South Carolina General Assembly
110th Session, 1993-1994

Bill 537

                    Current Status
Introducing Body:               Senate
Bill Number:                    537
Ratification Number:            203
Act Number:                     172
Primary Sponsor:                Stilwell
Type of Legislation:            GB
Subject:                        Mortgage loan brokers,
                                registration of
Companion Bill Number:          3664
Date Bill Passed both Bodies:   19930603
Computer Document Number:       DKA/4332AL.93
Governor's Action:              S
Date of Governor's Action:      19930616
Introduced Date:                19930311
Date of Last Amendment:         19930526
Last History Body:              ------
Last History Date:              19930616
Last History Type:              Act No. 172
Scope of Legislation:           Statewide
All Sponsors:                   Stilwell
                                J. Verne Smith
Type of Legislation:            General Bill


 Bill  Body    Date          Action Description              CMN  Leg Involved
 ----  ------  ------------  ------------------------------  ---  ------------
537    ------  19930616      Act No. 172
537    ------  19930616      Signed by Governor
537    ------  19930610      Ratified R 203
537    Senate  19930603      Concurred in House amendment,
                             enrolled for ratification
537    House   19930527      Read third time, returned to
                             Senate with amendment
537    House   19930526      Amended, read second time
537    House   19930518      Introduced, read first time,
                             placed on Calendar without
537    Senate  19930513      Amended, read third time,
                             sent to House
537    Senate  19930512      Read second time, ordered to
                             third reading with notice of
                             general amendments
537    Senate  19930421      Recalled from Committe,         02
                             placed on Calendar
537    Senate  19930311      Introduced, read first time,    02
                             referred to Committee
View additional legislative information at the LPITS web site.

(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A172, R203, S537)


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:


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.