Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                    Enrolled Senate Bill 613
  By Senators Azinger, Oliverio, Plymale, and Nelson [Passed March 5, 2024; in effect 90 days from passage]
     Enr SB 613
  AN ACT to amend and reenact §31-17-1, §31-17-3, §31-17-4, §31-17-6, §31-17-7, and §31-17-11
         of the Code of West Virginia, 1931, as amended; to amend said code by adding thereto a
         new section, designated §31-17-4a; and to amend said code by adding thereto a new
         section, designated §31-17A-9a, all relating to the licensure and regulation of mortgage
         brokers, lenders, and loan originators; updating definitions; eliminating outdated
         provisions; authorizing emergency rulemaking; permitting the Commissioner of Financial
         Institutions to participate in the multistate licensing and examination process; updating net
         worth requirements to use generally accepted accounting principles; providing information
         requirements for a change in control and updating the change in control process;
        specifying requirements for individuals in control of a licensee or applicant; confirming
        confidentiality of examination and licensee information but allowing release of aggregate
        data; permitting loan originators to conduct work at their residence if certain requirements
        are met; and making technical corrections.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE 17. WEST VIRGINIA RESIDENTIAL MORTGAGE LENDER, BROKER, AND
            SERVICER                                                                               ACT.
     §31-17-1. Definitions and general provisions.
         As used in this article:
         (a) "Additional charges" means every type of charge arising out of the making or
  acceptance of a primary or subordinate mortgage loan, except finance charges, including, but not
  limited to, official fees and taxes, reasonable closing costs and certain documentary charges and
  insurance premiums and other charges, which definition is to be read in conjunction with and
  permitted by §46A-3-109 of this code;
         (b) "Amount financed" means the total of the following items to the extent that payment is
  deferred:
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         (1) The cash price of the goods, services or interest in land, less the amount of any down
 payment, whether made in cash or in property traded in;
        (2) The amount actually paid, or to be paid, by the seller pursuant to an agreement with the
 buyer to discharge a security interest in, or a lien on, property traded in; and
        (3) If not included in the cash price:
        (A) Any applicable sales, use, privilege, excise or documentary stamp taxes;
        (B) Amounts actually paid, or to be paid, by the seller for registration, certificate of title or
 license fees; and
        (C) Additional charges permitted by this article;
         (c) "Applicant" means a person who has applied for a lender or broker license;
         (d) "Broker" means any person acting in the regular course of business who, for a fee or
 commission or other consideration, negotiates or arranges, or who offers to negotiate or arrange,
 or originates or assigns a primary or subordinate mortgage loan between a lender and a borrower.
 A person is considered to be acting in the regular course of business if he or she negotiates or
 arranges, or offers to negotiate or arrange, or originates, processes, or assigns any primary or
 subordinate mortgage loans in any one calendar year; or if he or she seeks to charge a borrower,
 or receive from a borrower, money or other valuable consideration in any primary or subordinate
 mortgage transaction before completing performance of all broker services that he or she has
 agreed to perform for the borrower;
         (e) "Brokerage fee" means the fee or commission or other consideration charged by a
 broker or loan originator for the services described in subdivision (d) of this section;
         (f) "Commissioner" means the Commissioner of Financial Institutions of this state;
        (g) "Control" means:
        (1)(A) The power to vote, directly or indirectly, at least 25 percent of voting shares or voting
 interests of a licensee or person in control of a licensee;
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        (B) The power to elect or appoint a majority of key individuals or executive officers,
 managers, directors, trustees, or other persons exercising managerial authority of a person in
 control of a licensee; or
        (C) The power to exercise, directly or indirectly, a controlling influence over the
 management or policies of a licensee or person in control of a licensee.
        (2) Rebuttable presumption of control:
        (A) A person is presumed to exercise a controlling influence when the person holds the
 power to vote, directly or indirectly, at least 10 percent of outstanding voting shares or voting
 interests of a licensee or person in control of a licensee.
        (B) A person presumed to exercise a controlling influence as defined in this section can
 rebut the presumption of control if the person is a passive investor.
        (3) For the purposes of determining the percentage of a person controlled by any other
 person, the person's interest shall be aggregated with the interest of any other immediate family
 member, including the person's spouse, parents, children, siblings, mothers-in-law, fathers-in-law,
 sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law, and any other person who shares
 such person's home.
        (h) "Finance charge" means the sum of all interest and similar charges payable directly or
 indirectly by the debtor imposed or collected by the lender incident to the extension of credit as
 coextensive with the definition of "loan finance charge" set forth in section one hundred two, article
 one, chapter forty-six-a of this code;
        (i) "Key individual" means any individual ultimately responsible for establishing or directing
 policies and procedures of the licensee, such as an executive officer, manager, director, or trustee.
        (j) "Lender" means any person who makes, or offers to make, or accepts or offers to
 accept, or purchases, or services any primary or subordinate mortgage loan in the regular course
 of business. A person is considered to be acting in the regular course of business if he or she
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 makes or accepts, or offers to make or accept, any primary or subordinate mortgage loans in any
 one calendar year.
        "Lender" does not include any person who does not currently have, and has never held, a
 residential mortgage lender license in this, or in any other state, and who makes no more than
 three primary or subordinate mortgage loans in any calendar year to purchasers of any dwelling
 owned by that person: Provided, That the person is required to report within 30 days of the date of
 the loan, any such mortgage loan to the Division of Financial Institutions, on a form available from
 the division upon request. Failure to timely report as required by this subsection may result in
 imposition by the commissioner of a civil administrative penalty of up to $250;
         (k) "Licensee" means any person duly licensed by the commissioner under the provisions
 of this article or §31-17A-1 et seq. of this code as a lender, broker, or mortgage loan originator;
         (l) "Nationwide Multistate Licensing System and Registry" means a mortgage licensing
 system developed and maintained by the Conference of State Bank Supervisors and the
 American Association of Residential Mortgage Regulators for the licensing and registration of
 licensed mortgage brokers and lenders licensed under this article and mortgage loan originators
 licensed under§31-17A-1 et seq. of this code;
         (m) "Person" means an individual, partnership, association, trust, corporation, or any
 other legal entity, or any combination thereof;
         (n) "Primary mortgage loan" means any loan primarily for personal, family, or household
 use that is secured by a mortgage, deed of trust or other equivalent consensual security interest,
 on a dwelling as defined in Section 103(w) of the Truth in Lending Act or residential real estate
 upon which is constructed, or intended to be constructed, a dwelling;
         (o) "Servicing" or "servicing a residential mortgage loan" means through any medium or
 mode of communication, the collection or remittance for, or the right or obligation to collect or remit
 for another lender, note owner or noteholder, payments of principal, interest, including sales
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 finance charges in a consumer credit sale, and escrow items as insurance and taxes for property
 subject to a residential mortgage loan; and
         (p) "Subordinate mortgage loan" means any loan primarily for personal, family, or
 household use that is secured by a mortgage, deed of trust, or other equivalent consensual
 security interest on a dwelling as defined in Section 103(w) of the Truth in Lending Act or
 residential real estate upon which is constructed, or intended to be constructed, a dwelling and is
 subject to the lien of one or more prior recorded mortgages or deeds of trust.
        (q) "Tangible net worth" means the aggregate assets of a licensee excluding all intangible
 assets, less liabilities, as determined in accordance with United States generally accepted
 accounting principles.
     §31-17-3. Supervision by Commissioner of Financial Institutions; rules and regulations;
            personnel; participation in the Nationwide Multistate Licensing System and Registry.
         (a) It shall be the duty of the commissioner to enforce the provisions of this article and, to
  implement and make effective such provisions, he or she is hereby authorized and empowered to
  promulgate reasonable rules in accordance with the provisions of article three, chapter twenty-
  nine-a of this code and to employ such personnel as may be necessary. The commissioner may
  promulgate emergency rules pursuant to the provisions of §29A-3-15 of this code to implement the
  amendments made during the regular session of the Legislature, 2024, as they relate to the
  licensure and regulation of mortgage brokers, lenders, and loan originators.
         (b) The commissioner may participate in the Nationwide Multistate Licensing System and
  Registry and permit such system to process applications for mortgage lender and mortgage broker
 licenses in this state and receive and maintain records related to such licenses that are allowed or
 required to be maintained by the commissioner. The commissioner is authorized to establish
 relationships or contracts with the Nationwide Multistate Licensing System and Registry, or other
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 entities designated by the Nationwide Multistate Licensing System and Registry, to collect and
 maintain records and process transaction fees or other fees related to licensees subject to this
 article. The Nationwide Licensing System and Registry shall transfer, electronically, all fees
 payable to the Division of Financial Institutions directly to the credit of the commissioner's special
 revenue account with the state Treasurer.
     §31-17-4. Applications for licenses; requirements; bonds; fees; renewals; waivers and reductions; per loan fee.
         (a) In connection with an application for licensing as a mortgage lender or mortgage broker,
 the applicant shall, at a minimum, furnish to the Nationwide Multistate Licensing System and
 Registry, information concerning the applicant's identity, including:
         (1) Fingerprints for submission to the Federal Bureau of Investigation and any
 governmental agency or entity authorized to receive such information for a state, national and
 international criminal history background check; and
         (2) Personal history and experience in a form prescribed by the Nationwide Multistate
 Licensing System and Registry and the commissioner, including the submission of authorization
 for the Nationwide Multistate Licensing System and Registry and the commissioner to obtain:
         (A) An independent credit report obtained from a consumer reporting agency described in
 Section 603(p) of the Fair Credit Reporting Act; and
         (B) Information related to any administrative, civil or criminal findings by any governmental
 jurisdiction.
         (b) In order to reduce the points of contact which the Federal Bureau of Investigation may
 have to maintain for purposes of this article, the commissioner may use the Nationwide Multistate
 Licensing System and Registry or its designated vendor as a channeling agent for requesting
 information from, and distributing information to, the Department of Justice or any governmental
 agency.
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        (c) In order to reduce the points of contact which the commissioner may have to maintain,
 for purposes of this article, the commissioner may use the Nationwide Multistate Licensing System
 and Registry as a channeling agent for requesting and distributing information to and from any
 source so directed by the commissioner.
        (d) Application for a lender's or broker's license shall each year be submitted under oath, in
 the form prescribed by the commissioner. Background and credit checks shall be conducted in
 accordance with this article. Any application shall also disclose the location at which the business
 of lender or broker is to be conducted.
        (e) At the time of making application for a lender's license, the applicant therefor shall:
        (1) If a foreign corporation, submit a certificate from the Secretary of State certifying that
 the applicant is registered with the Secretary of State to transact business in this state;
        (2) Submit proof that he or she has available for the operation of the business at the
 location specified in the application, tangible net worth of at least $250,000 computed according to
 the United States generally accepted accounting principles as shown by the most recent audited
 financial statement;
        (3) File an electronic surety bond through the Nationwide Multistate Licensing System and
 Registry in favor of the state for the benefit of consumers, or for a claim by the commissioner for an
 unpaid civil administrative penalty, or an unpaid examination invoice in the amount of $100,000 for
 licensees with West Virginia annual loan originations of $0 to $3 million, $150,000 for West Virginia
 annual loan originations greater than $3 million and up to $10 million, and $250,000 for West
 Virginia annual loan originations over $10 million, in a form and with conditions as the
 commissioner may prescribe, and executed by a surety company authorized to do business in this
 state: Provided, That lender licensees who service West Virginia mortgage loans shall file with the
 commissioner a bond under the same conditions listed above in the amount of $200,000;
        (4) Pay to the commissioner a license fee of $1,250 plus the actual cost of fingerprint
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 processing and the processing fees assessed by the Nationwide Multistate Licensing System and
 Registry. If the commissioner shall determine that an investigation outside this state is required to
 ascertain facts or information relative to the applicant or information set forth in the application, the
 applicant may be required to advance sufficient funds to pay the estimated cost of the
 investigation. An itemized statement of the actual cost of the investigation outside this state shall
 be furnished to the applicant by the commissioner and the applicant shall pay, or shall have
 returned to him or her, as the case may be, the difference between his or her payment in advance
 of the estimated cost and the actual cost of the investigation; and
         (5) Submit a full and complete disclosure of any litigation or unresolved complaint filed by a
 governmental authority or class action lawsuit on behalf of consumers relating to the operation of
 the license applicant.
         (f) At the time of making application for a broker's license, the applicant therefor shall:
         (1) If a foreign corporation, submit a certificate from the Secretary of State certifying that
 the applicant is registered with the Secretary of State to transact business in this state;
         (2) Submit proof that he or she has available for the operation of the business at the
 location specified in the application, tangible net worth of at least $10,000 computed according to
 the United States generally accepted accounting principles as shown by the most recent audited
 financial statement;
         (3) File an electronic surety bond through the Nationwide Multistate Licensing System and
 Registry in favor of the state for the benefit of consumers, or for a claim by the commissioner for an
 unpaid civil administrative penalty or an unpaid examination invoice in the amount of $50,000 for
 licensees with West Virginia loan originations of $0 to $3 million, $75,000 for West Virginia loan
 originations greater than $3 million and up to $10 million, and $100,000 for West Virginia loan
 originations over $10 million in a form and with conditions as the commissioner may prescribe, and
 executed by a surety company authorized to do business in this state: Provided, That the bond
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  must be in the