Bill Summary – FastDemocracy

Enrolled Copy                                                                              H.B. 500
                                    REAL ESTATE AMENDMENTS
                                             2024 GENERAL SESSION
                                                  STATE OF UTAH
                                      Chief Sponsor: Calvin R. Musselman Senate Sponsor: Kirk A. Cullimore
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  LONG TITLE
  General Description:
         This bill modifies the Real Estate Code and the Real Estate Licensing and Practices Act.
  Highlighted Provisions:
         This bill:
         ▸ removes the 10-day reporting requirement for criminal convictions;
         ▸ enhances penalties for violations involving vulnerable adults and adults over a certain
  age;
         ▸ modifies licensing fee maximums;
         ▸ requires the Department of Real Estate to provide notice of a disciplinary proceeding to
  the principal broker; and
         ▸ makes technical changes.
  Money Appropriated in this Bill:
         None
  Other Special Clauses:
         None
  Utah Code Sections Affected:
  AMENDS:
         61-2c-102, as last amended by Laws of Utah 2020, Chapter 72
         61-2c-402, as last amended by Laws of Utah 2022, Chapter 204
         61-2f-102, as last amended by Laws of Utah 2017, Chapter 182
         61-2f-301, as last amended by Laws of Utah 2012, Chapter 166
         61-2f-401, as last amended by Laws of Utah 2023, Chapter 141
         61-2f-404, as last amended by Laws of Utah 2016, Chapter 384
         61-2g-306, as last amended by Laws of Utah 2012, Chapter 166
     H.B. 500                                                                                Enrolled Copy
       63I-2-261, as last amended by Laws of Utah 2023, Chapter 33
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   Be it enacted by the Legislature of the state of Utah:
         Section 1. Section 61-2c-102 is amended to read:
         61-2c-102 . Definitions.
   (1) As used in this chapter:
       (a) "Affiliation" means that a mortgage loan originator is associated with a principal
            lending manager in accordance with Section 61-2c-209.
       (b) "Applicant" means a person applying for a license under this chapter.
       (c) "Approved examination provider" means a person approved by the nationwide
            database or by the division as an approved test provider.
       (d) "Associate lending manager" means an individual who:
            (i) qualifies under this chapter as a principal lending manager; and
            (ii) works by or on behalf of another principal lending manager in transacting the
                business of residential mortgage loans.
       (e) "Balloon payment" means a required payment in a mortgage transaction that:
            (i) results in a greater reduction in the principle of the mortgage than a regular
                installment payment; and
            (ii) is made during or at the end of the term of the loan.
       (f) "Branch lending manager" means an individual who is:
            (i) licensed as a lending manager; and
            (ii) designated in the nationwide database by the individual's sponsoring entity as
                being responsible to work from a branch office and to supervise the business of
                residential mortgage loans that is conducted at the branch office.
       (g) "Branch office" means a licensed entity's office:
            (i) for the transaction of the business of residential mortgage loans regulated under
                this chapter;
            (ii) other than the main office of the licensed entity; and
            (iii) that operates under:
                (A) the same business name as the licensed entity; or
                (B) another trade name that is registered with the division under the entity license.
       (h) "Business day" means a day other than:
            (i) a Saturday;
            (ii) a Sunday; or
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     Enrolled Copy                                                                                   H.B. 500
          (iii) a federal or state holiday.
      (i) (i) "Business of residential mortgage loans" means for compensation or in the
          expectation of compensation to:
              (A) engage in an act that makes an individual a mortgage loan originator;
              (B) make or originate a residential mortgage loan;
              (C) directly or indirectly solicit a residential mortgage loan for another;
              (D) unless exempt under Section 61-2c-105 or excluded under Subsection
                   (1)(i)(ii), render services related to the origination of a residential mortgage
                   loan including:
                   (I) preparing a loan package;
                   (II) communicating with the borrower or lender;
                   (III) advising on a loan term;
                   (IV) receiving, collecting, or distributing information common for the
                        processing or underwriting of a loan in the mortgage industry; or
                   (V) communicating with a consumer to obtain information necessary for the
                        processing or underwriting of a residential mortgage loan; or
              (E) engage in loan modification assistance.
          (ii) "Business of residential mortgage loans" does not include:
              (A) ownership of an entity that engages in the business of residential mortgage
                   loans if the owner does not personally perform the acts listed in Subsection
                   (1)(i)(i);
              (B) acting in one or more of the following capacities:
                   (I) a loan wholesaler;
                   (II) an account executive for a loan wholesaler;
                   (III) a loan closer; or
                   (IV) funding a loan; or
              (C) if employed by a person who owns or services an existing residential
                   mortgage loan, the direct negotiation with the borrower for the purpose of loan
                   modification.
      (j) "Certified education provider" means a person who is certified under Section
          61-2c-204.1 to provide Utah-specific prelicensing education.
      (k) "Closed-end" means a loan:
          (i) with a fixed amount borrowed; and
          (ii) that does not permit additional borrowing secured by the same collateral.
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      H.B. 500                                                                                Enrolled Copy
      (l) "Commission" means the Residential Mortgage Regulatory Commission created in
            Section 61-2c-104.
      (m) "Community development financial institution" means the same as that term is
            defined in 12 U.S.C. Sec. 4702.
      (n) "Compensation" means anything of economic value that is paid, loaned, granted,
            given, donated, or transferred to an individual or entity for or in consideration of:
            (i) services;
            (ii) personal or real property; or
            (iii) another thing of value.
      (o) "Concurrence" means that entities given a concurring role must jointly agree for the
            action to be taken.
      (p) "Continuing education" means education an individual takes in order to meet the
            education requirements imposed by Sections 61-2c-204.1 and 61-2c-205 to activate,
            renew, or reinstate a license under this chapter.
      (q) "Control," as used in Subsection 61-2c-105(2)(f), means the power to directly or
            indirectly:
            (i) direct or exercise a controlling interest over:
                (A) the management or policies of an entity; or
                (B) the election of a majority of the directors, officers, managers, or managing
                     partners of an entity;
            (ii) vote 20% or more of a class of voting securities of an entity by an individual; or
            (iii) vote more than 5% of a class of voting securities of an entity by another entity.
      (r) (i) "Control person" means an individual identified by an entity registered with the
            nationwide database as being an individual directing the management or policies
            of the entity.
            (ii) "Control person" may include one of the following who is identified as provided
                in Subsection (1)(r)(i):
                (A) a manager;
                (B) a managing partner;
                (C) a director;
                (D) an executive officer; or
                (E) an individual who performs a function similar to an individual listed in this
                     Subsection (1)(r)(ii).
      (s) "Depository institution" means the same as that term is defined in Section 7-1-103.
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      Enrolled Copy                                                                                   H.B. 500
      (t) "Director" means the director of the division.
      (u) "Division" means the Division of Real Estate.
      (v) "Dwelling" means a residential structure attached to real property that contains one
          to four family units including any of the following if used as a residence:
          (i) a condominium unit;
          (ii) a cooperative unit;
          (iii) a manufactured home; or
          (iv) a house.
      (w) "Employee":
          (i) means an individual:
              (A) whose manner and means of work performance are subject to the right of
                   control of, or are controlled by, another person; and
              (B) whose compensation for federal income tax purposes is reported, or is
                   required to be reported, on a W-2 form issued by the controlling person; and
          (ii) does not include an independent contractor who performs duties other than at the
              direction of, and subject to the supervision and instruction of, another person.
      (x) "Entity" means:
          (i) a corporation;
          (ii) a limited liability company;
          (iii) a partnership;
          (iv) a company;
          (v) an association;
          (vi) a joint venture;
          (vii) a business trust;
          (viii) a trust; or
          (ix) another organization.
      (y) "Executive director" means the executive director of the Department of Commerce.
      (z) "Federal licensing requirements" means Secure and Fair Enforcement for Mortgage
          Licensing, 12 U.S.C. Sec. 5101 et seq.
      (aa) "Foreclosure rescue" means, for compensation or with the expectation of receiving
          valuable consideration, to:
          (i) engage, or offer to engage, in an act that:
              (A) the person represents will assist a borrower in preventing a foreclosure; and
              (B) relates to a transaction involving the transfer of title to residential real
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      H.B. 500                                                                                Enrolled Copy
                     property; or
            (ii) as an employee or agent of another person:
                (A) solicit, or offer that the other person will engage in an act described in
                     Subsection (1)(aa)(i); or
                (B) negotiate terms in relationship to an act described in Subsection (1)(aa)(i).
      (bb) "Inactive status" means a dormant status into which an unexpired license is placed
            when the holder of the license is not currently engaging in the business of residential
            mortgage loans.
      (cc) "Lending manager" means an individual licensed as a lending manager under
            Section 61-2c-206 to transact the business of residential mortgage loans.
      (dd) "Licensee" means a person licensed with the division under this chapter.
      (ee) "Licensing examination" means the examination required by Section 61-2c-204.1 or
            61-2c-206 for an individual to obtain a license under this chapter.
      (ff) "Loan modification assistance" means, for compensation or with the expectation of
            receiving valuable consideration, to:
            (i) act, or offer to act, on behalf of a person to:
                (A) obtain a loan term of a residential mortgage loan that is different from an
                     existing loan term including:
                     (I) an increase or decrease in an interest rate;
                     (II) a change to the type of interest rate;
                     (III) an increase or decrease in the principal amount of the residential mortgage
                         loan;
                     (IV) a change in the number of required period payments;
                     (V) an addition of collateral;
                     (VI) a change to, or addition of, a prepayment penalty;
                     (VII) an addition of a cosigner; or
                     (VIII) a change in persons obligated under the existing residential mortgage
                         loan; or
                (B) substitute a new residential mortgage loan for an existing residential mortgage
                     loan; or
            (ii) as an employee or agent of another person:
                (A) solicit, or offer that the other person will engage in an act described in
                     Subsection (1)(ff)(i); or
                (B) negotiate terms in relationship to an act described in Subsection (1)(ff)(i).
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      Enrolled Copy                                                                                       H.B. 500
      (gg) (i) "Mortgage loan originator" means an individual who, for compensation or in
          expectation of compensation:
              (A) (I) takes a residential mortgage loan application;
                     (II) offers or negotiates terms of a residential mortgage loan for the purpose of:
                         (Aa) a purchase;
                         (Bb) a refinance;
                         (Cc) a loan modification assistance; or
                         (Dd) a foreclosure rescue; or
                     (III) directly or indirectly solicits a residential mortgage loan for another
                         person; and
              (B) is licensed as a mortgage loan originator in accordance with this chapter.
          (ii) "Mortgage loan originator" does not include a person who:
              (A) is described in Subsection (1)(gg)(i), but who performs exclusively
                     administrative or clerical tasks as described in Subsection (1)(i)(ii)(A);
              (B) (I) is licensed under Chapter 2f, Real Estate Licensing and Practices Act;
                     (II) performs only real estate brokerage activities; and
                     (III) receives no compensation from:
                         (Aa) a lender;
                         (Bb) a lending manager; or
                         (Cc) an agent of a lender or lending manager; or
              (C) is solely involved in extension of credit relating to a timeshare plan, as defined
                     in 11 U.S.C. Sec. 101(53D).
      (hh) "Nationwide database" means the Nationwide Mortgage Licensing System and
          Registry, authorized under federal licensing requirements.
      (ii) "Nontraditional mortgage product" means a mortgage product other than a 30-year
          fixed rate mortgage.
      (jj) "Person" means an individual or entity.
      (kk) "Prelicensing education" means education taken by an individual seeking to be
          licensed under this chapter in order to meet the education requirements imposed by
          Section 61-2c-204.1 or 61-2c-206 for an individual to obtain a license under this
          chapter.
      (ll) "Principal lending manager" means an individual:
          (i) licensed as a lending manager under Section 61-2c-206; and
          (ii) identified in the nationwide database by the individual's sponsoring entity as the
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      H.B. 500                                                                                  Enrolled Copy
                entity's principal lending manager.
      (mm) "Prospective borrower" means a person applying for a mortgage from a person
            who is required to be licensed under this chapter.
      (nn) "Record" means information that is:
            (i) prepared, owned, received, or retained by a person; and
            (ii) (A) inscribed on a tangible medium; or
                (B) (I) stored in an electronic or other medium; and
                    (II) in a perceivable and reproducible form.
      (oo) "Residential mortgage loan" means an extension of credit, if:
            (i) the loan or extension of credit is secured by a:
                (A) mortgage;
                (B) deed of trust; or
                (C) consensual security interest; and
            (ii) the mortgage, deed of trust, or consensual security interest described in
                Subsection (1)(oo)(i):
                (A) is on a dwelling located in the state; and
                (B) is created with the con