See other bills
under the
same topic
        PRIOR PRINTER'S NOS. 390, 736                  PRINTER'S NO. 942

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 377 Session of 2001


        INTRODUCED BY WENGER, PICCOLA, ARMSTRONG, M. WHITE, THOMPSON,
           GREENLEAF, WAUGH, ROBBINS, TARTAGLIONE, BOSCOLA, MOWERY,
           WOZNIAK, STOUT AND LEMMOND, FEBRUARY 8, 2001

        AS AMENDED ON THIRD CONSIDERATION, APRIL 30, 2001

                                     AN ACT

     1  Amending the act of December 22, 1989 (P.L.687, No.90), entitled
     2     "An act providing for the regulation and licensing of
     3     mortgage bankers and mortgage brokers; imposing additional
     4     powers and duties on the Department of Banking and the State
     5     Real Estate Commission; and providing penalties," further
     6     providing for license requirements and exemptions, for         <--
     7     application for license, for licensee requirements, for
     8     authority of department or commission and for penalties.

     9     The General Assembly of the Commonwealth of Pennsylvania
    10  hereby enacts as follows:
    11     Section 1.  Sections 3, 4(c)(1) and (e) and 8(a)(5) of the
    12  act of December 22, 1989 (P.L.687, No.90), known as the Mortgage
    13  Bankers and Brokers Act, amended December 21, 1998 (P.L.987,
    14  No.131), are amended to read:
    15  Section 3.  License requirements and exemptions.
    16     (a)  License required.--On and after the effective date of
    17  this act, no person shall act as a mortgage banker, loan
    18  correspondent, mortgage broker or limited mortgage broker in
    19  this Commonwealth without a license as provided for in this act,
    20  provided, however, that any person licensed as a mortgage banker


     1  may also act as a loan correspondent or mortgage broker and any
     2  person licensed as a loan correspondent may also act as a
     3  mortgage broker without a separate license. A person licensed as
     4  a mortgage broker may only perform the services of a mortgage
     5  broker as defined in section 2.
     6     (b)  Exceptions.--The following persons shall not be required
     7  to be licensed under this act in order to conduct the first
     8  mortgage loan business but shall be subject to those provisions
     9  of this act as specifically provided in this section:
    10         (1)  A State-chartered bank, bank and trust company,
    11     savings bank, private bank or national bank, a State or
    12     federally chartered savings and loan association, a federally
    13     chartered savings bank or a State or federally chartered
    14     credit union.
    15         (2)  An attorney authorized to practice law in this
    16     Commonwealth, who acts as a mortgage broker in negotiating or
    17     placing a mortgage loan in the normal course of legal
    18     practice.
    19         (3)  A person licensed pursuant to the provisions of the
    20     act of February 19, 1980 (P.L.15, No.9), known as the Real
    21     Estate Licensing and Registration Act, who is principally
    22     engaged in a third-party real estate brokerage business, but
    23     only to the extent that he provides information, verbal or
    24     written, to or negotiates or places a mortgage loan for a
    25     buyer of real estate and is not compensated by the buyer or
    26     any other person for providing such information or
    27     negotiating or placing such mortgage loan. If he is
    28     compensated for providing such information or negotiating or
    29     placing such mortgage loan, he shall be subject to the
    30     provisions of sections 8, 10, 11 and 14(b), excluding section
    20010S0377B0942                  - 2 -

     1     8(a)(1).
     2         (4)  A seller of a dwelling, if he has resided in the
     3     dwelling at least one year and as part of the purchase price
     4     receives a first mortgage executed by the purchaser.
     5         (5)  A person who either originates or negotiates less
     6     than three mortgage loans in a calendar year in this
     7     Commonwealth unless he is otherwise deemed to be engaged in
     8     the first mortgage loan business.
     9         (6)  Builders, when obtaining mortgages for their own
    10     construction or for the sale of their own construction.
    11         (7)  Any agency or instrumentality of the Federal
    12     Government or a corporation otherwise created by an act of
    13     the United States Congress, including, but not limited to,
    14     the Federal National Mortgage Association, the Government
    15     National Mortgage Association, the Veterans' Administration,
    16     the Federal Home Loan Mortgage Corporation and the Federal
    17     Housing Administration.
    18         (8)  The Pennsylvania Housing Finance Agency.
    19         (9)  A licensee under the act of April 8, l937 (P.L.262,
    20     No.66), known as the Consumer Discount Company Act, except
    21     that any such licensee who makes a mortgage loan other than
    22     under the provisions of that act shall be subject to the
    23     provisions of sections 4(b)(2) and (3), 8, 10 and 14(b) of
    24     this act, excluding section 8(a)(1).
    25         (10)  Except for licensees described in paragraph (9),
    26     subsidiaries and affiliates of the following institutions:
    27     State-chartered banks, bank and trust companies, savings
    28     banks, private banks, savings and loan associations and
    29     credit unions or national banks, federally chartered savings
    30     and loan associations, federally chartered savings banks and
    20010S0377B0942                  - 3 -

     1     federally chartered credit unions, except that such
     2     subsidiaries and affiliates of institutions enumerated in
     3     this paragraph shall:
     4             (i)  be subject to the provisions of sections 8,
     5         9(a)(3), 10 and 14(b), excluding section 8(a)(1);
     6             (ii)  deliver as required to the department annually
     7         copies of financial reports made to all supervisory
     8         agencies; and
     9             (iii)  be registered with the department.
    10         (11)  Employees of a mortgage banker, mortgage broker and
    11     loan correspondent licensee or excepted persons acting for
    12     their employers.
    13         (12)  An insurance company, association or exchange
    14     authorized to transact business in this Commonwealth under
    15     the act of May 17, 1921 (P.L.682, No.284), known as The
    16     Insurance Company Law of 1921, and any subsidiaries and
    17     affiliates thereof, except that such subsidiaries and
    18     affiliates shall:
    19             (i)  be subject to the provisions of sections 8,
    20         9(a)(3), 10 and 14(b), excluding section 8(a)(1);
    21             (ii)  deliver as required to the department annually
    22         copies of financial reports made to all supervisory
    23         agencies; and
    24             (iii)  be registered with the department.
    25         (13)  Any person who makes a mortgage loan to an employee
    26     of that person as an employment benefit, given that person
    27     does not hold himself out to the public as a first mortgage
    28     lender.
    29         (14)  Nonprofit corporations making mortgage loans to
    30     promote home ownership or improvements for the disadvantaged,
    20010S0377B0942                  - 4 -

     1     given that the corporation does not hold itself out to the
     2     public as a first mortgage lender.
     3         (15)  A nonprofit corporation making not more than 12
     4     mortgage loans a calendar year with its own funds, that shall
     5     not include funds borrowed through warehouse lines of credit
     6     or other sources for the purpose of making mortgage loans,
     7     which loans are retained in the corporation's own portfolios
     8     and not regularly sold to others and are made to promote and
     9     advance the cultural traditions and lifestyles of bona fide
    10     religious organizations provided that the corporation does
    11     not hold itself out to the public as a first mortgage lender.
    12     (c)  Loans for business or commercial purposes.--This act
    13  shall not apply to mortgage loans made for business or
    14  commercial purposes.
    15  Section 4.  Application for license.
    16     * * *
    17     (c)  Mortgage broker's license.--
    18         (1)  The department shall issue a mortgage broker's
    19     license applied for pursuant to this act if the applicant
    20     establishes that he is eligible to and will obtain and
    21     maintain a bond in the amount of $100,000, in a form
    22     acceptable to the department, prior to the issuance of the
    23     license, from a surety company authorized to do business in
    24     this Commonwealth. The bond shall be a penal bond conditioned
    25     on compliance with this act and subject to forfeiture by the
    26     department and shall run to the Commonwealth of Pennsylvania
    27     [and shall be for the use of the Commonwealth and] for its
    28     use. The bond shall also be for the use of any person [or
    29     persons] against the mortgage broker for failure to carry out
    30     the terms of any provision for which advance fees are paid.
    20010S0377B0942                  - 5 -

     1     If such person [or persons shall be so] is aggrieved, he may
     2     [upon recovering judgment against such licensee issue
     3     execution under such judgment and maintain an action upon the
     4     bond of the licensee in any court having jurisdiction for the
     5     amount claimed plus costs, provided the department assents
     6     thereto.] with the written assent of the department, recover
     7     advance fees and costs from the bond by filing a claim with
     8     the surety company or maintaining an action on the bond. In
     9     the alternative, an aggrieved person may recover advance fees
    10     and costs by filing a formal complaint against the mortgage
    11     broker with the department which shall adjudicate the matter.
    12     Such an adjudication shall be binding upon the surety company
    13     and enforceable by the department in Commonwealth Court and
    14     by an aggrieved person in any court. Any aggrieved person
    15     seeking to recover advance fees and costs from a bond that
    16     has already been forfeited by the department or which the
    17     department is in the process of forfeiting may recover
    18     payment on such bond if, after filing a petition with the
    19     department, the department assents to his requested payment
    20     or portion thereof. The department may pay the aggrieved
    21     person from the bond proceeds it recovered in such case.
    22     Nothing in this section shall be construed as limiting the
    23     ability of any court or district justice to award to any
    24     aggrieved person other damages, court costs and attorney fees
    25     as permitted by law, but those claims that are not advance
    26     fees or related costs may not be recovered from the bond. The
    27     department, in its discretion, may assent to or order pro
    28     rata or other recovery on the bond for any aggrieved person
    29     if claims against the bond may or do exceed its full monetary
    30     amount. No bond shall comply with the requirements of this
    20010S0377B0942                  - 6 -

     1     section unless it contains a provision that it shall not be
     2     canceled for any cause unless notice of intention to cancel
     3     is given to the department at least 30 days before the day
     4     upon which cancellation shall take effect. Cancellation of
     5     the bond shall not invalidate the bond regarding the period
     6     of time it was in effect.
     7     * * *
     8     (e)  Education.--To maintain a mortgage banker's, a loan
     9  correspondent's or a mortgage broker's license, the applicant or
    10  licensee shall demonstrate to the satisfaction of the secretary
    11  that at least one [person] individual from each licensed office
    12  has attended a minimum of six hours of such continuing education
    13  each year. To maintain a limited mortgage broker's license, the
    14  licensee shall demonstrate to the satisfaction of the secretary
    15  that he has attended at least two hours of continuing education
    16  each year. The secretary shall delineate the requirements for
    17  such continuing education by regulation within three years of
    18  the effective date of this act. The secretary may review and
    19  approve continuing education programs and providers to satisfy
    20  the continuing education requirement. The secretary may charge
    21  providers of continuing education programs a fee, to be
    22  determined by the secretary, for department review of continuing
    23  education programs and providers.
    24  Section 8.  Licensee requirements.
    25     (a)  Requirements on licensee.--A licensee shall:
    26         * * *
    27         (5)  Comply with all provisions of the act of January 30,
    28     1974 (P.L.13, No.6), referred to as the Loan Interest and
    29     Protection Law, provided, however, that this shall not be
    30     deemed an override of section 501 of the Depository
    20010S0377B0942                  - 7 -

     1     Institutions Deregulation and Monetary Control Act of 1980
     2     (94 Stat. 161, 12 U.S.C. § [1735f-7 note] 1735f-7a).
     3     * * *
     4     Section 2.  Section 10(c) of the act is amended to read:
     5  Section 10.  Authority of department or commission.
     6     * * *
     7     (c)  Powers.--The department and the commission shall have
     8  the authority to:
     9         (1)  Examine any instrument, document, account, book,
    10     record or file of a licensee or any other person, or make
    11     such other investigation as may be necessary to administer
    12     the provisions of this act.
    13         (2)  Conduct administrative hearings on any matter
    14     pertaining to this act, issue subpoenas to compel the
    15     attendance of witnesses and the production of instruments,
    16     documents, accounts, books and records at any such hearing,
    17     which may be retained by the department or commission until
    18     the completion of all proceedings in connection with which
    19     they were produced, and administer oaths and affirmations to
    20     any person whose testimony is required. In the event a person
    21     fails to comply with a subpoena issued by the department or
    22     commission or to testify on any matter concerning which he
    23     may be lawfully interrogated, on application by the
    24     department or commission, the Commonwealth Court may issue an
    25     order requiring the attendance of such person, the production
    26     of instruments, documents, accounts, books or records or the
    27     giving of testimony.
    28         (3)  Request and/or receive any information or records of
    29     any kind, including a report of criminal history record
    30     information, from any Federal, State, local or foreign
    20010S0377B0942                  - 8 -

     1     government entity, regarding any applicant for a license,
     2     licensee or any person related in any way to the business of
     3     such applicant or licensee, at a cost to be paid by the
     4     applicant or licensee.
     5     * * *
     6     Section 3.  Section 14(b) of the act, amended December 21,
     7  1998 (P.L.987, No.131), is amended to read:
     8  Section 14.  Penalties.
     9     * * *
    10     (b)  Nonlicensees subject to the provisions of this act.--Any
    11  person who is subject to the provisions of this act, even though
    12  not licensed hereunder, or any person who is not licensed by the
    13  department or is not exempt from the licensing requirements, who
    14  violates any of the provisions to which it is subject shall be
    15  subject to a fine levied by the department or commission of up
    16  to $2,000 for each offense. Any such nonlicensed person who
    17  commits three or more offenses may, at the discretion of the
    18  department or commission, be prohibited from engaging in [the
    19  business of a mortgage broker or mortgage banker] the first
    20  mortgage loan business unless licensed under this act.
    21     * * *
    22     Section 4.  This act shall take effect in 60 days.






    A16L07DMS/20010S0377B0942        - 9 -