Bill 3963

                    Current Status

Bill Number:               3963
Ratification Number:       621
Act Number                 544
Introducing Body:          House
Subject:                   Registration of mortgage loan
                           brokers

(A544, R621, H3963)

AN ACT TO AMEND TITLE 40, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 58 SO AS TO REQUIRE REGISTRATION OF MORTGAGE LOAN BROKERS.

Be it enacted by the General Assembly of the State of South Carolina:

Registration of mortgage loan brokers

SECTION 1. Title 40 of the 1976 Code is amended by adding:

"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 and Deeds of Trust 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 either (1) the broker of the mortgage loan 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 either a mortgage or a deed of trust 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;

(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;

(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.

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 thereafter continuously maintaining the amount of fifty thousand dollars in cash or securities approved by the administrator or a bond in the amount of fifty 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 administrator. 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 capitalization requirements required by the administrator and the descriptions of the business activities, financial responsibility, educational background,

and general character and fitness of the

applicant as required by the administrator. The application must be accompanied by a fee, payable to the administrator, of five hundred dollars.

Section 40-58-60. (A) Upon the filing of an application for registration, if the administrator 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, he shall register the applicant as a mortgage loan broker and issue and deliver a certificate of registration. If the administrator does not so find, he 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 40-58-70. 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, to include presenting the broker in the guise of a lender or pursuing a course of misrepresentation through agents or otherwise;

(2) 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) fail to escrow a fee which is paid by the borrower before procuring a loan in an interest-bearing account of a supervised financial organization in this State;

(6) fail to refund promptly to the borrower an escrowed amount with interest if a loan is not procured as set forth in item (7);

(7) retain a fee paid by a borrower to the loan

broker when a loan is not procured within the time specified by the loan broker at the rate, term, and overall cost agreed to by the loan broker and the borrower, regardless of an express written agreement to the contrary. This item does not apply if the failure to procure a loan is due solely to the borrower's negligence or outright refusal to provide information specifically required by the lender.

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 administrator, 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 administrator in accordance with Section 40-58-90 and continues

to engage in the action in violation of the administrator's order, he is subject to a penalty of one thousand dollars for each action he takes in violation of the administrator's order. The penalty provision of this section is in addition to and not in lieu of any other provision of law applicable to a mortgage loan broker for the mortgage loan broker's failure to comply with an order of the administrator.

(C) The administrator, upon the finding that a mortgage loan broker has engaged in a course of conduct in violation of this chapter, may revoke the registration of the mortgage loan broker temporarily or permanently in his discretion.

(D) 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 administrator and by written notice to the administrator, may appeal to the circuit court of the county where the appellant resides as provided by Article 3, Chapter 23 of Title 1, the State Administrative Procedures Act.

Section 40-58-100. The administrator may promulgate reasonable regulations necessary to effectuate the purposes of this chapter.

Section 40-58-110. In addition to the initial application for registration fee of five hundred dollars required by Section 40-58-50, a registrant shall pay an annual renewal fee of five hundred dollars."

Time effective

SECTION 2. This act takes effect October 1, 1988.