SENATE AMENDED PRIOR PRINTER'S NOS. 3197, 3237, 3578 PRINTER'S NO. 3862
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, YEWCIC AND CALTAGIRONE, FEBRUARY 6, 2008
SENATOR D. WHITE, BANKING AND INSURANCE, IN SENATE, AS AMENDED, JUNE 4, 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; providing for unlicensed mortgage 5 loan activity; and making related repeals. 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
1 MORTGAGE LOAN INDUSTRY LICENSING AND CONSUMER PROTECTION 2 Subch. 3 A. Preliminary Provisions 4 B. License Requirements and Exceptions 5 C. Mortgage Loan Business Restrictions and Requirements 6 D. Administrative and Licensure Provisions 7 E. Miscellaneous Provisions 8 SUBCHAPTER A 9 PRELIMINARY PROVISIONS 10 Sec. 11 6101. Scope of chapter. 12 6102. Definitions. 13 § 6101. Scope of chapter. 14 This chapter relates to mortgage loan industry licensing and 15 consumer protection. This chapter does not apply to a banking 16 institution or federally chartered or State-chartered credit 17 union, if the primary regulator of the banking institution or 18 federally or State-chartered credit union supervises the banking 19 institution or federally or State-chartered credit union. 20 § 6102. Definitions. 21 The following words and phrases when used in this chapter 22 shall have the meanings given to them in this section unless the 23 context clearly indicates otherwise: 24 "Advance fee." Any funds requested by or to be paid to a 25 person in advance of or during the processing of a mortgage loan 26 application, excluding those fees paid by a consumer directly to 27 a credit agency reporting bureau, title company or real estate 28 appraiser. 29 "Applicant." A person who applies for a license under this 30 chapter. 20080H2179B3862 - 2 -
1 "Banking institution." Any of the following: 2 (1) A State-chartered bank, bank and trust company, 3 savings bank or private bank. 4 (2) A national bank. 5 (3) A federally chartered or State-chartered savings 6 association. 7 (4) An operating subsidiary of any of the entities 8 listed under this definition. 9 "Billing cycle." In respect to open-end mortgage loans, the 10 time interval between periodic billing dates. A billing cycle 11 shall be considered to be a monthly cycle if the closing date of 12 the cycle is the same date each month or does not vary by more 13 than four days from that date. 14 "Branch." An office or other place of business, other than 15 the principal place of business, located in this Commonwealth or 16 any other state, where a person engages in the mortgage loan 17 business subject to this chapter. 18 "Consumer discount company." A licensee under the act of 19 April 8, 1937 (P.L.262, No.66), known as the Consumer Discount 20 Company Act. 21 "Department." The Department of Banking of the Commonwealth. 22 "Finder's fee" or "referral fee." Any payment of money or 23 other consideration for the referral of a mortgage loan to a 24 licensee, except for consideration paid for goods or facilities 25 actually furnished or services actually performed. 26 "First mortgage loan." A loan which is secured in whole or 27 in part by a first lien upon any interest in real property 28 created by a security agreement, including a mortgage, 29 indenture, deed of trust or any other similar instrument or 30 document, which real property is used as a one-family to four- 20080H2179B3862 - 3 -
1 family dwelling, a portion of which may be used for 2 nonresidential purposes. 3 "First mortgage loan business." The mortgage loan business 4 as applied to first mortgage loans. 5 "Licensee." A person who is licensed under this chapter. 6 "Lock-in agreement." An agreement between a mortgage lender 7 and a consumer whereby the mortgage lender guarantees, until a 8 specified date, the availability of a specified rate of interest 9 or specified formula by which the rate of interest and a 10 specific number of discount points will be determined, if the 11 mortgage loan is approved and closed by the specified date. If a 12 specified date is not determinable, the mortgage lender may 13 fulfill the requirement of this definition by setting forth with 14 specificity the method by which the duration of the lock-in 15 period will be determined. 16 "Mortgage broker." A person who engages in the mortgage loan 17 business by directly or indirectly negotiating or placing 18 mortgage loans for others in the primary market for 19 consideration. 20 "Mortgage lender." A person who engages in the mortgage loan 21 business by directly or indirectly originating and closing 22 mortgage loans with its own funds in the primary market for 23 consideration. 24 "Mortgage loan." A first or secondary mortgage loan, or 25 both, as the context may require. 26 "Mortgage loan business." The business of advertising, 27 causing to be advertised, soliciting, negotiating or arranging 28 in the ordinary course of business or offering to make or making 29 mortgage loans. 30 "Mortgage loan correspondent." A person who engages in the 20080H2179B3862 - 4 -
1 mortgage loan business by directly or indirectly originating and 2 closing mortgage loans in his or her own name utilizing funds 3 provided by a wholesale table funder or other funding sources 4 under the circumstances described under section 6123(6) 5 (relating to mortgage loan business prohibitions) and 6 simultaneously assigning the mortgage loans to the wholesale 7 table funder. 8 "Mortgage originator." An individual not licensed as a 9 mortgage lender, mortgage broker or loan correspondent under 10 this chapter who solicits, accepts or offers to accept mortgage 11 loan applications, or negotiates mortgage loan terms, in other 12 than a clerical or ministerial capacity and who is personally in 13 direct contact, in writing, including electronic messaging, or 14 by voice communication, with consumers with regard to the 15 solicitations, acceptances, offers or negotiations. The term 16 does not include directors, partners or ultimate equitable 17 owners of 10% or more of a licensee. 18 "Open-end loan." A mortgage loan made by a mortgage lender 19 under this chapter pursuant to an agreement between the mortgage 20 lender and the consumer whereby all of the following apply: 21 (1) The mortgage lender may permit the consumer to 22 obtain advances of money from the licensee from time to time 23 or the mortgage lender may advance money on behalf of the 24 consumer from time to time as directed by the consumer. 25 (2) The amount of each advance, interest and permitted 26 charges and costs are debited to the consumer's account and 27 payments and other credits are credited to the same account. 28 (3) Interest is computed on the unpaid principal balance 29 or balances of the account outstanding from time to time. 30 (4) The consumer has the privilege of paying the account 20080H2179B3862 - 5 -
1 in full at any time or, if the account is not in default, in 2 monthly installments of fixed or determinable amounts as 3 provided in the open-end loan agreement. 4 "Person." An individual, association, joint venture or 5 joint-stock company, partnership, limited partnership, limited 6 partnership association, limited liability company, business 7 corporation, nonprofit corporation or any other group of 8 individuals, however organized. 9 "Primary market." The market wherein mortgage loans are 10 originated between a lender and a consumer. 11 "Principal place of business." The primary office of a 12 person located in this Commonwealth which is staffed on a full- 13 time basis and at which the person's books, records, accounts 14 and documents are maintained. 15 "Secondary mortgage loan." A loan which is secured in whole 16 or in part by a lien upon any interest in real property created 17 by a security agreement, including a mortgage, indenture, deed 18 of trust or any other similar instrument or document, which real 19 property is subject to a prior lien and which is used as a one- 20 family to four-family dwelling, a portion of which may be used 21 for nonresidential purposes. 22 "Secondary mortgage loan business." The mortgage loan 23 business as applied to secondary mortgage loans. 24 "Tangible net worth." Net worth less the following assets: 25 (1) That portion of any assets pledged to secure 26 obligations of any person other than that of the applicant. 27 (2) Any asset, except construction loan receivables 28 secured by first mortgages from related companies, due from 29 officers or stockholders of the applicant or related 30 companies in which the applicant's officers or stockholders 20080H2179B3862 - 6 -
1 have an interest. 2 (3) That portion of the value of any marketable 3 security, listed or unlisted, not shown at lower of cost or 4 market value, except for any shares of Federal National 5 Mortgage Association stock required to be held under a 6 servicing agreement, which are carried at cost. 7 (4) Any amount in excess of the lower of the cost or 8 market value of mortgages in foreclosures, construction loans 9 or foreclosed property acquired by the applicant through 10 foreclosure. 11 (5) Any investment shown on the balance sheet in the 12 applicant's joint ventures, subsidiaries, affiliates or 13 related companies which is greater than the value of the 14 assets at equity. 15 (6) Goodwill. 16 (7) The value placed on insurance renewals or property 17 management contract renewals or other similar intangibles of 18 the applicant. 19 (8) Organization costs of the applicant. 20 (9) The value of any servicing contracts held by the 21 applicant not determined in accordance with the American 22 Institute of Certified Public Accountants Statement of 23 Position 76-2, dated August 25, 1976, or subsequent revisions 24 thereto. 25 (10) Any real estate held for investment where 26 development will not start within two years from the date of 27 its initial acquisition. 28 (11) Any leasehold improvements not being amortized over 29 the lesser of the expected life of the asset or the remaining 30 term of the lease. 20080H2179B3862 - 7 -
1 (12) Any fees paid or collected which are not 2 recoverable through the closing or selling of loans. 3 "Wholesale table funder." A licensed mortgage lender or 4 person exempt under section 6112(1) or (7) (relating to 5 exceptions to license requirements) who, in the regular course 6 of business, provides the funding for the closing of mortgage 7 loans through mortgage loan correspondents and who by assignment 8 obtains title to the mortgage loans. 9 SUBCHAPTER B 10 LICENSE REQUIREMENTS AND EXCEPTIONS 11 Sec. 12 6111. License requirements. 13 6112. Exceptions to license requirements. 14 § 6111. License requirements. 15 (a) General rule.--Except as provided under subsections (b) 16 and (c) and section 6112 (relating to exceptions to license 17 requirements), on and after the effective date of this section, 18 no person shall engage in the mortgage loan business in this 19 Commonwealth without being licensed as a mortgage broker, 20 mortgage lender, mortgage loan correspondent or mortgage 21 originator as provided under this chapter. A mortgage originator 22 may not engage in the mortgage loan business unless the mortgage 23 originator is employed and supervised by a licensed mortgage 24 broker, mortgage lender or mortgage loan correspondent. 25 (b) Licensed activity exceptions.-- 26 (1) A mortgage lender may act as a mortgage broker or 27 mortgage loan correspondent without a separate mortgage 28 broker or mortgage loan correspondent license and, if 29 licensed as an individual, may perform the services of a 30 mortgage originator without a separate mortgage originator 20080H2179B3862 - 8 -
1 license. 2 (2) A mortgage loan correspondent may act as a mortgage 3 broker without a separate mortgage broker license and, if 4 licensed as an individual, may perform the services of a 5 mortgage originator without a separate mortgage originator 6 license. 7 (3) A person licensed as a mortgage broker may only 8 perform the services of a mortgage broker. If a mortgage 9 broker is licensed as an individual, a mortgage broker may 10 perform the services of a mortgage originator without a 11 separate mortgage originator license. 12 (c) Loans for business or commercial purposes.--This chapter 13 shall not apply to mortgage loans made for business or 14 commercial purposes. 15 § 6112. Exceptions to license requirements. 16 The following persons shall not be required to be licensed 17 under this chapter in order to conduct the mortgage loan 18 business: 19 (1) A banking institution or a federally chartered or 20 State-chartered credit union, if the primary regulator of the 21 banking institution or federally chartered or State-chartered 22 credit union supervises the banking institution or federally 23 chartered or State-chartered credit union. 24 (2) An attorney authorized to practice law in this 25 Commonwealth not otherwise engaged in or holding himself or 26 herself out to the public as being engaged in the mortgage 27 loan business who acts as a mortgage broker in negotiating or 28 placing a mortgage loan in the normal course of legal 29 practice. 30 (3) A person who either originates, negotiates or 20080H2179B3862 - 9 -
1 services less than three mortgage loans in a calendar year in 2 this Commonwealth, unless the person is otherwise deemed to 3 be engaged in the mortgage loan business by the department. 4 (4) Any agency or instrumentality of the Federal 5 Government or a corporation otherwise created by an act of 6 the United States Congress, including the Federal National 7 Mortgage Association, the Government National Mortgage 8 Association, the Veterans' Administration, the Federal Home 9 Loan Mortgage Corporation and the Federal Housing 10 Administration. 11 (5) Any agency or instrumentality of a state or local 12 government, the District of Columbia or any territory of the 13 United States, including the Pennsylvania Housing Finance 14 Agency and other government housing finance agencies. 15 (6) Consumer discount companies, except that a consumer 16 discount company that acts as a mortgage broker, mortgage 17 lender or mortgage loan correspondent other than under the 18 provisions of the act of April 8, 1937 (P.L.262, No.66), 19 known as the Consumer Discount Company Act shall be subject 20 to the provisions of Subchapter C (relating to mortgage loan 21 business restrictions and requirements) and sections 22 6131(c)(2) and (3) (relating to application for license), 23 6135 (relating to licensee requirements), 6138 (relating to 24 authority of department) and 6140(b) (relating to penalties). 25 Employees of licensees under the Consumer Discount Company 26 Act that act as mortgage originators shall be subject to the 27 licensing requirements of this chapter. Consumer discount 28 companies that employ mortgage originators shall be subject 29 to the same requirements as mortgage lenders in regard to the 30 employment and supervision of mortgage originators. 20080H2179B3862 - 10 -
1 (7) Except for consumer discount companies, affiliates 2 of banking institutions and subsidiaries and affiliates of 3 federally chartered or State-chartered credit unions, except 4 that the subsidiaries and affiliates shall: 5 (i) be subject to the provisions of Subchapter C and 6 sections 6135(a)(2), (3), (4) and (5) AND (4), (b) and <-- 7 (c), 6138 and 6140(b); 8 (ii) deliver as required to the department annually 9 copies of financial reports made to all supervisory 10 agencies; and 11 (iii) be registered with the department. 12 (8) Employees of a mortgage broker, mortgage lender or 13 mortgage loan correspondent, to the extent that the employees 14 are not otherwise required to be licensed as mortgage 15 originators. 16 (9) Employees of excepted persons enumerated under this 17 section, unless otherwise provided under this subsection. 18 (10) A person that makes a mortgage loan to the person's 19 employee as an employment benefit if the person does not hold 20 itself out to the public as a mortgage lender. 21 (11) Nonprofit corporations not otherwise engaged in or 22 holding themselves out to the public as being engaged in the 23 mortgage loan business making mortgage loans to promote home 24 ownership or improvements for the disadvantaged. 25 (12) A nonprofit corporation not otherwise engaged in or 26 holding itself out to the public as being engaged in the 27 mortgage loan business which meets all of the following: 28 (i) Does not make more than 12 mortgage loans in a 29 calendar year with its own funds, not including funds 30 borrowed through warehouse lines of credit or other 20080H2179B3862 - 11 -
1 sources for the purpose of making mortgage loans. 2 (ii) Makes mortgage loans which are retained in the 3 corporation's own portfolios and not regularly sold to 4 others and are made to promote and advance the cultural 5 traditions and lifestyles of bona fide religious 6 organizations. 7 SUBCHAPTER C 8 MORTGAGE LOAN BUSINESS RESTRICTIONS AND REQUIREMENTS 9 Sec. 10 6121. General requirements. 11 6122. Powers conferred on certain licensees engaged in the 12 mortgage loan business. 13 6123. Mortgage loan business prohibitions. 14 6124. Prohibited clauses in mortgage loan documents. 15 6125. Mortgage lending authority. 16 6126. Requirements as to open-end loans. 17 § 6121. General requirements. 18 A licensee shall do all of the following: 19 (1) Comply with all provisions of the act of January 30, 20 1974 (P.L.13, No.6), referred to as the Loan Interest and 21 Protection Law (Usury Law). This paragraph shall not 22 supersede section 501 of the Depository Institutions 23 Deregulation and Monetary Control Act of 1980 (94 Stat. 161, 24 12 U.S.C. § 1735f-7a) or the Alternative Mortgage Transaction 25 Parity Act of 1982 (96 Stat. 1545, 12 U.S.C. §§ 3801-3806 et 26 seq.). 27 (2) Comply with the provisions of the act of December 3, 28 1959 (P.L.1688, No.621), known as the Housing Finance Agency 29 Law, that are applicable to the licensee. 30 (3) Comply with all applicable Federal law, including 20080H2179B3862 - 12 -
1 the Real Estate Settlement Procedures Act (88 Stat. 1724, 12 2 U.S.C. §§ 2601 et seq.), the Truth in Lending Act (82 Stat. 3 146, 15 U.S.C. §§ 1601 et seq.) and the Equal Credit 4 Opportunity Act (88 Stat. 1521, 15 U.S.C. §§ 1691 et seq.). 5 (4) Give to the consumer a copy of the promissory note 6 evidencing the mortgage loan and any mortgage loan agreement, 7 mortgage instrument or other document evidencing a mortgage 8 loan signed by the consumer. 9 (5) Give to the consumer written evidence of credit 10 life, credit and accident and health, credit unemployment and 11 property insurance, if any, provided by the licensee to the 12 consumer. 13 (6) If a payment is made in cash on account of a 14 mortgage loan, give to the consumer at the time the payment 15 is actually received a written receipt which shall show the 16 account number or other identification mark or symbol, date, 17 amount paid and, upon request of the consumer, the unpaid 18 balance of the account prior to and after the cash payment. 19 (7) Upon written request from the consumer, give or 20 forward to the consumer within ten days from the date of 21 receipt of the request a written statement of the consumer's 22 account which shall show the dates and amounts of all 23 installment payments credited to the consumer's account, the 24 dates, amounts and an explanation of all other charges or 25 credits to the account and the unpaid balance of the account. 26 A licensee shall not be required to furnish more than two 27 statements in any 12-month period. 28 (8) If a mortgage loan is paid in full and, in the case 29 of an open-end loan, the mortgage lender is no longer 30 obligated to make future advances to the consumer, the 20080H2179B3862 - 13 -
1 mortgage lender shall do all of the following: 2 (i) Cancel any insurance provided by the licensee in 3 connection with the mortgage loan and refund to the 4 consumer, in accordance with regulations promulgated by 5 the Insurance Department, any unearned portion of the 6 premium for the insurance. 7 (ii) Stamp or write on the face of the mortgage loan 8 agreement or promissory note evidencing the mortgage loan 9 "Paid in Full" or "Canceled," the date paid and, within 10 60 days, return the mortgage loan agreement or promissory 11 note to the consumer. 12 (iii) Release any lien on real property and cancel 13 the same of record and, at the time the mortgage loan 14 agreement or promissory note evidencing the mortgage loan 15 is returned, deliver to the consumer good and sufficient 16 assignments, releases or any other certificate, 17 instrument or document as may be necessary to evidence 18 the release. 19 (9) Provide for periodic accounting of any escrow 20 accounts held by the mortgage lender to the consumer not less 21 than annually, showing the amounts received from the consumer 22 and the amounts disbursed from the accounts. 23 (10) Refund all fees, other than those fees paid by the 24 licensee to a third party, paid by a consumer when a mortgage 25 loan is not produced within the time specified by the 26 mortgage broker, mortgage lender or mortgage loan 27 correspondent at the rate, term and overall cost agreed to by 28 the consumer. This paragraph shall not apply if the failure 29 to produce a mortgage loan is due solely to the consumer's 30 negligence, his or her refusal to accept and close on a loan 20080H2179B3862 - 14 -
1 commitment or his or her refusal or inability to provide 2 information necessary for processing, including employment 3 verifications and verifications of deposits. The licensee 4 shall disclose to the consumer, in writing, at the time of a 5 loan application which fees paid or to be paid are 6 nonrefundable. 7 (11) Ensure that all lock-in agreements shall be in 8 writing and shall contain at least the following provisions: 9 (i) The expiration date of the lock-in, if any. 10 (ii) The interest rate locked in, if any. 11 (iii) The discount points locked in, if any. 12 (iv) The fee locked in, if any. 13 (v) The lock-in fee, if any. 14 (12) Upon written request from the consumer or a person 15 authorized by the consumer, provide, within ten days from the 16 date of receipt of the request, a written statement regarding 17 the unpaid balance of a consumer's mortgage loan or account. 18 The statement shall contain the total amount required to pay 19 off a mortgage loan and a specific expiration date for the 20 payoff information. A licensee shall not be required to 21 furnish more than two statements in any 12-month period. 22 (13) In the case of a mortgage broker, mortgage lender or 23 mortgage loan correspondent, do all of the following: 24 (i) Maintain supervision and control of and 25 responsibility for the acts and omissions of all mortgage 26 originators employed by the licensee. 27 (ii) Maintain a list of all current and former 28 mortgage originators employed by the licensee and the 29 dates of the employment. 30 (iii) In the event that a licensee believes that a 20080H2179B3862 - 15 -
1 mortgage originator employed by the licensee has engaged 2 in any activity that is illegal or in violation of this 3 chapter or any regulation or statement of policy 4 promulgated under this chapter, the licensee shall 5 provide the department with written notification of the 6 belief and the licensee's proposed corrective measures 7 within 30 days. A licensee shall not be liable to a 8 mortgage originator in connection with the notification. 9 § 6122. Powers conferred on certain licensees engaged in the 10 mortgage loan business. 11 (a) Mortgage lenders.--If they are in compliance with the 12 provisions of this chapter, all mortgage lenders engaged in the 13 mortgage loan business shall have power and authority: 14 (1) To make first and secondary mortgage loans AND, <-- 15 SUBJECT TO THE LIMITATIONS OF THIS CHAPTER, TO CHARGE AND 16 COLLECT APPLICATION FEES FOR THE LOANS. 17 (2) To collect fees or premiums for title examination, 18 abstract of title, title insurance, credit reports, surveys, 19 appraisals, notaries, postage, including messenger and 20 express carrier, tax service or other costs or fees actually 21 related to the processing of a mortgage loan application or 22 making of a mortgage loan, when the fees are actually paid or 23 incurred by the licensee and to collect fees or charges 24 prescribed by law which actually are or will be paid to 25 public officials for determining the existence of or for 26 perfecting or releasing or satisfying any security related to 27 the mortgage loan and include these in the principal of the 28 mortgage loan. 29 (3) To provide access to credit life, credit disability, 30 credit accident and health and credit unemployment insurance. 20080H2179B3862 - 16 -
1 A consumer shall not be compelled to purchase credit life, 2 credit disability, credit accident and health or credit 3 unemployment insurance as a condition of the making of a 4 mortgage loan, and all contracts utilized shall reflect a 5 clear disclosure that the purchase of credit life, credit 6 disability, credit accident and health or credit unemployment 7 insurance is not a prerequisite to obtaining a mortgage loan. 8 If, however, the consumer elects to obtain credit life, 9 credit disability, credit accident and health or credit 10 unemployment insurance through the licensee, the consumer 11 shall consent thereto in writing. If consumers desire joint- 12 life or joint accident and health insurance, all consumers 13 shall consent thereto in writing. The insurance shall be 14 obtained from an insurance company authorized by the laws of 15 this Commonwealth to conduct business in this Commonwealth. 16 Any benefit or return to the licensee from the sale or 17 provision of the insurance shall not be included in the 18 computation of the maximum charge authorized for mortgage 19 loans under this chapter and shall not be deemed a violation 20 of this chapter when the insurance is written pursuant to the 21 laws of this Commonwealth governing insurance. 22 (4) To require property insurance on security against 23 reasonable risks of loss, damage and destruction and to 24 provide access to the insurance to the consumer. The amount 25 and term of the insurance shall be reasonable in relation to 26 the amount and term of the mortgage loan contract and the 27 value of the security. This requirement shall be satisfied if 28 the consumer demonstrates at the time the mortgage loan is 29 made that the consumer has valid and collectible insurance 30 covering the property to be insured and has furnished the 20080H2179B3862 - 17 -
1 licensee with a loss payable endorsement sufficient for the 2 protection of the licensee. If the consumer elects to obtain 3 property insurance through the licensee, the consumer shall 4 consent thereto in writing, and the insurance shall be 5 obtained from an insurance company authorized by the laws of 6 this Commonwealth to conduct business in this Commonwealth. 7 Any benefit or return to the licensee from the sale or 8 provision of property insurance shall not be included in the 9 computation of the maximum charge authorized for mortgage 10 loans under this chapter and shall not be deemed a violation 11 of this chapter when the insurance is written pursuant to the 12 laws of this Commonwealth governing insurance. The premium 13 for any property insurance may be included in the principal 14 amount of the mortgage loan requested by the consumer. 15 However, the premium shall be disclosed as a separate item on 16 the face of the principal contract document and the 17 licensee's individual consumer ledger records. 18 (5) To collect a fee for a subsequent dishonored check 19 or instrument taken in payment, not to exceed the service 20 charge permitted to be imposed under 18 Pa.C.S. § 4105 21 (relating to bad checks). 22 (b) Mortgage brokers and loan correspondents.--Provided they 23 are in compliance with the provisions of this chapter, all 24 mortgage brokers and mortgage loan correspondents shall have 25 power and authority: 26 (1) To collect title examination, credit report and 27 appraisal fees actually related to the making of a mortgage 28 loan when the fees are actually paid or incurred by the 29 licensee and to include the fees in the principal of the 30 mortgage loan which is being negotiated or arranged. 20080H2179B3862 - 18 -
1 (2) To charge a broker's fee if the fee is disclosed to 2 the consumer for whom the loan is being negotiated or 3 arranged. 4 (3) To accept from a licensee a fee or premium for 5 brokering or cobrokering a mortgage loan, provided that the 6 payment and acceptance of the fee or premium is in compliance 7 with Federal law, including the Real Estate Settlement 8 Procedures Act of 1974 (Public Law 93-533, 88 Stat. 1724). 9 § 6123. Mortgage loan business prohibitions. 10 A licensee engaging in the mortgage loan business shall not: 11 (1) Charge, contract for, collect or receive charges, 12 fees, premiums, commissions or other considerations in excess 13 of those authorized by the provisions of THE LIMITATIONS OF <-- 14 THOSE CONTAINED IN 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 20080H2179B3862 - 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 20080H2179B3862 - 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 section 501 of the Depository Institution Deregulation and 26 Monetary Control Act of 1980 (94 Stat. 161, 12 U.S.C. § 27 1735f-7a). 28 (b) Secondary mortgage loans.--Mortgage lenders engaged in 29 the secondary mortgage loan business may: 30 (1) if the licensee is qualified, make secondary 20080H2179B3862 - 21 -
1 mortgage loans on terms as are permissible under applicable 2 Federal law, including the Alternative Mortgage Transaction 3 Parity Act of 1982; or 4 (2) (i) make secondary mortgage loans repayable in 5 installments and charge, contract for and receive thereon 6 interest at a rate not exceeding 1.85% per month. No 7 interest shall be paid, deducted or received in advance, 8 except that interest from the date of disbursement of 9 funds to the consumer to the first day of the following 10 month and shall be permitted in the event the first 11 installment payment is more than 30 days after the date 12 of disbursement. Interest shall not be compounded and 13 shall be computed only on unpaid principal balances. 14 However, the inclusion of earned interest in a new note 15 shall not be considered compounding. For the purpose of 16 computing interest, a month shall be any period of 30 17 consecutive days; 18 (ii) charge and collect an application fee not 19 exceeding 3% of the original principal amount of the 20 SECONDARY mortgage loan. The fee shall be fully earned at <-- 21 the time the SECONDARY mortgage loan is made and may be <-- 22 added to the principal amount of the SECONDARY mortgage <-- 23 loan. No application fee may be collected on subsequent 24 advances made pursuant to an open-end loan if the full 25 fee of 3% of the credit limit was collected at the time 26 the open-end loan was made; or 27 (iii) charge and collect a delinquency charge of $20 28 or 10% of each payment, whichever is greater, for a 29 payment which is more than 15 days late. 30 § 6126. Requirements as to open-end loans. 20080H2179B3862 - 22 -
1 The following shall apply: 2 (1) A mortgage lender may make open-end loans and may 3 contract for and receive thereon interest and charges as set 4 forth under this chapter. 5 (2) A mortgage lender shall not compound interest by 6 adding any unpaid interest authorized by this section to the 7 unpaid principal balance of the consumer's account, provided 8 however, that the unpaid principal balance may include the 9 additional charges authorized by this subchapter. 10 (3) Interest authorized by this section shall be deemed 11 not to exceed the maximum interest permitted by this 12 subchapter if the interest is computed in each billing cycle 13 by any of the following methods: 14 (i) by converting the monthly rate to a daily rate 15 and multiplying the daily rate by the applicable portion 16 of the daily unpaid principal balance of the account, in 17 which case the daily rate shall be 1/30 of the monthly 18 rate; 19 (ii) by multiplying the monthly rate by the 20 applicable portion of the average monthly unpaid 21 principal balance of the account in the billing cycle, in 22 which case the average daily unpaid principal balance is 23 the sum of the amount unpaid each day during the cycle 24 divided by the number of days in the cycle; or 25 (iii) by converting the monthly rate to a daily rate 26 and multiplying the daily rate by the average daily 27 unpaid principal balance of the account in the billing 28 cycle, in which case the daily rate shall be 1/30 of the 29 monthly rate. 30 (4) For all of the methods of computation in paragraph 20080H2179B3862 - 23 -
1 (3)(i), (ii) and (iii), the billing cycle shall be monthly, 2 and the unpaid principal balance on any day shall be 3 determined by adding to any balance unpaid as of the 4 beginning of that day all advances and other permissible 5 amounts charged to the consumer and deducting all payments 6 and other credits made or received that day. 7 (5) The consumer may at any time pay all or any part of 8 the unpaid balance in the consumer's account without 9 prepayment penalty or, if the account is not in default, the 10 consumer may pay the unpaid principal balance in monthly 11 installments. Minimum monthly payment requirements shall be 12 determined by the licensee and set forth in the agreement 13 evidencing the open-end loan. 14 (6) A mortgage lender may contract for and receive the 15 fees, costs and expenses permitted by this subchapter on 16 other first or secondary mortgage loans, subject to all the 17 conditions and restrictions set forth in this subchapter, 18 with the following variations: 19 (i) If credit life or disability insurance is 20 provided and if the insured dies or becomes disabled when 21 there is an outstanding open-end loan indebtedness, the 22 insurance shall be sufficient to pay the total balance of 23 the loan due on the date of the consumer's death in the 24 case of credit life insurance, or all minimum payments 25 which become due on the loan during the covered period of 26 disability in the case of credit disability insurance. 27 The additional charge for credit life insurance or credit 28 disability insurance shall be calculated in each billing 29 cycle by applying the current monthly premium rate for 30 insurance, as the rate may be determined by the Insurance 20080H2179B3862 - 24 -
1 Commissioner, to the unpaid balances in the consumer's 2 account, using any of the methods specified in paragraph 3 (3) for the calculation of loan charges. 4 (ii) No credit life or disability insurance written 5 in connection with an open-end loan shall be canceled by 6 the licensee because of delinquency of the consumer in 7 the making of the required minimum payments on the loan 8 unless one or more of the payments is past due for a 9 period of 90 days or more, and the licensee shall advance 10 to the insurer the amounts required to keep the insurance 11 in force during the period, which amounts may be debited 12 to the consumer's account. 13 (iii) The amount, terms and conditions of any 14 insurance against loss or damage to property must be 15 reasonable in relation to character and value of the 16 property insured and the maximum anticipated amount of 17 credit to be extended. 18 (7) Notwithstanding any other provisions in this chapter 19 to the contrary, a mortgage lender may retain any security 20 interest in real or personal property until the open-end loan 21 is terminated, provided that, if there is no outstanding 22 balance in the account and there is no commitment by the 23 licensee to make advances, the mortgage lender shall, within 24 ten days following written demand by the consumer, deliver to 25 the consumer a release of the mortgage, indenture, deed of 26 trust or any other similar instrument or document on any real 27 property taken as security for the open-end loan. The 28 mortgage lender shall include on all billing statements 29 provided in connection with an open-end loan a statement that 30 the licensee retains a security interest in the consumer's 20080H2179B3862 - 25 -
1 real property whenever the security interest has not been 2 released. 3 (8) A mortgage lender may charge, contract for, receive 4 or collect on any open-end loan account an annual fee not to 5 exceed $50 per year. 6 SUBCHAPTER D 7 ADMINISTRATIVE AND LICENSURE PROVISIONS 8 Sec. 9 6131. Application for license. 10 6132. License fees. 11 6133. Issuance of license. 12 6134. License duration. 13 6135. Licensee requirements. 14 6136. Licensee limitations. 15 6137. Surrender of license. 16 6138. Authority of department. 17 6139. Suspension, revocation or refusal. 18 6140. Penalties. 19 § 6131. Application for license. 20 (a) Contents.--An application for a license under this 21 chapter shall be on a form prescribed and provided by the 22 department. 23 (1) In the case of a mortgage broker, mortgage lender or 24 mortgage loan correspondent, the application shall include 25 the following: 26 (i) The name of the applicant. 27 (ii) The address of the principal place of business 28 of the applicant and the address or addresses where the 29 applicant's mortgage loan business is to be conducted. 30 (iii) The full name, official title and business 20080H2179B3862 - 26 -
1 address of each director and principal officer of the 2 mortgage loan business. 3 (iv) Any other information that may be required by 4 the department. 5 (2) In the case of a mortgage originator, the 6 application shall include the following: 7 (i) The name of the applicant. 8 (ii) The name of the employer licensee of the 9 applicant and location of the employer licensee to which 10 the applicant is assigned. 11 (iii) Any other information that may be required by 12 the department. 13 (3) An applicant shall demonstrate to the department 14 that policies and procedures have been developed to receive 15 and process consumer inquiries and grievances promptly and 16 fairly. 17 (b) Duty to update.--All applicants and licensees shall be 18 required to provide the department with written notice of the 19 change in any information contained in an application for a 20 license or for any renewal of a license within ten days of an 21 applicant or licensee becoming aware of the change. 22 (c) Mortgage lender license.--The department shall issue a 23 mortgage lender license applied for under this chapter if the 24 applicant has: 25 (1) Been approved by or meets the current criteria for 26 approval of at least one of the following: 27 (i) Federal National Mortgage Association. 28 (ii) Federal Home Loan Mortgage Corporation. 29 (iii) Federal Housing Administration. 30 (2) Been approved for and will continue to maintain as a 20080H2179B3862 - 27 -
1 licensee a line of credit, repurchase agreement or equivalent 2 mortgage-funding capability of not less than $1,000,000. 3 (3) Established a minimum tangible net worth of $250,000 4 at the time of application and will, at all times thereafter, 5 maintain the minimum tangible net worth. 6 (4) Been approved for and will continue to maintain as a 7 licensee fidelity bond coverage in accordance with the 8 guidelines established by the Federal National Mortgage 9 Association or the Federal Home Loan Mortgage Corporation. 10 (d) Mortgage loan correspondent license.--The department 11 shall issue a loan correspondent's license applied for under 12 this chapter if the applicant: 13 (1) Obtains and will maintain a bond in the amount of 14 $100,000, in a form acceptable to the department, prior to 15 the issuance of the license, from a surety company authorized 16 to do business in this Commonwealth. The bond shall run to 17 the Commonwealth and shall be for the use of the Commonwealth 18 and any person or persons who obtain a judgment against the 19 mortgage loan correspondent for failure to carry out the 20 terms of any provision for which advance fees are paid. No 21 bond shall comply with the requirements of this section 22 unless it contains a provision that it shall not be canceled 23 for any cause unless notice of intention to cancel is given 24 to the department at least 30 days before the day upon which 25 cancellation shall take effect. 26 (2) Establishes a minimum tangible net worth of $100,000 27 at the time of application and will, at all times thereafter, 28 maintain the minimum tangible net worth. 29 (e) Mortgage broker license.-- 30 (1) The department shall issue a mortgage broker license 20080H2179B3862 - 28 -
1 applied for under this chapter if the applicant obtains and 2 will maintain a bond in the amount of $100,000, in a form 3 acceptable to the department, prior to the issuance of the 4 license, from a surety company authorized to do business in 5 this Commonwealth. The bond shall be a penal bond conditioned 6 on compliance with this chapter and subject to forfeiture by 7 the department and shall run to the Commonwealth for its use. 8 The bond shall also be for the use of any person against the 9 mortgage broker for failure to carry out the terms of any 10 provision for which advance fees are paid. If the person is 11 aggrieved, the person may, with the written consent of the 12 department, recover advance fees and costs from the bond by 13 filing a claim with the surety company or maintaining an 14 action on the bond. In the alternative, an aggrieved person 15 may recover advance fees and costs by filing a formal 16 complaint against the mortgage broker with the department 17 which shall adjudicate the matter. The adjudication shall be 18 binding upon the surety company and enforceable by the 19 department in Commonwealth Court and by an aggrieved person 20 in any court. Any aggrieved person seeking to recover advance 21 fees and costs from a bond that has already been forfeited by 22 the department or which the department is in the process of 23 forfeiting may recover payment on the bond if, after filing a 24 petition with the department, the department consents to the 25 aggrieved person's requested payment or portion thereof. The 26 department may pay the aggrieved person from the bond 27 proceeds it recovers. Nothing in this section shall be 28 construed as limiting the ability of any court or magisterial 29 district judge to award to any aggrieved person other 30 damages, court costs and attorney fees as permitted by law, 20080H2179B3862 - 29 -
1 but those claims that are not advance fees or related costs 2 may not be recovered from the bond. The department, in its 3 discretion, may consent to or order pro rata or other 4 recovery on the bond for any aggrieved person if claims 5 against the bond may or do exceed its full monetary amount. 6 No bond shall comply with the requirements of this section 7 unless it contains a provision that it shall not be canceled 8 for any cause unless notice of intention to cancel is given 9 to the department at least 30 days before the day upon which 10 cancellation shall take effect. Cancellation of the bond 11 shall not invalidate the bond regarding the period of time it 12 was in effect. 13 (2) Mortgage brokers who can demonstrate to the 14 satisfaction of the department that they do not and will not 15 accept advance fees shall be exempt from the bond requirement 16 of this subsection. 17 (f) Mortgage originator license.--A mortgage originator 18 shall be an employee of a single mortgage broker, mortgage 19 lender or mortgage loan correspondent licensed under this 20 chapter, which licensee shall directly supervise, control and 21 maintain responsibility for the acts and omissions of the 22 mortgage originator. A mortgage originator shall be assigned to 23 and work out of a licensed location of the employer licensee. 24 (g) Education.-- 25 (1) In order to obtain a license under this chapter, an 26 applicant shall submit to the department with its application 27 evidence that the applicant or an officer of the applicant, <-- 28 IN THE CASE OF A MORTGAGE ORIGINATOR APPLICANT, OR A 29 DIRECTOR, PARTNER OR ULTIMATE EQUITABLE OWNER OF AT LEAST 10% 30 OF A LICENSEE, IN THE CASE OF ANY OTHER LICENSE APPLICANT, 20080H2179B3862 - 30 -
1 has successfully completed a minimum of 12 hours of 2 instruction and a testing program regarding the first and 3 secondary mortgage loan businesses and the provisions of this 4 chapter, the act of January 30, 1974 (P.L.13, No.6), referred 5 to as the Loan Interest and Protection Law and relevant 6 Federal law including the Real Estate Settlement Procedures 7 Act of 1974 (Public Law 93-533, 88 Stat. 1724), Truth in 8 Lending provisions of Title I of the Consumer Credit 9 Protection Act (Public Law 90-321, 15 U.S.C. § 1601 et seq.) 10 and the Equal Credit Opportunity Act (Public Law 93-495, 15 11 U.S.C. § 1691 et seq.). 12 (2) In order to maintain a license: 13 (i) A mortgage broker, mortgage lender or mortgage 14 loan correspondent shall demonstrate to the satisfaction 15 of the department that at least one individual from each 16 licensed office that is not a mortgage originator, and 17 all mortgage originators employed by the licensee, have 18 attended a minimum of six hours of continuing education 19 each year. 20 (ii) A mortgage originator licensee shall 21 demonstrate to the satisfaction of the department that 22 the licensee has attended a minimum of six hours of 23 continuing education each year. 24 (3) The department shall delineate the requirements for 25 prequalification education and testing and continuing 26 education by regulation. The department may review and 27 approve education programs and providers to satisfy the 28 education requirements. Providers of prequalification 29 education and testing and continuing education programs may 30 include the licensee or a subsidiary or affiliate of the 20080H2179B3862 - 31 -
1 licensee. The department may charge providers of education 2 programs a fee, to be determined by the department, for 3 department review of education programs and providers. 4 (h) License renewals.--Licenses shall be issued for terms of 5 12 months and may be renewed by the department each year on a 6 schedule set by the department upon application by the licensee 7 and the payment of any and all applicable renewal fees. The 8 licensee shall demonstrate to the department that it is 9 conducting the mortgage loan business in accordance with the 10 requirements of this chapter and that the directors, officers, 11 partners, employees, agents and ultimate equitable owners of 10% 12 or more of the licensee continue to meet all of the initial 13 requirements for licensure required by this chapter unless 14 otherwise determined by the department. 15 (i) Out-of-State applicants.-- 16 (1) If an applicant is not a resident of this 17 Commonwealth, as a condition to receiving a license under 18 this chapter, the applicant shall be authorized to do 19 business in this Commonwealth in accordance with the laws of 20 this Commonwealth regulating corporations and other entities 21 conducting business in this Commonwealth and shall maintain 22 at least one office in this Commonwealth which is the office 23 that shall be licensed as the principal place of business for 24 the purposes of this chapter. Wholesale table funders shall 25 be exempt from the requirement to maintain at least one 26 office in this Commonwealth. 27 (2) Out-of-State applicants shall file with the license 28 application an irrevocable consent, duly acknowledged, that 29 suits and actions may be commenced against that person in the 30 courts of this Commonwealth by the service of process of any 20080H2179B3862 - 32 -
1 pleading upon the department in the usual manner provided for 2 service of process and pleadings by the laws and court rules 3 of this Commonwealth. The consent shall provide that this 4 service shall be as valid and binding as if service had been 5 made personally upon the person in this Commonwealth. In all 6 cases where process or pleadings are served upon the 7 department under the provisions of this section, the process 8 or pleadings shall be served in triplicate, one copy shall be 9 filed in the department's offices and the others shall be 10 forwarded by the department, by certified or registered mail, 11 return receipt requested, to the last known principal place 12 of business of the person. 13 § 6132. License fees. 14 (a) Initial application fees.--An applicant shall pay to the 15 department at the time an application is filed an initial 16 nonrefundable application fee as set forth under this 17 subsection. 18 (1) For mortgage lenders and mortgage loan 19 correspondents, $1,500 for the principal place of business in 20 this Commonwealth and an additional fee of $1,500 for each 21 branch office. 22 (2) For mortgage brokers, $1,000 for the principal place 23 of business in this Commonwealth and an additional fee of 24 $250 for each branch office. 25 (3) Subject to the limitations under subsection (c), for <-- 26 mortgage originators, $100. 27 (3) FOR MORTGAGE ORIGINATORS, $200. <-- 28 (b) Renewal fees.--Prior to each annual renewal of a 29 license, a licensee shall pay to the department a nonrefundable 30 license renewal fee as set forth under this subsection. 20080H2179B3862 - 33 -
1 (1) For mortgage lenders and mortgage loan 2 correspondents, $750 for the principal place of business in 3 this Commonwealth and an additional fee of $750 for each 4 branch office. 5 (2) For mortgage brokers, $500 for the principal place 6 of business in this Commonwealth and an additional fee of 7 $250 for each branch office. 8 (3) Subject to the limitations under subsection (c), for <-- 9 FOR mortgage originators, $100. <-- 10 (c) Fee limitation.--For a licensee that employs 50 or more <-- 11 mortgage originators, the initial application fee and license 12 renewal fee shall be $50 per mortgage originator, to a maximum 13 of $10,000 total per year. 14 (d) (C) No abatement of fee.--No abatement of a licensee fee <-- 15 shall be made if the license is issued for a period of less than 16 one year. 17 § 6133. Issuance of license. 18 (a) Time limit.--Within 60 days after a completed 19 application is received, the department shall either issue a 20 license, or for any reason which the department may refuse to 21 issue a license under this section or for which the department 22 may suspend, revoke or refuse to renew a license under section 23 6139 (relating to suspension, revocation or refusal), refuse to 24 issue a license. The 60-day time limit specified in this 25 subsection may be extended by the department for an additional 26 30 days if the department determines that the extension is 27 necessary. The department shall provide written notification to 28 any applicant whose application review has been extended and 29 include the final date by which a decision shall be rendered 30 regarding the application. 20080H2179B3862 - 34 -
1 (a.1) Investigations.--Upon receipt of an application for a 2 license, the department may conduct an investigation of the 3 applicant or a director, officer, partner, employee, agent or 4 ultimate equitable owner of 10% or more of the applicant as it 5 deems necessary. 6 (b) Appeal of denial.--If the department refuses to issue a 7 license, it shall notify the applicant in writing of the denial, 8 the reason for the denial and the applicant's right to appeal 9 the denial to the Secretary of Banking. An appeal from the 10 department's refusal to approve an application for a license 11 must be filed by the applicant within 30 days of notice of 12 refusal. 13 (c) Contents of license.--Each license issued by the 14 department shall specify: 15 (1) The name and address of the licensee and the address 16 or addresses covered by the license, the address so specified 17 to be that of the licensee's principal place of business 18 within this Commonwealth, or for a licensee acting only in 19 the capacity of a wholesale table funder, either in or 20 outside of this Commonwealth. 21 (2) The licensee's reference number. 22 (3) Any other information the department shall require 23 to carry out the purposes of this chapter. 24 (d) Denial of license due to conviction.-- 25 (1) The department may deny a license if it finds that 26 the applicant or a director, officer, partner, employee, 27 agent or ultimate equitable owner of 10% or more of the 28 applicant has been convicted of a crime of moral turpitude or 29 felony in any jurisdiction or of a crime which, if committed 30 in this Commonwealth, would constitute a crime of moral 20080H2179B3862 - 35 -
1 turpitude or felony. For the purposes of this subsection, a 2 person shall be deemed to have been convicted of a crime if 3 the person: 4 (i) pleads guilty or nolo contendere to a criminal 5 charge before a court or Federal magistrate; or 6 (ii) is found guilty by the decision or judgment of 7 a court or Federal magistrate or by the verdict of a 8 jury, irrespective of the pronouncement of sentence or 9 the suspension thereof, unless the plea of guilty or nolo 10 contendere or the decision, judgment or verdict is set 11 aside, vacated, reversed or otherwise abrogated by lawful 12 judicial process. 13 (2) A license under this chapter shall be deemed to be a 14 covered license within the meaning of section 405 of the act 15 of May 15, 1933 (P.L.565, No.111), known as the Department of 16 Banking Code. The department shall notify a licensee if a 17 covered individual within the meaning of section 405 of the 18 Department of Banking Code that is or will be employed or 19 contracted by the licensee has a criminal background that 20 renders the employee unfit for employment in the mortgage 21 loan business. 22 (e) Denial of license for other reason.--The department may 23 deny a license or otherwise restrict a license if it finds that 24 the applicant or a director, officer, partner, employee, agent 25 or ultimate equitable owner of 10% or more of the applicant: 26 (1) has had a license application or license issued by 27 the department denied, not renewed, suspended or revoked; 28 (2) is the subject of an order of the department; 29 (3) has violated or failed to comply with any provision 30 of this chapter or any regulation, statement of policy or 20080H2179B3862 - 36 -
1 order of the department; 2 (4) does not possess the financial responsibility, 3 character, reputation, integrity and general fitness to 4 command the confidence of the public and to warrant the 5 belief that the mortgage loan business will be operated 6 lawfully, honestly, fairly and within the legislative intent 7 of this chapter and in accordance with the general laws of 8 this Commonwealth; or 9 (5) has an outstanding debt to the Commonwealth or any 10 Commonwealth agency. 11 (f) Conditional licenses.--The department may impose 12 conditions on the issuance of any license under this chapter. If 13 the department determines that conditions imposed upon a 14 licensee have not been fulfilled, the department may take any 15 action authorized under this chapter against the licensee that 16 the department deems necessary. In the case of mortgage 17 originator applicants, the department may issue mortgage 18 originator licenses effective immediately upon receipt of an 19 application, which licenses shall be conditional licenses issued 20 under this subsection. 21 § 6134. License duration. 22 A license issued by the department shall be subject to all of 23 the following limitations: 24 (1) Be renewed on the licensee's renewal date each year 25 upon completion of the requirements of section 6131(h) 26 (relating to application for license). No refund of any 27 portion of the license fee shall be made if the license is 28 voluntarily surrendered to the department or suspended or 29 revoked by the department prior to its expiration date. 30 (2) Be invalid if the licensee's authority to conduct 20080H2179B3862 - 37 -
1 business is voided under any law of this Commonwealth or any 2 other state, unless the licensee demonstrates to the 3 satisfaction of the department that the applicable court or 4 governmental entity was clearly erroneous in voiding the 5 licensee's authority to conduct business. 6 (3) Not be assignable or transferable by operation of 7 law or otherwise. 8 § 6135. Licensee requirements. 9 (a) Requirements of licensee.-- 10 (1) A licensee who is a mortgage broker, mortgage lender 11 or mortgage loan correspondent shall conspicuously display, 12 at each licensed place of business, its license and copies of 13 the licenses of all mortgage originators assigned to that 14 location. A licensee who is a mortgage originator shall keep 15 the license in the immediate possession of the licensee 16 whenever the licensee is engaged in the mortgage loan 17 business. 18 (2) Each licensee shall maintain at its principal place 19 of business within this Commonwealth, or at such place within 20 or outside this Commonwealth if agreed to by the department, 21 the original or a copy of any books, accounts, records and 22 documents, or electronic or similar access thereto, of the 23 business conducted under the license as prescribed by the 24 department to enable the department to determine whether the 25 business of the licensee is being conducted in accordance 26 with the provisions of this chapter and the regulations, 27 statements of policy or orders issued under this chapter. The 28 department shall have free access to and authorization to 29 examine records maintained within or outside this 30 Commonwealth by the licensee. The costs of the examination, 20080H2179B3862 - 38 -
1 including travel costs, shall be borne by the licensee. The 2 department may deny or revoke the authority to maintain 3 records within or outside this Commonwealth for good cause in 4 the interest of protection for Commonwealth consumers, 5 including for the licensee's failure to provide books, 6 accounts, records or documents to the department upon 7 request. 8 (3) A mortgage broker, mortgage lender or mortgage loan 9 correspondent, on a date determined by the department, shall 10 file annually a report with the department setting forth such 11 information as the department shall require concerning the 12 first or secondary mortgage loan business conducted by the 13 licensee during the preceding calendar year. The report shall 14 be on a form provided by the department. Licensees who fail 15 to file the required report at the date required by the 16 department may be subject to a penalty of $100 for each day 17 after the due date until the report is filed. 18 (4) Each licensee shall be subject to examination by the 19 department at its discretion, at which time the department 20 shall have free access, during regular business hours, to the 21 licensee's place or places of business in this Commonwealth 22 and to all instruments, documents, accounts, books and 23 records which pertain to a licensee's first or secondary 24 mortgage loan business, whether maintained in or outside this 25 Commonwealth. The department may examine a licensee at any 26 time if the department deems the examination to be necessary 27 or desirable. The cost of any such examination shall be borne 28 by the licensee. 29 (5) Each licensee shall include in all advertisements 30 language indicating that the licensee is licensed by the 20080H2179B3862 - 39 -
1 department. In the case of a mortgage originator, all 2 advertising shall include the name of the mortgage 3 originator's employer. 4 (b) Accounting records.--The licensee's accounting records 5 must be constructed and maintained in compliance with generally 6 accepted accounting principles or as provided by department 7 regulation. All instruments, documents, accounts, books and 8 records relating to the mortgage loan business shall be kept 9 separate and apart from the records of any other business 10 conducted by the licensee. Records of first and secondary 11 mortgage loans shall be easily distinguishable and easily 12 separated. All records shall be preserved and kept available for 13 investigation or examination by the department for a period 14 determined by the department. 15 (c) Copies.--If copies of instruments, documents, accounts, 16 books or records are maintained under subsection (a)(2), they 17 may be photostatic, microfilm or electronic copies or copies 18 provided in some other manner approved by the department. 19 § 6136. Licensee limitations. 20 (a) Name and changes to name.--A licensee cannot transact 21 any business under this chapter under any other name or names 22 except those names designated in its license. A mortgage 23 originator may not use any other name other than the mortgage 24 originator's personal legal name. A licensee that changes its 25 name or place or places of business shall notify the department 26 within ten days of the change and the department shall issue a 27 certificate to the licensee, if appropriate, which shall specify 28 the licensee's new name or address. 29 (b) Other businesses.--A licensee cannot conduct a business 30 other than the mortgage loan business licensed by the department 20080H2179B3862 - 40 -
1 under this chapter without at least 30 days' prior written 2 notification to the department. 3 § 6137. Surrender of license. 4 Upon satisfying the department that all creditors of a 5 licensee have been paid or that other arrangements satisfactory 6 to the creditors and the department have been made, a licensee 7 may voluntarily surrender its license to the department by 8 delivering its license to the department with written notice 9 that the license is being voluntarily surrendered, but an action 10 by a licensee shall not affect the licensee's civil or criminal 11 liability for acts committed. 12 § 6138. Authority of department. 13 (a) General authority.--The department shall have the 14 authority to: 15 (1) Examine any instrument, document, account, book, 16 record or file of a licensee or any person having a 17 connection to the licensee or make other investigation as may 18 be necessary to administer the provisions of this chapter. 19 Pursuant to this authority, the department may remove any 20 instrument, document, account, book, record or file of a 21 licensee to a location outside of the licensee's office 22 location. The costs of the examination shall be borne by the 23 licensee or the entity subject to the examination. 24 (2) Conduct administrative hearings on any matter 25 pertaining to this chapter, issue subpoenas to compel the 26 attendance of witnesses and the production of instruments, 27 documents, accounts, books and records at any hearing. The 28 instruments, documents, accounts, books and records may be 29 retained by the department until the completion of all 30 proceedings in connection with which the materials were 20080H2179B3862 - 41 -
1 produced. A department official may administer oaths and 2 affirmations to a person whose testimony is required. In the 3 event a person fails to comply with a subpoena issued by the 4 department or to testify on a matter concerning which he may 5 be lawfully interrogated, on application by the department, 6 the Commonwealth Court may issue an order requiring the 7 attendance of the person, the production of instruments, 8 documents, accounts, books and records and the giving of 9 testimony. 10 (3) Request and receive information or records of any 11 kind, including reports of criminal history record 12 information from any Federal, State, local or foreign 13 government entity regarding an applicant for a license, 14 licensee or person related in any way to the business of the 15 applicant or licensee, at a cost to be paid by the applicant 16 or licensee. 17 (4) Issue regulations, statements of policy or orders as 18 may be necessary for the proper conduct of the mortgage loan 19 business by licensees, the issuance and renewal of licenses 20 and the enforcement of this chapter. 21 (5) Prohibit or permanently remove a person or licensee 22 responsible for a violation of this chapter from working in 23 the present capacity or in any other capacity of the person 24 or licensee related to activities regulated by the 25 department. 26 (6) Order a person or licensee to make restitution for 27 actual damages to consumers caused by any violation of this 28 chapter. 29 (7) Issue cease and desist orders that are effective 30 immediately, subject to a hearing as specified in subsection 20080H2179B3862 - 42 -
1 (b) within 14 days of the issuance of the order. 2 (8) Impose such other conditions as the department deems 3 appropriate. 4 (b) Hearings.--A person aggrieved by a decision of the 5 department may appeal the decision of the department to the 6 Secretary of Banking. The appeal shall be conducted under 2 7 Pa.C.S. Ch. 5 Subch. A (relating to practice and procedure of 8 Commonwealth agencies). 9 (c) Injunctions.--The department may maintain an action for 10 an injunction or other process against a person to restrain and 11 prevent the person from engaging in an activity violating this 12 chapter. 13 (d) Final orders.--A decision of the Secretary of Banking 14 shall be a final order of the department and shall be 15 enforceable in a court of competent jurisdiction. The department 16 may publish final adjudications issued under this section, 17 subject to redaction or modification to preserve 18 confidentiality. 19 (e) Appeals.--A person aggrieved by a decision of the 20 Secretary of Banking may appeal the decision under 2 Pa.C.S. Ch. 21 7 Subch A. (relating to judicial review of Commonwealth agency 22 action). 23 (f) Orders affecting mortgage originators.--An order issued 24 against a licensee is applicable to the mortgage originators 25 employed by the licensee. 26 § 6139. Suspension, revocation or refusal. 27 (a) Departmental action.--The department may suspend, revoke 28 or refuse to renew a license issued under this chapter if any 29 fact or condition exists or is discovered which, if it had 30 existed or had been discovered at the time of filing of the 20080H2179B3862 - 43 -
1 application for the license, would have warranted the department 2 in refusing to issue the license or if a licensee or director, 3 officer, partner, employee or owner of a licensee has: 4 (1) Made a material misstatement in an application or 5 any report or submission required by this chapter or any 6 department regulation, statement of policy or order. 7 (2) Failed to comply with or violated any provision of 8 this chapter or any regulation or order promulgated or issued 9 by the department under this chapter. 10 (3) Engaged in dishonest, fraudulent or illegal 11 practices or conduct in a business or unfair or unethical 12 practices or conduct in connection with the mortgage loan 13 business. 14 (4) Been convicted of or pleaded guilty or nolo 15 contendere to a crime of moral turpitude or felony. 16 (5) Permanently or temporarily been enjoined by a court 17 of competent jurisdiction from engaging in or continuing 18 conduct or a practice involving an aspect of the mortgage 19 loan business. 20 (6) Become the subject of an order of the department 21 denying, suspending or revoking a license applied for or 22 issued under this chapter. 23 (7) Become the subject of a United States Postal Service 24 fraud order. 25 (8) Failed to comply with the requirements of this 26 chapter to make and keep records prescribed by regulation, 27 statement of policy or order of the department, to produce 28 records required by the department or to file financial 29 reports or other information that the department by 30 regulation, statement of policy or order may require. 20080H2179B3862 - 44 -
1 (9) Become the subject of an order of the department 2 denying, suspending or revoking a license under the 3 provisions of any other law administered by the department. 4 (10) Demonstrated negligence or incompetence in 5 performing an act for which the licensee is required to hold 6 a license under this chapter. 7 (11) Accepted an advance fee without having obtained the 8 bond required by section 6131(d)(1) or (e)(1) (relating to 9 application for license). 10 (12) Become insolvent, meaning that the liabilities of 11 the applicant or licensee exceed the assets of the applicant 12 or licensee or that the applicant or licensee cannot meet the 13 obligations of the applicant or licensee as they mature or is 14 in such financial condition that the applicant or licensee 15 cannot continue in business with safety to the customers of 16 the applicant or licensee. 17 (13) Failed to complete the qualifying or continuing 18 education as required by section 6131(g). 19 (14) In the case of a mortgage broker, mortgage lender 20 or mortgage loan correspondent, conducted the mortgage loan 21 business through an unlicensed mortgage originator. 22 (15) Failed to comply with the terms of any agreement 23 under which the department authorizes a licensee to maintain 24 records at a place other than the licensee's principal place 25 of business. 26 (b) Reinstatement.--The department may reinstate a license 27 which was previously revoked or denied renewal if all of the 28 following exist: 29 (1) The condition which warranted the original action 30 has been corrected to the department's satisfaction. 20080H2179B3862 - 45 -
1 (2) The department has reason to believe that the 2 condition is not likely to occur again. 3 (3) The licensee satisfies all other requirements of 4 this chapter. 5 § 6140. Penalties. 6 (a) Persons operating without licenses.-A person subject to 7 the provisions of this chapter and not licensed by the 8 department who violates any provision of this chapter or who 9 commits any action which would subject a license to suspension, 10 revocation or nonrenewal under section 6139 (relating to 11 suspension, revocation or refusal) may be fined by the 12 department up to $10,000 for each offense. 13 (b) Violation by licensee.--A person licensed under this 14 chapter or director, officer, owner, partner, employee or agent 15 of a licensee who violates a provision of this chapter or who 16 commits any action which would subject the licensee to 17 suspension, revocation or nonrenewal under section 6139 may be 18 fined by the department up to $10,000 for each offense. 19 SUBCHAPTER E 20 MISCELLANEOUS PROVISIONS 21 Sec. 22 6151. Applicability. 23 6152. Relationship to other laws. 24 6153. Preservation of existing contracts. 25 § 6151. Applicability. 26 The provisions of this chapter shall apply to: 27 (1) Any mortgage loan which is: 28 (i) negotiated, offered or otherwise transacted 29 within this Commonwealth, in whole or in part, whether by 30 the ultimate lender or any other person; 20080H2179B3862 - 46 -
1 (ii) made or executed within this Commonwealth; or 2 (iii) notwithstanding the place of execution, 3 secured by real property located in this Commonwealth. 4 (2) Any person who engages in the mortgage loan business 5 in this Commonwealth. 6 Section 6152. Relationship to other laws. 7 The following apply: 8 (1) A political subdivision may not enact or enforce any 9 ordinance, resolution or regulation pertaining to the 10 financial or lending activities of a person that: 11 (i) is subject to the jurisdiction of the 12 department, including activities subject to this chapter; 13 (ii) is subject to the jurisdiction or regulatory 14 supervision of the Board of Governors of the Federal 15 Reserve System, the Office of the Comptroller of the 16 Currency, the Office of Thrift Supervision, the National 17 Credit Union Administration, the Federal Deposit 18 Insurance Corporation, the Federal Trade Commission or 19 the United States Department of Housing and Urban 20 Development; or 21 (iii) originates, purchases, sells, assigns, 22 securitizes or services any property interest or 23 obligation created by a financial transaction or loan 24 made, executed or originated by a person referred to in 25 subparagraph (i) or (ii) or assists or facilitates such a 26 transaction or loan. 27 (2) This subsection applies to any ordinance, resolution 28 or regulation pertaining to financial or lending activity, 29 including any ordinance, resolution or regulation: 30 (i) disqualifying a person from doing business with 20080H2179B3862 - 47 -
1 a political subdivision based upon financial or lending 2 activity; or 3 (ii) imposing reporting requirements or any other 4 obligations upon a person regarding financial or lending 5 activity. 6 § 6153. Preservation of existing contracts. 7 Nothing contained in this chapter shall be construed to 8 impair or affect first or secondary mortgage loans executed 9 prior to the effective date of this chapter. 10 Section 2. Title 18 is amended by adding a section to read: 11 § 7331. Unlicensed mortgage loan business. 12 A person that operates without a license in violation of 7 13 Pa.C.S. § 6111 (relating to license requirements) commits a 14 felony of the third degree. 15 Section 3. Repeals. 16 (a) Intent.--The General Assembly declares that the repeals 17 under subsection (b) are necessary to effectuate the provisions 18 of 7 Pa.C.S. Ch. 61. 19 (b) Provision.--The following acts and parts of acts are 20 repealed: 21 (1) Chapter 3 of the act of December 22, 1989 (P.L.687, 22 No.90), known as the Mortgage Bankers and Brokers and 23 Consumer Equity Protection Act. 24 (2) The act of December 12, 1980 (P.L.1179, No.219), 25 known as the Secondary Mortgage Loan Act. 26 Section 4. Transition shall be as follows: <-- 27 (1) A license issued under an act repealed by section 3 28 of this act shall remain in full force and effect as a 29 transitional license, and loans may continue to be made under 30 the transitional license. 20080H2179B3862 - 48 -
1 (2) The following are the requirements for a 2 transitional license: 3 (i) The person holding the license under the 4 repealed act must submit an application for a license 5 under 7 Pa.C.S. Ch. 61 within 60 days of the effective 6 date of this section. An application shall be valid under 7 this paragraph if the names, birth dates and addresses of 8 all individual mortgage solicitors required to be 9 licensed under 7 Pa.C.S. Ch. 61 and employed by the 10 license holder have also been listed with the department 11 as individuals currently employed as mortgage originators 12 who will be applying for individual licenses under 7 13 Pa.C.S. Ch. 61. 14 (ii) Upon filing an application for a license under 15 7 Pa.C.S. Ch. 61, an applicant must proceed expeditiously 16 in accordance with the directions of the department. 17 (3) The department shall set forth for a reasonable time 18 period for transition under this section as a notice in the 19 Pennsylvania Bulletin. The time period shall be at least 90 20 days but not more than 180 days and shall include the 21 training and submission of applications by all mortgage loan 22 solicitors employed by the licensee. 23 Section 5. This act shall take effect in 60 days. 24 SECTION 4. THIS ACT SHALL TAKE EFFECT IN 120 DAYS. <-- B4L07VDL/20080H2179B3862 - 49 -