Senate Bill No. 195
(By Senators Kessler, Ball, Dittmar, Hunter, Wooton and Deem)
__________
[Introduced January 22, l999;
referred to the Committee Banking and Insurance.]
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A BILL to amend and reenact article seventeen, chapter thirty- one of the code of West Virginia, one thousand nine hundred
thirty-one, as amended; and to amend and reenact sections
one hundred seven and one hundred ten-a, article four,
chapter forty-six-a of said code, all relating to the
regulation of residential mortgage lenders, brokers and
servicers; creating the West Virginia residential mortgage
lender, broker and servicer act; setting forth legislative
findings; defining terms; providing licensure classes and
application deadlines; establishing licensure requirements
and exemptions therefrom; setting forth registration and
examination requirements for associate and principal
residential mortgage brokers; requiring the licensing of
residential mortgage services and exempting certain persons
therefrom; requiring licensure for the conduct of business;
setting forth applicability of article; when a certificate
of exemption is required; setting forth licensing application, net worth and bond requirements; establishing
licensure terms and prohibiting transfer thereof; providing
for license fees, renewal and cancellation thereof;
authorizing commissioner to take enforcement actions;
setting forth standards of conduct for licensees;
establishing additional standards for brokers; setting
forth recordkeeping requirements; requiring notification of
material changes to commissioner; providing for the
confidentiality of certain information; exempting certain
persons who report or exchange information with
commissioner from liability; permitting employees and
officials of division to receive loans from licensees;
authorizing electronic transmission and telephonic loan
applications and setting forth requirements thereof;
establishing scope of article; empowering commissioner to
administer law; permitting commissioner to examine
licensee's records; requiring display of license; requiring
licensees to report annually; prohibiting certain terms,
points and fees; exempting licensees from other
registration and bonding requirements; providing for the
voidability of certain loans; declaring severability of provisions; and clarifying the permissible finance charges
of regulated consumer lenders.
Be it enacted by the Legislature of West Virginia:
That article seventeen, chapter thirty-one of the code of
West Virginia, one thousand nine hundred thirty-one, as amended,
be amended and reenacted; and that sections one hundred seven
and one hundred ten-a, article four, chapter forty six-a of said
code be amended and reenacted, all to read as follows:
CHAPTER 31. CORPORATIONS.
ARTICLE 17. WEST VIRGINIA RESIDENTIAL MORTGAGE LENDER, BROKER
AND SERVICER ACT.
§31-17-1. Short title.
This article shall be known and may be cited as the "West
Virginia Residential Mortgage Lender, Broker and Servicer Act."
§31-17-2. Legislative findings; purpose.
(a) The Legislature finds that residential home ownership
is an important element in the quality of life in the
neighborhoods and communities of this state. The Legislature
further finds that the activities of residential mortgage
brokers, lenders and servicers greatly impact what is in many
cases the most significant financial decision citizens will
make. Consequently, these activities have a direct and
immediate impact on the wealth, stability and comfort of the
homeowners and potential homeowners in this state. The Legislature further finds that due to the recent trend toward
deregulation in the financial services industry, there has been
rapid growth in the mortgage lending and services industries
outside of traditional, regulated depository institutions.
Further, there has been explosive growth in the sub-prime
mortgage lending industry and, additionally, mortgage lenders of
all types increasingly rely upon nonfinancial intermediaries,
such as mortgage brokers, to find customers. These developments
raise questions and concerns as to whether all entities engaging
in residential mortgage activities within this state operate
under appropriate regulations. Consequently, the Legislature
finds that reasonable standards governing the business practices
of residential mortgage brokers, lenders and servicers are
essential for the protection of the citizens of this state.
(b) The purpose of this act is to protect consumers
conducting residential mortgage loan transactions secured by
real estate located in this state by ensuring, with special
attention to those consumers obtaining sub-prime loans, that the
residential mortgage brokering, lending and servicing industries
operate in a manner that is fair, honest and free from deceptive
practices.
§31-17-3. Definitions.
As used in this article:
(1) "Act" means the West Virginia residential mortgage
lender, broker and servicer act.
(2) "Advance fee" means a commission, fee, charge or
compensation of any kind paid to a residential mortgage lender
or broker before the closing of a loan, that is intended in
whole or in part as payment for the lender's or broker's
services in finding or attempting to find or making a loan for
a borrower. Advance fee does not include pass-through fees to
third parties or commitment or extended lock fees or other fees
as determined by the commissioner.
(3) "Borrower" means a person or persons applying for a
residential mortgage loan, a mortgagor or the person or persons
on whose behalf the activities in subdivisions twelve, fourteen,
twenty-two and twenty-three of this section are conducted.
(4) "Closing" means either or both of the following: (1)
The process whereby the finance transaction between a buyer and
seller is consummated; or (2) the process whereby the documents
creating a loan obligation and a security interest in
residential real property become effective between the borrower
and the lender.
(5) "Commissioner" means the commissioner of banking of
West Virginia.
(6) "Depository institution" means a depository institution the deposits of which are insured by the federal deposit
insurance corporation or the national credit union share
insurance fund.
(7) "Electronically transmitted" shall mean any
transmission via diskette, wire or tape including but not
limited to an intranet (interactive or otherwise), the internet,
any other computer network, electronic mail or any other similar
method of transmission.
(8) "Electronic signature" shall mean any generally
accepted electronic authentication method, as defined by section
two, article five, chapter thirty-nine of this code, that
provides the same assurance as a signature in a paper-based
system.
(9) "Employee" means an individual who is treated as an
employee by the residential mortgage lender, broker or servicer
for purposes of compliance with federal income tax laws.
(10) "Escrow account" means a trust account that is
established and maintained to hold funds received from a
borrower, such as real estate taxes and insurance premiums,
incurred in connection with the servicing of the deed of trust.
(11) "Exempt person" means a person exempt from sections
five or seven of this article, as applicable.
(12) "Making a residential mortgage loan" means for compensation or gain, or the expectation of compensation or
gain, advancing funds, or extending credit or making a
commitment to advance funds or extend credit in connection with
a residential mortgage loan secured by real estate located in
West Virginia.
(13) "Mortgage broker" or "broker" means a person who
performs the activities described in subdivisions fourteen and
twenty-three of this section. A person acting within his or her
capacity as an employee of a residential mortgage lender is not
included within this definition. A person who originates a
table-funded residential mortgage loan, but does not provide or
advance the funds for such a loan, is a "broker" under this
article.
(14) "Mortgage brokering" or "brokering" means helping to
obtain from another person, for a borrower, a residential
mortgage loan or assisting a borrower in obtaining a residential
mortgage loan in return for consideration to be paid by the
borrower or lender or both. Mortgage brokering or brokering
includes, but is not limited to, soliciting, placing, or
negotiating a residential mortgage loan.
(15) "Net worth" has the meaning given it in section twelve
of this article.
(16) "Person" means a natural person, firm, partnership, limited liability partnership, corporation, association, limited
liability company or other form of business organization and the
officers, directors, employees or agents of that person.
(17) "Person in control" means a licensee's owner,
president, senior officer responsible for the licensee's
business, chief financial officer or any other person who
performs similar functions or who otherwise controls the conduct
of the affairs of the licensee. A person controlling ten
percent or more of the voting stock of any corporate applicant
is a "person in control" under this subsection. A person who
serves as a limited partner in a partnership does not constitute
a "person in control" under this subsection.
(18) "Residential mortgage loan" means a loan or credit
sale made primarily for personal, family or household use and
secured primarily by either: (1) A deed of trust on residential
real property located in West Virginia; or (2) certificates of
stock or other evidence of ownership interest in and proprietary
lease from corporations, partnerships or other forms of business
organizations formed for the purpose of cooperative ownership of
residential real property located in West Virginia.
(19) "Residential mortgage lender" or "lender" means a
person who makes, takes assignment of, or accepts a residential
mortgage loan including a person who provides or advances the funds in a table funding transaction.
(20) "Residential mortgage servicer" or "servicer" means a
person who engages in the activity of servicing a residential
mortgage loan as defined in subdivision twenty-two of this
section.
(21) "Residential real property" or "residential real
estate" means real property improved or intended to be improved
by a structure designed principally for the occupancy of from
one to four families.
(22) "Servicing" or "servicing a residential mortgage loan"
means through any medium or mode of communication the collection
or remittance for, or the right or obligation to collect or
remit for, another lender, note owner, noteholder, payments of
principal, interest (including sales finance charges in a
consumer credit sale) and escrow items such as insurance and
taxes for property subject to a residential mortgage loan.
(23) "Soliciting, placing, or negotiating a residential
mortgage loan" means for compensation or gain or expectation of
compensation or gain, whether directly or indirectly, accepting
or offering to accept an application for a residential mortgage
loan, assisting or offering to assist a borrower in applying for
a residential mortgage loan, or negotiating or offering to
negotiate the terms or conditions of a residential mortgage loan with a lender on behalf of a borrower.
(24) "Table funding" means a closing or settlement at which
a residential mortgage loan is funded by a lender by way of a
contemporaneous advance of residential mortgage loan funds and
an assignment of the residential mortgage loan to the lender
advancing the funds.
(25) "Trust account" means a negotiable order of withdrawal
account, demand deposit or checking account maintained for the
purpose of segregating trust funds from other funds. A "trust
account" must not allow the financial institution a right of
set-off against the money owed it by the account holder.
(26) "Trust funds" means funds received by a residential
mortgage lender, broker or servicer in a fiduciary capacity for
later distribution, such as appraisal or credit report fees,
taxes, or insurance premiums. Trust funds include, but are not
limited to commitment, lock, extended lock and advance fees.
§31-17-4. Classes of license; transition to licensing.
(a) The commissioner may issue the following classes of
license under this article:
(1) A residential mortgage lender license;
(2) A residential mortgage broker license; and
(3) A residential mortgage servicer license.
(b) In order to allow reasonable time for a transition to the licensing requirements imposed by this article, persons
engaged in residential mortgage brokering, lending or servicing
on the first day of June, one thousand nine hundred ninety-nine
who file an application for a license or a certificate of
exemption by the fifteenth day of August, one thousand nine
hundred ninety-nine shall be permitted to continue their
activities until the commissioner formally approves or denies
their license application or issues an exemption certificate.
§31-17-5. Licensing requirement for residential mortgage
lenders and brokers; exemptions.
(a) Beginning the first day of October, one thousand nine
hundred ninety-nine, no person shall act as a residential
mortgage lender or broker, or make, take assignment of, or
accept residential mortgage loans in this state without first
obtaining a license from the commissioner according to the
licensing procedures provided in this article.
(b) The following persons are exempt from the residential
mortgage lender or broker licensing requirements:
(1) An employee of a mortgage lender licensee acting only
in the capacity of a lender: Provided, That such an employee
may refer a loan to another licensed or exempt lender without
receiving individual compensation; and an employee of a
residential mortgage broker licensee who solicits or originates residential mortgages only on behalf of that licensee and who
first registers as either an associate or principal residential
mortgage broker under section six of this article;
(2) A person engaged solely in non-residential mortgage
activities;
(3) A person licensed as a real estate broker under article
twelve, chapter forty-seven of this code, and an associate real
estate broker or real estate sales person if:
(A) The individual associate broker or real estate
salesperson acts only under the name, authority and supervision
of the real estate broker to whom this exemption applies;
(B) The real estate broker does not collect an advance fee
for its residential mortgage-related activities; and
(C) The residential mortgage lending activities are
incidental to the real estate broker's primary activities as a
real estate broker or salesperson;
(4) A person acting as a lender for no more than five
residential mortgage loans, during any calendar year;
(5) The federal government, a state or municipal
government, or any agency or instrumentality thereof;
(6) An employee or employer pension, profit-sharing, or
retirement plan making loans only to its participants;
(7) A person acting in a fiduciary capacity, such as a trustee or receiver, as a result of a specific order issued by
a court of competent jurisdiction;
(8) The West Virginia housing development fund and
community based non-profit housing providers originating loans
solely for purchase by the fund;
(9) A non-profit organization that provides loans for low
to moderate income housing if such organization is regularly
examined by a federal agency or entity: Provided, That a non-
profit foundation that provides funding for low to moderate
income housing need not be examined by a federal agency or
entity to qualify for an exemption under this subdivision;
(10) Regulated consumer lenders licensed under article
four, chapter forty-six-a of this code;
(11) A trust or other entity which holds residential
mortgage loans in order to securities and create financial
instruments or securities that are traded on an exchange
registered with the securities exchange commission or privately
placed in accordance with securities exchange commission or
national association of securities dealers rules or guidelines;
(12) Habitat for humanity international, inc. and its
affiliates providing low-income housing within West Virginia;
and
(13) A person exempted by order of the commissioner.
§31-17-6. Associate and principal residential mortgage brokers;
registration and examination requirements.
(a) A residential mortgage broker licensee shall have, as
a managing principal, a residential mortgage broker who shall:
(1) Have at least three years of experience in the field of
residential mortgage lending or brokering or a four year degree
from an accredited university or college in a business field
including, but not limited to, marketing, finance or accounting;
(2) Meet the examination requirements for residential
mortgage brokers established by this section: Provided, That a
residential mortgage broker who was doing business in this state
on the first day of January, one thousand nine-hundred ninety- nine may act as a principal broker and shall have until the
first day of September, two thousand, to meet the examination
requirements established by this section; and
(3) Register with the commissioner of banking by filing a
form, containing such information as the commissioner may
require, accompanied by a registration fee of fifty dollars.
(b) A residential mortgage broker licensee may employ an
associate broker under this article only if the associate broker
hired under this subsection:
(1) Is subject to the supervision and control of a
principal residential mortgage broker who is responsible for his or her performance and actions;
(2) Meets the examination requirements for residential
mortgage brokers established by this section within twelve
months of his or her employment with the residential mortgage
broker licensee; and
(3) Registers, within sixty days of his or her employment,
with the commissioner of banking by filing a form, containing
such information as the commissioner may require, accompanied by
a registration fee of fifty dollars.
(c) Unless otherwise exempt under the provisions of section
five of this article, no person may act as a residential
mortgage broker unless he or she is first properly registered
with the commissioner under this section and is employed by a
residential mortgage broker licensee.
(d) No person may act as a residential mortgage broker in
this state unless he or she has first passed an examination
testing knowledge of state and federal laws and regulations
regarding residential mortgage lending and consumer protection.
The examination shall be created, administered and graded by the
commissioner or his or her designee. The examination shall be
given at least twice each year at a date and time chosen by the
commissioner.
(e) In order to obtain a passing grade on the examination, the applicant for a residential mortgage broker license must:
(1) Have the ability to prepare, explain and execute
written and oral communications which relate to the mortgage
origination process;
(2) Have the ability to explain and compute the
mathematical calculations necessary to a residential mortgage
transaction, including calculation of an annual percentage rate
and computation of a mortgage payment;
(3) Identify and explain federal and state laws and
regulations in regards to mortgage brokerage and lending
procedures;
(4) Have the ability to explain the loan closing process;
and
(5) Identify and explain applicable portions of chapter
forty-six-a of this code, the Federal Truth In Lending Act, 15
U.S.C. §§1601 et seq., the Real Estate Settlement Procedures
Act, 12 U.S.C. §§2601 et seq., the Equal Credit Opportunity Act,
15 U.S.C. §§1691-1691f, the Fair Credit Reporting Act, the Home
Mortgage Disclosure Act, 12 U.S.C. §2801, and other federal
regulations that are or may become applicable to the residential
mortgage brokering and lending business.
(f) Each year, applicants shall be given an opportunity to
enroll in a course of instruction, not to exceed sixty hours of classroom time, designed to prepare applicants for the
examination. The course of instruction shall be designed and
administered by the commissioner, or his or her designee, and
shall cover those topics described in subsection (e) of this
section. The commissioner shall charge a fee for enrollment in
the course to defray the costs associated with developing and
presenting the instruction.
(g) A residential mortgage broker shall only be required to
pass the examination once. However, upon determining
significant substantive changes in law or the mortgage industry
have occurred, the commissioner may require such brokers to
attend continuing education.
§31-17-7. Licensing requirement for residential mortgage
servicers; exemptions.
(a) Beginning the first day of October, one thousand nine
hundred ninety-nine, no person shall engage in activities or
practices that are within the definition of "servicing a
residential mortgage loan" under subdivision twenty-two, section
threeo of this article without first obtaining a license from
the commissioner as provided in this article.
(b) The following persons are exempt from the residential
mortgage servicer licensing requirements:
(1) A person licensed as a residential mortgage lender servicing only its own loan portfolio or loans it originated and
subsequently sold or transferred to another person;
(2) An employee of a residential mortgage servicer licensed
under this article;
(3) A person engaged solely in non-residential mortgage
activities;
(4) A person servicing loans that person has purchased from
another lender or made with its own funds;
(5) The federal government, or a state or municipal
government, or any agency or instrumentality thereof;
(6) An employee or employer pension, profit-sharing or
retirement plan making loans only to its participants;
(7) A person acting in a fiduciary capacity, such as a
trustee or receiver, as a result of a specific order issued by
a court of competent jurisdiction;
(8) The West Virginia housing development fund and
community based non-profit housing providers servicing loans
solely for the fund;
(9) A non-profit organization that provides loans for low
to moderate income housing if such organization is regularly
examined by a federal agency or entity;
(10) A person approved by the federal national mortgage
association (Fanniemae), the federal home loan mortgage corporation, or the government national mortgage association to
provide residential mortgage servicing: Provided, That such
person shall provide the commissioner with the name, address,
and telephone number of a representative authorized to respond
to and resolve complaints by borrowers relating to the servicing
of their residential mortgage loans: Provided, however, That
this exemption shall expire forty-eight hours after suspension
or termination of the servicer's status as an approved servicer
by the aforementioned entities;
(11) An attorney acting in his or her professional capacity
attempting to collect or enforce a residential mortgage loan
transaction; and
(12) A person exempted by order of the commissioner.
§31-17-8. Conducting business under license.
No person required to be licensed under this article may,
without a license, conduct business under a name or title or
circulate or use advertising or make representations or give
information to a person, that indicates or reasonably implies
activity within the scope of this article.
§31-17-9. Applicability to federally insured depository
institutions and regulated consumer lenders.
(a) This article does not apply to depository institutions
or individuals acting in their capacity as employees of such institutions, the deposits of which are insured by the federal
deposit insurance corporation or the national credit union share
insurance fund.
(b) The provisions of sections thirteen, nineteen, twenty- three, thirty and thirty-two of this article apply to any
regulated consumer lender licensed under article four, chapter
forty-six-a of this code who is engaged in the business of
making residential mortgage loans.
§31-17-10. Certificates of exemption.
Any person desiring to qualify as an exempt person under
subdivision (4), (9), (12) or (13), subsection (b), section five
or under subdivision (9), (10) or (12), subsection (b), section
seven of this article must obtain a certificate of exemption
from the commissioner. A certificate of exemption will be
issued upon the person's filing, on a form provided by the
commissioner and accompanied by the appropriate fee, a statement
indicating the basis on which the exemption is claimed and, if
applicable, the name and address of the state or federal
regulatory agency or body to which complaints regarding the
person's residential mortgage originating or servicing
activities may be directed and other information which may be
required by the commissioner.
§31-17-11. Application requirements for residential mortgage lenders, brokers and servicers; time for approval.
(a) An application for a residential mortgage lender,
broker or servicer license must be in writing, under oath, and
on a form prescribed by the commissioner.
(b) The application must contain the name and complete
business address or addresses of the license applicant. If the
license applicant is a partnership, limited liability
partnership, association, limited liability company, corporation
or other form of business organization, the application must
contain the names and complete business addresses of each
partner, member, director and principal. The application must
also include a description of the activities of the license
applicant, in the detail and for the time periods the
commissioner may require. The application must also include,
but not be limited to, all of the following:
(1) An affirmation under oath that the applicant:
(A) Will maintain competent staff and adequate staffing
levels, through direct employees or otherwise, to meet the
requirements of this article;
(B) Will advise the commissioner of any material changes
to the information submitted in the most recent application
within thirty days of the change;
(C) Will advise the commissioner in writing within fifteen days of any bankruptcy petitions filed against or by the
applicant or licensee;
(D) Is financially solvent and in compliance with net worth
requirements;
(E) Complies with federal and state tax laws;
(F) Is, or that a person in control of the applicant is, at
least eighteen years of age;
(G) Complies with all applicable provisions of chapter
forty-six-a of this code; and
(H) Is qualified to hold property and transact business in
this state.
(2) Information as to the mortgage lending, servicing, or
brokering experience of the applicant and persons in control of
the applicant;
(3) Information as to criminal convictions, excluding
traffic violations, of persons in control of the applicant;
(4) Whether a court or state or federal regulator with
jurisdiction has found that applicant or persons in control of
the applicant have engaged in conduct evidencing gross
negligence, fraud, misrepresentation, or deceit in performing an
act for which a license is required under this article;
(5) Whether the applicant or persons in control of the
applicant have been the subject of an order of suspension or revocation, cease and desist order, or injunctive order, or
order barring involvement in an industry or profession issued by
this or any other state or federal regulatory agency or by the
secretary of the United States department of housing and urban
development within the ten-year period immediately preceding
submission of the application; and
(6) Other information required by the commissioner.
(c) The commissioner shall issue a license if he or she
finds that the applicant meets the requirements of this article
and any rules adopted under this article. The commissioner
shall approve or deny every application for an original license
within one hundred twenty days from the date a complete
application is submitted, unless the commissioner extends the
period for good cause.
(d) Only one license shall be required of a residential
mortgage lender or servicer, regardless of the number of branch
offices maintained by each licensee. However, every person
receiving a license under this article shall, before opening a
branch office, provide the commissioner with written notice of
its intent to open a branch stating the address of the branch
office and the date on which it will open.
§31-17-12. Net worth requirements for residential mortgage
brokers, lenders and servicers.
(a) A licensee who is issued a residential mortgage broker
license shall maintain a minimum net worth of twenty five
thousand dollars. A licensee who is issued a residential
mortgage lender license shall maintain a minimum net worth of
two hundred fifty thousand dollars. A licensee who is issued a
residential mortgage servicer's license shall maintain a minimum
net worth of one million dollars.
(b) Net worth must be computed according to generally
accepted accounting principles and must reflect any adjustment
to net worth required by the government national mortgage
association: Provided, That the commissioner may accept
personal financial statements from residential mortgage brokers
in a form he or she deems appropriate.
(c) The commissioner shall require the submission of
financial data audited by an independent certified public
accountant for applicants for a license for residential mortgage
lending or servicing. A consolidated audit with an affiliated
parent company is acceptable under this subsection.
§31-17-13. Bond requirement of residential mortgage brokers,
lenders and servicers.
(a) A residential mortgage broker licensee shall
continuously maintain a surety bond in an amount not less than
twenty-five thousand dollars if it employs up to ten registered residential mortgage brokers. This surety bond shall be
increased an additional twenty-five thousand dollars for each
increase of up to ten additional registered brokers employed by
the licensee.
(b) A residential mortgage lender licensee shall
continuously maintain a surety bond in an amount not less than
two hundred fifty thousand dollars.
(c) A residential mortgage servicer licensee shall
continuously maintain a surety bond in an amount not less than
five hundred thousand dollars.
(d) All bonds required by this section shall be in a form
and manner approved by the commissioner, issued by an insurance
company authorized to do so in this state. The commissioner is
authorized to obtain a blanket bond for all licensees, if
feasible, and require participation under the blanket bond by
all licensees. If the commissioner determines that a blanket
bond is not feasible, the individual licensees must obtain and
submit their bond with the appropriate license application, and
evidence of continued coverage must be submitted with each
license renewal. Any change in the bond must be submitted for
approval by the commissioner, within ten days of its execution.
(e) A bond posted by the licensee under this section shall be conditioned upon compliance with all law related to
activities conducted under the provisions of this article and
any rules thereunder. The bond shall be made to the favor of
the commissioner for the benefit and protection of any claimant
against the applicant or licensee with respect to residential
mortgage brokering, lending or servicing in connection with the
licensed operations in this state. A claimant damaged by a
breach of the conditions of the bond shall, upon the assent of
the commissioner, have a right of action against the bond for
compensatory damages suffered thereby and may bring suit
directly thereon, or the commissioner may bring suit on behalf
of the claimant. The aggregate liability of the surety in no
event shall exceed the principal sum of the bond.
(f) No bond shall be acceptable unless it provides that in
the event of cancellation the surety shall, within thirty days,
file written notice of such cancellation with the commissioner.
No surety filing such notice of cancellation shall be discharged
from any liability already accrued under the bond or which shall
accrue before the expiration of the thirty day period. All
sureties shall remain liable for all payments resulting from
violations occurring or fees due during the term of the bond and
prior to the date of cancellation.
§31-17-14. Term of license; non-transferability.
Licenses for residential mortgage lenders, brokers and
servicers issued under this article expire on the thirtieth day
of September, two thousand, and are renewable annually on forms
prescribed by the commissioner. No license shall be
transferable or assignable by the licensee unless the
commissioner consents to such transfer or assignment.
§31-17-15. Fees; nonrefundability.
(a) The following fees must be paid to the commissioner for
deposit into the special revenue account in the state treasury
for the division of banking established in section eight,
article two, chapter thirty-one-a of this code:
(1) For a residential mortgage broker license, five hundred
dollars;
(2) For a residential mortgage lender license, one thousand
two hundred fifty dollars;
(3) For a residential mortgage servicer's license, one
thousand two hundred fifty dollars;
(4) For a certificate of exemption, one hundred dollars;
(5) For reissuing any license due to a change of address or
name, one hundred dollars; and
(6) For registering as a principal or associate residential
mortgage broker, fifty dollars.
(b) All fees are nonrefundable except that an overpayment of a fee must be refunded upon proper application.
§31-17-16. License renewal.
(a) Licenses are renewable annually on or before the first
day of October.
(b) A person whose application is properly and timely filed
who has not received notice of denial of renewal is considered
approved for renewal and the person may continue to transact
business as a residential mortgage broker, lender or servicer
whether or not the renewed license has been received on or
before the first day of October of the renewal year.
Application for renewal of a license is considered timely filed
if received by the commissioner, or mailed with proper postage
and postmarked by the fifteenth day of August of the renewal
year. An application for renewal is considered properly filed
if made upon forms duly executed and sworn to, accompanied by
fees prescribed by this article, and containing any information
that the commissioner requires.
(c) A person who fails to make a timely application for
renewal of a license and who has not received the renewal
license as of the first day of October of the renewal year is
unlicensed until the renewal license has been issued by the
commissioner and is received by the person.
§31-17-17. Cancellation of licenses.
A licensee ceasing an activity or activities regulated by
this article and desiring to no longer be licensed shall so
inform the commissioner in writing and, at the same time,
surrender the license and all other symbols or indicia of
licensure. The licensee shall include a plan for the withdrawal
from the regulated business, including a timetable for the
disposition of the business. The licensee's surety bond shall
remain in effect unless the commissioner approves, in writing,
a cancellation or reduction of such bond.
31-17-18. Enforcement actions.
(a) The commissioner may, by order, take any or all of the
following actions:
(1) Bar a person from engaging in residential mortgage
brokering, lending or servicing;
(2) Deny, suspend or revoke a residential mortgage broker,
lender or servicer license;
(3) Publicly reprimand a licensee for actions involving the
brokering, lending or servicing of a residential mortgage loan
in this state;
(4) Impose a civil penalty as provided for in subdivision
sixteen, subsection (c), section four, article two, chapter
thirty-one-a of this code for actions involving the brokering,
lending or servicing of a residential mortgage loan in this state; or
(5) Revoke an exemption or certificate of exemption.
(b) In order to take the actions contained in subsection
(a) of this section, the commissioner must find:
(1) That the order is in the public interest; and
(2) That the residential mortgage lender, broker, servicer,
license-applicant, or other person, officer, director, partner,
employee, or agent or any person occupying a similar status or
performing similar functions, or a person in control of the
lender, broker, servicer, license-applicant, has:
(A) Violated any provision of this article or rule or order
under this article; or
(B) Filed an application for a license that is incomplete
in any material respect or contains a statement that, in light
of the circumstances under which it is made, is false or
misleading with respect to a material fact; or
(C) Failed to maintain compliance with the affirmations
made under subdivision (1), subsection (b) section eleven of
this article; or
(D) Engaged in an act or practice, whether or not the act
or practice involves the business of making a residential
mortgage loan, that demonstrates untrustworthiness, financial
irresponsibility or incompetence; or
(E) Pled guilty, with or without explicitly admitting
guilt, pled nolo contendere, or been convicted of a felony or a
misdemeanor involving moral turpitude, personal dishonesty or
failure to fulfill a fiduciary obligation; or
(F) Been the subject of an order of suspension or
revocation, a cease and desist order or an injunction order
barring involvement in an industry or profession issued by any
other state or federal regulatory agency or by the secretary of
housing and urban development; or
(G) Been found by a court of competent jurisdiction to have
engaged in conduct evidencing gross negligence, fraud,
misrepresentation, or deceit; or
(H) Refused to cooperate with an investigation or
examination by the commissioner; or
(I) Failed to pay any fee or assessment imposed by the
commissioner; or
(J) Failed to comply with state tax obligations; or
(K) Failed to provide, in a timely manner, information
requested by the commissioner.
(c) To begin a proceeding under this section, the
commissioner shall issue an order requiring the subject of the
proceeding to show cause why action should not be taken against
the person according to this section. The order must be calculated to give reasonable notice of the time and place for
the hearing and must state the reasons for entry of the order.
If the commissioner determines that there is an immediate danger
to the public, he or she may, by order, summarily suspend a
license or exemption or summarily bar a person from engaging in
residential mortgage loan brokering, lending or servicing,
pending a final determination of an order to show cause. If a
license or exemption is summarily suspended or if the person is
summarily barred from any involvement in the residential
mortgage loan business, pending final determination of an order
to show cause, a hearing on the merits must be held within
thirty days of the issuance of the order of summary suspension
or bar. All hearings must be conducted under article five,
chapter twenty-nine-a of this code. The commissioner may
appoint a hearing examiner to preside at the taking of evidence
and make a recommended decision for consideration by the
commissioner. After the hearing, the commissioner shall, within
fifteen days of the conclusion of the hearing or within fifteen
days of receiving a recommended decision from the hearing
examiner, whichever is later, enter an order disposing of the
matter as the facts require. If the subject of the order fails
to appear at the hearing after having been duly notified
thereof, the person is considered in default, and the proceeding may be determined against the subject of the order upon
consideration of the order to show cause, the allegations of
which may be considered by the commissioner to be true.
(d) The commissioner may institute a proceeding under this
section within two years of the date the commissioner discovers
the activity which gives rise to the enforcement action.
§31-17-19. General standards of conduct.
(a) Neither regulated consumer lenders, nor persons
licensed or registered under this article shall:
(1) Fail to maintain a trust account to hold trust funds
received in connection with a residential mortgage loan if trust
funds are held or collected;
(2) Fail to deposit all trust funds into a trust account
within three business days of receipt; commingle trust funds
with funds belonging to the licensee; or use trust account funds
for any purpose other than that for which they are received;
(3) Unreasonably delay the proper servicing of a
residential mortgage loan. For purposes of this subdivision,
evidence of unreasonable delay includes, but is not limited to:
(i) Failure of the servicer to respond reasonably to the
borrower's inquiries concerning the status of the loan; or (ii)
failure by the servicer to take actions appropriate under the
terms of the loan within a reasonable period of time.
(4) Fail to disburse funds according to its contractual or
statutory obligations in a manner which constitutes a material
breach of those obligations;
(5) Fail to perform in conformance with its written
agreements with borrowers, investors or other licensees in a
manner which constitutes a material violation of those
agreements;
(6) Charge a fee for a product or service where the product
or service is not actually provided, or misrepresent the amount
charged by or paid to a third party for a product or service;
(7) Knowingly violate any provision of any other applicable
state or federal law regulating residential mortgage loans
including, without limitation, chapter forty-six-a of this code;
(8) Knowingly make or cause to be made, directly or
indirectly, any false, deceptive or misleading statement or
representation in connection with a residential mortgage loan
transaction including, without limitation, a false, deceptive or
misleading statement or representation regarding the borrower's
ability to qualify for any mortgage product;
(9) Conduct a residential mortgage lending or servicing
business under any name other than that under which the license
or certificate of exemption was issued unless such person uses
a trade name which has been submitted to and approved by the commissioner;
(10) 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 residential deed of
trust or is being offered as security according to an
application for a residential mortgage loan;
(11) Issue any document indicating conditional
qualification or conditional approval for a residential mortgage
loan, unless the document also clearly indicates the final
qualification or approval is not guaranteed, and may be subject
to additional review;
(12) Make or assist in making any residential mortgage loan
with the intent that the loan will not be repaid and that the
residential mortgage 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. A
monthly aggregate personal, family or household debt service to
gross income ratio of the borrower on a nonpurchase money
residential mortgage loan which exceeds fifty-five percent,
including the residential mortgage loan, shall constitute a
rebuttable presumption of such intent unless the loan is originated through programs or under the guidelines established
by the West Virginia housing development fund, the federal
national mortgage association (Fanniemae), the federal home loan
mortgage corporation, or the government national mortgage
association ;
(13) Provide or offer to provide for a borrower, any
brokering or lending services under an arrangement with a person
other than a licensee or exempt person, provided that a person
may rely upon a written representation by the residential
mortgage lender or broker that it is in compliance with the
licensing requirements of this article;
(14) Claim to represent a licensee, unless the person is an
employee of the licensee;
(15) Fail to comply with the recordkeeping and notification
requirements set forth in section twenty-one of this article or
fail to abide by the affirmations made on the application for
licensure;
(16) If a servicer, fail to notify the commissioner within
forty-eight hours of loss of approved status as a servicer for
the government national mortgage association, the federal
national mortgage association (Fanniemae) or the federal home
loan mortgage corporation;
(17) Make, provide or arrange for a residential mortgage loan that is of a lower investment grade if the borrower's
credit score or, if the broker or lender does not utilize credit
scoring or if a credit score is unavailable, then comparable
underwriting data, indicates that the borrower may qualify for
a residential mortgage loan, available from or through the
broker or lender, that is of a higher investment grade, unless
the borrower is informed that the borrower may qualify for a
higher investment grade loan with a lower interest rate and/or
lower discount points, and consents in writing to receipt of the
lower investment grade loan.
For purposes of this subdivision, "investment grade" refers
to a system of categorizing residential mortgage loans in which
the loans are: (i) Commonly referred to as "prime" or
"subprime"; (ii) commonly designated by an alphabetical
character with "A" being the prime or highest quality investment
grade; and (iii) are distinguished by interest rate or discount
points or both charged to the borrower, which vary according to
the degree of perceived risk of default based on factors such as
the borrower's credit, including credit score and credit
patterns, income and employment history, debt ratio, loan-to- value ratio, and prior bankruptcy or foreclosure;
(18) Make, publish, disseminate, circulate, place before
the public, or cause to be made, directly or indirectly, any advertisement or marketing material of any type, or any
statement or representation relating to the business of
residential mortgage loans that is false, deceptive, or
misleading or fails to disclose the license number of the
licensee;
(19) Advertise loan types or terms that are not available
from or through the licensee or exempt person on the date
submitted for advertisement. For purposes of this clause,
advertisement includes, but is not limited to, a list of sample
residential mortgage loan terms, including interest rates,
discount points, and closing costs provided by licensees or
exempt persons to a print or electronic medium that presents the
information to the public;
(20) Use or employ phrases, pictures, return addresses,
geographic designations or other means that create the
impression, directly or indirectly, that a licensee or other
person is a governmental agency, or is associated with,
sponsored by, or in any manner connected to, related to, or
endorsed by a governmental agency, if that is not the case;
(21) If a lender or servicer, fail to provide either a
timely release of a deed of trust when the borrower has
satisfied the debt secured by that deed of trust as required by
section one, article twelve, chapter thirty-eight of this code or a timely disclosure of the amount of a pay off of an existing
loan when requested by the borrower;
(22) Accept any fees at closing which were not disclosed to
the borrower;
(23) Accept attorney's fees at closing in excess of the
fees that have been or will be remitted to its attorneys;
(24) Obtain any agreement or instrument in which blanks are
left to be filled in after execution;
(25) Collect a fee as both broker and lender for the same
residential mortgage loan; or
(26) Fail to provide to the borrower a copy of all
documents signed by the borrower related to the loan at the time
the loan is made.
(b) For purposes of this section, a statement,
representation, or advertisement is deceptive or misleading if
it has the capacity or tendency to deceive or mislead a borrower
or potential borrower. The commissioner shall consider the
following factors in deciding whether a statement,
representation or advertisement is deceptive or misleading: the
overall impression that the statement, representation, or
advertisement reasonably creates; the particular type of
audience to which it is directed; and whether it may be
reasonably comprehended by the segment of the public to which it is directed.
§31-17-20. Additional standards for residential mortgage
brokers.
(a) A residential mortgage broker who offers to obtain a
loan secured by a deed of trust on residential real estate
located in this state shall enter into a written contract with
each proposed borrower and shall provide a copy of the written
contract to each borrower at or before the time of receipt of
any fee or valuable consideration paid for residential mortgage
loan origination services. Residential mortgage brokers who
offer their services exclusively through electronic
communication over the internet may comply with this section by
providing, in lieu of a written contract, the same information
in the form of electronic communication that can be downloaded
and printed by the borrower. In addition to other requirements
of law, the contract must:
(1) Specifically identify whether the residential mortgage
broker may receive compensation from sources other than the
borrower in connection with the loan transaction; and
(2) State the total amount of commission or compensation
that the borrower agrees to pay for the residential mortgage
broker's services, and the basis on which the compensation will
be computed.
(b) If an advance fee is solicited or received, by the
broker, the contract must also:
(1) Identify the trust account into which the fees or
consideration will be deposited;
(2) Set forth the circumstances under which the residential
mortgage broker will be entitled to disbursement from the trust
account; and
(3) Set forth the circumstances under which the borrower
will be entitled to a refund of all or part of the fee.
(c) The residential mortgage broker shall deposit in a
trust account within three business days all fees received
before the time a loan is actually funded.
(d) The residential mortgage broker shall maintain a
separate record of all fees received for services performed or
to be performed as a residential mortgage broker. Each record
must set forth the date the funds are received, the person from
whom the funds are received; the amount received, the date of
deposit in the escrow account, the account number, the date the
funds are disbursed and the check number of the disbursement,
and a description of each disbursement and the justification for
the disbursement.
(e) The residential mortgage broker shall provide, upon the
request of the borrower or applicant, at the expiration of the contract, a list of the lenders or loan sources to whom loan
applications were submitted on behalf of the borrower.
§31-17-21. Recordkeeping and notification requirements.
(a) A licensee must advise the commissioner of any material
changes to the information submitted in the most recent license
application within thirty days of the change.
(b) A licensee must advise the commissioner in writing
within fifteen days of any bankruptcy petitions filed against or
by the licensee.
(c) A licensee must investigate and attempt to resolve
complaints made regarding acts or practices subject to the
provisions of this article. If a complaint is received in
writing, the licensee must maintain a file containing all
materials relating to the complaint and subsequent investigation
for a period of twenty-four months.
(d) A residential mortgage lender or broker shall keep and
maintain for twenty-four months after the date of final entry a
record of all trust funds, sufficient to identify the
transaction, date and source of receipt, and date and
identification of disbursement.
(e) A licensee must keep and maintain for twenty-four
months after the date of final entry the business records
regarding residential mortgage loans applied for, originated, or serviced in the course of its business.
(f) A licensee shall comply with the requirements of this
section to keep and maintain records by using methods which
comply with the provisions of section one hundred eight, article
one, chapter forty-six-a of this code. Records may be stored in
any locality provided the licensee ensures that the records will
be available to the division of banking within three business
days of a request by the commissioner.
§31-17-22. Confidentiality of information.
(a) Reports of investigation and examination, together with
related documents and financial information not normally
available to the public that is submitted in confidence by a
person regulated under this article, including but not limited
to information regarding pending litigation and expected
outcomes, are confidential and may not be disclosed to the
public by the commissioner or employees of the division of
banking, and are exempt from disclosure under the provisions of
article one, chapter twenty-nine-b of this code.
(b) Nothing in this section prevents release to the public
of any list of licensees or aggregated financial data for the
licensees, or prevents disclosure of information the presiding
officer deems relevant to the proper adjudication or
administration of justice at public administrative or judicial hearings, or prevents disclosure of information relevant to
supporting the issuance of any administrative or judicial order.
31-17-23. Safe harbor provisions.
(a) A person who files a complaint with the division of
banking alleging in good faith that another person has violated
a provision of this article may not be held liable for damages
by the person who is the subject of that complaint. The
commissioner shall not make public the name or identity of the
person accused in such a complaint unless he or she brings an
enforcement proceeding under section eighteen of this article.
(b) The director of the West Virginia housing development
fund may disclose to the commissioner the identity of any person
suspended from participating in residential housing programs
administered by the fund. Neither the director nor any other
employee or official of the fund may be held liable for such
disclosure. Such information shall not be disclosed by the
commissioner and shall remain confidential unless he or she
brings an enforcement proceeding under section eighteen of this
article.
(c) A residential mortgage broker, lender or servicer
licensee who becomes aware that an employee has engaged in a
pattern of behavior that may be a violation of any provision of
this article or applicable federal law shall promptly report to the commissioner the identity of the employee and the facts and
circumstances constitution such behavior. Neither the licensee
nor any other official or employee of the licensee may be held
liable for such report to the commissioner. The information in
such report shall not be disclosed by the commissioner and shall
remain confidential unless he or she brings an enforcement
proceeding under section eighteen of this article. The
commissioner may, however, refer matters of possible criminal
violations to appropriate law enforcement officials.
(d) Notwithstanding any other provision of law, employees
and officials of the West Virginia division of banking may apply
for and receive residential mortgage loans from licensees and
persons holding certificates of exemption under this article as
long as the loans are offered under the same terms and
conditions available to the general public at that time. Any
division of banking employee or official who enters into
negotiations for a residential mortgage loan with a regulated
consumer lender or a person licensed under this article shall
notify the commissioner within three business days and may not
take official action regarding that licensee during negotiations
and the term of any outstanding loan with a licensee or
regulated consumer lender. If the commissioner enters into
negotiations with a regulated consumer lender or a licensee under this article, he or she must notify the appropriate
cabinet secretary for the division of banking and defer any
official action regarding that licensee to such cabinet
secretary during negotiations and throughout the term of any
outstanding loan with that regulated consumer lender or
licensee.
§31-17-24. Electronic transmission and telephone applications
permitted; requirements.
(a) Nothing in this article shall be construed to prohibit
residential mortgage brokers or lenders from providing pre- application disclosures, taking residential mortgage loan
applications, or accepting other commitments from borrowers
including, but not limited to, rate lock-in agreements, by means
of electronic transmission, provided:
(1) With regard to all electronically transmitted pre- application disclosures, no residential mortgage broker or
lender shall take an application for a residential mortgage loan
unless the applicant for the loan, through electronic signature,
accepts the pre-application disclosures he or she has received
electronically or acknowledges electronic receipt of the pre- application disclosures through the use of a "required confirm
button" without which the transaction may not proceed further;
(2) With regard to all electronically transmitted residential mortgage loan pre-application disclosures, loan
applications or other commitments obtained from a residential
mortgage loan applicant, the broker or lender shall mail a hard
copy of such document or documents, within three business days
of their receipt by the broker or lender, to each applicant who
indicates that he or she does not have the technological
capacity to down-load and print such disclosures, applications,
or commitments; and
(3) Every electronically transmitted disclosure,
application or commitment form used by a residential mortgage
lender or broker shall include the e-mail address of the lender
or broker who transmitted said form.
(b) Nothing in this article shall be construed to prohibit
the taking of residential mortgage loan applications by
telephone. However, within three days of the taking of such
application or filling out other required forms, and in any
event prior to the taking of any fee, the applicant must be
given two copies of the application or the forms and of the
appropriate disclosures for review by the applicant. The
applicant must also be provided with a stamped, self-addressed
return envelope and a written request that the applicant sign
and return one copy of the application and the disclosures to
the residential mortgage broker or lender.
§31-17-25. Scope of article.
(a) This article applies when an offer of residential
mortgage broker services or lender services is made for the
purpose of obtaining a residential mortgage loan secured by
property located in this state. For purposes of this
subsection, an "offer" means any advertisement or solicitation
of any type, including an advertisement or solicitation in
newspapers and magazines, by mail, by telephone, on television,
on radio, or via the internet or any other electronic medium of
any kind, for residential mortgage brokering or lending
services. The term "offer" excludes an advertisement or
solicitation that specifically states that the services are not
available to borrowers seeking residential mortgage loans that
will be secured with real property located in West Virginia.
(b) The provisions of this article regarding residential
mortgage servicing apply when the residential mortgage loan
being serviced is secured by a deed of trust on residential real
estate located in this state.
§31-17-26. Powers of the commissioner.
In addition to the authority granted elsewhere in this
article and in this code, the commissioner shall have the
authority to:
(a) Keep records of all licensees issued under this article;
(b) Receive, consider, investigate, and act upon complaints
made by any person in connection with any residential mortgage
licensee doing business in this state;
(c) Propose rules for legislative approval in accordance
with the provisions of article three, chapter twenty-nine-a of
this code and promulgated emergency rules pursuant to section
fifteen of said article, as the commissioner deems necessary and
proper to effectuate the purposes of this article, to prevent
circumvention or evasion thereof and to facilitate compliance
therewith;
(d) Subpoena documents and witnesses and compel their
attendance and production, to administer oaths, and to require
the production of any books, papers, or other materials relevant
to any inquiry authorized by this article;
(e) Periodically examine the books and records of every
licensee under this article at intervals set by the
commissioner;
(f) Appoint examiners, supervisors, experts, and special
assistants needed to effectively and efficiently administer this
article;
(g) Define by proposed rules for legislative approval, in
accordance with the provisions of article three, chapter twenty-nine-a of this code, any terms used in this article for the
efficient and clear administration of this article.
§31-17-27. Examinations of licensees.
(a) Each licensee is subject to a periodic examination of
the licensee's business records by the commissioner at the
expense of the licensee. For the purpose of enforcing this
article, the commissioner may examine all books, records, papers
or other objects that the commissioner determines are necessary
for conducting a complete examination and may also examine under
oath any person associated with the license holder, including an
officer, director or employee of the license holder or
authorized representative. If a person required by the
commissioner to submit to an examination refuses to permit the
examination or to answer any question authorized by this
article, the commissioner may suspend the person's license until
the examination is completed.
(b) The commissioner may require the licensee to bear the
cost of any examination made pursuant to this section, at a
rate of fifty dollars for each examiner hour expended, together
with all reasonable and necessary travel expenses incurred in
connection with the examination.
§31-17-28. Posting and availability of licenses.
Licensed residential mortgage lenders, brokers and servicers with an office in West Virginia, shall prominently
post and display their original license, or a photocopy thereof
in their office. Original licenses shall be maintained at the
licensee's main office and shall be made available for
examination and inspection by representatives of the
commissioner.
§31-17-29. Reports of licensees.
Each licensee shall file with the commissioner, on or
before the fifteenth day of March of each year, a report under
oath or affirmation concerning the licensee's business and
operations in this state in the preceding license year on a form
prescribed by the commissioner.
§31-17-30. Prohibited terms; points and fees.
(a) Residential mortgage loans made, arranged, or offered
to be made under this article may not:
(1) Be secured by any personal property unless such
property is affixed to the residence;
(2) Be accelerated because of a decrease in the market
value of the residence that is securing the loan;
(3) Unless preempted by federal law, contain any scheduled
balloon payment: Provided, That this subdivision does not apply
to bridge loans used in connection with the purchase or
construction of another residence;
(4) Contain terms of repayment which do not result in
continuous reduction of principal: Provided, That the
provisions of this subdivision shall not apply to mortgage loans
obtained under article twenty-four, chapter forty-seven of this
code, home equity, open-end lines of credit, or bridge loans
used in connection with the purchase or construction of another
residence;
(5) No residential mortgage broker or lender may solicit a
borrower to refinance a residential mortgage loan if that broker
or lender provided, within the previous twenty-four months,
broker or lender services to that borrower: Provided, That a
broker or lender may assist in the refinancing of a residential
mortgage loan for such borrower if, within that twenty-four
month period: (i) The borrower seeks such refinancing without
direct solicitation by the broker or lender; and (ii) the
borrower is required to pay combined fees and points, as
permitted and described in subdivision (6) of this subsection,
totaling no more than two percent of the loan amount financed in
lieu of the five percent allowed by subdivision (6). To the
extent this subdivision overrides the preemption on limiting
points and other such charges on first lien residential mortgage
loans contained in Section 501 of 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.
(6) Require the borrower to pay, in addition to any
periodic interest, combined fees and points of any kind to the
residential mortgage lender and broker to arrange, originate,
evaluate, maintain or service the residential mortgage loan that
exceed, in the aggregate, five percent of the loan amount
financed: Provided, That reasonable closing costs payable to
unrelated third parties as permitted under section one hundred
nine, article three, chapter forty-six-a of this code shall not
be included within this limitation; however, yield spread
premiums paid to the broker or lender shall be included in this
limitation. The financing of such fees and points shall be
permissible and, where included as part of the finance charge,
shall not constitute charging interest on interest. To the
extent that this section overrides the preemption on limiting
points and other such charges on first lien residential mortgage
loans contained in Section 501 of the United States Depository
Institutions Deregulation and Monetary Control Act of 1980, 12
U.S.C. §1735-7a, the state law limitations contained in this
section shall apply.
(b) Nothing in this section should be construed to prohibit
a residential mortgage lender from agreeing, in connection with a loan, to compensate a broker with a portion of the lender's
fees or points: Provided, That the fact of such compensation is
disclosed to the borrower consistent with the solicitation
representation made to the borrower, and would be of the type
permitted by the Real Estate Settlement Procedures Act, 12
U.S.C. §§2601 et seq., for services rendered by the broker, as
the federal law is in effect on the effective date of this
article.
(c) Any instrument evidencing a residential mortgage loan
made or arranged under this article which contains any provision
in violation of this section shall be per se unconscionable and
a violation of section one hundred twenty-one, article two,
chapter forty-six-a of this code.
§31-17-31. Residential mortgage brokers, lenders and servicers
licensed under this article are exempt from registration
under other law.
(a) Residential mortgage brokers who are licensed under
this article are not subject to the registration and bonding
requirements of sections four and five, article six-c, chapter
forty-six-a of this code.
(b) Residential mortgage lenders and servicers who are
licensed under this article are not subject to the registration,
bonding or other requirements of article sixteen, chapter forty-seven of this code.
§31-17-32. Loans made in violation of this article voidable as
to lien, interest and other fees.
(a) If any residential mortgage loan is made in violation
of the licensing or registration provisions of this article,
except as a result of a bona fide error, a lien securing such a
loan shall be void and neither the lender nor any holder of the
obligation shall have the right to collect or receive any
interest or charges whatsoever, and the lender or any holder
shall refund all interest payments and all fees with respect to
such loan which have been paid by the borrower.
(b) If any residential mortgage loan is made in violation
of any provision of sections nineteen or twenty of this article,
and it can be established by a preponderance of the evidence
that the lender willfully engaged in a pattern of violations of
those sections, a lien securing such loan shall be void and
neither the lender nor any holder of the obligation shall have
the right to collect or receive any interest or charges
whatsoever, and the lender or any holder shall refund all
interest payments and all fees with respect to such loan which
have ben paid by the borrower.
§31-17-33. Severability.
If any provision of this article or its application to any person or circumstance is held unconstitutional or invalid, such
unconstitutionality or invalidity shall not affect other
provisions or applications of the article, and to this end the
provisions of this article are hereby declared to be severable.
CHAPTER 46A. WEST VIRGINIA CONSUMER CREDIT AND
PROTECTION ACT.
ARTICLE 4. REGULATED CONSUMER LENDERS.
§46A-4-107. Loan finance charge for regulated consumer lenders.
(1) With respect to a regulated consumer loan, including a
revolving loan account, a regulated consumer lender may contract
for and receive a loan finance charge not exceeding that
permitted by this section.
(2) On a loan of two thousand dollars or less, which is
unsecured by real property, the loan finance charge, calculated
according to the actuarial method, may not exceed thirty-one
percent per year on the unpaid balance of the principal amount.
(3) On a loan of greater than two thousand dollars or which
is secured by real property, the loan finance charge, calculated
according to the actuarial method, may not exceed twenty-seven
percent per year on the unpaid balance of the principal amount:
Provided, That the loan finance charge on any loan greater than
ten thousand dollars may not exceed eighteen percent per year on
the unpaid balance of the principal amount. Loans made by regulated consumer lenders shall be subject to the restrictions
and supervision set forth in this article irrespective of their
rate of finance charges.
(4) Where the loan is nonrevolving and is greater than two
thousand dollars, the permitted finance charge may include a
charge of not more than a total of two percent of the amount
financed for any origination fee, points or investigation fee:
Provided, That where any loan, revolving or nonrevolving, is
secured by residential real estate, the permitted finance charge
may include a charge of not more than a total of five percent of
the amount financed for any origination fee, points or
investigation fee. In any loan secured by real estate, such
charges may not be imposed again by the same or affiliated
lender in any refinancing of that loan made within twenty-four
months thereof, unless these earlier charges have been rebated
by payment or credit to the consumer under the actuarial method,
or the total of the earlier and proposed charges does not exceed
five percent of the amount financed. Charges permitted under
this subsection shall be included in the calculation of the loan
finance charge. The financing of such charges shall be
permissible and shall not constitute charging interest on
interest. In a revolving home equity loan, the amount of the
credit line extended shall, for purposes of this subsection, constitute the amount financed. Other than herein provided, no
points, origination fee, investigation fee or other similar
prepaid finance charges attributable to the lender or its
affiliates may be levied. Except as provided for by section one
hundred nine [§ 46A-3-109], article three of this chapter, no
additional charges may be made; nor may any charge permitted by
this section be assessed unless the loan is made. To the extent
that this section overrides the preemption on limiting points
and other such charges on first lien residential mortgages
contained in Section 501 of the United States Depository
Institutions Deregulation and Monetary Control Act of 1980 [12
U.S.C. § 3501 et seq.], the state law limitations contained in
this section shall apply. must comply with the provisions of
section thirty, article seventeen, chapter thirty-one of this
code. If the loan is precomputed:
(a) The loan finance charge may be calculated on the
assumption that all scheduled payments will be made when due;
and
(b) The effect of prepayment, refinancing or consolidation
is governed by the provisions on rebate upon prepayment,
refinancing or consolidation contained in section one hundred
eleven, article three of this chapter.
(5) For the purposes of this section, the term of a loan commences on the date the loan is made. Differences in the
lengths of months are disregarded and a day may be counted as
one thirtieth of a month. Subject to classifications and
differentiations the licensee may reasonably establish, a part
of a month in excess of fifteen days may be treated as a full
month if periods of fifteen days or less are disregarded and if
that procedure is not consistently used to obtain a greater
yield than would otherwise be permitted.
(6) With respect to a revolving loan account:
(a) A charge may be made by a regulated consumer lender in
each monthly billing cycle which is one twelfth of the maximum
annual rates permitted by this section computed on an amount not
exceeding the greatest of:
(i) The average daily balance of the debt; or
(ii) The balance of the debt at the beginning of the first
day of the billing cycle, less all payments on and credits to
such debt during such billing cycle and excluding all additional
borrowings during such billing cycle. For the purpose of this
subdivision a billing cycle is monthly if the billing statement
dates are on the same day each month or do not vary by more than
four days therefrom.
(b) If the billing cycle is not monthly, the maximum loan
finance charge which may be made by a regulated consumer lender is that percentage which bears the same relation to an
applicable monthly percentage as the number of days in the
billing cycle bears to thirty.
(c) Notwithstanding subdivisions (a) and (b) of this
subsection, if there is an unpaid balance on the date as of
which the loan finance charge is applied, the licensee may
contract for and receive a charge not exceeding fifty cents if
the billing cycle is monthly or longer, or the pro rata part of
fifty cents which bears the same relation to fifty cents as the
number of days in the billing cycle bears to thirty if the
billing cycle is shorter than monthly, but no charge may be made
pursuant to this subdivision if the lender has made an annual
charge for the same period as permitted by the provisions on
additional charges.
(7) As an alternative to the loan finance charges allowed
by subsections (2) and (4) of this section, a regulated consumer
lender may on a loan of one thousand two hundred dollars or less
contract for and receive interest at a rate of up to thirty-one
percent per year on the unpaid balance of the principal amount,
together with a nonrefundable loan processing fee of not more
than two percent of the amount financed: Provided, That no
other finance charges are imposed on the loan. The processing
fee permitted under this subsection shall be included in the calculation of the loan finance charge and the financing of the
fee shall be permissible and shall not constitute charging
interest on interest.
(8) Notwithstanding any contrary provision in this section
to the contrary, a licensed regulated consumer lender who is the
assignee of a nonrevolving consumer loan unsecured by real
property located in this state, which loan contract was applied
for by the consumer when he or she was in another state, and
which was executed and had its proceeds distributed in that
other state, may collect, receive and enforce the loan finance
charge and other charges, including late fees, provided in said
contract under the laws of the state where executed: Provided,
That the consumer was not induced by the assignee or its in- state affiliates to apply and obtain the loan from an out-of- state source affiliated with the assignee in an effort to evade
the consumer protections afforded by this article. Such charges
shall not be deemed to be usurious or in violation of the
provisions of this article or any other provisions of this code.
46A-4-110a. Prohibited conduct.
(1) A regulated consumer lender shall not:
(a) Accept or receive deposits or sell or offer for sale
its secured or unsecured evidences or certificates of
indebtedness; or
(b) Pay any fees, bonuses, commissions, rewards or other
consideration to any person, firm or corporation for the
privilege of using any plan of operation, scheme or device for
the organization or carrying on of business under this article,
or the use of any name, trademark or copyright to be so used:
Provided, That nothing herein prevents a regulated consumer
lender from agreeing in connection with a loan to pay a broker
fee, finders fee or dealer participation fee, or to split the
origination fee or points paid: Provided, however, That the fee
or fee split is disclosed to the borrower and where proper is
included in the finance charge. Provided, That reasonable
closing costs as permitted under section one hundred nine,
article three of this chapter shall not be included within this
limitation and: Provided, however, That the financing of such
fees and points as permitted under section one hundred seven of
this article shall be permissible and, where included as part of
the finance charge, shall not constitute charging interest on
interest.
(2) Unless preempted by federal law, no consumer loan by
a regulated consumer lender may contain any scheduled balloon
payment as set forth in this chapter. Nor may any regulated
consumer lender loan contain terms of repayment which result in
negative amortization: Provided, That nothing herein prevents unequal payment schedules resulting from a variable rate loan or
a revolving line of credit.
(3) A regulated consumer lender may not make revolving
loans for the retail purchase of consumer goods and services by
use of a lender credit card.
NOTE: The purpose of this bill is to amend the current law
governing the licensing and regulation of secondary mortgage
lenders and brokers by establishing licensing and regulation
requirements which apply to all persons engaged in mortgage
brokering, lending and servicing regardless of the loan's lien
priority, unless otherwise exempted. This bill would regulate
all persons engaged in the residential mortgage business in
which a loan is secured by real estate in West Virginia with the
exception of federally insured depositions and credit unions
(which are otherwise regulated by federal law).
This bill was recommended by the Joint Standing
Committee on the Judiciary for introduction and passage during
the 1999 legislative session.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
Article 17 has been substantially rewritten; therefore,
strike-throughs and underscoring have been omitted.