AN ACT TO AMEND TITLE 5, DELAWARE CODE, BY ADDING A CHAPTER 31 THERETO, RELATING TO SECONDARY MORTGAGE LOANS.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Title 5, Delaware Code, is amended by adding thereto a new Chapter 31 to read as follows:
CHAPTER 31. SECONDARY MORTGAGE LOANS
§ 3101. Definitions
1. In this act, unless the context otherwise requires, the following words shall have the following meanings:
(a) "Secondary mortgage loan" means (1) a loan not to be repaid in 90 days or less which is secured in whole or in part by a mortgage upon any interest in real property used as a dwelling with accommodations for not more than 4 families, which property is subject to the lien of one or more prior mortgages or (2) the purchase of any interest in an existing mortgage made to secure such a loan.
(b) "Person" means an individual, corporation, partnership or any other group of individuals however organized, but does not include any banking institution, savings bank, Federal savings and loan association, insurance company or any other financial institution which is subject to any other law of this State or of the United States regulating the power of such institution to engage in mortgage loan transactions.
(c) "Licensee" means any person duly licensed by the commissioner pursuant to this act.
(d) "Commissioner" means the State Bank Commission-
(e) "Payment period" means the period of time scheduled by the terms of a secondary mortgage loan to elapse between the days upon which installment payments are required to be made on such loan.
(f) "Net proceeds" means the difference between the full amount of a secondary mortgage loan and the amount of interest taken in advance upon such loan pursuant to this act.
§ 3102. License to make secondary mortgage loan
2. No person shall make or negotiate, or offer to make or negotiate, any secondary mortgage loan in the regular course of business unless he or his broker, agent or other representative shall have first obtained a license from the commissioner as provided for by this act. A person shall not be deemed to be acting in the regular course of business if he makes or negotiates not more than 2 secondary mortgage loans in a calendar year.
§ 3103. Qualifications of licensee
3. Every applicant for a license under this act shall have been a bona fide resident of this State for a period of at least 2 years prior to the date of filing the application for such license. In the case of a corporate applicant, the holder or holders of at least 50% of the stock of such corporation shall have resided in this State for a period of at least 2 years prior to the date of filing the application.
§ 3104. Application for license
4. (a) Application for a license under this act shall be in writing, under oath, and shall be in the form prescribed by the commissioner .
(b) The application shall state the name and residence and business addresses of the applicant, and if the applicant is a copartnership or association, of every member thereof, and if a corporation, of each officer, director and stockholder thereof. It shall also state the address where the business is to be conducted and any other information the commissioner may require.
§ 3105. Issuance or refusal of license
5. Within 60 days after the filing of the application and the payment of the fees hereinafter set forth the commissioner shall either:
(a) Issue and deliver to the applicant a license to engage in the business of making or negotiating secondary mortgage loans in accordance with the provisions of this act at the location specified in the said application; or
(b) Refuse to issue the license for any reason for which the commissioner may suspend, revoke or refuse to renew any license under section II of this act.
§ 3106. Procedure on refusal of license
6. If the commissioner refuses to issue a license he shall:
(a) Notify the applicant of the denial and of his right to request a hearing within 10 days.
(b) If the applicant does not request a hearing, return the sum paid as a license fee.
(c) If the applicant requests such a hearing, give notice of the grounds for refusal and hold a hearing thereon. Within 30 days thereafter the commissioner shall file a written decision containing his findings and conclusions and serve a copy thereof upon the applicant.
§ 3107. License; contents
7. (a) Each license shall specify the location of the office or branch and must be conspicuously displayed therein. In case such location be changed, the commissioner shall indorse the change of location on the license without charge.
(c) No license shall transact the business provided for by this act under any other name or maintain an office at any other location than that designated in the license.
§ 3108. License fee
8. Every licensee shall pay to the commissioner at the time of making the application and annually thereafter upon renewal a license fee of $25.00.
§ 3109. Licensee bond
9. Every licensee shall file with the commissioner a corporate surety bond in the principal sum of $5,000.00. Such bond shall be in form satisfactory to the commissioner and shall be issued by a surety company authorized to transact business in this State. The bond shall run to the State and shall be conditioned that the licensee will comply with the provisions of this act. The aggregate liability of the surety on the bond shall in no event exceed the amount of such bond.
§ 3110. Abatement of license fee
10. No abatement in the amount of said license fee shall be made if the license is issued for less than 1 year, nor if the license is surrendered, canceled or revoked prior to the expiration of the period for which such license was issued. Every license shall expire on December 31 of each year.
§ 3111. Suspension; revocation; refusal of license; procedure; grounds
11. The commissioner may suspend, revoke or refuse to renew any license issued hereunder, upon 10 days' notice in writing, forwarded by registered or certified mail to the principal place of business of such licensee, stating the contemplated action and in general the grounds therefor, and after reasonable opportunity to be heard, if he shall find that the licensee or any owner, director, officer, member, partner, stockholder, employee or agent of such licensee has:
(b) committed any fraud, engaged in any dishonest activities, or misrepresented or failed to disclose any of the material particulars of any secondary mortgage loan transaction to any one entitled to such information;
(c) violated any of the provisions of this act or of any rule or regulation promulgated pursuant thereto ;
(d) otherwise demonstrated unworthiness, bad faith, dishonesty or any other quality indicating that the business of the licensee has not been or will not be conducted honestly, fairly, equitably and efficiently within the purposes and intent of this act.
§ 3112. Surrender of license
12. Any licensee may surrender his license by delivering the license to the commissioner with written notice that he thereby surrenders the license, but such surrender shall not affect the licensee's civil or criminal liability for acts committed prior to the surrender.
§ 3113. Term of license
13. Every license issued hereunder shall remain in force and effect until the same shall have expired or been surrendered, revoked or suspended in accordance with the provisions of this act, but the commissioner may re-instate suspended licenses or issue new licenses to a licensee whose license or licenses have been revoked, if the conditions under which such licenses were revoked have been corrected and the commissioner is satisfied as the result of an investigation that such conditions are not likely to recur.
§ 3114. Investigation by Commissioner of violations
14. The commissioner, if he has reasonable cause to believe that any licensee, or any other person, has violated any of the provisions of this act or of any rules or regulations promulgated pursuant thereto, shall have the power to make such investigations as it shall deem necessary, and may examine the books, accounts, records and files of such licensee or any other such person believed to have violated this act or any rules or regulations promulgated pursuant thereto.
§ 3115. Commissioner; power to issue subpoena
15. The commissioner shall have power to issue subpoenas to compel the attendance of witnesses and the production of documents, papers, books, records and other evidence before him in any matter over which he has jurisdiction, control or supervision. The commissioner shall have the power to administer oaths and affirmations to any person whose testimony is required.
§ 3116. Enforcement of Commissioner's subpoena in Superior Court
0. In case of a failure of any person to comply with any subpoena issued by the commissioner or to testify with respect to any matter concerning which he may be lawfully interrogated, the Superior Court, on application of the commissioner, may issue an order requiring the attendance of such person and the giving of testimony or production of evidence. Any person failing to obey the court's order may be punished by the court as for contempt.
§ 3117. Maintenance of books and records by licensee
1. Every licensee shall maintain at its place or places of business in this State such books, accounts and records relating to all transactions within this act as will enable the commissioner to enforce full compliance with the provisions of this act.
§ 3118. Period of retention of records by licensee
2. All books, accounts and records of the licensee shall be preserved and kept available as provided herein for such period of time as the commissioner may by regulation require.
§ 3119. Prescription of information to be shown in licensee books
3. The commissioner is hereby authorized to prescribe the minimum information to be shown in such books, accounts and records of the licensee so that such records will enable the commissioner to determine compliance with the provisions of this act.
§ 3120. Prohibition of secondary mortgage not made or offered in accordance with this act
20. No licensee shall make or offer to make any secondary mortgage loan except on the terms and conditions authorized by this act.
§ 3121. Formula to determine maximum loan
0. A licensee may make a secondary mortgage loan in such an amount that the net proceeds thereof shall equal a predetermined sum, and may take interest in advance upon the full amount of such loan for the period from the making of the loan to the date of maturity of the final installment. The full amount of such loan shall not exceed the aggregate of the net proceeds and the amount of interest which may be taken in advance, as determined by the application of the formula,
I=.14 A (P+1)
in which "I" represents the amount of interest which may be taken in advance; "A" represents the amount of the predetermined net proceeds; "P" represents the number of payment periods contained in the period from the date of the making of the loan to and including the date of maturity of the final installment; and "N" represents, to the nearest whole number, the number of payment periods contained in a calendar year.
§ 3122. Maximum service charges
1. The commissioner shall prepare and distribute to each licensee an itemized schedule of the maximum amounts which may be charged to an applicant for a secondary mortgage loan for costs, fees, services, points, premiums, collection charges,
late charges and all other reasonable expenses which may be incurred by such applicant in connection with a secondary mortgage loan. The maximum amounts permitted by said schedule may vary with the amount of the secondary mortgage loan and shall bear a reasonable relationship to such loan, the services required and the complexity of the transaction. No licensee or any other person shall demand, collect or receive from any applicant for a secondary mortgage loan, directly or indirectly, any other charges, or any greater amounts for any authorized charges, than those permitted by said schedule. Every licensee shall furnish to every applicant for a secondary mortgage loan a copy of said schedule at the time when such application is made.
§ 3123. Instrument evidencing loan; contents
23. No instrument evidencing or securing a secondary mortgage loan shall contain:
(a) Any acceleration clause under which any part or all of the unpaid balance of the obligation not yet matured may be declared due and payable because the holder deems himself to be insecure;
(b) any power of attorney to confess judgment or any other power of attorney;
(c) any provisions whereby the debtor waives any rights accruing to him under the provisions of this act or of any other law ;
(d) any requirements that more than one installment be payable in any one installment period, or that the amount of any installment be greater or less than that of any other installment, except for the final installment which may be in a lesser amount;
(e) any assignment of or order for the payment of any salary, wages, commissions, or other compensation for services, or any part thereof, earned or to be earned.
§ 3124. Statement of account; supplied to borrower
24. Upon written request from the borrower, the holder of a secondary mortgage loan instrument shall deliver to the borrower within 10 days from receipt of the written request a statement of the borrower's account showing the date and amount of all payments made or credited to the account and the total unpaid balance. Not more than 2 such statements shall be required in any 12-month period.
§ 3125. Satisfaction of debt; refund of interest taken in advance
25. Any borrower may satisfy in full at any time before maturity the amount of any balance to become due on any secondary mortgage obligation, and in so satisfying any such debt shall receive a refund credit on account of the interest taken in advance.
§ 3126. Requirement that prior mortgage holders refuse to make loan
26. No license shall make or negotiate any secondary mortgage loan unless it shall appear, from satisfactory evidence furnished by the applicant, that the holder of every existing mortgage upon the property offered as security for the secondary mortgage loan, other than the licensee, has declined to make a loan in the desired amount on the security of another mortgage upon such property.
§ 3127. False or misleading advertising prohibited
27. It shall be unlawful for any person to cause to be placed before the public in this State, directly or indirectly, any false or misleading advertising matter pertaining to secondary mortgage loans or the availability thereof; provided, however, that this section shall not apply to the owner, publisher, operator or employees of any publication or radio or television station which disseminates such advertising matter without knowledge of the false or misleading character thereof.
§ 3128. Penalties for violation of chapter
28. Any person who shall knowingly violate any provision of this act or shall directly or indirectly counsel, aid or abet such violation shall be liable, in addition to all other penalties and forfeitures imposed by this act or by any other law, to a penalty of not more than $1,000.00 for each offense. The Superior Court shall have exclusive jurisdiction over offenses under this Chapter.
§ 3129. Enforce ability of loan not made in compliance with this act
29. No obligation arising out of a secondary mortgage loan shall be enforceable in the courts of this State unless such loan was negotiated and made in full compliance with the provisions of this act.
§ 3130. Rules and regulations; power of commissioner to make
30. The commissioner is hereby authorized and empowered to make, alter, amend and repeal such rules and regulations as shall be necessary to the establishment and maintenance of a standard of fair, equitable and honest conduct in the transaction of secondary mortgage loans.
§ 3131. Exclusion of certain institutions from the operation of the act
31. Nothing contained in this act shall be deemed to have any effect whatever upon the existing powers of any banking institution, savings bank, Federal savings and loan association, or insurance company or other financial institution which is subject to any other law of this State or of the United States regulating the power of such institution to engage in mortgage loan transactions, or upon the conditions and limitations imposed by any such law upon the exercise of such powers.
Section 2. This act shall take effect on the ninetieth day next following the enactment thereof and shall be applicable to all secondary mortgage loans which have been entered into or more on or after said date.
Approved May 27, 1966.