Utah Enacts Changes to Lender Licensing and Property Laws
by: Emily Ross, Esq.
Changes to Lender Licensing Laws
The Utah legislature recently amended the Utah Residential Mortgage Practices and Licensing Act by modifying requirements for licensure. In addition to other unchanged requirements, applicants for licensure as a residential mortgage lender must now authorize the division to obtain credit reports, which were not previously required. Also, applicant must authorize the division to run periodic criminal background checks. Previously, applicants were only required to authorize a single criminal background check at the time of application. UT-Bills: HB 290. Title 61-2c-202.
The legislature also made two small changes to Title 61-2c-206 governing the licensure of lending managers. Previously, a lending manager only had to undergo a criminal background check at application if they were not registered as a mortgage loan originator in the nationwide database. HB 290 removed this exception, now requiring all applicants to undergo a criminal background check. Additionally, they changed the statute dictating whether a lending manager can play more than one role within an entity. Previously, the lending manager was forbidden by statute to act simultaneously as the principal lending manager and the branch lending manager if the sponsoring entity operates more than one office located within the state. The legislature changed this requirement to read that they cannot be the principal lending manager and branch lending manager if the sponsoring entity operates more than one office, whether or not those offices are located inside or outside Utah.
New Bill Authorizes Release of Mortgage or Trust Deed Upon Partial Repayment
With a recent bill, the Utah legislature made changes to statutes relating to the reconveyance of a trust deed and the release of a mortgage. A trust deed is a legal mechanism in which a legal deed is transferred to a trustee to hold in trust as the security for a loan between a lender and a borrower. Prior to this new legislation, a trust deed or mortgage could only be reconveyed or released upon complete payment by the mortgagor or borrower. This new legislation allows a title insurer or title agent to reconvey a trust deed or release a mortgage with only partial payment so long as all parties, namely the borrower and lender or servicer, agree on the terms of the release. UT Bills: HB-404.
Modifications to Law Governing Actions of Trustees
The Utah legislature also recently passed a bill modifying existing laws governing the withdrawal of trustees under a trust deed. Under a trust deed, the borrower is referred to as the trustor while the lender is referred to as the beneficiary. The trustee holds the property in trust until such time that the beneficiary indicates that the property may be transferred to the borrower. Among other things, the recent bill states that the trustee has no duty to the beneficiary until such time that the beneficiary informs the trustee, in writing, to exercise their powers.
In addition to the above provision clarifying the duty owed by the trustee, the new changes also include a provision allowing a trustee to withdrawal by resignation. In order to do so, a trustee must file a record of resignation in the record office of the county that the property involved is located. Within three days of resignation, the trustee must deliver notice of this resignation to all interested parties involved in legal action against the trustee as it relates to their duties as trustee. At this point, the party involved in legal action has ten days to substitute the beneficiary of the trust as the defendant in the action in place of the trustee. When a new trustee is appointed, they become the defendant. If a party in a legal matter does not file to make the beneficiary the defendant within the allotted 10 days, the judge must dismiss the case with prejudice. There is an exception carved out that in cases involving negligent or intentional misconduct on the part of the trustee, the beneficiary cannot be appointed to appear in the case in their stead. Utah Bills: H.B. 385.
Changes to Utah Laws Governing the Conversion of Modular, Manufactured
and Mobile Homes to Real Property
With H.B. 396 and H.B. 71, the Utah legislature recently modified the Financial Institution Mortgage Financing Regulation Act, (“Financial Institution Act”), and its subset, the Mortgage Lending and Servicing Act. These changes address the conversion of modular, manufactured and mobile homes from personal property to real property.
H.B. 396 addresses modular homes in particular, adding modular home to the definitions section of the Financial Institution Act, adopting the definition used in Title 15A-1-302. This statute defines a “modular unit” as a structure “(a) built from sections that are manufactured in accordance with the State Construction Code and transported to a building site; and (b) the purpose of which is human habitation, occupancy, or use.” Utah Title 15A-1-302. The bill differentiates the statutes governing modular homes and mobile homes. The conversion of mobile and manufactured homes is governed by Title 70D-2-401. This bill specifically exempts modular homes from this section and creates a section at 70-D-401.5 to govern their conversion.
This new section at 70-D-401.5 dictates what conditions must be met for a modular home to be considered real property. These conditions include, but are not limited to, the home being permanently affixed to real property owned by the person seeking to have the home declared real property; the owner of the real property filing an affidavit of real property with the county recorder and the home being assessed as real property for the purposes of property taxes. These new provisions go into effect June 2, 2013.
The Utah legislature again addressed the issue of converting manufactured and mobile homes from personal to real property with House Bill 71. Under Title 70-D2-401 a manufactured or mobile home is considered to be personal property unless it meets the provisions enumerated in this section. The new changes to this section allow an alternative for owners of manufactured or mobile homes when they no longer have the required certificate of title to the home. Without this, the traditional means of conversion enumerated in 70-D2-401 is not available. This new provision allows an owner to file an affidavit of affixture instead. This affidavit must include seven items: (a) the vehicle identification number; (b) the legal description of the real property the home is permanently affixed to; (c) a statement attesting to the permanent affixture; (d) a statement that the home is not registered with the Motor Vehicle Division of the State Tax Commission; (e) a statement that the home is being taxed as an improvement to real estate; (f) a statement that the certificate of title is lost or has been destroyed; and (g) a statement that the deed or loan document include the manufacturer’s identification number. The owner must then file the affidavit of affixture with the appropriate county recorder. These changes go into effect May 14, 2013.
About the Author:
Emily Ross, Esq., is Senior Counsel and Compliance Specialist at Bankers Advisory, Inc. She is a graduate of Auburn University and received her J.D. at Case Western Reserve School of Law. She is admitted to the bar in Massachusetts and Vermont. She can be reached at Emily.ross@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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