Bill Text: IN HB1216 | 2010 | Regular Session | Introduced
Bill Title: Loan broker and securities matters.
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Introduced - Dead) 2010-01-19 - Representative Riecken added as coauthor [HB1216 Detail]
Download: Indiana-2010-HB1216-Introduced.html
Citations Affected: IC 23-2-5; IC 23-19.
Synopsis: Loan broker and securities matters. Expands the definition
of "loan broker", for purposes of the law governing loan brokers, to
include a person who assists in modifying an existing residential
mortgage loan. Allows the securities commissioner (commissioner) to
bring a court action to enjoin violations of, and enforce compliance
with, the law governing loan brokers. Provides that the court in such an
action may, among other actions, order an asset freeze or the
appointment of a receiver or conservator to take control of a
respondent's property. Provides that the commissioner shall require
each applicant for initial registration as an investment adviser
representative to submit fingerprints for a national criminal history
background check by the Federal Bureau of Investigation. Requires the
applicant to pay any fees or costs associated with the fingerprints and
background check. Allows the commissioner to award up to 10% of the
amount recovered by the securities division as a penalty for a violation
of the uniform securities act to any person who provided information
leading to the imposition of the penalty.
Effective: July 1, 2010.
January 11, 2010, read first time and referred to Committee on Financial Institutions.
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A BILL FOR AN ACT to amend the Indiana Code concerning
business and other associations.
(b) As used in this chapter, "licensee" means a person that is issued a license under this chapter.
(c) As used in this chapter, "loan broker" means any person who, in return for any consideration from any source procures, attempts to procure, or assists in procuring a residential mortgage loan from a third party or any other person, or who assists in modifying an existing residential mortgage loan made by a third party or any other person, whether or not the person seeking the loan or the loan modification actually obtains the loan or the loan modification. "Loan broker" does not include any of the following:
(1) Any supervised financial organization (as defined in IC 24-4.5-1-301(20)), including a bank, savings bank, trust
company, savings association, or credit union.
(2) Any other financial institution that is:
(A) regulated by any agency of the United States or any state;
and
(B) regularly actively engaged in the business of making
consumer loans that are not secured by real estate or taking
assignment of consumer sales contracts that are not secured by
real estate.
(3) Any insurance company.
(4) Any person arranging financing for the sale of the person's
product. or
(5) A creditor that is licensed under IC 24-4.4-2-402.
(6) With respect to a person who acts only to assist in
modifying an existing residential mortgage loan made by a
third party or any other person, any of the following:
(A) A nonprofit organization exempt from taxation under
Section 501(c)(3) of the Internal Revenue Code.
(B) A consumer reporting agency (as defined in the Federal
Fair Credit Reporting Act (15 U.S.C. 1681 et seq.)).
(d) As used in this chapter, "loan brokerage business" means a
person acting as a loan broker.
(e) As used in this chapter, "mortgage loan origination activities"
means performing any of the following activities for compensation or
gain in connection with a residential mortgage loan:
(1) Receiving or recording a borrower's or potential borrower's
residential mortgage loan application information in any form for
use in a credit decision by a creditor.
(2) Offering to negotiate or negotiating terms of a residential
mortgage loan.
(f) As used in this chapter, "borrower's residential mortgage loan
application information" means the address of the proposed residential
real property to be mortgaged and borrower's essential personal and
financial information necessary for an informed credit decision to be
made on the borrower's mortgage loan application.
(g) As used in this chapter, "mortgage loan originator" means an
individual engaged in mortgage loan origination activities. The term
does not include a person who:
(1) performs purely administrative or clerical tasks on behalf of
a mortgage loan originator or acts as a loan processor or
underwriter;
(2) performs only real estate brokerage activities and is licensed
in accordance with IC 25-34.1 or the applicable laws of another
state, unless the person is compensated by a creditor, a loan
broker, a mortgage loan originator, or any agent of a creditor, a
loan broker, or a mortgage loan originator; or
(3) is involved only in extensions of credit relating to time share
plans (as defined in 11 U.S.C. 101(53D)).
(h) As used in this chapter, "mortgage loan originator license"
means a license issued by the commissioner authorizing an individual
to act as a mortgage loan originator on behalf of a loan broker licensee.
(i) As used in this chapter, "person" means an individual, a
partnership, a trust, a corporation, a limited liability company, a limited
liability partnership, a sole proprietorship, a joint venture, a joint stock
company, or another group or entity, however organized.
(j) As used in this chapter, "ultimate equitable owner" means a
person who, directly or indirectly, owns or controls ten percent (10%)
or more of the equity interest in a loan broker licensed or required to be
licensed under this chapter, regardless of whether the person owns or
controls the equity interest through one (1) or more other persons or
one (1) or more proxies, powers of attorney, or variances.
(k) As used in this chapter, "principal manager" means an individual
who:
(1) has at least three (3) years of experience:
(A) as a mortgage loan originator; or
(B) in financial services;
that is acceptable to the commissioner; and
(2) is principally responsible for the supervision and management
of the employees and business affairs of a loan broker licensee.
(l) As used in this chapter, "principal manager license" means a
license issued by the commissioner authorizing an individual to act as:
(1) a principal manager; and
(2) a mortgage loan originator;
on behalf of a loan broker licensee.
(m) As used in this chapter, "bona fide third party fee", with respect
to a residential mortgage loan, includes any of the following:
(1) Fees for real estate appraisals. However, if the residential
mortgage loan is governed by Title XI of the Financial Institutions
Reform, Recovery, and Enforcement Act (12 U.S.C. 3331 through
3352), the fee for an appraisal performed in connection with the
loan is not a bona fide third party fee unless the appraisal is
performed by a person that is licensed or certified under
IC 25-34.1-3-8.
(2) Fees for title examination, abstract of title, title insurance,
property surveys, or similar purposes.
(3) Notary and credit report fees.
(4) Fees for the services provided by a loan broker in procuring possible business for a creditor if the fees are paid by the creditor.
(n) As used in this chapter, "branch office" means any fixed physical location from which a loan broker licensee holds itself out as engaging in the loan brokerage business.
(o) As used in this chapter, "loan processor or underwriter" means an individual who:
(1) is employed by a loan broker licensee and acts at the direction of, and subject to the supervision of, the loan broker licensee or a licensed principal manager employed by the loan broker licensee; and
(2) performs solely clerical or support duties on behalf of the loan broker licensee, including any of the following activities with respect to a residential mortgage loan application received by the loan broker licensee:
(A) The receipt, collection, distribution, and analysis of information commonly used in the processing or underwriting of a residential mortgage loan.
(B) Communicating with a borrower or potential borrower to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that the communication does not include:
(i) offering or negotiating loan rates or terms; or
(ii) counseling borrowers or potential borrowers about residential mortgage loan rates or terms.
(p) As used in this chapter, "real estate brokerage activity" means any activity that involves offering or providing real estate brokerage services to the public, including any of the following:
(1) Acting as a real estate broker or salesperson for a buyer, seller, lessor, or lessee of real property.
(2) Bringing together parties interested in the sale, lease, or exchange of real property.
(3) Negotiating, on behalf of any party, any part of a contract concerning the sale, lease, or exchange of real property, other than in connection with obtaining or providing financing for the transaction.
(4) Engaging in any activity for which the person performing the activity is required to be licensed under IC 25-34.1 or the applicable laws of another state.
(5) Offering to engage in any activity, or to act in any capacity with respect to any activity, described in subdivisions (1) through
(4).
(q) As used in this chapter, "registered mortgage loan originator"
means a mortgage loan originator who:
(1) is an employee of:
(A) a depository institution;
(B) a subsidiary that is:
(i) owned and controlled by a depository institution; and
(ii) regulated by a federal financial institution regulatory
agency (as defined in 12 U.S.C. 3350(6)); or
(C) an institution regulated by the Farm Credit Administration;
and
(2) is registered with and maintains a unique identifier with the
Nationwide Mortgage Licensing System and Registry.
(r) As used in this chapter, "residential mortgage loan" means a loan
that is secured by a mortgage, deed of trust, or other consensual
security interest on real estate in Indiana on which there is located or
intended to be constructed a dwelling (as defined in the federal Truth
in Lending Act (15 U.S.C. 1602(v)) that is or will be used primarily for
personal, family, or household purposes.
(s) As used in this chapter, "personal information" includes any of
the following:
(1) An individual's first and last names or first initial and last
name.
(2) Any of the following data elements:
(A) A Social Security number.
(B) A driver's license number.
(C) A state identification card number.
(D) A credit card number.
(E) A financial account number or debit card number in
combination with a security code, password, or access code
that would permit access to the person's account.
(3) With respect to an individual, any of the following:
(A) Address.
(B) Telephone number.
(C) Information concerning the individual's:
(i) income or other compensation;
(ii) credit history;
(iii) credit score;
(iv) assets;
(v) liabilities; or
(vi) employment history.
(t) As used in this chapter, personal information is "encrypted" if the
personal information:
(1) has been transformed through the use of an algorithmic
process into a form in which there is a low probability of
assigning meaning without use of a confidential process or key;
or
(2) is secured by another method that renders the personal
information unreadable or unusable.
(u) As used in this chapter, personal information is "redacted" if the
personal information has been altered or truncated so that not more
than the last four (4) digits of:
(1) a Social Security number;
(2) a driver's license number;
(3) a state identification number; or
(4) an account number;
are accessible as part of the personal information.
(v) As used in this chapter, "depository institution" has the meaning
set forth in the Federal Deposit Insurance Act (12 U.S.C. 1813(c)) and
includes any credit union.
(w) As used in this chapter, "state licensed mortgage loan
originator" means any individual who:
(1) is a mortgage loan originator;
(2) is not an employee of:
(A) a depository institution;
(B) a subsidiary that is:
(i) owned and controlled by a depository institution; and
(ii) regulated by a federal financial institution regulatory
agency (as defined in 12 U.S.C. 3350(6)); or
(C) an institution regulated by the Farm Credit Administration;
(3) is licensed by a state or by the Secretary of the United States
Department of Housing and Urban Development under Section
1508 of the S.A.F.E. Mortgage Licensing Act of 2008 (Title V of
P.L.110-289); and
(4) is registered as a mortgage loan originator with, and maintains
a unique identifier through, the Nationwide Mortgage Licensing
System and Registry.
(x) As used in this chapter, "unique identifier" means a number or
other identifier that:
(1) permanently identifies a mortgage loan originator; and
(2) is assigned by protocols established by the Nationwide
Mortgage Licensing System and Registry and the federal financial
institution regulatory agencies to facilitate:
(A) the electronic tracking of mortgage loan originators; and
(B) the uniform identification of, and public access to, the employment history of and the publicly adjudicated disciplinary and enforcement actions against mortgage loan originators.
(1) Adopt rules under IC 4-22-2 to implement this chapter.
(2) Make investigations and examinations:
(A) in connection with any application for licensure under this chapter or with any license already granted; or
(B) whenever it appears to the commissioner, upon the basis of a complaint or information, that reasonable grounds exist for the belief that an investigation or examination is necessary or advisable for the more complete protection of the interests of the public.
(3) Charge as costs of investigation or examination all reasonable expenses, including a per diem prorated upon the salary of the commissioner or employee and actual traveling and hotel expenses. All reasonable expenses are to be paid by the party or parties under investigation or examination if the party has violated this chapter.
(4) Issue notices and orders, including cease and desist notices and orders, after making an investigation or examination under subdivision (2).
(5) Sign all orders, official certifications, documents, or papers issued under this chapter or delegate the authority to sign any of those items to a deputy.
(6) Hold and conduct hearings.
(7) Hear evidence.
(8) Conduct inquiries with or without hearings.
(9) Receive reports of investigators or other officers or employees
of the state of Indiana or of any municipal corporation or
governmental subdivision within the state.
(10) Administer oaths, or cause them to be administered.
(11) Subpoena witnesses, and compel them to attend and testify.
(12) Compel the production of books, records, and other
documents.
(13) Order depositions to be taken of any witness residing within
or without the state. The depositions shall be taken in the manner
prescribed by law for depositions in civil actions and made
returnable to the commissioner.
(14) Order that each witness appearing under the commissioner's
order to testify before the commissioner shall receive the fees and
mileage allowances provided for witnesses in civil cases.
(15) Provide interpretive opinions or issue determinations that the
commissioner will not institute a proceeding or an action under
this chapter against a specified person for engaging in a specified
act, practice, or course of business if the determination is
consistent with this chapter. The commissioner may adopt rules
to establish fees for individuals requesting an interpretive opinion
or a determination under this subdivision. A person may not
request an interpretive opinion or a determination concerning an
activity that:
(A) occurred before; or
(B) is occurring on;
the date the opinion or determination is requested.
(16) Subject to subsection (f), designate a multistate automated
licensing system and repository, established and operated by a
third party, to serve as the sole entity responsible for:
(A) processing applications for:
(i) licenses under this chapter; and
(ii) renewals of licenses under this chapter; and
(B) performing other services that the commissioner
determines are necessary for the orderly administration of the
division's licensing system.
A multistate automated licensing system and repository described
in this subdivision may include the Nationwide Mortgage
Licensing System and Registry established by the Conference of
State Bank Supervisors and the American Association of
Residential Mortgage Regulators. The commissioner may take
any action necessary to allow the division to participate in a
multistate automated licensing system and repository.
(b) If a witness, in any hearing, inquiry, or investigation conducted
under this chapter, refuses to answer any question or produce any item,
the commissioner may file a written petition with the circuit or superior
court in the county where the hearing, investigation, or inquiry in
question is being conducted requesting a hearing on the refusal. The
court shall hold a hearing to determine if the witness may refuse to
answer the question or produce the item. If the court determines that
the witness, based upon the witness's privilege against
self-incrimination, may properly refuse to answer or produce an item,
the commissioner may make a written request that the court grant use
immunity to the witness. Upon written request of the commissioner, the
court shall grant use immunity to a witness. The court shall instruct the
witness, by written order or in open court, that:
(1) any evidence the witness gives, or evidence derived from that
evidence, may not be used in any criminal proceedings against
that witness, unless the evidence is volunteered by the witness or
is not responsive to a question; and
(2) the witness must answer the questions asked and produce the
items requested.
A grant of use immunity does not prohibit evidence that the witness
gives in a hearing, investigation, or inquiry from being used in a
prosecution for perjury under IC 35-44-2-1. If a witness refuses to give
the evidence after the witness has been granted use immunity, the court
may find the witness in contempt.
(c) In any prosecution, action, suit, or proceeding based upon or
arising out of this chapter, the commissioner may sign a certificate
showing compliance or noncompliance with this chapter by any person.
This shall constitute prima facie evidence of compliance or
noncompliance with this chapter and shall be admissible in evidence
in any action at law or in equity to enforce this chapter.
(d) If:
(1) a person disobeys any lawful:
(A) subpoena issued under this chapter; or
(B) order or demand requiring the production of any books,
accounts, papers, records, documents, or other evidence or
information as provided in this chapter; or
(2) a witness refuses to:
(A) appear when subpoenaed;
(B) testify to any matter about which the witness may be
lawfully interrogated; or
(C) take or subscribe to any oath required by this chapter;
the circuit or superior court of the county in which the hearing, inquiry,
or investigation in question is held, if demand is made or if, upon
written petition, the production is ordered to be made, or the
commissioner or a hearing officer appointed by the commissioner, shall
compel compliance with the lawful requirements of the subpoena,
order, or demand, compel the production of the necessary or required
books, papers, records, documents, and other evidence and
information, and compel any witness to attend in any Indiana county
and to testify to any matter about which the witness may lawfully be
interrogated, and to take or subscribe to any oath required.
(e) If a person fails, refuses, or neglects to comply with a court order
under this section, the person shall be punished for contempt of court.
(f) The commissioner's authority to designate a multistate automated
licensing system and repository under subsection (a)(16) is subject to
the following:
(1) The commissioner may not require any person that is not
required to be licensed under this chapter, or any employee or
agent of a person that is not required to be licensed under this
chapter, to:
(A) submit information to; or
(B) participate in;
the multistate automated licensing system and repository.
(2) The commissioner may require a person required under this
chapter to submit information to the multistate automated
licensing system and repository to pay a processing fee considered
reasonable by the commissioner.
(b) In an action under this section and on a proper showing, the court may:
(1) issue a permanent or temporary injunction, restraining order, or declaratory judgment;
(2) order other appropriate or ancillary relief, which may include:
(A) an asset freeze, accounting, writ of attachment, writ of general or specific execution, and appointment of a receiver or conservator;
(B) ordering a receiver or conservator appointed under clause (A) to:
(i) take charge and control of a respondent's property, including investment accounts and accounts in a depository institution, rents, and profits;
(ii) collect debts; and
(iii) acquire and dispose of property;
(C) imposing a civil penalty up to ten thousand dollars ($10,000) per violation and an order of rescission, restitution, or disgorgement directed to a person that has engaged in an act, practice, or course of business constituting a violation of this chapter or a rule adopted or order issued under this chapter; and
(D) ordering the payment of prejudgment and postjudgment interest; or
(3) order such other relief as the court considers appropriate.
(c) The commissioner may not be required to post a bond in an action or proceeding under this chapter.
(d) Penalties collected under this section shall be deposited in the securities division enforcement account created under IC 23-19-6-1(f).
(1) Employ any device, scheme, or artifice to defraud.
(2) Make any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of circumstances under which they are made, not misleading.
(3) Engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any person.
(4) Collect or solicit any consideration, except a bona fide third party fee, in connection with a residential mortgage loan until:
(A) the loan has been closed; or
(B) if the person assists in modifying an existing residential
mortgage loan made by a third party or any other person,
the loan is modified.
(5) Receive any funds if the person knows that the funds were
generated as a result of a fraudulent act.
(6) File or cause to be filed with a county recorder any document
that the person knows:
(A) contains:
(i) a misstatement; or
(ii) an untrue statement;
of a material fact; or
(B) omits a statement of a material fact that is necessary to
make the statements that are made, in the light of
circumstances under which they are made, not misleading.
(7) Knowingly release or disclose the unencrypted, unredacted
personal information of one (1) or more borrowers or prospective
borrowers, unless the personal information is used in an activity
authorized by the borrower or prospective borrower under one (1)
or more of the following circumstances:
(A) The personal information is:
(i) included on an application form or another form; or
(ii) transmitted as part of an application process or an
enrollment process.
(B) The personal information is used to obtain a consumer
report (as defined in IC 24-5-24-2) for an applicant for credit.
(C) The personal information is used to establish, amend, or
terminate an account, a contract, or a policy, or to confirm the
accuracy of the personal information.
However, personal information allowed to be disclosed under this
subdivision may not be printed in whole or in part on a postcard
or other mailer that does not require an envelope, or in a manner
that makes the personal information visible on an envelope or a
mailer without the envelope or mailer being opened.
(8) Engage in any reckless or negligent activity allowing the
release or disclosure of the unencrypted, unredacted personal
information of one (1) or more borrowers or prospective
borrowers. An activity described in this subdivision includes an
action prohibited by section 18(d) of this chapter.
(9) Knowingly bribe, coerce, or intimidate another person to
corrupt or improperly influence the independent judgment of a
real estate appraiser with respect to the value of any real estate
offered as security for a residential mortgage loan, as prohibited
by section 9.1(d) of this chapter.
(10) Violate any of the following:
(A) The federal Truth in Lending Act (15 U.S.C. 1601 et seq.).
(B) The federal Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.), as amended.
(C) The federal Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.).
(D) Any other federal law or regulation concerning residential mortgage lending.
(b) A person who commits an act described in subsection (a) is subject to sections 10, 11.5, 14, 15, and 16 of this chapter.
(1) the information or record required for the filing of a uniform application; and
(2) upon request by the commissioner, any other financial or other information or record that the commissioner determines is appropriate.
(b) If the information or record contained in an application filed under subsection (a) is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.
(c) At the time of application for an initial registration as an investment adviser representative under this article, the commissioner shall require each applicant to submit fingerprints for a national criminal history background check (as defined in IC 10-13-3-12) by the Federal Bureau of Investigation, for use by the commissioner in determining whether the applicant should be denied registration under this chapter for any reason set forth in section 12(d) of this chapter. The applicant shall pay any fees or costs associated with the fingerprints and background check required under this subsection.
noon on the forty-fifth day after the filing of any amendment
completing the application.
(d) (e) A registration is effective until midnight on December 31 of
the year for which the application for registration is filed. Unless an
order is in effect under section 12 of this chapter, a registration may be
automatically renewed each year by filing such records as are required
by rule adopted or order issued under this article, by paying the fee
specified in section 10 of this chapter, and by paying costs charged by
the designee of the commissioner for processing the filings.
(e) (f) A rule adopted or order issued under this article may impose
other conditions, not inconsistent with the National Securities Markets
Improvement Act of 1996. An order issued under this article may
waive, in whole or in part, specific requirements in connection with
registration as are in the public interest and for the protection of
investors.
