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S1389................................................by JUDICIARY AND RULES
RESIDENTIAL MORTGAGE PRACTICES - Adds to and amends existing law relating
to the Residential Mortgage Practices Act; to revise definitions and define
terms; to revise exemptions; to revise provisions providing for unlawful
acts and punishment; to revise provisions applicable to licenses to do
business as mortgage brokers or mortgage lenders; to set forth provisions
applicable to licenses to do business as loan originators; to revise
provisions applicable to the revocation or suspension of a license; to
increase the bond amount for mortgage broker and mortgage lender licensees
and to provide for a certificate of deposit in lieu of such bond; to
require a bond for loan originator licensees and to provide for a
certificate of deposit in lieu of such bond; to provide for the adoption of
rules requiring continuing education; to provide notification and records
maintenance requirements for mortgage broker and mortgage lender licensees
who employ or contract with loan originator licensees; to increase the
annual license renewal fee for mortgage broker and mortgage lender
licensees; to set forth an annual license renewal fee for loan originator
licensees; to revise the prohibited practices of mortgage broker and
mortgage lender licensees; to set forth prohibited practices of loan
originators; and to set forth provisions applicable to loan originator
licensing.
02/24 Senate intro - 1st rdg - to printing
02/25 Rpt prt - to Com/HuRes
03/05 Rpt out - rec d/p - to 2nd rdg
03/08 2nd rdg - to 3rd rdg
03/09 3rd rdg - PASSED - 33-1-1
AYES -- Andreason, Bailey, Brandt, Bunderson, Burkett, Burtenshaw,
Calabretta, Cameron, Compton, Darrington, Davis, Gannon, Geddes,
Goedde, Hill, Ingram, Kennedy, Keough, Little, Lodge, Malepeai,
Marley, McKenzie, McWilliams, Noh, Pearce, Richardson, Schroeder,
Sorensen, Stegner, Stennett, Werk, Williams
NAYS -- Sweet
Absent and excused -- Noble
Floor Sponsor - Goedde
Title apvd - to House
03/10 House intro - 1st rdg - to Bus
03/18 Rpt out - rec d/p - to 2nd rdg
03/19 2nd rdg - to 3rd rdg
Rls susp - PASSED - 55-8-7
AYES -- Andersen, Barraclough, Bayer, Bedke, Bell, Block, Boe, Bolz,
Bradford, Campbell, Cannon, Clark, Collins, Cuddy, Deal, Denney,
Douglas, Eberle, Edmunson, Eskridge, Field(18), Field(23), Gagner,
Garrett, Harwood, Henbest, Jaquet, Jones, Kellogg, Langhorst,
Martinez, McGeachin, Meyer, Miller, Mitchell, Naccarato, Nielsen,
Pasley-Stuart, Ridinger, Ring, Ringo, Roberts, Robison, Rydalch,
Sayler, Schaefer, Shepherd, Shirley, Smith(30), Smith(24), Smylie,
Snodgrass, Stevenson, Wills, Mr. Speaker
NAYS -- Barrett, Crow, Kulczyk, Langford, McKague, Raybould, Sali,
Wood
Absent and excused -- Bauer, Black, Ellsworth, Lake, Moyle, Skippen,
Trail
Floor Sponsor - Meyer
Title apvd - to Senate
03/19 To enrol
03/20 Rpt enrol - Pres signed - Sp signed
03/22 To Governor
04/02 Governor signed
Session Law Chapter 377
Effective: 07/01/04;
Section 7 - effective on 01/01 of the year
that Legislature grants appropriation for
loan originator licensing to Department
of Finance
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE SENATE
SENATE BILL NO. 1389
BY JUDICIARY AND RULES COMMITTEE
1 AN ACT
2 RELATING TO THE RESIDENTIAL MORTGAGE PRACTICES ACT; AMENDING SECTION 26-3101,
3 IDAHO CODE, TO PROVIDE THAT THE CHAPTER SHALL BE KNOWN AS THE "RESIDENTIAL
4 MORTGAGE PRACTICES ACT"; AMENDING SECTION 26-3102, IDAHO CODE, TO REVISE
5 AND UPDATE DEFINITIONS AND TO DEFINE "LOAN ORIGINATOR" AND "LOAN
6 ORIGINATION ACTIVITIES"; AMENDING SECTION 26-3103, IDAHO CODE, TO REVISE
7 EXEMPTIONS; AMENDING SECTION 26-3104, IDAHO CODE, TO REVISE PROVISIONS
8 PROVIDING FOR UNLAWFUL ACTS AND PUNISHMENT; AMENDING SECTION 26-3105,
9 IDAHO CODE, TO REVISE TERMINOLOGY AND TO MAKE A GRAMMATICAL CORRECTION;
10 AMENDING SECTION 26-3108, IDAHO CODE, TO REVISE DESCRIPTIVE LANGUAGE AND
11 TO REVISE PROVISIONS APPLICABLE TO LICENSES TO DO BUSINESS AS MORTGAGE
12 BROKERS OR MORTGAGE LENDERS; AMENDING CHAPTER 31, TITLE 26, IDAHO CODE, BY
13 THE ADDITION OF A NEW SECTION 26-3108A, IDAHO CODE, TO SET FORTH PROVI-
14 SIONS APPLICABLE TO LICENSES TO DO BUSINESS AS LOAN ORIGINATORS; AMENDING
15 SECTION 26-3109, IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO THE REVO-
16 CATION OR SUSPENSION OF A LICENSE; AMENDING SECTION 26-3110, IDAHO CODE,
17 TO REVISE DESCRIPTIVE LANGUAGE, TO INCREASE THE BOND AMOUNT FOR MORTGAGE
18 BROKER AND MORTGAGE LENDER LICENSEES, TO REQUIRE THE LICENSEE TO PLACE THE
19 BOND ON FILE WITH THE DEPARTMENT, TO PROVIDE FOR A CERTIFICATE OF DEPOSIT
20 IN LIEU OF BOND, TO REQUIRE A BOND FOR LOAN ORIGINATOR LICENSEES AND TO
21 PROVIDE FOR A CERTIFICATE OF DEPOSIT IN LIEU OF SUCH BOND, TO PROVIDE
22 CLARIFYING LANGUAGE, TO REFERENCE LAWS PERTAINING TO LOAN ORIGINATION AND
23 MORTGAGE LENDING, TO PROVIDE FOR THE ADOPTION OF RULES REQUIRING CONTINU-
24 ING EDUCATION, TO PROVIDE FOR THE FILING OF INFORMATION BY ACCREDITED
25 SPONSORS OF CONTINUING EDUCATION PROGRAMS AND TO SET FORTH FEES FOR
26 REVIEWS; AMENDING SECTION 26-3111, IDAHO CODE, TO SPECIFY THAT FINANCIAL
27 RECORDS SHALL BE MAINTAINED, TO PROVIDE THAT LOAN RECORDS NEED NOT BE
28 MAINTAINED FOR MORE THAN THREE YEARS AFTER MAKING THE FINAL ENTRY RELATING
29 TO THE LOAN, TO PROVIDE NOTIFICATION AND RECORDS MAINTENANCE REQUIREMENTS
30 FOR MORTGAGE BROKER AND MORTGAGE LENDER LICENSEES WHO EMPLOY OR CONTRACT
31 WITH LOAN ORIGINATOR LICENSEES, TO INCREASE THE ANNUAL LICENSE RENEWAL FEE
32 FOR MORTGAGE BROKER AND MORTGAGE LENDER LICENSEES, TO PROVIDE CLARIFYING
33 LANGUAGE AND TO SET FORTH AN ANNUAL LICENSE RENEWAL FEE FOR LOAN
34 ORIGINATOR LICENSEES; AMENDING SECTION 26-3112, IDAHO CODE, TO MAKE A
35 TECHNICAL CORRECTION; AMENDING SECTION 26-3114, IDAHO CODE, TO REVISE
36 DESCRIPTIVE LANGUAGE AND TO REVISE THE PROHIBITED PRACTICES OF MORTGAGE
37 BROKER AND MORTGAGE LENDER LICENSEES; AMENDING CHAPTER 31, TITLE 26, IDAHO
38 CODE, BY THE ADDITION OF A NEW SECTION 26-3114A, IDAHO CODE, TO SET FORTH
39 PROHIBITED PRACTICES OF LOAN ORIGINATORS; AMENDING SECTION 26-3116, IDAHO
40 CODE, TO PROVIDE CORRECT CODE REFERENCES; AMENDING CHAPTER 31, TITLE 26,
41 IDAHO CODE, BY THE ADDITION OF A NEW SECTION 26-3116A, IDAHO CODE, TO SET
42 FORTH PROVISIONS APPLICABLE TO INITIAL LOAN ORIGINATOR LICENSING; AND PRO-
43 VIDING EFFECTIVE DATES AND A CONTINGENCY.
44 Be It Enacted by the Legislature of the State of Idaho:
2
1 SECTION 1. That Section 26-3101, Idaho Code, be, and the same is hereby
2 amended to read as follows:
3 26-3101. SHORT TITLE. This chapter may shall be known and may be cited as
4 the "Residential Mortgage Practices Act."
5 SECTION 2. That Section 26-3102, Idaho Code, be, and the same is hereby
6 amended to read as follows:
7 26-3102. DEFINITIONS. As used in this chapter and in rules promulgated
8 pursuant to this chapter:
9 (1) "Act" means this Idaho residential mortgage practices act.
10 (2) "Agent" means a person who acts with the consent and on behalf of a
11 licensee, and is subject to the licensee's direct or indirect control, and may
12 include an independent contractor.
13 (3) "Borrower" means the person who has applied to a lender for a resi-
14 dential mortgage loan from a licensee, or person required to be licensed,
15 under this chapter, or on whose behalf the activities set forth in subsections
16 (178), and (189), or (20) of this section are conducted.
17 (4) "Department" means the department of finance of the state of Idaho.
18 (5) "Director" means the director of the department of finance.
19 (6) "Licensee" means a person licensed pursuant to this chapter to engage
20 in the activities regulated by this act.
21 (7) "Mortgage banker lender" means any person, other than an exempt per-
22 son, who makes residential mortgage loans to borrowers, and performs the
23 activities described in subsection (178) of this section.
24 (8) "Mortgage broker" means any person, other than an exempt person, who
25 performs the activities described in subsection (189) of this section with
26 respect to a residential mortgage loan. For the purposes of this chapter, the
27 term "mortgage broker" does not include persons who are mortgage bankers lend-
28 ers.
29 (9) "Loan originator" means any person, other than an exempt person, who
30 performs the activities described in subsection (20) of this section with
31 respect to a residential mortgage loan. For the purposes of this chapter, the
32 term "loan originator" does not include persons who are mortgage brokers or
33 mortgage lenders.
34 (10) "Mortgage brokerage agreement" means a written agreement in which a
35 mortgage broker agrees to obtain a residential mortgage loan for the borrower
36 or assist the borrower in obtaining a residential mortgage loan.
37 (101) "Person" means an individual, sole proprietorship, partnership, cor-
38 poration, limited liability company, limited liability partnership, or other
39 association of individuals, however organized.
40 (112) "Real estate settlement procedures act" means the act set forth in
41 12 U.S.C. section 2601 et seq., as amended to and including January 1, 20034,
42 or a subsequent date if so defined by administrative rule.
43 (123) "Regulation X" means regulation X as promulgated by the U.S. depart-
44 ment of housing and urban development and codified in 24 CFR part 3500 et
45 seq., as amended to and including January 1, 20034, or a subsequent date if so
46 defined by administrative rule.
47 (134) "Regulation Z" means regulation Z as promulgated by the board of
48 governors of the federal reserve system and codified in 12 CFR part 226 et
49 seq., as amended to and including January 1, 20034, or a subsequent date if so
50 defined by administrative rule.
51 (145) "Residential mortgage loan" means a loan made primarily for per-
52 sonal, family, or household use and primarily secured by a security interest
3
1 on residential real property located in this state.
2 (156) "Residential real property" means real property located in this
3 state improved by a one (1) to four (4) family dwelling.
4 (167) "Truth in lending act" means the act set forth in 15 U.S.C. section
5 1601 et seq., as amended to and including January 1, 20034, or a subsequent
6 date if so defined by administrative rule.
7 (178) "Mortgage banking lending activities" means for compensation or
8 gain, either directly or indirectly, accepting or offering to accept applica-
9 tions for residential mortgage loans, assisting or offering to assist in the
10 preparation of an application for a residential mortgage loan.
11 (189) "Mortgage brokering activities" means for compensation or gain,
12 either directly or indirectly, accepting or offering to accept an application
13 for a residential mortgage loan, assisting or offering to assist in the prepa-
14 ration of an application for a residential mortgage loan on behalf of a bor-
15 rower, or negotiating or offering to negotiate the terms or conditions of a
16 residential mortgage loan with any person making residential mortgage loans.
17 (20) "Loan origination activities" means for compensation or gain, either
18 directly or indirectly, engaging in any of the following activities while rep-
19 resenting or acting on behalf of a mortgage broker or mortgage lender:
20 (a) Soliciting, accepting, or offering to accept an application for a
21 residential mortgage loan;
22 (b) Assisting a borrower or offering to assist a borrower in the prepara-
23 tion of a residential mortgage loan application; or
24 (c) Negotiating or offering to negotiate the terms or conditions of a
25 residential mortgage loan with a borrower.
26 SECTION 3. That Section 26-3103, Idaho Code, be, and the same is hereby
27 amended to read as follows:
28 26-3103. EXEMPTIONS. The provisions of this chapter do not apply to:
29 (1) Agencies of the United States and agencies of this state and its
30 political subdivisions;
31 (2) An owner of real property who offers credit secured by a contract of
32 sale, mortgage or deed of trust on the property sold;
33 (3) A loan that is made by a person to an employee of that person if the
34 proceeds of the loan are used to assist the employee in meeting his housing
35 needs;
36 (4) Any person licensed or chartered under the laws of this state or the
37 United States as a bank, rRegulated lenders licensed under the Idaho credit
38 code and regularly engaged in making regulated consumer loans other than those
39 secured by a security interest in real property, savings and loan association,
40 credit union, or trust company;
41 (5) Trust companies as defined in section 26-3203, Idaho Code;
42 (6) Any person licensed or chartered under the laws of any other state or
43 of the United States as a bank, savings and loan association, or credit union,
44 or industrial loan company. The terms "bank," "savings and loan association,"
45 "credit union" and "industrial loan company" shall include employees and
46 agents of such organizations as well as wholly-owned subsidiaries of such
47 organizations, provided that the subsidiary is regularly examined by the char-
48 tering state or federal agency for consumer compliance purposes, and shall
49 also include employees and agents of a licensee if the licensee is an affili-
50 ate of a bank and is wholly owned by the holding company system that owns the
51 bank;
52 (67) Attorneys, or persons licensed under chapter 2, title 54, Idaho
53 Code, provided that the license held by such attorneys or persons is in an
4
1 active status;
2 (78) Persons employed by, licensees on a full-time basis or persons who
3 are employed by no more than one (1) licensee on a part-time basis or who con-
4 tract with, a licensee under this chapter to perform only clerical or adminis-
5 trative functions on behalf of such licensee, and who do not solicit borrowers
6 or negotiate the terms of loans on behalf of the licensee;
7 (89) Any person or entity not making more than five (5) loans primarily
8 for personal, family, or household use and primarily secured by a security
9 interest on residential real property, with his own funds for his own invest-
10 ment, in any period of twelve (12) consecutive months; nor
11 (910) Any person who funds a residential mortgage loan which has been
12 originated and processed by a licensee or by an exempt person, who does not
13 directly or indirectly solicit borrowers in this state for the purpose of mak-
14 ing residential mortgage loans, and who does not participate in the negotia-
15 tion of residential mortgage loans with the borrower. For the purpose of this
16 subsection, "negotiation of residential mortgage loans" does not include set-
17 ting the terms under which a person may buy or fund a residential mortgage
18 loan originated by a licensee or exempt person.
19 SECTION 4. That Section 26-3104, Idaho Code, be, and the same is hereby
20 amended to read as follows:
21 26-3104. UNLAWFUL ACTS. (1) No Any person, except a person exempt under
22 section 26-3103, Idaho Code, shall who engages in mortgage banking activities
23 brokering or mortgage brokering lending activities without first obtaining a
24 mortgage broker or mortgage lender license from the department in accordance
25 with this chapter, shall be guilty of a felony.
26 (2) Any person, not exempt under section 26-3103, Idaho Code, who engages
27 in mortgage banking loan origination activities or mortgage brokering activi-
28 ties without first obtaining a loan originator license issued pursuant to in
29 accordance with this chapter, shall be guilty of a felony.
30 SECTION 5. That Section 26-3105, Idaho Code, be, and the same is hereby
31 amended to read as follows:
32 26-3105. POWERS AND DUTIES OF DIRECTOR. In addition to any other duties
33 imposed upon the director by law, the director shall:
34 (1) Administer and enforce the provisions and requirements of this chap-
35 ter;
36 (2) Conduct investigations and issue subpoenas as necessary to determine
37 whether a person has violated any provision of this chapter or rules promul-
38 gated under the authority of this chapter;
39 (3) Conduct examinations of the books and records of licensees and con-
40 duct investigations as necessary and proper for the enforcement of the provi-
41 sions of this chapter and the rules promulgated under the authority of this
42 chapter;
43 (4) Appoint a volunteer advisory board which shall consist of two (2)
44 individuals who are mortgage bankers lenders and two (2) individuals who are
45 mortgage brokers;
46 (5) Pursuant to chapter 52, title 67, Idaho Code, issue orders and pro-
47 mulgate rules that, in the opinion of the director, are necessary to execute,
48 enforce and effectuate the purposes of this chapter;
49 (6) Be authorized to set, by annual written notification to licensees,
50 limits on the fees and charges which are set forth in subsections (1) and (2)
51 of section 26-3113, Idaho Code;
5
1 (7) Require that all funds collected by the department under this chapter
2 shall be deposited into the finance administrative account pursuant to section
3 67-2702, Idaho Code; and
4 (8) Review and approve forms used by licensees prior to their use as pre-
5 scribed by the director.
6 SECTION 6. That Section 26-3108, Idaho Code, be, and the same is hereby
7 amended to read as follows:
8 26-3108. LICENSE TO DO BUSINESS AS A MORTGAGE BANKER BROKER OR MORTGAGE
9 BROKER LENDER. (1) The director shall receive and act on all applications for
10 licenses to do business as a mortgage banker broker or mortgage broker lender.
11 Applications shall be filed in the manner prescribed by the director, shall
12 contain such information as the director may reasonably require, shall be
13 updated as necessary to keep the information current, and shall be accompanied
14 by an application fee of two three hundred fifty dollars ($20350). When an
15 application for licensure is denied or withdrawn, the director shall retain
16 all fees paid by the applicant.
17 (2) An application for license may be denied if the director finds that:
18 (a) The financial responsibility, character, and fitness of the license
19 applicant, and of the officers and directors thereof, if the applicant is
20 a corporation, partners thereof if the applicant is a partnership, members
21 or managers thereof if the applicant is a limited liability company, and
22 individuals designated in charge of the applicant's places of business,
23 are not such as to warrant belief that the business will be operated hon-
24 estly and fairly within the purposes of this chapter;
25 (b) The individual designated in charge of applicant's places of business
26 does not have a minimum of three (3) years' experience in residential
27 mortgage lending;
28 (c) The applicant does not have a net worth of at least ten thousand dol-
29 lars ($10,000);
30 (d) The applicant has been convicted of any felony or a misdemeanor
31 involving any aspect of the financial services business, or a court has
32 accepted a finding of guilt on the part of the applicant of any felony or
33 a misdemeanor involving any aspect of the financial services business;
34 (ed) The applicant has had a license, substantially equivalent to a
35 license under this chapter and issued by any state, denied, revoked or
36 suspended under the law of such state;
37 (fe) The applicant has filed an application for a license which is false
38 or misleading with respect to any material fact;
39 (gf) The applicant or any partner, officer, director, manager, member,
40 employee or agent of the applicant has violated this chapter or any rule
41 or order lawfully made pursuant to this chapter;
42 (hg) The applicant or any partner, officer, director, manager, member,
43 employee or agent of the applicant has violated any other law of this
44 state, or federal laws, rule or regulations pertaining to the mortgage
45 banking or mortgage brokering activities set forth in section 26-3102,
46 Idaho Code financial services industry; or
47 (ih) The applicant has not provided information on the application as
48 reasonably required by the director pursuant to subsection (1) of this
49 section.
50 (3) The director is empowered to conduct investigations as he may deem
51 necessary, to enable him to determine the existence of the requirements set
52 out in subsection (2) of this section.
53 (4) Upon written request, an applicant is entitled to a hearing on the
6
1 question of his qualifications for a license if:
2 (a) The director has notified the applicant in writing that his applica-
3 tion has been denied, or objections filed;
4 (b) The director has not issued a license within sixty (60) days after
5 the application for the license was filed. If a hearing is held, the
6 applicant and those filing objections shall reimburse, pro rata, the
7 director for his reasonable and necessary expenses incurred as a result of
8 the hearing. A request for hearing may not be made more than fifteen (15)
9 days after the director has mailed a writing to the applicant notifying
10 him that the application has been denied and stating in substance the
11 director's finding supporting denial of the application or that objections
12 have been filed and the substance thereof.
13 (5) Every licensee under this section shall have licensed and shall main-
14 tain a home office licensed under this chapter as a the licensee's principal
15 location for the transaction of mortgage business. The director may, on appli-
16 cation, issue additional branch licenses to the same licensee upon compliance
17 with all the provisions of this chapter governing the issuance of a single
18 license. A separate license shall be required for each place of business from
19 which mortgage brokering activities or mortgage banking lending activities are
20 directly or indirectly conducted. The individual in charge of each place of
21 business must satisfy the requirements of subsections (2)(b), (dc) and (ed) of
22 this section. Each license under this section shall remain in full force and
23 effect unless the licensee does not satisfy the renewal requirements of sec-
24 tion 26-3111(23), Idaho Code, or the license is relinquished, suspended, or
25 revoked; provided however, branch licenses shall be terminated upon the relin-
26 quishment or revocation of a home office license.
27 (6) No licensee under this section shall change the location of any place
28 of business, consolidate two (2) or more locations, or close any home office
29 location, without giving the director at least fifteen (15) days' prior writ-
30 ten notice. A licensee under this section shall give written notice to the
31 director within three (3) business days of the closure of any branch location
32 licensed under this chapter. Written notice of the closure of a home or branch
33 office location shall include a detailed explanation of the disposition of all
34 loan applications pending at the time of closure of the licensed location.
35 (7) A No licensee under this section shall not engage in the business of
36 making or brokering residential mortgage loans at any place of business for
37 which he does not hold a license nor shall he engage in business under any
38 other name than that on the license.
39 (8) The director may suspend action upon a mortgage broker or mortgage
40 lender license application pending resolution of any criminal charges before
41 any court of competent jurisdiction against an applicant which would could
42 disqualify that applicant if convicted.
43 (9) The director may suspend action upon a mortgage broker or mortgage
44 lender license application pending resolution of any civil action or adminis-
45 trative proceeding against an applicant in which the civil action or adminis-
46 trative proceeding involves any aspect of a financial service business and the
47 outcome of which could disqualify the applicant.
48 (10) An applicant under this section shall make complete disclosure of all
49 information required in the application, including information concerning
50 officers, directors, partners, members, managers, employees or agents. An
51 applicant, or an individual acting on behalf of the applicant, is not liable
52 in any civil action other than a civil action brought by a governmental
53 agency, related to an alleged untrue statement made pursuant to this section
54 unless it is shown by clear and convincing evidence that:
55 (a) The applicant, or an individual acting on behalf of the applicant,
7
1 knew at the time that the statement was made that it was false in any
2 material respect; or
3 (b) The applicant, or an individual acting on behalf of the applicant,
4 acted in reckless disregard as to the statement's truth or falsity.
5 (11) Each mortgage broker or mortgage lender licensed under this chapter
6 shall display in plain view the certificate of licensure issued by the depart-
7 ment in its principal office and in each branch office.
8 SECTION 7. That Chapter 31, Title 26, Idaho Code, be, and the same is
9 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
10 ignated as Section 26-3108A, Idaho Code, and to read as follows:
11 26-3108A. LICENSE TO DO BUSINESS AS A LOAN ORIGINATOR. (1) The director
12 shall receive and act on all loan originator license applications. Applica-
13 tions shall be filed in the manner prescribed by the director, shall contain
14 such information as the director may reasonably require, shall be updated as
15 necessary to keep the information current, and shall be accompanied by an
16 application fee of two hundred dollars ($200). When an application for licen-
17 sure is denied or withdrawn, the director shall retain all fees paid by the
18 applicant.
19 (2) An application for license may be denied if the director finds that:
20 (a) The financial responsibility, character, and fitness of the license
21 applicant are not such as to warrant belief that the loan originator will
22 operate honestly and fairly within the purposes of this chapter;
23 (b) The applicant has been convicted of any felony or a misdemeanor
24 involving any aspect of the financial services business, or a court has
25 accepted a finding of guilt on the part of the applicant of any felony or
26 a misdemeanor involving any aspect of the financial services business;
27 (c) The applicant has had a license, substantially equivalent to a
28 license under this chapter and issued by any state, denied, revoked or
29 suspended under the law of such state;
30 (d) The applicant has filed an application for a license which is false
31 or misleading with respect to any material fact;
32 (e) The applicant has violated this chapter or any rule or order lawfully
33 made pursuant to this chapter;
34 (f) The applicant has violated any state or federal law, rule or regula-
35 tion pertaining to mortgage brokering, mortgage lending, or loan
36 origination activities set forth in section 26-3102, Idaho Code; or
37 (g) The applicant has not provided information on the application as rea-
38 sonably required by the director pursuant to subsection (1) of this sec-
39 tion.
40 (3) The director is empowered to conduct investigations as he may deem
41 necessary, to enable him to determine the existence of the requirements set
42 out in subsection (2) of this section.
43 (4) Upon written request, an applicant is entitled to a hearing on the
44 question of his qualifications for a license if:
45 (a) The director has notified the applicant in writing that his applica-
46 tion has been denied, or objections filed;
47 (b) The director has not issued a license within sixty (60) days after
48 the application for the license was filed. If a hearing is held, the
49 applicant and those filing objections shall reimburse, pro rata, the
50 director for his reasonable and necessary expenses incurred as a result of
51 the hearing. A request for hearing may not be made more than fifteen (15)
52 days after the director has mailed a writing to the applicant notifying
53 him that the application has been denied and stating in substance the
8
1 director's finding supporting denial of the application or that objections
2 have been filed and the substance thereof.
3 (5) A loan originator may transact business only for a mortgage broker or
4 mortgage lender licensed in accordance with the provisions of this chapter.
5 The original license issued by the department to a loan originator must be
6 provided to and be maintained by the employing mortgage broker or mortgage
7 lender at the mortgage broker's or lender's main office. A copy of the loan
8 originator's license must be displayed at the office where that loan
9 originator principally transacts business.
10 (6) Each license under this section shall remain in full force and effect
11 unless the licensee does not satisfy the renewal requirements of section
12 26-3111(4), Idaho Code, or the license is relinquished, suspended or revoked.
13 (7) A loan originator licensee under this chapter shall not engage in
14 loan origination activities at any location that is not a licensed home or
15 branch office location of the mortgage broker or mortgage lender he represents
16 or is acting on behalf of, nor shall he engage in loan origination activities
17 under any other name than that on the license.
18 (8) The director may suspend action upon a loan originator license appli-
19 cation pending resolution of any criminal charges before any court of compe-
20 tent jurisdiction against an applicant which could disqualify that applicant
21 if convicted.
22 (9) The director may suspend action upon a loan originator license appli-
23 cation pending resolution of any civil action or administrative proceeding
24 against an applicant, in which the civil action or administrative proceeding
25 involves any aspect of a financial service business and the outcome of which
26 could disqualify the applicant.
27 (10) An applicant under this section shall make complete disclosure of all
28 information required in the application. An applicant, or an individual acting
29 on behalf of the applicant, is not liable in any civil action other than a
30 civil action brought by a governmental agency, related to an alleged untrue
31 statement made pursuant to this section unless it is shown by clear and con-
32 vincing evidence that:
33 (a) The applicant, or an individual acting on behalf of the applicant,
34 knew at the time that the statement was made that it was false in any
35 material respect; or
36 (b) The applicant, or an individual acting on behalf of the applicant,
37 acted in reckless disregard as to the statement's truth or falsity.
38 SECTION 8. That Section 26-3109, Idaho Code, be, and the same is hereby
39 amended to read as follows:
40 26-3109. REVOCATION OR SUSPENSION OF LICENSE. (1) If the department has
41 reason to believe that grounds exist for revocation or suspension of a
42 license, the department may initiate a contested case against a mortgage
43 banker broker, or mortgage broker lender or loan originator, and any partner,
44 officer, director, manager, member, employee or agent whose activities consti-
45 tute the basis for revocation or suspension, in accordance with chapter 52,
46 title 67, Idaho Code. The director may, after proceedings pursuant to chapter
47 52, title 67, Idaho Code, suspend the license for a period not to exceed six
48 (6) months, or revoke the license, if he finds that:
49 (a) The licensee or any partner, officer, director, manager, member,
50 employee or agent of the licensee has violated this chapter or any rule or
51 order lawfully made pursuant to this chapter; or
52 (b) The licensee or any partner, officer, director, manager, member,
53 employee or agent of the licensee has violated any other laws of this
9
1 state, or federal laws, rule or regulations pertaining to the mortgage
2 banking brokering, or mortgage brokering lending, or loan origination
3 activities set forth in section 26-3102, Idaho Code; or
4 (c) Facts or conditions exist which would clearly have justified the
5 director in refusing to grant a license had these facts or conditions been
6 known to exist at the time the license was issued; or
7 (d) The licensee or any partner, officer, director, manager, member,
8 employee or agent of the licensee has been convicted of any felony or a
9 misdemeanor involving any aspect of the financial services business, or a
10 court has accepted a finding of guilt on the part of the licensee or part-
11 ner, officer, director, manager, member, employee or agent of the licen-
12 see, of any felony or a misdemeanor involving any aspect of the financial
13 services business; or
14 (e) The licensee or any partner, officer, director, manager, member,
15 employee or agent of the licensee has had a license substantially equiva-
16 lent to a license under this chapter, and issued by another state, denied,
17 revoked or suspended under the laws of such state; or
18 (f) The licensee has filed an application for a license which as of the
19 date the license was issued, or as of the date of an order denying, sus-
20 pending or revoking a license, was incomplete in any material respect or
21 contained any statement that was, in light of the circumstances under
22 which it was made, false or misleading with respect to any material fact;
23 or
24 (g) The licensee fails to maintain a net worth of ten thousand dollars
25 ($10,000) The mortgage broker or mortgage lender licensee has employed, or
26 has entered into a contractual relationship with, any person who performs
27 loan origination activities for the licensee without first obtaining a
28 loan originator license under this chapter; or
29 (h) The mortgage broker or mortgage lender licensee has failed to notify
30 the director of the employment or termination of, or the entering into or
31 termination of a contractual relationship with, a licensed loan originator
32 pursuant to section 26-3111(2), Idaho Code; or
33 (i) The mortgage broker or mortgage lender licensee has failed to super-
34 vise diligently and control the mortgage-related activities of a loan
35 originator employed by the licensee.
36 (2) If the director finds that probable cause for revocation of a license
37 exists and that enforcement of this chapter and the public interest require
38 immediate suspension of the license pending investigation, he may, after a
39 hearing upon five (5) days' written notice, enter an order suspending the
40 license for not more than thirty (30) days.
41 (3) Any licensee may relinquish the license by notifying the department
42 in writing of its relinquishment, but this relinquishment shall not affect his
43 liability for acts previously committed, and may not occur after the filing of
44 a complaint for revocation of the license.
45 (4) The director may, in his discretion, reinstate a license, terminate a
46 suspension, or grant a new license to a person whose license has been revoked
47 or suspended if no fact or condition then exists which clearly would justify
48 the department in refusing to grant a license.
49 SECTION 9. That Section 26-3110, Idaho Code, be, and the same is hereby
50 amended to read as follows:
51 26-3110. SURETY BONDS AND CONTINUING EDUCATION. (1) All mortgage broker
52 and mortgage lender licensees, with or without an office located in this
53 state, shall maintain a surety bond to the state of Idaho in accordance with
10
1 this section. The bond to be maintained shall be in the amount of ten twenty-
2 five thousand dollars ($1025,000). This amount shall be increased by addi-
3 tional sums of ten thousand dollars ($10,000) for each licensed branch office.
4 The bond shall be a continuing obligation of the issuing surety. The surety's
5 liability under the bond for any claims made thereunder either individually or
6 in the aggregate shall in no event exceed the face amount of the bond issued.
7 The bond shall be issued by a surety authorized to do business in the state of
8 Idaho. The licensee shall place the bond, including any and all riders and
9 endorsements executed subsequent to the effective date of the bond, shall be
10 placed on file with the department. In lieu of the bonds required by this sec-
11 tion, a certificate of deposit issued by an Idaho bank and made payable to the
12 director may be provided to the director in the same principal amount as
13 required for bonds. The interest on the certificate of deposit shall be pay-
14 able to the licensee. The certificate of deposit shall be maintained at all
15 times during which the licensee is authorized to conduct mortgage brokering or
16 mortgage lending activities under this chapter, and must provide that it will
17 remain in effect for at least three (3) years following discontinuance of
18 operations unless released earlier by the director.
19 (2) All loan originator licensees under this chapter, whether operating
20 within or outside of the state of Idaho, shall maintain a surety bond to the
21 state of Idaho in accordance with this section. The bond to be maintained
22 shall be in the amount of ten thousand dollars ($10,000). The surety's liabil-
23 ity under the bond for any claims made thereunder either individually or in
24 the aggregate shall in no event exceed the face amount of the bond issued. The
25 bond shall be issued by a surety authorized to do business in the state of
26 Idaho. The licensee shall place the bond, including any and all riders and
27 endorsements executed subsequent to the effective date of the bond, on file
28 with the department. In lieu of the bond required by this section, a certifi-
29 cate of deposit issued by an Idaho bank and made payable to the director may
30 be provided to the director in the same principal amount as required for a
31 bond. The interest on the certificate of deposit shall be payable to the
32 licensee. The certificate of deposit shall be maintained at all times during
33 which the licensee is authorized to conduct loan origination activities under
34 this chapter, and must provide that it will remain in effect for at least
35 three (3) years following discontinuance of operations unless released earlier
36 by the director.
37 (3) In the event that a licensee under this chapter, or any employee or
38 agent of a such licensee, has violated any of the provisions of this chapter
39 or of a rule or order lawfully made pursuant to this chapter, or federal law
40 or regulation pertaining to the loan origination, mortgage banking lending or
41 mortgage brokering activities set forth in section 26-3102, Idaho Code, and
42 has damaged any person by such violation, then the bond shall be forfeited and
43 paid by the surety to the state of Idaho for the benefit of any person so dam-
44 aged.
45 (4) (a) The director may adopt rules to require continuing education of
46 licensees under this chapter for the purpose of enhancing the professional
47 competence and the professional responsibility of all licensees. The rules
48 may include, but shall not be limited to, criteria for the content of con-
49 tinuing education courses, the accreditation of continuing education spon-
50 sors and programs, the computation of continuing education credits, and
51 general compliance with this subsection.
52 (b) Continuing professional education requirements shall be determined by
53 the director, provided however, the requirements shall not exceed twenty
54 (20) credit hours within a two (2) year period.
55 (c) The director may require accredited sponsors of continuing education
11
1 programs to file information, in a manner prescribed by the director,
2 regarding the contents and materials of proposed courses to satisfy the
3 education requirements with the director for review and approval. The
4 director may set fees for the initial and continuing review of courses for
5 which credit hours will be granted. The initial filing fee for review of
6 materials shall not exceed five hundred dollars ($500) and the fee for
7 continued review shall not exceed two hundred fifty dollars ($250) per
8 annum per course offered.
9 SECTION 10. That Section 26-3111, Idaho Code, be, and the same is hereby
10 amended to read as follows:
11 26-3111. RECORDS -- ANNUAL REPORTS -- RENEWAL OF LICENSE. (1) Every
12 licensee shall maintain records, including financial records, in conformity
13 with generally accepted accounting principles, in a manner that will enable
14 the director to determine whether the licensee is complying with the provi-
15 sions of this chapter. The recordkeeping system of a licensee shall be suffi-
16 cient if he makes the required information reasonably available. The records
17 need not be kept in the place of business where residential mortgage loans are
18 made, if the director is given free access to the records wherever located.
19 The records pertaining to any loan need not be preserved for more than five
20 three (53) years after making the final entry relating to the loan.
21 (2) Any mortgage broker or mortgage lender licensee who employs or con-
22 tracts with a loan originator licensee, for the purpose of conducting loan
23 origination activities, shall:
24 (a) Notify the director of the employment of, or contractual relationship
25 with, a loan originator licensee within thirty (30) days of such employ-
26 ment or contract. Notification shall be made in a manner prescribed by the
27 director;
28 (b) Notify the director of the termination of employment of, or contrac-
29 tual relationship with, a loan originator licensee within thirty (30) days
30 of such termination. Notification shall be made in a manner prescribed by
31 the director; and
32 (c) Maintain any records relating to the employment of, or contractual
33 relationship with, a loan originator licensee, for a period not to exceed
34 three (3) years.
35 (3) On or before August 31 of each year, every mortgage broker and mort-
36 gage lender licensee under this chapter shall pay an annual license renewal
37 fee of one hundred fifty dollars ($1500), and file with the director a renewal
38 form containing such information as the director may require and a composite
39 annual report for the residential mortgage loans made or brokered by him.
40 (4) On or before October 31 of each year, every loan originator licensee
41 under this chapter shall pay an annual license renewal fee of one hundred dol-
42 lars ($100), and file with the director a renewal form containing such infor-
43 mation as the director may require.
44 SECTION 11. That Section 26-3112, Idaho Code, be, and the same is hereby
45 amended to read as follows:
46 26-3112. EXAMINATION AND INVESTIGATIONS. (1) The director shall examine
47 periodically at intervals he deems appropriate, the loans and business
48 records of each licensee. In addition, for the purpose of discovering viola-
49 tions of the provisions of this chapter or securing information lawfully
50 required, the director may at any time investigate the loans, business, books
51 and records of any such licensee. For these purposes, he shall have free and
12
1 reasonable access to the offices, places of business, and books and records of
2 the licensee. The director, for purposes of examination of licensees herein,
3 shall be paid the actual cost of examination by the licensee, within thirty
4 (30) days of the examination.
5 (2) If a licensee's records are located outside this state, the licensee
6 shall have the option to make them available to the director at a convenient
7 location within this state, or pay the reasonable and necessary expenses for
8 the director or his representative to examine them at the place where they are
9 maintained. The director may designate representatives, including comparable
10 officials of the state in which the records are located, to inspect them on
11 his behalf.
12 (3) For the purposes of this section, the director may administer oaths
13 or affirmations, and upon his own motion or upon request of any party, may
14 subpoena witnesses, compel their attendance, adduce evidence, and require the
15 production of any matter which is relevant to the investigation, including the
16 existence, description, nature, custody, condition, and location of any books,
17 documents, or other tangible things and the identity and location of persons
18 having knowledge of relevant facts, or any other matter reasonably calculated
19 to lead to the discovery of admissible evidence.
20 (4) Upon failure to obey a subpoena or to give testimony and upon reason-
21 able notice to all persons affected thereby the director may apply to the dis-
22 trict court for an order compelling compliance.
23 SECTION 12. That Section 26-3114, Idaho Code, be, and the same is hereby
24 amended to read as follows:
25 26-3114. PROHIBITED PRACTICES OF MORTGAGE BROKERS AND MORTGAGE LENDERS.
26 No mortgage broker or mortgage lender licensee or person required under this
27 chapter to have a such license shall:
28 (1) Obtain any exclusive dealing or exclusive agency agreement from any
29 borrower;
30 (2) Delay closing of any residential mortgage loan for the purpose of
31 increasing interest, costs, fees, or charges payable by the borrower;
32 (3) Accept any fees at closing which were not previously disclosed fully
33 to the borrower;
34 (4) Obtain any agreement or instrument in which blanks are left to be
35 filled in after execution signing by a borrower;
36 (5) Engage in any misrepresentation in connection with a residential
37 mortgage loan;
38 (6) Make payment, whether directly or indirectly, of any kind to any in-
39 house or fee appraiser for the purpose of influencing the independent judgment
40 of the appraiser with respect to the value of any real estate which is to be
41 covered by a residential mortgage loan;
42 (7) Make any false promises likely to influence or persuade, or pursue a
43 course of misrepresentations and false promises through loan originators or
44 other agents, solicitors, or through advertising or otherwise;
45 (8) Misrepresent, circumvent or conceal, through whatever subterfuge or
46 device, any of the material particulars or the nature thereof, regarding a
47 residential mortgage loan transaction; to which it is a party; nor
48 (9) Enter into any agreement, with or without the payment of a fee, to
49 fix in advance a particular interest rate or other term in a residential mort-
50 gage loan unless written confirmation of the agreement is delivered to the
51 borrower as required by rule pursuant to this chapter.
52 SECTION 13. That Chapter 31, Title 26, Idaho Code, be, and the same is
13
1 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
2 ignated as Section 26-3114A, Idaho Code, and to read as follows:
3 26-3114A. PROHIBITED PRACTICES OF LOAN ORIGINATORS. No loan originator
4 licensee or person required under this chapter to have such license shall:
5 (1) Be employed simultaneously by more than one (1) mortgage broker or
6 mortgage lender licensed under this chapter;
7 (2) Enter into concurrent contractual relationships for delivery of loan
8 origination services to more than one (1) licensee under this chapter;
9 (3) Obtain any exclusive dealing or exclusive agency agreement from any
10 borrower;
11 (4) Delay closing of any residential mortgage loan for the purpose of
12 increasing interest, costs, fees, or charges payable by the borrower;
13 (5) Accept any fees at closing which were not previously disclosed fully
14 to the borrower;
15 (6) Obtain any agreement or instrument in which blanks are left to be
16 filled in after signing by a borrower;
17 (7) Engage in any misrepresentation in connection with a residential
18 mortgage loan;
19 (8) Make payment, whether directly or indirectly, of any kind to any in-
20 house or fee appraiser for the purpose of influencing the independent judgment
21 of the appraiser with respect to the value of any real estate which is to be
22 covered by a residential mortgage loan;
23 (9) Make any false promises likely to influence or persuade, or pursue a
24 course of misrepresentations and false promises through agents, solicitors,
25 advertising or otherwise;
26 (10) Misrepresent, circumvent or conceal, through whatever subterfuge or
27 device, any of the material particulars or the nature thereof, regarding a
28 residential mortgage loan transaction; nor
29 (11) Enter into any agreement, with or without the payment of a fee, to
30 fix in advance a particular interest rate or other term in a residential mort-
31 gage loan unless written confirmation of the agreement is delivered to the
32 borrower as required by rule pursuant to this chapter.
33 SECTION 14. That Section 26-3116, Idaho Code, be, and the same is hereby
34 amended to read as follows:
35 26-3116. INITIAL LICENSING AND COMPLIANCE. A person who conducts any of
36 the activities set forth in subsections (178) and (189) of section 26-3102,
37 Idaho Code, on the effective date of this act shall, within sixty (60) days
38 following the effective date of this act, apply to the department for a
39 license.
40 SECTION 15. That Chapter 31, Title 26, Idaho Code, be, and the same is
41 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
42 ignated as Section 26-3116A, Idaho Code, and to read as follows:
43 26-3116A. INITIAL LOAN ORIGINATOR LICENSING. A person who conducts any of
44 the activities set forth in section 26-3102(20), Idaho Code, shall have sixty
45 (60) days to apply to the department for a loan originator license following
46 the effective date of the loan originator licensing provisions of this chapter
47 and, notwithstanding the provisions of section 26-3108A, Idaho Code, shall pay
48 an initial one (1) time reduced loan origination license application fee of
49 one hundred dollars ($100).
14
1 SECTION 16. This act shall be in full force and effect on and after July
2 1, 2004, provided however, that the loan originator licensing requirements set
3 forth in Section 7 of this act shall not become effective until the succeeding
4 January 1 following the legislative session in which the Legislature grants to
5 the Department of Finance a specific appropriation and approval of additional
6 department staffing for implementation of the loan originator licensing provi-
7 sions of this act and the Director of the Department of Finance files with the
8 Secretary of State certification that such appropriation and approval require-
9 ments have been satisfied.
Revised Statement of Purpose
STATEMENT OF PURPOSE
RS 14141
The purpose of this legislation is to establish licensing and
educational requirements for all persons who originate
residential mortgage loans and are not regulated under other laws
of the state. This bill will provide for greater consumer
protection.
The bill also defines the relationship between a mortgage
broker/banker and loan originators, making that relationship the
same as described under Idaho Code as a real estate broker and
sales associates and insurance broker and sales associates. The
bill allows for continuing education requirements.
FISCAL NOTE
This bill is revenue neutral, calling for the establishment of
license fees at a level to cover all administrative costs to the
Department of Finance. It increases existing licensing fees to
mortgage brokers.
Contact:
Name: Senator John W. Goedde
Phone: 208-332-1000
STATEMENT OF PURPOSE/FISCAL NOTE S 1389
REVISED REVISED REVISE