Current Status Bill Number:1281 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:19960321 Primary Sponsor:Thomas All Sponsors:Thomas Drafted Document Number:bbm\10696jm.96 Companion Bill Number:4782 Residing Body:Senate Current Committee:Banking and Insurance Committee 02 SBI Subject:Mortgage loan broker, satellite office locations
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
Senate 19960321 Introduced, read first time, 02 SBI
referred to Committee
View additional legislative information at the LPITS web site.
TO AMEND SECTION 37-5-203, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CONSUMER PROTECTION CODE, DEBTORS' REMEDIES, AND CIVIL LIABILITY FOR VIOLATION OF DISCLOSURE PROVISIONS, SO AS TO PROVIDE THAT CERTAIN PROVISIONS OF THIS SUBSECTION SHALL NOT BE CONSTRUED TO IMPOSE CIVIL LIABILITY OR PENALTIES ON AN ARRANGER OF CREDIT WHEN DISCLOSURE CONSTITUTING A VIOLATION OF THE FEDERAL TRUTH IN LENDING ACT IS ACTUALLY COMMITTED BY ANOTHER PERSON AND THE ARRANGER OF THE CREDIT HAS NO KNOWLEDGE OF THE VIOLATION WHEN IT OCCURRED, AND TO REQUIRE THE CREDITOR TO PROVIDE A COPY OF THE FINAL CLOSING DOCUMENTS TO THE ARRANGER OF CREDIT; TO AMEND SECTION 40-58-20, AS AMENDED, RELATING TO DEFINITIONS UNDER THE PROVISIONS OF LAW ON THE REGISTRATION OF MORTGAGE LOAN BROKERS, SO AS TO DEFINE "REGULAR BUSINESS HOURS", "SATELLITE OFFICE", AND "TABLE-FUNDED TRANSACTION", AND TO MAKE CERTAIN CHANGES TO THE DEFINITION OF "EXEMPT PERSON OR ORGANIZATION"; TO AMEND THE 1976 CODE BY ADDING SECTION 40-58-35 SO AS TO PROVIDE THAT A MORTGAGE LOAN BROKER MAY CONTRACT FOR AND RECEIVE A LOAN BROKER'S FEE AS SET FORTH IN THE BROKER'S FEE AGREEMENT WITH THE APPLICANT, AND PERMIT THE AGREEMENT TO INCLUDE A NONREFUNDABLE APPLICATION FEE; TO AMEND SECTION 40-58-65, RELATING TO THE REGISTRATION OF MORTGAGE LOAN BROKERS, RECORDS, CONFIDENTIALITY, THE PHYSICAL PRESENCE OF A MORTGAGE BROKER IN THE STATE, AND OFFICIAL PLACE OF BUSINESS, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT A REGISTERED MORTGAGE LOAN BROKER WITH AN OFFICIAL PLACE OF BUSINESS WITHIN SOUTH CAROLINA ALSO MAY MAINTAIN ONE OR MORE SATELLITE OFFICES UNDER CERTAIN CONDITIONS; TO AMEND SECTION 40-58-110, AS AMENDED, RELATING TO THE REGISTRATION OF MORTGAGE LOAN BROKERS, FIRST TIME REGISTRANTS' PROCESSING FEES, AND ANNUAL RENEWAL OF REGISTRATION, SO AS TO PROVIDE THAT A BROKER SHALL PAY AN INITIAL FEE OF FIFTY DOLLARS WHEN REGISTERING EACH SATELLITE LOCATION AND THAT THERE SHALL BE NO RENEWAL FEE CHARGED A SATELLITE OFFICE, REQUIRE THE BROKER TO GIVE WRITTEN NOTICE OF TEN DAYS BEFORE THE OPENING OF A NEW, OFFICIAL BRANCH OR SATELLITE LOCATION, AND PROVIDE THAT NO FEE IS REQUIRED WHEN THE REGISTRANT GIVES NOTICE OF A CHANGE OF ADDRESS FOR AN OFFICIAL BRANCH OR SATELLITE LOCATION; TO AMEND SECTION 37-10-102, AS AMENDED, RELATING TO THE CONSUMER PROTECTION CODE, MISCELLANEOUS LOAN PROVISIONS, AND ATTORNEY'S FEES AND OTHER CHARGES ON MORTGAGE LOANS FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES, SO AS TO DELETE CERTAIN PROVISIONS AND PROVIDE INSTEAD THAT AN ATTORNEY LICENSED TO PRACTICE LAW IN SOUTH CAROLINA MUST BE INVOLVED IN THE CLOSING OF THE LOAN FOR CERTAIN PURPOSES, AND TO PROVIDE THAT THE TITLE INSURANCE MUST BE ISSUED THROUGH A TITLE INSURANCE COMPANY LICENSED TO CONDUCT BUSINESS IN SOUTH CAROLINA AND MUST BE ACCEPTABLE TO THE LENDER; AND TO AMEND SECTION 37-3-201, AS AMENDED, RELATING TO THE CONSUMER PROTECTION CODE, LOANS, MAXIMUM CHARGES, AND THE LOAN FINANCE CHARGE FOR CONSUMER LOANS OTHER THAN SUPERVISED LOANS, SO AS TO PROVIDE THAT THIS SECTION DOES NOT APPLY TO A MORTGAGE LOAN BROKER AS DEFINED IN SECTION 40-58-20.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 37-5-203(6) of the 1976 Code is amended to read:
"(6) In this section, creditor includes a person who in the ordinary course of business regularly extends or arranges for the extension of credit, or offers to arrange for the extension of credit. Nothing in this subsection, however, shall be construed to impose civil liability or penalties on an arranger of credit when disclosure constituting a violation of the Federal Truth in Lending Act is actually committed by another person and the arranger of credit has no knowledge of the violation when it occurred. The creditor shall provide a copy of the final closing documents to the arranger of credit."
SECTION 2. Section 40-58-20 of the 1976 Code, as last amended by Act 172 of 1993, is further amended by adding:
"(12) `Regular business hours' means open for business not less than thirty hours a week, Monday through Friday.
(13) `Satellite office' means a location at which a mortgage broker may conduct mortgage loan broker business other than at a location that is open for regular business hours and is not required to be staffed full-time 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.
(14) `Table-funded transaction' means a transaction in which a loan closes in the broker's name but is funded by the lender."
SECTION 3. Section 40-58-20(5)(a) of the 1976 Code, as amended by Act 172 of 1993, is further amended to read:
(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 (HUD) or Federal Housing Administration approved mortgagee, that is solely brokering HUD-approved or Veterans Administration (VA) loans, authorized, chartered, licensed, or approved under the laws of this State or of the United States or an instrumentality of them;"
SECTION 4. The 1976 Code is amended by adding:
"Section 40-58-35. A mortgage loan broker registered under this chapter may contract for and receive a loan broker's fee as set forth in the broker's fee agreement with the applicant. The agreement also may include a nonrefundable application fee which shall not exceed fifty dollars provided that the loan does not close because of lack of due diligence or other fault of the broker."
SECTION 5. Section 40-58-65 of the 1976 Code, as added by Act 172 of 1993, is amended to read:
"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.
(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 registered 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 registered 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.
(B)(D) 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).
(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."
SECTION 6. Section 40-58-110(A) of the 1976 Code, as amended by Act 172 of 1993, is amended to read:
"(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. A broker shall pay an initial fee of fifty dollars when registering each satellite location, and there shall be no renewal fee charged a satellite office. The broker shall notify the department in writing ten days before the opening of a new, official branch or satellite location. No fee is required when the registrant notifies the department of a change of address for an official branch or satellite location."
SECTION 7. Section 37-10-102(a) of the 1976 Code is amended to read:
"(a) The creditor must ascertain the preference of the borrower as to the legal counsel that is employed to represent the debtor in all matters of the transaction relating to the closing of the transaction and except in the case of a loan on property that is subject to the South Carolina Horizontal Property Act (Section 27-31-10 et seq.) the insurance agent to furnish required hazard and flood property insurance in connection with the mortgage and comply with such preference, and the credit application on the first page thereof must contain information as is necessary to ascertain these preferences of the borrower. The creditor may require that the attorney or agent so chosen be able to provide reasonable security to the creditor by way of mortgage title insurance in a company acceptable to the creditor and other insurance in a company acceptable to the creditor. If title insurance is made a condition of the loan at any point during the negotiations, it must remain a condition all the time thereafter regardless of which attorney ultimately closes the transaction. Any legal fees other than for examination and certification of the title, the preparation of all required documents, and the closing of the transaction required or incurred by the creditor in connection with the transaction is the responsibility of the creditor regardless of which party pays for the title work, document preparation, and closing.
An attorney licensed to practice law in South Carolina must be involved in the closing of the loan in order to represent the interests of both the lender and the borrower, to explain the terms and conditions of the transaction to the borrower, and to issue title insurance insuring both the borrower's and the lender's interests. The title insurance must be issued through a title insurance company licensed to conduct business in South Carolina and must be acceptable to the lender."
SECTION 8. Section 37-3-201 of the 1976 Code, as last amended by Act 119 of 1989, is further amended by adding:
"(7) This section does not apply to a mortgage loan broker as defined in Section 40-58-20(3)."
SECTION 9. This act takes effect upon approval by the Governor.