H*4569 Session 112 (1997-1998)
H*4569(Rat #0461, Act #0336 of 1998) General Bill, By Cato and Gamble
A BILL TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION
40-58-67 SO AS TO REQUIRE ANNUAL CONTINUING PROFESSIONAL EDUCATION FOR
LICENSED MORTGAGE LOAN BROKERS; TO AMEND SECTIONS 40-58-10, 40-58-20,
40-58-30, 50-58-50, 40-58-55, 40-58-60, 40-58-65, 40-58-80, AND 40-58-110, ALL
AS AMENDED, RELATING TO REGULATION OF MORTGAGE LOAN BROKERS, SO AS TO REQUIRE
LICENSING RATHER THAN REGISTRATION OF MORTGAGE LOAN BROKERS, SO AS TO INCLUDE
IN THE DEFINITION OF "EXEMPT PERSON OR ORGANIZATION" THOSE WHO PLACE OR SELL
ALL OF THEIR CONVENTIONAL REAL ESTATE MORTGAGE LOANS WITH FEDERALLY INSURED
INSTITUTIONS, TO REQUIRE TWO YEARS' EXPERIENCE WORKING AS AN ORIGINATOR BEFORE
INITIAL LICENSING AND TO PROVIDE EXPERIENCE OR EDUCATIONAL EXCEPTIONS, TO
DEFINE "ORIGINATOR"; TO ALLOW BROKERS PROPERLY REGISTERED BEFORE OCTOBER 1,
1998, TO CONTINUE TO ACT AS MORTGAGE LOAN BROKERS WITHOUT REGARD TO EXPERIENCE
OR EDUCATION REQUIREMENTS ADDED BY THIS ACT, TO RAISE FROM FIVE TO TEN YEARS
THE PERIOD AFTER WHICH CONVICTIONS OF CERTAIN OFFENSES A PERSON MAY NOT BE
LICENSED AND TO PROVIDE EXCEPTIONS, TO AUTHORIZE THE SUSPENSION OF A LICENSE
FOR VIOLATIONS, TO INCREASE THE INITIAL APPLICATION FEE AND ANNUAL RENEWAL FEE
FROM FIVE TO FIVE HUNDRED FIFTY DOLLARS, AND TO ESTABLISH A COMMITTEE TO STUDY
WHETHER OR NOT A LICENSING EXAMINATION SHOULD BE REQUIRED FOR MORTGAGE LOAN
BROKERS, TO PROVIDE THE COMMITTEE'S MEMBERSHIP AND REQUIRE A REPORT TO THE
GENERAL ASSEMBLY BEFORE FEBRUARY 1, 1999.-AMENDED TITLE
02/04/98 House Introduced and read first time HJ-7
02/04/98 House Referred to Committee on Labor, Commerce and
Industry HJ-8
02/19/98 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-2
02/24/98 House Debate adjourned until Wednesday, February 25,
1998 HJ-37
02/25/98 House Amended HJ-47
02/25/98 House Read second time HJ-48
02/26/98 House Read third time and sent to Senate HJ-16
03/03/98 Senate Introduced and read first time SJ-13
03/03/98 Senate Referred to Committee on Labor, Commerce and
Industry SJ-13
04/23/98 Senate Committee report: Favorable with amendment Labor,
Commerce and Industry SJ-11
05/12/98 Senate Read second time SJ-16
05/12/98 Senate Ordered to third reading with notice of
amendments SJ-16
05/13/98 Senate Amended SJ-32
05/14/98 Senate Read third time and returned to House with
amendments SJ-27
05/21/98 House Concurred in Senate amendment and enrolled HJ-19
06/04/98 Ratified R 461
06/09/98 Signed By Governor
06/09/98 Effective date Section 11 of this act takes
effect upon approval by the Governor--the
remaining provisions take effect 10-01-98
06/18/98 Copies available
06/18/98 Act No. 336
(A336, R461, H4569)
AN ACT TO AMEND THE CODE OF LAWS OF SOUTH
CAROLINA, 1976, BY ADDING SECTION 40-58-67 SO AS TO
REQUIRE ANNUAL CONTINUING PROFESSIONAL EDUCATION
FOR LICENSED MORTGAGE LOAN BROKERS; TO AMEND
SECTIONS 40-58-10, 40-58-20, 40-58-30, 40-58-50, 40-58-55, 40-58-60,
40-58-65, 40-58-80, AND 40-58-110, ALL AS AMENDED, RELATING
TO REGULATION OF MORTGAGE LOAN BROKERS, SO AS TO
REQUIRE LICENSING RATHER THAN REGISTRATION OF
MORTGAGE LOAN BROKERS, SO AS TO INCLUDE IN THE
DEFINITION OF EXEMPT PERSON OR ORGANIZATION THOSE
WHO PLACE OR SELL ALL OF THEIR CONVENTIONAL REAL
ESTATE MORTGAGE LOANS WITH FEDERALLY INSURED
INSTITUTIONS, TO REQUIRE TWO YEARS' EXPERIENCE
WORKING AS AN ORIGINATOR BEFORE INITIAL LICENSING
AND TO PROVIDE EXPERIENCE OR EDUCATIONAL
EXCEPTIONS, TO DEFINE "ORIGINATOR"; TO ALLOW BROKERS
PROPERLY REGISTERED BEFORE OCTOBER 1, 1998, TO
CONTINUE TO ACT AS MORTGAGE LOAN BROKERS WITHOUT
REGARD TO EXPERIENCE OR EDUCATION REQUIREMENTS
ADDED BY THIS ACT, TO RAISE FROM FIVE TO TEN YEARS
THE PERIOD AFTER WHICH CONVICTION OF CERTAIN
OFFENSES A PERSON MAY NOT BE LICENSED AND TO
PROVIDE EXCEPTIONS, TO AUTHORIZE THE SUSPENSION OF
A LICENSE FOR VIOLATIONS, TO INCREASE THE INITIAL
APPLICATION FEE AND ANNUAL RENEWAL FEE FROM FIVE TO
FIVE HUNDRED FIFTY DOLLARS, AND TO ESTABLISH A
COMMITTEE TO STUDY WHETHER OR NOT A LICENSING
EXAMINATION SHOULD BE REQUIRED FOR MORTGAGE LOAN
BROKERS, TO PROVIDE THE COMMITTEE'S MEMBERSHIP AND
REQUIRE A REPORT TO THE GENERAL ASSEMBLY BEFORE
FEBRUARY 1, 1999.
Be it enacted by the General Assembly of the State of South Carolina:
Continuing professional education
SECTION 1. Chapter 58, Title 40 of the 1976 Code is amended by
adding:
"Section 40-58-67. Effective for license years beginning after
September 30, 1998, all licensed mortgage loan brokers must complete at
least eight hours of continuing professional education annually. If the
licensed mortgage loan broker is a sole proprietorship or partnership, any
owners and partners must complete the required eight hours of continuing
professional education annually. If the licensed mortgage loan broker is
a limited liability company or corporation, any member or president, chief
executive officer, or other officer who has ownership interest of
twenty-five percent or greater and who actively participates in the broker
entity must complete the required eight hours of continuing professional
education annually. Up to eight hours of continuing professional
education may be carried forward from one year to the next year; for the
license year beginning October 1, 1998, up to eight hours of continuing
professional education taken in the preceding twelve months may be
carried forward. The continuing professional education completed must
be reported to the department annually on a form approved by it showing
the date and title of the courses taken, the teacher or sponsor of the course
taken, and the hours of continuing professional education claimed for the
course. If the course is taught in a classroom setting, fifty minutes of
classroom contact shall equal one hour of continuing professional
education. Course sponsors must maintain records of attendees for two
years after the course. As used in this chapter, 'actively participates'
means engaging in direct loan brokering activity as defined in Section
40-58-20(3) and (4).
Documentation of attendance at the courses or correspondence courses
completed must be maintained by the mortgage loan broker and shall
consist of a certificate of completion issued by the teacher or sponsor of
the course showing the recommended number of hours of continuing
professional education. This documentation is subject to inspection by
the department for up to two years after the date of the course. Courses
offered by the National Association of Mortgage Brokers, the South
Carolina Mortgage Brokers Association, the department or courses related
to real estate law or related law topics, appraisals, mortgage lending,
financial management, financial planning, or mortgage processing are
considered to qualify for continuing professional education. The
department shall offer continuing professional education courses to assist
mortgage loan brokers in obtaining the continuing professional education
required by this chapter.
The department shall appoint two mortgage loan brokers and one
representative of the department to a panel for two-year terms to approve
any courses questioned as to their qualifications as continuing
professional education. The panel may conduct its meetings via
conference call. The department shall develop a questionnaire to ascertain
the interest and background of potential members of this panel.
If a mortgage loan broker fails to complete his continuing professional
education in a timely manner, his license shall expire and the licensee
shall pay a penalty not in excess of one hundred dollars in order to renew
the license.
However, the mortgage loan broker may request an administrative
hearing to appeal the expiration of his license for failure to complete
continuing professional education requirements. A license may be
renewed without penalty within thirty days after the expiration if the
broker completes his professional education requirements."
Licensing of mortgage brokers
SECTION 2. Section 40-58-10(A) of the 1976 Code, as last amended
by Act 172 of 1993, is further amended to read:
"(A) This chapter may be cited as the Licensing Requirements Act of
Certain Loan Brokers of Mortgages on Residential Real Property."
Licensee, definition of "originator"
SECTION 3. A. Section 40-58-20(6) of the 1976 Code, as added by
Act 544 of 1988, is amended to read:
"(6) 'Licensee' means a person or organization who is licensed pursuant
to Section 40-58-50 which engages in the business of soliciting,
processing, placing, or negotiating mortgage loans for others or offering
to process, place, or negotiate mortgage loans for others."
B. Section 40-58-20 of the 1976 Code, as last amended by Act 429
of 1996, is further amended by adding an appropriately numbered item at
the end to read:
"( ) 'Originator' means an employee of a mortgage loan broker
whose primary job responsibilities include direct contact with and
informing loan applicants of the rates, terms, disclosure, and other aspects
of the mortgage. It does not mean an employee whose primary job
responsibilities are clerical in nature, such as processing the loan."
License
SECTION 4. Section 40-58-30 of the 1976 Code, as last amended by
Act 172 of 1993, is further amended to read:
"Section 40-58-30. (A) No mortgage loan broker, as defined in
Section 40-58-20(3), may engage in the business of processing, placing,
or negotiating a mortgage loan or offering to process, place, or negotiate
a mortgage loan in this State without first being licensed with the
administrator.
(B) Notwithstanding subsection (A) of this section, the provisions of
this chapter do not apply to an exempt person or organization as defined
in Section 40-58-20(5)."
Requirements for licensing
SECTION 5. Section 40-58-50 of the 1976 Code, as last amended by
Act 172 of 1993, is further amended to read:
"Section 40-58-50. (A) An application to become licensed as a
mortgage loan broker must be in writing, under oath, and in a form
prescribed by the department. The application must contain the name and
complete business and residential address or addresses of the applicant or,
if the applicant is a partnership, association, limited liability company,
corporation, or other form of business organization, the names and
complete business and residential addresses of each member, director, and
principal officer and a list of all employees who engage in direct loan
brokerage activity.
(B) The application must include an affirmation of financial solvency
noting bonding requirements required by the department and the
descriptions of the business activities, financial responsibility, educational
background, and general character and fitness of the applicant as required
by this chapter. The application must be accompanied by a fee, payable
to the department, of five hundred fifty dollars.
(C) An applicant must have at least two years' experience working as
an originator under the supervision of a mortgage loan broker before his
initial license is issued.
(1) In lieu of a showing of two years' experience, an applicant may
show proof of two years' employment with a federally insured depository
institution, or a VA, FHA, or HUD approved mortgagee during which the
applicant was actively engaged in originating residential mortgage loans.
(2) In lieu of one of the required years' experience, an applicant
may show proof of the equivalent of six or more semester hours of
satisfactorily completed course work in real estate finance, real estate law,
or the like counting toward the successful completion of a degree that is
baccalaureate level or more advanced with a major or minor in finance,
accounting, business administration, real estate finance economics, or
similar baccalaureate or more advanced degree approved by the
administrator or the administrator's designee from an accredited college
or university.
(3) However, all mortgage loan brokers properly licensed as a
mortgage loan broker before October 1, 1998, may act as mortgage loan
brokers after that date without regard to the experience or education
requirement of this subsection if they maintain compliance with the
continuing professional education requirements of Section 40-58-67 and
otherwise comply with this chapter."
Disqualification for licensing
SECTION 6. Section 40-58-55 of the 1976 Code, as added by Act 172
of 1993, is amended to read:
"Section 40-58-55. The department may refuse to license an
applicant or refuse to renew a license if it finds, after notice and a hearing
pursuant to the Administrative Procedures Act, that the applicant or his
agent has:
(1) violated a provision of this chapter or an order of the
department;
(2) withheld material information in connection with an application
for a license or its renewal, or made a material misstatement in connection
with the application;
(3) been convicted of a felony or of an offense involving breach of
trust, moral turpitude, fraud, or dishonest dealing within the past ten
years. Any person who is in business as a mortgage loan broker or is an
agent of a broker before October 1, 1998, and who has been convicted of
a felony or an offense involving breach of trust, moral turpitude, fraud, or
dishonest dealing within the past ten years may continue in business as a
mortgage loan broker or agent, but if a mortgage loan broker or an agent
of a broker is convicted of the above-referenced offenses on or after
October 1, 1998, that person shall be subject to the provisions of this
chapter."
License
SECTION 7. Section 40-58-60 of the 1976 Code, as amended by
Act 172 of 1993, is further amended to read:
"Section 40-58-60. (A) Upon the filing of an application for a
license, if the department finds that the financial responsibility,
experience, character, and general fitness of the applicant, and of the
members if the applicant is a copartnership, association, or limited
liability company, and of the officers and directors if the applicant is a
corporation, are such as to command the confidence of the community
and to warrant belief that the business may be operated honestly, fairly,
and efficiently according to the purposes of this chapter, it shall license
the applicant as a mortgage loan broker and issue a license. If the
department does not so find, it shall refuse to license the applicant and
shall notify him of the denial.
(B) Upon the receipt of the license, a mortgage loan broker is
authorized to engage in the business for which the license was issued.
(C) Each license issued to a licensee must state the address or
addresses at which the business is to be conducted and must state fully the
name of the licensee and the date of the license. A copy of the license
must be posted prominently in each place of business of the licensee. The
license is not transferable or assignable."
License
SECTION 8. Section 40-58-65 of the 1976 Code, as last amended by
Act 429 of 1996, is further amended to read:
"Section 40-58-65. (A) A person licensed pursuant to this chapter
must maintain at his usual place of business books, records, and
documents pertaining to the business conducted, to enable the department
to determine compliance with this chapter. A licensee with two or more
licensed offices may consolidate the records at any one of the licensed
offices. The records must be available for examination to the
administrator or his designee upon request. Books and records must be
maintained for at least three years.
(B) A mortgage broker doing business in this State shall maintain a
sufficient physical presence in this State and his records must be
maintained at the licensed location in this State. At a minimum, the
broker shall maintain an official place of business open during regular
business hours, staffed by one or more employees who have the authority
to contract on behalf of the broker and to accept service on behalf of the
broker. If the official place of business is not open for business within the
hours of 8:30 A.M. until 5:00 P.M., Monday through Friday, the broker
shall notify the department in writing of the business hours maintained by
the broker's official place of business.
(C) A licensed mortgage loan broker with an official place of business
within South Carolina also may maintain one or more satellite offices
provided that the:
(1) mortgage loan broker notifies the department in writing ten days
before the opening of a satellite office of the location of the satellite office
and notifies the department that all records from the satellite office are
stored in a main or branch location in this State which is staffed by one or
more employees during regular business hours;
(2) records of any pending mortgage loan application or records in
which a loan closing is still in process are made available at the mortgage
loan broker's main or branch location as provided in item (1) to the
administrator or his designee within two business days of a written
request delivered by facsimile transmission, mail, or hand-delivery by the
administrator or his designee;
(3) broker notifies the department in writing within two business
days of closing a satellite office.
(D) The department, at its discretion, may examine the books and
records of a licensee and other specified documents to determine whether
there has been substantial compliance with this chapter. Unless there is
reason to believe a violation of this chapter has occurred, examinations
must be limited to one each year. Records and information obtained by
the department during an examination are confidential and the department
must certify that it is in compliance with the Right to Financial Privacy
Act (RFPA).
(E) If the mortgage loan broker fails to notify the department of the
existence or closing of a satellite office, the actual operating hours of the
main or branch offices where records are kept, or the whereabouts of its
records, the broker is subject to a penalty of not less than fifty dollars and
not more than two hundred fifty dollars. If after the assessment of such
a fine within a one-year period, the administrator finds that additional
violations of this section are both intentional and repeated, the mortgage
loan broker is subject to all of the remedies for violations of this chapter
set forth in Section 40-58-80."
License suspension
SECTION 9. A. Section 40-58-80(C) of the 1976 Code, as last
amended by Act 172 of 1993, is further amended to read:
"(C) The department, upon the finding that a mortgage loan broker
has engaged intentionally or repeatedly in a course of conduct in violation
of this chapter, may revoke the license of the mortgage loan broker
temporarily or permanently in its discretion after reasonable notice to the
broker and an opportunity for the broker to be heard and may increase the
required bond up to a maximum of twenty-five thousand dollars to ensure
that the public is protected adequately. The department also may impose
upon persons violating the provisions of this chapter administrative fines
of not more than five hundred dollars for each offense or not more than
five thousand dollars for the same set of transactions or occurrences. Each
violation constitutes a separate offense. The department, if it determines
that the required bond must be increased, shall state in writing the reasons
for the increase and immediately serve it upon the mortgage loan broker.
The mortgage loan broker shall provide the new bond within thirty days
or the department shall revoke the license of the mortgage loan broker."
B. Section 40-58-80 of the 1976 Code, as last amended by Act 172
of 1993, is further amended by adding an appropriately lettered subsection
at the end to read:
"( ) The administrator of the department may suspend the right of an
individual to engage in mortgage loan broker activity after finding that an
employee of a licensed mortgage loan broker has failed to comply with a
provision of this chapter."
Fee increased
SECTION 10. Section 40-58-110 of the 1976 Code, as last amended by
Act 430 of 1996, is further amended to read:
"Section 40-58-110. (A) In addition to the initial license application
fee of five hundred fifty dollars required by Section 40-58-50, first time
licensees also shall pay a one-time, nonrefundable processing fee of two
hundred dollars. Thereafter, a licensee shall pay an annual renewal fee of
five hundred fifty dollars. A licensee shall pay an initial fee of one
hundred fifty dollars and, thereafter, a renewal fee of one hundred fifty
dollars for each satellite location. The broker shall notify the department
in writing ten days before opening a new, official branch or satellite
location. No initial fee is required when the licensee notifies the
department of a change in address for an official branch or satellite
location.
(B) The term of each license is one year. Licenses issued under this
chapter expire on September thirtieth each year and must be renewed in
accordance with the provisions of this section.
(C) Failure to renew a license within thirty days of its expiration
results in the license being canceled by the department. A license may be
renewed after the thirty-day grace period provided the renewal is
accompanied by a late penalty of two hundred fifty dollars in addition to
the five hundred fifty dollar license renewal fee. All renewable
applications must contain information required by the department. All
fees collected by the department pursuant to this chapter must be used to
implement the provisions of this chapter."
Study committee
SECTION 11. There is established a committee to study whether or not
a licensing examination should be required for mortgage loan brokers.
The committee consists of the administrator of the Department of
Consumer Affairs, or his designee; the chairmen of the respective Senate
and House Labor, Commerce and Industry committees, or their designees;
and two licensed mortgage brokers appointed by the administrator of the
Department of Consumer Affairs. The administrator of the Department
of Consumer Affairs, or his designee, shall serve as chairman of the
committee, and all members of the committee shall serve without
compensation or reimbursement. The committee shall make its report
and recommendations to the General Assembly no later than January 31,
1999. The committee is dissolved upon making its report and
recommendations.
Definition
SECTION 12. Section 40-58-20(5) of the 1976 Code, as last amended
by Act 172 of 1993 is further amended to read:
"(5) 'Exempt person or organization' means:
(a) a bank, bank holding company, credit union, savings and loan
association, savings and loan association holding company, their affiliates
and subsidiaries, a supervised licensed lender under Title 37 and a
restricted lender under Title 34 and their affiliates and subsidiaries, a
Department of Housing and Urban Development or Federal Housing
Administration approved mortgagee authorized, chartered, licensed, or
approved under the laws of this State or of the United States or an
instrumentality of them; or persons or organizations which sell or place
all of their conventional mortgage loans on real property with federally
insured and/or regulated financial institutions including, but not limited
to, banks, savings and loan associations, and credit unions."
Time effective
SECTION 13. Section 11 of this act takes effect upon approval by the
Governor. The remaining provisions take effect October 1, 1998.
Approved the 9th day of June, 1998. |