BILL REQ. #: Z-1092.2
| State of Washington | 58th Legislature | 2004 Regular Session |
Read first time 01/20/2004. Referred to Committee on Financial Institutions & Insurance.
AN ACT Relating to the mortgage broker practices act; amending RCW 19.146.020, 19.146.0201, 19.146.030, 19.146.200, 19.146.210, and 19.146.235; reenacting and amending RCW 19.146.220; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1 RCW 19.146.020 and 1997 c 106 s 2 are each amended to read
as follows:
(1) Except as provided under subsections (2) and (3) of this
section, the following are exempt from all provisions of this chapter:
(a) Any person doing business under the laws of the state of
Washington or the United States, and any federally insured person doing
business under the laws of any other state, relating to commercial
banks, bank holding companies, savings banks, trust companies, savings
and loan associations, credit unions, consumer 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;
(b) 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;
(c) Any person doing any act under order of any court, except for
a person subject to an injunction to comply with any provision of this
chapter or any order of the director issued under this chapter;
(d) Any person making or acquiring a residential mortgage loan
solely with his or her own funds for his or her own investment without
intending to resell the residential mortgage loans;
(e) 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 his or her 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;
(f) Any mortgage broker approved and subject to auditing by the
federal national mortgage association or the federal home loan mortgage
corporation;
(g) 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 (1)(g); and
(h) A real estate broker who provides only information regarding
rates, terms, and lenders in connection with a CLI system, who receives
a fee for providing such information, who conforms to all rules of the
director with respect to the providing of such service, and who
discloses on a form approved by the director that to obtain a loan the
borrower must deal directly with a mortgage broker or lender. However,
a real estate broker shall not be exempt if he or she does any of the
following:
(i) Holds himself or herself out as able to obtain a loan from a
lender;
(ii) Accepts a loan application, or submits a loan application to
a lender;
(iii) Accepts any deposit for third-party services or any loan fees
from a borrower, whether such fees are paid before, upon, or after the
closing of the loan;
(iv) Negotiates rates or terms with a lender on behalf of a
borrower; or
(v) Provides the disclosure required by RCW 19.146.030(1).
(2) Those persons otherwise exempt under subsection (1)(d) or (f)
of this section must comply with RCW 19.146.0201 through 19.146.080 and
shall be subject to the director's authority to issue a cease and
desist order for any violation of RCW 19.146.0201 through 19.146.080
and shall be subject to the director's authority to obtain and review
books and records that are relevant to any allegation of such a
violation.
(3) Any person otherwise exempted from the licensing provisions of
this chapter may voluntarily submit an application to the director for
a mortgage broker's license. The director shall review such
application and may grant or deny licenses to such applicants upon the
same grounds and with the same fees as may be applicable to persons
required to be licensed under this chapter.
(a) Upon receipt of a license under this subsection, such an
applicant is required to continue to maintain a valid license, is
subject to all provisions of this chapter, and has no further right to
claim exemption from the provisions of this chapter except as provided
in (b) of this subsection.
(b) Any licensee under this subsection who would otherwise be
exempted from the requirements of licensing by RCW 19.146.020 may apply
to the director for exemption from licensing. The director shall adopt
rules for reviewing such applications and shall grant exemptions from
licensing to applications which are consistent with those rules and
consistent with the other provisions of this chapter.
Sec. 2 RCW 19.146.0201 and 1997 c 106 s 3 are each amended to
read as follows:
It is a violation of this chapter for a loan originator, mortgage
broker required to be licensed under this chapter, or mortgage broker
otherwise exempted from this chapter under RCW 19.146.020(1) (d) or (f)
((in connection with a residential mortgage loan)) to:
(1) Directly or indirectly employ any scheme, device, or artifice
to defraud or mislead borrowers or lenders or to defraud any person;
(2) Engage in any unfair or deceptive practice toward any person;
(3) Obtain property by fraud or misrepresentation;
(4) Solicit or enter into a contract with a borrower that provides
in substance that the mortgage broker may earn a fee or commission
through the mortgage broker's "best efforts" to obtain a loan even
though no loan is actually obtained for the borrower;
(5) Solicit, advertise, or enter into a contract for specific
interest rates, points, or other financing terms unless the terms are
actually available at the time of soliciting, advertising, or
contracting from a person exempt from licensing under RCW 19.146.020(1)
(f) or (g) or a lender with whom the mortgage broker maintains a
written correspondent or loan brokerage agreement under RCW 19.146.040;
(6) Fail to make disclosures to loan applicants and
noninstitutional investors as required by RCW 19.146.030 and any other
applicable state or federal law;
(7) Make, in any manner, any false or deceptive statement or
representation with regard to the rates, points, or other financing
terms or conditions for a residential mortgage loan or engage in bait
and switch advertising;
(8) Negligently make any false statement or knowingly and willfully
make any omission of material fact in connection with any reports filed
by a mortgage broker or in connection with any investigation conducted
by the department;
(9) Make any payment, directly or indirectly, to any appraiser of
a property, for the purposes of influencing the independent judgment of
the appraiser with respect to the value of the property;
(10) Advertise any rate of interest without conspicuously
disclosing the annual percentage rate implied by such rate of interest
or otherwise fail to comply with any requirement of the truth-in-lending act, 15 U.S.C. Sec. 1601 and Regulation Z, 12 C.F.R. Sec. 226,
the real estate settlement procedures act, 12 U.S.C. Sec. 2601 and
Regulation X, 24 C.F.R. Sec. 3500, or the equal credit opportunity act,
15 U.S.C. Sec. 1691 and Regulation B, Sec. 202.9, 202.11, and 202.12,
as now or hereafter amended, in any advertising of residential mortgage
loans or any other mortgage brokerage activity;
(11) Fail to pay third-party providers no later than thirty days
after the recording of the loan closing documents or ninety days after
completion of the third-party service, whichever comes first, unless
otherwise agreed or unless the third-party service provider has been
notified in writing that a bona fide dispute exists regarding the
performance or quality of the third-party service;
(12) Collect, charge, attempt to collect or charge or use or
propose any agreement purporting to collect or charge any fee
prohibited by RCW 19.146.030 or 19.146.070;
(13)(a) Except when complying with (b) and (c) of this subsection,
to act as a mortgage broker in any transaction (i) in which the
mortgage broker acts or has acted as a real estate broker or
salesperson or (ii) in which another person doing business under the
same licensed real estate broker acts or has acted as a real estate
broker or salesperson;
(b) Prior to providing mortgage broker services to the borrower,
the mortgage broker, in addition to other disclosures required by this
chapter and other laws, shall provide to the borrower the following
written disclosure:
THIS IS TO GIVE YOU NOTICE THAT I OR ONE OF MY ASSOCIATES HAVE/HAS ACTED AS A REAL ESTATE BROKER OR SALESPERSON REPRESENTING THE BUYER/SELLER IN THE SALE OF THIS PROPERTY TO YOU. I AM ALSO A LICENSED MORTGAGE BROKER, AND WOULD LIKE TO PROVIDE MORTGAGE BROKERAGE SERVICES TO YOU IN CONNECTION WITH YOUR LOAN TO PURCHASE THE PROPERTY.
YOU ARE NOT REQUIRED TO USE ME AS A MORTGAGE BROKER IN CONNECTION WITH THIS TRANSACTION. YOU ARE FREE TO COMPARISON SHOP WITH OTHER MORTGAGE BROKERS AND LENDERS, AND TO SELECT ANY MORTGAGE BROKER OR LENDER OF YOUR CHOOSING; and
Sec. 3 RCW 19.146.030 and 1997 c 106 s 4 are each amended to read
as follows:
(1) Within three business days following receipt of a loan
application or any moneys from a borrower, a mortgage broker shall
provide to each borrower a full written disclosure containing an
itemization and explanation of all fees and costs that the borrower is
required to pay in connection with obtaining a residential mortgage
loan, and specifying the fee or fees which inure to the benefit of the
mortgage broker and other such disclosures as may be required by rule.
A good faith estimate of a fee or cost shall be provided if the exact
amount of the fee or cost is not determinable. This subsection shall
not be construed to require disclosure of the distribution or breakdown
of loan fees, discount, or points between the mortgage broker and any
lender or investor.
(2) The written disclosure shall contain the following information:
(a) The annual percentage rate, finance charge, amount financed,
total amount of all payments, number of payments, amount of each
payment, amount of points or prepaid interest and the conditions and
terms under which any loan terms may change between the time of
disclosure and closing of the loan; and if a variable rate, the
circumstances under which the rate may increase, any limitation on the
increase, the effect of an increase, and an example of the payment
terms resulting from an increase. Disclosure in compliance with the
requirements of the truth-in-lending act, 15 U.S.C. Sec. 1601 and
Regulation Z, 12 C.F.R. Sec. 226, as now or hereafter amended, shall be
deemed to comply with the disclosure requirements of this subsection;
(b) The itemized costs of any credit report, appraisal, title
report, title insurance policy, mortgage insurance, escrow fee,
property tax, insurance, structural or pest inspection, and any other
third-party provider's costs associated with the residential mortgage
loan. Disclosure through good faith estimates of settlement services
and special information booklets in compliance with the requirements of
the real estate settlement procedures act, 12 U.S.C. Sec. 2601, and
Regulation X, 24 C.F.R. Sec. 3500, as now or hereafter amended, shall
be deemed to comply with the disclosure requirements of this
subsection;
(c) If applicable, the cost, terms, duration, and conditions of a
lock-in agreement and whether a lock-in agreement has been entered, and
whether the lock-in agreement is guaranteed by the mortgage broker or
lender, and if a lock-in agreement has not been entered, disclosure in
a form acceptable to the director that the disclosed interest rate and
terms are subject to change;
(d) A statement that if the borrower is unable to obtain a loan for
any reason, the mortgage broker must, within five days of a written
request by the borrower, give copies of any appraisal, title report, or
credit report paid for by the borrower to the borrower, and transmit
the appraisal, title report, or credit report to any other mortgage
broker or lender to whom the borrower directs the documents to be sent;
(e) Whether and under what conditions any lock-in fees are
refundable to the borrower; and
(f) A statement providing that moneys paid by the borrower to the
mortgage broker for third-party provider services are held in a trust
account and any moneys remaining after payment to third-party providers
will be refunded.
(3) If subsequent to the written disclosure being provided under
this section, a mortgage broker enters into a lock-in agreement with a
borrower or represents to the borrower that the borrower has entered
into a lock-in agreement, then no less than three business days
thereafter including Saturdays, the mortgage broker shall deliver or
send by first-class mail to the borrower a written confirmation of the
terms of the lock-in agreement, which shall include a copy of the
disclosure made under subsection (2)(c) of this section.
(4) A mortgage broker shall not charge any fee that inures to the
benefit of the mortgage broker if it exceeds the fee disclosed on the
written disclosure pursuant to this section, unless (a) the need to
charge the fee was not reasonably foreseeable at the time the written
disclosure was provided and (b) the mortgage broker has provided to the
borrower, no less than three business days prior to the signing of the
loan closing documents, a clear written explanation of the fee and the
reason for charging a fee exceeding that which was previously
disclosed. However, if the borrower's closing costs, excluding prepaid
escrowed costs of ownership as defined by rule, does not exceed the
total closing costs in the most recent good faith estimate, excluding
prepaid escrowed costs of ownership as defined by rule, no other
disclosures shall be required by this subsection.
Sec. 4 RCW 19.146.200 and 1997 c 106 s 8 are each amended to read
as follows:
(1) A person may not engage in the business of a mortgage broker,
except as an employee of a person licensed or exempt from licensing,
without first obtaining and maintaining a license under this chapter.
However, a person who independently contracts with a licensed mortgage
broker need not be licensed if the licensed mortgage broker and the
independent contractor have on file with the director a binding written
agreement under which the licensed mortgage broker assumes
responsibility for the independent contractor's violations of any
provision of this chapter or rules adopted under this chapter; and if
the licensed mortgage broker's bond or other security required under
this chapter runs to the benefit of the state and any person who
suffers loss by reason of the independent contractor's violation of any
provision of this chapter or rules adopted under this chapter.
(2) A person may not bring a suit or action for the collection of
compensation as a mortgage broker unless the plaintiff alleges and
proves that he or she was a duly licensed mortgage broker, or exempt
from the license requirement of this chapter, at the time of offering
to perform or performing any such an act or service regulated by this
chapter. This subsection does not apply to suits or actions for the
collection or compensation for services performed prior to October 31,
1993.
(3) The license must be prominently displayed in the mortgage
broker's place of business.
(4) Every licensed mortgage broker shall at all times have a
designated broker responsible for all activities of the licensee in
conducting the business of a mortgage broker under this chapter.
Sec. 5 RCW 19.146.210 and 1997 c 106 s 10 are each amended to
read as follows:
(1) The director shall issue and deliver a mortgage broker license
to an applicant if, after investigation, the director makes the
following findings:
(a) The applicant has paid the required license fees;
(b) The applicant has complied with RCW 19.146.205;
(c) Neither the applicant, any of its principals, or the designated
broker have had a license issued under this chapter or any similar
state statute suspended or revoked within five years of the filing of
the present application;
(d) Neither the applicant, any of its principals, or the designated
broker have been convicted of a gross misdemeanor involving dishonesty
or financial misconduct or a felony within seven years of the filing of
the present application;
(e) The designated broker, (i) has at least two years of experience
in the residential mortgage loan industry or has completed the
educational requirements established by rule of the director and (ii)
has passed a written examination whose content shall be established by
rule of the director; and
(f) The applicant ((has)), its principals, and the designated
mortgage broker have demonstrated financial responsibility, character,
and general fitness such as to command the confidence of the community
and to warrant a belief that the business will be operated honestly,
fairly, and efficiently within the purposes of this chapter.
(2) If the director does not find the conditions of subsection (1)
of this section have been met, the director shall not issue the
license. The director shall notify the applicant of the denial and
return to the applicant the bond or approved alternative and any
remaining portion of the license fee that exceeds the department's
actual cost to investigate the license.
(3) The director shall issue a license under this chapter to any
licensee issued a license under chapter 468, Laws of 1993, that has a
valid license and is otherwise in compliance with the provisions of
this chapter.
(4) A license issued pursuant to this chapter ((is valid)) expires
on the date one year from the date of issuance ((with no fixed date of
expiration)) which, for license renewal purposes, is also the renewal
date. The director shall establish rules regarding the license renewal
process created under this chapter.
(5) A licensee may surrender a license by delivering to the
director written notice of surrender, but the surrender does not affect
the licensee's civil or criminal liability or any administrative
actions arising from acts or omissions occurring before such surrender.
(6) To prevent undue delay in the issuance of a license and to
facilitate the business of a mortgage broker, an interim license with
a fixed date of expiration may be issued when the director determines
that the mortgage broker has substantially fulfilled the requirements
for licensing as defined by rule.
Sec. 6 RCW 19.146.220 and 1997 c 106 s 12 and 1997 c 58 s 879 are
each reenacted and amended to read as follows:
(1) The director ((shall)) is authorized to enforce all laws and
rules relating to the licensing of mortgage brokers, grant or deny
licenses to mortgage brokers, and hold hearings.
(2) The director may impose ((the following sanctions:)) fines, or order
restitution against licensees, or deny, suspend, decline to renew, or
revoke licenses for:
(a) Deny applications for licenses for: (i)
(a) Violations of orders, including cease and desist orders
((issued under this chapter; or (ii) any violation of RCW 19.146.050 or
19.146.0201 (1) through (9);));
(b) Suspend or revoke licenses for:
(((i))) (b) False statements or omission of material information on
the application that, if known, would have allowed the director to deny
the application for the original license;
(((ii))) (c) Failure to pay a fee required by the director or
maintain the required bond;
(((iii))) (d) Failure to comply with any directive ((or)), order,
or subpoena of the director; or
(((iv))) (e) Any violation of ((RCW 19.146.050, 19.146.060(3),
19.146.0201 (1) through (9) or (12), 19.146.205(4), or 19.146.265;)) this chapter.
(c)
(3) The director may impose fines on ((the licensee,)) an employee
or loan originator of the licensee, or other person subject to this
chapter for:
(((i))) (a) Any violations of RCW 19.146.0201 (1) through (9) or
(12), 19.146.030 through 19.146.080, 19.146.200, 19.146.205(4), or
19.146.265; or
(((ii))) (b) Failure to comply with any directive or order of the
director((;)).
(((d))) (4) The director may issue orders directing a licensee, its
employee or loan originator, or other person subject to this chapter
to((:)) cease and desist from conducting business ((
(i)in a manner that
is injurious to the public or violates any provision of this chapter;
or)) or other harmful
activities.
(ii) Pay restitution to an injured borrower; or(e))) (5) The director may issue orders removing from office or
prohibiting from participation in the conduct of the affairs of a
licensed mortgage broker, or both, any officer, principal, employee, or
loan originator of any licensed mortgage broker or any person subject
to licensing under this chapter for:
(((i))) (a) Any violation of 19.146.0201 (1) through (9) or (12),
19.146.030 through 19.146.080, 19.146.200, 19.146.205(4), or
19.146.265; or
(((ii))) (b) False statements or omission of material information
on the application that, if known, would have allowed the director to
deny the application for the original license; or
(((iii))) (c) Conviction of a gross misdemeanor involving
dishonesty or financial misconduct or a felony after obtaining a
license; or
(((iv))) (d) Failure to comply with any directive or order of the
director.
(((3))) (6) Each day's continuance of a violation or failure to
comply with any directive or order of the director is a separate and
distinct violation or failure.
(((4))) (7) The director shall establish by rule standards for
licensure of applicants licensed in other jurisdictions.
(((5))) (8) The director shall immediately suspend the license or
certificate of a person who has been certified pursuant to RCW
74.20A.320 by the department of social and health services as a person
who is not in compliance with a support order ((or a residential or
visitation order)). If the person has continued to meet all other
requirements for reinstatement during the suspension, reissuance of the
license or certificate shall be automatic upon the director's receipt
of a release issued by the department of social and health services
stating that the licensee is in compliance with the order.
Sec. 7 RCW 19.146.235 and 1997 c 106 s 14 are each amended to
read as follows:
(1) For the purposes of investigating complaints ((arising under
this chapter)) or apparent violations of this chapter, the director may
at any time, either personally or by a designee, examine and
investigate the business, including but not limited to the books,
accounts, records, and files used therein, of every licensee and of
every person engaged in the business of mortgage brokering, whether
such a person shall act or claim to act under or without the authority
of this chapter. ((For that purpose the director and designated
representatives shall have access during regular business hours to the
offices and places of business, books, accounts, papers, records,
files, safes, and vaults of all such persons.)) For the purpose of this
section, an apparent violation is obvious, evident, open to view,
visible to the eye, within site or view, plain, or known. For the
purposes of this section, the director may visit, either personally or
by designee, the licensee's place or places of business to conduct
examinations and investigations. In order to conduct these
examinations and investigations, the director and designated
representatives have access during regular business hours to the
offices and places of business, books, accounts, papers, records,
files, safes, and vaults of all licensees. The director may interview
the licensee or other designated employee or independent contractor,
and undertake the activities necessary to ensure that the licensee is
in compliance with this chapter. The director or designated person may
direct ((or)), order, or subpoena the attendance of and examine under
oath all persons whose testimony may be required about the loans or the
business or subject matter of any such examination or investigation,
and may direct ((or)), order, or subpoena such person to produce books,
accounts, records, files, and any other documents the director or
designated person deems relevant to the inquiry. ((If a person who
receives such a directive or order does not attend and testify, or does
not produce the requested books, records, files, or other documents
within the time period established in the directive or order, then the
director or designated person may issue a subpoena requiring attendance
or compelling production of books, records, files, or other
documents.))
(2) No person subject to examination or investigation under this
chapter shall knowingly withhold, abstract, remove, mutilate, destroy,
or secrete any books, records, computer records, or other information.
A person who commits an act under this subsection is guilty of a class
B felony punishable under RCW 9A.20.021(1)(b) or punishable by a fine
of not more than twenty thousand dollars, or both.
((Once during the first two years of licensing, the director may
visit, either personally or by designee, the licensee's place or places
of business to conduct a compliance examination. The director may
examine, either personally or by designee, a sample of the licensee's
loan files, interview the licensee or other designated employee or
independent contractor, and undertake such other activities as
necessary to ensure that the licensee is in compliance with the
provisions of this chapter. For those licensees issued licenses prior
to March 21, 1994, the cost of such an examination shall be considered
to have been prepaid in their license fee. After this one visit within
the two-year period subsequent to issuance of a license, the director
or a designee may visit the licensee's place or places of business only
to ensure that corrective action has been taken or to investigate a
complaint.))