SENATE BILL NO. 283
AN ACT TO AMEND TITLE 5, DELAWARE CODE TO ADD A NEW CHAPTER 21 RELATING TO MORTGAGE LOAN BROKERS.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend Title 5 of the Delaware Code by adding thereto a new Chapter 21 reading as follows:
"Chapter 21. MORTGAGE LOAN BROKERS. §2101. Definitions.
In this chapter, unless the context otherwise requires:
'Borrower' means a person obtaining or desiring to obtain a mortgage loan.
'Commissioner' means the State Bank Commissioner.
'Licensee', 'licensed mortgage loan broker', or 'person
licensed' means any person duly licensed or regulated by the Commissioner pursuant to this chapter.
'Mortgage loan' means an extension of credit secured by a first or secondary mortgage on any one-to-four family residential owner-occupied property intended for personal, family or household purposes, which is (i) negotiated, offered or otherwise transacted within this State, in whole or in part, (ii) made or extended within this State, or (iii) secured by real property located in this State.
'Mortgage loan broker' means a person who in the ordinary course of business, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, negotiates or offers to negotiate, or arranges or solicits, or offers to arrange or solicit, a mortgage loan on behalf of a borrower, or (ii) holds himself out as being able to serve as an agent for any person in an attempt to obtain a mortgage loan; or (iii) holds himself out as being able to serve as an agent or independent contractor to negotiate the terms or conditions of a mortgage loan on behalf of a lender (but who is not a person employed as an employee or agent of the lender).
'Person' means an individual, corporation, partnership or any
other group of individuals however organized.
§2102. License required.
(a) Subject to the provisions of Section 2102(b), every person
desiring to transact the business of a mortgage loan broker shall be required to obtain a license under this chapter; provided, however that a person who acts as a mortgage loan broker with respect to 5 or fewer mortgage loans within any twelve-month period shall be deemed not to be transacting the business of a mortgage loan broker. The licensing requirements of this chapter shall not apply to (1) any banking organization, state or federal savings bank or savings and loan association, credit union, licensed lender or insurance company, provided that such person is licensed (or exempt from licensing) by, and is subject to regulation or supervision of, any agency of the United States or this State; or (2) any person licensed to practice law in this State, not actively and principally engaged in the mortgage loan brokerage business, when such person renders services in the course of such person's practice as an attorney at law; (3) any person licensed in this State as a real estate broker or a real estate salesperson, not actively and principally engaged in the mortgage loan brokerage business, when such person renders services in the course of the person's business as a real estate broker or salesperson; (4) any person employed as an employee or agent for a single licensed or exempt mortgage loan broker, provided that any fees paid by
borrowers are paid to the licensed or exempt mortgage loan broker and not to the employee or agent. Any person conducting a mortgage loan brokerage business but exempted from the licensing requirements of this section shall nevertheless be subject to the provisions of Section 2114 of this chapter in the conduct of such business.
(b) The Commissioner shall be authorized to exempt such persons or classes of persons, or such activities, from the licensing or other provisions of this chapter as the Commissioner shall find inappropriate to include within the coverage of this chapter in order to effectuate its purposes.
§2103. Application and fees.
Every application for a license shall be in writing in the form prescribed by the Commissioner and shall contain the name and complete address or addresses where the business of the applicant is to be conducted and, if the applicant is a partnership, association, corporation or other form of business organization, the names and complete addresses of each member, director and principal officer thereof. Such application shall
also include a description of the activities of the applicant, in such detail and for such periods as the Commissioner may require, as well as such other further information as the Commissioner may require. Such
applicant, at the time of making such application, shall pay to the Commissioner as an investigation fee the sum of $250 which shall not be refundable.
Upon approval, the applicant shall pay an annual license fee of $250 which shall be payable annually thereafter. No abatement in the
amount of said license fee shall be made if the license is issued for less than one year or if the license is surrendered, canceled or revoked prior to the expiration of the period for which such license was issued. Every license issued hereunder shall expire on December 31 of each year.
§2104. Issuance of license.
Upon the filing of an application for a license, if the Commissioner shall find that the financial responsibility, experience, character and general fitness of the applicant and of the members thereof (if the applicant is a partnership or association) and of the officers and directors thereof (if the applicant is a corporation) are such as to warrant belief that its business will be operated honestly, fairly and efficiently within the purpose of this chapter, he shall thereupon issue a license to transact business in accordance with this chapter. If the Commissioner shall not so find, he shall not issue such license and he shall notify the applicant of its denial, give notice of the grounds for refusal and notify the applicant of the right to request a hearing. If the applicant requests a hearing, the Commissioner shall hold such hearing under Chapter 101 of Title 29. The Commissioner shall approve or deny every application for license hereunder within 90 days from the date the Commissioner determines that the application as filed with him is complete.
§2105. Changes in officers or directors of licensee.
In the event that there shall be any change among the officers, partners or directors of any licensee, the licensee shall forthwith notify the Commissioner of the name, address and occupation of each new officer, partner or director and provide such other information as the Commissioner may require.
§2106. License requirements.
A licensee shall obtain a license for each office or other place of business from which its mortgage loan brokerage business is conducted upon payment of the required fees for each office and compliance with all applicable provisions of law. Each license issued under this chapter shall state the address at which the business is to be conducted and shall state fully the name of the licensee and the date and place of its organization or formation, if applicable. Such license shall be posted in a prominent position in the therein designated place of business of the licensee. In the event such location is changed, the Commissioner shall endorse the change of location on the license without charge. If there is a change of
name but no change in corporate or other business structure, the Commissioner shall endorse such name change on the license without charge. Such license shall not otherwise be transferrable or assignable. No licensee shall maintain an office at any other location than that designated in the license.
§2107. Renewal of license.
Every holder of a license or a renewal thereof, as provided for in this section, desiring to continue the transaction of business as provided for in this chapter, shall at least 30 days prior to the expiration of such license or renewal thereof make application to the Commissioner on forms to be provided by the Commissioner for a license renewal. The Commissioner may mandate that applications for renewal shall be treated as new applications if said renewal applications are not on file with the Office of the State Bank Commissioner by January 1 of each year. Licensees who have not complied with supervisory letters or who have not paid any supervisory assessment or examination fees when due may be refused license renewal.
§2108. Surety bond or letter of credit.
Every licensee shall file with the Commissioner a corporate surety bond in the principal sum of $25,000 in form and substance satisfactory to the Commissioner with surety provided by a corporation authorized to transact a surety business in this State. The bond shall run to the State and shall be conditioned that the licensee will comply with this chapter. The aggregate liability of the surety on the bond shall in no event exceed the amount of such bond. In lieu of requiring the filing of a surety bond, the Commissioner may, at his discretion, accept from a licensee a letter of credit in the amount of $25,000 running in favor of the State, with draws available by sight drafts thereunder in amounts determined by the Commissioner, up to the aggregate amount of $25,000, if the licensee shall fail to comply with this chapter. Any such letter of credit shall be issued by a financial institution, and shall be in form and substance, satisfactory to the Commissioner.
§2109. Suspension, revocation or surrender of license.
(a) The Commissioner may revoke any license issued hereunder if he shall find that:
The licensee has violated any provision of this chapter or any rule, regulation or order made by the Commissioner under and within the authority of this chapter or of any other law, rule or regulation of this State;
Any fact or condition exists which, if it had existed at the time of the original application for such license, would have warranted a refusal to originally issue such license on the part of the Commissioner; or
The licensee has engaged in business activities or practices inconsistant with its responsibilities as set forth in §2114 of this chapter.
(b) The Commissioner, may, for cause shown, suspend any license for a period not exceeding 30 days, pending investigation.
(c) Except as provided in subsection (b) of this section, no license shall be revoked or suspended except after notice and a hearing thereon.
(d) Any licensee may surrender any license by delivering to the
Commissioner such license together with written notice that it thereby surrenders such license, but such surrender shall not affect such licensee's civil or criminal liability for acts committed prior to such surrender,
(e) No revocation, suspension or surrender of any license shall impair or affect the obligation of any preexisting lawful contract between the licensee and any person.
Every license issued hereunder shall remain a in force and effect until the same shall have expired or shall have been surrendered, revoked or suspended in accordance with this chapter.
Whenever the Commissioner shall revoke or suspend a license issued pursuant to this chapter, he shall forthwith execute a written order to that effect. The Commissioner shall forthwith serve the written order upon the licensee. Any such order may be reviewed in the manner provided by Chapter 101 of Title 29.
§2110. Supervision and examination of business by Commissioner.
(a) Each licensee shall be subject to the supervision of the
Commissioner and the Commissioner shall visit and examine each licensee as frequently as the Commissioner deems it necessary or expedient. On the occasion of each such visit and examination, the Commissioner shall (in the company of one or more of the officers of such licensee, if requested by such licensee) be given free access to every part of the office or place or places of business and to the assets, securities, books, papers and records of such licensee.
If in the Commissioner's opinion it is necessary or convenient for a proper examination of a licensee, the Commissioner may retain one or more accountants, attorneys, appraisers or other third parties to assist the Commissioner in such examination. Within 10 days after receipt of a
statement from the Commissioner, such licensee shall pay or reimburse the fees, costs and expenses of any third parties retained by the Commissioner under this subsection.
Any examination under this section may be made by any person or persons designated by the Commissioner, and in such case all the powers vested in the Commissioner by this section shall be possessed by such person or persons so designated. When any such examination is made without the presence of the Commissioner, the Commissioner shall give written authority to the person or persons conducting such examination, which shall be exhibited, on request, to any person contacted in the course of the investigation.
§2111. Maintenance of books and records by licensee.
Every licensee shall maintain such books, accounts and records relating to its business as will enable the Commissioner to enforce full compliance with this chapter, which books, accounts and records shall be in such form, shall contain such information and shall be kept in such manner as the Commissioner may require. Such records shall be kept at such place and shall be preserved for such length of time as the Commissioner may specify.
A licensee shall file with the Commissioner such reports at such times as the Commissioner may require, which reports shall be in such form and shall contain such information as the Commissioner may specify.
The Commissioner may adopt such regulations, not inconsistent herewith, as the Commissioner may deem necessary or appropriate in the administration, interpretation and enforcement of this chapter.
§2113. Mortgage or loan broker disclosures.
A licensee may not receive a fee for acting as a mortgage loan broker except pursuant to a written agreement between the mortgage loan broker and the borrower. Such written agreement shall be entered into prior to the time that the mortgage loan broker undertakes to perform mortgage loan brokerage services on behalf of a borrower. A copy of the fully completed written agreement shall be provided to the borrower at the time he signs the agreement. The agreement (1) must describe the services to be provided by the mortgage loan broker and the time period within which such services are to be provided, (2) must specify the amount and terms of the fees that the mortgage loan broker is to receive and (3) shall otherwise contain such information and disclosures, in such format, as the Commissioner by regulation may provide.
§2114. Responsibilities of mortgage loan brokers.
A mortgage loan broker shall diligently and in good faith attempt to obtain a mortgage loan for the account of a borrower in accordance with the terms of the agreement for mortgage loan brokerage services. No mortgage loan broker shall make or use any false or misleading representations or omit any material fact in the offer, sale or performance of the services of a mortgage loan broker or engage directly or indirectly in any act that operates as fraud or deception upon any person in connection with the offer, sale or performance of the services of a mortgage loan broker, notwithstanding the absence of reliance by a borrower.
§2115. Mortgage loan broker fees.
A licensee may not accept any fee in connection with a mortgage loan, other than an application fee or any credit report fee, property appraisal fee, title examination fee or other bona fide third—party fee actually and reasonably paid or incurred by the licensee on behalf of the borrower, prior to obtaining a written commitment from a qualified lender (setting forth the terms and conditions upon which the lender is willing to make a mortgage loan to the borrower). The amount of fees that may be collected or received by a mortgage loan broker, whether constituting an application fee, a fee payable to a third party, fee payable at the time of written commitment or upon consummation of a mortgage loan or otherwise, shall be subject to such limitations as may be provided by regulation of the Commissioner. A licensee shall be obligated to refund all fees collected by it from a borrower, other than those fees paid by the licensee to a third party, if a written commitment for a mortgage loan from a qualified mortgage lender is not produced within the time specified by the mortgage loan broker and otherwise at the rate, terms and overall costs agreed upon by the borrower or the mortgage loan does not close; provided, however, that a licensee shall not be required to refund fees when the failure to obtain a written commitment for a mortgage loan or the failure of a closing thereunder to occur is due to the substantial fault of the borrower. For purposes of this section, substantial fault of the borrower means that the borrower has (1) failed to provide information or documentation required by the lender or mortgage loan broker in a timely manner, (2) provided information, in the application or subsequently, which upon verification prove to be significantly inaccurate, causing the need for review or further investigation by the lender or mortgage loan broker; (3) failed to produce no later than the date specified by the lender all documentation specified in its mortgage loan commitment or closing instructions as being required for closing; or (4) failed to be ready, willing or able to close the mortgage loan no later than the date specified by the lender. The Commissioner by regulation may provide further definition of the circumstances constituting substantial fault of a borrower, including, without limitation, reasonable time periods for the provision by a borrower of information or documentation or when information will be considered significantly inaccurate."
Section 2. This Act shall take effect immediately upon its enactment into law.
Approved July 7, 1992.