Transcript Residential Mortgage Lending Act

Residential Mortgage Lending Act
 LSA-R.S. 6:1081 through 6:1099
 Enacted effective July 9, 1999
 Revised April 14, 2000 Special Session
 Revised effective June 22, 2001
 Provides for licensure and registration of mortgage
originators, brokers, and lenders
Residential Mortgage Lending Act
 Subdivided into three parts
– PART I. GENERAL PROVISIONS
• Definitions
• Prohibitions
– PART II. LICENSURE, REGISTRATION, & CERTIFICATION
•
•
•
•
Licensure Requirements
Applications
Recordkeeping
Suspension and Revocation of Licenses and Registrations
– PART III. RESIDENTIAL MORTGAGE LOANS
• Fees and Charges
• Mortgage Loan Origination Agreements
• Criminal Penalties
Residential Mortgage Lending Act
 Who must be licensed
– Originators
– Brokers
– Lenders
– Wholesale Lenders
• which are not otherwise exempt
Definitions
 Originator
– a natural person employed by a mortgage
broker or lender who interviews the consumer
in connection with a residential mortgage loan.
This persons must sign the application (1003)
– does not include clerical people
Definitions
 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
 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
 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 find
a residential mortgage loan for a person
R.S. 6:1084
 No person, directly or indirectly, shall
engage in a residential mortgage lending
activity without complying with the RMLA
or rules and regulations promulgated
pursuant to thereof
Exemptions
 Credit Unions
– Totally exempt from all provisions of the
RMLA
Exemptions
 Banks, Savings Banks, S&Ls, and
subsidiaries of theirs, their parent
companies and their employees including
originators and exclusive agents
– Exempt from licensure and registration
– Still subject to requirement of Part III
Exemptions
 Licensed Attorneys
– When activity is incidental to practice
– Exempt from licensure and registration
– Still subject to Part III
Exemptions
 Any not for profit 501 c corporation making
loans to promote home ownership or
improvements for the disadvantaged
– Exempt from licensure and registration
– Still subject to Part III
Other Exemptions
 Mortgagees which are the former owner
 Licensed Lenders
– must meet 50% gross revenue test
 Insurance company or agent who brokers
exclusively to an insurer
 Any person who invests or contracts for no
more than 4 transactions in a calendar year
– must file application and pay $100 fee
Exempt Registrants
 Company Registers/Employees Exempt
– approved seller, servicer, seller/servicer, or
issuer approved by FNMA, GNMA, or
FHLMC including their HUD approved
subsidiaries
– out of state insurance companies
Exempt Registrants
 Companies Exempt/Originators Licensed
– HUD Mortgagees excluding loan
correspondents
– private investors who utilize licensed or exempt
individuals
• Loan correspondents and originators must be
licensed
Exempt Registrants
 May only engage in residential lending
activity through natural persons who are
licensed, registered, or exempt
Financial Responsibility
 Each applicant for licensure must provide
evidence of financial responsibility
– audited financial statement showing net worth
of at least $50,000 (no more than 18 mos old)
– pledged $50,000 deposit in federally insured
institution
– $50,000 securities SCM’s or US Govt pledged
to commissioner
– Surety Bond in amount of $50,000
Financial Responsibility
 Employees of Brokers and Lenders
including Originators
– May demonstrate financial responsibility by
submitting evidence that employer satisfies
requirements
Application Fees
 Mortgage Broker, Lender
– Renewal Fee
$300
$400
 Originators
– Renewal Fee
$100
$100
Registration Fees
 Exempt Registrations
– Renewal
$300
$400
RENEWALS
 Renewals are due by November 1st each
year
 Late after December 1
 Licenses and Registrations Expire January 1
Late Fees and Reinstatement Penalties
 Licensed Brokers and Lenders
– After December 1
$ 200
– After December 31 up to $ 1,000
• must show good cause for reinstatement
• $100 late fee for exempt brokers & lenders
 Originators
– After December 1
$ 50
– After December 31 up to $1,000
• must show good cause for reinstatement
LSA-R.S. 6:1089
 No residential mortgage lender may conduct
lending activities under any name other than
stated on its license
 Commissioner must be notified of changes
in location and pay $100 fee
 Must notify Commissioner of office closure
LSA-R.S. 6:1089 B.
 Whenever identity of broker or lender by
whom an originator is employed is changed,
Commissioner must be notified within 30
days
– Employer and Employee must give notification
– Failure to notify within 30 days results in a
$100 late notification fee
EXAMINATIONS FEES
 Fee not to exceed $400
 Due within 30 days of assessment
 Late fee of up to $50 per day not paid
timely
R.S. 6:1090
 No license may be sold or transferred
 No person shall acquire control of licensee
without obtaining prior written approval of
OFI after submitting an application and
$300 fee
R.S. 6:1090
 A mortgage broker can only broker loans to
a mortgage lender
– Brokering to a Broker is prohibited
R.S. 6:1090
 Licensees may only engage in residential
mortgage lending through natural persons
licensed as a mortgage broker, mortgage
lender, or originator, or who are registered
in accordance with the RMLA or who are
exempt from Part II
NET BRANCHING
 Prohibited by LSA-R.S. 6:1090 G.
– Except at provided by Rule
 OFI in process of drafting rule & currently
allowing :
– net compensation of branch employees only
– all contracts, leases, & accounts must be in
name of licensed or exempt company
– employer indemnification agreements not
permissible
RECORD RETENTION
 Requirements set forth by Rule and Policy
Suspension & Revocation of License
 After an opportunity to be heard in Administrative hearing,
Commissioner may revoke or suspend license of any
Lender, Broker, or Originator who:
– Violates any of the provisions of this Chapter or any Rule or
Regulation promulgated,or any order, including a cease and desist
order
– 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
– Fails to maintain records required after given written notice
– Continues in office upon conviction of any felony involving moral
turpitude
– 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
– 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
Suspension & Revocation
– 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
Fines & Penalties
 Upon being found guilty of violating any
provision of the RMLA or Rule brokers
and/or originators may be fined:
– 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
Forfeiture of Compensation
 R.S. 6:1092 G. - added by Act 617
– Any person who acts as a mortgage broker 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
TESTING REQUIREMENTS
 Beginning July 1, 2001, each new applicant
for licensure as an originator is required to
pass a professional licensing examination
– Test administered by PSI Exams, Inc.
– www.psiexams.com
Continuing Education
 Each licensed originator must take 10 hours
of continuing education each year prior to
renewal
– must include at least 2 hours of RMLA
education
– if licensed as a result of a test, continuing
education not required until December of the
following year
USURY
 APR is limited to the greater of 21% or
Federal Reserve Discount Rate + 15%
– Applies to both open and closed end credit
secured by a mortgage
– Preempted by Alternative Mortgage
Transaction Parity Act for variable rate and
balloon loans
Prepayment Penalties
 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
Up Front Fees By Brokers
 Appraisal
 Title Search
 Credit Report
– 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
Request for Payoff Amount
 Must be provided with 5 days of written
request of consumer
 Consumer entitled to one statement per year
at no charge
– thereafter, lender may charge a reasonable fee
provided that the fee is disclosed to the
consumer before furnishing the statement
Limits on Fees and Charges
 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
Mortgage Loan Origination Agreement
 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
– name, address, and phone number of originator
– name, address, and phone number 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
 Broker 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