WSR 97-01-003

PERMANENT RULES

DEPARTMENT OF

FINANCIAL INSTITUTIONS

[Filed December 5, 1996, 2:51 p.m.]

Date of Adoption: December 5, 1996.

Purpose: To establish rules governing computerized loan origination by parties other than mortgage brokers.

Citation of Existing Rules Affected by this Order: Amending WAC 208-660-025.

Statutory Authority for Adoption: RCW 42.320.040, 19.146.020 (1)(h), and 19.146.225.

Adopted under notice filed as WSR 96-15-128 on July 24, 1996.

Changes Other than Editing from Proposed to Adopted Version: In subsection (1) Definitions, limited the term "CLO service provider" to persons or entities covered by chapter 19.146 RCW.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 0, amended 0, repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.

Number of Sections Adopted on the Agency's own Initiative: New 0, amended 1, repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, amended 0, repealed 0.

Number of Sections Adopted using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 0, amended 1, repealed 0.

Effective Date of Rule: Thirty-one days after filing.

December 5, 1996

John L. Bley

Director

NEW SECTION

WAC 208-660-025 Computer loan origination services and systems. (1) Definitions. "Computer loan origination (CLO) services" means the provision of information to consumers by a mortgage broker, lender, real estate agent or other person regarding interest rates and other loan terms available from different lenders.

"CLO system" means computer hardware or software which facilitates the provision of CLO services to consumers.

"CLO service provider" means a party who provides CLO services to consumers. The term does not include any person or entity exempted from chapter 19.146 RCW by RCW 19.146.020 (1)(a) through (g).

"CLO system provider" means a party who provides a CLO system.

(2) CLO service providers may be subject to licensing. Unless otherwise exempt under RCW 19.146.020, any person providing CLO services is subject to licensing as a mortgage broker under chapter 19.146 RCW, if the person or broker:

(a) Holds himself or herself out as able to obtain a residential mortgage loan for a consumer from a lender;

(b) Accepts a loan application from a consumer, assists a consumer in completion of a loan application, or submits a loan application on behalf of a consumer to a mortgage broker or lender;

(c) Accepts deposits from a consumer for payment of third-party services or any fees in connection with a loan, whether the fees are paid before, upon, or after the closing of the loan;

(d) Negotiates the interest rates or terms of a loan with the mortgage broker or lender on behalf of a consumer; or

(e) Provides to the consumer a good faith estimate or other disclosure required of mortgage brokers or other lenders by state or federal law.

(3) Providers of CLO services must make disclosures. If the consumer of the CLO service pays for the CLO service either directly or indirectly, the CLO service provider shall give a disclosure statement to the consumer. The disclosure statement shall state:

(a) The amount of the CLO fee which the CLO service provider charges the consumer for the CLO service;

(b) That the use of the CLO system is not required to obtain a residential mortgage loan; and

(c) That the full range of loans available may not be listed on the CLO system, and different terms and conditions, including lower rates, may be available from others not listed on the system.

(4) Disclosure statement must be provided to consumer and retained by the CLO service provider. Each CLO service provider must give the consumer a copy of the disclosure form when the first CLO service is provided to the consumer. The consumer shall sign and date the disclosure statement as evidence that the consumer received the form. CLO service providers must retain copies of written disclosure statements signed by consumers at an in-state office for two years.

(5) Mortgage brokers may provide CLO systems--Conditions. A licensed mortgage broker may provide CLO systems. Prior to providing any CLO system, a mortgage broker subject to licensing must notify the director in writing of its intent to provide the service. The notification shall include:

(a) Copies of any and all agreements between the licensee and the CLO service provider, including any and all business names and addresses where CLO services will be provided;

(b) Copies of any and all CLO disclosure statements which the CLO service provider shall give to consumers in connection with the provision of the CLO services.

(6) CLO system providers and CLO service providers responsible for violations. The department may hold both CLO service providers and CLO system providers responsible for any and all violations of chapter 19.146 RCW or chapter 208-660 WAC, and subject either or both the licensee or the service provider to any and all applicable fines and penalties.