SENATE BILL REPORT

SB 5537

BYSenators Bender, Conner, Fleming, Garrett and Moore

Licensing mortgage brokers.

Senate Committee on Financial Institutions

Senate Hearing Date(s):February 17, 1987

Senate Staff:Stephanie Yates (786-7416)

AS OF FEBRUARY 16, 1987

BACKGROUND:

Financing of mortgages is typically available through financial institutions, mortgage bankers, and mortgage brokers.  Mortgage bankers differ from mortgage brokers in the following ways:  mortgage bankers generally use their own funds for a mortgage loan, then sell the mortgage on the secondary market, but retain servicing of the mortgage.  In contrast, mortgage brokers arrange for financing by matching a borrower with a lender, but seldom retain servicing of the mortgage.

Presently, Washington has no statutory provisions governing mortgage brokers.

SUMMARY:

No person shall use or advertise the title of mortgage broker, or conduct business as a mortgage broker, unless he or she is registered as a mortgage broker.

A mortgage broker is defined as any person who for compensation, or in the expectation of compensation, either directly or indirectly makes or negotiates, or offers to make or negotiate, a residential mortgage loan.  State and federal financial institutions, attorneys, real estate brokers, and mortgage brokers approved by the secondary market or the federal Department of Housing and Urban Development are exempt from the provisions of the act.

A state board of registration for mortgage brokers is created.  The board shall consist of five members to be appointed by the Governor.  All board members must be mortgage brokers and actively engaged in the business of a mortgage broker while serving on the board.

The charge of the board is to establish minimum education and experience standards for registration; prepare and administer a written examination; and determine, based on the application and examination, whether an applicant is qualified for registration as a mortgage broker.  Current mortgage brokers who meet the education and experience standards, and mortgage brokers who are registered in other states, are not required to take the written examination.

A certificate of registration may be revoked or suspended for fraud, deceit, gross negligence, gross incompetency, or gross misconduct in the practice of a mortgage broker.

The board may conduct hearings concerning alleged violations of the act, and may apply to enjoin any actions which are prohibited by the act.

Any person who violates any provisions of the act is guilty of a misdemeanor.

Revenue:    yes

Fiscal Note:      requested

Effective Date:January 1, 1988