Transcript Residential Mortgage Lending Act - Office of Financial Institutions

Louisiana Office of Financial
Institutions
Orientation to the
Louisiana Secure and Fair Enforcement of
Mortgage Licensing Act of 2009
Or
Louisiana S.A.F.E. Residential Mortgage Lending
Act
Updated08-10
SAFE Residential Mortgage Lending
Act
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LSA-R.S. 6:1081 through 6:1099
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Enacted effective July 31, 2009
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Provides for licensure of mortgage
originators, brokers, and lenders
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Amended effective August 15, 2010
Residential Mortgage Lending Act
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Subdivided into three parts
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PART I. GENERAL PROVISIONS
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PART II. LICENSURE, REGISTRATION, & CERTIFICATION
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Licensure Requirements
Applications
Recordkeeping – OFI Rule RML 01-01
Examination and Investigation of Complaints
Suspension and Revocation of Licenses and Registrations
PART III. RESIDENTIAL MORTGAGE LOANS
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Definitions
Prohibitions
Promulgation of Rules
Fees and Charges
Mortgage Loan Origination Agreements
Criminal Penalties
Part IV. Reverse Mortgage Loans
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Requirements
Counseling
Commitment and cooling off period
Duties to elders
Residential Mortgage Lending Act
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Who must be licensed
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Originators
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(including contract processors and underwriters)
Brokers
Lenders
Wholesale Lenders
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which are not otherwise exempt
Definitions
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“Mortgage Loan Originator” means an
individual who for compensation or gain
or with the expectation of compensation
or gain takes a residential mortgage loan
application or offers or negotiates terms
of a residential mortgage loan.
Definitions
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Mortgage Broker or Residential Mortgage Broker
– any person who, directly or indirectly, for
compensation or expectation of compensation,
negotiates, places, or finds, or offers to negotiate,
place or find a residential mortgage loan for
another person
– includes FHA loan correspondents and lenders
who table fund loans
Definitions
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Mortgage Lender or Residential Mortgage Lender
– any person who, directly or indirectly, originates
or makes, or offers to originate or make, a
residential mortgage loan for another person
Definitions
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Residential Mortgage Lending Activity
–
any activity, including electronic activity, engaged
in for compensation or with the expectation of
compensation in connection with a residential
loan transaction including origination or funding,
negotiation or placement, or offering to
negotiate,place or fund a residential mortgage
loan for a person
Definitions
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Residential Mortgage Loan
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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 Reg Z
or residential immovable property upon which is
constructed or intended to be constructed a
dwelling as defined in Reg Z
Residential Mortgage Loan
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Now covers all loans secured by a persons
dwelling including:
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Mobile home loans without a security interest in
the land
Motor homes used as the person’s dwelling
Boats if used as the person’s dwelling
Vacant land if to be used to construct or move a
person’s residence on it
Definitions
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Registered Mortgage Loan Originator
– An individual who meets the definition of a
mortgage loan originator and is an employee of a
depository institution or a subsidiary that is either
owned and controlled by a depository institution
and regulated by a federal banking agency or an
institution regulated by the Farm Credit
Administration and is registered with, and
maintains a unique identifier through, the
Nationwide Mortgage Licensing System &
registry.
R.S. 6:1084
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No person, directly or indirectly, shall engage
in a residential mortgage lending activity
without complying with the Louisiana
S.A.F.E. Residential Mortgage Lending Act
or rules and regulations promulgated
pursuant to thereof
R.S. 6:1086
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Beginning July 31, 2009, unless otherwise
exempt, no person shall engage in
residential mortgage lending activity without
first obtaining and maintaining annually:
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A license and registration as a mortgage loan
originator, or a license as a mortgage lender or
broker
A unique identifier in the NMLS&R
R.S. 6:1086
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The following persons shall have until
July 31, 2010 to obtain a license in
compliance with the Act:
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A person whose activities were not subject to the
licensing provisions of this Act on July 30, 2009
A person engaged in residential mortgage lending
activities which was subject to an exemption
provided by this Chapter on July 30, 2009
Originator Exemptions
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Registered mortgage loan originators, when acting
for a depository institution
An individual who offers or negotiates terms of a
residential mortgage loan with or on behalf of an
immediate family member
A licensed attorney who negotiates the terms of a
residential mortgage loan on behalf of a client as an
ancillary matter to the representation of the client
unless the attorney is compensated by a lender, a
mortgage broker, or other mortgage originator
including any agents of such
Originator Exemptions
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Any individual who performs only real estate brokerage
activities and is licensed provided they are not compensated by
a lender, mortgage broker, or other mortgage originator or any
of their agents
Any individual engaged solely in extensions of credit involving
timeshares
Individuals who are employees of a retailer of manufactured or
modular homes performing only clerical duties which receive no
compensation or gain from a mortgage broker or lender
An individual who offers or negotiates terms of a mortgage loan
secured by a dwelling that is owned by and serves as the
individual’s residence
Originator Exemptions
Loan Processor or Underwriter
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An individual engaging solely in loan processor or underwriting
activities, who does not represent to the public, through
advertising or other means including the use of business cards,
stationary, brochures, signs, rate lists, or other promotional
items, that such individual can or sill perform any of the
activities of a mortgage originator.
Defined as a person who performs clerical or support duties as
an employee at the direction of and subject to the supervision
of a person license or exempt from the Act.
Originator Exemptions
Loan Processor or Underwriter
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Clerical or Support Duties include subsequent to
receipt of an application:
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Receipt, collection, distribution, and analysis or information
common for the processing or underwriting of a residential
mortgage loan
Communicating with a consumer to obtain the information
necessary for the processing or underwriting of a loan, to
the extent that such communication does not include
offering or negotiating loan rates or terms, or counseling
consumers about residential loan rates or terms
Originator Exemptions
Loan Processor or Underwriter
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DO NOT APPLY TO:
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Independent contractor loan processors or
underwriters
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They must obtain an originator license and a
unique identifier issued by the NMLS&R
Mortgage Broker/Lender Exemptions
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Depository Institutions or direct or indirect
subsidiaries including their employees
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Exempt from licensure
Still subject to requirement of Part III
Direct & Indirect Subsidiaries
Depository Institutions
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Proposed definitions:
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Direct Subsidiary - any firm, corporation, association, trust, or
legal entity which is 100 percent owned by a bank, savings
bank, savings and loan association, or credit union.
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Indirect Subsidiary - any firm, corporation, association, trust, or
legal entity which is 100 percent owned by a direct subsidiary
as defined above, and any firm, corporation, association, trust,
legal entity, partnership, or limited liability company which is
100 percent owned by a bank, savings bank, savings and loan
association, or credit union, and one or more direct subsidiaries
as defined above.
Mortgage Broker/Lender
Exemptions
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Mortgagees which are the former owner
of the dwelling or residential immovable
property
Insurance company or agent which holds
a current producer license and brokers
loans exclusively to an insurer
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Both still subject to Part III of Act
Mortgage Broker/Lender
Exemptions
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Licensed Attorneys
When activity is incidental to providing legal
services
Exempt from licensure
Still subject to Part III
Mortgage Broker/Lender
Exemptions
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Any not for profit 501(c) corporation making
loans to promote home ownership or
improvements for the disadvantaged
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Exempt from licensure
Still subject to Part III
Mortgage Broker/Lender
Exemptions
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Any Real Estate Investment Trust
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Small Business investment Companies
licensed by SBA
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Both Still subject to Part III
Requirements for Licensing
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Fingerprints and fee for background check
Personal history and experience submitted
through the NMLS&R
Authorization and fee for obtaining a credit
report
Information required for owners, members, or
partners
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For corporation each 10% or greater shareholder
Requirements for Licensing
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Demonstrate financial responsibility, character, and general fitness to
warrant a determination that the applicant will operate honestly, fairly
and efficiently within the purposes of this Chapter.
Complete 20 hours of pre-licensing education approved by NMLS&R
also a minimum of each of the following
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3 hours of federal law and regulations
3 hours of ethics including fraud, consumer protection, and fair lending
2 hours of training relating to non-traditional mortgage marketplace
Pass a written examination with both national and state components
Obtain and maintain a surety bond
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Originators may be covered by a Surety Bond obtained by their employer
Restrictions on granting Licenses
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Paid all fees due to OFI
Never had a mortgage related license revoked in any
governmental jurisdiction
Never convicted, pled guilty, or nolo contendere to a felony
involving fraud, dishonesty, breach of trust, or money
laundering
Not convicted, pled guilty, or nolo contendere to any felony
within the last seven years
Surety Bond / Deposit
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Each applicant for licensure must provide one of
the following in amount which determined by
loan volume:
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Surety Bond based upon loan volume from the previous year:
 $0 to $99,999,999 bond amount of $25,000
 $100,000,000 or greater bond amount of $50,000
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Employer may obtain coverage for employees
Pledged deposit in federally insured
institution located in Louisiana in the amount
of Surety Bond otherwise required
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* For initial license bond or deposit must be at least $25,000
Nationwide Mortgage Licensing
System and Registry (NMLSR)
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Effective June 18, 2007 Act 36 of the 2007
legislature authorized the Office of Financial
Institution’s participation in a nationwide
online licensing system.
The licensing system collects application
data from individuals and companies and
submit it to each jurisdiction (state) where
they are licensed or applying for a license.
Nationwide Mortgage Licensing
System and Registry (NMLSR)
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Office of Financial Institutions began
utilizing the system on August 1, 2008.
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Beginning August 1, 2008, all application
filings and notifications with OFI were
required to be made through the licensing
system.
Nationwide Mortgage Licensing
System and Registry (NMLSR)
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All persons utilizing the nationwide licensing
system shall be required to pay user fees in
addition to any applicable license, renewal,
notification, or late fees.
The Commissioner may share any
information disclosed to the system with any
state or federal regulatory agencies having
authority over residential mortgage lending
activities
Application Fees
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Mortgage Broker, Lender
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Each Branch (other than main office)
Renewal Fee
$300
Originators
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Renewal Fee
$400
$100
$100
$100
RENEWALS
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Renewals in the NMLS&R begin November 1st
each year. Licensees must attest to the
accuracy of their records.
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Late after December 31st and before March 1st
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Broker/Lender late fee $200
Originator late fee
$50
Licenses Expire January 1 unless all
requirements satisfied before March 1
Requirements for Renewal
Must continue to meet all requirements for obtaining
a license
 Must satisfy the continuing educational requirements
 Must be in compliance with all uncontested orders or
consent agreements including payment of fees,
penalties, or refunds
NOTE failing to meet requirements will result in license
expiring on December 31
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LSA-R.S. 6:1089
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No residential mortgage lender or originator may
conduct lending activities under any name other than
in their current record on the NMLS&R
Commissioner must be notified prior to changes in
name or location and pay $100 fee
Must notify Commissioner of office closure within 30
days
A late notification results in an additional $100 late
fee
LSA-R.S. 6:1089 B.
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Whenever employment of an originator changes,
Commissioner must be notified within 30 days
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Employer and Employee must give notification through
NMLS&R
Employee must pay $50 transfer fee to change sponsorship
of their license to another broker or lender
Failure to notify within 30 days results in a $100 late
notification fee per occurrence
Upon leaving employment remove relationship and
sponsorship through NMLS&R
R.S. 6:1090
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No license may be sold or transferred
No person shall acquire control (51%) of
licensee without obtaining prior written
approval of OFI after submitting an
application and $300 fee
Failure to obtain approval constitutes
operating without a license and subjects the
acquirer to the associated penalties
R.S. 6:1090
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A mortgage broker can only broker loans to a
mortgage lender
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Brokering to a Broker is prohibited
R.S. 6:1090
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Licensees may only engage in residential
mortgage lending through natural persons
licensed as a mortgage broker, mortgage
lender, or originator, or who are exempt from
Part II
NET BRANCHING
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Prohibited by LSA-R.S. 6:1090 G.
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Except as provided by Rule
OFI in process of drafting rule & currently
allowing :
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net compensation of branch employees only
all contracts, leases, & accounts must be in name
of licensed
employer indemnification agreements not
permissible
Restrictions on Employment after
denial or revocation
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No person who has been denied a license or
had a license revoked whether they failed to
request an administrative hearing or the
decision was affirmed in an administrative
hearing, may be employed as a processor of
mortgage loans or hold a position
responsible for the operation of the principal
place of business or any branch
R.S. 6:1090 (I)
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No person licensed pursuant to the Residential
Mortgage Lending Act, R.S. 6:1081 et seq., shall
engage in or be financially compensated for any
loan transaction in which such person, for a fee,
commission, or other valuable consideration, is
acting as a licensee under the Louisiana Real
Estate License Law, R.S. 37:1430 et seq., in
connection with the same residential loan
transaction.
RECORD RETENTION
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Requirements set forth by Rule and Policy
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See http://www.ofi.louisiana.gov
EXAMINATIONS FEES
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Fee not to exceed $400 per location visited
Due within 30 days of assessment
Late fee of up to $50 per day not paid timely
Other expenses may apply where records
must be reviewed at an out-of-state location.
Suspension & Revocation of License
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After an opportunity to be heard in Administrative hearing,
Commissioner may revoke or suspend license of person who:
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Violates any of the provisions of this Chapter or any Rule or
Regulation promulgated, or any order, including but not limited to a
cease and desist order or subpoena
Violates any provision of a voluntary consent agreement
Has knowingly provided or caused to be provided false or
fraudulent information or financial statements or withheld
information which would have resulted in denial of license
Refuses to permit examination of books and records or fails to
furnish required information
Suspension & Revocation
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Fails to maintain records required after given written notice
Continues in office any individual with power to direct management
or policies of a licensee upon conviction of any felony
Violates any provision of a regulatory or prohibitory statute and
has been found to have violated such by the governmental agency
responsible for determining such
Misrepresents or conceals material facts or makes false promises
to influence an applicant or mortgagor
Knowingly engages in any transaction, practice, or course of
business which perpetrates a fraud upon any person in connection
with the making, purchasing, sale or brokering of any mortgage
loan.
Suspension & Revocation
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Misrepresents or conceals material facts terms, conditions, etc. of a
transaction to which he is a party, pertinent to an applicant or mortgagor
Failure to account for or deliver personal property which has come into
their hands which is not their property or which they are not entitled to
retain
Fails to disburse without cause any funds in accordance with any
agreements with a residential mortgage loan
Fails to pay any fee or assessment imposed by the Chapter or Rule
Violates written restriction or conditions of license
Fails, after notice without lawful excuse, to obey any order or subpoena
issued by the Commissioner
Commissioner discovers any fact or condition that currently exists which if
it had existed at the time of the original application, would have warranted
denial of the application
Reapplication upon revocation
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A person whose license has been revoked
for any reason may not reapply for a license
until at least five years have elapsed from the
date of the order of revocation, unless the
commissioner, in his sole discretion,
prescribes an earlier or later date
Immediate Suspension
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The Commissioner may order an immediate
suspension of the license of any person who:
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Fails to maintain bond or pledged deposit
Commits serious violations of the Act such that, in
the opinion of the Commissioner, the public safety
and welfare demand emergency action
Submits a check covering the fee for any
application, notification, examination, late fee, or
penalty which is returned by the licensee’s
depository institution
Immediate Suspension
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Is convicted of a felony which would have
prohibited issuance or renewal of the license
Has license suspended or revoked in another
jurisdiction
Appeal of Immediate Suspension
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A person for whom a license has been
suspended shall have thirty days from the
date of the order to request a hearing in
accordance with the Administrative
Procedure Act
Failure to timely request a hearing shall
constitute a waiver of appeal rights regarding
the suspension
Fines & Penalties
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Upon being found guilty of violating any provision of
the RMLA or Rule brokers, and/or originators may be
fined:
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Up to $1,000 per violation &
Up to $1,000 per day the person acts as a residential
mortgage broker, lender, or originator without complying
with the RMLA or any rules promulgated thereunder
Refunds may also be ordered for any unauthorized fee or
charge
Prohibitions
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It shall be a violation for any person engaged in
residential mortgage lending activity subject to
this Chapter to:
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Directly or indirectly employ any scheme, device, or
artifice to defraud or mislead borrowers, lenders, or any
person, when such person or individual knew or should
have known that such was defrauding or misleading
Engage in any unfair or deceptive practice toward any
person
Obtain property by fraud or misrepresentation
Prohibitions
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With intent to defraud, solicit or enter into a contract
with a consumer providing for payment of an unlawful
fee or commission to a person subject to this Chapter
even though no loan is actually obtained for the
consumer
Solicit, advertise, or enter into a contract for specific
interest rates, points, or other terms when the person or
individual knew or should have known that such terms
are not actually available at the time of soliciting,
advertising, or contracting.
Prohibitions
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Conduct any business covered by this Chapter without
holding a license or knowingly assist or aid and abet
any person in the conduct of business under this
Chapter without a valid license as required
As determined by the commissioner, structure a
residential loan transaction in such a manner as to
circumvent the provisions of this Chapter
Fail to comply with this Chapter or rules or regulations
promulgated under it, or fail to comply with any other
state or federal law, including rules and regulations
issued thereunder, applicable to any residential
mortgage lending activity
Prohibitions
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Make in any manner, any false or deceptive statement
or representation with regard to the rates, points, or
terms or conditions for a residential mortgage loan
when such person or individual knew or should have
known that such was false or deceptive, or engage in
bait and switch advertising
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 NMLS&R, or in connection
with any investigation conducted by the commissioner
or any other governmental agency
Prohibitions
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Make any payment, threat, or promise, directly, to any
person or appraiser of a property for the purpose of
influencing the independent judgment of the person in
connection with a residential mortgage loan, or
influencing the independent judgment of the appraiser
with respect to the value of the property
Collect, charge, or attempt to collect or charge, or use
or propose any agreement purporting to collect or
charge any fee prohibited by this Chapter
Engage in loan processing or underwriting activities as
an independent contractor without obtaining a license
to act as a residential mortgage loan originator
Prohibitions
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Fail to truthfully account for monies belonging to a
party to a residential mortgage loan transaction
Represent to the public through advertising or other
means of communicating or providing information
including the use of business cards, stationary,
brochures, signs, rate lists, or other promotional items,
that such an individual can or will perform any activities
of a mortgage loan originator, while such individual
engages in activities solely as a loan processor or
underwriter
Forfeiture of Compensation
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R.S. 6:1092 G.
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Any person who acts as a mortgage broker,
lender, or originator without complying with
licensing provisions shall be subject to forfeiture
of compensation attributable to residential
mortgage lending activity conducted after August
15, 2001
This shall not impair the validity of note or
mortgage
Public Information
R.S. 6:103 B. & R.S. 6:1092 J.
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The Commissioner may make public the following:
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Orders Requiring Refunds
Civil Money Penalty Assessments
License Suspension
License Revocation
Application Denials
Consent Agreements
Status of Applications, legal action taken pertaining to them,
and legal grounds for taking such action
Continuing Education
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Each licensed originator must take 8 hours of
NMLS&R approved continuing education each year
prior to renewal
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3 hours of education pertaining to federal laws and
regulations
2 hours of ethics, which shall include instruction on fraud,
consumer protection, and fair lending issues
2 hours related to lending standards for the nontraditional
mortgage product marketplace
1 hour any other course approved by NMLS&R
Testing Requirements
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All licensed originators must obtain a passing grade
on both the National and State Components of the
test developed by the NMLS&R
All new applicants on or after July 31, 2009 must
obtain a passing grade on both components of the
test before obtaining a license
Originators which were licensed on or before July
30, 2009 must obtain a passing grade on both
components by December 31, 2010
Testing Requirements
State Component Exemption

Originators which obtained a passing grade
on or after January 1, 2004 on the Louisiana
pre-licensing test previously administered by
PSI Exams
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Will be exempt from taking the state component
of the test but must obtain a passing grade on the
national component by December 31, 2010
A passing score is 75% correct answers
Testing Requirements
Failing Grades
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An individual may retake one or both of the
components of the test up to three
consecutive times after waiting at least thirty
days between tests
After failing three consecutive tests the
individual must wait at least six months
before taking a test again
Requirement to
Retake Examinations
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An originator who fails to maintain a license
for a period of five years or longer will be
required to obtain a passing grade on both
components prior to obtaining a license
Prepayment Penalties
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Are limited as follows:
5% of unpaid principal during first year
4% of unpaid principal during second year
3% of unpaid principal during third year
2% of unpaid principal during fourth year
1% of unpaid principal during fifth year
No prepayment penalty allowed after fifth year
Prepayment Penalties Continued

No prepayment penalty may be charged or
collected if all or part of the prepayment of all
or part of the outstanding loan is made from
insurance proceeds received for damage to
the property securing the loan in connection
with a Gubernatorial declared disaster
Allowable
Up Front Fees By Brokers
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Appraisal
Title Search
Credit Report
Actual cost of Loan Prospector or Desktop Underwriter fees not
to exceed $25
Licensed brokers may collect up to a $500 application fee
provided:
– Prior to collecting the consumer is provided a written
disclosure of the amount of the fee and
– The application fee shall be refundable at any time prior to
ordering any service required by the lender or is the lender
is unable to approve the loan after all requested
documentation has been provided
Allowable
Up Front Fees By Brokers (cont)
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amount collected cannot exceed good
faith estimate of actual cost
any portion which exceeds actual cost
must be refunded to borrower or credited
to their account at closing
Originator Requirements
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Originator is required to sign the initial
application and include their NMLS&R
unique identifier
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Originator may only originate loans for one
employer
Lender Fees
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Lenders prohibited from collecting advance
expense fees for third party settlement
services that exceed Good Faith Estimate of
actual cost
Any portion of excess collected over actual
cost must be refunded or credited to
borrower at closing
Lender Fees (cont)
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Licensed lenders may collect up to a $500 application fee
provided:
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Prior to collecting the consumer is provided a
written disclosure of the amount of the fee and
The application fee shall be refundable at any
time prior to ordering any service required by the
lender or is the lender is unable to approve the
loan after all requested documentation has been
provided
NOTE: RESPA and TILA prohibit until disclosures are given
Limits on Fees and Charges
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Late Fees limited to 5% of unpaid amount
Collection fees limited to 25% when referred
to an attorney
NSF the greater of 5% of the amount of
check or $25
Prohibition on Finance of
Single Premium Insurance
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No mortgage lender shall finance or include
in the loan amount any single premium credit
life, dismemberment, health and accident,
mortgage life and disability, involuntary
unemployment, or debt cancellation
insurance sold in connection with a
residential mortgage loan transaction
Financing of Single Premium Private
Mortgage Insurance Not Prohibited
Exceptions To Prohibition on Finance
of Single Premium Insurance

The prohibition on financing of single
premium credit insurance does not apply
to the following:
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Loans with a principal balance of $50,000 or less
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Loans where the portion of the original principal
balance attributable to the insurance premiums is
scheduled to be fully amortized no later than the
coverage expiration date of the insurance product.
Request for Payoff Amount
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Must be provided with 5 days of written
request of consumer
Consumer entitled to one statement per year
at no charge
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thereafter, lender may charge a reasonable fee
provided that the fee is disclosed to the consumer
before furnishing the statement
Mortgage Loan Origination Agreement
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Must be provided by broker within 3 days of
the initial application
Must describe the nature of broker’s
relationship with borrower and the manner in
which they will be compensated
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name, address, phone number, and NMLS&R unique
identifier of originator
name, address, phone number, and unique identifier of
mortgage lender (mortgage broker)
Mortgage Loan Origination Agreement

Failure to provide a copy of the agreement
subjects broker to a refund of any brokerage
fees collected
Criminal Penalties
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Broker or lender knowingly collects
excessive advance expense deposits
Any person who knowingly provides false or
misleading information on an application
Any licensee or registrant who fails to
disburse funds belonging a borrower
Any lender, broker, or originator knowingly
operating without a license
Criminal Penalties

Upon Conviction for these, person may be
sentenced to:
–
a fine of not less than $500 nor more than $1,000,
imprisonment not exceeding one year, or both
Reverse Mortgage Loans

Reverse mortgage loan means a nonrecourse loan
secured by immovable property that meets all of the
following criteria:
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Loan provides purchase money proceeds for the acquisition
by a borrower of a domicile to be inhabited by the borrower
as his principal domicile or cash advances to a borrower
based upon the equity or the value in a borrower’s inhabited
principal domicile.
The loan requires no payment of principal or interest until
the entire loan becomes due and payable.
Reverse Mortgage Loans

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Conventional reverse mortgage loan means
a reverse mortgage loan other than a
program reverse mortgage loan
Program reverse mortgage loan means a
reverse mortgage loan offered or intended to
be insured by FHA
Reverse Mortgage Loans

Prepayment in whole or part shall be
permitted without penalty at any time during
the term of a reverse mortgage loan

If the reverse mortgage loan provides for
periodic advances, they may not be reduced
in amount or number based upon any
adjustment in interest rate
Reverse Mortgage Loans

A reverse mortgage may become due and
payable upon one of the following:
–
–
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Property securing loan is sold or title to the home
is otherwise transferred
Any fixed maturity date agreed to by borrower and
lender
An event of default specified in loan documents
occurs
Reverse Mortgage Loans

This first page of any mortgage securing a
reverse mortgage loan shall contain the
following statement in ten-point bold face
type:

“This mortgage secures a reverse mortgage
loan.”
Reverse Mortgage Loans
Required only for conventional reverse mortgages
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Counseling: prior to acceptance of a final and
complete application or assessing any fees, lender
must receive certification that the borrower has
received counseling
Lender may not pay any counseling fees without first
informing the consumer that it may create a conflict
of interest
Lender must provide borrower with names of at least
five nonprofit counseling agencies approved by HUD
Reverse Mortgage Loans
Required only for conventional reverse mortgages

Cooling off period: At least seven (7)
calendar days prior to closing a reverse
mortgage loan, the lender shall provide the
borrower with a loan term sheet or
commitment letter outlining the proposed
terms of the loan and informing the borrower
that they are not obligate to proceed with the
loan transaction.
Reverse Mortgage Loans
duties to elders

Elder means any person sixty (60) years of
age or older

Lender must provide a notice to borrower of
what should be discussed with a counselor
Items counselor required to discuss
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How unexpected medical or other events causing the borrower
to move out of their home earlier than anticipated will impact
the cost of the reverse mortgage
Extent to which borrower’s financial needs may be better met
by other options
Whether the borrower intends to purchase an annuity or other
financial or insurance product with proceeds
Effect of repayment of loan on other residents of the domicile
after borrowers are deceased or permanently abandon the
domicile
Borrower’s ability to finance routine or catastrophic home
repairs especially if maintenance is a factor that may determine
when the loan becomes payable
Items counselor required to discuss
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The impact that a reverse mortgage may have on the
borrower’s tax obligations and the eligibility for government
assistance programs, and the effect that losing equity in the
domicile will have on the borrower’s estate and heirs
Ability of borrower to refinance alternative living
accommodations, such as assisted living or long-term care,
after equity is depleted
If meeting with counselor is prior to meeting with a lender then
counselor shall give the notice of the items listed above that are
required to be discussed with the borrower.