North Carolina Amends SAFE Act
by: Louis Danastorg
North Carolina’s General Assembly Amends the Secure and Fair Enforcement Mortgage Licensing Act to Provide for the Licensure of a Transitional Mortgage Loan Originator
Earlier this July, North Carolina’s General Assembly amended a number of NC SAFE provisions related and applying to applications for the licensure of transitional mortgage loan originators filed on or after September 1, 2013. The amendments allow mortgage originators holding out-of-state licenses to apply for a limited term license, so that they may continue lawfully conducting business while transitioning between or working within multiple jurisdictions. Applications for a transitional mortgage loan originator license are processed and evaluated by the Commissioner of Banks.
Section 1: Definitions
A licensee is any person licensed as mortgage loan originator (MLO), mortgage broker, mortgage lender, mortgage servicer, or transitional mortgage loan originator. The term transitional mortgage loan originator refers to an individual authorized to act as a mortgage loan originator, but limited to a term of no more than 120 days and not subject to reapplication, renewal, or extension by the Commissioner.
Section 2: License and Registration Requirements
No person may participate in the mortgage business or act as mortgage loan originator without first obtaining a license that authorizes an individual employed by a licensee to conduct the business of a MLO. North Carolina considers acting as a MLO without a license unlawful conduct.
A transitional MLO license may be issued to an individual, who has an active license to originate mortgage loans in any state or territory other than North Carolina, expected to complete all necessary licensure requirements. The individual must have been fingerprinted and presently hold a unique identifier with the Nationwide Mortgage Licensing System and Registry. The Commissioner may also grant a transitional MLO license if permitted by a guideline, rule, regulation, or interpretive letter that clarifies section 1503 of Title V of the Housing and Economic Recovery Act of 2008.
Section 3: License and Registration Application; Claim of Exemption
Eligible applicants for licensure as a transitional MLO must:
- be at least 18 years old,
- have an active out-of-state MLO license,
- have a valid NMLS number,
- have been employed for at least two years as a mortgage loan originator, and
- have provided proof of employment, including written attestation by the employer.
The Commissioner may request the North Carolina Department of Justice perform a criminal record check for any person having applied for or holding a license to act as a mortgage lender, broker, servicer, originator or transitional MLO. The Commissioner must provide the licensee’s fingerprints, any additionally required information, and a form indicating the subject person’s consent to the criminal check. North Carolina DOJ may charge a fee for the review of each individual’s criminal history.
Section 4-5: Issuance of License; License Application Fees
The Commissioner shall issue a license should an applicant satisfy all requirements outlined in G.S. 53-244.050 (Section 3); unless the applicant has demonstrated a lack of personal financial responsibility, character, or general fitness. The Commissioner must show that the community could not, or does not, trust the applicant to operate honestly, fairly and efficiently, or has disregarded their personal finances.
Applications for initial licensure as a mortgage broker, lender or servicer shall cost $1250; $300 for an exclusive mortgage broker; and $125 for a MLO or transitional MLO. Applicants must also pay the actual costs for obtaining and processing credit and criminal history checks.
Section 6-8: Active License Requirements and Assignability; Surety Bond Requirements; Minimum Net Worth Requirements
In North Carolina it is unlawful to engage in the mortgage business without obtaining the appropriate license. Subsequently, it is unlawful for any person in the mortgage business to employ, compensate, or appoint as an agent any unlicensed MLO. MLO and transitional MLO licenses are only effective during the period which the individual is employed by a licensed mortgage lender, broker or servicer. When the employment relationship terminates, the licensee employer must provide the Commissioner written notice, including the specific reason for termination.
No MLO or transitional MLO may be simultaneously employed by more than one mortgage blender, broker or servicer. Each licensed mortgage lender, broker or servicer shall maintain an updated roster with the Commissioner of all employed MLOs or transitional MLOs, and no unlicensed person shall hold him or herself out as a mortgage lender, broker, servicer, MLO, or transitional MLO. Each MLO or transitional MLO shall be covered by a surety bond through employment with a licensee, and the Commissioner may adopt requirement rules for the surety bonds as needed.
All MLOs or transitional MLOs must continuously maintain a minimum net worth, see. G.S. 53-244.104. Any MLO or transitional MLO employed by or appointed exclusive agent of a person subject to this Article may use the employer’s net worth to satisfy the minimum net worth requirement.
Section 9-10: Display of Licenses; Unique Identifier Shown
All mortgage brokers and lenders must display in plain, public view the certificate of licensure in its principal, and each branch, office. Each MLO shall similarly display his or her license wherever the individual acts as a MLO. All residential mortgage loan application forms, solicitations, advertisements, websites, and any other documents by rule or order of the Commissioner shall clearly display any MLO’s unique NMLS identifier.
Section 11: Prohibited Acts
It is unlawful for any person in the course of any residential mortgage loan transaction to fail to account for or deliver any funds or documents related to or concerning the loan, including borrower paid appraisal and credit report fees, which the licensee is not entitled to retain under the circumstances.
Section 12: Licensure Authority
The Commissioner has the authority to, by order, deny, suspend, revoke, or refuse to issue or renew any license. Further, the Commissioner has the discretion to restrict or limit how the licensee engages in the mortgage business, should the person:
- be the subject of an order by the Commissioner denying or suspending the person’s license,
- the subject of an out-of-state order entered within the past five years,
- or has been the qualifying individual, branch manager or MLO with knowledge of or reasonably should have had knowledge of, or participated in, any activity that resulted in the entering of a Commissioner order for license suspension or withdrawal.
Section 13: Investigation and Examination Authority
This Article grants the Commissioner the authority to review, investigate, or examine complaints or violations involving any person subject to this Article as often as deemed necessary. The Commissioner may interview any person connected to a licensee’s mortgage loan transactions, including their customers. The Commissioner may direct, subpoena, or order the attendance of and examine under oath all persons with knowledge about the loans or the business, or subject matter of any examination or investigation. The Commissioner also has the authority to compel the production of any books, accounts, records, files, and any other documents considered relevant.
Any licensee or person subject to this Article shall comply with Commissioner’s requests to produce books and records relating to the licensee’s operations. No person may knowingly withhold, abstract, remove, mutilate, destroy, or secrete any mortgage loan related information. Licensees must make available any person concerning their business for interview by the Commissioner upon request.
Section 14-16: Rule-Making Authority; Records; Commissioner’s Participation in Nationwide Registry; Confidentiality of Information
The Commissioner has discretion to adopt any rules he or she deems necessary to protect the borrowing public, prohibit unfair or deceptive practices, to instruct licensees, and to implement and interpret the provisions of G.S. 24-1.1E (Restrictions and Limitations on High-cost Home Loans), 24-1.1F (Rate Spread Home Loans), and 24-10.2 (Consumer Protections in Certain Home Loans).
The Commissioner shall keep a current roster of the names and locations of all licensees, as well as, those exempt persons required to file a notice. The Commissioner is authorized to participate in the NMLS to facilitate enforcing the requirement that all MLOs and transitional MLOs be licensed and registered with the NMLS.
Information or material relating to the employment and publicly available criminal history of a mortgage lender, broker, servicer, MLO, or transitional MLO shall not be covered by this Article’s confidentiality provisions.
About the Author
Louis Danastorg, J.D., M.B.A. is Associate Counsel and Compliance Specialist at Bankers Advisory, Inc. He is a graduate of Vanderbilt University and earned his Juris Doctor and Masters of Business Administration from Suffolk University. He can be reached at Louis@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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