TITLE 10. FINANCE AND FINANCIAL INSTITUTIONS
REGISTRAR'S NOTICE: The
State Corporation Commission is exempt from the Administrative Process Act in
accordance with § 2.2-4002 A 2 of the Code of Virginia, which exempts
courts, any agency of the Supreme Court, and any agency that by the
Constitution is expressly granted any of the powers of a court of record.
Title of Regulation: 10VAC5-160. Rules Governing
Mortgage Lenders and Brokers (amending 10VAC5-160-10, 10VAC5-160-20,
10VAC5-160-40, 10VAC5-160-50; adding 10VAC5-160-90, 10VAC5-160-100).
Statutory Authority: §§ 6.2-1613 and 12.1-13 of the
Code of Virginia.
Effective Date: February 15, 2011.
Agency Contact: E.J. Face, Jr., Commissioner, Bureau of
Financial Institutions, State Corporation Commission, P.O. Box 640, Richmond,
VA 23218, telephone (804) 371-9659, FAX (804) 371-9416, or email firstname.lastname@example.org.
The amendments to this regulation governing mortgage
lenders and brokers accomplish three basic goals: (i) address the transition of
mortgage lender and broker licensees and new applicants to the electronic
National Mortgage Licensing System and Registry (NMLS); (ii) provide basic
codes of conduct for licensees in maintaining records with NMLS and supervising
mortgage loan originators (already licensed through NMLS); and (iii) make
technical changes and corrections to conform to NMLS, as well as to the
recodification of Title 6.1 of the Code of Virginia into Title 6.2. All
applications for mortgage lender or broker licenses under Chapter 16 (§ 6.2-1600
et seq.) of Title 6.2 of the Code of Virginia must be sent through NMLS beginning
January 3, 2011. Mortgage lenders and brokers licensed prior to January 1,
2011, are required to transition to NMLS no later than April 1, 2011. Licensees
may not employ persons who are not licensed as mortgage loan originators under
Chapter 17 (§ 6.2-1700 et seq.) of Title 6.2 of the Code of Virginia to
take applications for, or offer or negotiate the terms of, residential mortgage
loans. Licensees must disclose on all documents provided to a borrower the
licensee's NMLS unique identifier, as well as the unique identifier of any
mortgage loan originator associated with the loan. Licensees are required to
keep their information current in NMLS. The commission may enforce these
regulations or Chapter 16 by fines or suspension or revocation of licenses.
In response to comments received, the final regulations
differ from the proposed regulations in that the licensee's unique identifier
and the unique identifier of the mortgage loan originator must be included on
the loan application only, rather than on all documents provided to the
borrower as originally proposed. Licensees are required to keep their
information current in NMLS. The State Corporation Commission may enforce these
regulations or Chapter 16 (§ 6.2-1600 et seq.) of Title 6.2 of the Code of
Virginia by civil penalties or by suspension or revocation of licenses.
AT RICHMOND, FEBRUARY 15, 2010
COMMONWEALTH OF VIRGINIA, ex rel.
STATE CORPORATION COMMISSION
CASE NO. BFI-2010-00255
Ex Parte: In re: Mortgage Lenders and
ORDER ADOPTING REGULATIONS
The Bureau of Financial Institutions ("Bureau")
submitted to the Commission proposed amendments to 10 VAC 5-160 ("Chapter
160") of the Virginia Administrative Code, which governs the conduct of
licensed mortgage lenders and brokers ("Licensees"). The impetus for
the proposed amendments is Chapter 831 of the 2010 Virginia Acts of Assembly
("Chapter 831"), which became effective on July 1, 2010, and required
all Licensees to register with the Nationwide Mortgage Licensing System and
Registry ("NMLS"). The proposed regulation set forth the requirements
for Licensees to transition to NMLS and maintain current and accurate records
in NMLS, as well as the requirements for new mortgage lenders and brokers to
apply for licensure through NMLS. The proposed regulation also clarified
certain operating rules for Licensees through their participation in NMLS and
supervision of mortgage loan originators, also licensed through NMLS.
On November 16, 2010, the State Corporation Commission
("Commission") entered an Order to Take Notice of a proposal by the
Commission to amend 10 VAC 5-160, regulations governing mortgage lenders and
brokers. The Order and proposed regulations were published in the Virginia
Register of Regulations on December 6, 2010, published on the Commission's web
site, and mailed to all licensed mortgage lenders and brokers and other
interested parties. Interested parties were afforded the opportunity to provide
written comments or request a hearing on or before December 20, 2010.
Comments on the proposed regulations were filed by
Professional Mortgage Corp., the Virginia Association of Mortgage Brokers, Nfm,
Inc., and First Savings Mortgage Corporation. Each party's comments were
confined to expressing concern over the proposed requirement that a licensee
disclose its NMLS-assigned unique identifier and that of the applicable
mortgage loan originator on all documents provided to a borrower. No party
requested a hearing in this matter.
NOW THE COMMISSION, upon consideration of the proposed
regulations, the written comments filed, the recommendations of staff, and
applicable law, concludes that the proposed regulations should be modified to
(i) require a licensee to disclose its NMLS-assigned unique identifier and that
of the applicable mortgage loan originator only on an application for a
mortgage loan; and (ii) accommodate and reflect recodification of Title 6.1 of
the Code of Virginia as Title 6.2 of the Code of Virginia.1
Accordingly, IT IS ORDERED THAT:
(1) The proposed regulations, 10 VAC 5-160, as modified
herein and attached hereto, are adopted effective as of the date of this Order.
(2) This Order and the attached regulations shall be
posted on the Commission's website at: http://www.scc.virginia.gov/case.
(3) The Commission's Division of Information Resources
shall send a copy of this Order, including a copy of the attached regulations,
to the Virginia Registrar of Regulations for publication in the Virginia
Register of Regulations.
(4) This case is dismissed from the Commission's docket
of active cases.
AN ATTESTED COPY hereof shall be sent to the Commissioner of
Financial Institutions, who shall forthwith mail a copy of this Order,
including a copy of the attached regulations, to all licensed mortgage lenders
and brokers, as well as other interested parties as he may designate.
The following words and terms when used in this chapter shall
have the following meanings unless the context clearly indicates otherwise:
"Advertisement" means a commercial message in any
medium that promotes, directly or indirectly, a mortgage loan. The term
includes a communication sent to a consumer as part of a solicitation of
business, but excludes messages on promotional items such as pens, pencils,
notepads, hats, calendars, etc., as well as rate sheets or other information
distributed or made available solely to other businesses.
"Affiliate" for purposes of subdivision 3 of §
6.2-1602 of the Code of Virginia means an entity of which 25% or more of
the voting shares or ownership interest is held, directly or indirectly, by a
company that also owns a bank, savings institution, or credit union.
"Chapter 16" means Chapter 16 (§ 6.2-1600
et seq.) of Title 6.2 of the Code of Virginia.
"Commission" and "commissioner" shall
have the meanings ascribed to them in §
6.1-409 [ 6.2-1600
6.2-100 ] of the Code of Virginia.
"Commitment" means a written offer to make a
mortgage loan signed by a person authorized to sign such offers on behalf of a
"Commitment agreement" means a commitment accepted
by an applicant for a mortgage loan, as evidenced by the applicant's signature
"Commitment fee" means any fee or charge accepted
by a mortgage lender, or by a mortgage broker for transmittal to a mortgage
lender, as consideration for binding the mortgage lender to make a mortgage
loan in accordance with the terms of a commitment or as a requirement for
acceptance by the applicant of a commitment, but the term does not include fees
paid to third persons or interest.
"Dwelling" means one- to four-family residential
property located in the Commonwealth.
"Fees paid to third persons" means the bona fide
fees or charges paid by the applicant for a mortgage loan to third persons
other than the mortgage lender or mortgage broker, or paid by the applicant to,
or retained by, the mortgage lender or mortgage broker for transmittal to such
third persons in connection with the mortgage loan, including, but not limited
to, recording taxes and fees, reconveyance or releasing fees, appraisal fees,
credit report fees, attorney fees, fees for title reports and title searches,
title insurance premiums, surveys and similar charges.
"Licensee" means a person licensed under Chapter 16
(§ 6.1-408 et seq.) of Title 6.1 of the Code of Virginia.
"Lock-in agreement" means a written agreement
between a mortgage lender, or a mortgage broker acting on behalf of a mortgage
lender, and an applicant for a mortgage loan that establishes and sets an
interest rate and the points to be charged in connection with a mortgage loan
that is closed within the time period specified in the agreement. A lock-in
agreement can be entered into before mortgage loan approval, subject to the
mortgage loan being approved and closed, or after such approval. A commitment
agreement that establishes and sets an interest rate and the points to be
charged in connection with a mortgage loan that is closed within the time
period specified in the agreement is also a lock-in agreement. The interest
rate that is established and set by the agreement may be either a fixed rate or
an adjustable rate.
"Lock-in fee" means any fee or charge accepted by a
mortgage lender, or by a mortgage broker for transmittal to a mortgage lender,
as consideration for making a lock-in agreement, but the term does not include
fees paid to third persons or interest.
"Mortgage lender," "mortgage broker," and
"mortgage loan" shall have the meanings ascribed to them in §
6.2-1600 of the Code of Virginia.
"Mortgage loan originator," "Nationwide
Mortgage Licensing System and Registry," and "Registry" shall
have the meanings ascribed to them in § 6.2-1700 of the Code of Virginia.
"Personal, family or household purposes" for
purposes of §
6.1-409 6.2-1600 of the Code of Virginia means
that the individual obtaining the loan intends to use the proceeds to build or
purchase a dwelling that will be occupied by such individual or another
individual as their temporary or permanent residence. The term includes a loan
used to build or purchase a dwelling that will be (i) improved or rehabilitated
by or on behalf of the purchaser for subsequent sale to one or more other
individuals who will reside in the dwelling on a temporary or permanent basis,
or (ii) leased by the purchaser to one or more other individuals who will
reside in the dwelling on a temporary or permanent basis.
"Points" means any fee or charge retained or
received by a mortgage lender or mortgage broker stated or calculated as a
percentage or fraction of the principal amount of the loan, other than or in
addition to fees paid to third persons or interest.
"Reasonable period of time" means that period of
time, determined by a mortgage lender in good faith on the basis of its most
recent relevant experience and other facts and circumstances known to it,
within which the mortgage loan will be closed.
"Senior officer" for purposes of §§
6.1-415 6.2-1606, 6.1-416 6.2-1607, and 6.1-416.1
6.2-1608 of the Code of Virginia means an individual who has significant
management responsibility within an organization or otherwise has the authority
to influence or control the conduct of the organization's affairs, including
but not limited to its compliance with applicable laws and regulations.
"Subsidiary" for purposes of subdivision 3 of §
6.2-1602 of the Code of Virginia means an entity of which 25% or more of
the voting shares or ownership interest is held, directly or indirectly, by a
bank, savings institution, or credit union.
10VAC5-160-20. Operating rules.
A licensee shall conduct its business in accordance with the
1. No licensee shall misrepresent the qualification
requirements for a mortgage loan or any material loan terms or make false or
misleading statements to induce an applicant to apply for a mortgage loan or to
induce an applicant to enter into any commitment agreement or lock-in agreement
or to induce an applicant to pay any commitment fee or lock-in fee in
connection therewith. A "material loan term" means the loan terms
required to be disclosed to a consumer pursuant to (i) the Truth in Lending Act
(15 USC § 1601 et seq.), and regulations and official commentary issued
thereunder, as amended from time to time, (ii) §
of the Code of Virginia, and (iii) 10VAC5-160-30. A misrepresentation or false
or misleading statement resulting directly from incorrect information furnished
to a licensee by a third party, or a good-faith misunderstanding of information
furnished by a third party, shall not be considered a violation of this section
if the licensee has supporting documentation thereof and the licensee's
reliance thereon was reasonable.
2. No licensee shall retain any portion of any fees or charges
imposed upon consumers for goods or services provided by third parties. All
moneys received by a licensee from an applicant for fees paid to third persons
shall be accounted for separately, and all disbursements for fees paid to third
persons shall be supported by adequate documentation of the services for which
such fees were or are to be paid. All such moneys shall be deposited in an
escrow account in a bank, savings institution, or credit union segregated from
other funds of the licensee.
3. The mortgagor who obtains a mortgage loan shall be entitled
to continue to make payments to the transferor of the servicing rights under a
mortgage loan until the mortgagor is given written notice of the transfer of
the servicing rights by the transferor. The notice shall specify the name and
address to which future payments are to be made and shall be mailed or
delivered to the mortgagor at least 10 calendar days before the first payment
affected by the notice.
4. If a person has been or is engaged in business as a
mortgage lender or mortgage broker and has filed a bond with the commissioner,
as required by §
6.1-413 6.2-1604 of the Code of Virginia, such
bond shall be retained by the commissioner notwithstanding the occurrence of
any of the following events:
a. The person's application for a license is withdrawn or
b. The person's license is surrendered, suspended, or revoked;
c. The person ceases engaging in business as a mortgage lender
or mortgage broker.
5. Within 15 days of becoming aware of the occurrence of any
of the following events, a licensed mortgage lender or mortgage broker shall
file a written report with the commissioner describing such event and its
expected impact, if any, on the activities of the licensee in the Commonwealth:
a. The licensee files for bankruptcy or reorganization.
b. Any governmental authority institutes revocation or
suspension proceedings against the licensee, or revokes or suspends a
mortgage-related license held or formerly held by the licensee.
c. Any governmental authority takes (i) formal regulatory or
enforcement action against the licensee relating to its mortgage business or
(ii) any other action against the licensee relating to its mortgage business
where the total amount of restitution or other payment from the licensee
exceeds $20,000. A licensee shall not be required to provide the commissioner
with information about such event to the extent that such disclosure is
prohibited by the laws of another state.
d. Based on allegations by any governmental authority that the
licensee violated any law or regulation applicable to the conduct of its
licensed mortgage business, the licensee enters into, or otherwise agrees to
the entry of, a settlement or consent order, decree, or agreement with or by
such governmental authority.
e. The licensee surrenders its license to engage in any
mortgage-related business in another state in lieu of threatened or pending
license revocation, license suspension, or other regulatory or enforcement
f. The licensee is denied a license to engage in any
mortgage-related business in another state.
g. The licensee or any of its employees, officers, directors,
or principals is indicted for a felony.
h. The licensee or any of its employees, officers, directors,
or principals is convicted of a felony.
6. No licensee shall inform a consumer that such consumer has
been or will be "preapproved" or "pre-approved" for a
mortgage loan unless the licensee contemporaneously provides the consumer with
a separate written disclosure (in at least 10-point type) that (i) explains
what preapproved means; (ii) informs the consumer that the consumer's loan
application has not yet been approved; (iii) states that a written commitment
to make a mortgage loan has not yet been issued; and (iv) advises the consumer
what needs to occur before the consumer's loan application can be approved.
This provision shall not apply to advertisements subject to 10VAC5-160-60. In
the case of a preapproval initially communicated to a consumer by telephone,
the licensee shall provide the written disclosure to the consumer within three
7. No licensee shall permit any individual who is not
licensed as a mortgage loan originator pursuant to Chapter 17 (§ 6.2-1700
et seq.) of Title 6.2 of the Code of Virginia to, on behalf of the licensee,
take an application for or offer or negotiate the terms of a residential
mortgage loan as defined in [
§ 6.2-1700 of the Code of
Virginia. § 1503(8) of the federal Secure and Fair Enforcement
for Mortgage Licensing Act of 2008 (P.L. 110-289), that is secured by real
property located in the Commonwealth. ]
8. Beginning April 1, 2011, every licensee shall disclose
all documents any application ] provided
to the borrower associated with a Virginia residential mortgage loan: (i) the
licensee's unique identifier assigned by the Registry; and (ii) the unique
identifier assigned by the Registry to any mortgage loan originator who took
the application [ or negotiated the terms of for ]
10VAC5-160-40. Schedule of annual fees for the examination,
supervision, and regulation of mortgage lenders and mortgage brokers.
Pursuant to §
6.1-420 6.2-1612 of the Code of
Virginia, the Commission sets the following schedule of annual fees to be paid
by mortgage lenders and mortgage brokers required to be licensed under Chapter
16 (§ 6.1-408 et seq.) of Title 6.1 of the Code of Virginia. Such fees
are to defray the costs of examination, supervision and regulation of such
lenders and brokers by the Bureau of Financial Institutions. The fees are
related to the actual costs of the Bureau, to the volume of business of the
lenders and brokers, and to other factors relating to supervision and
LENDER LICENSEE: Minimum fee
-- $800, plus $6.60 per loan
BROKER LICENSEE: Minimum fee -- $400, plus $6.60 per loan
DUAL AUTHORITY (LENDER/BROKER): Minimum fee -- $1,200, plus
$6.60 per loan
The annual fee for each mortgage lender shall be computed on
the basis of the number of mortgage loans, as defined in §
of the Code of Virginia, made or originated during the calendar year preceding
the year of assessment. The annual fee for each mortgage broker shall be based
on the number of such loans brokered. The annual fee for each mortgage
lender/broker shall be based on the total number of mortgage loans made or
originated and mortgage loans brokered. The annual fee computed using the above
schedule shall be rounded down to the nearest whole dollar.
Fees shall be assessed on or before April 25 for the current
calendar year. By law the fee must be paid on or before May 25.
The annual report of each licensee shall be due March 1 of
each year and shall provide the basis for licensee assessment, i.e., the number
of loans made or brokered. If the annual report of a licensee has not been
filed by the assessment date, a provisional fee, subject to adjustment when the
report is filed, shall be assessed. In cases where a license or additional
authority has been granted between January 1 and March 31, one of the following
fees or additional fee shall be assessed: lender -- $400; broker -- $200;
lender/broker -- $600.
Fees prescribed and assessed by this schedule are apart from,
and do not include, the reimbursement for expenses permitted by subsection
B C ] of § 6.1-420 6.2-1612 of the Code
10VAC5-160-50. Responding to requests from Bureau of Financial
A. When the Bureau of Financial Institutions (bureau)
requests a written response, books, records, documentation, or other
information from a mortgage lender or mortgage broker (licensee) in connection
with the bureau's investigation, enforcement, or examination of compliance with
applicable laws, the licensee shall deliver a written response as well as any
requested books, records, documentation, or information within the time period
specified in the bureau's request. If no time period is specified, a written
response as well as any requested books, records, documentation, or information
shall be delivered by the licensee to the bureau not later than 30 days from
the date of such request. In determining the specified time period for
responding to the bureau and when considering a request for an extension of
time to respond, the bureau shall take into consideration the volume and
complexity of the requested written response, books, records, documentation or
information and such other factors as the bureau determines to be relevant
under the circumstances.
B. Requests made by the bureau pursuant to subsection A are
deemed to be in furtherance of the bureau's investigation and examination
authority provided for in §
6.1-419 6.2-1611 of the Code of
Virginia. Failure to comply with subsection A may result in [ fines
civil penalties ], license suspension, or license revocation.
10VAC5-160-90. National Mortgage Licensing System and
A. Beginning January 3, 2011, applications for a mortgage
lender or mortgage broker license shall be made through the Registry in
accordance with instructions provided by the Commissioner. The Commissioner may
provide these instructions through the Registry, on the Commission's Internet
web site, or by any other means the Commissioner deems appropriate.
B. The Commissioner shall notify all licensees no later
than January 1 of each calendar year of the information required to be included
in the annual report to be submitted by each licensee pursuant to
§ 6.2-1610 of the Code of Virginia.
C. Entities exempt from the requirement for licensure
under Chapter 16 that supervise mortgage loan originators licensed pursuant to
Chapter 17 (§ 6.2-1700 et seq.) of Title 6.2 of the Code of Virginia
may obtain a unique identifier through the Registry.
D. All licensees holding a license under Chapter 16 prior
to January 1, 2011, shall obtain such unique identifier and provide all
required information to the Registry no later than April 1, 2011.
E. Every licensee shall maintain current information in
its records with the Registry. Any changes to the licensee's address, principal
officers, or any other information in the Registry shall be updated by the
licensee as soon as is practicable, but in no event later than five business
days from when the change takes effect.
A. Failure to comply with any provision of Chapter 16 or
this chapter may result in [
fines civil penalties ],
license suspension, or license revocation.
B. Pursuant to § 6.2-1624 of the Code of Virginia, a
licensee shall be subject to a [
fine civil penalty ]
of up to $2,500 for every violation of Chapter 16, this chapter, or other
law or regulation applicable to the conduct of the licensee's business.
Furthermore, if a licensee violates any provision of Chapter 16, this chapter,
or other law or regulation applicable to the conduct of the licensee's business
in connection with multiple borrowers, loans, or prospective loans, the
licensee shall be subject to a separate [ fine civil
penalty ] for each borrower, loan, or prospective loan. For
example, if a licensee makes five loans and the licensee violates two
provisions of this chapter in connection with each of the five loans, there
would be a total of 10 violations and the licensee would be subject to a
maximum [ fine civil penalty ] of
VA.R. Doc. No. R11-2653; Filed February 15, 2011, 2:47 p.m.