Hawaii Modifies Provisions Regarding Mortgage Originator Licensing Requirements

The state of Hawaii has recently passed Senate Bill 951, which updates the state’s mortgage loan origination law with regard to licensing requirements. These updates are effective as of September 1st, 2017.

The first major revision relates to presumption of control. The law states that an individual is presumed to control a mortgage loan origination company if he or she is a director, general partner, or managing member who directly or indirectly has the right to vote 10% or more of a class of voting securities or has the power to sell (or direct the sale of) 10% or more of a class of voting securities of that licensee or applicant.  In addition, an individual is presumed to control a mortgage loan origination company if he or she is an executive officer, which the law defines as a chairperson of an executive committee, senior officer responsible for a subject entity or organization’s business, chief financial officer, or any other person who performs similar functions related to the subject entity or organization.

The updates also address the issue of a change in control. The Commissioner may approve a change of control if, after investigation, he or she is able to determine that the following three conditions are met: the person or persons who obtain control will be in compliance with the applicable regulations once approved; the person or persons who will obtain control have the competence, experience, character, and general fitness to control the licensee in a lawful manner; and the interests of the public will not be jeopardized by the change of control.

Another revision states that each licensed mortgage loan originator company must designate a “qualified individual” to fulfill various duties and responsibilities. He or she must be a licensed mortgage loan originator, and must also have the duty to manage and supervise the mortgage loan origination activities of the principal office as well as all company branch offices.  The qualified individual is responsible for supervising the maintenance and accounting of client trust accounts and disbursements, as well as supervising all records, contracts, documents, mortgage loan originator agreements, mortgage loan documents, and all licensed mortgage loan originators themselves.  He or she is also responsible for developing and enforcing policies and procedures, developing and monitoring compliance with a policy on continuing education requirements, ensuring all licenses are active, conducting training, and ensuring compliance with record retention policies.

An additional update relates to the requirements for becoming licensed as a mortgage loan originator in Hawaii. An applicant must submit to NMLS his or her fingerprints, or if an applicant is not an individual, then the fingerprints of each of the applicant’s control persons, executive officers, directors, general partners, and managing members, which may be submitted to the FBI or other governmental agencies for state, national, and international criminal history background checks.  An applicant must also provide his or her personal history and experience.  If the applicant is not an individual, the entity must submit the personal history and experience of each of the applicant’s control persons, executive officers, directors, general partners, and managing members, including an authorization for NMLS and the commissioner to obtain credit reports and information related to any administrative, civil, or criminal findings by any governmental jurisdiction.

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Zachary Pearlstein, JD, is a senior regulatory compliance consultant with Bankers Advisory. He is a graduate of Brandeis University and earned his juris doctor at Suffolk University Law School. He is admitted to the Massachusetts Bar.

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