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S. 1090
STATUS INFORMATION
General Bill
Sponsors: Senators Thomas, Ford, Anderson, Jackson and Malloy
Document Path: l:\council\bills\agm\19068mm08.doc
Companion/Similar bill(s): 924
Introduced in the Senate on February 12, 2008
Introduced in the House on April 30, 2008
Last Amended on April 29, 2008
Currently residing in the House Committee on Labor, Commerce and Industry
Summary: Mortgage Lending Act
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number
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2/12/2008 Senate Introduced and read first time SJ-5
2/12/2008 Senate Referred to Committee on Banking and Insurance SJ-5
4/22/2008 Senate Committee report: Favorable with amendment Banking and
Insurance SJ-9
4/24/2008 Senate Committee Amendment Amended and Adopted SJ-90
4/24/2008 Senate Read second time SJ-90
4/29/2008 Senate Amended SJ-59
4/29/2008 Senate Read third time and sent to House SJ-59
4/30/2008 House Introduced and read first time HJ-7
4/30/2008 House Referred to Committee on Labor, Commerce and Industry
HJ-8
View the latest legislative information at the LPITS web site
VERSIONS OF THIS BILL
2/12/2008
4/22/2008
4/24/2008
4/29/2008
\Indicates Matter Stricken
Indicates New Matter
AS PASSED BY THE SENATE
April 29, 2008
S. 1090
S. Printed 4/29/08--S.
Read the first time February 12, 2008.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, SO AS TO ENACT "THE SOUTH CAROLINA MORTGAGE LENDING ACT", BY ADDING CHAPTER 22 TO TITLE 37 SO AS TO REQUIRE THE LICENSING OF A MORTGAGE LENDER, LOAN OFFICER, LIMITED LOAN OFFICER, OR SOMEONE ACTING AS A MORTGAGE LENDER; PROVIDE DEFINITIONS; ESTABLISH QUALIFICATIONS FOR LICENSURE AND GROUNDS FOR REVOCATION, SUSPENSION, RENEWAL, AND TERMINATION; DESCRIBE PROHIBITED ACTIVITIES; PROVIDE FOR RECORD-KEEPING, TRUST AND ESCROW ACCOUNTS, AND ANNUAL REPORTS; PROVIDE FOR THE FELONY OFFENSE OF MORTGAGE FRAUD AND PENALTIES; PROVIDE FOR ENFORCEMENT OTHERWISE THROUGH THE DEPARTMENT OF CONSUMER AFFAIRS AND THROUGH CRIMINAL PENALTIES; BY AMENDING SECTIONS 37-1-301, 37-3-501, AND 37-23-20, ALL RELATING TO DEFINITIONS IN CONNECTION WITH MORTGAGE LENDING AND BROKERING AND HIGH-COST AND CONSUMER HOME LOANS, SO AS TO CONFORM DEFINITIONS, AND TO ADD A DEFINITION FOR "ADJUSTABLE RATE MORTGAGE"; BY AMENDING SECTIONS 37-23-40, 37-23-45, AND 37-23-75, ALL RELATING TO PROTECTIONS FOR THE BORROWER IN A HIGH-COST OR CONSUMER HOME LOAN TRANSACTION, SO AS TO REQUIRE CERTAIN DISCLOSURES IN CONNECTION WITH AN ADJUSTABLE RATE MORTGAGE; AND BY AMENDING CHAPTER 58 OF TITLE 40, RELATING TO THE REGISTRATION OF MORTGAGE LOAN BROKERS, SO AS TO CHANGE THE REGISTRATION REQUIREMENTS TO LICENSING REQUIREMENTS, TO REDEFINE "MORTGAGE BROKER", "EXEMPT ORGANIZATION", "RESIDENTIAL REAL PROPERTY", INTER ALIA, AND TO ADD NEW DEFINITIONS, INCLUDING "BRANCH OFFICE", "PATTERN OF RESIDENTIAL MORTGAGE FRAUD", "TABLEFUNDING", AND OTHERS; REQUIRE CERTAIN PROFESSIONAL COURSES, AN ADDITIONAL YEAR OF EXPERIENCE, AND A FINGERPRINT CHECK FOR MORTGAGE BROKERS AND MORTGAGE ORIGINATORS; TO REQUIRE CERTAIN RECORDS BE KEPT AND MADE ACCESSIBLE; ADD CERTAIN PROHIBITIONS IN CONNECTION WITH A REAL ESTATE APPRAISAL; REQUIRE AND PRESCRIBE MORTGAGE BROKER AGREEMENTS; AUTHORIZE ENFORCEMENT BY THE DEPARTMENT OF CONSUMER AFFAIRS, AND PRESCRIBE ADMINISTRATIVE PENALTIES INCLUDING FINES AND INJUNCTIONS AND CRIMINAL PENALTIES; REQUIRE CERTAIN REPORTS AND FILINGS; AND PROVIDE FOR THE FELONY OFFENSE OF MORTGAGE FRAUD AND PENALTIES.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. This act may be cited as "The South Carolina Mortgage Lending Act".
SECTION 2. Title 37 of the 1976 Code is amended by adding:
Section 37-22-110. The following definitions apply in this chapter:
(1) 'Act as a mortgage broker' means to act, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, by soliciting, processing, placing, or negotiating mortgages for others or offering to process, place, or negotiate mortgages for others or engaging in tablefunding of mortgages or as a loan correspondent, as that term is defined in 24 CFR Part 202 et seq., whether those acts are done by telephone, by electronic means, by mail, or in person with the borrowers or potential borrowers. 'Act as a mortgage broker' also includes a person or organization who brings borrowers or lenders together to obtain mortgages or renders a settlement service as described in 12 USC 2602(3) and 24 CFR Part 3500.2(b).
(2) 'Act as a mortgage lender' means to engage in the business of making or servicing mortgages for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, including soliciting, processing, or negotiating a mortgage.
(3) 'Administrator' means the administrator of the Department of Consumer Affairs (department) or the administrator's designees; except that, for purposes of licensing, investigation, examination, and regulation of a person who is also licensed as a supervised lender, including any persons engaged by a licensed supervised lender to engage in the solicitation and acceptance of applications for mortgage loans, the term 'administrator' as used in this chapter means the State Board of Financial Institutions (board).
(4) 'Affiliate' means a company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 USC Section 1841), et seq. For purposes of this item, the term 'control' means ownership of all of the voting stock or comparable voting interest of the controlled person.
(5) 'Affiliated mortgage lender' means a licensed mortgage lender that meets the criteria of either subitems (a), (b), and (c) of this item or subitems (d) and (e) of this item. The licensee:
(a) by itself or with its affiliates, is licensed in five or more states to engage in the mortgage lending business and (i) is supervised by a state or federal regulatory agency whose regulatory scheme has been determined by the administrator to be substantially similar to that of South Carolina, (ii) is organized and supervised under the laws of a state that has adopted a model licensing law endorsed by the administrator; or (iii) is supervised by a state or federal agency that is a party to an interstate compact or has otherwise entered into a cooperative reciprocal agreement by which the state or federal regulatory agency and the State of South Carolina, directly or by duly authorized act of the administrator, have agreed mutually to recognize state licensing laws which have specific enumerated criteria;
(b) including its affiliates and wholly owned subsidiaries, has more than one hundred employees that are licensed pursuant to this chapter;
(c) has an audited consolidated net worth of fifty million dollars or more, or if the licensee does not have the required net worth, its parent shall provide to the administrator (i) evidence satisfactory to the administrator that the parent has an audited net worth of one hundred million dollars or more, and (ii) an unconditional guarantee or comparable instrument of surety satisfactory to the administrator of the performance of the licensee of its obligations pursuant to this chapter;
(d) is a direct or indirect wholly owned subsidiary of a bank holding company or financial services holding company subject to regulation by the Federal Reserve Board or the Office of Thrift Supervision;
(e) has an audited net worth of fifty million dollars or, if the licensee does not have the required net worth, (i) its parent, if it is not a bank holding company or financial holding company, meets the requirements of subitem (c) of this item, or (ii) its parent, if the parent is a bank holding company or financial holding company, has audited total assets in excess of ten billion dollars and provides the administrator with the unconditional guarantee or comparable instrument of surety required by subsubitem (c) of this item.
(6) 'Branch manager' means the individual who is in charge of and who is responsible for the business operations of a branch office of a mortgage lender.
(7) 'Branch office' means an office of the licensee acting as a mortgage lender that is separate and distinct from the licensee's principal office.
(8) 'Control', except as provided in item (4) of this section, means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. A person that (i) is a director, general partner or executive officer; (ii) directly or indirectly has the right to vote ten percent or more of a class of a voting security or has the power to sell or direct the sale of ten percent or more of a class of voting securities; (iii) in the case of an LLC, is the managing member; or (iv) in the case of a partnership, has the right to receive upon dissolution, or has contributed, ten percent or more of the capital, is presumed to control that company.
(9) 'Employee' means an individual who has an employment relationship, acknowledged by both the individual and the mortgage lender, and is treated like an employee for purposes of compliance with the federal income tax laws.
(10) 'Exempt person' means any:
(a) agency of the federal government or state government granting mortgage loans under specific authority of the laws of a state or the United States;
(b) employee of a licensee whose responsibilities are limited to clerical and administrative tasks for the employer and who does not solicit borrowers, accept applications, or negotiate the terms of loans on behalf of the employer;
(c) person authorized to engage in business as a bank or a wholly owned subsidiary of a bank, farm credit system, savings institution or wholly owned subsidiary of a savings institution, or credit union or a wholly owned subsidiary of a credit union under the laws of the United States, this State, or another state. Except for Section 37-22-200, Section 37-22-250, and Section 37-22-280, this chapter does not apply to the exempt persons described in this subitem; or
(d) officer or employee of an exempt person described in subitem (c) of this item when acting in the scope of employment for the exempt person.
(11) 'Financial Services or financial services related' means pertaining to securities, commodities, banking, insurance, consumer lending, or real estate including, but not limited to, acting as or being associated with a bank or savings association, credit union, mortgage lender, mortgage servicer, mortgage broker, real estate broker, real estate salesperson or agent, closing agent, title company, or escrow agent.
(12) 'Licensee' means a person or organization who is licensed pursuant to this chapter.
(13) 'Loan officer' means an individual who, in exchange for compensation as an employee of a licensed mortgage lender and employed by the mortgage lender, solicits, negotiates, accepts, or offers to accept applications for mortgages and includes direct contact with and informing mortgage applicants of the rates, terms, disclosures, and other aspects of the mortgage. The definition of 'loan officer' does not include an exempt person described in subitems (10)(b) and (d) of this section.
(14) 'Limited loan officer' means an individual who, in exchange for compensation as an employee of an affiliated mortgage lender, employed by the affiliated mortgage lender, directly solicits, negotiates, offers, or makes commitments for mortgage loans. The definition of 'limited loan officer' does not include an exempt person described in subitems (10)(b) and (d) of this section.
(15) 'Make a mortgage loan' means to close a mortgage loan, advance funds, offer to advance funds, or make a commitment to advance funds to a borrower under a mortgage loan.
(16) 'Managing principal' means a person who meets the requirements of Section 37-22-140(C) and who agrees to be primarily responsible for the operations of a licensed mortgage lender.
(17) 'Mortgage broker' means a person or organization in the business of soliciting, processing, placing, or negotiating mortgages for others or offering to process, place, or negotiate mortgages for others. Mortgage broker also includes a person or organization who brings borrowers or lenders together to obtain mortgages or renders a settlement service as described in 12 USC 2602(3) and 24 CFR Part 3500.2(b). A person who acts as a mortgage broker, as that term is defined in item (1) of this section.
(18) 'Mortgage lender' means a person who acts as a mortgage lender as that term is defined in item (2) of this section or engages in the business of servicing mortgage loans for others or collecting or otherwise receiving mortgage loan payments directly from borrowers for distribution to any other person. However, the definition does not include a person who acts as a mortgage lender only in tablefunding transactions.
(19) 'Mortgage loan' means a loan made to a natural person primarily for personal, family, or household use, (i) primarily secured by a mortgage or a deed of trust on residential real property located in South Carolina; (ii) negotiated, offered or otherwise transacted within this State, in whole or in part; or (iii) made or extended within this State.
(20) 'Parent' means the person that controls an affiliated mortgage lender, as control is defined in item (8) of this section.
(21) 'Pattern of residential mortgage fraud' means one or more misstatements, misrepresentations, or omissions made during the mortgage lending process that involve two or more residential properties, which have the same or similar intents, results, accomplices, victims, or methods of commission or otherwise are interrelated by distinguishing characteristics.
(22) 'Person' means an individual, partnership, limited liability company, limited partnership, corporation, association, or other group engaged in joint business activities, however organized.
(23) 'Residential real property' means real property located in the State of South Carolina upon which there is located or is to be located one or more single-family, owner-occupied dwellings or dwelling units that are to be occupied as the owner's principal dwelling, and includes real estate and residential manufactured home (land/home) transactions.
(24) 'RESPA' means the Real Estate Settlement Procedures Act of 1974, 12 USC Section 2601 et seq.
(25) 'Soliciting, processing, placing, or negotiating a mortgage' means, for compensation or gain or in the expectation of compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage, assisting or offering to assist in the processing of an application for a mortgage, soliciting or offering to solicit a mortgage on behalf of a third party, or negotiating or offering to negotiate the terms or conditions of a mortgage with a lender on behalf of a third party.
(26) 'Supervised loan' means a first mortgage and second mortgage, in addition to the definition in Section 37-3-501.
(27) 'Tablefunding' means a transaction where a mortgage broker closes a loan in its own name with funds provided by others.
Section 37-22-120. (A) Other than an exempt person, it is unlawful for a person doing business in this State to act as a mortgage lender, or directly or indirectly to engage in the business of a mortgage lender, without first obtaining a license from the administrator pursuant to this chapter.
(B) It is unlawful for a person to engage in the solicitation and acceptance of applications for mortgage loans without first obtaining a license as a loan officer, limited loan officer, or mortgage lender issued by the administrator pursuant to this chapter. It is unlawful for a person to employ, compensate, or appoint as its agent a loan officer unless the loan officer is licensed as a loan officer pursuant to this chapter. Exempt persons are not be subject to this subsection.
(C) The license of a loan officer or limited loan officer is not effective during a period when that person is not employed by an affiliated mortgage lender or mortgage lender licensed pursuant to this chapter.
(D) When a loan officer or a limited loan officer ceases to be employed by an affiliated mortgage lender, or mortgage lender licensed pursuant to this chapter, the loan officer, limited loan officer, and the affiliated mortgage lender or mortgage lender licensed pursuant to this chapter or by whom that person is employed promptly shall notify the administrator in writing. The affiliated mortgage lender's or mortgage lender's notice must include a statement of the specific reason or reasons for, as applicable, the termination of the loan officer's or limited loan officer's employment.
(E) A loan officer or limited loan officer must not be employed simultaneously by more than one affiliated mortgage lender or mortgage lender licensed pursuant to this chapter.
(F) A person who has completed and filed with the administrator the application and all documents required for licensure as a loan officer, other than documents relating to the required examination and the mortgage lending fundamentals course, may act as a loan officer during the period before action is taken on the application by the administrator, if the:
(1) administrator or another state or federal regulatory agency of financial services or financial services related businesses has not denied, revoked, or taken adverse action with respect to an application filed by or license held by that person during the ten-year period ending on the date of filing of the application;
(2) loan officer is employed by a licensed mortgage lender, and the managing principal of the mortgage lender (i) certifies to the administrator in writing that the managing principal reasonably believes that the application of the person for licensure as a loan officer meets or exceeds all of the relevant requirements of this chapter for licensure; and (ii) undertakes in writing that the managing principal and the employer will be responsible for the acts of the applicant during the period that the application is pending; and
(3) person is currently or within the six-month period before the date of the application has been employed as and acting as a loan officer for an entity which is exempt by virtue of an exemption claimed pursuant to Section 37-22-110(10)(c).
(G) The administrator may deny or suspend the rights of a mortgage lender to employ a loan officer acting pursuant to subsection (F) of this section if the administrator finds that the mortgage lender, or its managing principal, makes the certification or undertaking set forth in item (2) of subsection (F) of this section in bad faith.
Section 37-22-130. (A) A person who has exhausted all administrative remedies available before the administrator and who is aggrieved by the administrator's determination is entitled to a contested case hearing before the Administrative Law Court as provided in Section 1-23-600(D) and judicial review as provided in Sections 1-23-380(B) and 1-23-610. This section does not limit utilization of or the scope of judicial review available under other means of review, redress, relief, or trial de novo provided by law. A preliminary, procedural, or intermediate action or ruling of the Administrative Law Court is reviewable immediately if review of the final decision of the Administrative Law Court would not provide an adequate remedy.
(B) Contested case proceedings are instituted by filing a request for a contested case hearing with the Administrative Law Court according to the rules of procedure of the Administrative Law Court. Copies of the request for a contested case hearing must be served upon the administrator and all parties of record. The final decision of the administrative law judge may be appealed as provided in Sections 1-23-380 and 1-23-610.
Section 37-22-140. (A) A person desiring to obtain a license pursuant to this chapter shall make written application for licensure to the administrator on forms prescribed by the administrator. The application must contain the information the administrator considers necessary including, but not limited to, the applicant's:
(1) name and address and social security number or if applicable Employer Identification Number (EIN);
(2) form and place of organization, if applicable;
(3) proposed method of and locations for doing business, if applicable;
(4) qualifications and business history and, if applicable, the business history of any partner, officer, or director, a person occupying a similar status or performing similar functions, or a person directly or indirectly controlling the applicant, including: (i) a description of an injunction or administrative order by a state or federal authority to which the person is or has been subject, including denial, suspension or revocation of a financial services or financial services related license or registration; (ii) a conviction of a misdemeanor within the last ten years involving financial services or a financial services related business or any fraud, false statements or omissions, theft or wrongful taking of property, bribery, perjury, forgery, counterfeiting, extortion, or a conspiracy to commit any of these offenses; and (iii) felony convictions;
(5) financial condition, credit history, and business history, with respect to an application for licensing as a mortgage lender; and credit history and business history, with respect to the application for licensing as a loan officer; and
(6) consent to a national and state fingerprint-based criminal history record check and submit a set of the applicant's fingerprints in a form acceptable to the administrator. The applicant must undergo a state criminal records check, supported by fingerprints, by the South Carolina Law Enforcement Division (SLED), and a national criminal records check, supported by fingerprints, by the Federal Bureau of Investigation (FBI). The results of these criminal records checks must be reported to the administrator. SLED is authorized to retain the fingerprints for certification purposes and for notification of the administrator regarding subsequent criminal charges which may be reported to SLED or the FBI, or both. The administrator shall keep all information pursuant to this section privileged, in accordance with applicable state and federal guidelines. In the case of an applicant that is a corporation, partnership, limited liability company, association, or trust, each individual who has control of the applicant or who is the managing principal or a branch manager shall consent to a national and state fingerprint-based criminal history record check and submit a set of that individual's fingerprints pursuant to this item. The applicant must undergo a state criminal records check, supported by fingerprints, by SLED, and a national criminal records check, supported by fingerprints, by the FBI. The results of these criminal records checks must be reported to the administrator. The South Carolina Law Enforcement Division is authorized to retain the fingerprints for certification purposes and for notification of the administrator regarding any subsequent criminal charges. The administrator shall keep all information pursuant to this section privileged, in accordance with applicable state and federal guidelines. Refusal to consent to a criminal history record check constitutes grounds for the administrator to deny licensure to the applicant as well as to any entity (i) by whom or by which the applicant is employed, (ii) over which the applicant has control, or (iii) as to which the applicant is the current or proposed managing principal or a current or proposed branch manager.
(B) In addition to the requirements imposed by the administrator in subsection (A) of this section, each individual applicant for licensure as a loan officer shall:
(1) have attained the age of at least eighteen years of age;
(2) work for a licensed mortgage lender; and
(3) have satisfactorily completed, within the three years immediately preceding the date application is made, a mortgage lending fundamentals course approved by the administrator. The course must consist of at least eight hours of classroom instruction in subjects related to mortgage lending approved by the administrator or possess residential mortgage lending education or experience in residential mortgage lending transactions that the administrator considers equivalent to the course. In addition, the applicant shall have completed satisfactorily a written examination approved by the administrator. The administrator may waive portions of the examination based upon evidence satisfactory to the administrator that the applicant has acquired a professional certification or accreditation that indicates mastery of the subject matter.
(C) In addition to the requirements of subsection (A) of this section, each applicant for licensure as a mortgage lender at the time of application and at all times after that shall comply with the following requirements:
(1) Except as provided in item (2) of this subsection, if the applicant is a sole proprietor, the applicant shall have at least three years of experience in residential mortgage lending or other experience or competency requirements as the administrator may impose. Experience as a limited loan officer does not constitute mortgage lending experience pursuant to this item.
(2) If the applicant is a general or limited partnership, at least one of its general partners shall have the experience described in item (1) of this subsection.
(3) If the applicant is a corporation, at least one of its principal officers shall have the experience described in item (1) of this subsection.
(4) If the applicant is a limited liability company, at least one of its members or managers shall have the experience described in item (1) of this subsection.
(D) Each applicant shall identify one person meeting the requirements of subsection (C) of this section to serve as the applicant's managing principal.
(E) Every applicant for initial licensure shall pay a filing fee of one thousand dollars for licensure as a mortgage lender or fifty dollars for licensure as a loan officer or limited loan officer, in addition to the actual cost of obtaining credit reports and national and state fingerprint-based criminal history record checks. If a licensed loan officer changes employment, then a new license must be issued and a fee of twenty-five dollars must be paid for issuing the new license.
(F) A mortgage lender shall post a surety bond in the amount of one hundred fifty thousand dollars executed by a surety company authorized by the laws of this State to transact business within this State. The surety bond must be in a form satisfactory to the administrator, must be executed to the State of South Carolina, and must be for the use of the State and for consumers who may have a cause of action against the mortgage lender, after notice and opportunity for hearing before the Administrative Law Court. The aggregate liability of the surety may not exceed the principal sum of the bond. The license of a licensee is void upon the termination of the bond by the surety company, unless, a new bond has been filed with the administrator before the termination.
(G) Any general partner, member or manager of a limited liability company, or officer of a corporation who meets individually the requirements of subsection (B) of this section, upon payment of the applicable fee, meets the qualifications for licensure as a loan officer subject to the provisions of subsection (I) of this section.
(H) Each principal office and each branch office of a licensed mortgage lender at which business is conducted must be licensed pursuant to this chapter and must be issued a separate license. A licensed mortgage lender shall file with the administrator an application on a form prescribed by the administrator that identifies the address of the principal office and each branch office and branch manager. A licensing fee of one hundred fifty dollars must be assessed by the administrator for each branch office issued a license.
(I) If the administrator determines that an applicant meets the qualifications for licensure and finds that the financial responsibility, character, and general fitness of the applicant are such as to command the confidence of the community and to warrant belief that the business will be operated honestly and fairly, the administrator shall issue a license to the applicant. If the administrator does not so find, the administrator shall refuse to license the applicant and shall notify him of the denial.
Section 37-22-150. (A) An affiliated mortgage lender shall notify the administrator, on forms prescribed by the administrator, when it hires a limited loan officer. The form must contain information the administrator considers necessary including, but not limited to, the name, social security number, address, and business location of the limited loan officer. Limited loan officers employed by an affiliated mortgage lender shall:
(1) have attained the age of at least eighteen years;
(2) work exclusively in financial services or financial services related business for an affiliated mortgage lender. The affiliated mortgage lender who hires the limited loan officer shall:
(a) supervise the limited loan officer as required by this chapter;
(b) sign the notification form regarding the hiring of the applicant;
(c) certify the applicant is qualified as a limited loan officer subject to background checks, training, testing, and fundamental education requirements; and
(d) bear joint and several liability for claims and damages, including punitive damages, arising out of the limited loan officer's mortgage lending activities, as allowed by law.
(B) An applicant for a limited loan officer license may act provisionally as a limited loan officer during the pendency of the application before the administrator for up to sixty days after submission of the completed forms identified in subsection (A) of this section and a written undertaking by the employing affiliated mortgage lender that it will be responsible for all the applicant's mortgage lending activities.
(C) Systems, programs, and procedures used by the affiliated mortgage lender for employment background checks, training, testing, and education by the affiliated mortgage lender must be submitted to and reviewed by the administrator, who may approve those which are comparable and functionally equivalent to those for loan officers pursuant to Section 37-22-140 and Section 37-22-170. The administrator must be notified of material changes or modifications to the approved systems, programs, and procedures. The administrator may approve those systems, programs, and procedures used by the affiliated mortgage lender for these purposes that meet or exceed programs otherwise accredited by the administrator or that have been approved for the affiliated mortgage lender by at least five other states in which the affiliated mortgage lender is licensed and whose licensing requirements are substantially similar to those of South Carolina.
(D) Except as specified in this section, limited loan officers are subject to licensing standards and disciplinary authority in the same way as loan officers pursuant to this chapter.
(E) A person whose license is revoked, suspended, or barred pursuant to this chapter is prohibited from participating in the mortgage lending business in this State.
Section 37-22-160. (A) All licenses issued by the administrator pursuant to this chapter expire annually on the 31st day of December following issuance or on another date that the administrator may determine. The license is invalid after that date unless renewed. The renewal period for all licensees is from November 1 through December 1 annually or on another date the administrator may determine. Applications received after December 1 or another date the administrator determines are late and the late fees in subsection (B) apply. A license may be renewed by compliance with subsection (C) of this section and by paying to the administrator, in addition to the actual cost of obtaining credit reports and national and state fingerprint-based criminal history record checks as the administrator may require, a renewal fee as follows:
(1) licensed mortgage lenders shall pay an annual renewal fee of eight hundred dollars and one hundred fifty dollars for each branch office; and
(2) licensed loan officers or limited loan officers shall pay an annual fee of fifty dollars.
(B) If a license of a licensed mortgage lender is not renewed during the renewal period, an additional fifteen hundred dollars, in addition to the renewal fee in subsection (A) of this section, must be assessed as a late fee to any renewal. If a license of a licensed loan officer or limited loan officer is not renewed during the renewal period, three hundred dollars in addition to the renewal fee in subsection (A) of this section must be assessed as a late fee to a renewal. If a licensee fails to renew its license within thirty days after the date the license expires, the administrator may require the licensee to comply with the requirements for the initial issuance of a license pursuant to this chapter, in addition to paying a late fee that has accrued.
(C) When required by the administrator, each individual described in Section 37-22-140 shall furnish to the administrator consent to a national and state fingerprint-based criminal history record check and a set of fingerprints in a form acceptable to the administrator. Refusal to consent to a criminal history record check may constitute grounds for the administrator to deny renewal of the license of the person as well as the license of another person by which he is employed, over which he has control, or as to which he is the current or proposed managing principal or a current or proposed branch manager.
(D) A license issued pursuant to this chapter is not assignable or transferable. Control of a licensee must not be acquired through a stock purchase or other device without the prior written consent of the administrator. The administrator may not give written consent if the administrator finds that any of the grounds for denial, revocation, or suspension of a license pursuant to Section 37-22-210 are applicable to the acquiring person.
Section 37-22-170. (A) As a condition of license renewal, a licensee must complete at least eight hours of continuing professional education annually for the purpose of enhancing professional competence and responsibility. The continuing professional education completed must be reported to the administrator annually by the licensee on an approved form showing the date and title, the teacher or sponsor, and the hours of continuing professional education claimed for the course taken. If the course is taught in a classroom setting, fifty minutes of classroom contact equals one hour of continuing professional education. Documentation of courses completed must be maintained by all licensees and 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 administrator for up to two years after the date of course completion.
(B) Up to eight hours of continuing professional education may be carried forward from one year to the next year.
(C) The administrator shall require education providers of the fundamentals mortgage lending course required pursuant to Section 37-22-140 and the continuing education courses required pursuant to this section to file with the administrator for review and approval information regarding the contents and materials of courses proposed to satisfy the education requirements. All course approvals expire annually and must be reviewed and renewed through the administrator. The administrator shall set fees for the initial and continuing review of courses for which credit hours will be granted. The initial filing fee for review of materials may not exceed five hundred dollars and the fee for continued review may not exceed two hundred fifty dollars a year for each course offered. Course providers must maintain records of attendees for two years after course completion.
(D) The department shall appoint two of its licensees for two-year terms and the board shall appoint one of its licensees for a two-year term and one representative each of the department and the board to a panel to review and approve courses questioned as being qualified for continuing professional education. The panel may conduct its meetings by way of conference call or other electronic means. The administrator shall develop a questionnaire to ascertain the interest and background of potential members of this panel. The panel shall consider the following criteria for review and approval:
(1) content of continuing education courses;
(2) accreditation of continuing education providers, sponsors, courses and programs;
(3) other accreditation;
(4) computation of credit;
(5) special cases and exemptions;
(6) general compliance procedures; and
(7) sanctions for noncompliance.
(E) Courses offered by national or state professional mortgage organizations, such as the Mortgage Bankers Association, Mortgage Bankers Association of the Carolinas, or approved in another state are recognized for meeting the education requirement in this State.
(F) If a licensee fails to complete the continuing professional education before the license expiration date, his license expires and he shall pay a penalty of not more than one hundred dollars to reinstate the license. However, the licensee may request a contested case hearing to appeal the expiration of his license for failure to complete continuing professional education requirements.
Section 37-22-180. A mortgage lender licensed pursuant to this chapter shall have a managing principal who operates the business under that manager's full charge, control, and supervision. A mortgage lender may operate a branch office subject to the requirements of this chapter. Each principal and branch office of a mortgage lender licensed pursuant to this chapter shall have a branch manager who meets the experience requirements of Section 37-22-140(C)(1); except, that an affiliated mortgage lender may designate a branch manager who does not meet the experience requirements so long as, at or before the designation, it certifies that the person has been employed by the affiliated mortgage lender for at least one year as a loan officer, limited loan officer, or in a comparable position in another state. The managing principal for a licensee's business also may serve as the branch manager of the licensee's branch offices. Each mortgage lender licensed pursuant to this chapter shall file a form prescribed by the administrator indicating the business's designation of managing principal and branch manager for each branch and each individual's acceptance of the responsibility. A mortgage lender licensed pursuant to this chapter shall notify the administrator of a change in its managing principal or branch manager designated for each branch. The license of a licensee who does not comply with this provision must be suspended pursuant to Section 37-22-210 until the licensee complies with this section. An individual licensee who operates as a sole proprietorship is a managing principal for the purposes of this chapter.
Section 37-22-190. (A) A licensee shall report to the administrator any change of address of the principal place of business or a branch office at least fifteen days before the change. Change of address notification of a licensed location must be accompanied by a fee of twenty-five dollars.
(B) A mortgage lender licensed pursuant to this chapter shall display in plain view in its principal office and in each branch the certificate of licensure issued by the administrator. A loan officer licensed pursuant to this chapter shall display in each branch office in which the officer acts as a loan officer a copy of the certificate of licensure issued by the administrator.
Section 37-22-200. In addition to the activities prohibited by other provisions of state or federal law, it is unlawful for a person, in the course of a mortgage loan transaction, to:
(1) misrepresent or conceal 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, or to pursue a course of misrepresentation through agents or otherwise;
(2) refuse improperly to issue a satisfaction of a mortgage pursuant to Section 29-3-310;
(3) fail to account for or to deliver to a person entitled to receive them funds, documents, or other things of value obtained in connection with a mortgage loan, including money provided by a borrower for a real estate appraisal or a credit report, which the mortgage lender or loan officer is not entitled to retain under the circumstances;
(4) pay, receive, or collect in whole or in part any commission, fee, or other compensation for a mortgage loan transaction in violation of this chapter, including any unlicensed person other than an exempt person;
(5) charge or collect a fee or rate of interest or to make a mortgage loan with terms or conditions or in a manner contrary to the provisions of this title;
(6) advertise mortgage loans, including rates, margins, discounts, points, fees, commissions, or other material information, including material limitations on the loans, unless the person is able to make the mortgage loans available to qualified applicants;
(7) fail to disburse funds in good faith and in accordance with a written commitment or agreement to make a mortgage loan that has been accepted by the borrower;
(8) engage in a transaction, practice, or course of business in connection with the making of, or purchase or sale of, any mortgage loan that is not in good faith or fair dealing, that is unconscionable, as set forth in Section 37-5-108, or that constitutes a fraud upon a person;
(9) fail to pay reasonable fees within a reasonable time to a licensed third party for services that are:
(a) requested from the third party in writing by the mortgage lender or an employee of the mortgage lender; and
(b) performed by the third party in connection with the origination or closing of a mortgage loan for a customer or mortgage lender;
(10) influence or attempt to influence through coercion, extortion, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan. This item does not prohibit a mortgage lender from asking the appraiser to do one or more of the following:
(a) consider additional appropriate property information;
(b) provide further detail, substantiation, or explanation for the appraiser's value conclusion; or
(c) correct errors in the appraisal report;
(11) fail to comply with the mortgage loan servicing transfer, escrow account administration, or borrower inquiry response requirements imposed by sections 6 and 10 of the Real Estate Settlement Procedures Act (RESPA), 12 USC Section 2605 and Section 2609, and regulations adopted under them by the Secretary of the Department of Housing and Urban Development;
(12) fail to provide within a reasonable time, upon written request of a borrower, a payment history statement in a form easily understood by the borrower, including payment dates and amounts and charges, within the twelve months preceding the month in which the request is received and the total amount unpaid as of the end of the period covered by the statement. The statement must be provided without charge once during each year of the term of the obligation. If additional statements are requested, the borrower may be charged a reasonable fee for each additional statement;
(13) take a security interest in residential real property where the principal amount of the mortgage loan is less than five thousand dollars; or
(14) use any trade name or insignia of membership in any organization of which the licensee is not a member or advertise falsely through any material including, but not limited to, any business card, stationary or signage concerning a designation or certification of special education, credentials, trade organization membership, or business.
Section 37-22-210. (A) The administrator, by order, may deny, suspend, revoke, or refuse to issue or renew a license of a licensee or applicant pursuant to this chapter or may restrict or limit the activities relating to mortgage loans of a licensee or a person who owns an interest in or participates in the business of a licensee, if the administrator finds both that:
(1) the order is in the public interest; and
(2) any of the following circumstances apply to the applicant, licensee, or any partner, member, manager, officer, director, loan officer, limited loan officer, managing principal, or other person occupying a similar status or performing similar functions or a person directly or indirectly controlling the applicant or licensee. The person:
(a) has filed an application for license that, as of its effective date or as of a date after filing, contained a statement that, in light of the circumstances under which it was made, is false or misleading with respect to a material fact;
(b) has violated or failed to comply with a provision of this chapter or order of the administrator;
(c) has been convicted of a felony or, within the past ten years, has been convicted of a misdemeanor involving financial services or financial services related business or an offense involving breach of trust or fraudulent or dishonest dealing;
(d) is permanently or temporarily enjoined by a court of competent jurisdiction from engaging in or continuing any conduct or practice involving financial services or financial services related business;
(e) is the subject of an order of the administrator denying, suspending, or revoking that person's license;
(f) is the subject of an order entered within the past ten years by the authority of a state with jurisdiction over that state's financial services or financial services related industry denying or revoking that person's license;
(g) does not meet the qualifications or the financial responsibility, character, or general fitness requirements of Section 37-22-140 or a bond or capital requirements pursuant to this chapter;
(h) has been the executive officer or controlling shareholder or owned a controlling interest in a financial services or financial services related business that has been subject to an order or injunction described in subitem (d), (e), or (f) of this item;
(i) has failed to pay the proper filing or renewal fee pursuant to this chapter or a fine or fee imposed by a state or federal regulatory authority. However, the administrator may enter only a denial order pursuant to this subitem, and the administrator shall vacate the order when the deficiency is corrected;
(j) has falsely certified attendance or completion of hours at an approved education course.
(B) The administrator, by order, summarily may postpone or suspend the license of a licensee pending final determination of a proceeding pursuant to this section. Upon entering the order, the administrator shall notify promptly the applicant or licensee that the order has been entered, the reasons for the order, and the procedure for requesting a hearing before the Administrative Law Court. If a licensee does not request a hearing and the administrator does not request a hearing, the order remains in effect until it is modified or vacated by the administrator.
(C) The administrator, by order, may impose a civil penalty upon a licensee or any member, partner, officer, director, or other person occupying a similar status or performing similar functions on behalf of a licensee for a violation of this chapter. The civil penalty may not exceed ten thousand dollars for each violation of this chapter by a mortgage lender. The administrator may impose a civil penalty that shall not exceed ten thousand dollars for each violation of this chapter by a person other than a licensee or exempt person.
(D) In addition to other powers pursuant to this chapter, upon finding that an action of a person is in violation of this chapter, the administrator may order the person to cease from the prohibited action. If the person subject to the order fails to appeal the order of the administrator in accordance with Section 37-22-130, or if the person appeals and the appeal is denied or dismissed, and the person continues to engage in the prohibited action in violation of the administrator's order, the person is subject to a civil penalty that may not exceed twenty-five thousand dollars for each violation of the administrator's order. The penalty provision of this section is in addition to and not instead of another provision of law for failure to comply with an order of the administrator.
(E) Unless otherwise provided, all actions and hearings pursuant to this chapter are governed by the Administrative Procedures Act, Section 1-23-310 et seq.
(F) When a licensee is accused of any act, omission, or misconduct that subjects the licensee to disciplinary action, the licensee, with the consent and approval of the administrator, may surrender the license and the rights and privileges pertaining to it and is not eligible to receive, or to submit an application for, licensure for a period of time established by the administrator.
(G) If the administrator has reasonable grounds to believe that a licensee or other person has violated this chapter or that facts exist that would be the basis for an order against a licensee or other person, the administrator, either personally or by a person duly designated by the administrator, at any time may investigate or examine the loans and business of the licensee and examine the books, accounts, records, and files of the licensee or other person relating to the complaint or matter under investigation. The administrator may require the licensee or other person to submit a consent to a national and state fingerprint-based criminal history record check and a set of that person's fingerprints in a form acceptable to the administrator in connection with an examination or investigation. Refusal to submit the requested criminal history record check or a set of fingerprints is grounds for disciplinary action. The reasonable cost of this investigation or examination must be charged against the licensee.
(H) The administrator may subpoena documents and witnesses, and compel their production and attendance, to examine under oath all persons whose testimony the administrator considers relative to the person's business, and require the production of books, papers, or other materials.
(I) The administrator, at the expense of the administrator's office, may conduct routine examinations of the books and records of a licensee to determine the compliance with this chapter. The administrator may cooperate and share information with an agency of this State, other states, or the federal government. The administrator may accept or participate in examinations conducted by one of these agencies instead of an examination.
(J) In addition to the authority described in this section, the administrator may require a licensee to pay to a borrower or other individual amounts received by the licensee or its employees in violation of this title.
(K) If the administrator finds that the managing principal, branch manager, or loan officer of a licensee had knowledge of, or reasonably should have had knowledge of, or participated in an activity that results in the entry of an order suspending or withdrawing the license of a licensee, the administrator may prohibit the branch manager, managing principal, or loan officer from serving as a branch manager, managing principal, or loan officer for the period of time the administrator considers necessary.
Section 37-22-220. (A) The administrator shall keep a list of all applicants for licensure pursuant to this chapter which includes the date of application, name, and place of residence and whether the license was granted or refused.
(B) The administrator shall keep a current roster showing the names and places of business of all licensees that shows their respective loan officers and a roster of exempt persons required to file a notice pursuant to Section 37-22-250. The rosters must: (i) be kept on file in the office of the administrator; (ii) contain information regarding all orders or other action taken against the licensees, loan officers, and other persons; and (iii) be open to public inspection.
(C)(1) A licensee shall make and keep the accounts, correspondence, memoranda, papers, books, and other records prescribed by the administrator. Records must be preserved for three years unless the administrator prescribes otherwise for particular types of records. A licensee should develop, maintain, and test disaster recovery plans for all records that are maintained. The recordkeeping requirements imposed by the administrator or this subsection must not be greater than those imposed by applicable state or federal law. Licensee's records may be maintained electronically, if approved by the administrator, so long as they are readily accessible for examination by the administrator.
(2) Beginning on January 1, 2010, in addition to the records required to be maintained by licensees pursuant to Subsection(C)(1), each licensee shall maintain a mortgage log that at a minimum identifies the borrower, including his credit score, the property, the loan terms, the loan officer, the appraiser, the closing agent, the broker, and the lender. To assist the Department of Consumer Affairs administrator in identifying possible discriminatory mortgage lending patterns, each licensee shall submit to the administrator by March thirty-first of each year his mortgage log data and the data identified in 12 CFR Part 203 et seq., in a form determined by the administrator. The licensee shall pay a fine of one hundred dollars a day for late or incomplete data submissions, after notification and right to cure. Data collected by the administrator pursuant to this section is confidential and may be released only in composite form. The board annually shall submit to the department, in a form prescribed by the department and no later than April thirtieth, the data that it collected. The department shall prepare and make available to the public a report based on the above referenced data. The report must be available by June thirtieth each year.
(D) If the information contained in a document filed with the administrator is or becomes inaccurate or incomplete in a material respect, the licensee promptly shall file a correcting amendment to the information contained in the document.
(E) A licensee shall maintain in a segregated escrow fund or trust account funds that come into the licensee's possession, but which are not the licensee's property and which the licensee is not entitled to retain under the circumstances. The escrow fund or trust account must be held on deposit in a federally insured financial institution.
(F) A licensee ceasing activities regulated by this chapter and desiring no longer to be licensed shall inform the administrator at least seven days in advance. The licensee shall include with the notification a plan of withdrawal that includes a timetable for the disposition of the business, the location of the books, records, and accounts until the end of the retention period, and certification of the proper disposal of those records after that.
Section 37-22-230. (A) A licensee shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the administrator to determine if the licensee is complying with the provisions of this title. The recordkeeping system of a licensee is sufficient if he makes the required information reasonably available. The records need not be kept in the place of business where loans are made if the administrator is given free access to the records wherever located and the licensee pays the reasonable cost of their examination.
(B) On or before March thirty-first each year, a licensee shall file with the administrator a composite annual report in the form prescribed by the administrator relating to all mortgage loans made, serviced, or brokered by him. The licensee shall pay a fine of one hundred dollars a day for late or incomplete annual reports, after notification and right to cure.
(C) The mortgage loan report shall include, but is not limited to, the total number and amounts in connection with all mortgage loans, of:
(1) first and subordinate lien loans originated by licensee and closed in the name of another party;
(2) first and subordinate lien loans originated by another party and closed in the name of the licensee;
(3) first and subordinate lien loans originated by and closed in the name of the licensee;
(4) first and subordinate lien loans originated by and closed in the name of another party but funded by licensee;
(5) loans purchased by licensee;
(6) first and subordinate lien loans serviced by licensee;
(7) loans owned with and without servicing rights;
(8) loans sold with and without servicing rights;
(9) loans paid off before and at maturity;
(10) unpaid loans at the beginning and end of the reporting year;
(11) delinquent loans that are 30-59, 60-89, and more than 90 days delinquent, of all the loans the licensee owned as of December thirty-first;
(12) loans in foreclosure as of December thirty-first and foreclosed in the previous calendar year by licensee;
(13) mortgage loans charged against reserve for loan losses as a result of foreclosures during the reporting year; and
(14) loans repurchased during the previous calendar year.
(D) The annual report also must include the total gross revenue earned in this State under his license, the total dollar amount of points paid to the licensee by borrowers on first and subordinate lien mortgage loans, the total dollar amount of points paid to brokers by the licensee on first and subordinate lien mortgage loans, including yield spread premiums, and the lending institution, maximum amount available, outstanding balance, and expiration date of licensee's four largest warehouse lines of credit during the previous calendar year.
(E) Information contained in annual reports is confidential and may be published only in composite form.
(F) Subsections (B), (C), (D), and (E) take effect January 1, 2010.
Section 37-22-240. A person who violates Section 37-22-120 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. Each transaction involving the unlawful making or servicing of a mortgage loan is a separate offense.
Section 37-22-250. (A) An exempt person described in Section 37-22-110(10)(c) who is engaged in the mortgage lending business, shall file a form with the administrator within thirty days of the effective date of this chapter. An exempt person who commences a mortgage lending business in this State after the effective date of this chapter shall file the form with the administrator upon commencement of the business. This form, prescribed by the administrator, must contain the:
(1) name of the respective exempt person;
(2) basis of the exempt status of the exempt person;
(3) principal business address of the exempt person; and
(4) state or federal regulatory authority responsible for the exempt person's supervision, examination, or regulation, if any.
(B) In addition to other measures to which the exempt person may be subject pursuant to this chapter, failure by an exempt person to file the required form does not affect his exempt status. However, the exempt person is subject to a civil penalty set by the administrator that may not exceed two hundred fifty dollars for each year the form is not filed. A person required to file pursuant to this section may not transact business in this State as a mortgage lender or mortgage servicer unless the person has filed the prescribed form with the administrator in accordance with this section.
(C) This section does not apply to financial institutions chartered with the State Board of Financial Institutions or chartered or filed with the Office of Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, National Credit Union Administration, or the Federal Reserve.
Section 37-22-260. (A) The South Carolina Law Enforcement Division shall provide a criminal history record check to the administrator for a person who has applied for or holds a mortgage lender or loan officer license through the administrator pursuant to this chapter.
(B) In addition, if a person described in subsection (A) is a corporation, partnership, limited liability company, association, or trust, SLED shall provide a criminal history record check to the administrator for a person who has control of that person, or who is the managing principal or a branch manager of that person.
(C) The administrator shall provide to SLED, along with the request, the fingerprints of the person, additional information required by SLED, records check fees required by SLED and the FBI, and a form signed by the person consenting to the check of the criminal record and to the use of the fingerprints and other identifying information required by the state or national repositories. Using the information supplied by the administrator to SLED, the applicant must undergo a state criminal records check, supported by fingerprints, by SLED, and a national criminal records check, supported by fingerprints, by the FBI. The results of these criminal records checks must be reported to the administrator. The South Carolina Law Enforcement Division is authorized to retain the fingerprints for certification purposes and for notification of the administrator regarding subsequent criminal charges which may be reported. The administrator shall keep all information pursuant to this section privileged, in accordance with applicable state and federal guidelines.
Section 37-22-270. Fees specified in this chapter must be paid to the administrator, must be used to implement the provisions of this chapter, and are nonrefundable.
Section 37-22-280. (A) A person commits the offense of residential mortgage fraud when, with the intent to defraud, the person:
(1) knowingly makes a material act, misstatement, misrepresentation, or omission during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or other party to the mortgage lending process;
(2) knowingly uses or facilitates the use of a material act, misstatement, misrepresentation, or omission, knowing that it contains a misstatement, misrepresentation, or omission, during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or other party to the mortgage lending process;
(3) receives proceeds or other funds in connection with a residential mortgage closing which the person knew resulted from a violation of items (1) or (2) of this subsection;
(4) conspires to violate any of the provisions of items (1), (2), or (3) of this subsection; or
(5) files or causes to be filed with the official registrar of deeds of a county of this State a document the person knows to contain a material misstatement, misrepresentation, or omission.
(B) An offense of residential mortgage fraud must not be predicated solely upon information lawfully disclosed pursuant to federal or state disclosure laws, regulations, and interpretations related to the mortgage lending process.
(C)(1) A person violating this section is guilty of a felony and, upon conviction, must be imprisoned for not less than one year or more than ten years, or fined not more than five thousand dollars, or both.
(2) If a violation of this section involves engaging or participating in a pattern of residential mortgage fraud or a conspiracy or endeavor to engage or participate in a pattern of residential mortgage fraud, the violation is punishable by imprisonment for not less than three years or more than twenty years, or by a fine not more than one hundred thousand dollars, or both.
(3) Each residential property transaction subject to a violation of this section is a separate offense.
(D) In the absence of fraud, bad faith, or malice, a person is not subject to an action for civil liability for filing reports or furnishing other information regarding suspected residential mortgage fraud to a regulatory or law enforcement agency.
(E) For the purpose of venue pursuant to this section, a violation of this section must be considered to have been committed in the county where the residential property is located that is the subject of the residential mortgage fraud.
Section 37-22-290. The administrator may promulgate regulations necessary to effectuate the purposes of this chapter."
SECTION 3.A. Section 37-1-301(29) of the 1976 Code is amended to read:
"(29) 'Licensee' means a supervised lender licensed under Section 37-3-503 any person licensed pursuant to this title."
B. Section 37-23-20(9), (10) and (12) of the 1976 Code, as added by Act 42 of 2003, is amended to read:
"(9) 'High-cost home loan' means a loan, other than an open-end credit plan or a reverse mortgage transaction, in which the:
(a) principal amount of the loan does not exceed the conforming loan size limit for a single-family dwelling as established from time to time by the Federal National Mortgage Association;
(b) borrower is a natural person;
(c) debt is incurred by the borrower primarily for personal, family, or household purposes;
(d) loan is secured by either:
(i) a security interest in a residential manufactured home, as defined in Section 37-1-301(24) which is to be occupied by the borrower as the borrower's principal dwelling; or
(ii) a mortgage on real estate upon which there is located or there is to be located a structure designed principally for occupancy from one to four families and which is or is to be occupied by the borrower as the borrower's principal dwelling; and
(e) terms of the loan exceed one or more of the threshold thresholds as defined in item (15) of this section.; or
(f) an adjustable rate mortgage at the fully indexed rate assuming a fully amortizing repayment schedule that would exceed one or more of the thresholds as defined in item (15) of this section.
(10) 'Lender' includes, but is not limited to, a mortgage broker or a mortgage banker originating a loan in a tablefunded loan transaction in which the broker or banker is identified as the original payee of the note.
(12) 'Originator' or 'loan officer' means an employee of a mortgage loan broker or mortgage lender 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."
C. Section 37-23-20 of the 1976 Code, as added by Act 42 of 2003, is amended by adding:
"(17) An adjustable rate mortgage (ARM) is a mortgage in which the interest rate and monthly payment vary over time."
D. Section 37-23-40(2) of the 1976 Code, as added by Act 42 of 2003, is amended to read:
"(2) make a high-cost home loan unless the lender reasonably believes at the time the loan is consummated that one or more of the obligors, when considered individually or collectively, is able to make the scheduled payments to repay the obligation based upon a consideration of their current and expected income, current obligations, employment status, and other financial resources other than the borrower's equity in the dwelling that secures repayment of the loan. If the loan is an adjustable rate mortgage (ARM), the analysis of the obligor must include an evaluation of the ability to repay by final maturity at the fully indexed rate assuming a fully amortizing repayment schedule. An obligor is presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the obligor's total monthly debts, including amounts owed pursuant to the loan including, but not limited to, principal, interest, current property taxes, and current insurance, do not exceed fifty percent of the obligor's monthly gross income as verified by the credit application, the obligor's financial statement, a credit report, financial information provided to the lender by or on behalf of the obligor, or another authoritative means a credit report, and information provided to a lender by a third party, including the Internal Revenue Service (IRS). A presumption of inability to make the scheduled payments to repay the obligation does not arise solely from the fact that, at the time the loan is consummated, the obligor's total monthly debts, including amounts owed under the loan, exceed fifty percent of the obligor's monthly gross income;"
E. Section 37-23-45 of the 1976 Code, as added by Act 42 of 2003, is amended by adding:
"(4) For a loan that is an ARM as defined in Section 37-23-20(17), a listing of the schedule when the loan will be reset and a listing of the monthly payment that is owed for each change that is allowed by the terms of the contract. If the consumer escrows the insurance and taxes with each monthly payment, it must be reflected in the payment listed."
F. Section 37-23-75 of the 1976 Code, as added by Act 42 of 2003, is amended by adding:
"(4) For a loan that is an ARM as defined in Section 37-23-20(17), a listing of the schedule when the loan will be reset and a listing of the monthly payment that is owed for each change that is allowed by the terms of the contract. If the consumer escrows the insurance and taxes with each monthly payment, it must be reflected in the payment listed."
SECTION 4. Chapter 58, Title 40 of the 1976 Code is amended to read:
Section 40-58-10. (A) This chapter may be cited as the Licensing Requirements Act of Certain Brokers of Mortgages on Residential Real Property.
(B) No A person, partnership, corporation, banking organization, or other organization shall may not broker a residential mortgage as defined in this chapter unless the broker of the mortgage:
(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' 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, and includes real estate and residential manufactured home (land and home) transactions.
(3) 'Mortgage broker' means a person or organization in the business of soliciting, processing, placing, or negotiating mortgages for others or offering to process, place, or negotiate mortgages for others or engaging in tablefunding of mortgages or as a loan correspondent, as that term is defined by 24 CFR Part 202 et seq., whether those acts are done by telephone, electronic means, mail, or in person with the borrower or potential borrower. Mortgage broker also includes a person or organization who brings borrowers or lenders together to obtain mortgages or renders a settlement service as described in 24 CFR Part 3500.2(a)(16)(ii) 12 USC 2602(3) and 24 CFR Part 3500.2(b).
(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, assisting or offering to assist in the processing of an application for a mortgage, soliciting or offering to solicit a mortgage on behalf of a third party, or negotiating or offering to negotiate the terms or conditions of a mortgage 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; or persons or organizations which sell or place all of their conventional mortgages on real property with federally insured and/or regulated financial institutions including, but not limited to, banks, savings and loan associations, and credit unions.
(b) an attorney at law licensed to practice law in South Carolina who is not engaged principally in negotiating mortgages 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.
(a) an agency of the federal government or a state government granting mortgage loans under specific authority of the laws of a state or the United States;
(b) any employee of a licensee whose responsibilities are limited to clerical and administrative tasks for the employer and who does not solicit borrowers, accept applications, or negotiate the terms of loans on behalf of the employer;
(c) a person authorized to engage in business as a bank or a wholly owned subsidiary of a bank, a farm credit system, savings institution or a wholly owned subsidiary of a savings institution, or credit union or a wholly owned subsidiary of a credit union, under the laws of the United States, this State, or another state. Except for Sections 40-58-70, 40-58-130 and 40-58-140, this chapter does not apply to the exempt persons set forth in this subitem;
(d) an officer or employee of an exempt person described in subitem (c) of this item when acting in the scope of employment for the exempt person.
(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 mortgages for others or offering to process, place, or negotiate mortgages for others. Licensee includes mortgage brokers as defined in item (3) and originators as defined in item (14) this chapter.
(7) 'Administrator' means the administrator of the Department of Consumer Affairs of this State or the administrator's designees.
(8) 'RESPA' means the Real Estate Settlement Procedures Act of 1974, 12 USC 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)(10) 'Department' means the South Carolina Department of Consumer Affairs.
(12)(11) 'Regular business hours' means open for business not less than thirty hours a week, Monday through Friday, 8:30 AM to 5:00 PM.
(13)(12) 'Satellite office' means a location at which a mortgage broker may conduct mortgage 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)(13) 'Originator' means an employee of a mortgage broker whose primary job responsibilities include direct contact with and informing mortgage applicants of the rates, terms, disclosure, and other aspects of the mortgage, including accepting or offering to accept applications for mortgages. It does not mean an employee, including processors, whose job responsibilities are limited to clerical and administrative tasks and who does not solicit borrowers or negotiate the rates, terms, disclosure, or other aspects of a mortgage on behalf of the employer which do not require licensure.
(15)(14) 'Processor' means an employee of a mortgage broker whose primary job responsibilities are mortgage processing and may include direct contact with applicants but does not include informing applicants of rates, terms, disclosure, or solicitation of mortgages.
(15) 'Branch manager' means an individual who is in charge of and who is responsible for the business operations of a branch office of a mortgage broker.
(16) 'Branch office' means an office or location of the mortgage broker licensee which is separate and distinct from the licensee's principal or main office and at which a mortgage broker may conduct mortgage broker business, that is open during regular business hours and is required to be staffed full time by one or more originator licensees who have the authority to contract on behalf of the broker and to accept service on behalf of the broker.
(17) 'Control' means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. A person that (i) is a director, general partner or executive officer; (ii) directly or indirectly has the right to vote ten percent or more of a class of a voting security or has the power to sell or direct the sale of ten percent or more of a class of voting securities; (iii) in the case of an LLC, is a managing member; or (iv) in the case of a partnership, has the right to receive upon dissolution, or has contributed, ten percent or more of the capital, is presumed to control that company.
(18) 'Employee' means an individual who has an employment relationship acknowledged by both the individual and the mortgage broker, and is treated as an employee for purposes of compliance with the federal income tax laws.
(19) 'Exclusive mortgage broker' means an individual who acts as a mortgage broker exclusively for a single mortgage lender or single exempt person and who is licensed under the provisions of Section 40-58-50(C).
(20) 'Financial services or financial services related' means pertaining to securities, commodities, banking, insurance, consumer lending, or real estate including, but not limited to; acting as or being associated with a bank or savings association, credit union, mortgage lender, mortgage servicer, mortgage broker, real estate broker, real estate salesperson or agent, closing agent, title company, or escrow agent.
(21) 'Managing principal' means a person who meets the requirements of Section 40-58-50(B) and who agrees to be primarily responsible for the operations of a licensed mortgage broker in this State.
(22) 'Pattern of residential mortgage fraud' means one or more misstatements, misrepresentations, or omissions made during the mortgage lending process that involve two or more residential properties, which have the same or similar intents, results, accomplices, victims, or methods of commission or otherwise are interrelated by distinguishing characteristics.
(23) 'Tablefunding' means a transaction in which a licensee closes a loan in its own name with funds provided by others.
Section 40-58-30. (A) A mortgage broker, as defined in Section 40-58-20(3), or an originator, as defined in Section 40-58-20(14)(13), may not engage in the business of processing, placing, or negotiating a mortgage or offering to process, place, or negotiate a mortgage in this State without first being licensed with the administrator.
(B) It is unlawful for a person to employ, to compensate, or to appoint as its agent an originator unless the originator is licensed pursuant to this chapter. The license of an originator is not effective during any period when that person is not employed by a mortgage broker licensed pursuant to this chapter. When an originator ceases to be employed by a licensed mortgage broker, the originator and the mortgage broker by whom that person was employed shall promptly notify the department in writing. The mortgage broker's notice must include a statement of the specific reason or reasons for the termination of the loan originator's employment. An originator must not be employed simultaneously by more than one mortgage broker. If a licensed originator changes employment, a new license must be issued and a fee of twenty-five dollars must be paid for issuance of the new license.
(C) 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. A person or organization may not offer or agree to offer mortgage 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 twenty-five thousand dollars executed by a surety company authorized by the laws of this State to transact business within this State. Continuously maintaining a bond may be considered evidence of financial responsibility for a person or organization that offers or agrees to offer mortgage brokerage services. 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 mortgage broker, after notice and opportunity for hearing before the Administrative Law Court. The license of a licensee is void upon the termination of the bond by the surety company unless a new bond is filed with the department before the termination.
Section 40-58-50. (A) An application to become licensed as a mortgage broker or an originator 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. If the applicant for a mortgage broker license 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 brokerage activity including, but not limited to, originators.
(B)(1) The application for a mortgage broker license 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, including consent to a national and state criminal history records check and a set of the applicant's fingerprints in a form acceptable to the department. The application must be accompanied by a nonrefundable fee, payable to the department, of five hundred fifty dollars, in addition to the actual cost of obtaining national and state criminal history record checks by the Federal Bureau of Investigation (FBI) and the South Carolina Law Enforcement Division (SLED). Using the information supplied by the administrator to SLED, the applicant must undergo a state criminal records check, supported by fingerprints, by SLED, and a national criminal records check, supported by fingerprints, by the FBI. The results of these criminal records checks must be reported to the department. The South Carolina Law Enforcement Division is authorized to retain the fingerprints for certification purposes and for notification of the department regarding criminal charges. The administrator shall keep all information pursuant to this section privileged, in accordance with applicable state and federal guidelines. Additionally, the applicant must have completed satisfactorily, within the three years immediately preceding the date application is made, a mortgage lending fundamentals course approved by the administrator. The course must consist of at least eight hours of classroom instruction in subjects related to mortgage lending approved by the administrator or possess residential mortgage lending education or experience in residential mortgage lending transactions that the administrator considers equivalent to the course. In addition, the applicant must complete satisfactorily a written examination approved by the administrator. The administrator may waive portions of the examination based upon satisfactory evidence to the administrator that an applicant has acquired a professional certification or accreditation that indicates mastery of the subject matter.
(2) An applicant for a mortgage broker's license must have at least two three years' experience working as an originator under the supervision of a mortgage broker in residential mortgage lending or brokering or other experience or competency requirements the department may impose before an initial license is issued.
(a) In lieu of a showing of two three years' experience, an applicant may show proof of two three 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 mortgages. If the applicant is a partnership, limited liability company (LLC), or corporation, at least one partner, member/manager, or principal officer shall have the experience required for the applicant. Each applicant shall identify the person meeting the experience requirement to serve as the applicant's managing principal. The managing principal shall operate the business under his full charge, control, and supervision and is required to complete the education and testing requirements for the mortgage broker licensee. The managing principal also may serve as the branch manager of a licensee branch office. Each main branch and branch office of a mortgage broker licensed pursuant to this chapter must have a branch manager who meets the experience requirements of Section 40-58-50(B)(2). The mortgage broker licensee must designate a managing principal in writing and notify the department of any changes in managing principal.
(b) In lieu Instead of one of the required year's 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 similar course work 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.
(C) However, all mortgage loan brokers properly licensed as a mortgage loan broker before October 1, 1998, may act as mortgage 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. If an individual applicant to be licensed as a mortgage broker meets all other requirements for licensure pursuant to this section but does not meet the requirements of subsection (B)(2) of this section, the individual applicant may be licensed as an exclusive mortgage broker upon compliance with all of the following, in addition to otherwise complying with this chapter:
(1) successfully complete both a residential mortgage-lending course approved by the administrator of not less then forty hours of classroom instruction and a written examination approved by the administrator;
(2) act exclusively as a mortgage broker for a single mortgage lender licensee or single exempt mortgage lender for whom the broker is considered an agent, who is responsible for supervising the broker as required by this chapter, who signs the license application of the applicant, and who is jointly and severally liable with the broker for any claims arising out of the broker's mortgage lending activities;
(3) is compensated for the broker's mortgage brokering activities on a basis that is not dependent upon the loan amount, interest rate, fees, or other terms of the loans brokered; and
(4) does not handle borrower or third-party funds in connection with the brokering or closing of mortgage loans.
(C)(D) The application for a mortgage broker license must include an affirmation of financial solvency noting bonding requirements required by the department and the an originator license must designate the employing mortgage broker and must include descriptions of the business activities, financial responsibility, educational background, and general character and fitness of the applicant as required by this chapter, including consent to a national and state criminal history records check and a set of the applicant's fingerprints in a form acceptable to the department. The application must be accompanied by a nonrefundable fee, payable to the department, of five hundred fifty dollars, in addition to the actual cost of obtaining national and state criminal history record checks by the South Carolina Law Enforcement Division FBI and SLED. Using the information supplied by the administrator to SLED, the applicant must undergo a state criminal records check, supported by fingerprints, by SLED, and a national criminal records check, supported by fingerprints, by the FBI. The results of these criminal records checks must be reported to the department. The South Carolina Law Enforcement Division is authorized to retain the fingerprints for certification purposes and for notification of the department regarding criminal charges. The administrator shall keep all information pursuant to this section privileged, in accordance with applicable state and federal guidelines. Additionally, the applicant must have completed satisfactorily, within the three years immediately preceding the date application is made, a mortgage lending fundamentals course approved by the administrator. The course must consist of at least eight hours of classroom instruction in subjects related to mortgage lending approved by the administrator or possess residential mortgage lending education or experience in residential mortgage lending transactions that the administrator considers equivalent to the course. In addition, the applicant must complete satisfactorily a written examination approved by the administrator. The administrator may waive portions of the examination based upon satisfactory evidence to the administrator that an applicant has acquired a professional certification or accreditation that indicates mastery of the subject matter.
(D)(E) An applicant for an originator's license must be at least eighteen years of age and must have at least six months of experience in residential mortgage lending or complete eight hours of continuing education within ninety days of employment. Additionally, all originators properly licensed before April 1, 2005, may act as originators 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.
Section 40-58-55. Refusal to license applicant or renew license; grounds.
(A) Upon request for a contested case hearing by a person whose application for a license or renewal of a license has been denied, the Administrative Law Court may review the determination by the department 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.
(B) A person who was in business as a mortgage 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 broker or agent, but if a mortgage broker or an agent of a broker is convicted of an offense enumerated in item (3) of subsection (A) on or after October 1, 1998, that person is subject to the provisions of this chapter. (Reserved)
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 partnership, 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 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, the licensee 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.
(D) If the information contained in any document filed with the administrator is or becomes inaccurate or incomplete in a material respect, the licensee promptly shall file a correcting amendment to the information contained in the document.
Section 40-58-65. (A)(1) A mortgage broker 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, and shall include a mortgage log that identifies the borrower, including credit score, the property, loan terms, the loan originator, the appraiser, the closing agent, the broker, and the lender. To assist the administrator in identifying possible discriminatory mortgage lending patterns, each licensee shall submit his mortgage log data and the data identified in 12 CFR Part 203 et seq., in a form determined by the administrator by March thirty-first of each year. The licensee shall pay a fine of one hundred dollars a day for late or incomplete data submissions, after notification and right to cure. Data collected by the administrator pursuant to this section is confidential and may be released only in composite form. The administrator shall prepare and make available to the public a report based on the above data. The report must be available by June thirtieth of each year. The mortgage log must be completed with information known at the time of review by the department and must include loans in process, closed loans, turndowns, and withdrawals. A mortgage broker with two or more licensed offices may consolidate the records at any one of the licensed offices so long as the administrator is notified of the location of the records. 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 licensee's records may be maintained electronically, if approved by the administrator, so long as they are readily accessible for examination by the administrator.
(2) This subsection takes effect January 1, 2010.
(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 licensees 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 AM until 5:00 PM, 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 broker with an official place of business within South Carolina also may maintain one or more branch or satellite offices if the:
(1) mortgage broker notifies the department in writing ten seven days before the opening of a branch or satellite office of the location of the branch or satellite office, the branch manager for each branch location, and notifies the department that all records from the branch or satellite office are stored in a main or branch location in this State which is staffed by one or more employees licensees during regular business hours;
(2) records of any pending mortgage application or records in which a loan closing is still in process from a satellite office are made available at the mortgage broker's main or branch location as provided in item (1) to the administrator or his designee within two seven 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 seven business days of closing a branch or satellite office.;
(4) mortgage broker licensee is responsible and accountable for the activities of all licensed locations, branch managers, and loan originators. Compliance reviews must include examination of all facts and circumstances of branch operations to ensure this responsibility and accountability.
(D) The department may examine the books and records of a mortgage broker 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). The department may cooperate and share information with an agency of this State, other states, or the federal government. The department may accept or participate in examinations conducted by one of these agencies instead of an examination.
(E) If the mortgage broker fails to notify the department of the existence or closing of a branch or 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 a fine within a one-year period, the administrator finds that additional violations of this section are both intentional and repeated, the mortgage broker is subject to all of the remedies for violations of this chapter penalties as set forth in Section 40-58-80.
(F) A mortgage broker licensee who ceases doing business in this State must notify the administrator at least seven days in advance. The notification must include a withdrawal plan that includes a timetable for disposition of the business, the location of the books, records, and accounts until the end of the retention period, and certification of the proper disposal of those records.
(G) A mortgage broker licensee should develop, maintain, and test disaster recovery plans for all records that are maintained.
Section 40-58-67. (A)(1) Effective for license years beginning after September 30, 1998, for licensed mortgage brokers and after March 31, 2005, for licensed originators, Licensees must complete at least eight hours of continuing professional education annually. If the licensed mortgage 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 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 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 brokering activity as defined in Section 40-58-20(3) and (4).
(2) Documentation of attendance at the courses or correspondence courses completed must be maintained by the mortgage broker for all licensees 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 national or state professional organizations, such as the National Association of Mortgage Brokers, the South Carolina Mortgage Brokers Association, or the department or courses related to real estate law or related law topics, appraisals, mortgage lending, financial management, financial planning, or mortgage processing qualify for continuing professional education. The department shall offer continuing professional education courses to assist mortgage brokers in obtaining the continuing professional education required by this chapter. or courses approved in another state qualify for the education requirements of this chapter.
(B) The department shall appoint two mortgage 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 or other electronic means. The department shall develop a questionnaire to ascertain the interest and background of potential members of this panel.
(C) If a licensee fails to complete his continuing professional education in a timely manner prior to renewal, his license shall expire and the licensee shall pay a penalty not in excess of one hundred dollars in order to renew the license.
(D) However, the licensee 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 licensee completes his professional education requirements.
(E) The administrator shall require education providers of the fundamentals mortgage lending course required pursuant to Section 40-58-50 and the continuing education courses required pursuant to this section to file information regarding the contents and materials of proposed courses to satisfy the education requirements with the administrator for review and approval. All course approvals expire annually and must be reviewed by the department. The administrator shall set fees for the initial and continuing review of courses for which credit hours will be granted. The initial filing fee for review of materials may not exceed five hundred dollars and the fee for continued review may not exceed two hundred fifty dollars each year for each course offered.
Section 40-58-70. A licensee may not In addition to the activities prohibited by other provisions of state or federal law, it is unlawful for a person in the course of any mortgage loan transaction to:
(1) misrepresent the material facts or make false promises likely to influence, persuade, or induce an applicant for a mortgage or a mortgagor to take a mortgage. 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 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 broker, as provided in Section 37-5-108, or which operates a fraud upon a person, in connection with the making of or purchase or sale of a mortgage;
(4) fail to use due diligence and make reasonable efforts to procure a mortgage on behalf of a borrower;
(5) collect any third party fees before a conditional mortgage commitment is obtained by the mortgage broker with the exception of normal processing expenses associated with the making of mortgages 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. A party to a transaction, other than the consumer, may not 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. influence or attempt to influence through coercion, extortion, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan. This item does not prohibit a mortgage broker or mortgage lender from asking the appraiser to do one or more of the following:
(a) consider additional appropriate property information;
(b) provide further detail, substantiation, or explanation for the appraiser's value conclusion; or
(c) correct errors in the appraisal report;
(7) fail to pay reasonable fees within a reasonable time to a licensed third party for services that are:
(a) requested from the third party in writing by the mortgage broker or an employee of the mortgage broker; and
(b) performed by the third party in connection with the origination or closing of a mortgage loan for a customer or mortgage lender; or
(8) use any trade name or insignia of membership in any organization of which the licensee is not a member or advertise falsely through any material including, but not limited to, any business card, stationary, or signage concerning a designation or certification of special education, credentials, trade organization membership, or business.
Section 40-58-75. (A) Within three business days of the receipt of an application for a mortgage, the broker must disclose in a statement the total estimated charges to the borrower for the mortgage and an itemization of the charges provided if required under RESPA or state law. The disclosure is considered delivered when deposited with United States Postal Service for first class delivery.
(B) A person may not 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 or state law.
(D) A mortgage broker agreement must be in writing and include the current name, address, and telephone number of the mortgage broker's branch office, the account number, if any, the date of the agreement, the name of the borrower or proposed borrower, signature of the borrower and mortgage broker, the amount of any fees, and the nature of services provided to the borrower. A copy of the completed agreement must be provided to the borrower by the mortgage broker. The mortgage broker agreement may provide for a signed acknowledgement by the borrower of receipt of a copy of the agreement. If a mortgage broker co-brokers mortgage loans, the mortgage broker agreement must contain a statement advising the applicant that the loan may be co-brokered. Within three days of making a final decision to co-broker a loan, the broker must provide the applicant with written notice of co-brokering, including the name and street and mailing address of the co-broker as well as which broker is to be contacted regarding progress of the mortgage brokers' services provided to the applicant. Each broker in a co-brokering arrangement must be licensed with the department.
(E) Additional disclosure requirements exist in Title 37, Chapter 10 and Chapter 23.
Section 40-58-78. (A) A loan agreement with a mortgage broker or originator must contain an explicit statement that:
(1) the mortgage broker or originator is acting as the agent of the borrower in providing brokerage services to the borrower;
(2) when acting as agent for the borrower, it owes to that borrower a duty of utmost care, honesty, and loyalty in the transaction, including the duty of full disclosure of all material facts. If the mortgage broker or originator is authorized to act as an agent for any other person, the brokerage agreement must contain a statement of that fact and identification of that person;
(3) a detailed description of the services the mortgage broker or originator agrees to perform for the borrower, and a good faith estimate of any fees the mortgage broker or originator will receive for those services, whether paid by the borrower, the institutional lender, or both; and
(4) a clear and conspicuous statement of the conditions under which the borrower is obligated to pay for the services rendered under the agreement.
(B) If a mortgage broker or originator violates the provisions of subsection (A), the borrower may recover from the mortgage broker or originator charged with the violation:
(1) a penalty in an amount determined by the court of not less than one thousand five hundred dollars and not more than seven thousand five hundred dollars for each loan transaction;
(2) fees paid by the borrower to the mortgage broker or originator for services rendered by the agreement; and
(3) actual costs, including attorney's fees, for enforcing the borrower's rights under the agreement.
(C) No A mortgage broker or originator charged with the violation may not be held liable in an action brought under this section for a violation if the mortgage broker or originator charged with the violation shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid the error.
Section 40-58-80. Cease and desist orders; penalties; revocation of license.
(A) Upon a finding that an action of a licensee 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 either, the department may file a request for a contested case hearing with the Administrative Law Court seeking an order to require the licensee to cease and desist from the action.
(B) If an administrative law judge issues an order requiring the licensee to cease and desist from the action and the licensee fails to appeal the cease and desist order and continues to engage in the action in violation of the order, the licensee is subject to a penalty of not less than one thousand or more than two thousand five hundred dollars for each action the licensee takes in violation of the order. The penalty provision of this section is in addition to and not instead of other provisions of law applicable to a licensee.
(C) The administrative law judge, upon a finding that a licensee has engaged intentionally or repeatedly in a course of conduct in violation of this chapter, may revoke the license temporarily or permanently in its discretion after reasonable notice and an opportunity to be heard and may increase the mortgage broker's required bond up to a maximum of twenty-five thousand dollars to ensure that the public is protected adequately. The administrative law judge 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. If it is determined that the required bond must be increased, the administrative law judge shall state in writing the reasons for the increase and immediately serve it upon the mortgage broker and the department. The mortgage broker shall provide the new bond within thirty days or the department shall revoke the license of the mortgage 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.
(F) The administrator of the department may suspend the right of an individual to engage in mortgage broker activity after finding that an originator or other employee of a licensed mortgage broker has failed to comply with a provision of this chapter. After an action by the administrator pursuant to this section, the originator or other employee of a licensed mortgage broker may request a contested case hearing before the Administrative Law Court.
(A) The administrator, by order, may deny, suspend, revoke, or refuse to issue or renew a license of a licensee or applicant pursuant to this chapter or may restrict or limit the activities relating to mortgage loans of a licensee or a person who owns an interest in or participates in the business of a licensee, if the administrator finds that both:
(1) the order is in the public interest; and
(2) any of the following circumstances apply to the applicant, licensee, or any partner, member, manager, officer, director, loan originator, managing principal, or other person occupying a similar status or performing similar functions or a person directly or indirectly controlling the applicant or licensee. The person:
(a) has filed an application for license that, as of its effective date or as of a date after filing, contained a statement that, in light of the circumstances under which it was made, is false or misleading with respect to a material fact;
(b) has violated or failed to comply with any provision of this chapter or order of the administrator;
(c) has been convicted of a felony, or, within the past ten years, has been convicted of a misdemeanor involving financial services or financial services related business, or an offense involving breach of trust or fraudulent or dishonest dealing;
(d) is enjoined permanently or temporarily by a court of competent jurisdiction from engaging in or continuing any conduct or practice involving the financial services or financial services related business;
(e) is the subject of an order of the administrator denying, suspending, or revoking that person's license;
(f) is the subject of an order entered within the past ten years by the authority of a state with jurisdiction over that state's financial services or financial services related industry denying or revoking that person's license;
(g) does not meet the qualifications or the financial responsibility, character, or general fitness requirements of Section 40-58-50 or bond or capital requirements pursuant to this chapter;
(h) has been the executive officer or controlling shareholder or owned a controlling interest in a financial services or financial services related business who has been subject to an order or injunction described in subitem (d),(e), or (f) of this item;
(i) has failed to pay the proper filing or renewal fee pursuant to this chapter or any fine or fee imposed by any state or federal regulatory authority. However, the administrator may enter only a denial order pursuant to this subitem, and the administrator shall vacate the order when the deficiency is corrected; or
(j) has falsely certified attendance or completion of hours at an approved education course.
(B) The administrator, by order, summarily may postpone or suspend the license of a licensee pending final determination of a proceeding pursuant to this section. Upon entering the order, the administrator shall notify promptly the applicant or licensee that the order has been entered, the reasons for the order, and the procedure for requesting a hearing before the Administrative Law Court. If a licensee does not request a hearing and the administrator does not request a hearing, the order remains in effect until it is modified or vacated by the administrator.
(C) The administrator, by order, may impose a civil penalty upon a licensee or any partner, officer, director, or other person occupying a similar status or performing similar functions on behalf of a licensee for a violation of this chapter. The civil penalty may not exceed ten thousand dollars for each violation. The administrator may impose a civil penalty that may not exceed ten thousand dollars for each violation of this chapter by a person other than a licensee or exempt person.
(D) In addition to other powers pursuant to this chapter, upon finding that an action of a person is in violation of this chapter, the administrator may order the person to cease and desist from the prohibited action. If the person subject to the order fails to appeal the order of the administrator in accordance with Section 40-58-90, or if the person appeals and the appeal is denied or dismissed, and the person continues to engage in the prohibited action in violation of the administrator's order, the person is subject to a civil penalty that may not exceed twenty-five thousand dollars for each violation of the administrator's order. The penalty provision of this section is in addition to and not instead of another provision of law for failure to comply with an order of the administrator.
(E) Unless otherwise provided, all actions and hearings pursuant to this chapter are governed by the Administrative Procedures Act, Section 1-23-310 et seq.
(F) When a licensee is accused of any act, omission, or misconduct that subjects the licensee to disciplinary action, the licensee, with the consent and approval of the administrator, may surrender the license and the rights and privileges pertaining to it and is not eligible to receive, or to submit an application for, licensure for a period of time established by the administrator.
(G) If the administrator has reasonable grounds to believe that a licensee or other person has violated this chapter or that facts exist that would be the basis for an order against a licensee or other person, the administrator, either personally or by a person duly designated by the administrator, at any time may investigate or examine the loans and business of the licensee and examine the books, accounts, records, and files of the licensee or other person relating to the complaint or matter under investigation. The administrator may require the licensee or other person to submit a consent to a national and state fingerprint-based criminal history record check and a set of that person's fingerprints in a form acceptable to the administrator in connection with an examination or investigation. Refusal to submit the requested criminal history record check or a set of fingerprints is grounds for disciplinary action. The reasonable cost of this investigation or examination must be charged against the licensee.
(H) The administrator may subpoena documents and witnesses, and compel their production and attendance, to examine under oath all persons whose testimony the administrator considers relative to the person's business, and require the production of books, papers, or other materials.
(I) The administrator, at the expense of the administrator's office, may conduct routine examinations of the books and records of a licensee in order to determine compliance with this chapter.
(J) In addition to the authority described in this section, the administrator may require a licensee to pay to a borrower or other individual amounts received by the licensee or its employees in violation of this chapter.
(K) If the administrator finds that the managing principal, branch manager, or loan originator of a licensee had knowledge of, or reasonably should have had knowledge of, or participated in, any activity that results in the entry of an order suspending or withdrawing the license of a licensee, the administrator may prohibit the branch manager, managing principal, or loan originator from serving as a branch manager, managing principal, or loan originator for the period of time the administrator considers necessary.
(L) A person who violates a provision of this chapter other than Section 40-58-140 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, for each offense. Each violation is considered a separate offense.
Section 40-58-90. (A) All appeals are to be made pursuant to the Administrative Procedures Act and the rules governing practice before the Administrative Law Court. A person who has exhausted all administrative remedies available before the administrator and who is aggrieved by the administrator's determination is entitled to a contested case hearing before the Administrative Law Court as provided in Section 1-23-600(D) and judicial review as provided in Sections 1-23-380(B) and 1-23-610. This section does not limit utilization of or the scope of judicial review available under other means of review, redress, relief, or trial de novo provided by law. A preliminary, procedural, or intermediate action or ruling of the Administrative Law Court is reviewable immediately if review of the final decision of the Administrative Law Court would not provide an adequate remedy.
(B) Contested case proceedings are instituted by filing a request for a contested case hearing with the Administrative Law Court according to the rules of procedure of the Administrative Law Court. Copies of the request for a contested case hearing must be served upon the administrator and all parties of record. The final decision of the administrative law judge may be appealed as provided in Sections 1-23-380 and 1-23-610.
Section 40-58-100. The department may promulgate regulations necessary to effectuate the purposes of this chapter.
Section 40-58-110. (A)(1) In addition to the initial nonrefundable license application fee of five hundred fifty dollars required by Section 40-58-50, first time mortgage broker licensees also shall pay a one-time, nonrefundable processing fee of two hundred dollars. Thereafter, a mortgage broker licensee shall pay an annual nonrefundable renewal fee of five hundred fifty dollars. A mortgage broker licensee shall pay an initial nonrefundable fee of one hundred fifty dollars and, thereafter, a nonrefundable renewal fee of one hundred fifty dollars for each branch or satellite location.
(2) The initial nonrefundable license fee is fifty dollars for an originator license, and fifty dollars, nonrefundable, for a renewal license. In addition, all licensees must pay the cost of obtaining national and state criminal history record checks as the department may require. The broker shall notify the department in writing ten days before opening a new, official branch or satellite location or changing the address of a licensed location. No initial A fee of twenty-five dollars is required when the licensee notifies the department of a change in address for an official branch or satellite a licensed location.
(B)(1) The term of each license is one year. Licenses issued under this chapter expire on September thirtieth each year for mortgage brokers and March thirty-first for originators December thirty-first annually following issuance or another date that the department may determine and must be renewed in accordance with the provisions of this section.
(2) The renewal period for all licensees is from November first through December first annually or on any other dates that the department may determine.
(3) Applications received after December first or any other date the department may determine are deemed late and late fees below apply.
(C) Failure to renew a license within thirty days of its expiration results in the license being canceled by the department requiring the licensee to complete the initial licensing process, including a criminal records check. A license renewed within thirty days of expiration must be accompanied by a late penalty of two hundred fifty dollars for mortgage brokers and twenty-five dollars for originators in addition to the nonrefundable renewal fee. If a license of a licensed mortgage broker is not renewed before the dates in subsection (B), two hundred fifty dollars in addition to the renewal fee pursuant to subsection (A) must be assessed as a late fee to any renewal. If a license of a licensed loan originator is not renewed before the dates in subsection (B), one hundred dollars in addition to the renewal fee pursuant to subsection (A) of this section must be assessed as a late fee to any renewal. If a licensee fails to renew his license within thirty days after the date the license expires, the administrator may require the licensee to comply with the requirements for the initial issuance of a license pursuant to this chapter, in addition to paying any late fee that has accrued. All renewable renewal 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.
(D) A person who is licensed as an exclusive mortgage broker pursuant to Section 40-58-50(C), and who later meets the requirements of Section 40-58-50(B)(2)(a) and (b), must renew his license as a mortgage broker as provided in Section 40-58-50(A), (B)(1), and (B)(2)(a) and (b).
Section 40-58-120. (A) A licensee shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the administrator to determine whether the licensee is complying with this chapter. The recordkeeping system of a licensee is sufficient if he makes the required information reasonably available.
(B) On or before March thirty-first each year a licensee shall file with the administrator a composite annual report in the form prescribed by the administrator relating to all mortgage loans made or brokered by him. The licensee shall pay a fine of one hundred dollars each day for late or incomplete annual reports, after notification and right to cure.
(C) The report must include, but is not limited to, the volume and amounts of first and second lien mortgage loans originated by licensee and closed in the name of another party and the volume and amounts of first and second lien mortgage loans originated and closed in the name of the licensee.
(D) Information contained in annual reports is confidential and may be published only in composite form.
(E) Subsections (B), (C), and (D) take effect January 1, 2010.
Section 40-58-130. (A) An exempt person described in Section 40-58-20(5)(c) who is engaged in the mortgage brokerage business, shall file a form with the administrator within thirty days of the effective date of this chapter. An exempt person who commences mortgage brokerage business in this State after the effective date of this chapter shall file the form with the administrator upon commencement of the business. This form, prescribed by the administrator, must contain the:
(1) name of the respective exempt person;
(2) basis of the exempt status of the exempt person;
(3) principal business address of the exempt person; and
(4) state or federal regulatory authority responsible for the exempt person's supervision, examination, or regulation, if any.
(B) In addition to other measures to which the exempt person may be subject pursuant to this chapter, failure by an exempt person to file the required form does not affect his exempt status. However, the exempt person is subject to a civil penalty set by the administrator that may not exceed the sum of two hundred fifty dollars for each year the form is not filed. A person required to file pursuant to this section may not transact business in this State as a mortgage broker unless the person has filed the prescribed form with the administrator in accordance with this section.
Section 40-58-140. (A)(1) A person commits the offense of residential mortgage fraud when, with the intent to defraud, the person:
(a) knowingly makes a material act, misstatement, misrepresentation, or omission during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or other party to the mortgage lending process;
(b) knowingly uses or facilitates the use of a material act, misstatement, misrepresentation, or omission, knowing that it contains the misstatement, misrepresentation, or omission, during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or other party to the mortgage lending process;
(c) receives proceeds or other funds in connection with a residential mortgage closing which the person knew resulted from a violation of subitem (a) or (b) of this item;
(d) conspires to violate any of the provisions of subitems (a), (b), or (c) of this item; or
(e) files or causes to be filed with the official registrar of deeds of a county of this State a document the person knows to contain a material misstatement, misrepresentation, or omission.
(2) The offense of residential mortgage fraud must not be predicated solely upon information lawfully disclosed pursuant to federal or state disclosure laws, regulations, and interpretations related to the mortgage lending process.
(B)(1) A person violating this section is guilty of a felony and, upon conviction, must be imprisoned for not less than one year or more than ten years or fined not more than five thousand dollars, or both.
(2) If a violation involves engaging or participating in a pattern of residential mortgage fraud or a conspiracy or endeavor to engage or participate in a pattern of residential mortgage fraud, the violation is punishable by imprisonment for not less than three years or more than twenty years or a fine not more than one hundred thousand dollars, or both.
(3) Each residential property transaction that is the subject of a violation of this section is a separate offense.
(C) In the absence of fraud, bad faith or malice, a person is not subject to an action for civil liability for filing reports or furnishing other information regarding suspected residential mortgage fraud to a regulatory or law enforcement agency.
(D) For the purposes of venue pursuant to this section, a violation of this section must be considered to have been committed in the county where the residential property is located that is the subject of the residential mortgage fraud."
SECTION 5. Except as otherwise provided herein, this act is effective January 1, 2009; and except that Section 37-22-280 and Section 40-58-140 take effect upon approval by the Governor and licensing requirements for loan officers and limited loan officers as defined herein take effect July 1, 2009.
This web page was last updated on Monday, October 10, 2011 at 1:31 P.M.