Bill Text: CA SB217 | 2011-2012 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Mortgage loan originators: licensure.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2011-10-03 - Chaptered by Secretary of State. Chapter 444, Statutes of 2011. [SB217 Detail]
Download: California-2011-SB217-Amended.html
Bill Title: Mortgage loan originators: licensure.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2011-10-03 - Chaptered by Secretary of State. Chapter 444, Statutes of 2011. [SB217 Detail]
Download: California-2011-SB217-Amended.html
BILL NUMBER: SB 217 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 15, 2011
AMENDED IN ASSEMBLY JUNE 29, 2011
AMENDED IN ASSEMBLY JUNE 16, 2011
INTRODUCED BY Senator Vargas
FEBRUARY 9, 2011
An act to amend Section 22013 10166.05 of
the Business and Professions Code, and to amend Sections 22109.1 and
50141 of, and to add Section 22065 to, the Financial Code,
relating to mortgage loan originators.
LEGISLATIVE COUNSEL'S DIGEST
SB 217, as amended, Vargas. California Finance Lenders
Law: exemptions: mortgage Mortgage loan
originators. Originators: licensure.
(1) Existing law provides for the licensure and regulation of
mortgage loan originators, as defined, by the Commissioner of
Corporations under the California Finance Lenders Law and the
California Residential Mortgage Lending Act. Existing law requires a
real estate license endorsement by the Real Estate Commissioner under
the Real Estate Law for a real estate licensee to engage in the
business of a mortgage loan originator. Existing law prohibits the
issuance of a mortgage loan originator license or a license
endorsement to act as a mortgage loan originator if the applicant for
a license or license endorsement has been convicted of, or pled
guilty or nolo contendre to, a felony during the 7-year period
preceding the date of the application for licensing or at any time
preceding the date of application if the felony involved an act of
fraud, dishonesty, a breach of trust, or money laundering.
This bill would provide that an expunged or pardoned felony
conviction does not require denial of a license or license
endorsement but would authorize the consideration of the underlying
crime, facts, or circumstances of the expunged or pardoned felony
conviction when determining whether to issue a license or license
endorsement, as specified.
Existing
(2) Existing law , the
California Finance Lenders Law, provides for the licensure and
regulation of finance lenders and brokers and mortgage loan
originators, as defined, by the Commissioner of Corporations.
Existing law exempts from the provisions of the California
Finance Lenders Law specified persons and entities, including any
person doing business under any law of any state or of the United
States relating to banks, trust companies, savings and loan
associations, and insurance premium finance agencies. A willful
violation of the California Finance Lenders Law is a crime.
This bill would exempt from the definition of a mortgage
loan originator, under the California Finance Lenders Law, an
individual who acts as a mortgage loan originator for 5 or fewer
residential mortgage loans during a calendar year, if specified
requirements are met. The bill would also authorize a
person exempt from the provisions of the California Finance Lenders
Law to apply to the commissioner Commissioner
of Corporations for an exempt company registration for the
purpose of sponsoring one or more individuals required to be licensed
as mortgage loan originators under the federal Secure and Fair
Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) if
specified requirements are met, including that the mortgage loan
originator is covered under an exclusive written contract with, and
originates mortgage loans solely on behalf of, the exempt person. The
bill would require an exempt person to comply with all rules and
orders that the commissioner deems necessary to ensure compliance
with the federal SAFE Act and would require an exempt
person to pay an annual registration fee established by the
commissioner.
Because a willful violation of these requirements under the
California Finance Lenders Law would be a crime, this bill would
impose a state-mandated local program.
The
(3) 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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22013 of the Financial Code
is amended 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.
(5) (A) An individual who acts as a mortgage loan originator for
five or fewer residential mortgage loans during a calendar year shall
not be deemed a mortgage loan originator and shall not be required
to obtain a mortgage loan originator license from the commissioner if
all of the following requirements are met:
(i) The individual acts as a mortgage loan originator on behalf of
a single licensee.
(ii) The licensee on whose behalf the individual acts brokers the
loans exclusively to a single depository institution.
(iii) Before authorizing the individual to originate mortgage
loans on its behalf, the licensee submits the name of the individual
to the commissioner; agrees in writing, on a form acceptable to the
commissioner, to be accountable for the actions of the individual in
connection with the loan origination; and provides any other
information to the commissioner about the individual that the
commissioner may request.
(B) Any licensee that becomes aware of an individual who is
originating residential mortgage loans on its behalf and who has
exceeded the five loan per calendar year threshold shall immediately
notify the commissioner and shall direct the individual to cease
engaging in mortgage loan originator activity, until he or she
obtains a mortgage loan originator license.
(C) Notwithstanding Sections 22004 and 22059, a licensee may
broker loans to a depository institution pursuant to this paragraph.
(D) The exclusion from licensing provided by this paragraph shall
not apply if the Director of the federal Consumer Financial
Protection Bureau or a court of competent jurisdiction makes a final
and specific determination that this paragraph does not comply with
the requirements of Section 1508 of the SAFE Act (12 U.S.C. Sec.
5107).
(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.
SECTION 1. Section 10166.05 of the
Business and Professions Code is amended to read:
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) (1) 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
court during the seven year
seven-year period preceding the date of the application
for licensing.
(2) At
licensing, or at any time preceding the date of
application, if the felony involved an act of fraud, dishonesty, a
breach of trust, or money laundering. Whether a particular crime
is classified as a felony shall be determined by the law of the
jurisdiction in which an individual is convicted.
(2) For purposes of this subdivision, an expunged or pardoned
felony conviction shall not require denial of an application.
However, the commissioner may consider the underlying crime, facts,
or circumstances of an expunged or pardoned felony conviction when
determining the eligibility of an applicant for licensure under this
subdivision or subdivision (c).
(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.
SEC. 2. Section 22065 is added to the Financial Code, to read:
22065. (a) Persons not subject to this division may apply to the
commissioner for an exempt company registration for the purpose of
sponsoring one or more individuals required to be licensed as
mortgage loan originators pursuant to the federal SAFE
Act. A mortgage loan originator eligible for licensure pursuant to
this section shall meet all of the following requirements:
(1) Be covered under an exclusive written contract with, and
originate mortgage loans solely on behalf of, that exempt person.
(2) Be a licensed insurance producer in good standing under
Article 3 (commencing with Section 1631) of Chapter 5 of Part 2 of
Division 1 of the Insurance Code.
(3) Hold a license from the Insurance Commissioner as an insurance
producer for an insurer that controls, is controlled by, or is under
common control with that exempt person.
(b) An exempt person shall comply with all rules and orders that
the commissioner deems necessary to ensure compliance with the
federal SAFE Act and shall pay an annual registration fee
established by the commissioner.
SEC. 3. Section 22109.1 of the
Financial Code is amended to read:
22109.1. (a) The commissioner shall deny an application for a
mortgage loan originator license unless the commissioner makes, at a
minimum, the following findings:
(1) 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.
(2) (A) 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:
(A) During
court during the seven-year period preceding the
date of the application for licensing and registration.
(B) At
registration, or 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. Whether a particular
crime is classified as a felony shall be determined by the law of the
jurisdiction in which an individual is convicted.
(C) Provided that any pardon of a conviction shall not be a
conviction for purposes of this paragraph.
(B) For purposes of this paragraph, an expunged or pardoned felony
conviction shall not require denial of an application. However, the
commissioner may consider the underlying crime, facts, or
circumstances of an expunged or pardoned felony conviction when
determining the eligibility of an applicant for licensure under this
paragraph or paragraph (3).
(3) 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.
(4) The applicant has completed the prelicensing education
requirement described in Section 22109.2.
(5) The applicant has passed a written test that meets the test
requirement described in Section 22109.3.
(6) 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.
(b) Before denying a license under this section, the commissioner
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
shall have all the powers granted under that chapter.
SEC. 4. Section 50141 of the Financial
Code is amended to read:
50141. (a) The commissioner shall deny an application for a
mortgage loan originator license unless the commissioner makes at a
minimum the following findings:
(1) 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.
(2) (A) 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 paragraph, any pardon of a conviction
shall not constitute a conviction. Whether a
particular crime is classified as a felony shall be determined by the
law of the jurisdiction in which an individual is convicted.
(B) For purposes of this paragraph, an expunged or pardoned felony
conviction shall not require denial of an application. However, the
commissioner may consider the underlying crime, facts, or
circumstances of an expunged or pardoned felony conviction when
determining the eligibility of an applicant for licensure under this
paragraph or paragraph (3).
(3) 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.
(4) The applicant has completed the prelicensing education
requirement described in Section 50142.
(5) The applicant has passed a written test that meets the test
requirements described in Section 50143.
(6) 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.
(7) 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.
(b) Before denying a license under this section, the commissioner
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
shall have all the powers granted under that chapter.
SEC. 3. SEC. 5. 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.
