PRINTER'S NO. 3197
No. 2179 Session of 2008
INTRODUCED BY DALEY, HESS, THOMAS, SIPTROTH, SCAVELLO, McGEEHAN, GEORGE, BELFANTI, BRENNAN, CARROLL, JAMES, JOSEPHS, MAHONEY, MYERS, SANTONI, WALKO, BENNINGTON, HARHAI, KOTIK, WAGNER, J. WHITE AND YEWCIC, FEBRUARY 6, 2008
REFERRED TO COMMITTEE ON COMMERCE, FEBRUARY 6, 2008
AN ACT 1 Amending Titles 7 (Banks and Banking) and 18 (Crimes and 2 Offenses) of the Pennsylvania Consolidated Statutes, 3 regulating the mortgage loan industry in terms of practice, 4 licensure and penalties; and providing for unlicensed 5 mortgage loan activity. 6 The General Assembly of the Commonwealth of Pennsylvania 7 hereby enacts as follows: 8 Section 1. Title 7 of the Pennsylvania Consolidated Statutes 9 is amended by adding parts to read: 10 PART I 11 PRELIMINARY PROVISIONS 12 (Reserved) 13 PART II 14 LICENSING 15 Ch. 16 61. Mortgage Loan Industry Licensing and Consumer Protection 17 CHAPTER 61 18 MORTGAGE LOAN INDUSTRY LICENSING AND CONSUMER PROTECTION
1 Subch. 2 A. Preliminary Provisions 3 B. License Requirements and Exceptions 4 C. Mortgage Loan Business Restrictions and Requirements 5 D. Administrative and Licensure Provisions 6 E. Miscellaneous Provisions 7 SUBCHAPTER A 8 PRELIMINARY PROVISIONS 9 Sec. 10 6101. Scope of chapter. 11 6102. Definitions. 12 § 6101. Scope of chapter. 13 This chapter relates to mortgage loan industry licensing and 14 consumer protection. 15 § 6102. Definitions. 16 The following words and phrases when used in this chapter 17 shall have the meanings given to them in this section unless the 18 context clearly indicates otherwise: 19 "Advance fee." Any funds requested by or to be paid to a 20 person in advance of or during the processing of a mortgage loan 21 application, excluding those fees paid by a consumer directly to 22 a credit agency reporting bureau, title company or real estate 23 appraiser. 24 "Applicant." A person who applies for a license under this 25 chapter. 26 "Banking institution." Any of the following: 27 (1) A State-chartered bank, bank and trust company, 28 savings bank or private bank. 29 (2) A national bank. 30 (3) A federally chartered or State-chartered savings 20080H2179B3197 - 2 -
1 association. 2 (4) An operating subsidiary of any of the entities 3 listed under this definition. 4 "Billing cycle." In respect to open-end mortgage loans, the 5 time interval between periodic billing dates. A billing cycle 6 shall be considered to be a monthly cycle if the closing date of 7 the cycle is the same date each month or does not vary by more 8 than four days from that date. 9 "Branch." An office or other place of business, other than 10 the principal place of business, located in this Commonwealth or 11 any other state, where a person engages in the mortgage loan 12 business subject to this chapter. 13 "Consumer discount company." A licensee under the act of 14 April 8, 1937 (P.L.262, No.66), known as the Consumer Discount 15 Company Act. 16 "Department." The Department of Banking of the Commonwealth. 17 "Finder's fee" or "referral fee." Any payment of money or 18 other consideration for the referral of a mortgage loan to a 19 licensee, except for consideration paid for goods or facilities 20 actually furnished or services actually performed. 21 "First mortgage loan." A loan which is secured in whole or 22 in part by a first lien upon any interest in real property 23 created by a security agreement, including a mortgage, 24 indenture, deed of trust or any other similar instrument or 25 document, which real property is used as a one-family to four- 26 family dwelling, a portion of which may be used for 27 nonresidential purposes. 28 "First mortgage loan business." The mortgage loan business 29 as applied to first mortgage loans. 30 "Licensee." A person who is licensed under this chapter. 20080H2179B3197 - 3 -
1 "Lock-in agreement." An agreement between a mortgage lender 2 and a consumer whereby the mortgage lender guarantees, until a 3 specified date, the availability of a specified rate of interest 4 or specified formula by which the rate of interest and a 5 specific number of discount points will be determined, if the 6 mortgage loan is approved and closed by the specified date. If a 7 specified date is not determinable, the mortgage lender may 8 fulfill the requirement of this definition by setting forth with 9 specificity the method by which the duration of the lock-in 10 period will be determined. 11 "Mortgage broker." A person who engages in the mortgage loan 12 business by directly or indirectly negotiating or placing 13 mortgage loans for others in the primary market for 14 consideration. 15 "Mortgage lender." A person who engages in the mortgage loan 16 business by doing any of the following: 17 (1) Directly or indirectly originating and closing 18 mortgage loans with its own funds in the primary market for 19 consideration. 20 (2) Servicing mortgage loans. 21 "Mortgage loan." A first or secondary mortgage loan, or 22 both, as the context may require. 23 "Mortgage loan business." The business of advertising, 24 causing to be advertised, soliciting, negotiating or arranging 25 in the ordinary course of business or offering to make or making 26 or servicing mortgage loans. 27 "Mortgage loan correspondent." A person who engages in the 28 mortgage loan business by directly or indirectly originating and 29 closing mortgage loans in his or her own name utilizing funds 30 provided by a wholesale table funder or other funding sources 20080H2179B3197 - 4 -
1 under the circumstances described under section 6123(6) 2 (relating to mortgage loan business prohibitions) and 3 simultaneously assigning the mortgage loans to the wholesale 4 table funder. 5 "Mortgage originator." An individual not licensed as a 6 mortgage lender, mortgage broker or loan correspondent under 7 this chapter who solicits, accepts or offers to accept mortgage 8 loan applications, or negotiates mortgage loan terms, in other 9 than a clerical or ministerial capacity and who is personally 10 and regularly in direct contact, in writing, including 11 electronic messaging, or by voice communication, with consumers 12 with regard to the solicitations, acceptances, offers or 13 negotiations. The term does not include directors, partners or 14 ultimate equitable owners of 10% or more of a licensee. 15 "Open-end loan." A mortgage loan made by a mortgage lender 16 under this chapter pursuant to an agreement between the mortgage 17 lender and the consumer whereby all of the following apply: 18 (1) The mortgage lender may permit the consumer to 19 obtain advances of money from the licensee from time to time 20 or the mortgage lender may advance money on behalf of the 21 consumer from time to time as directed by the consumer. 22 (2) The amount of each advance, interest and permitted 23 charges and costs are debited to the consumer's account and 24 payments and other credits are credited to the same account. 25 (3) Interest is computed on the unpaid principal balance 26 or balances of the account outstanding from time to time. 27 (4) The consumer has the privilege of paying the account 28 in full at any time or, if the account is not in default, in 29 monthly installments of fixed or determinable amounts as 30 provided in the open-end loan agreement. 20080H2179B3197 - 5 -
1 "Person." An individual, association, joint venture or 2 joint-stock company, partnership, limited partnership, limited 3 partnership association, limited liability company, business 4 corporation, nonprofit corporation or any other group of 5 individuals, however organized. 6 "Primary market." The market wherein mortgage loans are 7 originated between a lender and a consumer. 8 "Principal place of business." The primary office of a 9 person located in this Commonwealth which is staffed on a full- 10 time basis and at which the person's books, records, accounts 11 and documents are maintained. 12 "Secondary mortgage loan." A loan which is secured in whole 13 or in part by a lien upon any interest in real property created 14 by a security agreement, including a mortgage, indenture, deed 15 of trust or any other similar instrument or document, which real 16 property is subject to a prior lien and which is used as a one- 17 family to four-family dwelling, a portion of which may be used 18 for nonresidential purposes. 19 "Secondary mortgage loan business." The mortgage loan 20 business as applied to secondary mortgage loans. 21 "Service a mortgage loan." The collection or remittance of 22 payments for another or the right to collect or remit payments 23 for another of principal, interest, taxes, insurance and any 24 other payments pursuant to a mortgage loan. 25 "Tangible net worth." Net worth less the following assets: 26 (1) That portion of any assets pledged to secure 27 obligations of any person other than that of the applicant. 28 (2) Any asset, except construction loan receivables 29 secured by first mortgages from related companies, due from 30 officers or stockholders of the applicant or related 20080H2179B3197 - 6 -
1 companies in which the applicant's officers or stockholders 2 have an interest. 3 (3) That portion of the value of any marketable 4 security, listed or unlisted, not shown at lower of cost or 5 market value, except for any shares of Federal National 6 Mortgage Association stock required to be held under a 7 servicing agreement, which are carried at cost. 8 (4) Any amount in excess of the lower of the cost or 9 market value of mortgages in foreclosures, construction loans 10 or foreclosed property acquired by the applicant through 11 foreclosure. 12 (5) Any investment shown on the balance sheet in the 13 applicant's joint ventures, subsidiaries, affiliates or 14 related companies which is greater than the value of the 15 assets at equity. 16 (6) Goodwill. 17 (7) The value placed on insurance renewals or property 18 management contract renewals or other similar intangibles of 19 the applicant. 20 (8) Organization costs of the applicant. 21 (9) The value of any servicing contracts held by the 22 applicant not determined in accordance with the American 23 Institute of Certified Public Accountants Statement of 24 Position 76-2, dated August 25, 1976, or subsequent revisions 25 thereto. 26 (10) Any real estate held for investment where 27 development will not start within two years from the date of 28 its initial acquisition. 29 (11) Any leasehold improvements not being amortized over 30 the lesser of the expected life of the asset or the remaining 20080H2179B3197 - 7 -
1 term of the lease. 2 (12) Any fees paid or collected which are not 3 recoverable through the closing or selling of loans. 4 "Wholesale table funder." A licensed mortgage lender or 5 person exempt under section 6112(1) or (7) (relating to 6 exceptions to license requirements) who, in the regular course 7 of business, provides the funding for the closing of mortgage 8 loans through mortgage loan correspondents and who by assignment 9 obtains title to the mortgage loans. 10 SUBCHAPTER B 11 LICENSE REQUIREMENTS AND EXCEPTIONS 12 Sec. 13 6111. License requirements. 14 6112. Exceptions to license requirements. 15 § 6111. License requirements. 16 (a) General rule.--Except as provided under subsections (b) 17 and (c) and section 6112 (relating to exceptions to license 18 requirements), on and after the effective date of this section, 19 no person shall engage in the mortgage loan business in this 20 Commonwealth without being licensed as a mortgage broker, 21 mortgage lender, mortgage loan correspondent or mortgage 22 originator as provided under this chapter. A mortgage originator 23 may not engage in the mortgage loan business unless the mortgage 24 originator is employed and supervised by a licensed mortgage 25 broker, mortgage lender or mortgage loan correspondent. 26 (b) Licensed activity exceptions.-- 27 (1) A mortgage lender may act as a mortgage broker or 28 mortgage loan correspondent without a separate mortgage 29 broker or mortgage loan correspondent license and, if 30 licensed as an individual, may perform the services of a 20080H2179B3197 - 8 -
1 mortgage originator without a separate mortgage originator 2 license. 3 (2) A mortgage loan correspondent may act as a mortgage 4 broker without a separate mortgage broker license and, if 5 licensed as an individual, may perform the services of a 6 mortgage originator without a separate mortgage originator 7 license. 8 (3) A person licensed as a mortgage broker may only 9 perform the services of a mortgage broker. If a mortgage 10 broker is licensed as an individual, a mortgage broker may 11 perform the services of a mortgage originator without a 12 separate mortgage originator license. 13 (c) Loans for business or commercial purposes.--This chapter 14 shall not apply to mortgage loans made for business or 15 commercial purposes. 16 § 6112. Exceptions to license requirements. 17 The following persons shall not be required to be licensed 18 under this chapter in order to conduct the mortgage loan 19 business: 20 (1) A banking institution or a federally chartered or 21 State-chartered credit union, if the primary regulator of the 22 banking institution or federally chartered or State-chartered 23 credit union supervises the banking institution or federally 24 chartered or State-chartered credit union. 25 (2) An attorney authorized to practice law in this 26 Commonwealth not otherwise engaged in or holding himself or 27 herself out to the public as being engaged in the mortgage 28 loan business who acts as a mortgage broker in negotiating or 29 placing a mortgage loan in the normal course of legal 30 practice. 20080H2179B3197 - 9 -
1 (3) A person who either originates, negotiates or 2 services less than three mortgage loans in a calendar year in 3 this Commonwealth, unless the person is otherwise deemed to 4 be engaged in the mortgage loan business by the department. 5 (4) Any agency or instrumentality of the Federal 6 Government or a corporation otherwise created by an act of 7 the United States Congress, including the Federal National 8 Mortgage Association, the Government National Mortgage 9 Association, the Veterans' Administration, the Federal Home 10 Loan Mortgage Corporation and the Federal Housing 11 Administration. 12 (5) Any agency or instrumentality of a state or local 13 government, the District of Columbia or any territory of the 14 United States, including the Pennsylvania Housing Finance 15 Agency and other government housing finance agencies. 16 (6) Consumer discount companies, except that a consumer 17 discount company that acts as a mortgage broker, mortgage 18 lender or mortgage loan correspondent other than under the 19 provisions of the act of April 8, 1937 (P.L.262, No.66), 20 known as the Consumer Discount Company Act shall be subject 21 to the provisions of Subchapter C (relating to mortgage loan 22 business restrictions and requirements) and sections 23 6131(c)(2) and (3) (relating to application for license), 24 6135 (relating to licensee requirements), 6138 (relating to 25 authority of department) and 6140(b) (relating to penalties). 26 Employees of licensees under the Consumer Discount Company 27 Act that act as mortgage originators shall be subject to the 28 licensing requirements of this chapter. Consumer discount 29 companies that employ mortgage originators shall be subject 30 to the same requirements as mortgage lenders in regard to the 20080H2179B3197 - 10 -
1 employment and supervision of mortgage originators. 2 (7) Except for consumer discount companies, affiliates 3 of banking institutions and subsidiaries and affiliates of 4 federally chartered or State-chartered credit unions, except 5 that the subsidiaries and affiliates shall: 6 (i) be subject to the provisions of Subchapter C and 7 sections 6135(a)(2), (3), (4) and (5), (b) and (c), 6138 8 and 6140(b); 9 (ii) deliver as required to the department annually 10 copies of financial reports made to all supervisory 11 agencies; and 12 (iii) be registered with the department. 13 (8) Employees of a mortgage broker, mortgage lender or 14 mortgage loan correspondent, to the extent that the employees 15 are not otherwise required to be licensed as mortgage 16 originators. 17 (9) Employees of excepted persons enumerated under this 18 section, unless otherwise provided under this subsection. 19 (10) Any individual not otherwise engaged in or holding 20 himself out to the public as being engaged in the mortgage 21 loan business who becomes the subsequent holder of more than 22 two mortgage loans in a calendar year solely for investment 23 purposes and who does not service mortgage loans. 24 (11) Nonprofit corporations not otherwise engaged in or 25 holding themselves out to the public as being engaged in the 26 mortgage loan business making mortgage loans to promote home 27 ownership or improvements for the disadvantaged. 28 (12) A nonprofit corporation not otherwise engaged in or 29 holding itself out to the public as being engaged in the 30 mortgage loan business which meets all of the following: 20080H2179B3197 - 11 -
1 (i) Does not make more than 12 mortgage loans in a 2 calendar year with its own funds, not including funds 3 borrowed through warehouse lines of credit or other 4 sources for the purpose of making mortgage loans. 5 (ii) Makes mortgage loans which are retained in the 6 corporation's own portfolios and not regularly sold to 7 others and are made to promote and advance the cultural 8 traditions and lifestyles of bona fide religious 9 organizations. 10 SUBCHAPTER C 11 MORTGAGE LOAN BUSINESS RESTRICTIONS AND REQUIREMENTS 12 Sec. 13 6121. General requirements. 14 6122. Powers conferred on certain licensees engaged in the 15 mortgage loan business. 16 6123. Mortgage loan business prohibitions. 17 6124. Prohibited clauses in mortgage loan documents. 18 6125. Mortgage lending authority. 19 6126. Requirements as to open-end loans. 20 § 6121. General requirements. 21 A licensee shall do all of the following: 22 (1) Comply with all provisions of the act of January 30, 23 1974 (P.L.13, No.6), referred to as the Loan Interest and 24 Protection Law (Usury Law). This paragraph shall not 25 supersede section 501 of the Depository Institutions 26 Deregulation and Monetary Control Act of 1980 (94 Stat. 161, 27 12 U.S.C. § 1735f-7a) or the Alternative Mortgage Transaction 28 Parity Act of 1982 (96 Stat. 1545, 12 U.S.C. §§ 3801-3806 et 29 seq.). 30 (2) Comply with the provisions of the act of December 3, 20080H2179B3197 - 12 -
1 1959 (P.L.1688, No.621), known as the Housing Finance Agency 2 Law, that are applicable to the licensee. 3 (3) Comply with all applicable Federal law, including 4 the Real Estate Settlement Procedures Act (88 Stat. 1724, 12 5 U.S.C. §§ 2601 et seq.), the Truth in Lending Act (82 Stat. 6 146, 15 U.S.C. §§ 1601 et seq.) and the Equal Credit 7 Opportunity Act (88 Stat. 1521, 15 U.S.C. §§ 1691 et seq.). 8 (4) Give to the consumer a copy of the promissory note 9 evidencing the mortgage loan and any mortgage loan agreement, 10 mortgage instrument or other document evidencing a mortgage 11 loan signed by the consumer. 12 (5) Give to the consumer written evidence of credit 13 life, credit and accident and health, credit unemployment and 14 property insurance, if any, provided by the licensee to the 15 consumer. 16 (6) If a payment is made in cash on account of a 17 mortgage loan, give to the consumer at the time the payment 18 is actually received a written receipt which shall show the 19 account number or other identification mark or symbol, date, 20 amount paid and, upon request of the consumer, the unpaid 21 balance of the account prior to and after the cash payment. 22 (7) Upon written request from the consumer, give or 23 forward to the consumer within ten days from the date of 24 receipt of the request a written statement of the consumer's 25 account which shall show the dates and amounts of all 26 installment payments credited to the consumer's account, the 27 dates, amounts and an explanation of all other charges or 28 credits to the account and the unpaid balance of the account. 29 A licensee shall not be required to furnish more than two 30 statements in any 12-month period. 20080H2179B3197 - 13 -
1 (8) If a mortgage loan is paid in full or, in the case 2 of an open-end loan, the mortgage lender is no longer 3 obligated to make future advances to the consumer, the 4 mortgage lender shall do all of the following: 5 (i) Cancel any insurance provided by the licensee in 6 connection with the mortgage loan and refund to the 7 consumer, in accordance with regulations promulgated by 8 the Insurance Department, any unearned portion of the 9 premium for the insurance. 10 (ii) Stamp or write on the face of the mortgage loan 11 agreement or promissory note evidencing the mortgage loan 12 "Paid in Full" or "Canceled," the date paid and, within 13 60 days, return the mortgage loan agreement or promissory 14 note to the consumer. 15 (iii) Release any lien on real property and cancel 16 the same of record and, at the time the mortgage loan 17 agreement or promissory note evidencing the mortgage loan 18 is returned, deliver to the consumer good and sufficient 19 assignments, releases or any other certificate, 20 instrument or document as may be necessary to evidence 21 the release. 22 (9) Provide for periodic accounting of any escrow 23 accounts held by the mortgage lender to the consumer not less 24 than annually, showing the amounts received from the consumer 25 and the amounts disbursed from the accounts. 26 (10) Refund all fees, other than those fees paid by the 27 licensee to a third party, paid by a consumer when a mortgage 28 loan is not produced within the time specified by the 29 mortgage broker, mortgage lender or mortgage loan 30 correspondent at the rate, term and overall cost agreed to by 20080H2179B3197 - 14 -
1 the consumer. This paragraph shall not apply if the failure 2 to produce a mortgage loan is due solely to the consumer's 3 negligence, his or her refusal to accept and close on a loan 4 commitment or his or her refusal or inability to provide 5 information necessary for processing, including employment 6 verifications and verifications of deposits. The licensee 7 shall disclose to the consumer, in writing, at the time of a 8 loan application which fees paid or to be paid are 9 nonrefundable. 10 (11) Ensure that all lock-in agreements shall be in 11 writing and shall contain at least the following provisions: 12 (i) The expiration date of the lock-in, if any. 13 (ii) The interest rate locked in, if any. 14 (iii) The discount points locked in, if any. 15 (iv) The fee locked in, if any. 16 (v) The lock-in fee, if any. 17 (12) Upon written request from the consumer or a person 18 authorized by the consumer, provide, within ten days from the 19 date of receipt of the request, a written statement regarding 20 the unpaid balance of a consumer's mortgage loan or account. 21 The statement shall contain the total amount required to pay 22 off a mortgage loan and a specific expiration date for the 23 payoff information. A licensee shall not be required to 24 furnish more than two statements in any 12-month period. 25 (13) In the case of a mortgage broker, mortgage lender or 26 mortgage loan correspondent, do all of the following: 27 (i) Maintain supervision and control of and 28 responsibility for the acts and omissions of all mortgage 29 originators employed by the licensee. 30 (ii) Maintain a list of all current and former 20080H2179B3197 - 15 -
1 mortgage originators employed by the licensee and the 2 dates of the employment. 3 (iii) In the event that a licensee believes that a 4 mortgage originator employed by the licensee has engaged 5 in any activity that is illegal or in violation of this 6 chapter or any regulation or statement of policy 7 promulgated under this chapter, the licensee shall 8 provide the department with written notification of the 9 belief and the licensee's proposed corrective measures 10 within 30 days. A licensee shall not be liable to a 11 mortgage originator in connection with the notification. 12 § 6122. Powers conferred on certain licensees engaged in the 13 mortgage loan business. 14 (a) Mortgage lenders.--If they are in compliance with the 15 provisions of this chapter, all mortgage lenders engaged in the 16 mortgage loan business shall have power and authority: 17 (1) To make first and secondary mortgage loans. 18 (2) To collect fees or premiums for title examination, 19 abstract of title, title insurance, credit reports, surveys, 20 appraisals, notaries, postage, including messenger and 21 express carrier, tax service or other costs or fees actually 22 related to the processing of a mortgage loan application or 23 making of a mortgage loan, when the fees are actually paid or 24 incurred by the licensee and to collect fees or charges 25 prescribed by law which actually are or will be paid to 26 public officials for determining the existence of or for 27 perfecting or releasing or satisfying any security related to 28 the mortgage loan and include these in the principal of the 29 mortgage loan. 30 (3) To provide access to credit life, credit disability, 20080H2179B3197 - 16 -
1 credit accident and health and credit unemployment insurance. 2 A consumer shall not be compelled to purchase credit life, 3 credit disability, credit accident and health or credit 4 unemployment insurance as a condition of the making of a 5 mortgage loan, and all contracts utilized shall reflect a 6 clear disclosure that the purchase of credit life, credit 7 disability, credit accident and health or credit unemployment 8 insurance is not a prerequisite to obtaining a mortgage loan. 9 If, however, the consumer elects to obtain credit life, 10 credit disability, credit accident and health or credit 11 unemployment insurance through the licensee, the consumer 12 shall consent thereto in writing. If consumers desire joint- 13 life or joint accident and health insurance, all consumers 14 shall consent thereto in writing. The insurance shall be 15 obtained from an insurance company authorized by the laws of 16 this Commonwealth to conduct business in this Commonwealth. 17 Any benefit or return to the licensee from the sale or 18 provision of the insurance shall not be included in the 19 computation of the maximum charge authorized for mortgage 20 loans under this chapter and shall not be deemed a violation 21 of this chapter when the insurance is written pursuant to the 22 laws of this Commonwealth governing insurance. 23 (4) To require property insurance on security against 24 reasonable risks of loss, damage and destruction and to 25 provide access to the insurance to the consumer. The amount 26 and term of the insurance shall be reasonable in relation to 27 the amount and term of the mortgage loan contract and the 28 value of the security. This requirement shall be satisfied if 29 the consumer demonstrates at the time the mortgage loan is 30 made that the consumer has valid and collectible insurance 20080H2179B3197 - 17 -
1 covering the property to be insured and has furnished the 2 licensee with a loss payable endorsement sufficient for the 3 protection of the licensee. If the consumer elects to obtain 4 property insurance through the licensee, the consumer shall 5 consent thereto in writing, and the insurance shall be 6 obtained from an insurance company authorized by the laws of 7 this Commonwealth to conduct business in this Commonwealth. 8 Any benefit or return to the licensee from the sale or 9 provision of property insurance shall not be included in the 10 computation of the maximum charge authorized for mortgage 11 loans under this chapter and shall not be deemed a violation 12 of this chapter when the insurance is written pursuant to the 13 laws of this Commonwealth governing insurance. The premium 14 for any property insurance may be included in the principal 15 amount of the mortgage loan requested by the consumer. 16 However, the premium shall be disclosed as a separate item on 17 the face of the principal contract document and the 18 licensee's individual consumer ledger records. 19 (5) To collect a fee for a subsequent dishonored check 20 or instrument taken in payment, not to exceed the service 21 charge permitted to be imposed under 18 Pa.C.S. § 4105 22 (relating to bad checks). 23 (b) Mortgage brokers and loan correspondents.--Provided they 24 are in compliance with the provisions of this chapter, all 25 mortgage brokers and mortgage loan correspondents shall have 26 power and authority: 27 (1) To collect title examination, credit report and 28 appraisal fees actually related to the making of a mortgage 29 loan when the fees are actually paid or incurred by the 30 licensee and to include the fees in the principal of the 20080H2179B3197 - 18 -
1 mortgage loan which is being negotiated or arranged. 2 (2) To charge a broker's fee if the fee is disclosed to 3 the consumer for whom the loan is being negotiated or 4 arranged. 5 (3) To accept from a licensee a fee or premium for 6 brokering or cobrokering a mortgage loan, provided that the 7 payment and acceptance of the fee or premium is in compliance 8 with Federal law, including the Real Estate Settlement 9 Procedures Act of 1974 (Public Law 93-533, 88 Stat. 1724). 10 § 6123. Mortgage loan business prohibitions. 11 A licensee engaging in the mortgage loan business shall not: 12 (1) Charge, contract for, collect or receive charges, 13 fees, premiums, commissions or other considerations in excess 14 of those authorized by the provisions of this chapter. 15 (2) Disburse the proceeds of a mortgage loan in any form 16 other than cash, electronic funds transfer, certified check 17 or cashier's check where the proceeds are disbursed by the 18 licensee to a closing agent. This paragraph shall not be 19 construed as requiring a lender to utilize a closing agent 20 and shall not apply to disbursements by check directly from 21 the licensee's account payable to the consumer, consumer 22 designees or other parties due funds from the closing. 23 (3) Advertise, cause to be advertised or otherwise 24 solicit whether orally, in writing, by telecast, by broadcast 25 or in any other manner any statement or representation which 26 is false, misleading or deceptive. 27 (4) Require a consumer to pay, to the licensee or any 28 other person, a broker's fee, finder's fee, commission, 29 premium or any other charges for obtaining, procuring or 30 placing of a mortgage loan, except as provided under this 20080H2179B3197 - 19 -
1 chapter. This restriction shall not prohibit a mortgage 2 lender from paying a fee to a mortgage broker in connection 3 with the placement or procurement of a mortgage loan, nor 4 prohibit a consumer from requesting or directing a mortgage 5 lender licensee to pay a fee from the proceeds of a mortgage 6 loan or include it in the amount to be financed. 7 (5) Make any mortgage loan on the condition, agreement 8 or understanding that the consumer contract with any specific 9 person or organization for insurance services as agent, 10 broker or underwriter. 11 (6) In the case of a mortgage loan correspondent, 12 service mortgage loans or close mortgage loans utilizing 13 funding other than a wholesale table funder, except in an 14 emergency circumstance where wholesale table funding is not 15 available. 16 (7) In the case of a mortgage broker or mortgage 17 originator, commit to close or close mortgage loans in its 18 own name, service mortgage loans, enter into lock-in 19 agreements or collect lock-in fees, provided, however, that a 20 mortgage broker or mortgage originator can provide a lender's 21 lock-in agreement to a consumer on behalf of that lender and 22 collect lock-in fees payable to that lender on the lender's 23 behalf. 24 (8) In the case of a mortgage originator, accept any 25 fees from consumers in the mortgage originator's own name. A 26 mortgage originator may accept fees payable to the mortgage 27 originator's employer licensee and fees payable to third- 28 party entities on behalf of the mortgage originator's 29 employer licensee. A mortgage originator may not accept 30 advance fees payable to the mortgage originator's employer 20080H2179B3197 - 20 -
1 licensee unless the licensee is authorized to collect advance 2 fees under this chapter. 3 § 6124. Prohibited clauses in mortgage loan documents. 4 No writing of any kind executed in connection with a mortgage 5 loan shall contain: 6 (1) An agreement whereby the consumer waives any rights 7 accruing to the consumer under the provisions of this 8 chapter. 9 (2) An irrevocable wage assignment of, or order for the 10 payment of, any salary, wages, commissions or any other 11 compensation for services, or any part thereof, earned or to 12 be earned. 13 (3) An agreement to pay any amount other than the unpaid 14 balance of the mortgage loan agreement or promissory note or 15 any other charge authorized by this chapter. 16 § 6125. Mortgage lending authority. 17 (a) First mortgage loans.--Mortgage lenders engaged in the 18 first mortgage loan business may make first mortgage loans 19 pursuant to: 20 (1) the act of January 30, 1974 (P.L.13, No.6), referred 21 to as the Loan Interest and Protection Law; or 22 (2) if the licensee is qualified, applicable Federal 23 law, including the Alternative Mortgage Transaction Parity 24 Act of 1982 (Public Law 97-320, 12 U.S.C. § 3801 et seq.) and 25 the Depository Institution Deregulation and Monetary Control 26 Act of 1980 (94 Stat. 161, Public Law 96-221). 27 (b) Secondary mortgage loans.--Mortgage lenders engaged in 28 the secondary mortgage loan business may: 29 (1) if the licensee is qualified, make secondary 30 mortgage loans on terms as are permissible under applicable 20080H2179B3197 - 21 -
1 Federal law, including the Alternative Mortgage Transaction 2 Parity Act of 1982; or 3 (2) (i) make secondary mortgage loans repayable in 4 installments and charge, contract for and receive thereon 5 interest at a rate not exceeding 1.85% per month. No 6 interest shall be paid, deducted or received in advance, 7 except that interest from the date of disbursement of 8 funds to the consumer to the first day of the following 9 month and shall be permitted in the event the first 10 installment payment is more than 30 days after the date 11 of disbursement. Interest shall not be compounded and 12 shall be computed only on unpaid principal balances. 13 However, the inclusion of earned interest in a new note 14 shall not be considered compounding. For the purpose of 15 computing interest, a month shall be any period of 30 16 consecutive days; 17 (ii) charge and collect an application fee not 18 exceeding 3% of the original principal amount of the 19 mortgage loan. The fee shall be fully earned at the time 20 the mortgage loan is made and may be added to the 21 principal amount of the mortgage loan. No application fee 22 may be collected on subsequent advances made pursuant to 23 an open-end loan if the full fee of 3% of the credit 24 limit was collected at the time the open-end loan was 25 made; or 26 (iii) charge and collect a delinquency charge of $20 27 or 10% of each payment, whichever is greater, for a 28 payment which is more than 15 days late. 29 § 6126. Requirements as to open-end loans. 30 The following shall apply: 20080H2179B3197 - 22 -
1 (1) A mortgage lender may make open-end loans and may 2 contract for and receive thereon interest and charges as set 3 forth under this chapter. 4 (2) A mortgage lender shall not compound interest by 5 adding any unpaid interest authorized by this section to the 6 unpaid principal balance of the consumer's account, provided 7 however, that the unpaid principal balance may include the 8 additional charges authorized by this subchapter. 9 (3) Interest authorized by this section shall be deemed 10 not to exceed the maximum interest permitted by this 11 subchapter if the interest is computed in each billing cycle 12 by any of the following methods: 13 (i) by converting the monthly rate to a daily rate 14 and multiplying the daily rate by the applicable portion 15 of the daily unpaid principal balance of the account, in 16 which case the daily rate shall be 1/30 of the monthly 17 rate; 18 (ii) by multiplying the monthly rate by the 19 applicable portion of the average monthly unpaid 20 principal balance of the account in the billing cycle, in 21 which case the average daily unpaid principal balance is 22 the sum of the amount unpaid each day during the cycle 23 divided by the number of days in the cycle; or 24 (iii) by converting the monthly rate to a daily rate 25 and multiplying the daily rate by the average daily 26 unpaid principal balance of the account in the billing 27 cycle, in which case the daily rate shall be 1/30 of the 28 monthly rate. 29 (4) For all of the methods of computation in paragraph 30 (3)(i), (ii) and (iii), the billing cycle shall be monthly, 20080H2179B3197 - 23 -
1 and the unpaid principal balance on any day shall be 2 determined by adding to any balance unpaid as of the 3 beginning of that day all advances and other permissible 4 amounts charged to the consumer and deducting all payments 5 and other credits made or received that day. 6 (5) The consumer may at any time pay all or any part of 7 the unpaid balance in the consumer's account without 8 prepayment penalty or, if the account is not in default, the 9 consumer may pay the unpaid principal balance in monthly 10 installments. Minimum monthly payment requirements shall be 11 determined by the licensee and set forth in the agreement 12 evidencing the open-end loan. 13 (6) A mortgage lender may contract for and receive the 14 fees, costs and expenses permitted by this subchapter on 15 other first or secondary mortgage loans, subject to all the 16 conditions and restrictions set forth in this subchapter, 17 with the following variations: 18 (i) If credit life or disability insurance is 19 provided and if the insured dies or becomes disabled when 20 there is an outstanding open-end loan indebtedness, the 21 insurance shall be sufficient to pay the total balance of 22 the loan due on the date of the consumer's death in the 23 case of credit life insurance, or all minimum payments 24 which become due on the loan during the covered period of 25 disability in the case of credit disability insurance. 26 The additional charge for credit life insurance or credit 27 disability insurance shall be calculated in each billing 28 cycle by applying the current monthly premium rate for 29 insurance, as the rate may be determined by the Insurance 30 Commissioner, to the unpaid balances in the consumer's 20080H2179B3197 - 24 -
1 account, using any of the methods specified in paragraph 2 (3) for the calculation of loan charges. 3 (ii) No credit life or disability insurance written 4 in connection with an open-end loan shall be canceled by 5 the licensee because of delinquency of the consumer in 6 the making of the required minimum payments on the loan 7 unless one or more of the payments is past due for a 8 period of 90 days or more, and the licensee shall advance 9 to the insurer the amounts required to keep the insurance 10 in force during the period, which amounts may be debited 11 to the consumer's account. 12 (iii) The amount, terms and conditions of any 13 insurance against loss or damage to property must be 14 reasonable in relation to character and value of the 15 property insured and the maximum anticipated amount of 16 credit to be extended. 17 (7) Notwithstanding any other provisions in this chapter 18 to the contrary, a mortgage lender may retain any security 19 interest in real or personal property until the open-end loan 20 is terminated, provided that, if there is no outstanding 21 balance in the account and there is no commitment by the 22 licensee to make advances, the mortgage lender shall, within 23 ten days following written demand by the consumer, deliver to 24 the consumer a release of the mortgage, indenture, deed of 25 trust or any other similar instrument or document on any real 26 property taken as security for the open-end loan. The 27 mortgage lender shall include on all billing statements 28 provided in connection with an open-end loan a statement that 29 the licensee retains a security interest in the consumer's 30 real property whenever the security interest has not been 20080H2179B3197 - 25 -
1 released. 2 (8) A mortgage lender may charge, contract for, receive 3 or collect on any open-end loan account an annual fee not to 4 exceed $50 per year. 5 SUBCHAPTER D 6 ADMINISTRATIVE AND LICENSURE PROVISIONS 7 Sec. 8 6131. Application for license. 9 6132. License fees. 10 6133. Issuance of license. 11 6134. License duration. 12 6135. Licensee requirements. 13 6136. Licensee limitations. 14 6137. Surrender of license. 15 6138. Authority of department. 16 6139. Suspension, revocation or refusal. 17 6140. Penalties. 18 § 6131. Application for license. 19 (a) Contents.--An application for a license under this 20 chapter shall be on a form prescribed and provided by the 21 department. 22 (1) In the case of a mortgage broker, mortgage lender or 23 mortgage loan correspondent, the application shall include 24 the following: 25 (i) The name of the applicant. 26 (ii) The address of the principal place of business 27 of the applicant and the address or addresses where the 28 applicant's mortgage loan business is to be conducted. 29 (iii) The full name, official title and business 30 address of each director and principal officer of the 20080H2179B3197 - 26 -
1 mortgage loan business. 2 (iv) Any other information that may be required by 3 the department. 4 (2) In the case of a mortgage originator, the 5 application shall include the following: 6 (i) The name of the applicant. 7 (ii) The name of the employer licensee of the 8 applicant and location of the employer licensee to which 9 the applicant is assigned. 10 (iii) Any other information that may be required by 11 the department. 12 (3) An applicant shall demonstrate to the department 13 that policies and procedures have been developed to receive 14 and process consumer inquiries and grievances promptly and 15 fairly. 16 (b) Duty to update.--All applicants and licensees shall be 17 required to provide the department with written notice of the 18 change in any information contained in an application for a 19 license or for any renewal of a license within ten days of an 20 applicant or licensee becoming aware of the change. 21 (c) Mortgage lender license.--The department shall issue a 22 mortgage lender license applied for under this chapter if the 23 applicant has: 24 (1) Been approved by or meets the current criteria for 25 approval of at least one of the following: 26 (i) Federal National Mortgage Association. 27 (ii) Federal Home Loan Mortgage Corporation. 28 (iii) Federal Housing Administration. 29 (2) Been approved for and will continue to maintain as a 30 licensee a line of credit, repurchase agreement or equivalent 20080H2179B3197 - 27 -
1 mortgage-funding capability of not less than $1,000,000. 2 (3) Established a minimum tangible net worth of $250,000 3 at the time of application and will, at all times thereafter, 4 maintain the minimum tangible net worth. 5 (4) Been approved for and will continue to maintain as a 6 licensee fidelity bond coverage in accordance with the 7 guidelines established by the Federal National Mortgage 8 Association or the Federal Home Loan Mortgage Corporation. 9 (d) Mortgage loan correspondent license.--The department 10 shall issue a loan correspondent's license applied for under 11 this chapter if the applicant: 12 (1) Obtains and will maintain a bond in the amount of 13 $100,000, in a form acceptable to the department, prior to 14 the issuance of the license, from a surety company authorized 15 to do business in this Commonwealth. The bond shall run to 16 the Commonwealth and shall be for the use of the Commonwealth 17 and any person or persons who obtain a judgment against the 18 mortgage loan correspondent for failure to carry out the 19 terms of any provision for which advance fees are paid. No 20 bond shall comply with the requirements of this section 21 unless it contains a provision that it shall not be canceled 22 for any cause unless notice of intention to cancel is given 23 to the department at least 30 days before the day upon which 24 cancellation shall take effect. 25 (2) Establishes a minimum tangible net worth of $100,000 26 at the time of application and will, at all times thereafter, 27 maintain the minimum tangible net worth. 28 (e) Mortgage broker license.-- 29 (1) The department shall issue a mortgage broker license 30 applied for under this chapter if the applicant obtains and 20080H2179B3197 - 28 -
1 will maintain a bond in the amount of $100,000, in a form 2 acceptable to the department, prior to the issuance of the 3 license, from a surety company authorized to do business in 4 this Commonwealth. The bond shall be a penal bond conditioned 5 on compliance with this chapter and subject to forfeiture by 6 the department and shall run to the Commonwealth for its use. 7 The bond shall also be for the use of any person against the 8 mortgage broker for failure to carry out the terms of any 9 provision for which advance fees are paid. If the person is 10 aggrieved, the person may, with the written consent of the 11 department, recover advance fees and costs from the bond by 12 filing a claim with the surety company or maintaining an 13 action on the bond. In the alternative, an aggrieved person 14 may recover advance fees and costs by filing a formal 15 complaint against the mortgage broker with the department 16 which shall adjudicate the matter. The adjudication shall be 17 binding upon the surety company and enforceable by the 18 department in Commonwealth Court and by an aggrieved person 19 in any court. Any aggrieved person seeking to recover advance 20 fees and costs from a bond that has already been forfeited by 21 the department or which the department is in the process of 22 forfeiting may recover payment on the bond if, after filing a 23 petition with the department, the department consents to the 24 aggrieved person's requested payment or portion thereof. The 25 department may pay the aggrieved person from the bond 26 proceeds it recovers. Nothing in this section shall be 27 construed as limiting the ability of any court or magisterial 28 district judge to award to any aggrieved person other 29 damages, court costs and attorney fees as permitted by law, 30 but those claims that are not advance fees or related costs 20080H2179B3197 - 29 -
1 may not be recovered from the bond. The department, in its 2 discretion, may consent to or order pro rata or other 3 recovery on the bond for any aggrieved person if claims 4 against the bond may or do exceed its full monetary amount. 5 No bond shall comply with the requirements of this section 6 unless it contains a provision that it shall not be canceled 7 for any cause unless notice of intention to cancel is given 8 to the department at least 30 days before the day upon which 9 cancellation shall take effect. Cancellation of the bond 10 shall not invalidate the bond regarding the period of time it 11 was in effect. 12 (2) Mortgage brokers who can demonstrate to the 13 satisfaction of the department that they do not and will not 14 accept advance fees shall be exempt from the bond requirement 15 of this subsection. 16 (f) Mortgage originator license.--A mortgage originator 17 shall be an employee of a single mortgage broker, mortgage 18 lender or mortgage loan correspondent licensed under this 19 chapter, which licensee shall directly supervise, control and 20 maintain responsibility for the acts and omissions of the 21 mortgage originator. A mortgage originator shall be assigned to 22 and work out of a licensed location of the employer licensee. 23 (g) Education.-- 24 (1) In order to obtain a license under this chapter, an 25 applicant shall submit to the department with its application 26 evidence that the applicant or an officer of the applicant 27 has successfully completed a minimum of 12 hours of 28 instruction and a testing program regarding the first and 29 secondary mortgage loan businesses and the provisions of this 30 chapter, the act of January 30, 1974 (P.L.13, No.6), referred 20080H2179B3197 - 30 -
1 to as the Loan Interest and Protection Law and relevant 2 Federal law including the Real Estate Settlement Procedures 3 Act of 1974 (Public Law 93-533, 88 Stat. 1724), Truth in 4 Lending provisions of Title I of the Consumer Credit 5 Protection Act (Public Law 90-321, 15 U.S.C. § 1601 et seq.) 6 and the Equal Credit Opportunity Act (Public Law 93-495, 15 7 U.S.C. § 1691 et seq.). 8 (2) In order to maintain a license: 9 (i) A mortgage broker, mortgage lender or mortgage 10 loan correspondent shall demonstrate to the satisfaction 11 of the department that at least one individual from each 12 licensed office that is not a mortgage originator, and 13 all mortgage originators employed by the licensee, have 14 attended a minimum of six hours of continuing education 15 each year. 16 (ii) A mortgage originator licensee shall 17 demonstrate to the satisfaction of the department that 18 the licensee has attended a minimum of six hours of 19 continuing education each year. 20 (3) The department shall delineate the requirements for 21 prequalification education and testing and continuing 22 education by regulation. The department may review and 23 approve education programs and providers to satisfy the 24 education requirements. Providers of prequalification 25 education and testing and continuing education programs may 26 include the licensee or a subsidiary or affiliate of the 27 licensee. The department may charge providers of education 28 programs a fee, to be determined by the department, for 29 department review of education programs and providers. 30 (h) License renewals.--Licenses shall be issued for terms of 20080H2179B3197 - 31 -
1 12 months and may be renewed by the department each year on a 2 schedule set by the department upon application by the licensee 3 and the payment of any and all applicable renewal fees. The 4 licensee shall demonstrate to the department that it is 5 conducting the mortgage loan business in accordance with the 6 requirements of this chapter and that the directors, officers, 7 partners, employees, agents and ultimate equitable owners of 10% 8 or more of the licensee continue to meet all of the initial 9 requirements for licensure required by this chapter unless 10 otherwise determined by the department. 11 (i) Out-of-State applicants.-- 12 (1) If an applicant is not a resident of this 13 Commonwealth, as a condition to receiving a license under 14 this chapter, the applicant shall be authorized to do 15 business in this Commonwealth in accordance with the laws of 16 this Commonwealth regulating corporations and other entities 17 conducting business in this Commonwealth and shall maintain 18 at least one office in this Commonwealth which is the office 19 that shall be licensed as the principal place of business for 20 the purposes of this chapter. Wholesale table funders shall 21 be exempt from the requirement to maintain at least one 22 office in this Commonwealth. 23 (2) Out-of-State applicants shall file with the license 24 application an irrevocable consent, duly acknowledged, that 25 suits and actions may be commenced against that person in the 26 courts of this Commonwealth by the service of process of any 27 pleading upon the department in the usual manner provided for 28 service of process and pleadings by the laws and court rules 29 of this Commonwealth. The consent shall provide that this 30 service shall be as valid and binding as if service had been 20080H2179B3197 - 32 -
1 made personally upon the person in this Commonwealth. In all 2 cases where process or pleadings are served upon the 3 department under the provisions of this section, the process 4 or pleadings shall be served in triplicate, one copy shall be 5 filed in the department's offices and the others shall be 6 forwarded by the department, by certified or registered mail, 7 return receipt requested, to the last known principal place 8 of business of the person. 9 § 6132. License fees. 10 (a) Initial application fees.--An applicant shall pay to the 11 department at the time an application is filed an initial 12 nonrefundable application fee as set forth under this 13 subsection. 14 (1) For mortgage lenders and mortgage loan 15 correspondents, $1,500 for the principal place of business in 16 this Commonwealth and an additional fee of $1,500 for each 17 branch office. 18 (2) For mortgage brokers, $1,000 for the principal place 19 of business in this Commonwealth and an additional fee of 20 $250 for each branch office. 21 (3) Subject to the limitations under subsection (c), for 22 mortgage originators, $100. 23 (b) Renewal fees.--Prior to each annual renewal of a 24 license, a licensee shall pay to the department a nonrefundable 25 license renewal fee as set forth under this subsection. 26 (1) For mortgage lenders and mortgage loan 27 correspondents, $750 for the principal place of business in 28 this Commonwealth and an additional fee of $750 for each 29 branch office. 30 (2) For mortgage brokers, $500 for the principal place 20080H2179B3197 - 33 -
1 of business in this Commonwealth and an additional fee of 2 $250 for each branch office. 3 (3) Subject to the limitations under subsection (c), for 4 mortgage originators, $100. 5 (c) Fee limitation.--For a licensee that employs 50 or more 6 mortgage originators, the initial application fee and license 7 renewal fee shall be $50 per mortgage originator, to a maximum 8 of $10,000 total per year. 9 (d) No abatement of fee.--No abatement of a licensee fee 10 shall be made if the license is issued for a period of less than 11 one year. 12 § 6133. Issuance of license. 13 (a) Time limit.--Within 60 days after a completed 14 application is received, the department shall either issue a 15 license, or for any reason which the department may refuse to 16 issue a license under this section or for which the department 17 may suspend, revoke or refuse to renew a license under section 18 6139 (relating to suspension, revocation or refusal), refuse to 19 issue a license. The 60-day time limit specified in this 20 subsection may be extended by the department for an additional 21 30 days if the department determines that the extension is 22 necessary. The department shall provide written notification to 23 any applicant whose application review has been extended and 24 include the final date by which a decision shall be rendered 25 regarding the application. 26 (a.1) Investigations.--Upon receipt of an application for a 27 license, the department may conduct an investigation of the 28 applicant or a director, officer, partner, employee, agent or 29 ultimate equitable owner of 10% or more of the applicant as it 30 deems necessary. 20080H2179B3197 - 34 -
1 (b) Appeal of denial.--If the department refuses to issue a 2 license, it shall notify the applicant in writing of the denial, 3 the reason for the denial and the applicant's right to appeal 4 the denial to the Secretary of Banking. An appeal from the 5 department's refusal to approve an application for a license 6 must be filed by the applicant within 30 days of notice of 7 refusal. 8 (c) Contents of license.--Each license issued by the 9 department shall specify: 10 (1) The name and address of the licensee and the address 11 or addresses covered by the license, the address so specified 12 to be that of the licensee's principal place of business 13 within this Commonwealth, or for a licensee acting only in 14 the capacity of a wholesale table funder, either in or 15 outside of this Commonwealth. 16 (2) The licensee's reference number. 17 (3) Any other information the department shall require 18 to carry out the purposes of this chapter. 19 (d) Denial of license due to conviction.-- 20 (1) The department may deny a license if it finds that 21 the applicant or a director, officer, partner, employee, 22 agent or ultimate equitable owner of 10% or more of the 23 applicant has been convicted of a crime of moral turpitude or 24 felony in any jurisdiction or of a crime which, if committed 25 in this Commonwealth, would constitute a crime of moral 26 turpitude or felony. For the purposes of this subsection, a 27 person shall be deemed to have been convicted of a crime if 28 the person: 29 (i) pleads guilty or nolo contendere to a criminal 30 charge before a court or Federal magistrate; or 20080H2179B3197 - 35 -
1 (ii) is found guilty by the decision or judgment of 2 a court or Federal magistrate or by the verdict of a 3 jury, irrespective of the pronouncement of sentence or 4 the suspension thereof, unless the plea of guilty or nolo 5 contendere or the decision, judgment or verdict is set 6 aside, vacated, reversed or otherwise abrogated by lawful 7 judicial process. 8 (2) A license under this chapter shall be deemed to be a 9 covered license within the meaning of section 405 of the act 10 of May 15, 1933 (P.L.565, No.111), known as the Department of 11 Banking Code. The department shall notify a licensee if a 12 covered individual within the meaning of section 405 of the 13 Department of Banking Code that is or will be employed or 14 contracted by the licensee has a criminal background that 15 renders the employee unfit for employment in the mortgage 16 loan business. 17 (e) Denial of license for other reason.--The department may 18 deny a license or otherwise restrict a license if it finds that 19 the applicant or a director, officer, partner, employee, agent 20 or ultimate equitable owner of 10% or more of the applicant: 21 (1) has had a license application or license issued by 22 the department denied, not renewed, suspended or revoked; 23 (2) is the subject of an order of the department; 24 (3) has violated or failed to comply with any provision 25 of this chapter or any regulation, statement of policy or 26 order of the department; 27 (4) does not possess the financial responsibility, 28 character, reputation, integrity and general fitness to 29 command the confidence of the public and to warrant the 30 belief that the mortgage loan business will be operated 20080H2179B3197 - 36 -
1 lawfully, honestly, fairly and within the legislative intent 2 of this chapter and in accordance with the general laws of 3 this Commonwealth; or 4 (5) has an outstanding debt to the Commonwealth or any 5 Commonwealth agency. 6 (f) Conditional licenses.--The department may impose 7 conditions on the issuance of any license under this chapter. If 8 the department determines that conditions imposed upon a 9 licensee have not been fulfilled, the department may take any 10 action authorized under this chapter against the licensee that 11 the department deems necessary. In the case of mortgage 12 originator applicants, the department may issue mortgage 13 originator licenses effective immediately upon receipt of an 14 application, which licenses shall be conditional licenses issued 15 under this subsection. 16 § 6134. License duration. 17 A license issued by the department shall be subject to all of 18 the following limitations: 19 (1) Be renewed on the licensee's renewal date each year 20 upon completion of the requirements of section 6131(h) 21 (relating to application for license). No refund of any 22 portion of the license fee shall be made if the license is 23 voluntarily surrendered to the department or suspended or 24 revoked by the department prior to its expiration date. 25 (2) Be invalid if the licensee's authority to conduct 26 business is voided under any law of this Commonwealth or any 27 other state, unless the licensee demonstrates to the 28 satisfaction of the department that the applicable court or 29 governmental entity was clearly erroneous in voiding the 30 licensee's authority to conduct business. 20080H2179B3197 - 37 -
1 (3) Not be assignable or transferable by operation of 2 law or otherwise. 3 § 6135. Licensee requirements. 4 (a) Requirements of licensee.-- 5 (1) A licensee who is a mortgage broker, mortgage lender 6 or mortgage loan correspondent shall conspicuously display, 7 at each licensed place of business, its license and copies of 8 the licenses of all mortgage originators assigned to that 9 location. A licensee who is a mortgage originator shall keep 10 the license in the immediate possession of the licensee 11 whenever the licensee is engaged in the mortgage loan 12 business. 13 (2) Each licensee shall maintain at its principal place 14 of business within this Commonwealth, or at such place within 15 or outside this Commonwealth if agreed to by the department, 16 the original or a copy of any books, accounts, records and 17 documents, or electronic or similar access thereto, of the 18 business conducted under the license as prescribed by the 19 department to enable the department to determine whether the 20 business of the licensee is being conducted in accordance 21 with the provisions of this chapter and the regulations, 22 statements of policy or orders issued under this chapter. The 23 department shall have free access to and authorization to 24 examine records maintained within or outside this 25 Commonwealth by the licensee. The costs of the examination, 26 including travel costs, shall be borne by the licensee. The 27 department may deny or revoke the authority to maintain 28 records within or outside this Commonwealth for good cause in 29 the interest of protection for Commonwealth consumers, 30 including for the licensee's failure to provide books, 20080H2179B3197 - 38 -
1 accounts, records or documents to the department upon 2 request. 3 (3) A mortgage broker, mortgage lender or mortgage loan 4 correspondent, on a date determined by the department, shall 5 file annually a report with the department setting forth such 6 information as the department shall require concerning the 7 first or secondary mortgage loan business conducted by the 8 licensee during the preceding calendar year. The report shall 9 be in writing and under oath on a form provided by the 10 department. Licensees who fail to file the required report at 11 the date required by the department shall be subject to a 12 penalty of $100 for each day after the due date until the 13 report is filed. 14 (4) Each licensee shall be subject to examination by the 15 department at its discretion, at which time the department 16 shall have free access, during regular business hours, to the 17 licensee's place or places of business in this Commonwealth 18 and to all instruments, documents, accounts, books and 19 records which pertain to a licensee's first or secondary 20 mortgage loan business, whether maintained in or outside this 21 Commonwealth. The department may examine a licensee at any 22 time if the department deems the examination to be necessary 23 or desirable. The cost of any such examination shall be borne 24 by the licensee. 25 (5) Each licensee shall include in all advertisements 26 language indicating that the licensee is licensed by the 27 department. In the case of a mortgage originator, all 28 advertising shall include the name of the mortgage 29 originator's employer. 30 (b) Accounting records.--The licensee's accounting records 20080H2179B3197 - 39 -
1 must be constructed and maintained in compliance with generally 2 accepted accounting principles or as provided by department 3 regulation. All instruments, documents, accounts, books and 4 records relating to the mortgage loan business shall be kept 5 separate and apart from the records of any other business 6 conducted by the licensee. Records of first and secondary 7 mortgage loans shall be easily distinguishable and easily 8 separated. All records shall be preserved and kept available for 9 investigation or examination by the department for a period 10 determined by the department. 11 (c) Copies.--If copies of instruments, documents, accounts, 12 books or records are maintained under subsection (a)(2), they 13 may be photostatic, microfilm or electronic copies or copies 14 provided in some other manner approved by the department. 15 § 6136. Licensee limitations. 16 (a) Name and changes to name.--A licensee cannot transact 17 any business under this chapter under any other name or names 18 except those names designated in its license. A mortgage 19 originator may not use any other name other than the mortgage 20 originator's personal legal name. A licensee that changes its 21 name or place or places of business shall notify the department 22 within ten days of the change and the department shall issue a 23 certificate to the licensee, if appropriate, which shall specify 24 the licensee's new name or address. 25 (b) Other businesses.--A licensee cannot conduct a business 26 other than the mortgage loan business licensed by the department 27 under this chapter without at least 30 days' prior written 28 notification to the department. 29 § 6137. Surrender of license. 30 Upon satisfying the department that all creditors of a 20080H2179B3197 - 40 -
1 licensee have been paid or that other arrangements satisfactory 2 to the creditors and the department have been made, a licensee 3 may voluntarily surrender its license to the department by 4 delivering its license to the department with written notice 5 that the license is being voluntarily surrendered, but an action 6 by a licensee shall not affect the licensee's civil or criminal 7 liability for acts committed. 8 § 6138. Authority of department. 9 (a) General authority.--The department shall have the 10 authority to: 11 (1) Examine any instrument, document, account, book, 12 record or file of a licensee or any person having a 13 connection to the licensee or make other investigation as may 14 be necessary to administer the provisions of this chapter. 15 Pursuant to this authority, the department may remove any 16 instrument, document, account, book, record or file of a 17 licensee to a location outside of the licensee's office 18 location. The costs of the examination shall be borne by the 19 licensee or the entity subject to the examination. 20 (2) Conduct administrative hearings on any matter 21 pertaining to this chapter, issue subpoenas to compel the 22 attendance of witnesses and the production of instruments, 23 documents, accounts, books and records at any hearing. The 24 instruments, documents, accounts, books and records may be 25 retained by the department until the completion of all 26 proceedings in connection with which the materials were 27 produced. A department official may administer oaths and 28 affirmations to a person whose testimony is required. In the 29 event a person fails to comply with a subpoena issued by the 30 department or to testify on a matter concerning which he may 20080H2179B3197 - 41 -
1 be lawfully interrogated, on application by the department, 2 the Commonwealth Court may issue an order requiring the 3 attendance of the person, the production of instruments, 4 documents, accounts, books and records and the giving of 5 testimony. 6 (3) Request and receive information or records of any 7 kind, including reports of criminal history record 8 information from any Federal, State, local or foreign 9 government entity regarding an applicant for a license, 10 licensee or person related in any way to the business of the 11 applicant or licensee, at a cost to be paid by the applicant 12 or licensee. 13 (4) Issue regulations, statements of policy or orders as 14 may be necessary for the proper conduct of the mortgage loan 15 business by licensees, the issuance and renewal of licenses 16 and the enforcement of this chapter. 17 (5) Prohibit or permanently remove an individual 18 responsible for a violation of this chapter from working in 19 the person's present capacity or in any other capacity 20 related to activities regulated by the department. 21 (6) Order a person to make restitution for actual 22 damages to consumers caused by any violation of this chapter. 23 (7) Issue cease and desist orders that are effective 24 immediately, subject to a hearing as specified in subsection 25 (b) within 14 days of the issuance of the order. 26 (8) Impose such other conditions as the department deems 27 appropriate. 28 (b) Hearings.--A person aggrieved by a decision of the 29 department may appeal the decision of the department to the 30 Secretary of Banking. The appeal shall be conducted under 2 20080H2179B3197 - 42 -
1 Pa.C.S. Ch. 5 Subch. A (relating to practice and procedure of 2 Commonwealth agencies). 3 (c) Injunctions.--The department may maintain an action for 4 an injunction or other process against a person to restrain and 5 prevent the person from engaging in an activity violating this 6 chapter. 7 (d) Final orders.--A decision of the Secretary of Banking 8 shall be a final order of the department and shall be 9 enforceable in a court of competent jurisdiction. The department 10 may publish final adjudications issued under this section, 11 subject to redaction or modification to preserve 12 confidentiality. 13 (e) Appeals.--A person aggrieved by a decision of the 14 Secretary of Banking may appeal the decision under 2 Pa.C.S. Ch. 15 7 Subch A. (relating to judicial review of Commonwealth agency 16 action). 17 (f) Orders affecting mortgage originators.--An order issued 18 against a licensee is applicable to the mortgage originators 19 employed by the licensee. 20 § 6139. Suspension, revocation or refusal. 21 (a) Departmental action.--The department may suspend, revoke 22 or refuse to renew a license issued under this chapter if any 23 fact or condition exists or is discovered which, if it had 24 existed or had been discovered at the time of filing of the 25 application for the license, would have warranted the department 26 in refusing to issue the license or if a licensee or director, 27 officer, partner, employee or owner of a licensee has: 28 (1) Made a material misstatement in an application or 29 any report or submission required by this chapter or any 30 department regulation, statement of policy or order. 20080H2179B3197 - 43 -
1 (2) Failed to comply with or violated any provision of 2 this chapter or any regulation or order promulgated or issued 3 by the department under this chapter. 4 (3) Engaged in dishonest, fraudulent or illegal 5 practices or conduct in a business or unfair or unethical 6 practices or conduct in connection with the mortgage loan 7 business. 8 (4) Been convicted of or pleaded guilty or nolo 9 contendere to a crime of moral turpitude or felony. 10 (5) Permanently or temporarily been enjoined by a court 11 of competent jurisdiction from engaging in or continuing 12 conduct or a practice involving an aspect of the mortgage 13 loan business. 14 (6) Become the subject of an order of the department 15 denying, suspending or revoking a license applied for or 16 issued under this chapter. 17 (7) Become the subject of a United States Postal Service 18 fraud order. 19 (8) Failed to comply with the requirements of this 20 chapter to make and keep records prescribed by regulation, 21 statement of policy or order of the department, to produce 22 records required by the department or to file financial 23 reports or other information that the department by 24 regulation, statement of policy or order may require. 25 (9) Become the subject of an order of the department 26 denying, suspending or revoking a license under the 27 provisions of any other law administered by the department. 28 (10) Demonstrated negligence or incompetence in 29 performing an act for which the licensee is required to hold 30 a license under this chapter. 20080H2179B3197 - 44 -
1 (11) Accepted an advance fee without having obtained the 2 bond required by section 6131(d)(1) or (e)(1) (relating to 3 application for license). 4 (12) Become insolvent, meaning that the liabilities of 5 the applicant or licensee exceed the assets of the applicant 6 or licensee or that the applicant or licensee cannot meet the 7 obligations of the applicant or licensee as they mature or is 8 in such financial condition that the applicant or licensee 9 cannot continue in business with safety to the customers of 10 the applicant or licensee. 11 (13) Failed to complete the qualifying or continuing 12 education as required by section 6131(g). 13 (14) In the case of a mortgage broker, mortgage lender 14 or mortgage loan correspondent, conducted the mortgage loan 15 business through an unlicensed mortgage originator. 16 (15) Failed to comply with the terms of any agreement 17 under which the department authorizes a licensee to maintain 18 records at a place other than the licensee's principal place 19 of business. 20 (b) Reinstatement.--The department may reinstate a license 21 which was previously revoked or denied renewal if all of the 22 following exist: 23 (1) The condition which warranted the original action 24 has been corrected to the department's satisfaction. 25 (2) The department has reason to believe that the 26 condition is not likely to occur again. 27 (3) The licensee satisfies all other requirements of 28 this chapter. 29 § 6140. Penalties. 30 (a) Persons operating without licenses.-A person subject to 20080H2179B3197 - 45 -
1 the provisions of this chapter and not licensed by the 2 department who violates any provision of this chapter or who 3 commits any action which would subject a license to suspension, 4 revocation or nonrenewal under section 6139 (relating to 5 suspension, revocation or refusal) may be fined by the 6 department up to $10,000 for each offense. 7 (b) Violation by licensee.--A person licensed under this 8 chapter or director, officer, owner, partner, employee or agent 9 of a licensee who violates a provision of this chapter or who 10 commits any action which would subject the licensee to 11 suspension, revocation or nonrenewal under section 6139 may be 12 fined by the department up to $10,000 for each offense. 13 SUBCHAPTER E 14 MISCELLANEOUS PROVISIONS 15 Sec. 16 6151. Applicability. 17 6152. Relationship to other laws. 18 6153. Preservation of existing contracts. 19 § 6151. Applicability. 20 The provisions of this chapter shall apply to: 21 (1) Any mortgage loan which is: 22 (i) negotiated, offered or otherwise transacted 23 within this Commonwealth, in whole or in part, whether by 24 the ultimate lender or any other person; 25 (ii) made or executed within this Commonwealth; or 26 (iii) notwithstanding the place of execution, 27 secured by real property located in this Commonwealth. 28 (2) Any person who engages in the mortgage loan business 29 in this Commonwealth. 30 Section 6152. Relationship to other laws. 20080H2179B3197 - 46 -
1 (a) General rule.-- 2 (1) A political subdivision may not enact or enforce any 3 ordinance, resolution or regulation pertaining to the 4 financial or lending activities of a person that: 5 (i) is subject to the jurisdiction of the 6 department, including activities subject to this chapter; 7 (ii) is subject to the jurisdiction or regulatory 8 supervision of the Board of Governors of the Federal 9 Reserve System, the Office of the Comptroller of the 10 Currency, the Office of Thrift Supervision, the National 11 Credit Union Administration, the Federal Deposit 12 Insurance Corporation, the Federal Trade Commission or 13 the United States Department of Housing and Urban 14 Development; or 15 (iii) originates, purchases, sells, assigns, 16 securitizes or services any property interest or 17 obligation created by a financial transaction or loan 18 made, executed or originated by a person referred to in 19 subparagraph (i) or (ii) or assists or facilitates such a 20 transaction or loan. 21 (2) This subsection applies to any ordinance, resolution 22 or regulation pertaining to financial or lending activity, 23 including any ordinance, resolution or regulation: 24 (i) disqualifying a person from doing business with 25 a political subdivision based upon financial or lending 26 activity; or 27 (ii) imposing reporting requirements or any other 28 obligations upon a person regarding financial or lending 29 activity. 30 (b) Corporate powers.--Nothing in this chapter shall be 20080H2179B3197 - 47 -
1 deemed to: 2 (1) limit the corporate powers of incorporated 3 institutions or their subsidiaries subject to the act of 4 November 30, 1965 (P.L.847, No.356), known as the Banking 5 Code of 1965; or 6 (2) impose conditions, limitations or restrictions upon 7 the exercise of corporate powers contrary to the provisions 8 of section 201 of the Banking Code of 1965. 9 (c) Preemption.--A provision of this chapter preempted by 10 Federal law with respect to a national bank or Federal savings 11 association shall not apply to the same extent to an operating 12 subsidiary of a national bank or Federal savings association 13 which satisfies the requirements for operating subsidiaries 14 established in 12 CFR § 5.34 (relating to operating 15 subsidiaries) or 559.3 (relating to what are the characteristics 16 of, and what requirements apply to, subordinate organizations of 17 Federal savings associations). 18 (d) Interpretation.--The provisions of this chapter shall be 19 interpreted and applied to the fullest extent practical in a 20 manner consistent with applicable Federal laws and regulations, 21 policies and orders of Federal regulatory agencies and shall not 22 be deemed to constitute an attempt to override Federal law. 23 § 6153. Preservation of existing contracts. 24 Nothing contained in this chapter shall be construed to 25 impair or affect first or secondary mortgage loans executed 26 prior to the effective date of this chapter. 27 Section 2. Title 18 is amended by adding a section to read: 28 § 7331. Unlicensed mortgage loan business. 29 A person that operates without a license in violation of 7 30 Pa.C.S. § 6111 (relating to license requirements) commits a 20080H2179B3197 - 48 -
1 felony of the third degree.
2 Section 3. Repeals.
3 (a) Intent.--The General Assembly declares that the repeals
4 under paragraph (2) are necessary to effectuate the provisions
5 of 7 Pa.C.S. Ch. 61.
6 (b) Provision.--The following acts and parts of acts are
7 repealed:
8 (1) Chapter 3 of the act of December 22, 1989 (P.L.687,
9 No.90), known as the Mortgage Bankers and Brokers and
10 Consumer Equity Protection Act.
11 (2) The act of December 12, 1980 (P.L.1179, No.219),
12 known as the Secondary Mortgage Loan Act.
13 Section 4. Transition shall be as follows:
14 (1) A license issued under an act repealed by section 3
15 of this act shall remain in full force and effect as a
16 transitional license, and loans may continue to be made under
17 the transitional license.
18 (2) The following are the requirements for a
19 transitional license:
20 (i) The person holding the license under the
21 repealed act must submit an application for a license
22 under 7 Pa.C.S. Ch. 61 within 60 days of the effective
23 date of this section. An application shall be valid under
24 this paragraph if the names, birth dates and addresses of
25 all individual mortgage solicitors required to be
26 licensed under 7 Pa.C.S. Ch. 61 and employed by the
27 license holder have also been listed with the department
28 as individuals currently employed as mortgage originators
29 who will be applying for individual licenses under 7
30 Pa.C.S. Ch. 61.
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1 (ii) Upon filing an application for a license under 2 7 Pa.C.S. Ch. 61, an applicant must proceed expeditiously 3 in accordance with the directions of the department. 4 (3) The department shall set forth for a reasonable time 5 period for transition under this section as a notice in the 6 Pennsylvania Bulletin. The time period shall be at least 90 7 days but not more than 180 days and shall include the 8 training and submission of applications by all mortgage loan 9 solicitors employed by the licensee. 10 Section 5. This act shall take effect in 60 days. B4L07VDL/20080H2179B3197 - 50 -