PRIOR PRINTER'S NO. 390 PRINTER'S NO. 736
No. 377 Session of 2001
INTRODUCED BY WENGER, PICCOLA, ARMSTRONG, M. WHITE, THOMPSON, GREENLEAF, WAUGH, ROBBINS, TARTAGLIONE, BOSCOLA, MOWERY, WOZNIAK, STOUT AND LEMMOND, FEBRUARY 8, 2001
SENATOR HOLL, BANKING AND INSURANCE, AS AMENDED, MARCH 20, 2001
AN ACT 1 Amending the act of December 22, 1989 (P.L.687, No.90), entitled 2 "An act providing for the regulation and licensing of 3 mortgage bankers and mortgage brokers; imposing additional 4 powers and duties on the Department of Banking and the State 5 Real Estate Commission; and providing penalties," further 6 providing for license requirements and exemptions, FOR <-- 7 APPLICATION FOR LICENSE, FOR LICENSEE REQUIREMENTS, FOR 8 AUTHORITY OF DEPARTMENT OR COMMISSION AND FOR PENALTIES. 9 The General Assembly of the Commonwealth of Pennsylvania 10 hereby enacts as follows: 11 Section 1. Section 3 SECTIONS 3, 4(C)(1) AND (E) AND 8(A)(5) <-- 12 of the act of December 22, 1989 (P.L.687, No.90), known as the 13 Mortgage Bankers and Brokers Act, amended December 21, 1998 14 (P.L.987, No.131), is ARE amended to read: <-- 15 Section 3. License requirements and exemptions. 16 (a) License required.--On and after the effective date of 17 this act, no person shall act as a mortgage banker, loan 18 correspondent, mortgage broker or limited mortgage broker in 19 this Commonwealth without a license as provided for in this act, 20 provided, however, that any person licensed as a mortgage banker
1 may also act as a loan correspondent or mortgage broker and any 2 person licensed as a loan correspondent may also act as a 3 mortgage broker without a separate license. A person licensed as 4 a mortgage broker may only perform the services of a mortgage 5 broker as defined in section 2. 6 (b) Exceptions.--The following persons shall not be required 7 to be licensed under this act in order to conduct the first 8 mortgage loan business but shall be subject to those provisions 9 of this act as specifically provided in this section: 10 (1) A State-chartered bank, bank and trust company, 11 savings bank, private bank or national bank, a State or 12 federally chartered savings and loan association, a federally 13 chartered savings bank or a State or federally chartered 14 credit union. 15 (2) An attorney authorized to practice law in this 16 Commonwealth, who acts as a mortgage broker in negotiating or 17 placing a mortgage loan in the normal course of legal 18 practice. 19 (3) A person licensed pursuant to the provisions of the 20 act of February 19, 1980 (P.L.15, No.9), known as the Real 21 Estate Licensing and Registration Act, who is principally 22 engaged in a third-party real estate brokerage business, but 23 only to the extent that he provides information, verbal or 24 written, to or negotiates or places a mortgage loan for a 25 buyer of real estate and is not compensated by the buyer or 26 any other person for providing such information or 27 negotiating or placing such mortgage loan. If he is 28 compensated for providing such information or negotiating or 29 placing such mortgage loan, he shall be subject to the 30 provisions of sections 8, 10, 11 and 14(b), excluding section 20010S0377B0736 - 2 -
1 8(a)(1). 2 (4) A seller of a dwelling, if he has resided in the 3 dwelling at least one year and as part of the purchase price 4 receives a first mortgage executed by the purchaser. 5 (5) A person who either originates or negotiates less 6 than three mortgage loans in a calendar year in this 7 Commonwealth unless he is otherwise deemed to be engaged in 8 the first mortgage loan business. 9 (6) Builders, when obtaining mortgages for their own 10 construction or for the sale of their own construction. 11 (7) Any agency or instrumentality of the Federal 12 Government or a corporation otherwise created by an act of 13 the United States Congress, including, but not limited to, 14 the Federal National Mortgage Association, the Government 15 National Mortgage Association, the Veterans' Administration, 16 the Federal Home Loan Mortgage Corporation and the Federal 17 Housing Administration. 18 (8) The Pennsylvania Housing Finance Agency. 19 (9) A licensee under the act of April 8, l937 (P.L.262, 20 No.66), known as the Consumer Discount Company Act, except 21 that any such licensee who makes a mortgage loan other than 22 under the provisions of that act shall be subject to the 23 provisions of sections 4(b)(2) and (3), 8, 10 and 14(b) of 24 this act, excluding section 8(a)(1). 25 (10) Except for licensees described in paragraph (9), 26 subsidiaries and affiliates of the following institutions: 27 State-chartered banks, bank and trust companies, savings 28 banks, private banks, savings and loan associations and 29 credit unions or national banks, federally chartered savings 30 and loan associations, federally chartered savings banks and 20010S0377B0736 - 3 -
1 federally chartered credit unions, except that such 2 subsidiaries and affiliates of institutions enumerated in 3 this paragraph shall: 4 (i) be subject to the provisions of sections 8, 5 9(a)(3), 10 and 14(b), excluding section 8(a)(1); 6 (ii) deliver as required to the department annually 7 copies of financial reports made to all supervisory 8 agencies; and 9 (iii) be registered with the department. 10 (11) Employees of a mortgage banker, mortgage broker and 11 loan correspondent licensee or excepted persons acting for 12 their employers. 13 (12) An insurance company, association or exchange 14 authorized to transact business in this Commonwealth under 15 the act of May 17, 1921 (P.L.682, No.284), known as The 16 Insurance Company Law of 1921, and any subsidiaries and 17 affiliates thereof, except that such subsidiaries and 18 affiliates shall: 19 (i) be subject to the provisions of sections 8, 20 9(a)(3), 10 and 14(b), excluding section 8(a)(1); 21 (ii) deliver as required to the department annually 22 copies of financial reports made to all supervisory 23 agencies; and 24 (iii) be registered with the department. 25 (13) Any person who makes a mortgage loan to an employee 26 of that person as an employment benefit, given that person 27 does not hold himself out to the public as a first mortgage 28 lender. 29 (14) Nonprofit corporations making mortgage loans to 30 promote home ownership or improvements for the disadvantaged, 20010S0377B0736 - 4 -
1 given that the corporation does not hold itself out to the 2 public as a first mortgage lender. 3 (15) A nonprofit corporation making not more than 12 4 mortgage loans a calendar year with its own funds, that shall 5 not include funds borrowed through warehouse lines of credit 6 or other sources for the purpose of making mortgage loans, 7 which loans are retained in the corporation's own portfolios 8 and not regularly sold to others and are made to promote and 9 advance the cultural traditions and lifestyles of bona fide 10 religious organizations provided that the corporation does 11 not hold itself out to the public as a first mortgage lender. 12 (c) Loans for business or commercial purposes.--This act 13 shall not apply to mortgage loans made for business or 14 commercial purposes. 15 SECTION 4. APPLICATION FOR LICENSE. <-- 16 * * * 17 (C) MORTGAGE BROKER'S LICENSE.-- 18 (1) THE DEPARTMENT SHALL ISSUE A MORTGAGE BROKER'S 19 LICENSE APPLIED FOR PURSUANT TO THIS ACT IF THE APPLICANT 20 ESTABLISHES THAT HE IS ELIGIBLE TO AND WILL OBTAIN AND 21 MAINTAIN A BOND IN THE AMOUNT OF $100,000, IN A FORM 22 ACCEPTABLE TO THE DEPARTMENT, PRIOR TO THE ISSUANCE OF THE 23 LICENSE, FROM A SURETY COMPANY AUTHORIZED TO DO BUSINESS IN 24 THIS COMMONWEALTH. THE BOND SHALL BE A PENAL BOND CONDITIONED 25 ON COMPLIANCE WITH THIS ACT AND SUBJECT TO FORFEITURE BY THE 26 DEPARTMENT AND SHALL RUN TO THE COMMONWEALTH OF PENNSYLVANIA 27 [AND SHALL BE FOR THE USE OF THE COMMONWEALTH AND] FOR ITS 28 USE. THE BOND SHALL ALSO BE FOR THE USE OF ANY PERSON [OR 29 PERSONS] AGAINST THE MORTGAGE BROKER FOR FAILURE TO CARRY OUT 30 THE TERMS OF ANY PROVISION FOR WHICH ADVANCE FEES ARE PAID. 20010S0377B0736 - 5 -
1 IF SUCH PERSON [OR PERSONS SHALL BE SO] IS AGGRIEVED, HE MAY 2 [UPON RECOVERING JUDGMENT AGAINST SUCH LICENSEE ISSUE 3 EXECUTION UNDER SUCH JUDGMENT AND MAINTAIN AN ACTION UPON THE 4 BOND OF THE LICENSEE IN ANY COURT HAVING JURISDICTION FOR THE 5 AMOUNT CLAIMED PLUS COSTS, PROVIDED THE DEPARTMENT ASSENTS 6 THERETO.] WITH THE WRITTEN ASSENT OF THE DEPARTMENT, RECOVER 7 ADVANCE FEES AND COSTS FROM THE BOND BY FILING A CLAIM WITH 8 THE SURETY COMPANY OR MAINTAINING AN ACTION ON THE BOND. IN 9 THE ALTERNATIVE, AN AGGRIEVED PERSON MAY RECOVER ADVANCE FEES 10 AND COSTS BY FILING A FORMAL COMPLAINT AGAINST THE MORTGAGE 11 BROKER WITH THE DEPARTMENT WHICH SHALL ADJUDICATE THE MATTER. 12 SUCH AN ADJUDICATION SHALL BE BINDING UPON THE SURETY COMPANY 13 AND ENFORCEABLE BY THE DEPARTMENT IN COMMONWEALTH COURT AND 14 BY AN AGGRIEVED PERSON IN ANY COURT. ANY AGGRIEVED PERSON 15 SEEKING TO RECOVER ADVANCE FEES AND COSTS FROM A BOND THAT 16 HAS ALREADY BEEN FORFEITED BY THE DEPARTMENT OR WHICH THE 17 DEPARTMENT IS IN THE PROCESS OF FORFEITING MAY RECOVER 18 PAYMENT ON SUCH BOND IF, AFTER FILING A PETITION WITH THE 19 DEPARTMENT, THE DEPARTMENT ASSENTS TO HIS REQUESTED PAYMENT 20 OR PORTION THEREOF. THE DEPARTMENT MAY PAY THE AGGRIEVED 21 PERSON FROM THE BOND PROCEEDS IT RECOVERED IN SUCH CASE. 22 NOTHING IN THIS SECTION SHALL BE CONSTRUED AS LIMITING THE 23 ABILITY OF ANY COURT OR DISTRICT JUSTICE TO AWARD TO ANY 24 AGGRIEVED PERSON OTHER DAMAGES, COURT COSTS AND ATTORNEY FEES 25 AS PERMITTED BY LAW, BUT THOSE CLAIMS THAT ARE NOT ADVANCE 26 FEES OR RELATED COSTS MAY NOT BE RECOVERED FROM THE BOND. THE 27 DEPARTMENT, IN ITS DISCRETION, MAY ASSENT TO OR ORDER PRO 28 RATA OR OTHER RECOVERY ON THE BOND FOR ANY AGGRIEVED PERSON 29 IF CLAIMS AGAINST THE BOND MAY OR DO EXCEED ITS FULL MONETARY 30 AMOUNT. NO BOND SHALL COMPLY WITH THE REQUIREMENTS OF THIS 20010S0377B0736 - 6 -
1 SECTION UNLESS IT CONTAINS A PROVISION THAT IT SHALL NOT BE 2 CANCELED FOR ANY CAUSE UNLESS NOTICE OF INTENTION TO CANCEL 3 IS GIVEN TO THE DEPARTMENT AT LEAST 30 DAYS BEFORE THE DAY 4 UPON WHICH CANCELLATION SHALL TAKE EFFECT. CANCELLATION OF 5 THE BOND SHALL NOT INVALIDATE THE BOND REGARDING THE PERIOD 6 OF TIME IT WAS IN EFFECT. 7 * * * 8 (E) EDUCATION.--TO MAINTAIN A MORTGAGE BANKER'S, A LOAN 9 CORRESPONDENT'S OR A MORTGAGE BROKER'S LICENSE, THE APPLICANT OR 10 LICENSEE SHALL DEMONSTRATE TO THE SATISFACTION OF THE SECRETARY 11 THAT AT LEAST ONE [PERSON] INDIVIDUAL FROM EACH LICENSED OFFICE 12 HAS ATTENDED A MINIMUM OF SIX HOURS OF SUCH CONTINUING EDUCATION 13 EACH YEAR. TO MAINTAIN A LIMITED MORTGAGE BROKER'S LICENSE, THE 14 LICENSEE SHALL DEMONSTRATE TO THE SATISFACTION OF THE SECRETARY 15 THAT HE HAS ATTENDED AT LEAST TWO HOURS OF CONTINUING EDUCATION 16 EACH YEAR. THE SECRETARY SHALL DELINEATE THE REQUIREMENTS FOR 17 SUCH CONTINUING EDUCATION BY REGULATION WITHIN THREE YEARS OF 18 THE EFFECTIVE DATE OF THIS ACT. THE SECRETARY MAY REVIEW AND 19 APPROVE CONTINUING EDUCATION PROGRAMS AND PROVIDERS TO SATISFY 20 THE CONTINUING EDUCATION REQUIREMENT. THE SECRETARY MAY CHARGE 21 PROVIDERS OF CONTINUING EDUCATION PROGRAMS A FEE, TO BE 22 DETERMINED BY THE SECRETARY, FOR DEPARTMENT REVIEW OF CONTINUING 23 EDUCATION PROGRAMS AND PROVIDERS. 24 SECTION 8. LICENSEE REQUIREMENTS. 25 (A) REQUIREMENTS ON LICENSEE.--A LICENSEE SHALL: 26 * * * 27 (5) COMPLY WITH ALL PROVISIONS OF THE ACT OF JANUARY 30, 28 1974 (P.L.13, NO.6), REFERRED TO AS THE LOAN INTEREST AND 29 PROTECTION LAW, PROVIDED, HOWEVER, THAT THIS SHALL NOT BE 30 DEEMED AN OVERRIDE OF SECTION 501 OF THE DEPOSITORY 20010S0377B0736 - 7 -
1 INSTITUTIONS DEREGULATION AND MONETARY CONTROL ACT OF 1980 2 (94 STAT. 161, 12 U.S.C. § [1735F-7 NOTE] 1735F-7A). 3 * * * 4 SECTION 2. SECTION 10(C) OF THE ACT IS AMENDED TO READ: 5 SECTION 10. AUTHORITY OF DEPARTMENT OR COMMISSION. 6 * * * 7 (C) POWERS.--THE DEPARTMENT AND THE COMMISSION SHALL HAVE 8 THE AUTHORITY TO: 9 (1) EXAMINE ANY INSTRUMENT, DOCUMENT, ACCOUNT, BOOK, 10 RECORD OR FILE OF A LICENSEE OR ANY OTHER PERSON, OR MAKE 11 SUCH OTHER INVESTIGATION AS MAY BE NECESSARY TO ADMINISTER 12 THE PROVISIONS OF THIS ACT. 13 (2) CONDUCT ADMINISTRATIVE HEARINGS ON ANY MATTER 14 PERTAINING TO THIS ACT, ISSUE SUBPOENAS TO COMPEL THE 15 ATTENDANCE OF WITNESSES AND THE PRODUCTION OF INSTRUMENTS, 16 DOCUMENTS, ACCOUNTS, BOOKS AND RECORDS AT ANY SUCH HEARING, 17 WHICH MAY BE RETAINED BY THE DEPARTMENT OR COMMISSION UNTIL 18 THE COMPLETION OF ALL PROCEEDINGS IN CONNECTION WITH WHICH 19 THEY WERE PRODUCED, AND ADMINISTER OATHS AND AFFIRMATIONS TO 20 ANY PERSON WHOSE TESTIMONY IS REQUIRED. IN THE EVENT A PERSON 21 FAILS TO COMPLY WITH A SUBPOENA ISSUED BY THE DEPARTMENT OR 22 COMMISSION OR TO TESTIFY ON ANY MATTER CONCERNING WHICH HE 23 MAY BE LAWFULLY INTERROGATED, ON APPLICATION BY THE 24 DEPARTMENT OR COMMISSION, THE COMMONWEALTH COURT MAY ISSUE AN 25 ORDER REQUIRING THE ATTENDANCE OF SUCH PERSON, THE PRODUCTION 26 OF INSTRUMENTS, DOCUMENTS, ACCOUNTS, BOOKS OR RECORDS OR THE 27 GIVING OF TESTIMONY. 28 (3) REQUEST AND/OR RECEIVE ANY INFORMATION OR RECORDS OF 29 ANY KIND, INCLUDING A REPORT OF CRIMINAL HISTORY RECORD 30 INFORMATION, FROM ANY FEDERAL, STATE, LOCAL OR FOREIGN 20010S0377B0736 - 8 -
1 GOVERNMENT ENTITY, REGARDING ANY APPLICANT FOR A LICENSE, 2 LICENSEE OR ANY PERSON RELATED IN ANY WAY TO THE BUSINESS OF 3 SUCH APPLICANT OR LICENSEE, AT A COST TO BE PAID BY THE 4 APPLICANT OR LICENSEE. 5 * * * 6 SECTION 3. SECTION 14(B) OF THE ACT, AMENDED DECEMBER 21, 7 1998 (P.L.987, NO.131), IS AMENDED TO READ: 8 SECTION 14. PENALTIES. 9 * * * 10 (B) NONLICENSEES SUBJECT TO THE PROVISIONS OF THIS ACT.--ANY 11 PERSON WHO IS SUBJECT TO THE PROVISIONS OF THIS ACT, EVEN THOUGH 12 NOT LICENSED HEREUNDER, OR ANY PERSON WHO IS NOT LICENSED BY THE 13 DEPARTMENT OR IS NOT EXEMPT FROM THE LICENSING REQUIREMENTS, WHO 14 VIOLATES ANY OF THE PROVISIONS TO WHICH IT IS SUBJECT SHALL BE 15 SUBJECT TO A FINE LEVIED BY THE DEPARTMENT OR COMMISSION OF UP 16 TO $2,000 FOR EACH OFFENSE. ANY SUCH NONLICENSED PERSON WHO 17 COMMITS THREE OR MORE OFFENSES MAY, AT THE DISCRETION OF THE 18 DEPARTMENT OR COMMISSION, BE PROHIBITED FROM ENGAGING IN [THE 19 BUSINESS OF A MORTGAGE BROKER OR MORTGAGE BANKER] THE FIRST 20 MORTGAGE LOAN BUSINESS UNLESS LICENSED UNDER THIS ACT. 21 * * * 22 Section 2 4. This act shall take effect in 60 days. <-- A16L07DMS/20010S0377B0736 - 9 -