Senate Bill No. 47
(By Senators Minard and Barnes)
[Introduced January 12, 2011; referred to the Committee on Banking and Insurance.]
A BILL to amend and reenact §31-17-5, §31-17-8 and §31-17-14 of the Code of West Virginia, 1931, as amended, all relating to mortgage license provisional approval; disclosure of fees in a mortgage loan; and administrative hearing, appeal and scheduling procedures.
Be it enacted by the Legislature of West Virginia:
That §31-17-5, §31-17-8 and §31-17-14 of the Code of West Virginia, 1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 17. WEST VIRGINIA RESIDENTIAL MORTGAGE LENDER, BROKER AND SERVICER ACT.
§31-17-5. Refusal or issuance of license.
(a) Upon an applicant's full compliance with the provisions of section four of this article, the commissioner shall investigate the relevant facts with regard to the applicant and his or her application for a lender's or broker's license, as the case may be. Upon the basis of the application and all other information before him or her, the commissioner shall make and enter an order denying the application and refusing the license sought if the commissioner finds: that
(1) The applicant does not have available the net worth required by the provisions of section four of this article, if applicable;
(2) The financial responsibility, character, reputation, experience or general fitness of the applicant, including its officers, directors, principals and employees, reasonably warrants the belief that the business will not be operated lawfully and properly in accordance with the provisions of this article; and
(3) The applicant has done any act or has failed or refused to perform performed or failed or refused to perform any duty or obligation for which the license sought could be suspended or revoked were it then issued and outstanding.
Otherwise, the commissioner shall issue to the applicant a lender's or broker's license which shall to entitle the applicant to engage in the business of lender or broker, as the case may be, during the period, unless sooner suspended or revoked, for which the license is issued.
(b) Every application for a lender's or broker's license shall be passed upon reviewed and the license issued or refused within sixty days after the applicant therefor has fully complied with the provisions of this article. The commissioner may grant a provisional license to an applicant pending the outcome of a final background investigation. If the results of the investigation reveal information that would have been grounds for a license denial or revocation, then the commissioner shall suspend or revoke the provisional license. Under no circumstances whatever may a person or licensee act as a broker and lender in the same transaction. Whenever an application for a lender's or broker's license is denied and the license sought is refused, which refusal denial has become final, the commissioner shall retain all fees to cover administrative costs of processing the broker or lender application.
§31-17-8. Maximum interest rate on subordinate loans; prepayment rebate; maximum points, fees and charges; overriding of federal limitations; limitations on lien documents; prohibitions on primary and subordinate mortgage loans; civil remedy.
(a) The maximum rate of finance charges on or in connection
with any subordinate mortgage loan may not exceed eighteen percent per year on the unpaid balance of the amount financed.
(b) A borrower shall have the right to prepay his or her debt, in whole or in part, at any time and shall receive a rebate for any unearned finance charge, exclusive of any points, investigation fees and loan origination fees, which rebate shall be computed under the actuarial method.
(c) Except as provided by section one hundred nine, article three, chapter forty-six-a of this code and by subsection (g) of this section, no additional charges may be made, nor may any charge permitted by this section be assessed unless the loan is made: Provided, That in the event the loan is not made, the licensee is not required to refund an appraisal fee that is collected from a loan applicant by the licensee and paid to an unrelated third-party appraiser unless the fee is required to be refunded pursuant to federal law.
(d) Where loan origination fees, investigation fees or points have been charged by the licensee, the charges may not be imposed again in any refinancing of that loan or any additional loan on that property made within twenty-four months, thereof unless the new loan has a reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and the refinanced loans, the cost of the new loan and the borrower’s circumstances. The licensee shall document this benefit in writing on a form prescribed by the commissioner and maintain such documentation in the loan file. To the extent this subdivision overrides the preemption on limiting points and other charges on first lien residential mortgage loans contained in the United States Depository Institutions Deregulation and Monetary Control Act of 1980, 12 U.S.C. §1735f-7a, the state law limitations contained in this section shall apply.
(e) Notwithstanding other provisions of this section, a delinquent charge or "late charge" may be charged on any installment made ten or more days after the regularly scheduled due date in accordance with section one hundred twelve or one hundred thirteen, article three, chapter forty-six-a of this code, whichever is applicable. The charge may be made only once on any one installment during the term of the primary or subordinate mortgage loan.
(f) Hazard insurance may be required by the lender. The charges for any insurance shall not exceed the standard rate approved by the Insurance Commissioner for the insurance. Proof of all insurance in connection with primary and subordinate mortgage loans subject to this article shall be furnished to the borrower within thirty days from and after the date of application therefor by the borrower.
(g) Except for fees for services provided by unrelated third parties for appraisals, inspections, title searches and credit reports, no application fee may be allowed whether or not the mortgage loan is consummated; however, the borrower may be required to reimburse the licensee for actual expenses incurred by the licensee in a purchase money transaction after acceptance and approval of a mortgage loan proposal made in accordance with the provisions of this article which is not consummated because of:
(1) The borrower's willful failure to close the loan; or (2) The borrower's false or fraudulent representation of a material fact which prevents closing of the loan as proposed. (h) No licensee shall make, offer to make, accept or offer to accept any primary or subordinate mortgage loan except on the terms and conditions authorized in this article.
(i) No licensee shall induce or permit any borrower to become obligated to the licensee under this article, directly or contingently, or both, under more than one subordinate mortgage loan at the same time for the purpose or with the result of obtaining greater charges than would otherwise be permitted under the provisions of this article.
(j) No instrument evidencing or securing a primary or subordinate mortgage loan shall contain:
(1) Any power of attorney to confess judgment;
(2) Any provision whereby the borrower waives any rights accruing to him or her under the provisions of this article;
(3) Any requirement that more than one installment be payable in any one installment period, or that the amount of any installment be greater or less than that of any other installment, except for the final installment which may be in a lesser amount, or unless the loan is structured as a revolving line of credit having no set final payment date;
(4) Any assignment of or order for the payment of any part of any salary, wages, commissions or other compensation for services, or any part thereof, earned or to be earned;
(5) A requirement for compulsory arbitration which does not comply with federal law; or
(6) Blank or blanks to be filled in after the consummation of the loan. A borrower must be given a copy of every signed document executed by the borrower at the time of closing.
(k) No licensee shall charge a borrower or receive from a borrower money or other valuable consideration as compensation before completing performance of all services the licensee has agreed to perform for the borrower unless the licensee also registers and complies with all requirements set forth for credit service organizations in article six-c, chapter forty-six-a of this code, including all additional bonding requirements as may be established therein.
(l) No licensee shall make or broker revolving loans secured by a primary or subordinate mortgage lien for the retail purchase of consumer goods and services by use of a lender credit card.
(m) In making any primary or subordinate mortgage loan, no licensee may, and no primary or subordinate mortgage lending transaction may, contain terms which:
(1) Collect a fee not contained in a good faith estimate disclosed to the borrower at least five business days prior to closing; collect any attorney fee at closing in excess of the fee that has been or will be remitted to the attorney; collect a fee for a product or service where the product or service is not actually provided; misrepresent the amount charged by or paid to a third party for a product or service; or collect duplicate fee or points to act as both broker and lender for the same mortgage loan, however, fees and points may be divided between the broker and the lender as they agree, but may not exceed the total charges otherwise permitted under this article: Provided, That the fact of if any fee, point or compensation is disclosed to the borrower consistent with the solicitation representation made to the borrower;
(2) Compensate, whether directly or indirectly, coerce or intimidate an appraiser for the purpose of influencing the independent judgment of the appraiser with respect to the value of real estate that is to be covered by a deed of trust or is being offered as security according to an application for a primary or subordinate mortgage loan;
(3) Make or assist in making any primary or subordinate mortgage loan with the intent that the loan will not be repaid and that the lender will obtain title to the property through foreclosure: Provided, That this subdivision shall not apply to reverse mortgages obtained under the provisions of article twenty-four, chapter forty-seven of this code;
(4) Require the borrower to pay, in addition to any periodic interest, combined fees, compensation, or points of any kind to the lender and broker to arrange, originate, evaluate, maintain or service a loan secured by any encumbrance on residential property that exceed, in the aggregate, six percent of the loan amount financed, including any yield spread premium paid by the lender to the broker. Provided, That Reasonable closing costs, as defined in section one hundred two, article one, chapter forty-six-a of this code, payable to unrelated third parties may not be included within this limitation. Provided, however, That However, no yield spread premium is permitted for any loan for which the annual percentage rate exceeds eighteen percent per year on the unpaid balance of the amount financed. Provided further, That if Also, if no yield spread premium is charged, the aggregate of fees, compensation or points can be no greater than five percent of the loan amount financed. The financing of the fees and points are permissible and, where included as part of the finance charge, does not constitute charging interest on interest. To the extent that this section overrides the preemption on limiting points and other charges on first lien residential mortgage loans contained in the United States Depository Institutions Deregulation and Monetary Control Act of 1980, 12 U.S.C. §1735f-7a, the state law limitations contained in this section applies;
(5) Secure a primary or subordinate mortgage loan by any security interest in personal property unless the personal property is affixed to the residential dwelling or real estate;
(6) Allow or require a primary or subordinate mortgage loan to be accelerated because of a decrease in the market value of the residential dwelling that is securing the loan;
(7) Require terms of repayment which do not result in continuous monthly reduction of the original principal amount of the loan. Provided, That the provisions of This subdivision may does not apply to reverse mortgage loans obtained under article twenty-four, chapter forty-seven of this code, home equity, open-end lines of credit, bridge loans used in connection with the purchase or construction of a new residential dwelling or commercial loans for multiple residential purchases;
(8) Secure a primary or subordinate mortgage loan in a principal amount that, when added to the aggregate total of the outstanding principal balances of all other primary or subordinate mortgage loans secured by the same property, exceeds the fair market value of the property on the date that the latest mortgage loan is made. For purposes of this paragraph, a broker or lender may rely upon a bona fide written appraisal of the property made by an independent third-party appraiser, duly licensed or certified by the West Virginia real estate appraiser licensing and certification board and prepared in compliance with the uniform standards of professional appraisal practice;
(9) Advise or recommend that the consumer not make timely payments on an existing loan preceding loan closure of a refinancing transaction; or
(10) Knowingly violate any provision of any other applicable state or federal law regulating primary or subordinate mortgage loans, including, without limitation, chapter forty-six-a of this code.
§31-17-14. Hearing before commissioner; provisions pertaining to hearing.
(a) Any applicant or licensee, as the case may be, adversely affected by an order made and entered by the commissioner in accordance with the provisions of section thirteen of this article, if not previously provided the opportunity to a hearing on the matter, may, in writing, demand a hearing before the commissioner. The commissioner may appoint a hearing examiner to conduct the hearing and prepare a recommended decision. The written demand for a hearing must be filed with the commissioner within thirty ten days after the date upon which the applicant or licensee was served with a copy of the order. The timely filing of a written demand for hearing shall stay or suspend execution of the order in question, pending a final determination, except for an order suspending a license for failure of the licensee to maintain the bond required by section four of this article in full force and effect. If a the written demand is timely filed as aforesaid, the aggrieved party is entitled to a hearing as a matter of right.
(b) All of the pertinent provisions of article five, chapter twenty-nine-a of this code shall apply to and govern the hearing and the administrative procedures in connection with and following such hearing, with like effect as if the provisions of the article were set forth in extenso in this subsection.
(c) For the purpose of conducting any such hearing hereunder, the commissioner or appointed hearing examiner shall have the power and authority to issue subpoenas and subpoenas duces tecum in accordance with the provisions of section one, article five, chapter twenty-nine-a of this code. All subpoenas and subpoenas duces tecum are shall be issued and served in the manner, within the time and for the fees and shall be enforced, as specified in the section, and all of the section provisions dealing with subpoenas and subpoenas duces tecum shall apply to subpoenas and subpoenas duces tecum issued for the purpose of a hearing hereunder.
(d) Any hearing shall be held within twenty thirty days after the date upon which the commissioner received the timely written demand therefor unless there is a postponement or continuance. The commissioner or hearing examiner may postpone or continue any hearing on his or her own motion or for good cause shown upon the application of by the aggrieved party. At any hearing, the aggrieved party may represent himself or herself or be represented by any attorney-at-law admitted to practice before any circuit court of this state.
(e) After the hearing and consideration of all of the testimony, evidence and record in the case, the commissioner shall make and enter an order affirming, modifying or vacating his or her earlier order, or shall make and enter an order as is considered appropriate, meet and proper. If the commissioner appoints a hearing examiner, then the commissioner must issue his or her final order within fifteen days of receiving the recommended decision of the hearing examiner. The order shall be accompanied by findings of fact and conclusions of law as specified in section three, article five, chapter twenty-nine-a of this code and a copy of the order and accompanying findings and conclusions shall be served upon the aggrieved party and his or her attorney of record, if any, in person or by certified mail, return receipt requested, or in any other manner in which process in a civil action in this state may be served. The order of the commissioner is final unless vacated or modified on judicial review thereof in accordance with the provisions of section fifteen of this article.
NOTE: The purpose of this bill is to make changes to the disclosure requirements regarding fees in a mortgage loan, grant the commissioner the authority to issue a provisional mortgage license and to change time frame for hearings.
Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.