AN ACT Relating to licensing; adding a new chapter to Title 18 RCW; prescribing penalties; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. In order to promote honesty and fair dealing with citizens and to preserve public confidence in the lending and real estate community, any person in either public or private capacity practicing or offering to practice as a mortgage broker, shall submit evidence that he is qualified to practice and shall be registered under the provisions of this chapter.

NEW SECTION. Sec. 2. It shall be unlawful for any person to use, or advertise the title mortgage broker, unless such person has duly registered under the provisions of this chapter.

NEW SECTION. Sec. 3. As used in this chapter, the following terms have the meanings indicated unless the context clearly requires otherwise:

(1) "Director" means the director of licensing of the state of Washington.

(2) "Board" means the state board of registration for mortgage brokers.

(3) "Mortgage broker" means every person who for compensation or in the expectation of compensation either directly or indirectly makes, negotiates, or offers to make or negotiate a residential mortgage loan.

(4) "Residential mortgage loan" means any loan primarily for personal, family, or household use secured by a mortgage or deed of trust on residential real estate upon which is constructed or intended to be constructed a single family dwelling or multiple family dwelling of four or less units.

NEW SECTION. Sec. 4. The following are exempt from all provisions of this chapter:

(1) Any person doing business under the laws of this state or the United States relating to banks, bank holding companies, mutual savings banks, trust companies, savings and loan associations, credit unions, consumer finance companies, industrial loan companies, insurance companies, or real estate investment trusts as defined in 26 U.S.C. Sec. 856 and the affiliates, subsidiaries, and service corporations thereof;

(2) An attorney licensed to practice law in this state who is not principally engaged in the business of negotiating residential mortgage loans when such attorney renders services in the course of his or her practice as an attorney;

(3) Any person doing any act under order of any court;

(4) Any person making or acquiring a residential mortgage loan solely with that person's own funds for that person's own investment without intending to resell the residential mortgage loans;

(5) A real estate broker or salesperson licensed by the state who obtains financing for a real estate transaction involving a bona fide sale of real estate in the performance of that person's duties as a real estate broker and who receives only the customary real estate broker's or salesperson's commission in connection with the transaction;

(6) Any mortgage broker approved and subject to auditing by the federal national mortgage association, the government national mortgage association, or the federal home loan mortgage corporation;

(7) Any mortgage broker approved by the United States secretary of housing and urban development for participation in any mortgage insurance program under the National Housing Act, 12 U.S.C. Sec. 1701, as now or hereafter amended; and

(8) The United States of America, the state of Washington, any other state, and any Washington city, county, or other political subdivision, and any agency, division, or corporate instrumentality of any of the entities in this subsection.

NEW SECTION. Sec. 5. There is created a state board of registration for mortgage brokers. The board shall consist of five mortgage brokers. Members of the board shall be appointed by the governor and must be residents of this state having the qualifications required by this chapter.

The members of the board must, while serving on the board, be actively engaged in their profession or trade and, immediately preceding appointment, have had at least five years experience in responsible charge of work or teaching within their profession or trade. No member of the board may be a past or present member of any other licensing board under this title.

NEW SECTION. Sec. 6. The members of the first board shall serve for the following terms:

One member for one year, one member for two years, one member for three years, one member for four years, and one member for five years from the date of appointment or until successors are duly appointed and qualified. Every member of the board shall receive a certificate of appointment from the governor, and before beginning the term of office shall file with the secretary of state a written oath or affirmation for the faithful discharge of the member's official duties. On the expiration of the term of each member, the governor shall appoint a successor to serve for a term of five years, or until a successor has been appointed and qualified. No member shall serve more than ten consecutive years.

The governor may remove any member of the board for cause. Vacancies in the board for any reason shall be filled by appointment for the unexpired term. In carrying out the provisions of this chapter, the members of the board shall be compensated in accordance with RCW 43.03.240 and shall be reimbursed for travel expenses according to the provisions of RCW 43.03.050 and 43.03.060, such funds to be provided from the mortgage brokers' account in the state general fund.

NEW SECTION. Sec. 7. The board shall adopt rules for its own organization and procedure and such other rules as it may deem necessary to the proper performance of its duties. Three members of the board shall constitute a quorum for the conduct of any business of the board.

The board may conduct hearings concerning alleged violations of the provisions of this chapter. In conducting such hearings the chairman of the board, or any member of the board acting in his place, may administer oaths or affirmations to witnesses appearing before the board, subpoena witnesses and compel their attendance, and require the production of books, records, papers and documents. If any person shall refuse to obey any subpoena so issued, or shall refuse to testify or to produce any books, records, papers or documents so required to be produced, the board may present its petition to the superior court of the county in which such person resides, setting forth the facts, and thereupon the court shall, in any proper case, enter a suitable order compelling compliance with the provisions of this chapter and imposing such other terms and conditions as the court may deem equitable.

NEW SECTION. Sec. 8. The board shall establish minimum education and experience standards to ensure that an applicant is qualified to be registered as a mortgage broker.

NEW SECTION. Sec. 9. Application for registration shall be filed with the director prior to the date set for examination and shall contain statements made under oath showing the applicant's education and a detailed summary of his practical experience, and shall contain not less than five references, of whom three or more shall be mortgage brokers having personal knowledge of the applicant's mortgage brokerage experience.

The application fee shall be determined by the director as provided in RCW 43.24.086 and shall include a nonrefundable examination fee, and a fee for issuance of the certificate.

The application fee for reexamination shall be determined by the director as provided in RCW 43.24.086, and must be filed with the director not less than six days prior to the date set for examination.

NEW SECTION. Sec. 10. Examinations of applicants for certificates of registration shall be held at least annually or at such times and places as the board may determine. The board shall determine from the examination and the material submitted with the applications whether or not the applicants possess sufficient knowledge, ability and moral fitness to safely and properly practice as a mortgage broker and to hold themselves out to the public as persons qualified for that practice.

The scope of the examination and methods of procedure shall be prescribed by the board. Applicants who fail to pass any subjects shall be permitted to retake the examination in the subjects failed. A passing grade in any subject area shall exempt the applicant from examination in that subject for five years. Failure to complete successfully the entire examination within five years will result in requiring a retake of the entire examination. The board may determine the standard for passing grades computed on a scale of one hundred percent. A certificate of registration shall be granted by the director to all qualified applicants who shall be certified by the board as having passed the required examination and as having given satisfactory proof of completion of the required experience.

NEW SECTION. Sec. 11. Current mortgage brokers who meet the experience and education standards for licensing under this chapter will not be required to take the written examination as provided for in section 10 of this act in order to obtain initial licensing.

NEW SECTION. Sec. 12. The director may, upon payment of a filing and investigation fee including the current registration fee in an amount as determined by the director as provided in RCW 43.24.086, grant a certificate of registration without examination to any applicant who is a registered mortgage broker in any other state or country whose requirements for registration are at least substantially equivalent to the requirements of this state for registration by examination, and which extends the same privileges of reciprocity to mortgage brokers registered in this state.

NEW SECTION. Sec. 13. Certificates of registration shall expire on the last day of June three years following their issuance or renewal. The director shall set the fee for renewal which shall be determined as provided in RCW 43.24.086. Renewal may be effected during the month of June by payment to the director of the required fee.

In case any registrant fails to pay the renewal fee before thirty days after the due date, the renewal fee shall be the current fee plus an amount equal to one year's fee at the discretion of the board. Any registrant in good standing, upon fully retiring from mortgage brokerage practice, may withdraw from practice by giving written notice to the director, and may thereafter resume practice at any time upon payment of the then current annual renewal fee. Any registrant, other than a properly withdrawn licensee, who fails to renew their registration for a period of one year may reinstate only on reexamination as is required for new registrants.

NEW SECTION. Sec. 14. The director may refuse to renew, or may suspend or revoke, a certificate of registration to use the title and practice as a mortgage broker in this state upon the following grounds:

(1) The holder of the certificate of registration is impersonating a practitioner or former practitioner.

(2) The holder of the certificate of registration is guilty of fraud, deceit, gross negligence, gross incompetency, or gross misconduct in practice as a mortgage broker.

(3) The holder of the certificate has committed fraud in applying for or obtaining a certificate.

NEW SECTION. Sec. 15. Any person may prefer charges of fraud, deceit, gross negligence, incompetency, or misconduct against any registrant. Such charges shall be in writing and shall be sworn to by the person making them and shall be filed with the director.

All charges unless dismissed by the director as unfounded or trivial, shall be heard by the board within three months after the date on which they have been preferred.

An action of suspension, revocation, refusal to renew, or a fine not exceeding one thousand dollars per violation by the director, shall be based upon the findings of the board after charges and evidence in support thereof have been heard and determined.

NEW SECTION. Sec. 16. Upon the recommendations of the board, the director may restore a license to any person whose license has been suspended or revoked. Application for the reissuance of a license shall be made in such a manner as indicated by the board.

A new certificate of registration to replace any certificate lost or destroyed, or mutilated may be issued by the director, and a charge determined by the director as provided in RCW 43.24.086 shall be made for such issuance.

NEW SECTION. Sec. 17. The director shall issue a certificate of registration upon payment of the registration fee as provided in this chapter to any applicant who has satisfactorily met all requirements for registration. All certificates of registration shall show the full name of the registrant, shall have a serial number and shall be signed by the chairman and the secretary of the board, and by the director.

NEW SECTION. Sec. 18. Any person violating any of the provisions of this chapter shall be guilty of a misdemeanor.

NEW SECTION. Sec. 19. The board is authorized to apply for relief by injunction without bond to restrain a person from the commission of any act which is prohibited by this chapter. The members of the board shall not be personally liable for their action in any such proceeding or in any other proceeding instituted by the board under the provisions of this chapter. The board, in any proper case, shall cause prosecution to be instituted in any county or counties where any violation of this chapter occurs, and shall aid in the prosecution of the violator.

NEW SECTION. Sec. 20. Sections 1 through 19 of this act shall constitute a new chapter in Title 18 RCW.

NEW SECTION. Sec. 21. If any provision of this act, or its application to any person or circumstance is held invalid, the remainder of the act, or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 22. This act shall take effect January 1, 1988. The director of the department of licensing may immediately take such steps as are necessary to ensure that this act is implemented on its effective date.