Arkansas Modifies Licensing Provisions under the Fair Mortgage Lending Act
The state of Arkansas has recently enacted House Bill 1801 to amend the Fair Mortgage Lending Act (FMLA). This provision is effective on August 18, 2017 (or 91 days after adjournment of the current legislative session).
The FMLA sets out the requirements for becoming licensed as a mortgage banker, mortgage broker, or mortgage servicer in Arkansas. The provision states that, at the time of application (and at all times thereafter), if an individual is a sole proprietor, he or she must have at least three years of experience in the field of mortgage lending (or must meet other competency requirements that the Securities Commissioner may adopt in a separate rule). If the applicant is a general or limited partnership, then at least one of the general partners must have at least three years of experience in the mortgage industry. If the applicant is a corporation, then at least one of the principal officers must have such experience, and the same applies for at least one of the managers of a limited liability company.
The provision then sets out the surety bond requirements for becoming licensed in Arkansas. The bill states that every mortgage broker, mortgage banker, and mortgage servicer must post a surety bond in an amount that is based upon loan activity during the prior year, and which is at least $100,000.00. Each bond must provide for suit on the bond by any individual who has a cause of action, and the aggregate liability of the surety must not exceed the principal sum of the bond. Finally, the surety bond must cover claims for at least five years after the licensee stops providing mortgage services in Arkansas.
In addition, the bill describes several duties of licensees in the state. For example, a licensee must make reasonable efforts with lenders with whom a mortgage broker regularly does business to secure a loan that is reasonably advantageous to the borrower. This must take into consideration all the circumstances including the rates, charges, and repayment terms of the loan, and the loan options for which the borrower qualifies with such lenders. He or she must also provide the Securities Commissioner with a quarterly report of all mortgage activity. He or she must safeguard and account for any money being held on behalf of a borrower. Additionally, the provision states that he or she must follow reasonable lawful instructions from a borrower, and must act with reasonable skill, care, and diligence.
Zachary Pearlstein, JD, is a Regulatory Compliance Director with CLA's Mortgage Advisory Division. He joined CLA on January 1, 2014, as part of its acquisition of Bankers Advisory, Inc. Zachary oversees Mortgage Advisory's regulatory compliance team, which focuses on federal and state compliance, fair lending, and the Home Mortgage Disclosure Act (HMDA). 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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