Ohio Amends Mortgage Loan Law and Establishes Residential Mortgage Lending Act

Ohio House Bill 199 amends multiple sections of the Ohio Revised Code to create the Ohio Residential Mortgage Lending Act (the Act) for the purpose of: regulating all non-depository lending secured by residential real estate, limiting the application of the current “Mortgage Loan Law” to unsecured loans and loans secured by other than residential real estate, and modifying an exemption to the Ohio Consumer Installment Loan Act. This bill was signed by the governor on December 22, 2017 and is effective 91 days after filing with the Secretary of State. Some of the important changes are discussed below.

“Mortgage Loan Law” changes

What was previously referred to as the “Mortgage Loan Law,” Ohio Revised Code sections 1321.51 to 1321.60, governed non-depository lenders that made loans secured by a mortgage, loans secured by something other than real estate, and unsecured loans. The Act limits the application of the Mortgage Loan Law to unsecured loans, and loans secured by something other than residential real estate. Under the Act, non-depository lenders that make loans secured by real estate are now governed by the Act.

The registration requirements have been modified; a lender must obtain a certificate of registration issued by the Superintendent of Financial Institutions in order to make loans, and lenders are not subject to the prior bonding requirement. The Act also eliminates the “mortgage loan originator” license that covered individuals who were compensated by a registrant.

The Act requires advertising for loans subject to sections 1321.51 to 1321.60 of the Revised Code not be false, misleading, or deceptive. The Act removes the description of what “false, misleading, or deceptive” advertising includes and states in any advertisement, a registrant shall comply with 12 C.F.R. 1026.16.

Ohio Residential Mortgage Lending Act

The Act is enacted as new Revised Code Chapter 1322, with the purpose of regulating all non-depository lending secured by residential real estate. It provides for the registration of mortgage lenders and mortgage brokers and the licensure of mortgage loan originators. Sections 1322.04 and 1322.05 provides for exemptions from the Act, including, but not limited to:

  • Any entity chartered and lawfully doing business under the authority of any law of Ohio, another state, or the United States as a bank, savings bank, trust company, savings and loan association, or credit union, or a subsidiary of any such entity that is regulated by a federal banking agency and is owned and controlled by a depository institution.
  • Any entity created solely for securitizing loans secured by an interest in real estate, provided it does not service the loans. For this purpose, “securitizing” means the packaging and sale of mortgage loans as a unit for sale as investment securities, but only to the extent of those activities.
  • A credit union service organization, if it utilizes services provided by registered mortgage loan originators or it holds a valid letter of exemption issued by the Superintendent of Financial Institutions in accordance with the Act;
  • A depository institution not otherwise required to be licensed under the Act that voluntarily makes a filing on the Nationwide Mortgage Licensing System & Registry as an exempt entity for the purpose of licensing loan originators exclusively associated with it, and it holds a valid letter of exemption issued by the Superintendent of Financial Institutions in accordance with the Act.

Section 1322.07 states that “no person, on the person’s own behalf or on behalf of any other person, shall act as a mortgage lender or mortgage broker without first having obtained a certificate of registration from the superintendent of financial institutions for the principal office and every branch office to be maintained by the person for the transaction of business as a mortgage lender or mortgage broker in this state. A registrant shall maintain an office location for the transaction of business as a mortgage lender or mortgage broker in this state.” The Act prohibits acting as a mortgage loan originator without a license from the Superintendent of Financial Institutions. A mortgage loan originator must be at least associated with a mortgage lender, mortgage broker, or entity holding a valid letter of exemption. However, the originator can only be associated with one mortgage lender, mortgage broker, or exempt entity at a time.

Ohio Consumer Installment Loan Act

The Ohio Consumer Installment Loan Act (CILA) generally does not apply to any credit transaction that does not require equal monthly payments. Under the Act, CILA applies when, with respect to a precomputed loan, the first installment period is extended and the first installment payment is larger than the remaining payments by the amount of interest charged for the extra days. Revised Code 1321.631(B)

The full text of the amendments can be found here: https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA132-HB-199

 

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Robert Harrison, JD, is a regulatory compliance consultant with Bankers Advisory. He is a graduate of Boston University and earned his juris doctor at the Boston University School of Law. Robert is admitted to the Bar in Massachusetts.

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