Transcript Louisiana S.A.F.E. Residential Mortgage Lending Act

Louisiana S.A.F.E.
Residential Mortgage Lending Act

Changes as a result of Act 522
of the 2009 Legislature
SAFE Residential Mortgage Lending
Act

LSA-R.S. 6:1081 through 6:1099
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Enacted effective July 31, 2009

Provides for licensure of mortgage
originators, brokers, and lenders
Definitions

“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
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
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Definitions
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
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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

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

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. 6:1086

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
 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
 DO
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NOT APPLY TO:
Independent contractor loan processors
or underwriters
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:
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.
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
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 24 hours of pre-licensing education approved by
NMLS&R (4 hours must also be approved by either NAMB
or MBA) also a minimum of each of the following
 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
 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:
 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
 Employer may obtain coverage for employees
 Pledged deposit in federally insured institution
located in Louisiana in the amount of Surety Bond
otherwise required
 * For initial license bond or deposit must be
at least $25,000
Nationwide Mortgage Licensing System
and Registry (NMLS&R)
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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 (NMLS&R)
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Office of Financial Institutions
began utilizing the system on
August 1, 2008.
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 (NMLS&R)
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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
RENEWALS
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Renewals are due by December 1st
each year
Late after December 31 and before
March 1,
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
Immediate Suspension
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The Commissioner may order an immediate
suspension of the license of any person
who:
 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
Continuing Education
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Each licensed originator must take 10 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
2 hours of the remaining required in addition to
being approved by the NMLS&R must also be
approved by either NAMB or MBA
Continuing Education for 2009
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Specific content will not be required
until Commissioner determines that
NMLS&R is adequately available for
all Louisiana licensees to become
compliant
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Anticipated in early 2010
Any 10 hours of education approved by
OFI will be sufficient for renewal of an
originator license for 2010
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
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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
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
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:
 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
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)