CHAPTER 421

FORMERLY

HOUSE BILL NO. 508

AN ACT TO AMEND TITLE 5 OF THE DELAWARE CODE RELATING TO MORTGAGE LOAN ORIGINATORS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :

Section 1: Amend Title 5 of the Delaware Code by adding a new Chapter 24 to read as follows:

“CHAPTER 24. MORTGAGE LOAN ORIGINATORS

§ 2401. Definitions.

In this chapter, unless the context otherwise requires:

(1) “Commissioner” means the State Bank Commissioner.

(2) “Education courses” means formal courses of learning, or instructional or training programs that relate to the current business of mortgage loan originating, including the statutory and regulatory requirements and judicial interpretations governing mortgage lending, banking and real estate transactions and practices in this State. Education courses required by this article may be offered by: (i) national, Delaware or other state associations that are controlled by and whose membership comprises, but is not necessarily restricted to, mortgage brokers or banking institutions; provided, however, that any such association shall maintain supervision of such education courses satisfactory to the Commissioner; (ii) degree and non-degree granting institutions of post-secondary education, approved by the Commissioner; or (iii) any other entities as may be approved by the Commissioner. Such approval shall remain in effect so long as the education courses offered by approved entities evidence standards that are consistent with the purposes of this chapter, as determined by the Commissioner.

(3) “Exempt organization” means any insurance company, banking organization, bank holding company, federal credit union, national bank, state bank, federal savings bank, or any bank, trust company, savings bank, savings and loan association or credit union or any affiliate or subsidiary of the preceding entities organized under the laws of any state, or any instrumentality created by the United States or any state with the power to make mortgage loans.

(4) “Mortgage loan” shall have the same meaning as such terms are defined pursuant to § 2101(4) of this title.
(5)
“Mortgage loan originating” means providing services to a customer of an originating entity by soliciting, negotiating, explaining or finalizing the terms of a mortgage loan; provided, however, that the term “soliciting” shall mean the discussion of a mortgage loan product or products with a customer or potential customer but shall not be deemed to mean the taking of customer information or the referral of a customer or the customer's information to a person who engages in mortgage loan originating; provided further that a MLO, as defined below shall not be deemed to include any person who provides clerical or secretarial services or provides legally related services that are not provided directly by an attorney relating to mortgage loan originating activities of an originating entity.
(6) “Mortgage loan originator” and “MLO” mean any person employed by or affiliated with an originating entity, who engages in mortgage loan originating irrespective of how such person is compensated by such originating entity, or any natural person who as an originating entity, or any substantial equity owner of an originating entity, engages in mortgage loan originating with respect to residential property; provided that “affiliated with an originating entity” shall mean any person who is an independent contractor and is compensated by such originating entity in whole or in part, either directly or indirectly. A MLO shall not mean any natural person who is an originating entity, or any substantial equity owner of an originating entity, or any officer or manager of an originating entity that supervises the activities of MLOs and does not communicate directly with the customers of the originating entity.

(7) “Originating entity” means a person or entity licensed pursuant to chapters 21 or 22 of this title.

(8) “Person” means an individual.

§ 2402. Licensing and application.

(a) No person shall engage in mortgage loan originating without first being licensed by the Commissioner as a MLO pursuant to this chapter, unless otherwise exempt pursuant to § 2405 of this chapter or regulations of the Commissioner. Every person licensed under this chapter shall be a financial institution for the purposes of Part I of this title.(b) Upon the filing of a license application, if the Commissioner shall find the general character and fitness and the education qualifications of the applicant are such as to warrant belief that the applicant will engage in mortgage loan originating honestly, fairly, and efficiently within the purpose of this chapter, the Commissioner shall thereupon issue a license to the applicant as a MLO.

(c) As part of such application, the applicant shall pay to the Commissioner as an investigation fee the sum of $250 which shall not be refundable. Upon approval, the applicant shall pay a license fee of $250, which shall be payable annually thereafter, and such amount shall be allocated to and for the assistance of the Delaware Emergency Mortgage Assistance Program. No abatement in the amount of said license fee shall be made if the license is issued for less than one (1) year or if the license is surrendered, suspended, 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.

(d) Upon licensing the applicant as a MLO, the Commissioner shall issue a certificate attesting to such licensing. The Commissioner shall transmit one copy of such certificate to the applicant, file another copy in his or her office, and transmit notice of approval of such application, in such form as the Commissioner deems appropriate, to the originating entity for which the applicant is providing services pursuant to subsection (h) of this section at the time of making such application. In the event of the expiration of a license, the Commissioner shall notify the originating entity of that expiration.

(e)(1) The Commissioner may refuse to issue a license pursuant to this chapter upon finding that the applicant (i) has been convicted of a felony, (ii) has had a license revoked by the Commissioner or a regulatory person or entity of another state that regulates persons engaging in mortgage loan originating, (iii) has been a director, partner, or substantial equity owner of an originating entity which has had a registration or license revoked by the Commissioner or a regulatory person or entity of another state that regulates such originating entities, or (iv) has been an employee, officer or agent of, or a consultant to, an originating entities which has had a registration or license revoked by the Commissioner or a regulatory person or entity of another state that regulates such originating entity where such person shall have been found by the Commissioner or by such similar regulatory person or entities of another state to bear responsibility in connection with such revocation. (2) For purposes of subsection(e)(1) above, a person shall be deemed to have been convicted of a felony if such person shall have pled guilty or nolo contendere to a charge thereof before a court or magistrate, or shall have been found guilty thereof by the decision or judgment of a court or magistrate or by the verdict of a jury, irrespective of the pronouncement of sentence or the suspension thereof; provided, however, that such conviction of a crime shall not require the Commissioner to refuse to license such applicant if such plea, decision, judgment or verdict shall have been set aside, reversed or otherwise abrogated by lawful judicial process or if the person convicted of the crime shall have received a pardon therefor from the President of the United States or the governor or other pardoning authority in the jurisdiction where the conviction occurred, or shall have received a certificate of good conduct granted by a board of parole pursuant to the provisions of the executive law to remove the disability under this chapter because of such conviction.

(3) If the Commissioner refuses to license an applicant or renew a license pursuant to this subsection, the Commissioner shall notify the applicant or licensed MLO of such refusal, in writing; provided, however, the Commissioner shall retain any fee charged for the expense of processing an initial application, notwithstanding that such application was rejected. Upon refusal to issue or renew a license, the Commissioner shall notify the originating entity of such refusal in writing. If the applicant requests a hearing, the Commissioner shall hold such hearing under Chapter 101 of Title 29. (f) An application for a license required under this chapter shall (i) be submitted by such method and in such form as the Commissioner may prescribe; (ii) under oath; and (iii) shall contain the following information: (1) The exact, legal name and residence address of the applicant and the date of birth of the applicant; (2) The current business name and address of the originating entity employing the applicant or with which the applicant has an affiliation; and (3) Such other pertinent information as the Commissioner may require.(g) Notwithstanding any law to the contrary, the Commissioner may require that any application for, or renewal of, a license or for any other submission or approval as may be required by this chapter be made or executed by electronic means if the Commissioner deems it necessary to ensure the efficient and effective administration of this chapter.(h) Notwithstanding subsection (a) of this section, a person, upon initial employment by or affiliation with an originating entity, may immediately engage in mortgage loan originating on a temporary basis until such time as such person is licensed as a MLO or notified by the Commissioner that his or her application has been denied. No originating entity shall permit any such person to engage in mortgage loan originating without having proof of notice from the Commissioner that it has received an application for licensing of such person as a MLO.(i) The fees and assessments established pursuant to chapter may be collected by, and also include a processing fee charged by, an entity with which the Commissioner has entered into a written contract or a memorandum of understanding to process applications and the annual licensing of MLOs pursuant to this chapter, and any such processing fees shall not be remitted to the Commissioner and shall not be deemed revenue pursuant to this section or any other law of this State.

§ 2403. Renewal of license.

Every MLO desiring to continue in mortgage loan originating shall, at least 30 days prior to the expiration of his or her 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 Commissioner at least thirty (30) days prior to the expiration of such license or renewal thereof. MLOs who have not complied with supervisory letters or who have not paid any money when due may be refused license renewal.

§ 2404. Education requirements.

Each MLO shall, as a condition of initial and subsequent annual licensing, satisfactorily complete education requirements as prescribed pursuant to this section and shall submit acceptable proof of the same as the Commissioner determines appropriate.

(1) Within the last five (5) years prior to approval or within one (1) year after approval of an application for licensing as a MLO, such person shall have completed eighteen (18) hours of education courses.( 2) Notwithstanding paragraph (1) of this section or subsection (a) of § 2402 of this chapter, any person employed by or affiliated with an originating entity prior to the effective date of this chapter, who engages in mortgage loan originating on or after such date, shall comply with the licensing and education requirements prescribed by this chapter on or before two years after that effective date.

( 3) After two years following initial licensing, each MLO, as a condition of maintaining a license as a MLO, shall complete a minimum of eighteen hours of education courses every two years during the next succeeding eight years. Thereafter, each MLO shall complete eight hours of education courses every four years; provided, however, that any MLO who is covered by subsection (2) of this section and has completed eighteen hours of education courses every two years for at least six years and shall at such time have acquired ten or more years of experience engaged in mortgage loan originating shall thereafter complete eight hours of education courses every four years.

( 4) Each biennial or quadrennial education requirement shall include, but not necessarily be limited to, education courses in statutory and regulatory requirements and judicial interpretations governing mortgage lending and real estate transactions and practices; provided, however, that three hours of such requirement consist of instruction in ethical conduct in the area of mortgage loan originating or lending practices.

( 5) All applicable education requirements shall be completed by the expiration date of a MLO's licensing during the year in which completion of the education requirements are due. Notwithstanding § 2407 of this chapter, failure to timely complete such education requirements shall cause the license of such MLO immediately to be suspended irrespective of whether the licensed MLO has made satisfactory payment of the annual license fee. Such license shall expire within thirty (30) days after the date such suspension commences if the applicable education requirements are not completed by the suspended MLO within such period of time. No originating entity shall permit any MLO that is subject to any education requirement pursuant to this chapter to engage in mortgage loan originating until acceptable proof or record of completion has been obtained by such originating entity. Failure of any originating entity to comply with the provisions of this section shall be deemed a violation of chapters 21 or 22 of this title, whichever is applicable to that entity.

§ 2405 . Exemptions.

(a) The provisions of this chapter shall not apply to an individual employed by an exempt organization or a subsidiary or affiliate of an exempt organization, provided, however, that any such affiliate or subsidiary licensed by the Commissioner pursuant to chapters 21 or 22 of this title shall provide an educational program or courses for its employees who engage in mortgage loan originating as defined by this chapter on behalf of such subsidiary or affiliate, and provided further that such educational program or courses shall be the substantial equivalent, as determined by the Commissioner, of the educational requirements applicable to mortgage loan originators as required by this chapter.

(b) The provisions of this chapter shall not apply to an individual who is under an exclusive contract with an exempt organization or a subsidiary or affiliate of an exempt organization to the extent that the individual is acting within the scope of the individual's employment or exclusive contract and is acting within the scope of the charter, license, authority, approval or certificate of the exempt organization or an affiliate or subsidiary of the exempt organization; provided, however, any such affiliate or subsidiary of such exempt organization licensed by the Commissioner pursuant to 21 or 22 of this title, shall provide an educational program or courses for individuals under exclusive contract with such affiliate or subsidiary who engage in mortgage loan originating as defined by this chapter on behalf of such affiliate or subsidiary, and provided further that such educational program or courses shall be the substantial equivalent, as determined by the Commissioner, of the educational requirements applicable to mortgage loan originators as required by this chapter.

(c) The provisions of this chapter shall not be deemed to require an attorney at law in good standing in this state, who engages in mortgage loan originating, to meet the licensing or education requirements prescribed pursuant to this chapter.

(d) No employee of, or a person affiliated with, an originating entity shall be subject to the licensing or education requirements of this chapter due solely to such employee or person assisting in the performance of the business activities of such originating entity that are incidental to the performance of any mortgage loan originating activities performed by such originating entity.

(e) No employee of, or a person affiliated with, an exempt organization shall be subject to the licensing or education requirements of this chapter due to such employee or person assisting in the performance of any business activities of a mortgage broker or lender licensed under chapters 21 or 22 of this title respectively that is controlled by, or is a subsidiary of, such exempt organization.

(f) Variances to, or extensions of, the education requirements prescribed pursuant to this chapter may be granted by the Commissioner (i) for reasons of health certified by an appropriate health care professional; (ii) for extended active duty with the armed forces of the United States; or (iii) for other good cause deemed acceptable by the Commissioner, in his or her sole discretion, which may prevent satisfactory or timely completion of such requirements.

(g) Such other persons as may be exempt pursuant to regulations of the Commissioner.

§ 2406 . Required records.

(a) Each originating entity shall obtain and retain acceptable documentation of the satisfactory completion of education courses required pursuant to this chapter by each MLO employed by or affiliated with such originating entity and shall provide such documentation at the request of the Commissioner. Such documentation shall be retained by an originating entity for six years. An originating entity shall retain a copy of any original proof or record of completion provided by a MLO. In those instances when an originating entity also retains the original proof or record of such completion of any then-applicable education requirement, such originating entity shall provide the original proof or record, upon request, when a MLO terminates or has terminated employment or affiliation with the originating entity.

(b) Every MLO shall maintain such books, accounts and records 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.

(c) A MLO 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.

(d) The Commissioner shall maintain a list of the MLOs licensed and in good standing. Such list shall indicate the name, license number and current originating entity, if any, employing each MLO or with whom such MLO is affiliated. Each originating entity shall on a quarterly basis in each calendar year advise the Commissioner, in writing, of any MLOs employed by or affiliated with such originating entity and shall also advise in such report of any dismissal for cause of a MLO employed by or affiliated with such originating entity during such quarter, which is due or based upon an alleged violation of this chapter.

§2407. Grounds for license suspension or revocation.

(a) The Commissioner may suspend or revoke any license to engage in the business of mortgage loan originating pursuant to this chapter upon finding that:

(1) Through a course of conduct, the MLO has violated any provisions of this chapter or any rule or regulation promulgated by the Commissioner under and within the authority of this title or of any other law, rule or regulation of this State or the federal government pertaining to mortgage lending, brokering or loan originating;

(2) Any fact or condition exists which, if it had existed at the time of the original application for such license, would have warranted the Commissioner to refuse to issue such initial license; or

(3) The MLO has committed a crime against the laws of this State or any other state or of the United States involving moral turpitude or fraudulent or dishonest dealing, or a final judgment has been entered against the MLO in a civil action upon grounds of fraud, misrepresentation or deceit;

( b) The Commissioner may temporarily suspend any license pending the issuance of a final order as provided in Chapter 101 of Title 29.

(c) Except as provided in subsection (b) of this section, no license shall be suspended or revoked except after notice and an opportunity for the licensee to request a hearing in accordance with Chapter 101 of Title 29. Any order of suspension issued after notice and a hearing may include as a condition of reinstatement that restitution be made to consumers of fees or other charges which have been improperly charged or collected as determined by the Commissioner.

(d) Any MLO may surrender a license by delivering to the Commissioner a written notice of license surrender, but such surrender shall not affect the MLO's civil or criminal liability for acts committed prior to such surrender.

(e) An expiration of a license in accordance with this chapter shall not affect such MLO's civil or criminal liability for acts committed prior to such expiration. If such expiration occurs after the issuance by the Commissioner of a statement of charges and notice of hearing, the Commissioner may proceed against the MLO as if such expiration had not taken place.

(f) No revocation, suspension, surrender or expiration of any license shall impair or affect the obligation of any pre-existing lawful contract between any licensee and any person.

(g) Every license issued pursuant to this chapter shall remain in force and effect until the same shall have expired in accordance with this chapter or shall have been surrendered, revoked or suspended in accordance with any other provisions of this chapter, but the Commissioner shall have authority to reinstate a suspended license or to issue a new license to a MLO whose license shall have been revoked if no fact or condition then exists which would have warranted the Commissioner to refuse to issue such initial license under this chapter.

(h) Whenever a license shall have expired in accordance with this chapter, the Commissioner shall notify the MLO and any affected licensee under this title that the license has expired and that the MLO may not engage in the business of soliciting, processing, placing or negotiating a mortgage loan or offering to solicit, process, place or negotiate a mortgage loan in this State.

§2408. Multi-State Automated Licensing System.

(a) The Commissioner is authorized to participate in any automated system involving one or more other states that will facilitate any aspect of the application and licensing processes of this chapter.

(b) Upon joining any such system, the Commissioner may by regulation establish:

(1) Any additional requirements for a license under this chapter that the Commissioner determines are necessary for participation in the system;

(2) Pre-licensing education and testing, and post-licensing continuing education of individuals employed by the applicants or licensees subject to the system; and

(3) Any additional investigation fees, any fees paid directly to the administrator of the system, or any other fee required by the system to process an application or maintain a license in such amount as the Commissioner determines is necessary to participate in the system.

(c) The administrator of any such system in which the Commissioner participates is authorized to act on behalf of the Commissioner to collect from the applicants and licensees subject to the system any payments due the Commissioner under this chapter, to collect information and maintain records in electronic or other format relating to those applicants and licensees, and to submit fingerprints and any other information required for a criminal history background check to the Federal Bureau of Investigation or other law enforcement agency.

(d) Information maintained on any such system in which the Commissioner participates regarding the applicants and licensees subject to the system may be shared with any other state participating in that system for the purpose of licensing, regulating, or supervising that same applicant or licensee under a statute similar to this chapter, if that state could have obtained that same information directly from the applicant or licensee under its own law. The Commissioner shall ensure that the system maintains appropriate confidentiality, privacy, data security, and security breach notification policies that are in full compliance with Delaware law.

§ 2409. Construction.

Nothing contained in this chapter shall be deemed to impair, alter or render ineffective any provision of chapter 21 or 22 of this title including, but not limited to, any provision thereof relating to issuing, suspending or revoking any mortgage broker or lending license.”

Section 2. This Act shall take effect on January 1, 2009; provided, however, that no person shall be required to obtain a license pursuant to this Chapter until the Commissioner has adopted one or more regulations implementing the provisions of this Chapter.

Approved August 21, 2008