S*537 Session 110 (1993-1994)
S*0537(Rat #0203, Act #0172) General Bill, By H.S. Stilwell, Leatherman,
J.V. Smith and Thomas
Similar(H 3664)
A Bill to amend Chapter 58, Title 40, as amended, Code of Laws of South
Carolina, 1976, relating to registration of mortgage loan brokers, so as to
provide additional definitions and restrictions on the registration of
mortgage loan brokers, to increase the bond required for applicants, to
increase registration fees, to specify the expiration of a registration, to
provide a penalty for violation of provisions, and to provide for
administrative fines; by adding Sections 40-58-55 so as to provide grounds for
refusal to register an applicant, 40-58-65 so as to require recordkeeping and
provide for inspection of those records, and 40-58-75 so as to provide for
disclosure statements to loan applicants.-amended title
03/11/93 Senate Introduced and read first time SJ-6
03/11/93 Senate Referred to Committee on Banking and Insurance SJ-7
04/21/93 Senate Recalled from Committee on Banking and Insurance SJ-2
05/12/93 Senate Read second time SJ-21
05/12/93 Senate Ordered to third reading with notice of
amendments SJ-21
05/13/93 Senate Amended SJ-22
05/13/93 Senate Read third time and sent to House SJ-22
05/18/93 House Introduced, read first time, placed on calendar
without reference HJ-8
05/26/93 House Amended HJ-61
05/26/93 House Read second time HJ-67
05/27/93 House Read third time and returned to Senate with
amendments HJ-120
06/03/93 Senate Concurred in House amendment and enrolled SJ-32
06/10/93 Ratified R 203
06/16/93 Signed By Governor
06/16/93 Effective date 06/16/93
07/21/93 Copies available
(A172, R203, S537)
AN ACT TO AMEND CHAPTER 58, TITLE 40, AS AMENDED,
CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO
REGISTRATION OF MORTGAGE LOAN BROKERS, SO AS TO
PROVIDE ADDITIONAL DEFINITIONS AND RESTRICTIONS ON
THE REGISTRATION OF MORTGAGE LOAN BROKERS, TO
INCREASE THE BOND REQUIRED FOR APPLICANTS, TO
INCREASE REGISTRATION FEES, TO SPECIFY THE EXPIRATION
OF A REGISTRATION, TO PROVIDE A PENALTY FOR VIOLATION
OF PROVISIONS, AND TO PROVIDE FOR ADMINISTRATIVE FINES;
BY ADDING SECTIONS 40-58-55 SO AS TO PROVIDE GROUNDS
FOR REFUSAL TO REGISTER AN APPLICANT, 40-58-65 SO AS TO
REQUIRE RECORDKEEPING AND PROVIDE FOR INSPECTION OF
THOSE RECORDS, AND 40-58-75 SO AS TO PROVIDE FOR
DISCLOSURE STATEMENTS TO LOAN APPLICANTS.
Be it enacted by the General Assembly of the State of South Carolina:
Registration of mortgage brokers revised
SECTION 1. Chapter 58, Title 40 of the 1976 Code is amended to
read:
"CHAPTER 58
Registration of Mortgage Loan Brokers
Section 40-58-10. (A) This chapter may be cited as the Registration
Requirements Act of Certain Loan Brokers of Mortgages on Residential
Real Property.
(B) No person, partnership, corporation, banking organization, or other
organization shall broker a residential mortgage loan as defined in this
chapter unless the broker of the mortgage loan:
(1) is an exempt person or organization as defined by Section
40-58-20(5); or
(2) has complied with the provisions of this chapter.
Section 40-58-20. As used in this chapter:
(1) `Mortgage loan' means a loan to a natural person made primarily
for personal, family, or household use primarily secured by a mortgage on
residential real property.
(2) `Residential real property' means real property located in this State
upon which there is located or there is to be located one or more single
family, owner-occupied dwellings or dwelling units.
(3) `Mortgage loan broker' means a person or organization in the
business of soliciting, processing, placing, or negotiating mortgage loans
for others or offering to process, place, or negotiate mortgage loans for
others. Mortgage loan broker also includes a person or organization who
brings borrowers or lenders together to obtain mortgage loans or renders a
settlement service as described in 24 CFR Part 3500.2(a)(16)(ii).
(4) `Soliciting, processing, placing, or negotiating a mortgage loan'
means for compensation or gain, either directly or indirectly, accepting or
offering to accept an application for a mortgage loan, assisting or offering
to assist in the processing of an application for a mortgage loan, soliciting
or offering to solicit a mortgage loan on behalf of a third party, or
negotiating or offering to negotiate the terms or conditions of a mortgage
loan with a lender on behalf of a third party.
(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;
(b) an attorney at law licensed to practice law in South Carolina who
is not engaged principally in negotiating mortgage loans when the attorney
renders services in the course of his practice as an attorney at law;
(c) a person employed by an organization defined in subitem (a) of
this item;
(d) title company which is qualified to issue title insurance, directly
or through its agents.
(6) `Registrant' means a person or organization who is registered
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.
(7) `Administrator' means the Administrator of the Department of
Consumer Affairs of this State.
(8) `RESPA' means the Real Estate Settlement Procedures Act of
1974, 12 U.S.C. Section 2601 et seq., as amended.
(9) `Recasting' means a promise for an individual to recoup a home
sold to a third party with the intent of the original seller to rent back the
property for a specific time at which the original seller will have the option
to purchase the property back at a specific price. The specific period of
time would normally be one year.
(10) `HUD' means the Department of Housing and Urban
Development.
(11) `Department' means the South Carolina Department of Consumer
Affairs.
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 registered 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).
Section 40-58-40. No person or organization may offer or agree to offer
loan brokerage services in this State without first depositing and
continuously maintaining the amount of ten thousand dollars in cash or
securities approved by the administrator or a bond in the amount of ten
thousand dollars executed by a surety company authorized by the laws of
this State to transact business within this State. The bond must be executed
to the State of South Carolina and must be for the use of the State and for
any consumers who may have a cause of action against the loan broker.
Section 40-58-50. (A) An application to become registered 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, 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 shall 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 dollars.
Section 40-58-55. The department may refuse to register an applicant or
refuse to renew a registration 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 registration 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 five
years.
Section 40-58-60. (A) Upon the filing of an application for registration,
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 or association, 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 register the applicant as a mortgage loan broker and issue a certificate
of registration. If the department does not so find, it shall refuse to register
the applicant and shall notify him of the denial.
(B) Upon the receipt of the certificate, a mortgage loan broker is
authorized to engage in the business for which the registration certificate
was issued.
(C) Each certificate issued to a registrant must state the address or
addresses at which the business is to be conducted and must state fully the
name of the registrant and the date of the registration. A copy of the
certificate must be posted prominently in each place of business of the
registrant. The certificate is not transferable or assignable.
Section 40-58-65. (A) A person registered 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 registrant with two or more registered
offices may consolidate the records at any one of the registered 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.
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 registered location in this State. At a minimum, the
broker shall maintain an official place of business, 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.
(B) The department, at its discretion, may examine the books and
records of a registrant 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).
Section 40-58-70. Mortgage loan brokers may not:
(1) misrepresent the material facts or make false promises likely to
influence, persuade, or induce an applicant for a mortgage loan or a
mortgagor to take a mortgage loan. This includes presenting the broker in
the guise of a lender or pursuing a course of misrepresentation through
agents or otherwise;
(2) intentionally misrepresent or conceal a material factor, term, or
condition of a transaction to which he is a party, pertinent to an applicant
for a mortgage loan or a mortgagor;
(3) engage in a transaction, practice, or course of business which is
unconscionable in light of the regular practices of a mortgage loan broker,
or which operates a fraud upon a person, in connection with the making of
or purchase or sale of a mortgage loan;
(4) fail to use due diligence and make reasonable efforts to procure a
loan on behalf of a borrower;
(5) collect any third party fees before a conditional loan commitment is
obtained by the mortgage broker with the exception of normal processing
expenses associated with the making of mortgage loans as authorized or
allowed by FNMA, FHLMC, FHA, VA, or any additional fees authorized
or allowed by the department;
(6) engage in recasting unless the applicant obtains the advice and
counsel of a licensed attorney who is independent to the transaction. No
party to a transaction, other than the consumer, may recommend, retain, or
influence the selection of independent counsel. An applicant for recasting
shall provide to the broker a document identifying the applicant, provide a
brief summary of the proposed transaction, and a written statement from an
attorney certifying that the applicant has been advised of the potential
consequences of recasting.
Section 40-58-75. (A) Within three business days of the receipt of an
application for a loan, the broker must disclose in a statement the total
estimated charges to the borrower for the loan and an itemization of the
charges provided if required under RESPA. The disclosure is considered
delivered when deposited with United States Postal Service for first class
delivery.
(B) No person may earn a mortgage broker's fee unless the person meets
the requirements of this chapter, is authorized to conduct mortgage
brokerage services by this chapter, or is exempt from the requirements of
this chapter.
(C) All fees earned for services rendered as a mortgage broker must be
disclosed to the applicant by the mortgage broker as required by
RESPA.
Section 40-58-80. (A) Upon the finding that an action of a mortgage
loan broker may be in violation of this chapter, or of a law or regulation of
this State or of the federal government or an agency of them, the
department, after reasonable notice to the mortgage loan broker and an
opportunity for the mortgage loan broker to be heard, shall order it to cease
and desist from the action.
(B) If the mortgage loan broker fails to appeal the cease and desist order
of the department in accordance with Section 40-58-90 and continues to
engage in the action in violation of the department's order, he is subject to a
penalty of not less than one thousand nor more than two thousand five
hundred dollars, in the discretion of the department, for each action he
takes in violation of the department's order. The penalty provision of this
section is in addition to and not instead of other provisions of law
applicable to a mortgage loan broker for the mortgage loan broker's failure
to comply with an order of the department.
(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 registration 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 registration of the mortgage loan
broker.
(D) A person who violates a provision of this chapter is guilty of a
misdemeanor, and upon conviction, must be fined not more than five
hundred dollars or imprisoned not more than six months, or both.
(E) Nothing in this chapter limits a statutory or common law right of a
person to bring an action in a court for an act or the right of the State to
punish a person for a violation of a law.
Section 40-58-90. An aggrieved party, within thirty days after the final
decision of the department and by written notice to the department, may
appeal to the circuit court of the county where the appellant resides as
provided by Article 3, Chapter 23 of Title 1, the Administrative Procedures
Act.
Section 40-58-100. The department may promulgate regulations
necessary to effectuate the purposes of this chapter.
Section 40-58-110. (A) In addition to the initial application for
registration fee of five hundred dollars required by Section 40-58-50, first
time registrants also shall pay a one-time, nonrefundable processing fee of
two hundred dollars. Thereafter, a registrant shall pay an annual renewal
fee of five hundred dollars.
(B) The term of each registration is one year. Registrations 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 registration within thirty days of its expiration
results in the registration being canceled by the department. A registration
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 dollars registration 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."
Time effective
SECTION 2. This act takes effect upon approval by the Governor.
Approved the 16th day of June, 1993. |