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Residential Mortgage Lending Act - PowerPoint PPT Presentation

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Residential Mortgage Lending Act. LSA-R.S. 6:1081 through 6:1099 Enacted effective July 9, 1999 Revised April 14, 2000 Special Session Revised effective June 22, 2001 Provides for licensure and registration of mortgage originators, brokers, and lenders. Residential Mortgage Lending Act.

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Residential Mortgage Lending Act

  • LSA-R.S. 6:1081 through 6:1099

  • Enacted effective July 9, 1999

  • Revised April 14, 2000 Special Session

  • Revised effective June 22, 2001

  • Provides for licensure and registration of mortgage originators, brokers, and lenders

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Residential Mortgage Lending Act

  • Subdivided into three parts


      • Definitions

      • Prohibitions


      • Licensure Requirements

      • Applications

      • Recordkeeping

      • Suspension and Revocation of Licenses and Registrations


      • Fees and Charges

      • Mortgage Loan Origination Agreements

      • Criminal Penalties

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Residential Mortgage Lending Act

  • Who must be licensed

    • Originators

    • Brokers

    • Lenders

    • Wholesale Lenders

      • which are not otherwise exempt

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  • Originator

    • a natural person employed by a mortgage broker or lender who interviews the consumer in connection with a residential mortgage loan. This persons must sign the application (1003)

    • does not include clerical people

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  • Mortgage Broker

    • any person who, directly or indirectly, for compensation or expectation of compensation, negotiates, places, or finds, or offers to negotiate, place or find a residential mortgage loan for another person

    • includes FHA loan correspondents and lenders who table fund loans

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  • Mortgage Lender

    • any person who, directly or indirectly, originates or makes, or offers to originate or make, a residential mortgage loan for another person

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  • Residential Mortgage Lending Activity

    • any activity, including electronic activity, engaged in for compensation or with the expectation of compensation in connection with a residential loan transaction including origination or funding, negotiation or placement, or offering to negotiate,place or find a residential mortgage loan for a person

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R.S. 6:1084

  • No person, directly or indirectly, shall engage in a residential mortgage lending activity without complying with the RMLA or rules and regulations promulgated pursuant to thereof

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  • Credit Unions

    • Totally exempt from all provisions of the RMLA

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  • Banks, Savings Banks, S&Ls, and subsidiaries of theirs, their parent companies and their employees including originators and exclusive agents

    • Exempt from licensure and registration

    • Still subject to requirement of Part III

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  • Licensed Attorneys

    • When activity is incidental to practice

    • Exempt from licensure and registration

    • Still subject to Part III

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  • Any not for profit 501 c corporation making loans to promote home ownership or improvements for the disadvantaged

    • Exempt from licensure and registration

    • Still subject to Part III

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Other Exemptions

  • Mortgagees which are the former owner

  • Licensed Lenders

    • must meet 50% gross revenue test

  • Insurance company or agent who brokers exclusively to an insurer

  • Any person who invests or contracts for no more than 4 transactions in a calendar year

    • must file application and pay $100 fee

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Exempt Registrants

  • Company Registers/Employees Exempt

    • approved seller, servicer, seller/servicer, or issuer approved by FNMA, GNMA, or FHLMC including their HUD approved subsidiaries

    • out of state insurance companies

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Exempt Registrants

  • Companies Exempt/Originators Licensed

    • HUD Mortgagees excluding loan correspondents

    • private investors who utilize licensed or exempt individuals

      • Loan correspondents and originators must be licensed

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Exempt Registrants

  • May only engage in residential lending activity through natural persons who are licensed, registered, or exempt

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Financial Responsibility

  • Each applicant for licensure must provide evidence of financial responsibility

    • audited financial statement showing net worth of at least $50,000 (no more than 18 mos old)

    • pledged $50,000 deposit in federally insured institution

    • $50,000 securities SCM’s or US Govt pledged to commissioner

    • Surety Bond in amount of $50,000

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Financial Responsibility

  • Employees of Brokers and Lenders including Originators

    • May demonstrate financial responsibility by submitting evidence that employer satisfies requirements

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Application Fees

  • Mortgage Broker, Lender $400

    • Renewal Fee $300

  • Originators $100

    • Renewal Fee $100

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Registration Fees

  • Exempt Registrations $400

    • Renewal $300

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  • Renewals are due by November 1st each year

  • Late after December 1

  • Licenses and Registrations Expire January 1

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Late Fees and Reinstatement Penalties

  • Licensed Brokers and Lenders

    • After December 1 $ 200

    • After December 31 up to $ 1,000

      • must show good cause for reinstatement

      • $100 late fee for exempt brokers & lenders

  • Originators

    • After December 1 $ 50

    • After December 31 up to $1,000

      • must show good cause for reinstatement

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LSA-R.S. 6:1089

  • No residential mortgage lender may conduct lending activities under any name other than stated on its license

  • Commissioner must be notified of changes in location and pay $100 fee

  • Must notify Commissioner of office closure

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LSA-R.S. 6:1089 B.

  • Whenever identity of broker or lender by whom an originator is employed is changed, Commissioner must be notified within 30 days

    • Employer and Employee must give notification

    • Failure to notify within 30 days results in a $100 late notification fee

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  • Fee not to exceed $400

  • Due within 30 days of assessment

  • Late fee of up to $50 per day not paid timely

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R.S. 6:1090

  • No license may be sold or transferred

  • No person shall acquire control of licensee without obtaining prior written approval of OFI after submitting an application and $300 fee

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R.S. 6:1090

  • A mortgage broker can only broker loans to a mortgage lender

    • Brokering to a Broker is prohibited

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R.S. 6:1090

  • Licensees may only engage in residential mortgage lending through natural persons licensed as a mortgage broker, mortgage lender, or originator, or who are registered in accordance with the RMLA or who are exempt from Part II

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  • Prohibited by LSA-R.S. 6:1090 G.

    • Except at provided by Rule

  • OFI in process of drafting rule & currently allowing :

    • net compensation of branch employees only

    • all contracts, leases, & accounts must be in name of licensed or exempt company

    • employer indemnification agreements not permissible

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  • Requirements set forth by Rule and Policy

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Suspension & Revocation of License

  • After an opportunity to be heard in Administrative hearing, Commissioner may revoke or suspend license of any Lender, Broker, or Originator who:

    • Violates any of the provisions of this Chapter or any Rule or Regulation promulgated,or any order, including a cease and desist order

    • Violates any provision of a voluntary consent agreement

    • Has knowingly provided or caused to be provided false or fraudulent information or financial statements or withheld information which would have resulted in denial of license

    • Refuses to permit examination of books and records or fails to furnish required information

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Suspension & Revocation

  • Fails to maintain records required after given written notice

  • Continues in office upon conviction of any felony involving moral turpitude

  • Violates any provision of a regulatory or prohibitory statute and has been found to have violated such by the governmental agency responsible for determining such

  • Misrepresents or conceals material facts or makes false promises to influence an applicant or mortgagor

  • Misrepresents or conceals material facts terms, conditions, etc. of a transaction to which he is a party, pertinent to an applicant or mortgagor

  • Failure to account for or deliver personal property which has come into their hands which is not their property or which they are not entitled to retain

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Suspension & Revocation

  • Fails to disburse without cause any funds in accordance with any agreements with a residential mortgage loan

  • Fails to pay any fee or assessment imposed by the Chapter or Rule

  • Violates written restriction or conditions of license

  • Fails, after notice without lawful excuse, to obey any order or subpoena issued by the Commissioner

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Fines & Penalties

  • Upon being found guilty of violating any provision of the RMLA or Rule brokers and/or originators may be fined:

    • Up to $1,000 per violation &

    • Up to $1,000 per day the person acts as a residential mortgage broker, lender, or originator without complying with the RMLA or any rules promulgated thereunder

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Forfeiture of Compensation

  • R.S. 6:1092 G. - added by Act 617

    • Any person who acts as a mortgage broker or originator without complying with licensing provisions shall be subject to forfeiture of compensation attributable to residential mortgage lending activity conducted after August 15, 2001

    • This shall not impair the validity of note or mortgage

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  • Beginning July 1, 2001, each new applicant for licensure as an originator is required to pass a professional licensing examination

    • Test administered by PSI Exams, Inc.


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Continuing Education

  • Each licensed originator must take 10 hours of continuing education each year prior to renewal

    • must include at least 2 hours of RMLA education

    • if licensed as a result of a test, continuing education not required until December of the following year

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  • APR is limited to the greater of 21% or Federal Reserve Discount Rate + 15%

    • Applies to both open and closed end credit secured by a mortgage

    • Preempted by Alternative Mortgage Transaction Parity Act for variable rate and balloon loans

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Prepayment Penalties

  • Are limited as follows:

    • 5% of unpaid principal during first year

    • 4% of unpaid principal during second year

    • 3% of unpaid principal during third year

    • 2% of unpaid principal during fourth year

    • 1% of unpaid principal during fifth year

    • No prepayment penalty allowed after fifth year

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Up Front Fees By Brokers

  • Appraisal

  • Title Search

  • Credit Report

    • amount collected cannot exceed good faith estimate of actual cost

    • any portion which exceeds actual cost must be refunded to borrower or credited to their account at closing

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Request for Payoff Amount

  • Must be provided with 5 days of written request of consumer

  • Consumer entitled to one statement per year at no charge

    • thereafter, lender may charge a reasonable fee provided that the fee is disclosed to the consumer before furnishing the statement

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Limits on Fees and Charges

  • Late Fees limited to 5% of unpaid amount

  • Collection fees limited to 25% when referred to an attorney

  • NSF the greater of 5% of the amount of check or $25

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Mortgage Loan Origination Agreement

  • Must be provided by broker within 3 days of the initial application

  • Must describe the nature of broker’s relationship with borrower and the manner in which they will be compensated

    • name, address, and phone number of originator

    • name, address, and phone number of mortgage lender (mortgage broker)

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Mortgage Loan Origination Agreement

  • Failure to provide a copy of the agreement subjects broker to a refund of any brokerage fees collected

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Criminal Penalties

  • Broker knowingly collects excessive advance expense deposits

  • Any person who knowingly provides false or misleading information on an application

  • Any licensee or registrant who fails to disburse funds belonging a borrower

  • Any lender, broker, or originator knowingly operating without a license

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Criminal Penalties

  • Upon Conviction for these person may be sentenced to:

    • a fine of not less than $500 nor more than $1,000, imprisonment not exceeding one year, or both