Lending Compliance Updates for State of Virginia
by: Emily Ross
On March 17, 2014 the Virginia General Assembly approved a change limiting flood insurance requirements by lenders. Previously, the Code of Virginia (6.2-412) stated that lenders cannot require a borrower to maintain property insurance coverage in an amount greater than the replacement value of the improvements that are used as collateral. In this situation the lender requires insurance as a condition of receiving the mortgage. The new change now includes flood insurance in this limitation. Now, lenders cannot require a borrower to carry general property insurance or flood insurance greater than the replacement value.
The new changes also included the addition of a formal definition for flood insurance. The statute defines flood insurance coverage as “insurance against the loss or damage to any property cause by flooding or the rising of the waters of the ocean or its tributaries.”
The requirements for determining the replacement value of the home remain the same. The lender may either accept the value of the improvements determined by the insurer or they may use the value of the improvements determined by the appraisal of the property.
On March 24, 2014, the General Assembly approved legislation to allow the issuance of temporary transitional mortgage loan originator licenses. These temporary licenses are meant to be used by individuals applying for permanent licenses. These transitional licenses are available to persons who fall into two limited categories. The first being those who maintains a license to originate loans from another state and secondly, for those who were registered loan originators within two months prior to applying for a transitional license. VA Code 6.2-1701.2.
According to the statute, these new licenses are valid for 120 days or until the date the commission issues or denies an originator license, whichever is sooner. During this time, a license holder may fulfill the pre-licensing education and testing requirements for full licensure. In order to apply for the transitional license, an individual must meet all of the same requirements as the full license, with the exception of the education and testing portions. These requirements involve standard information gathering and background checks as well as the issuance of a surety bond for either the individual applicant or the mortgage lending company for which they work.
Additionally, the commission cannot issue a transitional license if the applicant has had a mortgage originator license revoked by any government agency, the applicant has been convicted of any felony in the last seven years or if they have been convicted of a felony involving fraud, dishonesty, breach of trust or money laundering at any point during their life. A license must also be denied if the applicant has become registered through and obtained a unique identifier from the National Mortgage Licensing System and Registry. Before issuing a license, it must also be determined that the applicant is employed by a licensed mortgage lender or broker.
Upon invalidity at either 120 days or when a full license is denied or issued, a new transitional license cannot be renewed, extended or reinstated for any reason. In addition, anyone who has previously held a transitional license is not eligible for another transitional license in the future.
About the Author
Emily Ross, J.D. is Senior Regulatory Compliance Consultant for CliftonLarsonAllen LLP, Financial Institutions and a Bankers Advisory alumnus. She is a graduate of Auburn University and earned her Juris Doctor at Case Western Reserve School of Law. Emily is admitted to the Bar in Massachusetts and Vermont. She can be reached at Emily@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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