Residential Mortgage Lending Act

LSA-R.S. 6:1081 through 6:1099 Enacted effective July 9, 1999 Revised April 14, 2000 Special Session Revised effective June 22, 2001 Provides for licensure and registration of

mortgage originators, brokers, and lenders

Residential Mortgage Lending Act

Subdivided into three parts– PART I. GENERAL PROVISIONS

• Definitions

• Prohibitions

– PART II. LICENSURE, REGISTRATION, & CERTIFICATION• Licensure Requirements

• Applications

• Recordkeeping

• Suspension and Revocation of Licenses and Registrations

– PART III. RESIDENTIAL MORTGAGE LOANS• Fees and Charges

• Mortgage Loan Origination Agreements

• Criminal Penalties

Residential Mortgage Lending Act

Who must be licensed– Originators– Brokers – Lenders– Wholesale Lenders

• which are not otherwise exempt

Definitions

Originator– a natural person employed by a mortgage

broker or lender who interviews the consumer in connection with a residential mortgage loan. This persons must sign the application (1003)

– does not include clerical people

Definitions

Mortgage Broker– any person who, directly or indirectly, for

compensation or expectation of compensation, negotiates, places, or finds, or offers to negotiate, place or find a residential mortgage loan for another person

– includes FHA loan correspondents and lenders who table fund loans

Definitions

Mortgage Lender– any person who, directly or indirectly,

originates or makes, or offers to originate or make, a residential mortgage loan for another person

Definitions

Residential Mortgage Lending Activity– any activity, including electronic activity,

engaged in for compensation or with the expectation of compensation in connection with a residential loan transaction including origination or funding, negotiation or placement, or offering to negotiate,place or find a residential mortgage loan for a person

R.S. 6:1084

No person, directly or indirectly, shall engage in a residential mortgage lending activity without complying with the RMLA or rules and regulations promulgated pursuant to thereof

Exemptions

Credit Unions

– Totally exempt from all provisions of the RMLA

Exemptions

Banks, Savings Banks, S&Ls, and subsidiaries of theirs, their parent companies and their employees including originators and exclusive agents– Exempt from licensure and registration– Still subject to requirement of Part III

Exemptions

Licensed Attorneys– When activity is incidental to practice– Exempt from licensure and registration– Still subject to Part III

Exemptions

Any not for profit 501 c corporation making loans to promote home ownership or improvements for the disadvantaged– Exempt from licensure and registration– Still subject to Part III

Other Exemptions

Mortgagees which are the former owner Licensed Lenders

– must meet 50% gross revenue test

Insurance company or agent who brokers exclusively to an insurer

Any person who invests or contracts for no more than 4 transactions in a calendar year– must file application and pay $100 fee

Exempt Registrants

Company Registers/Employees Exempt– approved seller, servicer, seller/servicer, or

issuer approved by FNMA, GNMA, or FHLMC including their HUD approved subsidiaries

– out of state insurance companies

Exempt Registrants

Companies Exempt/Originators Licensed– HUD Mortgagees excluding loan

correspondents– private investors who utilize licensed or exempt

individuals

• Loan correspondents and originators must be licensed

Exempt Registrants

May only engage in residential lending activity through natural persons who are licensed, registered, or exempt

Financial Responsibility

Each applicant for licensure must provide evidence of financial responsibility– audited financial statement showing net worth of

at least $50,000 (no more than 18 mos old)

– pledged $50,000 deposit in federally insured institution

– $50,000 securities SCM’s or US Govt pledged to commissioner

– Surety Bond in amount of $50,000

Financial Responsibility

Employees of Brokers and Lenders including Originators

– May demonstrate financial responsibility by submitting evidence that employer satisfies requirements

Application Fees

Mortgage Broker, Lender $400– Renewal Fee $300

Originators $100– Renewal Fee $100

Registration Fees

Exempt Registrations $400– Renewal $300

RENEWALS

Renewals are due by November 1st each year

Late after December 1 Licenses and Registrations Expire January 1

Late Fees and Reinstatement Penalties

Licensed Brokers and Lenders– After December 1 $ 200

– After December 31 up to$ 1,000• must show good cause for reinstatement• $100 late fee for exempt brokers & lenders

Originators– After December 1 $ 50

– After December 31up to $1,000• must show good cause for reinstatement

LSA-R.S. 6:1089

No residential mortgage lender may conduct lending activities under any name other than stated on its license

Commissioner must be notified of changes in location and pay $100 fee

Must notify Commissioner of office closure

LSA-R.S. 6:1089 B.

Whenever identity of broker or lender by whom an originator is employed is changed, Commissioner must be notified within 30 days– Employer and Employee must give notification– Failure to notify within 30 days results in a

$100 late notification fee

EXAMINATIONS FEES

Fee not to exceed $400 Due within 30 days of assessment Late fee of up to $50 per day not paid

timely

R.S. 6:1090

No license may be sold or transferred No person shall acquire control of licensee

without obtaining prior written approval of OFI after submitting an application and $300 fee

R.S. 6:1090

A mortgage broker can only broker loans to a mortgage lender– Brokering to a Broker is prohibited

R.S. 6:1090

Licensees may only engage in residential mortgage lending through natural persons licensed as a mortgage broker, mortgage lender, or originator, or who are registered in accordance with the RMLA or who are exempt from Part II

NET BRANCHING

Prohibited by LSA-R.S. 6:1090 G. – Except at provided by Rule

OFI in process of drafting rule & currently allowing :– net compensation of branch employees only– all contracts, leases, & accounts must be in name of

licensed or exempt company– employer indemnification agreements not

permissible

RECORD RETENTION

Requirements set forth by Rule and Policy

Suspension & Revocation of License

After an opportunity to be heard in Administrative hearing, Commissioner may revoke or suspend license of any Lender, Broker, or Originator who:– Violates any of the provisions of this Chapter or any Rule or

Regulation promulgated,or any order, including a cease and desist order

– Violates any provision of a voluntary consent agreement

– Has knowingly provided or caused to be provided false or fraudulent information or financial statements or withheld information which would have resulted in denial of license

– Refuses to permit examination of books and records or fails to furnish required information

Suspension & Revocation

– Fails to maintain records required after given written notice– Continues in office upon conviction of any felony involving moral

turpitude– Violates any provision of a regulatory or prohibitory statute and has

been found to have violated such by the governmental agency responsible for determining such

– Misrepresents or conceals material facts or makes false promises to influence an applicant or mortgagor

– Misrepresents or conceals material facts terms, conditions, etc. of a transaction to which he is a party, pertinent to an applicant or mortgagor

– Failure to account for or deliver personal property which has come into their hands which is not their property or which they are not entitled to retain

Suspension & Revocation

– Fails to disburse without cause any funds in accordance with any agreements with a residential mortgage loan

– Fails to pay any fee or assessment imposed by the Chapter or Rule

– Violates written restriction or conditions of license

– Fails, after notice without lawful excuse, to obey any order or subpoena issued by the Commissioner

Fines & Penalties

Upon being found guilty of violating any provision of the RMLA or Rule brokers and/or originators may be fined:– Up to $1,000 per violation &– Up to $1,000 per day the person acts as a

residential mortgage broker, lender, or originator without complying with the RMLA or any rules promulgated thereunder

Forfeiture of Compensation

R.S. 6:1092 G. - added by Act 617– Any person who acts as a mortgage broker or

originator without complying with licensing provisions shall be subject to forfeiture of compensation attributable to residential mortgage lending activity conducted after August 15, 2001

– This shall not impair the validity of note or mortgage

TESTING REQUIREMENTS

Beginning July 1, 2001, each new applicant for licensure as an originator is required to pass a professional licensing examination– Test administered by PSI Exams, Inc.– www.psiexams.com

Continuing Education

Each licensed originator must take 10 hours of continuing education each year prior to renewal– must include at least 2 hours of RMLA education– if licensed as a result of a test, continuing

education not required until December of the following year

USURY

APR is limited to the greater of 21% or Federal Reserve Discount Rate + 15%

– Applies to both open and closed end credit secured by a mortgage

– Preempted by Alternative Mortgage Transaction Parity Act for variable rate and balloon loans

Prepayment Penalties

Are limited as follows:– 5% of unpaid principal during first year– 4% of unpaid principal during second year– 3% of unpaid principal during third year– 2% of unpaid principal during fourth year– 1% of unpaid principal during fifth year– No prepayment penalty allowed after fifth year

Up Front Fees By Brokers

Appraisal Title Search Credit Report

– amount collected cannot exceed good faith estimate of actual cost

– any portion which exceeds actual cost must be refunded to borrower or credited to their account at closing

Request for Payoff Amount

Must be provided with 5 days of written request of consumer

Consumer entitled to one statement per year at no charge– thereafter, lender may charge a reasonable fee

provided that the fee is disclosed to the consumer before furnishing the statement

Limits on Fees and Charges

Late Fees limited to 5% of unpaid amount Collection fees limited to 25% when

referred to an attorney NSF the greater of 5% of the amount of

check or $25

Mortgage Loan Origination Agreement

Must be provided by broker within 3 days of the initial application

Must describe the nature of broker’s relationship with borrower and the manner in which they will be compensated– name, address, and phone number of originator

– name, address, and phone number of mortgage lender (mortgage broker)

Mortgage Loan Origination Agreement

Failure to provide a copy of the agreement subjects broker to a refund of any brokerage fees collected

Criminal Penalties

Broker knowingly collects excessive advance expense deposits

Any person who knowingly provides false or misleading information on an application

Any licensee or registrant who fails to disburse funds belonging a borrower

Any lender, broker, or originator knowingly operating without a license

Criminal Penalties

Upon Conviction for these person may be sentenced to:– a fine of not less than $500 nor more than

$1,000, imprisonment not exceeding one year, or both