Bill Summary – FastDemocracy

Enrolled Copy                                                                              S.B. 234
                                     MORTGAGE COMMISSION
                                            2024 GENERAL SESSION
                                                 STATE OF UTAH
                                      Chief Sponsor: Michael K. McKell House Sponsor: Brady Brammer
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  LONG TITLE
  General Description:
      This bill makes changes to the Utah Residential Mortgage Practices and Licensing Act.
  Highlighted Provisions:
      This bill:
      ▸ clarifies the attorney exemption under the Utah Residential Mortgage Practices and
  Licensing Act; and
      ▸ makes technical changes.
  Money Appropriated in this Bill:
      None
  Other Special Clauses:
      None
  Utah Code Sections Affected:
  AMENDS:
      61-2c-105, as last amended by Laws of Utah 2018, Chapter 55
      61-2c-301, as last amended by Laws of Utah 2020, Chapter 72
      61-2c-401, as last amended by Laws of Utah 2018, Chapter 213
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  Be it enacted by the Legislature of the state of Utah:
        Section 1. Section 61-2c-105 is amended to read:
        61-2c-105 . Scope of chapter -- Exemptions.
  (1) (a) Except as to an individual who will engage in an activity as a mortgage loan
      originator, this chapter applies to a closed-end residential mortgage loan secured by a
      first lien or equivalent security interest on a dwelling.
      (b) This chapter does not apply to a transaction covered by Title 70C, Utah Consumer
          Credit Code.
     S.B. 234                                                                              Enrolled Copy
   (2) The following are exempt from this chapter:
       (a) the federal government;
       (b) a state;
       (c) a political subdivision of a state;
       (d) an agency of or entity created by a governmental entity described in Subsections
            (2)(a) through (c) including:
            (i) the Utah Housing Corporation created in Section 63H-8-201;
            (ii) the Federal National Mortgage Corporation;
            (iii) the Federal Home Loan Mortgage Corporation;
            (iv) the Federal Deposit Insurance Corporation;
            (v) the Resolution Trust Corporation;
            (vi) the Government National Mortgage Association;
            (vii) the Federal Housing Administration;
            (viii) the National Credit Union Administration;
            (ix) the Farmers Home Administration; and
            (x) the United States Department of Veterans Affairs;
       (e) a depository institution;
       (f) an entity that controls, is controlled by, or is under common control with a depository
            institution;
       (g) an employee or agent of an entity described in Subsections (2)(a) through (f):
            (i) when that person acts on behalf of the entity described in Subsections (2)(a)
                through (f); and
            (ii) including an employee of:
                (A) a depository institution;
                (B) a subsidiary of a depository institution that is:
                      (I) owned and controlled by the depository institution; and
                      (II) regulated by a federal banking agency, as defined in 12 U.S.C. Sec. 5102;
                           or
                (C) an institution regulated by the Farm Credit Administration;
       (h) except as provided in Subsection (3), a person who:
            (i) makes a loan:
                (A) secured by an interest in real property;
                (B) with the person's own money; and
                (C) for the person's own investment; and
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     Enrolled Copy                                                                                     S.B. 234
          (ii) that does not engage in the business of making loans secured by an interest in real
              property;
      (i) except as provided in Subsection (3), a person who receives a mortgage, deed of trust,
          or consensual security interest on real property if the individual or entity:
          (i) is the seller of real property; and
          (ii) receives the mortgage, deed of trust, or consensual security interest on real
              property as security for a separate money obligation;
      (j) a person who receives a mortgage, deed of trust, or consensual security interest on
          real property if:
          (i) the person receives the mortgage, deed of trust, or consensual security interest as
              security for an obligation payable on an installment or deferred payment basis;
          (ii) the obligation described in Subsection (2)(j)(i) arises from a person providing
              materials or services used in the improvement of the real property that is the
              subject of the mortgage, deed of trust, or consensual security interest; and
          (iii) the mortgage, deed of trust, or consensual security interest is created without the
              consent of the owner of the real property that is the subject of the mortgage, deed
              of trust, or consensual security interest;
      (k) a nonprofit corporation that:
          (i) (A) is exempt from paying federal income taxes;
              (B) is certified by the United States Small Business Administration as a small
                   business investment company;
              (C) is organized to promote economic development in this state; and
              (D) has as the nonprofit corporation's primary activity providing financing for
                   business expansion;
          (ii) is a community development financial institution; or
          (iii) (A) is exempt from paying federal income taxes;
              (B) has as the nonprofit corporation's primary purpose serving the public by
                   helping low-income individuals and families build, repair, or purchase housing;
              (C) does not require, under the terms of a mortgage, a balloon payment; and
              (D) to perform loan originator activities, uses only unpaid volunteers or
                   employees whose compensation is not based on the number or size of the
                   mortgage transactions that the employees originate;
      (l) an employee or volunteer for a nonprofit corporation described in Subsection
          (2)(k)(ii) or (iii), working within the scope of the nonprofit corporation's business;
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      S.B. 234                                                                                Enrolled Copy
       (m) except as provided in Subsection (3), a court appointed fiduciary; or
       (n) except as provided in Subsection (6), and subject to Subsection (5)(a), an attorney
            admitted to practice law in this state:
            (i) if the attorney is not principally engaged in the business of negotiating residential
                 mortgage loans when considering the attorney's ordinary practice as a whole for
                 all the attorney's clients; and
            (ii) when the attorney engages in loan modification assistance in the course of the
                 attorney's practice as an attorney.
   (3) An individual who will engage in an activity as a mortgage loan originator is exempt
       from this chapter only if the individual is an employee or agent exempt under Subsection
       (2)(g).
   (4) (a) A loan processor or loan underwriter who is not a mortgage loan originator is not
       required to obtain a license under this chapter when the loan processor or loan
       underwriter is:
            (i) employed by, and acting on behalf of, a person or entity licensed under this
                 chapter; and
            (ii) under the direction of and subject to the supervision of a person licensed under
                 this chapter.
       (b) A loan processor or loan underwriter who is an independent contractor is not exempt
            under Subsection (4)(a).
   (5) (a) [Notwithstanding Subsection (2)(m), an attorney] An attorney who is exempt from
       this chapter may not engage in conduct described in Section 61-2c-301 when
       transacting business of residential mortgage loans.
       (b) If an attorney exempt from this chapter violates Subsection (5)(a), the attorney:
            (i) is not subject to enforcement by the division under Part 4, Enforcement; and
            (ii) may be subject to disciplinary action generally applicable to an attorney admitted
                 to practice law in this state.
       (c) If the division receives a complaint alleging an attorney exempt from this chapter is
            in violation of Subsection (5)(a) or that an attorney subject to this chapter has
            violated this chapter, the division shall forward the complaint to the Utah State Bar
            for disciplinary action.
   (6) (a) An individual who is exempt under Subsection (2), (3), or (4) may voluntarily
       obtain a license under this chapter by complying with Part 2, Licensure.
       (b) An individual who voluntarily obtains a license under this Subsection (6) shall
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      Enrolled Copy                                                                                      S.B. 234
             comply with all the provisions of this chapter.
      (c) Notwithstanding Subsection (6)(b), an attorney who voluntarily obtains a license
             under this chapter is not subject to the provisions of this chapter when the attorney is
             acting within the scope of the attorney's role as an attorney, including when acting as
             an attorney for an individual or entity regulated under this chapter.
        Section 2. Section 61-2c-301 is amended to read:
        61-2c-301 . Prohibited conduct -- Violations of the chapter.
  (1) A person, when transacting the business of residential mortgage loans in this state, may
      not:
      (a) violate Section 8 of RESPA;
      (b) charge a fee in connection with a residential mortgage loan transaction:
             (i) that is excessive; or
             (ii) without providing to the loan applicant a written statement signed by the loan
                 applicant:
                 (A) stating whether or not the fee or deposit is refundable; and
                 (B) describing the conditions, if any, under which all or a portion of the fee or
                     deposit will be refunded to the loan applicant;
      (c) act incompetently in the transaction of the business of residential mortgage loans
             such that the person fails to:
             (i) safeguard the interests of the public; or
             (ii) conform to acceptable standards of the residential mortgage loan industry;
      (d) do any of the following as part of a residential mortgage loan transaction, regardless
             of whether the residential mortgage loan closes:
             (i) make a false statement or representation;
             (ii) cause false documents to be generated; or
             (iii) knowingly permit false information to be submitted by any party;
      (e) give or receive compensation or anything of value, or withhold or threaten to
             withhold payment of an appraiser fee, to influence the independent judgment of an
             appraiser in reaching a value conclusion in a residential mortgage loan transaction,
             except that it is not a violation of this section for a licensee to withhold payment
             because of a bona fide dispute regarding a failure of the appraiser to comply with the
             licensing law or the Uniform Standards of Professional Appraisal Practice;
      (f) violate or not comply with:
             (i) this chapter;
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      S.B. 234                                                                                   Enrolled Copy
            (ii) an order of the commission or division; or
            (iii) a rule made by the division;
       (g) fail to respond within the required time period to:
            (i) a notice or complaint of the division; or
            (ii) a request for information from the division;
       (h) make false representations to the division, including in a licensure statement;
       (i) engage in the business of residential mortgage loans with respect to the transaction if
            the person also acts in any of the following capacities with respect to the same
            residential mortgage loan transaction:
            (i) appraiser;
            (ii) escrow agent;
            (iii) real estate agent;
            (iv) general contractor; or
            (v) title insurance producer;
       (j) engage in unprofessional conduct as defined by rule;
       (k) engage in an act or omission in transacting the business of residential mortgage loans
            that constitutes dishonesty, fraud, or misrepresentation;
       (l) engage in false or misleading advertising;
       (m) (i) fail to account for money received in connection with a residential mortgage
            loan;
            (ii) use money for a different purpose from the purpose for which the money is
                received; or
            (iii) except as provided in Subsection (4), retain money paid for services if the
                services are not performed;
       (n) fail to provide a prospective borrower a copy of each appraisal and any other written
            valuation developed in connection with an application for credit that is to be secured
            by a first lien on a dwelling in accordance with Subsection (5);
       (o) engage in an act that is performed to:
            (i) evade this chapter; or
            (ii) assist another person to evade this chapter;
       (p) recommend or encourage default, delinquency, or continuation of an existing default
            or delinquency, by a mortgage applicant on an existing indebtedness before the
            closing of a residential mortgage loan that will refinance all or part of the
            indebtedness;
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      Enrolled Copy                                                                                   S.B. 234
      (q) in the case of the lending manager of an entity or a branch office of an entity, fail to
          exercise reasonable supervision over the activities of:
          (i) unlicensed staff; or
          (ii) a mortgage loan originator who is affiliated with the lending manager;
      (r) pay or offer to pay an individual who does not hold a license under this chapter for
          work that requires the individual to hold a license under this chapter;
      (s) in the case of a dual licensed title licensee as defined in Section 31A-2-402:
          (i) provide a title insurance product or service without the approval required by
              Section 31A-2-405; or
          (ii) knowingly provide false or misleading information in the statement required by
              Subsection 31A-2-405(2);
      (t) represent to the public that the person can or will perform any act of a mortgage loan
          originator if that person is not licensed under this chapter because the person is
          exempt under Subsection 61-2c-105(4), including through:
          (i) advertising;
          (ii) a business card;
          (iii) stationery;
          (iv) a brochure;
          (v) a sign;
          (vi) a rate list; or
          (vii) other promotional item;
      (u) (i) engage in an act of loan modification assistance without being licensed under
          this chapter;
          (ii) engage in an act of foreclosure rescue that requires licensure as a real estate agent
              or real estate broker under Chapter 2, Division of Real Estate, without being
              licensed under that chapter;
          (iii) engage in an act of loan modification assistance without entering into a written
              agreement specifying which one or more acts of loan modification assistance will
              be completed;
          (iv) request or require a person to pay a fee before obtaining:
              (A) a written offer for a loan modification from the person's lender or servicer; and
              (B) the person's written acceptance of the offer from the lender or servicer;
          (v) induce a person seeking a loan modification to hire the licensee to engage in an
              act of loan modification assistance by:
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      S.B. 234                                                                                 Enrolled Copy
                (A) suggesting to the person that the licensee has a special relationship with the
                      person's lender or loan servicer; or
                (B) falsely representing or advertising that the licensee is acting on behalf of:
                      (I) a government agency;
                      (II) the person's lender or loan servicer; or
                      (III) a nonprofit or charitable institution;
            (vi) recommend or participate in a loan modification that requires a perso