Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                  Introduced House Bill 5419
      By Delegate Barnhart, Hott and Espinosa By Request of the Division of Financial Institutions [Introduced February 02, 2024; Referred to the Committee on Banking and Insurance then the Judiciary]
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  A BILL to amend and reenact §31-17-1, §31-17-3, and §31-17-4 of the Code of West Virginia,
            1931, as amended; to amend said code by adding thereto a new section, designated §31-
            17-4a, to amend and reenact §31-17-6, §31-17-7, and §31-17-11 of said code, 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            definitions; eliminating outdated provisions; authorizing emergency rulemaking; permitting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) "Affiliated" means persons under the same ownership or management control. As to
  corporations, limited liability companies or partnerships, where common owners manage or
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  control a majority of the stock, membership interests or general partnership interests of one or
 more such corporations, limited liability companies or partnerships, those persons are considered
 affiliated. In addition, persons under the ownership or management control of the members of an
 immediate family shall be considered affiliated. For purposes of this section, "immediate family"
 means mother, stepmother, father, stepfather, sister, stepsister, brother, stepbrother, spouse, child
 and grandchildren;
           (c)(b) "Amount financed" means the total of the following items to the extent that payment
 is deferred:
           (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;
           (d)(c) "Applicant" means a person who has applied for a lender or broker license;
           (e)(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
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 mortgage transaction before completing performance of all broker services that he or she has
 agreed to perform for the borrower;
           (f)(e) "Brokerage fee" means the fee or commission or other consideration charged by a
 broker or loan originator for the services described in subdivision (e) (d) of this section;
           (g)(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;
           (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
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 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 §46A-1-102 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.
           (i)(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 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;
           (j)(k) "Licensee" means any person duly licensed by the commissioner under the
 provisions of this article or article 17A of this chapter as a lender, broker or mortgage loan
 originator;
           (k)(l) "Nationwide Mortgage 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 article 17A of this chapter;
           (l)(m) "Person" means an individual, partnership, association, trust, corporation or any
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  other legal entity, or any combination thereof;
            (m)(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;
            (n)(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
  finance charges in a consumer credit sale, and escrow items as insurance and taxes for property
  subject to a residential mortgage loan; and
            (o)(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 Banking Financial Institutions; rules and regulations; personnel; participation in the Nationwide Mortgage 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 §29A-3-1 of this code and to
  employ such personnel as may be necessary. The commissioner may promulgate emergency
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  rules pursuant to the provisions of §29A-3-15 of this code.
            (b) The commissioner may participate in the Nationwide Mortgage 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 Mortgage Multistate
 Licensing System and Registry or other entities designated by the Nationwide Mortgage 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 Mortgage Multistate
 Licensing System and Registry shall transfer electronically all fees payable to the Division of
 Banking Financial Institutions directly to the credit of the commissioner's special revenue account
 with the state Treasurer.
           (c) Mortgage lenders and brokers licensed pursuant to this article shall submit renewals for
 calendar year 2010 on or before October 1, 2009, in accordance with the amendments to this
 article and on a form prescribed by the commissioner. Beginning January 2, 2010, licensees shall
 transition to the Nationwide Mortgage Licensing System and Registry according to the terms
 established by                         that system.
     §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 Mortgage Multistate Licensing System
  and Registry information concerning the applicant's identity, including:
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            (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 Mortgage
  Multistate Licensing System and Registry and the commissioner, including the submission of
  authorization for the Nationwide Mortgage 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 Mortgage
 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.
           (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 Mortgage 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. , and shall contain the full name and address of the
 applicant and, if the applicant is a partnership, limited liability company or association, of every
 member thereof, and, if a corporation, of each officer, director and owner of ten percent or more of
 the capital stock thereof and further information as the commissioner may reasonably require.
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 Background and credit checks shall be conducted in accordance with this article. section for any
 officer, director or owner, directly or indirectly, of ten percent or more of the capital stock of a
 corporation or any member of a limited liability or partnership with, directly or indirectly, a ten 25
 percent or greater ownership interest. 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 with the commissioner a bond 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
 processing and the processing fees assessed by the Nationwide Mortgage Multistate Licensing
 System a