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HB 12: "An Act relating to mortgage lending, mortgage loan originators, depository institutions, nonprofit organizations, and nonprofit organization employees; and providing for an effective date."

00                              HOUSE BILL NO. 12                                                                          
01 "An Act relating to mortgage lending, mortgage loan originators, depository                                             
02 institutions, nonprofit organizations, and nonprofit organization employees; and                                        
03 providing for an effective date."                                                                                       
04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
05    * Section 1. AS 06.60.012(b) is amended to read:                                                                   
06            (b)  An individual required to be licensed as a mortgage loan originator shall                               
07                 (1)  register with the registry and maintain a valid unique identifier                                  
08       issued by the registry;                                                                                           
09                 (2)  work under                                                                                         
10                      (A)  an exclusive contract for, or as an employee of, a mortgage                               
11            licensee; or                                                                                             
12                      (B)  an exclusive contract for a registered depository                                         
13            institution; and                                                                                         
14                 (3)  be sponsored in the registry by a mortgage licensee under a                                        
01       sponsorship approved in the registry by the department or be sponsored by a                                   
02       registered depository institution under AS 06.60.014; in this paragraph,                                      
03       "sponsored" means authorized to conduct business as a mortgage loan originator under                              
04       the supervision of a mortgage licensee or a registered depository institution.                                
05    * Sec. 2. AS 06.60 is amended by adding a new section to read:                                                     
06            Sec. 06.60.014. Registered depository institutions. (a) A depository                                       
07       institution may sponsor a mortgage loan originator under AS 06.60.012(b) if the                                   
08       depository institution is registered with the department under this section, has an                               
09       exclusive written contract to sponsor a mortgage loan originator licensed under this                              
10       chapter, is otherwise in compliance with this chapter, and satisfies the other                                    
11       requirements of this section. Registration under this section does not affect the                                 
12       exemption of the depository institution under AS 06.60.015(a).                                                    
13            (b)  To register under (a) of this section, a depository institution shall                                   
14                 (1)  complete a registration form established by the department; the                                    
15       form must identify the mortgage loan originator to be sponsored by the depository                                 
16       institution; and                                                                                                  
17                 (2)  pay a registration fee established by the department.                                              
18            (c)  Registration under (b) of this section expires after one year. To renew a                               
19       registration, the depository institution shall file a renewal application with the                                
20       department and pay a renewal fee established by the department.                                                   
21            (d)  The department may deny an initial or renewal registration under this                                   
22       section, or may suspend or revoke the registration of a depository institution that is                            
23       registered under (b) of this section, if the department determines that the depository                            
24       institution                                                                                                       
25                 (1)  failed to satisfy a requirement of this section;                                                   
26                 (2)  failed to supervise its sponsored mortgage loan originator                                         
27       adequately; or                                                                                                    
28                 (3)  made a material misstatement or withheld information on the                                        
29       application for registration, on an application for the renewal of the registration, or on                        
30       another document required to be filed with the department.                                                        
31    * Sec. 3. AS 06.60.015 is amended to read:                                                                         
01            Sec. 06.60.015. Exemptions. (a) The following persons are exempt from the                                  
02       mortgage lender or mortgage broker licensing requirements of this chapter:                                        
03                 (1)  a depository institution;                                                                          
04                 (2)  a subsidiary that is                                                                               
05                      (A)  owned and controlled by a depository institution; and                                         
06                      (B)  regulated by a federal banking agency; [OR]                                                   
07                 (3)  an institution regulated by the Farm Credit Administration; or                                 
08                 (4)  a bona fide nonprofit organization.                                                            
09            (b)  The following individuals are exempt from the mortgage loan originator                                  
10       licensing requirements of this chapter:                                                                           
11                 (1)  a registered mortgage loan originator, when acting for an entity                                   
12       described in (a)(1), (2), or (3) of this section;                                                                 
13                 (2)  an individual who offers or negotiates terms of a residential                                      
14       mortgage loan with or on behalf of an immediate family member of the individual; in                               
15       this paragraph, "immediate family member" means a spouse, child, stepchild, sibling,                              
16       stepsibling, parent, stepparent, grandparent, or grandchild;                                                      
17                 (3)  an individual seller who offers or negotiates terms of a residential                               
18       mortgage loan secured by a dwelling that serves as the individual's residence;                                    
19                 (4)  a licensed attorney who negotiates the terms of a residential                                      
20       mortgage loan on behalf of a client as an ancillary matter to the attorney's                                      
21       representation of the client, unless the attorney is compensated by a lender, a mortgage                          
22       broker, or another mortgage loan originator or by an agent of a lender, a mortgage                                
23       broker, or another mortgage loan originator;                                                                  
24                 (5)  an employee of a bona fide nonprofit organization, if the                                      
25       employee acts as a mortgage loan originator only with respect to                                              
26                      (A)  the employee's duties to the bona fide nonprofit                                          
27            organization; and                                                                                        
28                      (B)  residential mortgage loans that have terms that are                                       
29            favorable to the borrower by being consistent with mortgage loan                                         
30            origination for a public or charitable purpose rather than in a commercial                               
31            context.                                                                                                 
01    * Sec. 4. AS 06.60.015 is amended by adding new subsections to read:                                               
02            (c)  For a nonprofit organization to qualify as a bona fide nonprofit                                        
03       organization under (a)(4) of this section, the department shall determine that the                                
04       nonprofit organization                                                                                            
05                 (1)  has and maintains the status of a tax-exempt organization under 26                                 
06       U.S.C. 501(c)(3) (Internal Revenue Code);                                                                         
07                 (2)  promotes affordable housing or provides home ownership                                             
08       education or similar services;                                                                                    
09                 (3)  conducts its activities in a manner that serves a public or charitable                             
10       purpose rather than a commercial purpose;                                                                         
11                 (4)  receives funding, receives revenue, and charges fees in a manner                                   
12       that does not provide an incentive for the organization or its employees to act other                             
13       than in the best interests of its clients;                                                                        
14                 (5)  compensates its employees in a manner that does not provide an                                     
15       incentive to its employees to act other than in the best interests of its clients;                                
16                 (6)  provides or identifies for a borrower residential mortgage loans                                   
17       with terms favorable to the borrower and comparable to mortgage loans and housing                                 
18       assistance provided under government housing assistance programs; for residential                                 
19       mortgage loans to have terms that are favorable to the borrower, the terms must be                                
20       consistent with mortgage loan origination for a public or charitable purpose rather than                          
21       in a commercial context; and                                                                                      
22                 (7)  meets other standards that the department determines are                                           
23       appropriate.                                                                                                      
24            (d)  The department may establish by regulation the information that an                                      
25       organization shall provide to qualify as a bona fide nonprofit organization under (c) of                          
26       this section.                                                                                                     
27            (e)  The department shall establish by regulation                                                            
28                 (1)  the procedure for determining that an organization meets the                                       
29       criteria identified under (c) of this section;                                                                    
30                 (2)  how long the determination made under (c) of this section shall                                    
31       remain in effect and the fee to be paid by the organization;                                                      
01                 (3)  how often and under what circumstances the department shall                                        
02       examine the books and activities of the organization to determine that the organization                           
03       continues to meet the criteria identified under (c) of this section; and                                          
04                 (4)  the procedure for denying an organization the status of a bona fide                                
05       nonprofit organization, for suspending or revoking an organization's status as a bona                             
06       fide nonprofit organization if the organization does not continue to meet the criteria                            
07       identified under (c) of this section, and for taking disciplinary action against an                               
08       organization arising out of a violation of (c) - (e) of this section; the provisions of                           
09       AS 44.62 (Administrative Procedure Act) apply to an action of the department under                                
10       this paragraph.                                                                                                   
11    * Sec. 5. AS 06.60.045(a) is amended to read:                                                                      
12            (a)  An applicant for a mortgage license shall file with the application                                     
13       submitted to the department under AS 06.60.020, and an applicant for registration                             
14       under AS 06.60.014 shall file with the application filed under AS 06.60.014, a                                
15       bond with one or more sureties. The department shall establish by regulation the                                  
16       amount of the required bond and the standards and procedures for recovery on the                                  
17       bond. The bond must be satisfactory to the department.                                                            
18    * Sec. 6. AS 06.60.045(c) is amended to read:                                                                      
19            (c)  An applicant for a mortgage license that covers more than one location or                           
20       an applicant for registration that covers more than one location is not required to                           
21       file more than one bond.                                                                                          
22    * Sec. 7. AS 06.60.045(d) is amended to read:                                                                      
23            (d)  The bond required under (a) of this section must be continuous until three                              
24       years after the department revokes or otherwise terminates the license or registration.                       
25    * Sec. 8. AS 06.60.045(e) is amended to read:                                                                      
26            (e)  If the department determines that the bond required under (a) of this                                   
27       section is unsatisfactory for any reason, the department may require the mortgage                                 
28       licensee or the registered depository institution to file with the department, within                         
29       10 days after the receipt of a written demand from the department, an additional bond                             
30       that complies with the provisions of this section.                                                                
31    * Sec. 9. AS 06.60.100 is amended to read:                                                                         
01            Sec. 06.60.100. Annual report. (a) Annually, on or before a date established                               
02       by the department by regulation, a mortgage licensee and a registered depository                              
03       institution shall file a report with the department providing relevant information that                       
04       the department requires concerning the business and operations of the mortgage                                    
05       licensee or registered depository institution. The mortgage licensee and the                              
06       registered depository institution shall make the report under oath or on affirmation.                         
07       The content and form of the report shall be established by the department by                                      
08       regulation.                                                                                                       
09            (b)  A mortgage licensee who or registered depository institution that fails                             
10       to file a report as required by this section is subject to a civil penalty of $25 for each                        
11       day's failure to file the report.                                                                                 
12            (c)  A mortgage licensee and a registered depository institution shall submit                            
13       to the registry, as required by the registry, reports of the condition of the licensee or                     
14       registered depository institution, which must be in the form and contain the                                  
15       information that the registry may require.                                                                        
16    * Sec. 10. AS 06.60.135(a) is amended to read:                                                                     
17            (a)  The requirements of this section apply to the business transactions of a                                
18       mortgage licensee or registered depository institution that occur entirely or partially                       
19       in this state.                                                                                                    
20    * Sec. 11. AS 06.60.135(b) is amended to read:                                                                     
21            (b)  A mortgage licensee or registered depository institution shall keep and                             
22       use in the [MORTGAGE LICENSEE'S] business of the mortgage licensee or                                         
23       registered depository institution the accounting records that are in accord with                              
24       generally accepted accounting principles.                                                                         
25    * Sec. 12. AS 06.60.135(c) is amended to read:                                                                     
26            (c)  A mortgage licensee and a registered depository institution shall                                   
27       maintain a record of the account of each borrower and for each mortgage loan or                                   
28       mortgage loan application that is related to the purchase or refinancing of an existing                           
29       mortgage loan. This record must contain all documents, work papers, electronic                                    
30       correspondence, and forms that are produced or prepared for the mortgage loan by the                              
31       mortgage licensee or registered depository institution, and the mortgage licensee                             
01       and registered depository institution shall retain each document, work paper,                                 
02       electronic correspondence, and form for 36 months from the date they were created.                                
03    * Sec. 13. AS 06.60.135(d) is amended to read:                                                                     
04            (d)  A mortgage licensee and a registered depository institution shall retain,                       
05       for at least three years after final payment is made on a mortgage loan, or three years                           
06       after a mortgage loan is sold, whichever occurs first, the original contract for the                              
07       [MORTGAGE LICENSEE'S] compensation of the mortgage licensee or registered                                     
08       depository institution, copies of the note, settlement statement, and truth-in-lending                        
09       disclosure, an account of fees received in connection with the loan, and other papers or                          
10       records relating to the loan that may be required by department order or regulation.                              
11    * Sec. 14. AS 06.60.135(e) is amended to read:                                                                     
12            (e)  If a mortgage licensee or registered depository institution conducts                                
13       business as a mortgage loan servicing agent for mortgage loans that the mortgage                                  
14       licensee or registered depository institution owns, or as an agent for other mortgage                         
15       lenders or investors, the mortgage licensee shall, in addition to complying with (b) and                          
16       (c) of this section, maintain a record for each mortgage loan. The record of each                                 
17       mortgage loan must include the amount of the mortgage loan, the total amount of                                   
18       interest and finance charges on the mortgage loan, the interest rate on the mortgage                              
19       loan, the amount of each payment to be made on the mortgage loan, a description of                                
20       the collateral taken for the mortgage loan, a history of all payments received by the                             
21       mortgage licensee or registered depository institution on the mortgage loan, a                                
22       detailed history of the amount of each payment that is applied to the reduction of the                            
23       mortgage loan principal, the interest that accrues on the mortgage loan, and any other                            
24       fees and charges that are related to the mortgage loan, as well as other papers required                          
25       by law, department order, or regulation. The mortgage licensee or registered                                  
26       depository institution shall retain the record required by this subsection for three                          
27       years after the loan is sold to another mortgage loan servicing agent or after the                                
28       mortgage loan is satisfied, whichever occurs first.                                                               
29    * Sec. 15. AS 06.60.140 is amended to read:                                                                        
30            Sec. 06.60.140. Availability of out-of-state records. A mortgage licensee                                  
31       who or registered depository institution that operates an office or other place of                            
01       business outside this state shall, at the request of the department,                                              
02                 (1)  make the records of the office or place of business available to the                               
03       department at a location within this state; or                                                                    
04                 (2)  reimburse the department its reasonable costs, as provided in                                      
05       AS 06.60.250(k), that are incurred by the department in conjunction with an                                       
06       investigation or examination conducted at the office or place of business.                                        
07    * Sec. 16. AS 06.60.410 is amended to read:                                                                        
08            Sec. 06.60.410. Censure, suspension, or bar. (a) In addition to any other                                  
09       remedy provided under this chapter, the department may, by order after appropriate                                
10       notice and opportunity for a hearing, censure a person, suspend the license of a person                           
11       for a period not to exceed 12 months, or bar a person from a position of employment,                              
12       management, or control of a licensee or registered depository institution if the                              
13       department finds that                                                                                             
14                 (1)  the censure, suspension, or bar is in the public interest;                                         
15                 (2)  the person has knowingly committed or caused a violation of this                                   
16       chapter or a regulation adopted under this chapter; and                                                           
17                 (3)  the violation has caused material damage to the licensee, to the                               
18       registered depository institution, or to the public.                                                          
19            (b)  When a person who is the subject of a proposed order under this section                                 
20       receives a notice of the department's intention to issue an order under this section, the                         
21       person is immediately prohibited from engaging in any activities for which a license is                           
22       required under this chapter or for which registration is required under                                       
23       AS 06.60.014.                                                                                                 
24            (c)  A person who is suspended or barred under this section is prohibited from                               
25       participating in a business activity of a licensee or registered depository institution                       
26       and from engaging in a business activity on the premises where a licensee or                                  
27       registered depository institution is conducting the [LICENSEE'S] business of a                            
28       licensee or registered depository institution. This subsection may not be construed                           
29       to prohibit a suspended or barred person from having the person's personal                                        
30       transactions processed by a licensee or registered depository institution.                                    
31    * Sec. 17. AS 06.60.900 is amended to read:                                                                        
01            Sec. 06.60.900. Applicability of administrative procedures. Notwithstanding                                
02       AS 06.01.030(f), the provisions of AS 44.62 (Administrative Procedure Act) apply to                               
03       an action of the department to deny, revoke, or suspend a license or registration                             
04       under this chapter, to censure, suspend, or bar a person under AS 06.60.410, to take                              
05       other disciplinary action under this chapter, to hold disciplinary hearings, and to issue                         
06       disciplinary orders. In this section, "registration" means the registration of a                              
07       depository institution under AS 06.60.014.                                                                    
08    * Sec. 18. AS 06.60.990 is amended by adding new paragraphs to read:                                               
09                 (35)  "bona fide nonprofit organization" means an organization that the                                 
10       department has determined qualifies as a bona fide nonprofit organization under                                   
11       AS 06.60.015(c);                                                                                                  
12                 (36)  "registered depository institution" means a depository institution                                
13       that is registered under AS 06.60.014.                                                                            
14    * Sec. 19. The uncodified law of the State of Alaska is amended by adding a new section to                         
15 read:                                                                                                                   
16       TRANSITION: REGULATIONS. The Department of Commerce, Community, and                                               
17 Economic Development may proceed under AS 06.60.910 to adopt regulations necessary to                                   
18 implement this Act. The regulations take effect under AS 44.62 (Administrative Procedure                                
19 Act), but not before January 1, 2016.                                                                                   
20    * Sec. 20. Section 19 of this Act takes effect immediately under AS 01.10.070(c).                                  
21    * Sec. 21. Except as provided in sec. 20 of this Act, this Act takes effect January 1, 2016.