Current Status Bill Number:
4569Ratification Number: 461Act Number: 336Type of Legislation: General Bill GBIntroducing Body: HouseIntroduced Date: 19980204Primary Sponsor: CatoAll Sponsors: Cato and GambleDrafted Document Number: jic\5209htc.98Date Bill Passed both Bodies: 19980521Date of Last Amendment: 19980513Governor's Action: SDate of Governor's Action: 19980609Subject: Mortgage loan brokers, continuing education requirements; Consumer Affairs, Banks and Savings and Loan Associations
Body Date Action Description Com Leg Involved ______ ________ _______________________________________ _______ ____________ ------ 19980617 Act No. A336 ------ 19980609 Signed by Governor ------ 19980604 Ratified R461 House 19980521 Concurred in Senate amendment, enrolled for ratification Senate 19980514 Read third time, returned to House with amendment Senate 19980513 Amended Senate 19980513 Committee amendment adopted Senate 19980512 Read second time, ordered to third reading with notice of general amendments, carrying over all amendments to third reading Senate 19980423 Committee report: Favorable with 12 SLCI amendment Senate 19980303 Introduced, read first time, 12 SLCI referred to Committee House 19980226 Read third time, sent to Senate House 19980225 Amended, read second time House 19980224 Debate adjourned until Wednesday, 19980225 House 19980219 Committee report: Favorable with 26 HLCI amendment House 19980204 Introduced, read first time, 26 HLCI referred to CommitteeView additional legislative information at the LPITS web site.
(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."
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."
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."
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."
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."
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."
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.
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."
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.