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.
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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-
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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
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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
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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
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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.
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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
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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
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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.
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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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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.
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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.
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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;
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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
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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.
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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. <--
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