud, consumer
protection, and fair lending issues, and two hours related to lending
standards for the nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), continuing education courses
and course providers shall be reviewed and approved by the
commissioner and the Nationwide Mortgage Licensing System and
Registry.
(c) The commissioner shall have the authority to substitute any of
the courses described in subdivision (a) for the course requirements
of Section 10170.5, subject to a finding that the course
requirements in subdivision (a) and the course completion standards
in subdivision (g) of Section 10166.06 are substantially equivalent
to, and meet the intent of, Section 10170.5.
(d) Nothing in this section shall preclude any education course,
as approved by the commissioner and the Nationwide Mortgage Licensing
System and Registry, that is provided by the employer of the
mortgage loan originator or an entity that is affiliated with the
mortgage loan originator by an agency contract, or any subsidiary or
affiliate of the employer or entity.
(e) Continuing education may be offered either in a classroom,
online, or by any other means approved by the commissioner and the
Nationwide Mortgage Licensing System and Registry.
(f) A mortgage loan originator may only receive credit for a
continuing education course in the year in which the course is taken.
(g) A mortgage loan originator may not take the same approved
course in the same or successive years to meet the requirements of
this section for continuing education.
(h) A mortgage loan originator who is an instructor of an approved
continuing education course may receive credit for his or her own
annual continuing education requirement at the rate of two hours
credit for every one hour taught.
(i) A person who successfully completes the education requirements
approved by the Nationwide Mortgage Licensing System and Registry in
any state other than California shall be granted credit by the
commissioner towards completion of continuing education requirements
in this state.
(j) A mortgage loan originator whose license endorsement lapses,
expires, or is suspended or revoked, and who wishes to regain his or
her license endorsement, shall complete continuing education
requirements for the last year in which the endorsement was held,
prior to issuance of a new or renewed endorsement.
10166.11. (a) A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131 and who makes,
arranges, or services loans secured by real property containing one
to four residential units, shall keep documents and records that will
properly enable the commissioner to determine whether the
residential mortgage brokerage, servicing, and lending functions
performed by the broker comply with this division and with all
applicable rules and orders made by the commissioner. These documents
shall include, at a minimum, the documents described in Section
10148. Upon request of the commissioner, a real estate broker shall
file an authorization for disclosure to the commissioner of financial
records of his or her licensed business pursuant to Section 7473 of
the Government Code.
(b) Notwithstanding subdivision (a) of Section 10148, the business
documents and records of real estate brokers described in
subdivision (a) and real estate salespersons acting under those
brokers are subject to inspection and examination or audit by the
commissioner, at his or her discretion, after reasonable notice. That
real estate broker or salesperson shall, upon request by the
commissioner and within the time period specified in that request,
allow the commissioner, or his or her authorized representative, to
inspect and copy any business documents and records. The commissioner
may suspend or revoke the license of the broker or salesperson if he
or she fails to produce documents or records within the time period
specified in the request.
(c) Inspection and examination or audit reports prepared by the
commissioner's duly designated representatives pursuant to this
section are not public records. Those reports may be disclosed to the
officers or directors of a licensee that is the subject of the
report for the purpose of corrective action. That disclosure shall
not operate as a waiver of the exemption specified in subdivision (d)
of Section 6254 of the Government Code.
10166.12. (a) As often as the commissioner deems necessary and
appropriate, the commissioner shall examine the affairs of each real
estate broker who is required to notify the commissioner or obtain a
license endorsement pursuant to Section 10166.02 for compliance with
this part. These examinations shall also include a review of the
affairs of all real estate brokers and real estate salespersons
acting under the supervision of each real estate broker who is
required to file reports with the department pursuant to Section
10166.07. The commissioner shall appoint suitable persons to perform
these examinations. The commissioner and his or her appointees may
examine the books, records, and documents of the licensee, and may
examine the licensee's officers, directors, employees, or agents
under oath regarding the licensee's operations. The commissioner may
cooperate with any agency of the state or federal government, other
states, agencies, the Federal National Mortgage Association, or the
Federal Home Loan Mortgage Corporation. The commissioner may accept
an examination conducted by one of these entities in place of an
examination by the commissioner under this section, unless the
commissioner determines that the examination does not provide
information necessary to enable the commissioner to fulfill his or
her responsibilities under this division.
(b) The commissioner may impose a penalty against a real estate
broker or real estate salesperson whose affairs are examined or
reviewed pursuant to subdivision (a) based on the findings of the
examination or review. The commissioner may suspend or revoke the
license or license endorsement of a real estate broker or real estate
salesperson who fails to pay that penalty. In addition, the
commissioner may bring an action in an appropriate court of this
state to collect payment of the penalty.
(c) Penalties collected pursuant to subdivision (b) shall be
deposited into the Recovery Account of the Real Estate Fund and
shall, upon appropriation by the Legislature, be available for
expenditure for the purposes specified in Chapter 6.5 (commencing
with Section 10470).
(d) The statement of the findings of an examination conducted
pursuant to this section shall belong to the commissioner and shall
not be disclosed to anyone other than the licensee, law enforcement
officials, or other state or federal regulatory agencies for further
investigation and enforcement. Reports required of licensees by the
commissioner under this division and results of examinations
performed by the commissioner under this division are the property of
the commissioner.
10166.13. A real estate broker who acts pursuant to Section
10131.1 or subdivision (d) or (e) of Section 10131 and who makes,
arranges, or services loans secured by real property containing one
to four residential units shall make any special reports to the
commissioner that the commissioner may, from time to time, require.
10166.14. A real estate broker shall notify the department when
he or she is no longer subject to this part. If a broker has already
made reports required by Sections 10166.07 and 10166.08 within the
year, he or she shall continue reports for that year, but shall
notify the department prior to the expiration of that year that he or
she will no longer be subject to this part in the succeeding year.
10166.15. (a) The commissioner shall regularly report violations
of this article, as well as enforcement actions taken against any
mortgage loan originator to whom an endorsement has been issued, and
enforcement actions taken against any individual for failure to
obtain an endorsement as a mortgage loan originator, to the
Nationwide Mortgage Licensing System and Registry.
(b) The commissioner shall establish a process that may be used by
mortgage loan originators to challenge information entered into the
Nationwide Mortgage Licensing System and Registry by the
commissioner.
(c) The commissioner is authorized to promulgate regulations
specifying (1) the recordkeeping requirements that mortgage loan
originators shall satisfy and (2) the penalties that shall apply to
mortgage loan originators for violations of this article.
10166.16. (a) Except as otherwise provided in Section 1512 of
the SAFE Act, the requirements under any federal or state law
regarding the privacy or confidentiality of any information or
material provided to the Nationwide Mortgage Licensing System and
Registry, and any privilege arising under federal or state law,
including the rules of any federal or state court, with respect to
that information or material, shall continue to apply to the
information or material after the information or material has been
disclosed to the Nationwide Mortgage Licensing System and Registry.
The information and material may be shared with all state and federal
regulatory officials with mortgage industry oversight authority
without the loss of privilege or the loss of confidentiality
protections provided by federal or state law.
(b) For these purposes, the commissioner is authorized to enter
agreements or sharing arrangements with other governmental agencies,
the Conference of State Bank Supervisors, the American Association of
Residential Mortgage Regulators, or other associations representing
governmental agencies as established by rule, regulation or order of
the commissioner.
(c) Information or material that is subject to a privilege or
confidentiality under subdivision (a) shall not be subject to either
of the following:
(1) Disclosure under any federal or state law governing the
disclosure to the public of information held by an officer or an
agency of the federal government or the state.
(2) Subpoena or discovery, or admission into evidence, in any
private civil action or administrative process, unless with respect
to any privilege held by the Nationwide Mortgage Licensing System and
Registry with respect to the information or material, the person to
whom the information or material pertains waives, in whole or in
part, in the discretion of the person, that privilege.
(d) This section shall not apply with respect to the information
or material relating to the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, mortgage
loan originators that is included in the Nationwide Mortgage
Licensing System and Registry for access by the public.
10166.17. In addition to any other duties imposed upon the
commissioner by law, the commissioner shall require mortgage loan
originators to be licensed and registered through the Nationwide
Mortgage Licensing System and Registry. In order to carry out this
requirement the commissioner is authorized to participate in the
Nationwide Mortgage Licensing System and Registry. For this purpose,
the commissioner may establish by rule, regulation, or order,
requirements as necessary, including, but not limited to, the
following:
(a) Background checks for the following:
(1) Criminal history through fingerprint or other databases.
(2) Civil or administrative records.
(3) Credit history.
(4) Any other information as deemed necessary by the Nationwide
Mortgage Licensing System and Registry.
(b) The payment of fees to apply for or renew licenses through the
Nationwide Mortgage Licensing System and Registry.
(c) The setting or resetting as necessary of renewal or reporting
dates.
(d) Requirements for amending or surrendering a license or any
other activities as the commissioner deems necessary for
participation in the Nationwide Mortgage Licensing System and
Registry.
SEC. 7. Section 10235.5 of the Business and Professions Code is
amended to read:
10235.5. (a) No real estate licensee or mortgage loan originator
shall place an advertisement disseminated primarily in this state for
a loan unless there is disclosed within the printed text of that
advertisement, or the oral text in the case of a radio or television
advertisement, the Department of Real Estate license number and the
unique identifier assigned to that licensee by the Nationwide
Mortgage Licensing System and Registry under which the loan would be
made or arranged.
(b) "Mortgage loan originator," "unique identifier," and
"Nationwide Mortgage Licensing System and Registry" have the meanings
set forth in Section 10166.01.
SEC. 8. Section 10236.4 of the Business and Professions Code is
amended to read:
10236.4. (a) In compliance with Section 10235.5, every licensed
real estate broker shall also display his or her license number on
all advertisements where there is a solicitation for borrowers or
potential investors. Every mortgage loan originator, as defined in
Section 10166.01, shall also display the unique identifier assigned
to that individual by the Nationwide Mortgage Licensing System and
Registry on all advertisements where there is a solicitation for
borrowers.
(b) The disclosures required by Sections 10232.4 and 10240 shall
include the licensee's license number, the mortgage loan originator's
unique identifier, if applicable, and the department's license
information telephone number.
(c) "Mortgage loan originator," "unique identifier," and
"Nationwide Mortgage Licensing System and Registry" have the meanings
set forth in Section 10166.01.
SEC. 9. Section 22012 is added to the Financial Code, to read:
22012. (a) "Branch office license" means a license to engage in
business as a finance lender or broker at a location other than the
location identified in a finance lender or broker license application
or amended application.
(b) "Depository institution" has the same meaning as in Section 3
of the Federal Deposit Insurance Act, and includes any credit union.
(c) "Federal banking agencies" means the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the
Director of the Office of Thrift Supervision, the National Credit
Union Administration, and the Federal Deposit Insurance Corporation.
(d) "Nationwide Mortgage Licensing System and Registry" means a
mortgage licensing system developed and maintained by the Conference
of State Bank Supervisors and the American Association of Residential
Mortgage Regulators for the licensing and registration of licensed
mortgage loan originators.
(e) "Residential mortgage loan" means any loan primarily for
personal, family, or household use that is secured by a mortgage,
deed of trust, or other equivalent consensual security interest on a
dwelling, as defined in Section 103(v) of the federal Truth in
Lending Act, or residential real estate upon which is constructed or
intended to be constructed a dwelling. "Dwelling" means a residential
structure that contains one to four units, whether or not that
structure is attached to real property. The term includes an
individual condominium unit, cooperative unit, mobilehome, or
trailer, if it is used as a residence.
(f) "SAFE Act" means the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289).
(g) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
(h) For purposes of Sections 22109.2, 22109.3, and 22109.5,
"nontraditional mortgage product" means any mortgage product other
than a 30-year fixed rate mortgage.
SEC. 10. Section 22013 is added to the Financial Code, to read:
22013. (a) "Mortgage loan originator" means an individual who,
for compensation or gain, or in the expectation of compensation or
gain, takes a residential mortgage loan application or offers or
negotiates terms of a residential mortgage loan.
(b) Mortgage loan originator does not include any of the
following:
(1) An individual who performs purely administrative or clerical
tasks on behalf of a person meeting the definition of a mortgage loan
originator, except as provided in subdivision (c) of Section 22014.
The term "administrative or clerical tasks" means the receipt,
collection, and distribution of information common for the processing
or underwriting of a loan in the mortgage industry and communication
with a consumer to obtain information necessary for the processing
or underwriting of a residential mortgage loan, to the extent that
the communication does not include offering or negotiating loan rates
or terms, or counseling consumers about residential mortgage loan
rates or terms.
(2) An individual who solely renegotiates terms for existing
mortgage loans held or serviced by his or her employer and who does
not otherwise act as a mortgage loan originator, unless the United
States Department of Housing and Urban Development or a court of
competent jurisdiction determines that the SAFE Act requires such an
employee to be licensed as a mortgage loan originator under state
laws implementing the SAFE Act.
(3) An individual that is solely involved in extensions of credit
relating to timeshare plans, as that term is defined in Section 101
(53D) of Title 11 of the United States Code.
(4) An individual licensed as a mortgage loan originator pursuant
to the provisions of Article 2.1 (commencing with Section 10166.01)
of Chapter 3 of Part 1 of Division 4 of the Business and Professions
Code and the SAFE Act.
(c) "Registered mortgage loan originator" means any individual who
is all of the following:
(1) Meets the definition of mortgage loan originator.
(2) 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.
(3) Is registered with, and maintains a unique identifier through,
the Nationwide Mortgage Licensing System and Registry.
(d) "Loan processor or underwriter" means an individual who
performs clerical or support duties as an employee at the direction
of, and subject to the supervision and instruction of, a mortgage
loan originator licensed by the state or a registered mortgage loan
originator.
SEC. 11. Section 22014 is added to the Financial Code, to read:
22014. (a) A loan processor or underwriter who does not represent
to the public, through advertising or other means of communicating
or providing information, including the use of business cards,
stationery, brochures, signs, rate lists, or other promotional items,
that the individual can or will perform any of the activities of a
mortgage loan originator shall not be required to be licensed as a
mortgage loan originator.
(b) An individual engaging solely in loan processor or underwriter
activities shall not represent to the public, through advertising or
other means of communicating or providing information including the
use of business cards, stationery, brochures, signs, rate lists, or
other promotional items, that the individual can or will perform any
of the activities of a mortgage loan originator.
(c) An independent contractor may not engage in the activities of
a loan processor or underwriter for a residential mortgage loan
unless the independent contractor loan processor or underwriter
obtains and maintains a mortgage loan originator license under this
division. Each independent contractor loan processor or underwriter
licensed as a mortgage loan originator shall have and maintain a
valid unique identifier issued by the Nationwide Mortgage Licensing
System and Registry.
SEC. 12. Section 22100 of the Financial Code is amended to read:
22100. (a) No person shall engage in the business of a finance
lender or broker without obtaining a license from the commissioner.
(b) Every licensee engaging in the business of making or brokering
residential mortgage loans shall require that every mortgage loan
originator employed or compensated by that licensee obtains and
maintains a mortgage loan originator license from the commissioner
under this division or Division 20 (commencing with Section 50000),
or has first obtained a license endorsement from the Commissioner of
Real Estate pursuant to Article 2.1 (commencing with Section
10166.01) of Chapter 3 of Part 1 of Division 4 of the Business and
Professions Code.
(c) A finance lender or broker shall not employ a mortgage loan
originator whose license or license endorsement has lapsed.
(d) A finance lender or broker may not make or broker a
residential mortgage loan unless that loan is offered by, negotiated
by, or applied for through a licensed mortgage loan originator.
(e) Every licensee engaged in the business of making or brokering
residential mortgage loans and every mortgage loan originator
licensed under this division shall register with and maintain a valid
unique identifier issued by the Nationwide Mortgage Licensing System
and Registry.
SEC. 13. Section 22101 of the Financial Code is amended to read:
22101. (a) An application for a license as a finance lender or
broker under this division shall be in the form and contain the
information that the commissioner may by rule require and shall be
filed upon payment of the fee specified in Section 22103.
(b) Notwithstanding any other provision of law, an applicant who
does not currently hold a license as a finance lender or broker under
this division shall furnish with his or her application, a full set
of fingerprints and related information for purposes of the
commissioner conducting a criminal history record check. The
commissioner shall obtain and receive criminal history information
from the Department of Justice and the Federal Bureau of
Investigation pursuant to Section 22101.5.
(c) Nothing in this section shall be construed to prevent a
licensee from engaging in the business of a finance lender through a
subsidiary corporation if the subsidiary corporation is licensed
pursuant to this division.
(d) For purposes of this section, "subsidiary corporation" means a
corporation that is wholly owned by a licensee.
(e) A new application shall not be required for a change in the
address of an existing location previously licensed under this
division. However, the licensee shall comply with the requirements of
Section 22153.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the
commissioner may by rule require an application to be made through
the Nationwide Mortgage Licensing System and Registry, and may
require fees, fingerprints, financial statements, supporting
documents, changes of address, and any other information, and
amendments or modifications thereto, to be submitted in the same
manner.
SEC. 14. Section 22101.5 of the Financial Code is amended to read:
22101.5. (a) The commissioner shall submit to the Department of
Justice fingerprint images and related information required by the
Department of Justice of all finance lender and broker license
candidates, as defined by subdivision (a) of Section 22101, for
purposes of obtaining information as to the existence and content of
a record of state or federal convictions, state or federal arrests,
and information as to the existence and content of a record of state
or federal arrests for which the Department of Justice establishes
that the person is free on bail or on his or
her own recognizance pending trial or appeal.
(b) When received, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary criminal
history information received pursuant to this section. The
Department of Justice shall review the information returned from the
Federal Bureau of Investigation and compile and disseminate a
response to the commissioner.
(c) The Department of Justice shall provide a response to the
commissioner pursuant to paragraph (1) of subdivision (p) of Section
11105 of the Penal Code.
(d) The commissioner shall request from the Department of Justice
subsequent arrest notification service, as provided pursuant to
Section 11105.2 of the Penal Code, for license candidates described
in subdivision (a).
(e) The Department of Justice shall charge a fee sufficient to
cover the costs of processing the requests pursuant to this section.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the
commissioner may by rule require fingerprints submitted by an
applicant to be submitted to the Nationwide Mortgage Licensing System
and Registry in addition to the Department of Justice.
SEC. 15. Section 22102 of the Financial Code is amended to read:
22102. (a) A finance lender or broker licensee seeking to engage
in business at a new location shall submit an application for a
branch office license to the commissioner at least 10 days before
engaging in business at a new location and pay the fee required by
Section 22103. The commissioner may require an applicant seeking to
engage in business at a new location to submit its application, or
parts thereof, through the Nationwide Mortgage Licensing System and
Registry.
(b) The licensee may engage in business at the new location 10
days after the date of submission of a branch office application.
(c) (1) The commissioner shall approve or deny the person
responsible for the lending activity at the new location in
accordance with Section 22109, and shall notify the licensee of this
decision within 90 days of the date of receipt of the application.
(2) If the commissioner denies the application, the licensee
shall, within 10 days of the date of receipt of notification of the
commissioner's denial, submit a new application to the commissioner
designating a different person responsible for the lending activity
at the new location. The commissioner shall approve or deny the
different person as provided in paragraph (1).
(d) A licensee shall not engage in business at a new location in a
name other than a name approved by the commissioner.
(e) The commissioner may adopt regulations to implement the
requirements of this section.
(f) A branch office license to engage in business at a new
location shall be issued in accordance with this section. A change of
street address of a place of business designated in a license shall
be made in accordance with Section 22153 and shall not constitute a
new location subject to the requirements of this section.
SEC. 16. Section 22103 of the Financial Code is amended to read:
22103. At the time of filing the application for a finance
lender, broker, or branch office license, the applicant shall pay to
the commissioner the sum of one hundred dollars ($100) as a fee for
investigating the application, plus the cost of fingerprint
processing and the criminal history record check under Section
22101.5, and two hundred dollars ($200) as an application fee. The
investigation fee, including the amount for the criminal history
record check, and the application fee are not refundable if an
application is denied or withdrawn.
SEC. 17. Section 22104 of the Financial Code is amended to read:
22104. (a) The applicant shall file with the application for a
finance lender or broker license financial statements prepared in
accordance with generally accepted accounting principles and
acceptable to the commissioner that indicate a net worth of at least
twenty-five thousand dollars ($25,000). Except as provided in
subdivision (b), a licensee shall maintain a net worth of at least
twenty-five thousand dollars ($25,000) at all times.
(b) A licensee employing one or more mortgage loan originators
shall continuously maintain a minimum net worth of at least two
hundred fifty thousand dollars ($250,000).
(c) The commissioner may promulgate rules or regulations with
respect to the requirements for minimum net worth, as are necessary
to accomplish the purposes of this division and comply with the SAFE
Act.
SEC. 18. Section 22105.1 is added to the Financial Code, to read:
22105.1. (a) An applicant for a mortgage loan originator license
shall apply by submitting the uniform form prescribed for such
purpose by the Nationwide Mortgage Licensing System and Registry. The
commissioner may require the submission of additional information or
supporting documentation to the department.
(b) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations when using a national
uniform application adopted or approved for use by the Nationwide
Mortgage Licensing System and Registry in connection with the SAFE
Act.
(c) In connection with an application for a license as a mortgage
loan originator, the applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including the following:
(1) Fingerprint images and related information, for purposes of
performing a federal, or both a state and federal, criminal history
background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain both of the
following:
(A) An independent credit report obtained from a consumer
reporting agency.
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(d) The commissioner may ask the Nationwide Mortgage Licensing
System and Registry to obtain state criminal history background check
information on applicants described in subdivision (a) using the
procedures set forth in subdivisions (e) and (f).
(e) If the Nationwide Mortgage Licensing System and Registry
electronically submits fingerprint images and related information, as
required by the Department of Justice, for an applicant for a
mortgage loan originator license, for the purposes of obtaining
information as to the existence and content of a record of state
convictions and state arrests and to the existence and content of a
record of state arrests for which the Department of Justice
establishes that the person is free on bail or on his or her
recognizance pending trial or appeal, the Department of Justice shall
provide an electronic response to the Nationwide Mortgage Licensing
System and Registry pursuant to paragraph (1) of subdivision (p) of
Section 11105 of the Penal Code, and shall provide the same
electronic response to the commissioner.
(f) The Nationwide Mortgage Licensing System and Registry may
request from the Department of Justice subsequent arrest notification
service, as provided pursuant to Section 11105.2 of the Penal Code,
for persons described in subdivision (a). The Department of Justice
shall provide the same electronic response to the commissioner.
(g) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the requests described in this section.
SEC. 19. Section 22105.2 is added to the Financial Code, to read:
22105.2. (a) The commissioner is authorized to establish
relationships or contracts with the Nationwide Mortgage Licensing
System and Registry or other entities designated by the Nationwide
Mortgage Licensing System and Registry to collect and maintain
records and process transaction fees or other fees related to
licensees or other persons subject to this division.
(b) For the purpose of participating in the Nationwide Mortgage
Licensing System and Registry, the commissioner is authorized to
waive or modify, in whole or in part, by rule, regulation, or order,
any or all of the requirements of this division and to establish new
requirements as reasonably necessary to participate in the Nationwide
Mortgage Licensing System and Registry.
(c) The commissioner may use the Nationwide Mortgage Licensing
System and Registry as a channeling agent for requesting information
from, and distributing information to, the Department of Justice or
any governmental agency.
(d) The commissioner may use the Nationwide Mortgage Licensing
System and Registry as a channeling agent for requesting and
distributing information to and from any source so directed by the
commissioner.
(e) The commissioner shall establish a process where applicants
and licensees may challenge information entered into the Nationwide
Mortgage Licensing System and Registry by the commissioner.
SEC. 20. Section 22105.3 is added to the Financial Code, to read:
22105.3. (a) Except as otherwise provided in Section 1512 of the
SAFE Act, the requirements under any federal or state law regarding
the privacy or confidentiality of any information or material
provided to the Nationwide Mortgage Licensing System and Registry,
and any privilege arising under federal or state law, including the
rules of any federal or state court, with respect to that information
or material, shall continue to apply to the information or material
after the information or material has been disclosed to the
Nationwide Mortgage Licensing System and Registry. The information
and material may be shared with all state and federal regulatory
officials with mortgage industry oversight authority without the loss
of privilege or the loss of confidentiality protections provided by
federal or state law.
(b) For these purposes, the commissioner is authorized to enter
agreements or share arrangements with other governmental agencies,
the Conference of State Bank Supervisors, the American Association of
Residential Mortgage Regulators, or other associations representing
governmental agencies as established by rule, regulation, or order of
the commissioner.
(c) Information or material that is subject to a privilege or
confidentiality under subdivision (a) shall not be subject to the
following:
(1) Disclosure under any federal or state law governing the
disclosure to the public of information held by an officer or an
agency of the federal government or the state.
(2) Subpoena or discovery, or admission into evidence, in any
private civil action or administrative process, unless with respect
to any privilege held by the Nationwide Mortgage Licensing System and
Registry with respect to the information or material, the person to
whom the information or material pertains waives, in whole or in
part, in the discretion of the person, that privilege.
(3) This section shall not apply with respect to the information
or material relating to the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, mortgage
loan originators that is included in the Nationwide Mortgage
Licensing System and Registry for access by the public.
SEC. 21. Section 22105.4 is added to the Financial Code, to read:
22105.4. The commissioner shall regularly report violations of
this division, as well as enforcement actions and other relevant
information, to the Nationwide Mortgage Licensing System and
Registry, to the extent that information is public record.
SEC. 22. Section 22106 of the Financial Code is amended to read:
22106. (a) The finance lender or broker license shall state the
name of the licensee, and if the licensee is a partnership, the names
of its general partners, and if a corporation or an association, the
date and place of its incorporation or organization, and the address
of the licensee's principal business location. On the approval and
licensing of a location pursuant to Section 22101 or 22102, the
commissioner shall issue an original license endorsed to show the
address of the authorized location and, if applicable, the name of
the subsidiary corporation licensed to operate the location. The
license shall state whether the licensee is licensed as a finance
lender or a broker.
(b) An application for a license for a business location outside
this state shall constitute an agreement by the applicant to do all
of the following:
(1) Make the licensee's books, accounts, papers, records, and
files available to the commissioner or the commissioner's
representatives in this state.
(2) Pay the reasonable expenses for travel, meals, and lodging of
the commissioner or the commissioner's representatives incurred
during any investigation or examination made at the licensee's
location outside this state.
A licensee located outside this state is not required to maintain
books and records regarding licensed loans separate from those for
other loans if the licensed loans can be readily identified.
SEC. 23. Section 22107 of the Financial Code is amended to read:
22107. (a) Each finance lender or broker licensee shall pay to
the commissioner its pro rata share of all costs and expenses,
including the costs and expenses associated with the licensing of
mortgage loan originators it employs, reasonably incurred in the
administration of this division, as estimated by the commissioner,
for the ensuing year and any deficit actually incurred or anticipated
in the administration of the program in the year in which the
assessment is made. The pro rata share shall be the proportion that a
licensee's gross income bears to the aggregate gross income of all
licensees as shown by the annual financial reports to the
commissioner, for the costs and expenses remaining after the amount
assessed pursuant to subdivision (c).
(b) On or before the 30th day of November in each year, the
commissioner shall notify each licensee of the amount assessed and
levied against it and that amount shall be paid by December 31. If
payment is not made by December 31, the commissioner shall assess and
collect a penalty, in addition to the assessment, of 1 percent of
the assessment for each month or part of a month that the payment is
delayed or withheld.
(c) In the levying and collection of the assessment, a licensee
shall neither be assessed for nor be permitted to pay less than two
hundred fifty dollars ($250) per licensed location per year.
(d) If a licensee fails to pay the assessment on or before the
31st day of January following the day upon which payment is due, the
commissioner may by order summarily suspend or revoke the certificate
issued to the licensee. If, after an order is made, a request for
hearing is filed in writing within 30 days, and a hearing is not held
within 60 days thereafter, the order is deemed rescinded as of its
effective date. During any period when its certificate is revoked or
suspended, a finance lender or broker licensee and any mortgage loan
originator licensee employed by the finance lender or broker shall
not conduct business pursuant to this division except as may be
permitted by order of the commissioner. However, the revocation,
suspension, or surrender of a certificate shall not affect the powers
of the commissioner as provided in this division.
(e) The commissioner shall, by rule, establish the timelines,
fees, and assessments applicable to applicants for original mortgage
loan originator licenses, license renewals, and license changes under
this division.
(f) Notwithstanding subdivisions (a) to (e), inclusive, the
commissioner may by rule require licensees to pay assessments through
the Nationwide Mortgage Licensing System and Registry.
SEC. 24. Section 22108 of the Financial Code is amended to read:
22108. (a) The commissioner may by rule require licensees to
file, at the times that he or she may specify, the information that
he or she may reasonably require regarding any changes in the
information provided in any application filed pursuant to this
division.
(b) The commissioner may by rule require a licensee to file
information through the Nationwide Mortgage Licensing System and
Registry.
SEC. 25. Section 22109 of the Financial Code is amended to read:
22109. (a) Upon reasonable notice and opportunity to be heard,
the commissioner may deny the application for a finance leader or
broker license for any of the following reasons:
(1) A false statement of a material fact has been made in the
application.
(2) The applicant or an officer, director, general partner, person
responsible for the applicant's lending activities in this state, or
person owning or controlling, directly or indirectly, 10 percent or
more of the outstanding interests or equity securities of the
applicant has, within the last 10 years, been convicted of or pleaded
nolo contendere to a crime, or committed an act involving
dishonesty, fraud, or deceit, if the crime or act is substantially
related to the qualifications, functions, or duties of a person
engaged in business in accordance with this division.
(3) The applicant or an officer, director, general partner, person
responsible for the applicant's lending activities in this state, or
person owning or controlling, directly or indirectly, 10 percent or
more of the outstanding interests or equity securities of the
applicant has violated any provision of this division or the rules
thereunder or any similar regulatory scheme of the State of
California or a foreign jurisdiction.
(4) The applicant employs a mortgage loan originator who is not
licensed, or has not initiated an application to become licensed,
pursuant to this division.
(b) The application shall be considered withdrawn within the
meaning of this section if the applicant fails to respond to a
written notification of a deficiency in the application within 90
days of the date of the notification.
(c) The commissioner shall, within 60 days from the filing of a
full and complete application for a license with the fees, either
issue a license or file a statement of issues prepared in accordance
with Chapter 5 (commencing with Section 11500) of Part 1 of Division
3 of Title 2 of the Government Code.
SEC. 26. Section 22109.1 is added to the Financial Code, to read:
22109.1. The commissioner shall not issue a mortgage loan
originator license unless the commissioner makes, at a minimum, the
following findings:
(a) The applicant has never had a mortgage loan originator license
revoked in any governmental jurisdiction, except that a subsequent
formal vacation of a revocation shall not be deemed a revocation.
(b) The applicant has not been convicted of, or pled guilty or
nolo contendere to, a felony in a domestic, foreign, or military
court, as follows:
(1) During the seven-year period preceding the date of the
application for licensing and registration.
(2) At any time preceding the date of application, if the felony
involved an act of fraud, dishonesty, or a breach of trust, or money
laundering.
(3) Provided that any pardon of a conviction shall not be a
conviction for purposes of this subdivision.
(c) The applicant has demonstrated such financial responsibility,
character, and general fitness as to command the confidence of the
community and to warrant a determination that the mortgage loan
originator will operate honestly, fairly, and efficiently within the
purposes of this division.
(d) The applicant has completed the prelicensing education
requirement described in Section 22109.2.
(e) The applicant has passed a written test that meets the test
requirement described in Section 22109.3.
(f) The applicant is employed by, and subject to the supervision
of, a finance lender or broker that has obtained a license from the
commissioner pursuant to this division.
SEC. 27. Section 22109.2 is added to the Financial Code, to read:
22109.2. (a) An applicant for a mortgage loan originator license
shall complete at least 20 hours of education approved in accordance
with subdivision (b). The education shall include at least the
following:
(1) Three hours of instruction on federal law and regulations.
(2) Three hours of ethics, which shall include instruction on
fraud, consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), prelicensing education
courses shall be reviewed and approved by the Nationwide Mortgage
Licensing System and Registry. Review and approval of a prelicensing
education course shall include review and approval of the course
provider.
(c) Nothing in this section shall preclude any prelicensing
education course, as approved by the Nationwide Mortgage Licensing
System and Registry, that is provided by the employer of the
applicant or an entity that is affiliated with the applicant by an
agency contract, or any subsidiary or affiliate of the employer or
entity.
(d) Prelicensing education may be offered either in a classroom,
online, or by any other means approved by the Nationwide Mortgage
Licensing System and Registry.
(e) The prelicensing education requirements approved by the
Nationwide Mortgage Licensing System and Registry for any state other
than California shall be accepted as credit toward completion of
prelicensing education requirements in California.
(f) An individual previously licensed under this division as a
mortgage loan originator, applying to be licensed again, shall prove
that he or she has completed all of the continuing education
requirements for the year in which the license was last held.
SEC. 28. Section 22109.3 is added to the Financial Code, to read:
22109.3. (a) An applicant for a mortgage loan originator license
shall pass a qualified written test developed by the Nationwide
Mortgage Licensing System and Registry and administered by a test
provider approved by the Nationwide Mortgage Licensing System and
Registry.
(b) A written test shall not be treated as a qualified written
test for purposes of subdivision (a) unless the test adequately
measures the applicant's knowledge and comprehension in appropriate
subject areas, including all of the following:
(1) Ethics.
(2) Federal law and regulation relating to mortgage origination.
(3) State law and regulation relating to mortgage origination.
(4) Federal and state law and regulation, including instruction on
fraud, consumer protection, the nontraditional mortgage marketplace,
and fair lending issues.
(c) Nothing in this section shall prohibit a test provider
approved by the Nationwide Mortgage Licensing System and Registry
from providing a test at the location of the employer of the
applicant or the location of any subsidiary or affiliate of the
employer of the applicant, or the location of any entity with which
the applicant holds an exclusive arrangement to conduct the business
of a mortgage loan originator.
(d) An individual shall not be considered to have passed a
qualified written test administered pursuant to this section unless
the individual achieves a test score of not less than 75 percent of
correct answers to questions.
(e) An individual who fails the qualified written test may retake
the test up to three consecutive times, although at least 30 days
shall pass between each retesting.
(f) An applicant who fails three consecutive retests shall wait at
least six months before retesting.
(g) A licensed mortgage loan originator who fails to maintain a
valid license for a period of five years or longer shall retake the
test, not taking into account any time during which the individual is
a registered mortgage loan originator.
SEC. 29. Section 22109.4 is added to the Financial Code, to read:
22109.4. (a) A mortgage loan originator shall comply with the
requirements of this section on or before December 31 of every year.
(b) The minimum standards for license renewal for a mortgage loan
originator shall include the following:
(1) The mortgage loan originator continues to meet the minimum
standards for license issuance under Section 22109.1.
(2) The mortgage loan originator has satisfied the annual
continuing education requirements described in Section 22109.5.
(3) The mortgage loan originator, or the finance lender or broker
employing the mortgage loan originator, has paid all required fees
for renewal of the license as provided in Section 22107.
(c) The license of a mortgage loan originator failing to satisfy
the minimum standards for license renewal shall expire at midnight on
January 31, except as provided in subdivision (h) of Section
22109.5. The commissioner may adopt procedures for the reinstatement
of expired licenses consistent with the standards established by the
Nationwide Mortgage Licensing System and Registry.
SEC. 30. Section 22109.5 is added to the Financial Code, to read:
22109.5. (a) A licensed mortgage loan originator shall complete
at least eight hours of continuing education approved in accordance
with subdivision (b). The continuing education shall include at least
the following:
(1) Three hours of instruction on federal law and regulations.
(2) Two hours of ethics, which shall include instruction on fraud,
consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of this section, continuing education courses
shall be reviewed and approved by the Nationwide Mortgage Licensing
System and Registry. Review and approval of a continuing education
course shall include review and approval of the course provider.
(c) Nothing in this section shall preclude any education course,
as approved by the Nationwide Mortgage Licensing System and Registry,
that is provided by the employer of the mortgage loan originator or
an entity which is affiliated with the mortgage loan originator by an
agency contract, or any subsidiary or affiliate of the employer or
entity.
(d) Continuing education may be offered in a classroom, online,
and by any other means approved by the Nationwide Mortgage Licensing
System and Registry.
(e) Except as provided in subdivision (i), a licensed mortgage
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 or
successive years to meet the annual requirements for continuing
education.
(f) A licensed mortgage loan originator who is an approved instructor
of an approved continuing education course may receive credit for
the licensed mortgage loan originator's own annual continuing
education requirement at the rate of two hours credit for every one
hour taught.
(g) A person who has successfully completed continuing education
requirements approved by the Nationwide Mortgage Licensing System and
Registry for any state other than California shall be granted credit
toward completion of continuing education requirements in
California.
(h) A licensed mortgage loan originator who subsequently becomes
unlicensed shall complete the continuing education requirements for
the last year in which the license was held prior to issuance of a
new or renewed license.
(i) A person meeting the requirements of paragraphs (1) and (3) of
subdivision (b) of Section 22109.4 may correct any deficiency in
continuing education as established by rule or regulation of the
commissioner.
SEC. 31. Section 22109.6 is added to the Financial Code, to read:
22109.6. In addition to any other duties imposed upon the
commissioner by law, the commissioner shall require mortgage loan
originators to be licensed and registered through the Nationwide
Mortgage Licensing System and Registry. In order to carry out this
requirement, the commissioner is authorized to participate in the
Nationwide Mortgage Licensing System and Registry. For this purpose,
the commissioner may establish by rule, regulation, or order,
requirements as necessary, including, but not limited to, the
following:
(a) Background information for the following:
(1) Criminal history through fingerprint or other databases.
(2) Civil or administrative records.
(3) Credit history.
(4) Any other information as deemed necessary by the Nationwide
Mortgage Licensing System and Registry.
(b) The payment of fees to apply for or renew licenses through the
Nationwide Mortgage Licensing System and Registry.
(c) The setting or resetting as necessary of renewal or reporting
dates.
(d) Requirements for amending or surrendering a license or any
other activities as the commissioner deems necessary for
participation in the Nationwide Mortgage Licensing System and
Registry.
SEC. 32. Section 22112 of the Financial Code is amended to read:
22112. (a) A licensee shall maintain a surety bond in accordance
with this subdivision in a minimum amount of twenty-five thousand
dollars ($25,000). The bond shall be payable to the commissioner and
issued by an insurer authorized to do business in this state. An
original surety bond, including any and all riders and endorsements
executed subsequent to the effective date of the bond, shall be filed
with the commissioner within 10 days of execution. For licensees
with multiple licensed locations, only one surety bond is required.
The bond shall be used for the recovery of expenses, fines, and fees
levied by the commissioner in accordance with this division or for
losses or damages incurred by borrowers or consumers as the result of
a licensee's noncompliance with the requirements of this division.
(b) When an action is commenced on a licensee's bond, the
commissioner may require the filing of a new bond. Immediately upon
recovery of any action on the bond, the licensee shall file a new
bond. Failure to file a new bond within 10 days of the recovery on a
bond, or within 10 days after notification by the commissioner that a
new bond is required, constitutes sufficient grounds for the
suspension or revocation of the license.
(c) The commissioner shall may by
rule require a higher bond amount for a licensee employing one or
more mortgage loan originators, based on the dollar amount of
residential mortgage loans originated by that licensee and any
mortgage loan originators employed by that licensee. Every mortgage
loan originator employed by the licensee shall be covered by the
surety bond.
SEC. 33. Section 22151 of the Financial Code is amended to read:
22151. (a) A finance lender license, broker license, and the
license of every mortgage loan originator employed by a lender or
finance broker, along with any currently effective order of the
commissioner approving a different name pursuant to Section 22155,
shall be conspicuously posted in the place of business authorized by
the license.
(b) A license is not transferable or assignable. A license issued
to a partnership or a limited partnership is not transferred or
assigned within the meaning of this section by the death, withdrawal,
or admission of a partner, general partner, or limited partner,
unless the death, withdrawal, or admission dissolves the partnership
to which the license was issued.
SEC. 34. Section 22152 of the Financial Code is amended to read:
22152. A finance lender or broker licensee shall maintain only
one place of business under a duplicate or original license issued
pursuant to Section 22101 or 22102. The commissioner may issue more
than one license to the same licensee upon compliance with all the
provisions of this division governing an original issuance of a
license.
SEC. 35. Section 22153 of the Financial Code is amended to read:
22153. (a) If a finance lender or broker licensee seeks to change
its place of business to a street address other than that designated
in its license, the licensee shall provide notice to the
commissioner at least 10 days prior to the change. The commissioner
shall notify the licensee within 10 days if the commissioner
disapproves the change, and if the commissioner does not notify the
licensee of disapproval within 10 days, the change in address shall
be deemed approved. The commissioner may require an applicant to
submit its application to change its place of business through the
Nationwide Mortgage Licensing System and Registry.
(b) If notice is not given at least 10 days prior to the change of
a street address of a place of business, as required by subdivision
(a), or notice is not given at least 10 days prior to engaging in
business at a new location, as required by Section 22102, the
commissioner may assess a civil or administrative penalty on the
licensee not to exceed five hundred dollars ($500).
SEC. 36. Section 22154 of the Financial Code is amended to read:
22154. (a) No licensee shall conduct the business of making loans
under this division within any office, room, or place of business in
which any other business is solicited or engaged in, or in
association or conjunction therewith, except as is authorized in
writing by the commissioner upon the commissioner's finding that the
character of the other business is such that the granting of the
authority would not facilitate evasions of this division or of the
rules and regulations made pursuant to this division. An
authorization once granted remains in effect until revoked by the
commissioner. The commissioner may authorize the other business
through the Nationwide Mortgage Licensing System and Registry.
(b) The products or services of an affiliated corporation of the
licensee that is a supervised financial institution, or a parent or
subsidiary of a supervised financial institution that is an affiliate
of the licensee, may be provided, offered, or sold at the licensed
location of the licensee without authorization by the commissioner
pursuant to subdivision (a) if (1) the activity is not prohibited by,
or in violation of, the laws applicable to the affiliate or
supervised financial institution, and (2) the products and services
are not offered and sold in a manner that restricts the ability of
the borrower or customer to individually select or reject a product
or service that is offered.
(c) The following definitions govern the construction of this
section:
(1) "Affiliated" or "affiliate" means the following: A corporation
is an affiliate of, or a corporation is affiliated with, another
specified corporation if it directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common
control with, the other specified corporation.
(2) "Supervised financial institution" means any commercial bank,
industrial bank, credit card bank, trust company, savings and loan
association, savings bank, credit union, California finance lender,
residential mortgage lender or servicer, or insurer, provided that
the institution is subject to supervision by an official or agency of
this state or of the United States.
SEC. 37. Section 22155 of the Financial Code is amended to read:
22155. No finance lender, broker, or mortgage loan originator
licensee shall transact the business licensed or make any loan
provided for by this division under any other name or at any other
place of business than that named in the license except pursuant to a
currently effective written order of the commissioner authorizing
the other name or other place of business. The commissioner's order,
while effective, shall be deemed to amend the original license issued
pursuant to Section 22015 or 22109.1. Notwithstanding any provision
of this section, a licensee may make any loan and engage in any other
business provided for by this division, other than the business
described in subdivision (b) of Section 22154, at a place other than
the licensed location under either of the following conditions:
(a) The borrower requests, either orally or in writing, that a
loan be initiated or made at a location other than the licensee's
licensed location. The use by the licensee of a preprinted
solicitation form returned to the licensee by the borrower shall not
constitute a request by the borrower that a loan be initiated or made
at a location other than the licensee's licensed location.
(b) The licensee makes a solicitation or advertises for, or makes
an offer of, a loan displayed on "home pages" or similar methods by
the licensee on the Internet, the World Wide Web, or similar
proprietary or common carrier electronic systems, and the prospective
borrower may transmit information over these electronic systems to
the licensee in connection with the licensee's offer to make a loan.
SEC. 38. Section 22156 of the Financial Code is amended to read:
22156. Finance lender, broker, and mortgage loan originator
licensees shall keep and use in their business, books, accounts, and
records which will enable the commissioner to determine if the
licensee is complying with the provisions of this division and with
the rules and regulations made by the commissioner. On any loan
secured by real property in which loan proceeds were disbursed to an
independent escrowholder, the licensee shall retain records and
documents as set forth by rules of the commissioner adopted pursuant
to Section 22150. Upon request of the commissioner, licensees shall
file an authorization for disclosure to the commissioner of financial
records of the licensed business pursuant to Section 7473 of the
Government Code.
SEC. 39. Section 22157 of the Financial Code is amended to read:
22157. Finance lender, broker, and mortgage loan originator
licensees shall preserve their books, accounts, and records,
including cards used in the card system, if any, for at least three
years after making the final entry on any loan recorded therein.
SEC. 40. Section 22159 of the Financial Code is amended to read:
22159. (a) Each finance lender or broker licensee shall file an
annual report with the commissioner, on or before the 15th day of
March, giving the relevant information that the commissioner
reasonably requires concerning the business and operations conducted
by the licensee within the state during the preceding calendar year
for each licensed place of business. The individual annual reports
filed pursuant to this section shall be made available to the public
for inspection except, upon request in the annual report to the
commissioner, the balance sheet contained in the annual report of a
sole proprietor or any other nonpublicly traded persons. "Nonpublicly
traded person" for purposes of this section means persons with
securities owned by 35 or fewer individuals. The report shall be made
under oath and in the form prescribed by the commissioner.
(b) A licensee shall make other special reports that may be
required by the commissioner.
(c) The commissioner may require a licensee that employs one or
more mortgage loan originators to submit to the Nationwide Mortgage
Licensing System and Registry reports of condition, which shall be in
the form and shall contain the information as the Nationwide
Mortgage Licensing System and Registry may require.
(d) The commissioner may by rule or order require a mortgage loan
originator to submit reports of condition to the Nationwide Mortgage
Licensing System and Registry, in lieu of the reports of condition
required of his or her employer pursuant to subdivision (c).
SEC. 41. Section 22168 of the Financial Code is amended to read:
22168. (a) The commissioner may, after appropriate notice and
opportunity for hearing, suspend for a period not to exceed 12 months
or bar a person from any position of employment with a licensee if
the commissioner finds that the person has willfully used or claimed
without authority a designation or certification of special
education, practice, or skill that the person has not attained, or
willfully held out to the public a confusingly similar designation or
certification for the purpose of misleading the public regarding his
or her qualifications or experience.
(b) Within 15 days from the date of a notice of intention to issue
an order pursuant to subdivision (a), the person may request a
hearing under the Administrative Procedure Act (Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code). Upon receiving a request, the matter shall be set
for hearing to commence within 30 days after receipt unless the
person subject to this division consents to a later date. If no
hearing is requested within 15 days after the mailing or service of
the notice and none is ordered by the commissioner, the failure to
request a hearing shall constitute a waiver of the right to a
hearing.
(c) Upon receipt of a notice of intention to issue an order
pursuant to subdivision (a), the person who is the subject of the
proposed order is immediately prohibited from engaging in any
activities subject to licensure under this division.
(d) Persons suspended or barred under this section are prohibited
from participating in any business activity of a licensed finance
lender, broker, or mortgage loan originator, and from engaging in any
business activity on the premises where a licensed finance lender,
broker, or mortgage loan originator is conducting its business. This
subdivision shall not be construed to prohibit suspended or barred
persons from having their personal transactions processed by a
licensed finance lender, broker, or mortgage loan originator.
SEC. 42. Section 22169 of the Financial Code is amended to read:
22169. (a) The commissioner may, after appropriate notice and
opportunity for hearing, by order, censure or suspend for a period
not exceeding 12 months, or bar from any position of employment,
management, or control any finance lender, broker, mortgage loan
originator, or any other person, if the commissioner finds either of
the following:
(1) That the censure, suspension, or bar is in the public interest
and that the person has committed or caused a violation of this
division or rule or order of the commissioner, which violation was
either known or should have been known by the person committing or
causing it or has caused material damage to the finance lender,
broker, or mortgage loan originator, or to the public.
(2) That the person has been convicted of or pleaded nolo
contendere to any crime, or has been held liable in any civil action
by final judgment, or any administrative judgment by any public
agency, if that crime or civil or administrative judgment involved
any offense involving dishonesty, fraud, or deceit, or any other
offense reasonably related to the qualifications, functions, or
duties of a person engaged in the business in accordance with the
provisions of this division.
(b) Within 15 days from the date of a notice of intention to issue
an order pursuant to subdivision (a), the person may request a
hearing under the Administrative Procedure Act (Chapter 4.5
(commencing with Section 11400) of Division 3 of Title 2 of the
Government Code). Upon receipt of a request, the matter shall be set
for hearing to commence within 30 days after such receipt unless the
person subject to this division consents to a later date. If no
hearing is requested within 15 days after the mailing or service of
such notice and none is ordered by the commissioner, the failure to
request a hearing shall constitute a waiver of the right to a
hearing.
(c) Upon receipt of a notice of intention to issue an order
pursuant to this section, the person who is the subject of the
proposed order is immediately prohibited from engaging in any
activities subject to licensure under the law.
(d) Persons suspended or barred under this section are prohibited
from participating in any business activity of a finance lender,
broker, or mortgage loan originator, and from engaging in any
business activity on the premises where a finance lender, broker, or
mortgage loan originator is conducting business.
SEC. 43. Section 22170 of the Financial Code is amended to read:
22170. (a) It is unlawful for any person to knowingly alter,
destroy, mutilate, conceal, cover up, falsify, or make a false entry
in any record, document, or tangible object with the intent to
impede, obstruct, or influence the administration or enforcement of
any provision of this division.
(b) It is unlawful for any person to knowingly make an untrue
statement to the commissioner or the Nationwide Mortgage Licensing
System and Registry during the course of licensing, investigation, or
examination, with the intent to impede, obstruct, or influence the
administration or enforcement of any provision of this division.
SEC. 44. Section 22171 of the Financial Code is amended to read:
22171. (a) The commissioner shall apply the guidance on
nontraditional mortgage product risks published on November 14, 2006,
by the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators, and the Statement on
Subprime Mortgage Lending published on July 17, 2007, by the
aforementioned entities and the National Association of Consumer
Credit Administrators, to licensees.
(b) The commissioner may adopt emergency and final regulations to
clarify the application of this section as soon as possible.
(c) A finance lender or broker licensee shall adopt and adhere to
policies and procedures that are reasonably intended to achieve the
objectives set forth in the documents described in subdivision (a). A
mortgage loan originator licensee shall adhere to policies and
procedures developed by its employer in accordance with this division
and applicable federal law and regulation.
SEC. 45. Section 22172 is added to the Financial Code, to read:
22172. (a) The commissioner may do one or more of the following:
(1) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license for a violation of this division, or
any rules or regulations adopted thereunder.
(2) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license if an applicant or licensee fails at
any time to meet the requirements of Section 22109.1 or 22109.4, or
withholds information or makes a material misstatement in an
application for a license or license renewal.
(3) Order restitution against a mortgage loan originator or any
finance lender or broker licensee employing a mortgage loan
originator for a violation of this division.
(4) Impose fines on a mortgage loan originator or any finance
lender or broker licensee employing a mortgage loan originator
pursuant to subdivisions (b), (c), and (d).
(5) Issue orders or directives to mortgage loan originators under
this division as follows:
(A) Order or direct a mortgage loan originator or any finance
lender or broker licensee employing a mortgage loan originator to
desist and refrain from conducting business, including immediate
temporary orders to desist and refrain.
(B) Order or direct a mortgage loan originator or any finance
lender or broker licensee employing a mortgage loan originator to
cease any harmful activities or violations of this division,
including immediate temporary orders to desist and refrain.
(C) Enter immediate temporary orders to cease business under a
license issued pursuant to the authority granted under Section 22100
if the commissioner determines that the license was erroneously
granted or the mortgage loan originator is currently in violation of
this division.
(D) Order or direct any other affirmative action as the
commissioner deems necessary.
(b) The commissioner may impose a civil penalty on a mortgage loan
originator or any finance lender or broker licensee employing a
mortgage loan originator, if the commissioner finds, on the record
after notice and opportunity for hearing, that the mortgage loan
originator or any finance lender or broker licensee employing a
mortgage loan originator has violated or failed to comply with any
requirement of this division or any regulation prescribed by the
commissioner under this division or order issued under authority of
this division.
(c) The maximum amount of penalty for each act or omission
described in subdivision (b) shall be twenty-five thousand dollars
($25,000).
(d) Each violation or failure to comply with any directive or
order of the commissioner is a separate and distinct violation or
failure.
SEC. 46. Section 22347 is added to the Financial Code, to read:
22347. The unique identifier of any licensed mortgage loan
originator shall be clearly shown on all residential mortgage loan
application forms, solicitations, or advertisements, including
business cards or Internet Web sites, and any other documents as
established by rule, regulation, or order of the commissioner.
SEC. 47. Section 22700 of the Financial Code is amended to read:
22700. (a) Finance lender and broker licenses issued under this
division shall remain in effect until they are surrendered, revoked,
or suspended.
(b) Mortgage loan originator licenses issued under this division
shall be renewed annually upon the payment of an annual assessment,
and if renewed by the licensee, shall remain in effect until they are
surrendered, revoked, or suspended.
(c) Surrender of a license becomes effective 30 days after receipt
of an application to surrender the license or within a shorter
period of time that the commissioner may determine, unless a
revocation or suspension proceeding is pending when the application
is filed or a proceeding to revoke or suspend or to impose conditions
upon the surrender is instituted within 30 days after the
application is filed. If a proceeding is pending or instituted,
surrender of a license becomes effective at the time and upon the
conditions that the commissioner determines.
SEC. 48. Section 22755 is added to the Financial Code, to read:
22755. It is a violation of this division for a mortgage loan
originator to do any of the following:
(a) Directly or indirectly employ any scheme, device, or artifice
to defraud or mislead borrowers or lenders or to defraud any person.
(b) Engage in any unfair or deceptive practice toward any person.
(c) Obtain property by fraud or misrepresentation.
(d) Solicit or enter into a contract with a borrower that provides
in substance that the mortgage loan originator may earn a fee or
commission through best efforts to obtain a loan even though no loan
is actually obtained for the borrower.
(e) Solicit, advertise, or enter into a contract for specific
interest rates, points, or other financing terms unless the terms are
actually available at the time of soliciting, advertising, or
contracting.
(f) Conduct any business covered by this division without holding
a valid license as required under this division, or assist or aide
and abet any person in the conduct of business under this division
without a valid license as required under this division.
(g) Fail to make disclosures as required by this division and any
other applicable state or federal law, including regulations
thereunder.
(h) Fail to comply with this division or rules or regulations
promulgated under this division, or fail to comply with any other
state or federal law, including the rules and regulations thereunder,
applicable to any business authorized or conducted under this
division.
(i) Make, in any manner, any false or deceptive statement or
representation including, with regard to the rates, points, or other
financing terms or conditions for a residential mortgage loan, or
engage in bait and switch advertising.
(j) Negligently make any false statement or knowingly and
willfully make any omission of material fact in connection with any
information or reports filed with a governmental agency or the
Nationwide Mortgage Licensing System and Registry or in connection
with any investigation conducted by the commissioner or another
governmental agency.
(k) Make any payment, threat, or promise, directly or indirectly,
to any person for the purposes of influencing the independent
judgment of the person in connection with a residential mortgage
loan, or make any payment, threat, or promise, directly or
indirectly, to any appraiser of a property, for the purposes of
influencing the independent judgment of the appraiser with respect to
the value of the property.
(l) Collect, charge, attempt to collect or charge, or use or
propose any agreement purporting to collect or charge any fee
prohibited by this division.
(m) Cause or require a borrower to obtain property insurance
coverage in an amount that exceeds the replacement cost of the
improvements as established by the property insurer.
(n) Fail to truthfully account for moneys belonging to a party of
a residential mortgage loan transaction.
SEC. 49. Section 50002 of the Financial Code is amended to read:
50002. (a) No person shall engage in the business of making
residential mortgage loans or servicing residential mortgage loans,
in this state, without first obtaining a license from the
commissioner in accordance with the requirements of Chapter 2
(commencing with Section 50120) or Chapter 3 (commencing with Section
50130), and any rules promulgated by the commissioner under this
law, unless a person or transaction is
excepted from a definition or exempt from licensure by
a provision of this law or a rule of the commissioner.
(b) An employee of a licensee or of a person exempt from licensure
is not required to be licensed when acting within the scope of his
or her employment and shall be exempt from any other law from which
his or her employer is exempt, except that an individual who meets
the definition of a mortgage loan originator in subdivision
(u) of Section 50003 Section 50003.5 shall be
subject to this division.
(c) The following persons are exempt from subdivision (a):
(1) Any bank, trust company, insurance company, or industrial loan
company doing business under the authority of, or in accordance
with, a license, certificate, or charter issued by the United States
or any state, district, territory, or commonwealth of the United
States that is authorized to transact business in this state.
(2) A federally chartered savings and loan association, federal
savings bank, or federal credit union that is authorized to transact
business in this state.
(3) A savings and loan association, savings bank, or credit union
organized under the laws of this or any other state that is
authorized to transact business in this state.
(4) A person engaged solely in business, commercial, or
agricultural mortgage lending.
(5) A wholly owned service corporation of a savings and loan
association or savings bank organized under the laws of this state or
the wholly owned service corporation of a federally chartered
savings and loan association or savings bank that is authorized to
transact business in this state.
(6) An agency or other instrumentality of the federal government,
or state or municipal government.
(7) An employee or employer pension plan making residential
mortgage loans only to its participants, or a person making those
loans only to its employees or the employees of a holding company, or
an owner who controls that person, affiliate, or subsidiary of that
person.
(8) A person acting in a fiduciary capacity conferred by the
authority of a court.
(9) A real estate broker licensed under California law, when
making, arranging, selling, or servicing a residential loan.
(10) A California finance lender or broker licensed under Division
9 (commencing with Section 22000), when acting under the authority
of that license.
(11) A trustee under a deed of trust pursuant to the Civil Code,
when collecting delinquent loan payments, interest, or other loan
amounts, or performing other acts in a judicial or nonjudicial
foreclosure proceeding.
(12) A mortgage loan originator who has obtained a license under
Chapter 3.5 (commencing with Section 50140), provided that the
mortgage loan originator is employed by a residential mortgage lender
or servicer.
(13) A registered mortgage loan originator described in
subdivision (e).
(d) An individual, unless specifically exempted under subdivision
(e), shall not engage in the business of a mortgage loan originator
with respect to any dwelling located in this state without first
obtaining and maintaining annually a license in accordance with the
requirements of Chapter 3.5 (commencing with Section 50140) and any
rules promulgated by the commissioner under that chapter. Each
licensed mortgage loan originator shall register with and maintain a
valid unique identifier issued by the Nationwide Mortgage Licensing
System and Registry.
(e) A registered mortgage loan originator is exempt from licensure
under subdivisions (a) and (d), when he or she is employed by a
depository institution, a subsidiary of a depository institution 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.
(f) A loan processor or underwriter who is an independent
contractor employed engaged by a residential mortgage lender or
servicer may not perform the activities of a loan processor or
underwriter under this division unless the independent contractor
loan processor or underwriter obtains and maintains a license under
Section 50120.
SEC. 50. Section 50002.5 is added to the Financial Code, to read:
50002.5. (a) Every licensee engaging in the business of making,
servicing, or making and servicing residential mortgage loans shall
require that every mortgage loan originator employed or compensated
by that licensee obtains and maintains a mortgage loan originator
license from the commissioner under this division or Division 9
(commencing with Section 22000), or has first obtained a license
endorsement from the commissioner of Real Estate pursuant to Article
2.1 (commencing with Section 10166.01) of Chapter 3 of Part 1 of
Division 4 of the Business and Professions Code.
(b) A residential mortgage lender or servicer shall not employ a
mortgage loan originator whose license or license endorsement has
lapsed.
(c) A residential mortgage lender or servicer may not make or
broker a residential mortgage loan unless that loan is negotiated by
or applied for through a licensed mortgage loan originator.
(d) Every licensee engaged in the business of making, servicing,
or making and servicing residential mortgage loans and every mortgage
loan originator licensed under this division shall register with and
maintain a valid unique identifier issued by the Nationwide Mortgage
Licensing System and Registry.
(e) No mortgage loan originator licensed under this division and
employed by a licensed residential mortgage lender or residential
mortgage servicer shall engage in any activity that is not an
authorized activity for a licensed residential mortgage lender or
residential mortgage servicer pursuant to this division.
SEC. 51. Section 50003 of the Financial Code is amended to read:
50003. (a) "Annual audit" means a certified audit of the licensee'
s books, records, and systems of internal control performed by an
independent certified public accountant in accordance with generally
accepted accounting principles and generally accepted auditing
standards.
(b) "Borrower" means the loan applicant.
(c) "Buy" includes exchange, offer to buy, or solicitation to buy.
(d) "Commissioner" means the Commissioner of Corporations.
(e) "Control" means the possession, directly or indirectly, of the
power to direct, or cause the direction of, the management and
policies of a licensee under this division, whether through voting or
through the ownership of voting power of an entity that possesses
voting power of the licensee, or otherwise. Control is presumed to
exist if a person, directly or indirectly, owns, controls, or holds
10 percent or more of the voting power of a licensee or of an entity
that owns, controls, or holds, with power to vote, 10 percent or more
of the voting power of a licensee. No person shall be deemed to
control a licensee solely by reason of his or her status as an
officer or director of the licensee.
(f) "Depository institution" has the same meaning as in Section 3
of the Federal Deposit Insurance Act, and includes any credit union.
(g) "Engage in the business" means the dissemination to the
public, or any part of the public, by means of written, printed, or
electronic communication or any communication by means of recorded
telephone messages or spoken on radio, television, or similar
communications media, of any information relating to the making of
residential mortgage loans, the servicing of residential mortgage
loans, or both. "Engage in the business" also means, without
limitation, making residential mortgage loans or servicing
residential mortgage loans, or both.
(h) "Federal banking agencies" means the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the
Director of the Office of Thrift Supervision, the National Credit
Union Administration, and the Federal Deposit Insurance Corporation.
(i) "In this state" includes any activity of a person relating to
making or servicing a residential mortgage loan that originates from
this state and is directed to persons outside this state, or that
originates from outside this state and is directed to persons inside
this state, or that originates inside this state and is directed to
persons inside this state, or that leads to the formation of a
contract and the offer or acceptance thereof is directed to a person
in this state (whether from inside or outside this state and whether
the offer was made inside or outside the state).
(j) "Institutional investor" means the following:
(1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
(2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial bank or industrial loan
company, personal property broker, consumer finance lender,
commercial finance lender, or insurance company, or subsidiary or
affiliate of one of the preceding entities, doing business under the
authority of or in accordance with a license, certificate, or charter
issued by the United States or any state, district, territory, or
commonwealth of the United States.
(3) Trustees of pension, profit-sharing, or welfare funds, if the
pension, profit-sharing, or welfare fund has a net worth of not less
than fifteen million dollars ($15,000,000), except pension,
profit-sharing, or welfare funds of a licensee or its affiliate,
self-employed individual retirement plans, or individual retirement
accounts.
(4) A corporation or other entity with outstanding securities
registered under Section 12 of the federal Securities Exchange Act of
1934 or a wholly owned subsidiary of that corporation or entity,
provided that the purchaser represents either of the following:
(A) That it is purchasing for its own account for investment and
not with a view to, or for sale in connection with, any distribution
of a promissory note.
(B) That it is purchasing for resale pursuant to an exemption
under Rule 144A (17 C.F.R. 230.144A) of the Securities and Exchange
Commission.
(5) An investment company registered under the Investment Company
Act of 1940; or a wholly owned and controlled subsidiary of that
company, provided that the purchaser makes either of the
representations provided in paragraph (4).
(6) A residential mortgage lender or servicer licensed to make
residential mortgage loans under this law or an affiliate or
subsidiary of that person.
(7) Any person who is licensed as a securities broker or
securities dealer under any law of this state, or of the United
States, or any employee, officer or agent of that person, if that
person is acting within the scope of authority granted by that
license or an affiliate or subsidiary controlled by that broker or
dealer, in connection with a transaction involving the offer, sale,
purchase, or exchange of one or more promissory notes secured
directly or indirectly by liens on real property or a security
representing an ownership interest in a pool of promissory notes
secured directly or indirectly by liens on real property, and the
offer and sale of those securities is qualified under the California
Corporate Securities Law of 1968 or registered under federal
securities laws, or exempt from qualification or registration.
(8) A licensed real estate broker selling the loan to an
institutional investor specified in paragraphs (1) to (7), inclusive,
or paragraph (9) or (10).
(9) A business development company as defined in Section 2(a)(48)
of the Investment Company Act of 1940 or a Small Business Investment
Company licensed by the United States Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of
1958.
(10) A syndication or other combination of any of the foregoing
entities that is organized to purchase a promissory note.
(11) A trust or other business entity established by an
institutional investor for the purpose of issuing or facilitating the
issuance of securities representing undivided interests in, or
rights to receive payments from or to receive payments primarily
from, a pool of financial assets held by the trust or business
entity, provided that all of the following apply:
(A) The business entity is not a sole proprietorship.
(B) The pool of assets consists of one or more of the following:
(i) Interest-bearing obligations.
(ii) Other contractual obligations representing the right to
receive payments from the assets.
(iii) Surety bonds, insurance policies, letters of credit, or
other instruments providing credit enhancement for the assets.
(C) The securities will be either one of the following:
(i) Rated as "investment grade" by Standard and Poor's Corporation
or Moody's Investors Service, Inc. "Investment grade" means that the
securities will be rated by Standard and Poor's Corporation as AAA,
AA, A, or BBB or by Moody's Investors Service, Inc. as Aaa, Aa, A, or
Baa, including any of those ratings with "+" or "--" designation or
other variations that occur within those ratings.
(ii) Sold to an institutional investor.
(D) The offer and sale of the securities is qualified under the
California Corporate Securities Law of 1968 or registered under
federal securities laws, or exempt from qualification or
registration.
(k) "Institutional lender" means the following:
(1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
(2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial loan company, or insurance
company, or service or investment company that is wholly owned and
controlled by one of the preceding entities, doing business under the
authority of and in accordance with a license, certificate, or
charter issued by the United States or any state, district,
territory, or commonwealth of the United States.
(3) Any corporation with outstanding securities registered under
Section 12 of the Securities Exchange Act of 1934 or any wholly owned
subsidiary of that corporation.
(4) A residential mortgage lender or servicer licensed to make
residential mortgage loans under this law.
(l) "Law" means the California Residential Mortgage Lending Act.
(m) "Lender" means a person that (1) is an approved lender for the
Federal Housing Administration, Veterans Administration, Farmers
Home Administration, Government National Mortgage Association,
Federal National Mortgage Association, or Federal Home Loan Mortgage
Corporation, (2) directly makes residential mortgage loans, and (3)
makes the credit decision in the loan transactions.
(n) "Licensee" means, depending on the context, a person licensed
under Chapter 2 (commencing with Section 50120), Chapter 3
(commencing with Section 50130), or Chapter 3.5 (commencing with
Section 50140).
(o) "Makes or making residential mortgage loans" or "mortgage
lending" means processing, underwriting, or as a lender using or
advancing one's own funds, or making a commitment to advance one's
own funds, to a loan applicant for a residential mortgage loan.
(p) "Mortgage loan," "residential mortgage loan," or "home
mortgage loan" means a federally related mortgage loan as defined in
Section 3500.2 of Title 24 of the Code of Federal Regulations, or a
loan made to finance construction of a one-to-four family dwelling.
(q) "Mortgage servicer" or "residential mortgage loan servicer"
means a person that (1) is an approved servicer for the Federal
Housing Administration, Veterans Administration, Farmers Home
Administration, Government National Mortgage Association, Federal
National Mortgage Association, or Federal Home Loan Mortgage
Corporation, and (2) directly services or offers to service mortgage
loans.
(r) "Nationwide Mortgage Licensing System and Registry" means a
mortgage licensing system developed and maintained by the Conference
of State Bank Supervisors and the American Association of Residential
Mortgage Regulators for the licensing and registration of licensed
mortgage loan originators.
(s) "Net worth" has the meaning set forth in Section 50201.
(t) "Own funds" means (1) cash, corporate capital, or warehouse
credit lines at commercial banks, savings banks, savings and loan
associations, industrial loan companies, or other sources that are
liability items on a lender's financial statements, whether secured
or unsecured, or (2) a lender's affiliate's cash, corporate capital,
or warehouse credit lines at commercial banks or other sources that
are liability items on the affiliate's financial statements, whether
secured or unsecured. "Own funds" does not include funds provided by
a third party to fund a loan on condition that the third party will
subsequently purchase or accept an assignment of that loan.
(u) "Person" means a natural person, a sole proprietorship, a
corporation, a partnership, a limited liability company, an
association, a trust, a joint venture, an unincorporated
organization, a joint stock company, a government or a political
subdivision of a government, and any other entity.
(v) "Residential real property" or "residential real estate" means
real property located in this state that is improved by a
one-to-four family dwelling.
(w) "SAFE Act" means the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289).
(x) "Service" or "servicing" means receiving more than three
installment payments of principal, interest, or other amounts placed
in escrow, pursuant to the terms of a mortgage loan and performing
services by a licensee relating to that receipt or the enforcement of
its receipt, on behalf of the holder of the note evidencing that
loan.
(y) "Sell" includes exchange, offer to sell, or solicitation to
sell.
(z) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
(aa) For purposes of Sections 50142, 50143, and 50145,
"nontraditional mortgage product" means any mortgage product other
than a 30-year fixed rate mortgage.
SEC. 52. Section 50003.5 is added to the Financial Code, to read:
50003.5. (a) "Mortgage loan originator" means an individual who,
for compensation or gain, or in the expectation of compensation or
gain, takes a residential mortgage loan application or offers or
negotiates terms of a residential mortgage loan.
(b) Mortgage loan originator does not include any of the
following:
(1) An individual who performs purely administrative or clerical
tasks on behalf of a person meeting the definition of a mortgage loan
originator, except as provided in subdivision (c) of Section
50003.6. The term "administrative or clerical tasks" means the
receipt, collection, and distribution of information common for the
processing or underwriting of a loan in the mortgage industry and
communication with a consumer to obtain information necessary for the
processing or underwriting of a residential mortgage loan, to the
extent that the communication does not include offering or
negotiating loan rates or terms, or counseling consumers about
residential mortgage loan rates or terms.
(2) An individual who solely renegotiates terms for existing
mortgage loans held or serviced by his or her employer and who does
not otherwise act as a mortgage loan originator, unless the United
States Department of Housing and Urban Development or a court of
competent jurisdiction determines that the SAFE Act requires that
employee to be licensed as a mortgage loan originator under state
laws implementing the SAFE Act.
(3) An individual that is solely involved in extensions of credit
relating to timeshare plans, as that term is defined in Section 101
(53D) of Title 11 of the United States Code.
(4) An individual licensed as a mortgage loan originator pursuant
to Article 2.1 (commencing with Section 10166.01) of Chapter 3 of
Part 1 of Division 4 of the Business and Professions Code and the
SAFE Act.
(c) "Registered mortgage loan originator" means any individual who
is all of the following:
(1) Meets the definition of mortgage loan originator.
(2) 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.
(3) Is registered with, and maintains a unique identifier through,
the Nationwide Mortgage Licensing System and Registry.
(d) "Loan processor or underwriter" means an individual who
performs clerical or support duties as an employee at the direction
of, and subject to the supervision and instruction of, a mortgage
loan originator licensed by the state or a registered mortgage loan
originator.
SEC. 53. Section 50003.6 is added to the Financial Code, to read:
50003.6. (a) A loan processor or underwriter who does not
represent to the public, through advertising or other means of
communicating or providing information, including the use of business
cards, stationery, brochures, signs, rate lists, or other
promotional items, that the individual can or will perform any of the
activities of a loan originator shall not be required to be licensed
as a mortgage loan originator.
(b) An individual engaging solely in loan processor or underwriter
activities shall not represent to the public, through advertising or
other means of communicating or providing information including the
use of business cards, stationery, brochures, signs, rate lists, or
other promotional items, that the individual can or will perform any
of the activities of a mortgage loan originator.
(c) An independent contractor may not engage in the activities of
a loan processor or underwriter for a residential mortgage loan
unless the independent contractor loan processor or underwriter
obtains and maintains a residential mortgage lender or residential
mortgage servicer license and a mortgage loan originator license
under this division.
SEC. 54. Section 50120 of the Financial Code is amended to read:
50120. (a) A residential mortgage lender shall file an
application for licensure under this chapter with the commissioner to
make or service residential mortgage loans in this state.
(b) A licensee may not engage in the business as a residential
mortgage lender under a name other than the name that appears on the
license, or a legally assumed name disclosed either in the
application or in an amendment to the application, which shall be
reflected on the license.
(c) A licensee may not make or service residential mortgage loans
secured by real property pursuant to the authority of a license, or
an exemption from licensure, under the Real Estate Law.
(d) The commissioner may, pursuant to Section 50321, order a
licensee to cease any other business conducted at any location where
the licensee operates under the authority of a residential mortgage
lender license, if the commissioner finds that the conduct of that
business has facilitated evasions of this division or the rules
adopted pursuant to this division, or that the conduct of that
business is in violation of any law to which that business is
subject.
(e) A license issued for a business location outside this state
shall constitute an agreement by the licensee to, at the sole
discretion of the commissioner, either (1) make the licensee's books,
accounts, papers, records, and files available to the commissioner
or the commissioner's representatives in this state within 10
calendar days of a request from the commissioner or, (2) pay the
reasonable expenses for travel, meals, and lodging of the
commissioner or the commissioner's representatives incurred during an
investigation or examination made at the licensee's location outside
this state.
(f) The commissioner may, by rule, require an applicant for a
residential mortgage lender or servicer license or a residential
mortgage lender or servicer licensee to make some or all filings with
the commissioner through the Nationwide Mortgage Licensing System
and Registry.
(g) The commissioner may, by rule, require licensees to pay
assessments through the Nationwide Mortgage Licensing System and
Registry.
SEC. 55. Section 50121 of the Financial Code is amended to read:
50121. The commissioner shall issue a residential mortgage leader
license upon the satisfaction of all of the following:
(a) The filing with the commissioner of a complete and executed
application for licensure, which may, at the discretion of the
commissioner, include background and experience disclosures required
by any of the uniform application forms of the Nationwide Mortgage
Licensing System and Registry.
(b) The payment of a nonrefundable investigation fee of one
hundred dollars ($100), plus the cost of fingerprint processing and
clearance, and an application filing fee of nine hundred dollars
($900).
(c) An investigation of the statements required by Section 50124
based upon which the commissioner is able to issue findings that the
financial responsibility, criminal records (verified by fingerprint,
at the discretion of the commissioner), experience, character, and
general fitness of the applicant and of the partners or members
thereof, if the applicant is a partnership or association, and of the
principal officers and directors thereof, if the license applicant
is a corporation, support a finding that the business will be
operated honestly, fairly, and in accordance with the requirements of
this division.
SEC. 56. Section 50122 of the Financial Code is amended to read:
50122. (a) Except as provided in Section 50120, the information
provided on an application for a residential mortgage lender,
residential mortgage servicer, or residential mortgage lender and
servicer license shall be sworn testimony on a form prescribed by the
commissioner. If an applicant proposes to engage in business as a
residential mortgage loan servicer as well as a residential mortgage
lender, this information shall be set forth in the
application. The commissioner may issue a
license under this chapter to engage in business as a residential
mortgage lender or to engage in business as a residential mortgage
lender and residential mortgage loan servicer. A person filing an
application under this chapter to engage in business as a residential
mortgage lender and a residential mortgage loan servicer is not
required to file an application under Chapter 3 (commencing with
Section 50130).
(b) The application shall contain the name and complete business
and residential address or addresses of the applicant. If the
applicant is a partnership, association, corporation, or other
entity, the application shall contain the names and complete business
and residential addresses of each member, director, and principal
officer. The application also shall include a description of the
activities of the applicant in the detail and for the periods that
the commissioner may require, including all of the following:
(1) A statement of financial solvency, noting the net worth
requirements and supported by an audited financial statement prepared
by an independent certified public accountant, and access to the
supporting credit information as required by this division.
(2) A statement that the applicant or its members, directors, or
principals, as appropriate, are at least 18 years of age. The
statement may be made by providing each person's date of birth.
(3) Information as to the character, fitness, financial and
business responsibility, background, experience, and criminal
convictions of any of the following:
(A) Any person that owns or controls, directly or indirectly, 10
percent or more of any class of stock of the applicant.
(B) Any person that controls, directly or indirectly, the election
of 25 percent or more of the members of the board of directors of an
applicant.
(C) Any person or entity that significantly influences or controls
the management of the applicant.
(4) A description of any disciplinary action filed under any other
license through which the person conducts its business.
(5) A description of any adverse judgments entered in court
actions filed by borrowers based upon allegations of fraud,
misrepresentation, or dishonesty in the conduct of the person's
business.
(6) A copy of the fidelity bond currently in effect.
(7) Other information as required by rule of the commissioner.
SEC. 57. Section 50123 of the Financial Code is amended to read:
50123. (a) A residential mortgage lender license shall remain in
effect until suspended, surrendered, or revoked.
(b) A residential mortgage lender licensee that ceases to engage
in the business regulated by this division and desires to no longer
be licensed shall inform the commissioner in writing and, at that
time, surrender the license and all other indicia of licensure to the
commissioner. The licensee shall file a plan for the withdrawal from
regulated business, and the plan shall include a timetable for the
disposition of the business. The plan shall also include a closing
audit, review, or other agreed upon procedures performed by an
independent certified public accountant prescribed by rule or order
of the commissioner. Upon receipt of the written notice and plan, the
commissioner shall review the plan and, if satisfactory to the
commissioner, shall accept the surrender of the license. A license is
not surrendered until its tender is accepted in writing by the
commissioner after a review, and a finding has been made on the
licensee's plan required to be filed by this section, and a
determination has been made that there is no violation of this law.
(c) A residential mortgage lender or servicer licensee may not
surrender its license under this division and, under the authority of
a real estate license, subsequently engage in residential mortgage
lending or servicing activities that are subject to this division,
unless the licensee has been licensed under this division for a
period of five years or more.
SEC. 58. Section 50124 of the Financial Code is amended to read:
50124. (a) A residential mortgage lender or servicer shall do all
of the following:
(1) Maintain adequate to meet the requirements of this division,
as prescribed by rule or order of the commissioner.
(2) Keep and maintain for 36 months from the date of final entry
the business records and other information required by law or rules
of the commissioner regarding any mortgage loan made or serviced in
the course of the conduct of its business.
(3) File with the commissioner any report required under law or by
rule or order of the commissioner.
(4) Disburse funds in accordance with its agreements and to make a
good faith and reasonable effort to effect closing in a timely
manner.
(5) Account or deliver to a person any personal property such as
money, funds, deposit, check, draft, mortgage, other document, or
thing of value, that has come into its possession and is not its
property, or that it is not in law or equity entitled to retain under
the circumstances, at the time that has been agreed upon or is
required by law, or, in the absence of a fixed time, upon demand of
the person entitled to the accounting or delivery.
(6) File with the commissioner an amendment to its application
prior to any material change in the information contained in the
application for licensure, including, without limitation, the plan of
operation. The commissioner shall, within 20 business days of
receiving a completed amendment to the application, or within a
longer time if agreed to by the licensee, approve or disapprove the
effectiveness of the proposed amendment.
(7) Comply with the provisions of this division, and with any
order or rule of the commissioner.
(8) Submit to periodic examination by the commissioner as required
by this division.
(9) Advise the commissioner by amendment to its application of any
material judgment filed against, or bankruptcy petition filed by,
the licensee within five days of the filing.
(10) Notify the commissioner, in writing, prior to opening a
branch office in this state or changing its business location or
locations or its branch offices from which activities subject to this
division are conducted.
(11) Comply with all applicable state and federal tax return
filing requirements.
(12) Refrain from employing, or paying a commission or other fee
to, a mortgage loan originator who is not licensed in this state,
unless the individual is exempt from licensure.
(13) Refrain from committing a crime against the laws of any state
or the United States, involving moral turpitude, misrepresentation,
fraudulent or dishonest dealing, or fraud, and disclose to the
commissioner any final judgment entered against it in a civil action
upon grounds or allegations of fraud, misrepresentation, or deceit.
(14) Refrain from engaging in conduct that would be cause for
denial of a license.
(15) Remain solvent.
(16) Proceed with due care and competence in performing any act
for which it is required to hold a license under this division.
(17) Comply with any other requirement established by rule of the
commissioner.
(b) The commissioner may require an applicant to submit a
statement agreeing to comply with the requirements of this section.
SEC. 59. Section 50125 of the Financial Code is amended to read:
50125. The commissioner may refuse to issue a residential
mortgage lender or servicer license if any of the following apply:
(a) The applicant is not in material compliance with a provision
of this division or an order or rule of the commissioner.
(b) The commissioner cannot make the findings specified in
subdivision (d) (c) of Section 50121.
(c) A material requirement for issuance of a license has not been
met.
SEC. 60. Section 50126 of the Financial Code is amended to read:
50126. (a) Upon reasonable notice and opportunity to be heard,
the commissioner may deny an application for any of the following
reasons:
(1) A false statement of a material fact has been made in the
application.
(2) Any officer, director, general partner, or person owning or
controlling, directly or indirectly, 10 percent or more of the
outstanding interests or equity securities of the applicant has,
within the last 10 years, (A) been convicted of, or pleaded nolo
contendere to, a crime or (B) committed any act involving dishonesty,
fraud, or deceit, if the crime or act is substantially related to
the qualifications, functions, or duties of a person engaged in
business in accordance with this division.
(3) The applicant or any officer, director, general partner, or
person owning or controlling, directly or indirectly, 10 percent or
more of the outstanding interests or equity securities of the
applicant, has violated any provision of this division or the rules
thereunder or any similar regulatory scheme of the State of
California or a foreign jurisdiction.
(4) The applicant employs a mortgage loan originator who is not
licensed in this state, unless the mortgage loan originator is exempt
from licensure.
(b) The application shall be considered withdrawn within the
meaning of this section if the applicant fails to respond to a
written notification of a deficiency in the application within 90
days of the date of the notification.
(c) The commissioner shall, within 60 days from the filing of a
full and complete application for a license, including the receipt of
background and investigative reports from the Department of Justice
or other government agencies, and the payment of the fees required by
Section 50121, issue either a residential mortgage lender or
servicer license or a statement of issues prepared in accordance with
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code.
SEC. 61. Section 50128 of the Financial Code is amended to read:
50128. As used in this act, the term "principal officer" means an
officer with direct responsibility for the conduct of the
residential mortgage lender or servicer licensee's or license
applicant's lending or servicing activities in this state.
SEC. 62. Section 50129 of the Financial Code is amended to read:
50129. (a) A residential mortgage lender or servicer licensed
under this chapter may, under the authority of that license and
subject to the provisions of this division, do both of the following:
(1) Engage as a principal in the business of buying from or
selling to institutional investors residential mortgage loans by
using or advancing one's own funds.
(2) Engage, pursuant to a written agency contract with an
institutional lender specified in paragraph (1), (2), or (4) of
subdivision (k) of Section 50003, in the business of soliciting,
processing applications, or applying residential loan underwriting
criteria, but not engage in the business of brokerage services
pursuant to this subdivision, for residential mortgage loans for that
lender, using or advancing the funds of that lender, provided that
no fees or charges may be demanded or collected by the residential
mortgage lender licensee for any performance or service, except fees
demanded by, or collected on behalf of, the institutional lender, and
that the licensee gives a written disclosure to the borrower, as
soon as practicable but prior to loan closing, identifying the
licensee and stating that the licensee is not the lender in the
transaction but has contracted to provide soliciting, processing, or
underwriting services for the lender. Separate schedules of the
number and principal amount of the loans processed and underwritten
shall be included in the licensee's annual report required by
subdivision (a) of Section 50401.
(b) The act of soliciting other institutional lenders with whom a
residential mortgage lender licensee has concluded an agency contract
pursuant to paragraph (2) of subdivision (a) for placement of a loan
upon declination of that loan by another institutional lender
contracted under paragraph (2) of subdivision (a), constitutes
brokerage services, and may be pursued by the licensee only following
execution of a loan brokerage agreement with the borrower as
provided in this division.
SEC. 63. Section 50130 of the Financial Code is amended to read:
50130. (a) A mortgage servicer shall file an application for
licensure under this chapter with the commissioner to service
mortgage loans in this state by satisfying the requirements of this
chapter and the applicable provisions, as determined by the
commissioner, of Chapter 2 (commencing with Section 50120).
(b) A mortgage servicer may apply for licensure by doing all of
the following:
(1) Filing with the commissioner an application containing the
information required by Section 50122, and any additional information
the commissioner may require by rule.
(2) Paying the investigation and application fees required by
Section 50121.
(3) Submitting any information required by Section 50124.
(4) Complying with the applicable provisions of Chapter 2
(commencing with Section 50120).
(c) A licensee may not make or service loans secured by real
property pursuant to the authority of a license, or exemption from
licensure, under the Real Estate Law.
(d) The commissioner may, pursuant to Section 50321, order a
licensee to cease any other business conducted at any location where
the licensee operates under the authority of a residential mortgage
servicer license, if the commissioner finds that the conduct of that
business has facilitated evasions of this division or the rules
adopted pursuant to this division, or that the conduct of that
business is in violation of any law to which that business is
subject.
(e) A license for a business location outside this state shall
constitute an agreement by the mortgage servicer to, at the
discretion of the commissioner, either (1) make the licensee's books,
accounts, papers, records, and files available to the commissioner
or the commissioner's representatives in this state within 10
calendar days of a request from the commissioner or, (2) pay the
reasonable expenses for travel, meals, and lodging of the
commissioner or the commissioner's representatives incurred during an
investigation or examination made at the licensee's location outside
this state.
(f) The commissioner shall license a mortgage servicer upon
completion of the investigation and issuance of the findings required
by Section 50121, subject to Sections 50123, 50125, 50126, and
50127.
(g) A mortgage servicer licensed to service mortgage loans shall
comply with all applicable requirements of California and federal
law, including the Civil Code and Section 2609 of the federal Real
Estate Settlement Procedures Act of 1974, as amended (12 U.S.C. Sec.
2601 et seq.).
(h) A license shall remain in effect until suspended, surrendered,
or revoked.
(i) The commissioner may require an applicant or licensee to make
some or all filings with the commissioner through the Nationwide
Mortgage Licensing System and Registry.
SEC. 64. Chapter 3.5 (commencing with Section 50140) is added to
Division 20 of the Financial Code, to read:
CHAPTER 3.5. MORTGAGE LOAN ORIGINATORS
50140. (a) An applicant for a license as a mortgage loan
originator shall apply by submitting the uniform form prescribed for
that purpose by the Nationwide Mortgage Licensing System and
Registry. The commissioner may require the submission of additional
information or supporting documentation to the department.
(b) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations when using a national
uniform application adopted or approved for use by the Nationwide
Mortgage Licensing System and Registry in connection with the SAFE
Act.
(c) The commissioner shall, by rule, establish the timelines,
fees, and assessments applicable to applicants for original mortgage
loan originator licenses, license renewals, and license changes under
this division.
(d) The commissioner may, by rule, require mortgage loan
originator licensees to pay assessments through the Nationwide
Mortgage Licensing System and Registry.
(e) In connection with an application for a license as a mortgage
loan originator, the applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including the following:
(1) Fingerprint images and related information, for purposes of
performing a federal, or both a state and federal, criminal history
background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain both of the
following:
(A) An independent credit report obtained from a consumer
reporting agency.
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(f) The commissioner may ask the Nationwide Mortgage Licensing
System and Registry to obtain state criminal history background check
information on applicants described in subdivision (a) using the
procedures set forth in subdivisions (g) and (h).
(g) If the Nationwide Mortgage Licensing System and Registry
electronically submits fingerprint images and related information, as
required by the Department of Justice, for an applicant for a
mortgage loan originator license, for the purposes of obtaining
information as to the existence and content of a record of state
convictions and state arrests and to the existence and content of a
record of state arrests for which the Department of Justice
establishes that the person is free on bail or on his or her
recognizance pending trial or appeal, the Department of Justice shall
provide an electronic response to the Nationwide Mortgage Licensing
System and Registry pursuant to paragraph (1) of subdivision (p) of
Section 11105 of the Penal Code, and shall provide the same
electronic response to the commissioner.
(h) The Nationwide Mortgage Licensing System and Registry may
request from the Department of Justice subsequent arrest notification
service, as provided pursuant to Section 11105.2 of the Penal Code,
for persons described in subdivision (a). The Department of Justice
shall provide the same electronic response to the commissioner.
(i) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the requests described in this section.
50141. The commissioner shall not issue a mortgage loan
originator license unless the commissioner makes at a minimum the
following findings:
(a) The applicant has never had a mortgage loan originator license
revoked in any governmental jurisdiction, except that a subsequent
formal vacation or set aside of such revocation shall not be deemed a
revocation.
(b) The applicant has not been convicted of, or pled guilty or
nolo contendere to, a felony in a domestic, foreign, or military
court during the seven-year period preceding the date of the
application for licensing and registration, or at any time preceding
the date of application, if such felony involved an act of fraud,
dishonesty, a breach of trust, or money laundering. For purposes of
this subdivision, any pardon of a conviction shall not constitute a
conviction.
(c) The applicant has demonstrated such financial responsibility,
character, and general fitness as to command the confidence of the
community and to warrant a determination that the mortgage loan
originator will operate honestly, fairly, and efficiently within the
purposes of this division.
(d) The applicant has completed the prelicensing education
requirement described in Section 50142.
(e) The applicant has passed a written test that meets the test
requirements described in Section 50143.
(f) The applicant is employed by, and subject to the supervision
of, a residential mortgage lender or servicer that has obtained a
license from the commissioner pursuant to this division.
(g) The surety bond of the residential mortgage lender or servicer
employing the applicant covers the activities of the applicant and
meets the requirements of Section 50205.
50142. (a) An applicant for a mortgage loan originator license
shall complete at least 20 hours of education approved in accordance
with subdivision (b). The education shall include at least the
following:
(1) Three hours of instruction on federal law and regulations.
(2) Three hours of ethics, which shall include instruction on
fraud, consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), prelicensing education
courses shall be reviewed and approved by the Nationwide Mortgage
Licensing System and Registry. Review and approval of a prelicensing
education course shall include review and approval of the course
provider.
(c) Nothing in this section shall preclude any prelicensing
education course approved by the Nationwide Mortgage Licensing System
and Registry that is provided by the employer of the applicant or an
entity that is affiliated with the applicant by an agency contract,
or any subsidiary or affiliate of the employer or entity.
(d) Prelicensing education may be offered either in a classroom,
online, or by any other means approved by the Nationwide Mortgage
Licensing System and Registry.
(e) The prelicensing education requirements approved by the
Nationwide Mortgage Licensing System and Registry for any state other
than California shall be accepted as credit toward completion of
prelicensing education requirements in California.
(f) An individual previously licensed under this chapter applying
to be licensed again must prove that he or she has completed all of
the continuing education requirements for the year in which that
individual last held the license.
50143. (a) An applicant for a mortgage loan originator license
shall pass a qualified written test developed by the Nationwide
Mortgage Licensing System and Registry and administered by a test
provider approved by the Nationwide Mortgage Licensing System and
Registry.
(b) A written test shall not be treated as a qualified written
test for purposes of subdivision (a) unless the test adequately
measures the applicant's knowledge and comprehension in appropriate
subject areas, including the following:
(1) Ethics.
(2) Federal law and regulation relating to mortgage origination.
(3) State law and regulation relating to mortgage origination.
(4) Federal and state law and regulation, including instruction on
fraud, consumer protection, the nontraditional mortgage marketplace,
and fair lending issues.
(c) Nothing in this section shall prohibit a test provider
approved by the Nationwide Mortgage Licensing System and Registry
from providing a test at the location of the employer of the
applicant or the location of any subsidiary or affiliate of the
employer of the applicant, or the location of any entity with which
the applicant holds an exclusive arrangement to conduct the business
of a mortgage loan originator.
(d) (1) An individual shall not be considered to have passed a
qualified written test unless the individual achieves a test score of
not less than 75 percent of correct answers to questions.
(2) An individual who fails the qualified written test may retake
the test up to three consecutive times, although at least 30 days
shall pass between each retesting.
(3) An applicant who fails three consecutive retests shall wait at
least six months before retesting.
(4) A licensed mortgage loan originator who fails to maintain a
valid license for a period of five years or longer shall retake the
test, not taking into account any time during which the individual is
a registered mortgage loan originator.
50144. (a) A mortgage loan originator shall comply with the
requirements of this section on or before December 31 of every year.
(b) The minimum standards for license renewal for mortgage loan
originators shall include the following:
(1) The mortgage loan originator continues to meet the minimum
standards for license issuance under Section 50141.
(2) The mortgage loan originator has satisfied the annual
continuing education requirements described in Section 50145.
(3) The mortgage loan originator, or the residential mortgage
lender or servicer employing the mortgage loan originator, has paid
all required fees for renewal of the license.
(4) The license of a mortgage loan originator failing to satisfy
the minimum standards for license renewal shall expire at midnight on
January 31, except as provided in Section 50145. The commissioner
may adopt procedures for the reinstatement of expired licenses
consistent with the standards established by the Nationwide Mortgage
Licensing System and Registry.
50145. (a) A licensed mortgage loan originator shall complete at
least eight hours of continuing education approved in accordance with
subdivision (b). The continuing education shall include at least the
following:
(1) Three hours of instruction on federal law and regulations.
(2) Two hours of ethics, which shall include instruction on fraud,
consumer protection, and fair lending issues.
(3) Two hours of training related to lending standards for the
nontraditional mortgage product marketplace.
(b) For purposes of subdivision (a), continuing education courses
shall be reviewed and approved by the Nationwide Mortgage Licensing
System and Registry. Review and approval of a continuing education
course shall include review and approval of the course provider.
(c) Nothing in this section shall preclude any education course
approved by the Nationwide Mortgage Licensing System and Registry
that is provided by the employer of the mortgage loan originator or
an entity that is affiliated with the mortgage loan originator by an
agency contract, or any subsidiary or affiliate of the employer or
entity.
(d) Continuing education may be offered either in a classroom,
online, or by any other means approved by the Nationwide Mortgage
Licensing System and Registry.
(e) Except as provided in subdivision (i), a licensed mortgage
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 or
successive years to meet the annual requirements for continuing
education.
(f) A licensed mortgage loan originator who is an approved
instructor of an approved continuing education course may receive
credit for the licensed mortgage loan originator's own annual
continuing education requirement at the rate of two hours credit for
every one hour taught.
(g) A person who has successfully completed continuing education
requirements approved by the Nationwide Mortgage Licensing System and
Registry for any state other than California shall be granted credit
toward completion of continuing education requirements in
California.
(h) A licensed mortgage loan originator who subsequently becomes
unlicensed shall complete the continuing education requirements for
the last year in which the license was held prior to issuance of a
new or renewed license.
(i) A person meeting the requirements of paragraphs (1) and (3) of
subdivision (b) of Section 50144 may correct any deficiency in
continuing education as established by rule or regulation of the
commissioner.
50146. In addition to any other duties imposed upon the
commissioner by law, the commissioner shall require mortgage loan
originators to be licensed and registered through the Nationwide
Mortgage Licensing System and Registry. In order to carry out this
requirement the commissioner is authorized to participate in the
Nationwide Mortgage Licensing System and Registry. For this purpose,
the commissioner may establish by rule, regulation, or order,
requirements as necessary, including, but not limited to, the
following:
(a) Background checks for:
(1) Criminal history through fingerprint or other databases.
(2) Civil or administrative records.
(3) Credit history.
(4) Any other information as deemed necessary by the Nationwide
Mortgage Licensing System and Registry or the commissioner.
(b) The payment of fees to apply for or renew licenses through the
Nationwide Mortgage Licensing System and Registry.
(c) The setting or resetting as necessary of renewal or reporting
dates.
(d) Requirements for amending or surrendering a license or any
other activities as the commissioner deems necessary for
participation in the Nationwide Mortgage Licensing System and
Registry.
SEC. 65. Chapter 3.6 (commencing with Section 50150) is added to
Division 20 of the Financial Code, to read:
CHAPTER 3.6. NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY
50150. (a) The commissioner is authorized to establish
relationships or contracts with the Nationwide Mortgage Licensing
System and Registry or other entities designated by the Nationwide
Mortgage Licensing System and Registry to collect and maintain
records and process transaction fees or other fees related to
licensees or other persons subject to this division.
(b) For the purpose of participating in the Nationwide Mortgage
Licensing System and Registry, the commissioner is authorized to
waive or modify, in whole or in part, by rule, regulation, or order,
any or all of the requirements of this division and to establish new
requirements as reasonably necessary to participate in the Nationwide
Mortgage Licensing System and Registry.
(c) The commissioner may use the Nationwide Mortgage Licensing
System and Registry as a channeling agent for requesting information
from, and distributing information to, the Department of Justice or
any governmental agency.
(d) The commissioner may use the Nationwide Mortgage Licensing
System and Registry as a channeling agent for requesting and
distributing information to and from any source so directed by the
commissioner.
(e) The commissioner shall establish a process where applicants
and licensees may challenge information entered into the Nationwide
Mortgage Licensing System and Registry by the commissioner.
50151. (a) Except as otherwise provided in Section 1512 of the
SAFE Act, the requirements under any federal law or the Information
Practices Act (Chapter 1 (commencing with Section 1798) of Part 4 of
Division 3 of the Civil Code) regarding the privacy or
confidentiality of any information or material provided to the
Nationwide Mortgage Licensing System and Registry, and any privilege
arising under federal or state law, including the rules of any
federal or state court, with respect to that information or material,
shall continue to apply to the information or material after the
information or material has been disclosed to the Nationwide Mortgage
Licensing System and Registry. The information and material may be
shared with all state and federal regulatory officials with mortgage
industry oversight authority without the loss of privilege or the
loss of confidentiality protections provided by federal law or the
Information Practices Act.
(b) Information or material that is subject to a privilege or
confidentiality under subdivision (a) shall not be subject to the
following:
(1) Disclosure under any federal or state law governing the
disclosure to the public of information held by an officer or an
agency of the federal government or the state.
(2) Subpoena or discovery, or admission into evidence, in any
private civil action or administrative process, unless with respect
to any privilege held by the Nationwide Mortgage Licensing System and
Registry with respect to the information or material, the person to
whom the information or material pertains waives, in whole or in
part, in the discretion of that person, that privilege.
(c) This section shall not apply with respect to the information
or material relating to the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, mortgage
loan originators that is included in the Nationwide Mortgage
Licensing System and Registry for access by the public.
50152. The commissioner shall report regularly violations of this
division, as well as enforcement actions and other relevant
information, to the Nationwide Mortgage Licensing System and
Registry, to the extent that information is public record.
SEC. 66. Section 50200 of the Financial Code is amended to read:
50200. (a) At the end of the licensee's fiscal year, but in no
case more than 12 months after the last audit conducted pursuant to
this section, each licensed residential mortgage lender or servicer
shall cause its books and accounts to be audited by an independent
certified public accountant. Beginning with all audits of business
conducted after December 31, 1995, the audit shall be sufficiently
comprehensive in scope to permit the expression of an opinion on the
financial statements prepared in accordance with generally accepted
accounting principles and shall be performed in accordance with
generally accepted auditing standards. The audit shall include a
reconciliation of the licensee's trust accounts as of the audit date.
(b) "Expression of an opinion" includes (1) an unqualified
opinion, (2) a qualified opinion, (3) a disclaimer of opinion, or (4)
an adverse opinion. If a financial statement, report, certificate,
or opinion of the independent certified public accountant is in any
way qualified, the commissioner may require the licensee to take any
action that the commissioner deems appropriate to address the
qualification. The commissioner may reject any financial statement,
report, certificate, or opinion by notifying the licensee or other
person required to make the filing of the rejection and the reason
therefor. Within 30 days after the receipt of the notice, the
licensee or other person shall correct the deficiencies. Failure to
correct the deficiencies is a violation of this division. The
commissioner shall retain a copy of all financial statements,
reports, certificates, or opinions so rejected.
(c) If a qualified or adverse opinion is expressed or if an
opinion is disclaimed, the reasons therefor must be fully explained.
(d) The audit report shall be filed with the commissioner within
105 days of the end of the licensee's fiscal year. The report filed
with the commissioner shall be certified by the certified public
accountant conducting the audit. The commissioner may promulgate
rules regarding late audit reports.
(e) If a licensee required to make an audit fails to cause an
audit to be made, the commissioner may cause the audit to be made by
an independent certified public accountant at the licensee's expense.
The commissioner shall select the independent certified public
accountant by advertising for bids or by other fair and impartial
means that the commissioner establishes by rule. The commissioner may
summarily revoke the license of a licensee who fails to file a
certified financial statement prepared by an independent certified
public accountant as required by this division or at the request of
the commissioner.
(f) Audits conducted in accordance with the uniform single audit
procedures of the United States Department of Housing and Urban
Development may be submitted in fulfillment of the requirements of
this section.
SEC. 67. Section 50201 of the Financial Code is amended to read:
50201. (a) A licensee issued a license for purposes of making or
servicing residential mortgage loans, including a licensee employing
one or more mortgage loan originators, shall continuously maintain a
minimum tangible net worth at all times of two hundred fifty thousand
dollars ($250,000).
(b) Tangible net worth shall be computed in accordance with
generally accepted accounting principles.
(c) The commissioner may promulgate rules or regulations with
respect to the requirements for minimum net worth, as are necessary
to accomplish the purposes of this division and comply with the SAFE
Act.
SEC. 68. Section 50202 of the Financial Code is amended to read:
50202. (a) Escrow funds for a purpose authorized by the
residential mortgage loan contract (1) shall be subject to and
satisfy all applicable state and federal requirements, including
Section 2609 of the federal Real Estate Settlement Procedures Act of
1974, as amended (12 U.S.C. Sec. 2601 et seq.) and all applicable
provisions of the Civil Code, (2) shall be maintained in a depository
institution as described in subdivision (b), and (3) may not be
commingled with a licensee's funds.
(b) Except as provided in subdivision (f), a trust account shall
be placed in a non-interest-bearing account in a federally insured
depository institution, a federal home loan bank, a federal reserve
bank, or other similar government-sponsored enterprise, to be removed
and used only for the following:
(1) Payments authorized by the borrower, allowed by the mortgage
loan contract, or required by federal or state law.
(2) Refunds to the borrower.
(3) Transfer to another institution that is described in this
subdivision.
(4) Forwarding to the appropriate servicer in case of a transfer
of servicing.
(5) Any other purpose authorized by the residential mortgage loan
contract.
(6) Compliance with a regulatory or court order.
(c) As used in this section, "trust funds" means funds collected
by a licensee in connection with the making or servicing of a
residential mortgage loan that the licensee holds on behalf of
another.
(d) Notwithstanding any other provision of law, but subject to the
limitations of Section 854, benefits accruing from the placement in
a non-interest-bearing account of a commercial bank (including a
national banking association) of funds received by a licensee who
services mortgage loans under this law, shall inure to the licensee,
unless otherwise agreed in writing by the licensee and the investor
on whose behalf the licensee services the loan. A borrower shall
receive at least 2 percent simple interest per annum on impound
account payments covered by Section 2954.8 of the Civil Code.
(e) Trust funds are not subject to the enforcement of a money
judgment arising out of a claim against the licensee or person acting
as the servicing agent, and in no instance shall the trust funds be
considered or treated as an asset of the licensee or person
performing the functions of a residential mortgage lender or loan
servicer.
(f) A licensee may, at the request of the owner of the trust
funds, transfer the funds initially deposited in a
non-interest-bearing trust account into an interest-bearing account
in a federally insured depository institution if all of the following
requirements are met:
(1) The account is in the name of the residential mortgage lender
licensee in trust for the specified beneficiary.
(2) All of the funds in the account are federally insured.
(3) The funds in the account are kept separate and distinct from
the funds of the licensee or funds of any other person for whom the
licensee holds funds in trust.
(4) The licensee discloses to the person from whom the funds are
received and the beneficiary of the account how interest will be
calculated and paid, whether service charges will be paid to the
depository and by whom, and possible notice requirements or penalties
for withdrawal of funds from the account.
(5) All interest earned on the account will be paid to the owner
of the trust funds or the beneficiary.
SEC. 69. Section 50204 of the Financial Code is amended to read:
50204. A licensee may not do any of the following:
(a) Disburse the mortgage loan proceeds in a form other than
direct deposit to the borrower's or borrower's designee's account,
wire, bank or certified check, ACH funds transfer, or attorney's
check drawn on a trust account. An entity may apply to the
commissioner for a waiver of the requirements of this subdivision by
demonstrating, in a letter application, that it has adopted or will
adopt another method of disbursement of loan proceeds that will
satisfy the purposes of this subdivision.
(b) Fail to disburse funds in accordance with a commitment to make
a mortgage loan that is accepted by the applicant.
(c) Accept fees at closing that are not disclosed to the borrower
on the federal HUD-1 Settlement Statement.
(d) Commit an act in violation of Section 2941 of the Civil Code.
(e) Obtain or induce an agreement or other instrument in which
blanks are left to be filled in after execution.
(f) Intentionally delay closing of a mortgage loan for the sole
purpose of increasing interest, costs, fees, or charges payable by
the borrower.
(g) Engage in fraudulent home mortgage underwriting practices.
(h) Make payment of any kind, whether directly or indirectly, to
an in-house or fee appraiser of a government or private money lending
agency, with which an application for a home mortgage has been
filed, for the purpose of influencing the independent judgment of the
appraiser with respect to the value of real estate that is to be
covered by the home mortgage.
(i) Engage in any acts in violation of Section 17200 or 17500 of
the Business and Professions Code.
(j) Knowingly misrepresent, circumvent, or conceal, through
subterfuge or device, any material aspect or information regarding a
transaction to which it is a party.
(k) Do an act, whether of the same or a different character than
specified in this section, that constitutes fraud or dishonest
dealings.
() Sell more than eight loans in a calendar year made under the
authority of this license to a person who is not an institutional
investor.
(m) Commit an act in violation of Section 1695.13 of the Civil
Code.
(n) Make or service a loan that is not a residential mortgage loan
under the authority of the license.
(o) Commit an act in violation of Section 2948.5 of the Civil
Code. Evidence of compliance with Section 2948.5 of the Civil Code
may be evidenced by (1) a certification executed by the licensee, at
no cost to the borrower, pursuant to Section 2015.5 of the Code of
Civil Procedure, or (2) other evidence in the loan file acceptable to
the commissioner.
(p) Make or broker a loan that is offered by, negotiated by, or
applied for through a mortgage loan originator who is not licensed in
this state through the Nationwide Mortgage Licensing System and
Registry, unless the mortgage loan originator is exempt from
licensure.
SEC. 70. Section 50205 of the Financial Code is amended to read:
50205. (a) A residential mortgage lender or servicer licensee
shall maintain a surety bond in accordance with this subdivision. The
bond shall be used for the recovery of expenses, fines, and fees
levied by the commissioner in accordance with this division or for
losses or damages incurred by borrowers or consumers as the result of
a licensee's noncompliance with the requirements of this division.
The bond shall be payable when the licensee fails to comply with a
provision of this division and shall be in the amount of fifty
thousand dollars ($50,000), and may be increased by order of the
commissioner to one hundred thousand dollars ($100,000) upon a
determination by the commissioner that the licensee is not in
compliance with any provision of this chapter or any rule or order
adopted or issued by the commissioner to implement or enforce
provisions of this chapter. The bond shall be payable to the
commissioner and issued by an insurance company authorized to do
business in this state. An original surety bond, including any and
all riders and endorsements executed subsequent to the effective date
of the bond, shall be filed with the commissioner within 10 days of
its execution.
(b) When an action is commenced on a licensee's bond, the
commissioner may require the filing of a new bond. Immediately upon
the recovery of an action on the bond, the licensee shall file a new
bond. Failure to file a new bond within 10 days of the recovery on a
bond, or within 10 days after notification by the commissioner that a
new bond is required, constitutes sufficient grounds for the
suspension or revocation of the license.
(c) The commissioner shall may by
rule require a higher bond amount for a licensee employing one or
more mortgage loan originators, based on the dollar amount of
residential mortgage loans originated by that licensee and any
mortgage loan originators employed by that licensee. Every mortgage
loan originator employed by the licensee shall be covered by the
surety bond.
SEC. 71. Section 50206 of the Financial Code is amended to read:
50206. (a) Prior to a change of control of the business of a
licensee, the person wishing to acquire control shall submit an
application to the commissioner and pay an investigation fee of one
hundred dollars ($100). The application shall contain the information
that the commissioner, by rule, may prescribe as necessary to
determine that the person meets the requirements of Section 50121.
(b) The commissioner shall approve or disapprove the proposed
change of control of a licensee in accordance with the provisions of
Section 50126.
(c) Upon notification by the commissioner that the change of
control has been disapproved, the acquiring party shall immediately
cease any activity subject to regulation under this division.
SEC. 72. Section 50208 of the Financial Code is amended to read:
50208. The license shall state the name of the licensee. If the
licensee is a partnership, the license shall state the names of its
general partners. If the licensee is a corporation or an association,
the license shall state the date and place of the corporation's
incorporation or organization. If the licensee is a residential
mortgage lender or servicer, the license shall state the address of
the licensee's principal business location. The license shall state
whether the licensee is licensed as a residential mortgage loan
lender or servicer or as a mortgage loan originator.
SEC. 73. Section 50209 is added to the Financial Code, to read:
50209. The unique identifier of any licensed mortgage loan
originator shall be clearly shown on all residential mortgage loan
application forms, solicitations, or advertisements, including
business cards or Internet Web sites, and any other documents as
established by rule, regulation, or order of the commissioner.
SEC. 74. Section 50302 of the Financial Code is amended to read:
50302. (a) As often as the commissioner deems necessary and
appropriate, but at least once every 48 months, the commissioner
shall examine the affairs of each residential mortgage lender and
servicer licensee for compliance with this division. The commissioner
shall appoint suitable persons to perform the examination. The
commissioner and his or her appointees may examine the books,
records, and documents of the licensee, and may examine the licensee'
s officers, directors, employees, or agents under oath regarding the
licensee's operations. The commissioner may cooperate with any agency
of the state or federal government, other states, agencies, the
Federal National Mortgage Association, or the Federal Home Loan
Mortgage Corporation. The commissioner may accept an examination
conducted by one of these entities in place of an examination by the
commissioner under this law, unless the commissioner determines that
the examination does not provide information necessary to enable the
commissioner to fulfill his or her responsibilities under this
division.
(b) The commissioner shall provide a written statement of the
findings of the examination, issue a copy of that statement to each
licensee's principals, officers, or directors, and take appropriate
steps to ensure correction of any violations of this division.
(c) Affiliates of a licensee are subject to examination by the
commissioner on the same terms as the licensee, but only when reports
from, or examination of, a licensee provides documented evidence of
unlawful activity between a licensee and affiliate benefiting,
affecting, or arising from the activities regulated by this division.
(d) The residential mortgage lender and servicer licensee shall
pay, and the commissioner shall assess, the reasonable expenses of
any examination of the licensee and affiliates, consistent with the
requirements of subdivision (c) of Section 50314.
(e) The statement of the findings of an examination shall belong
to the commissioner and shall not be disclosed to anyone other than
the licensee, law enforcement officials, or other state or federal
regulatory agencies for further investigation and enforcement.
Reports required of licensees by the commissioner under this division
and results of examinations performed by the commissioner under this
division are the property of the commissioner.
SEC. 75. Section 50307 of the Financial Code is amended to read:
50307. (a) Each residential mortgage lender and servicer licensee
shall file a report with the commissioner annually, on or before the
first day of March, giving the relevant information that the
commissioner reasonably requires to make the calculation required by
subdivision (a) of Section 50401. The report shall be made under oath
and in the form prescribed by the commissioner.
(b) A licensee shall make any other special reports to the
commissioner that the commissioner may, from time to time, require.
(c) If any licensed residential mortgage lender or servicer
subject to this division fails to make a report required by law or by
the commissioner, the commissioner may immediately cause the books,
records, papers, and affairs of that licensee to be thoroughly
examined.
SEC. 76. Section 50307.2 is added to the Financial Code, to read:
50307.2. The commissioner may require a licensee that employs one
or more mortgage loan originators to submit to the Nationwide
Mortgage Licensing System and Registry reports of condition, which
shall be in such form and shall contain such information as the
Nationwide Mortgage Licensing System and Registry may require.
SEC. 77. Section 50310 of the Financial Code is amended to read:
50310. Nothing in this law shall preclude a person, other than a
mortgage loan originator, whose license has been suspended or
revoked, summarily or otherwise, from continuing to service
residential mortgage loans pursuant to servicing contracts in
existence at the time of the suspension for a reasonable transition
period, as determined by the commissioner, after the date of the
entry of the final decision in the case suspending or revoking the
license.
SEC. 78. Section 50317 of the Financial Code is amended to read:
50317. (a) Any person who has been convicted of, or pleaded nolo
contendere to any crime specified in subdivision (b) within the past
10 years or has been held liable in any civil action by final
judgment or any administrative judgment by any public agency within
the past seven years, of any of the provisions specified in
subdivision (b), shall not serve as an officer, director, partner,
shareholder controlling 10 percent or more of the ownership
interests, trustee, or employee of a residential mortgage lender or
residential mortgage loan servicer. This subdivision shall not apply
to any person whose office, employment, ownership interest, or other
participation in the business of a licensed residential mortgage
lender or residential mortgage loan servicer commenced prior to
January 1, 1995, or whose criminal conviction, plea, or judgment
occurred prior to January 1, 1995.
(b) Subdivision (a) applies to criminal convictions of, pleas of
nolo contendere to, or civil or administrative judgments entered for
offenses including the following:
(1) Offenses specified in Chapter 18 (commencing with Section
3350) of Division 1.
(2) Offenses specified in Article 4 (commencing with Section 5300)
of Chapter 1 of Division 2.
(3) Offenses specified in Article 8 (commencing with Section
14750) of Chapter 4 of Division 5.
(4) Offenses specified in Chapter 7 (commencing with Section
17700) of Division 6.
(5) Offenses specified in Chapter 6 (commencing with Section
18435) of Division 7.
(6) Offenses specified in provisions of the laws of the United
States added or amended by the federal Financial Institutions Reform,
Recovery and Enforcement Act of 1989 (Public Law 101-73).
(7) Offenses involving robbery, burglary, theft, embezzlement,
fraud, fraudulent conversion or misappropriation of property,
forgery, bookmaking, receiving stolen property, counterfeiting,
extortion, checks, credit cards, or computer violations specified in
Section 502 of the Penal Code. For the purpose of this section, but
not Section 50318, an offense does not include a conviction for which
the person has obtained a certificate of rehabilitation from a court
of competent jurisdiction under Section 1203.4 or 4852.13 of the
Penal Code or a similar certificate of rehabilitation obtained in a
foreign jurisdiction.
(c) On and after January 1, 1995, any officer, director, or other
person who seeks a controlling ownership interest of 10 percent or
more in the business of a licensed residential mortgage
lender or residential mortgage loan
servicer shall, as a condition to obtaining that interest or
participation, authorize the commissioner to have access to that
person's state summary criminal history information, as defined in
Section 11105 of the Penal Code, for purposes of determining whether
the person has a prior conviction of, or pleaded nolo contendere to,
a criminal offense specified in subdivision (b).
(d) Any state summary criminal history information obtained
pursuant to this section shall be kept confidential and no recipient
shall disclose the contents other than for the purpose of acquisition
of an ownership interest in or other participation in the business
of a licensed residential mortgage lender or residential mortgage
loan servicer.
(e) Any person who knowingly violates subdivision (a), including,
but not limited to, any residential mortgage lender or residential
mortgage loan servicer who permits an ownership interest in or other
participation in the business of a residential mortgage lender or
residential mortgage loan servicer in violation of subdivision (a)
shall, upon conviction, be subject to punishment as set forth in
Section 50500.
(f) Nothing in this section shall be construed to permit the
reinstatement of any person barred by the commissioner pursuant to
Section 50320 nor to prohibit the commissioner from bringing any
action pursuant to Section 50320.
(g) If any provision of this section or the application of this
section to any person or circumstances is held invalid, that
invalidity shall not affect other provisions or applications of this
section that can be given effect without the invalid provision or
application, and to this end the provisions of this section are
severable.
(h) For purposes of this section, the term "employee" means (1) a
mortgage loan originator, including a loan officer or other
individual who negotiates agreements with the public, or (2) an
individual with access to or responsibility for trust funds held by
the licensee.
SEC. 79. Section 50318 of the Financial Code is amended to read:
50318. (a) The commissioner may, after appropriate notice and
opportunity for hearing, by order censure or suspend for a period not
exceeding 12 months, or bar from any position of employment,
management, or control any residential mortgage lender, residential
mortgage loan servicer, or mortgage loan originator, or any other
person, if the commissioner finds either of the following:
(1) That the censure, suspension, or bar is in the public interest
and that the person has committed or caused a violation of this
division or rule or order of the commissioner, and (A) the violation
was either known or should have been known by the person committing
or causing it, or (B) the violation has caused material damage to the
residential mortgage lender, residential mortgage loan servicer,
mortgage loan originator, or to the public.
(2) That the person (A) has been convicted of or pleaded nolo
contendere to any crime, or (B) has been held liable in any civil
action by final judgment, or any administrative judgment by any
public agency, if that crime or civil or administrative judgment
involved any offense specified in subdivision (b) of Section 50317,
or any other offense reasonably related to the qualifications,
functions, or duties of a person engaged in the business in
accordance with the provisions of this division.
(b) Within 15 days from the date of a notice of intention to issue
an order pursuant to subdivision (a), the person may request a
hearing under the Administrative Procedure Act (Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code). Upon receiving a request, the matter shall be set
for hearing to commence within 30 days after receipt unless the
person subject to this division consents to a later date. If no
hearing is requested within 15 days after the mailing or service of
the notice and none is ordered by the commissioner, the failure to
request a hearing shall constitute a waiver of the right to a
hearing.
(c) Upon receipt of a notice of intention to issue an order
pursuant to this section, the person who is the subject of the
proposed order is immediately prohibited from engaging in any
activities subject to licensure under the law.
(d) Persons suspended or barred under this section are prohibited
from participating in any business activity of a licensed residential
mortgage lender, residential mortgage loan servicer, or mortgage
loan originator and from engaging in any business activity on the
premises where a licensed residential mortgage lender, residential
mortgage loan servicer, or mortgage loan originator is conducting its
business. This subdivision shall not be construed to prohibit
suspended or barred persons from having their personal transactions
processed by a licensed residential mortgage lender, residential
mortgage loan servicer, or mortgage loan originator.
(e) This section shall apply to any violation, conviction, plea,
or judgment after the enactment of this section.
(f) If any provision of this section or the application of this
section to any person or circumstances is held invalid, that
invalidity shall not affect other provisions or applications of this
section that can be given effect without the invalid provision or
application, and to this end the provisions of this section are
severable.
(g) For purposes of this section, the term "employee" means (1) a
mortgage loan originator, including a loan officer or other
individual who negotiates agreements with the public, or (2) an
individual with access to or responsibility for trust funds held by
the licensee.
SEC. 80. Section 50320 of the Financial Code is amended to read:
50320. Whenever, in the opinion of the commissioner, a person is
engaged, either actually or through subterfuge, in the business of
making residential mortgage loans, servicing residential mortgage
loans, or engaging in business as a mortgage loan originator, without
a license from the commissioner, the commissioner may order that
person to desist and refrain. If, within 30 days after an order is
served, a request for a hearing is filed in writing and the hearing
is not held within 60 days of the filing, the order is rescinded.
This section does not apply to persons exempted under subdivision (b)
of Section 50002.
SEC. 81. Section 50325 of the Financial Code is amended to read:
50325. The commissioner may immediately revoke the residential
mortgage lender's, residential mortgage loan servicer's, or mortgage
loan originator's license if the licensee fails to comply with any
order issued under Section 50318, 50319, 50321, 50322, or 50503. The
commissioner shall not revoke the license if, within 10 days from the
effective date of the revocation order, the licensee secures a court
order restraining the enforcement of the commissioner's revocation
order.
SEC. 82. Section 50333 of the Financial Code is amended to read:
50333. (a) The commissioner shall apply the guidance on
nontraditional mortgage product risks published on November 14, 2006,
by the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators, and the Statement on
Subprime Mortgage Lending published on July 17, 2007, by the
aforementioned entities and the National Association of Consumer
Credit Administrators, to licensees.
(b) The commissioner may adopt emergency and final rules to
clarify the application of this section as soon as possible.
(c) A licensee shall adopt and adhere to policies and procedures
that are reasonably intended to achieve the objectives set forth in
the documents described in subdivision (a). A licensed mortgage loan
originator shall adhere to policies and procedures developed by his
or her employer in accordance with this division and applicable
federal law and regulation.
SEC. 83. Section 50401 of the Financial Code is amended to read:
50401. (a) In addition to other fees and reimbursements required
to be paid under this division, each residential mortgage lender or
servicer licensee shall pay to the commissioner an amount equal to
the lesser of: (1) its pro rata share of all costs and expenses
(including overhead and the maintenance of a prudent reserve not to
exceed 90 days' costs and expenses) that the commissioner reasonably
expects to incur in the current fiscal year in the administration of
this division and not otherwise recovered by the commissioner under
this division or from the State Corporations Fund, plus a deficit or
less a surplus actually incurred during the prior fiscal year; or (2)
five thousand dollars ($5,000). The pro rata share shall be the
greater of either one thousand dollars ($1,000) or the sum of: (A) a
number derived from the ratio of the aggregate principal amount of
the mortgage loans secured by residential real property originated by
the licensee to all mortgage loans secured by residential real
property originated by all licensees under this division, as shown by
the annual financial reports to the commissioner, which number is
then multiplied by one-half of the costs and expenses estimated by
the commissioner for the current fiscal year; plus (B) a number
derived from the ratio of the average value of mortgage loans secured
by residential real property serviced by a licensee to the average
value of all mortgage loans secured by residential real property
serviced by all licensees under this division, as shown by the annual
financial reports to the commissioner, which number is then
multiplied by one-half of the costs and expenses estimated by the
commissioner for the current fiscal year. For the purposes of this
section, the "principal amount" of a mortgage loan means the initial
total amount a borrower is obligated to repay the lender and the
"average value" of loans serviced means the sum of the aggregate
dollar value of all mortgage loans secured by residential real
property serviced by a licensee, calculated as of the last day of
each month in the calendar year just ended, divided by 12.
In order for the commissioner to calculate the assessment under
this section, each licensee shall file an annual report for the
calendar year just ended containing the information required by the
commissioner on or before March 1 of the year in which the assessment
is to be calculated.
In determining the amount assessed, the commissioner shall
consider all appropriations from the State Corporations Fund for the
support of this division and all reimbursements provided for under
this division.
(b) In no case shall the reimbursement, payment, or other fee
authorized by this section exceed the cost, including overhead,
reasonably incurred in the administration of this division, and the
maintenance of a prudent reserve not to exceed 90 days' costs and
expenses.
(c) On or before the 30th day of September in each year, the
commissioner shall notify each licensee by mail of the amount
assessed and levied against it and that amount shall be paid within
20 days. If payment is not made within 20 days, the commissioner
shall assess and collect a penalty, in addition to the assessment of
1 percent of the assessment for each month or part of a month that
the payment is delayed or withheld.
(d) If a licensee fails to pay the assessment on or before the
30th day following the day upon which payment is due, the
commissioner may by order summarily suspend or revoke the license
issued to the licensee. An order issued under this section is not
stayed by the filing of a request for a hearing. If, after an order
is made, the request for hearing is filed in writing within 15 days
from the date of service of the order and a hearing is not held
within 60 days of the filing, the order is deemed rescinded as of its
effective date. During a period when its license is revoked or
suspended, a licensee shall not conduct business pursuant to this
division except as may be permitted by further order of the
commissioner. However, the revocation, suspension, or surrender of a
license shall not affect the powers of the commissioner as provided
in this division.
SEC. 84. Section 50513 is added to the Financial Code, to read:
50513. (a) The commissioner may do one or more of the following:
(1) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license for a violation of this division, or
any rules or regulations adopted thereunder.
(2) Deny, suspend, revoke, condition, or decline to renew a
mortgage loan originator license if an applicant or licensee fails at
any time to meet the requirements of Section 50141 or 50144, or
withholds information or makes a material misstatement in an
application for a license or license renewal.
(3) Order restitution against a mortgage loan originator or any
residential mortgage lender or servicer licensee employing a mortgage
loan originator for a violation of this division.
(4) Impose fines on a mortgage loan originator or any residential
mortgage lender or servicer licensee employing a mortgage loan
originator pursuant to subdivisions (b), (c), and (d).
(5) Issue orders or directives to mortgage loan originators under
this division as follows:
(A) Order or direct a mortgage loan originator or any residential
mortgage lender or servicer licensee employing a mortgage loan
originator to desist and refrain from conducting business, including
immediate temporary orders to desist and refrain.
(B) Order or direct a mortgage loan originator or any residential
mortgage lender or servicer licensee employing a mortgage loan
originator to cease any harmful activities or violations of this
division, including immediate temporary orders to desist and refrain.
(C) Enter immediate temporary orders to cease business under a
license issued pursuant to the authority granted under Section 50002
if the commissioner determines that the license was erroneously
granted or the mortgage loan originator is currently in violation of
this division.
(D) Order or direct any other affirmative action as the
commissioner deems necessary.
(b) The commissioner may impose a civil penalty on a mortgage loan
originator or any residential mortgage lender or servicer licensee
employing a mortgage loan originator, if the commissioner finds, on
the record after notice and opportunity for hearing, that the
mortgage loan originator or any residential mortgage lender or
servicer licensee employing a mortgage loan originator has violated
or failed to comply with any requirement of this division or any
regulation prescribed by the commissioner under this division or
order issued under authority of this division.
(c) The maximum amount of penalty for each act or omission
described in subdivision (b) shall be twenty-five thousand dollars
($25,000).
(d) Each violation or failure to comply with any directive or
order of the commissioner is a separate and distinct violation or
failure.
SEC. 85. Section 50601 of the Financial Code is repealed.
SEC. 86. Section 50602 of the Financial Code is repealed.
SEC. 87. Section 50700 of the Financial Code is amended to read:
50700. (a) A residential mortgage lender, or a person or employee
acting under the authority of a residential mortgage lender's
license, including a mortgage loan originator, shall not provide
brokerage services to a borrower, except as provided in subdivision
(c).
(b) "Brokerage services" means either of the following:
(1) Obtaining or attempting to obtain, on behalf of a borrower, a
residential mortgage loan, as defined in subdivision (p) of Section
50003, secured by residential real estate, as defined in subdivision
(w) of Section 50003, made with the funds of another institutional
lender, as defined in paragraphs (1), (2), and (4) of subdivision (k)
of Section 50003, and closed in the name of that lender, for a fee
paid by the borrower or the institutional lender.
(2) Obtaining or attempting to obtain, on behalf of a borrower, a
residential mortgage loan, as defined in subdivision (p) of Section
50003, secured by residential real estate, as defined in subdivision
(w) of Section 50003, made with the funds of another institutional
lender, as defined in paragraphs (1), (2), and (4) of subdivision (k)
of Section 50003, but closed in the name of the licensee, for a fee
paid by the borrower or the institutional lender.
(c) A residential mortgage lender or a mortgage loan originator
employed by a residential mortgage lender may provide brokerage
services under the authority of the lender's license, if the lender
first enters into a written brokerage agreement with the borrower
that satisfies the requirements of Section 50701.
(d) This chapter does not authorize a residential mortgage lender
licensee to do any of the following:
(1) Provide brokerage services through independent contractors.
(2) Provide brokerage services through an employee not licensed as
a mortgage loan originator.
(3) Obtain or attempt to obtain for a borrower a residential
mortgage loan that is a "high cost mortgage," referred to in Section
152(aa)(1) of the federal Home Ownership and Equity Protection Act of
1994, as amended (15 U.S.C. Sec. 1602 (aa)).
(4) Hold itself out to borrowers, through advertising, as a
mortgage broker, rather than a residential mortgage lender. However,
a licensee shall disclose its status as a broker or agent when that
disclosure is required by law.
(5) Perform activity subject to Section 10131 of the Business and
Professions Code, except activities authorized by this division.
(e) A mortgage loan originator may only provide brokerage services
as an employee of a licensed residential mortgage lender.
SEC. 88. Section 50701 of the Financial Code is amended to read:
50701. (a) As soon as practical after a borrower requests that
the residential mortgage lender licensee arrange a loan to be made by
another institutional lender, and before the licensee performs
brokerage services for the borrower, the licensee and borrower shall
enter into a written loan brokerage agreement that satisfies the
requirements of this section.
(b) Both the licensee's authorized representative, who shall be a
licensed mortgage loan originator, and the borrower shall sign and
date the loan brokerage agreement, and the licensee shall deliver a
copy of the fully executed loan brokerage agreement to the borrower
either upon execution, if the documents are signed in the licensee's
office, or within three business days after execution.
(c) The loan brokerage agreement shall include the mortgage loan
originator's unique identifier.
(d) The loan brokerage agreement shall contain an explicit
statement that (1) the licensee is acting as the agent of the
borrower in providing brokerage services to the borrower, and (2)
when acting as agent for the borrower, it owes to that borrower a
fiduciary duty of utmost care, honesty, and loyalty in the
transaction, including the duty of full disclosure of all material
facts. If the licensee is authorized to act as an agent for any other
person, the brokerage agreement shall contain a statement of that
fact and identification of that person.
(e) The loan brokerage agreement shall contain a detailed
description of the services the licensee agrees to perform for the
borrower, and a good faith estimate of any fees the licensee will
receive for those services, whether paid by the borrower, the
institutional lender, or both.
(f) The loan brokerage agreement shall carry a clear and
conspicuous statement of the conditions under which the borrower is
obligated to pay the licensee for brokerage services rendered under
the agreement.
(g) The loan brokerage agreement shall provide that, if the
licensee makes a materially false or misleading statement or omission
in the inducement or implementation of the agreement, the borrower
may, in addition to any other legal rights or remedies, upon written
notice, do any of the following:
(1) Rescind the brokerage agreement.
(2) Recover fees paid by the borrower to the licensee for
brokerage services rendered by the licensee pursuant to the
agreement.
(3) Recover actual costs, including attorney's fees, for enforcing
the borrower's rights under the loan brokerage agreement.
(h) If the loan brokerage agreement fails to set forth the rights
in subdivision (g), these rights shall be implied by operation of
law.
(i) The loan brokerage agreement shall be the only agreement
between the borrower and the licensee with respect to a single loan.
(j) A licensee whose services to a borrower are limited to
providing brokerage services may not require a borrower to pay fees
or charges before the residential mortgage loan closing, other than
either of the following:
(1) Actual charges to be incurred by the licensee on behalf of the
borrower for services from third parties necessary to process the
application, such as credit reports, appraisals, inspections, flood
certification, and tax service, and, in transactions where those
services are provided by the licensee, a charge not to exceed the fee
customarily charged for the same or comparable service in the
community in which the service was rendered.
(2) An application fee.
A licensee may not accept a fee under Section 50203(a)(1) or (2)
and subsequently require a borrower to pay additional fees or charges
under this paragraph for the borrower's loan transaction.
(k) Any loan brokerage agreement that provides for the collection
of an application fee shall be approved as to form by the
commissioner before its use by a licensee, if the agreement meets the
following requirements:
(1) The agreement specifies the services to be rendered for the
application fee.
(2) The agreement sets forth the amount of the application fee and
the date the fee becomes due and payable.
(3) The agreement does not contain a provision that purports to
except or relieve the licensee from the responsibility to fulfill
verbal commitments and representations made by employees or agents of
the licensee when contracting for the application fee, or guarantee
that a loan will be obtained.
(4) The agreement sets forth a definite date for full performance
of the services promised in exchange for the application fee.
SEC. 89. Section 50705 of the Financial Code is repealed.
SEC. 90. Section 18034 is added to the Health and Safety Code, to
read:
18034. (a) A dealer, as defined in Section 18002.6, or a
salesperson, as defined in Section 18013, is not required to be
licensed as a mortgage loan originator under the provisions of state
law that implement the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289), if the dealer or
salesperson performs only administrative or clerical tasks on behalf
of a person meeting the definition of a mortgage loan originator,
and if the dealer or salesperson does not accept compensation from a
lender, mortgage loan originator, or from any agent of any lender or
mortgage loan originator.
(b) For purposes of this section, the term "administrative and
clerical tasks" means the receipt, collection, and distribution of
information common for the processing or underwriting of a loan in
the mortgage industry and communication with a consumer to obtain
information necessary for the processing or underwriting of a
residential mortgage loan.
SEC. 91. The Legislature finds and declares that Sections 6, 20,
and 65 of this act imposes a limitation on the public's right of
access to the meetings of public bodies or the writings of public
officials and agencies within the meaning of Section 3 of Article I
of the California Constitution. Pursuant to that constitutional
provision, the Legislature makes the following findings to
demonstrate the interest protected by this limitation and the need
for protecting that interest:
In order to allow the Department of Real Estate and the Department
of Corporations to fully accomplish their goals, it is imperative to
protect the interests of those persons submitting information to the
departments to ensure that any personal or sensitive business
information that this act requires those persons to submit is
protected as confidential information.
SEC. 92. Every person who is required to hold a mortgage loan
originator license under the California Finance Lenders Law or the
California Residential Mortgage Lending Act shall obtain that license
by July 31, 2010. Every person who is required to hold a mortgage
loan originator license endorsement under the Real Estate Law shall
obtain that license endorsement by December 31, 2010. No person
required to hold a mortgage loan originator license under the
California Finance Lenders Law or the California Residential Mortgage
Lending Act shall be required to obtain that license before July 1,
2010. No person required to hold a mortgage loan originator license
endorsement under the Real Estate Law shall be required to obtain
that license endorsement before December 1, 2010.
SEC. 93. The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
SEC. 94. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 95. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
In order to implement protections for the public relative to
mortgage loan originators at the earliest possible time, it is
necessary that this act take effect immediately.
