H. B. 4409


(By Delegate H. White)
[Introduced February 4, 2000; referred to the
Committee on Banking and Insurance then Government Organization.]
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 lenders, brokers, 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 brokers; requiring the licensing of residential mortgage servicers and exempting certain persons therefrom; requiring licensure for the conduct of business; setting forth applicability of article; when a certificate of exemption 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 record keeping 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 licensees' 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; 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 fee, or charge paid to a residential mortgage lender or broker before the closing of a loan, that is intended as payment for specific identifiable services necessary to evaluate a loan application including a credit check and appraisal of real estate. Advance fees are not compensation paid to the broker prior to the closing of a residential mortgage loan.
(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 (12), (14), (22) and (23) of this section are conducted.
(4) "Closing" means either or both of the following: (A) The process whereby the finance transaction between a buyer and seller is consummated; or (B) 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" means 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" means 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 section 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 (14) and (23) 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 or nontable-funded residential mortgage loan, but does not provide or advance the funds for the loan is a "broker" under this article. A broker may be designated a "managing principal" if he or she meets the requirements of subsection (a) of section six of this article. A broker may be designated an "associate broker" if he or she meets the requirements of subsection (b) of section six of 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: (A) A deed of trust on residential real property located in West Virginia; or (B) 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: Provided, That a person who takes assignment of a residential mortgage loan from an affiliate for the purpose of securitization shall not be included in this definition.
(20) "Residential mortgage servicer" or "servicer" means a person who engages in the activity of servicing a residential mortgage loan as defined in subdivision (23) 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 or 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 and which is not subject to set-off by any financial institution for money owed to the financial institution 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, two thousand, who file an application for a license or a certificate of exemption by the fifteenth day of August, two thousand, 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, two thousand, 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 the 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 nonresidential 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 a 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 or broker 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 nonprofit housing providers originating loans solely for purchase by the fund;
(9) A nonprofit organization that provides loans for low to moderate income housing if the organization is regularly subject to review, oversight, monitoring or examination by an agency or entity of this state or by a federal agency or entity: Provided, That a nonprofit foundation that provides funding for low to moderate income housing need not be subject to review, oversight, monitoring or examination by an agency or entity of this state or 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 and any trustee or administrator of the trust or other entity which holds residential mortgage loans in order to securitize 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 or applicable state laws, 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 for good cause shown.
§31-17-6. Associate and principal residential mortgage brokers; registration 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; and
(2) 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 managing principal residential mortgage broker who is responsible for his or her performance and actions;
(2) Is not an independent contractor and for tax purposes is considered an employee of the 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.
§31-17-7. Licensing requirement for residential mortgage servicers; exemptions.

(a) Beginning the first day of October, two thousand, no person shall engage in activities or practices that are within the definition of "servicing a residential mortgage loan" under subdivision (22), section three 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 nonresidential mortgage activities;
(4) A person servicing loans originated by an affiliate, or which that person has made with its own funds or 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 nonprofit housing providers servicing loans solely for the fund;
(9) A nonprofit organization that provides loans for low to moderate income housing if the organization is regularly subject to review, oversight, monitoring or examination by an agency or entity of this state or by a federal agency or entity;
(10) A person approved by the federal national mortgage association, the federal home loan mortgage corporation, or the government national mortgage association to provide residential mortgage servicing: Provided, That the 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 any of those 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 for good cause shown.
§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 the 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, thirty-one and thirty-two of this article are applicable to regulated consumer lenders licensed under article four, chapter forty-six-a of this code only when the regulated consumer lender is engaged in making a residential mortgage loan. Any regulated consumer lender licensed under article four, chapter forty-six-a of this code who holds the license on the first day of January, two thousand, shall not be subject to section thirteen of this article.
§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 transact business in this state through proper registration with the secretary of state and the state tax division, as required.
(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 sixty days from the date a complete application is submitted.
(d) Only one license shall be required of a residential mortgage lender, servicer or broker, 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 unaudited financial statements from residential mortgage brokers in a form he or she determines 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.
(d) If a licensee performs more than one activity requiring a license under this article, the licensee shall maintain the higher of any applicable net worth minimums required by this section.
§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. Applicants shall 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 laws 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 the cancellation with the commissioner. No surety filing the 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.
(g) If a licensee performs more than one activity requiring a license under this article, the licensee shall maintain the higher of any applicable bonds required by this section.
§31-17-14. Term of license; nontransferability.
Licenses for residential mortgage lenders, brokers and servicers issued under this article expire on the thirtieth day of September, 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 the transfer or assignment. No licensee may engage in the franchising of its license or in any other activity that attempts to transfer authority for activities under the license to another party.
§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, fifty 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 the 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 or registration;
(3) Publicly reprimand a licensee or registered broker 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 (16), 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 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 registration 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 registration 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.
(d) All hearings conducted pursuant to this section shall be conducted pursuant to the provisions of 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.
(e) 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.
(f) If any person who is subject to the provisions of this article fails to appear at a hearing after having been duly notified thereof, the person is considered in default, and the proceeding may be determined against the person upon consideration of the order to show cause, the allegations of which may be considered by the commissioner to be true.
(g) The commissioner may institute a proceeding under this section within two years of the date the commissioner discovers the activity that gives rise to the enforcement action.
§31-17-19. General standards of conduct.
(a) Neither regulated consumer lenders, nor persons required to be 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 twenty-four hours 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: (A) Failure of the servicer to respond reasonably to the borrower's inquiries concerning the status of the loan; or (B) 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 that 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 that 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 or encouraging a borrower to make a false or misleading statement regarding the borrower's credit worthiness, credit standing or credit capacity;
(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 the 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 the 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, 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 record keeping 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, fails 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 or the federal home loan mortgage corporation;
(17) 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;
(18) 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;
(19) 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;
(20) If a lender or servicer, fails 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 disclosure within three business days of the amount of a payoff of an existing loan when requested by the borrower or agent of the borrower;
(21) Accept any fees at closing that were not disclosed to the borrower;
(22) Accept attorney's fees at closing in excess of the fees that have been or will be remitted to its attorneys;
(23) Obtain any agreement or instrument in which blank sections are to be completed after execution;
(24) Collect a fee as both broker and lender for the same residential mortgage loan;
(25) 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 executed; or
(26) Fail to include the license number issued by the commissioner of banking in all print, broadcast or internet advertising.
(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 truth in advertising guidelines and regulations of the federal trade commission when deciding whether a statement, representation or advertisement is deceptive or misleading.
(c) Any residential mortgage loan transaction in violation of this section shall be subject to an action by the borrower seeking the civil remedies available under article five, chapter forty-six-a of this code.
§31-17-20. Additional standards for residential mortgage brokers.

(a) A residential mortgage broker licensed or registered under this article who offers to obtain a loan secured by a deed of trust on residential real estate located in this state shall enter into a retention agreement with each proposed borrower and shall provide a copy of the written retention agreement to each borrower at or before the time of receipt of any fee. The retention agreement must be signed by both the broker and the proposed borrower and provide notice in boldface conspicuous print that the borrower may cancel the agreement at any time prior to closing of the residential mortgage loan. No broker may receive compensation for services prior to the closing of a residential mortgage loan. The only fees that may be collected by a broker prior to the closing of a loan are advance fees as defined in this article. 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 retention agreement, 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;
(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;
(3) Provide the borrower with a complete and accurate statement of the availability of nonprofit credit counseling services; and
(4) Provide notice to the borrower that he or she has a right to proceed under the bond posted by the broker pursuant to section thirteen of this article.
(b) If an advance fee is solicited or received, by the broker, the agreement 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 may make 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 and include a notice that if the loan is not approved the borrower shall be entitled to the original of all items for which the borrower paid including, but not limited to, a credit report, appraisal and flood report.
(c) The residential mortgage broker shall deposit in a trust account within twenty-four hours 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 broker's contract, a list of the lenders or loan sources to whom loan applications were submitted or which were consulted on behalf of the applicant or borrower.
(f) Any violation of this section shall be subject to an action by the proposed borrower seeking the civil remedies available under article five, chapter forty-six-a of this code.
§31-17-21. Record keeping 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 licensed 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 and reports from licensees, 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. The commissioner may disclose information contained in an application for a license under this article.
(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 determines 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 written 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 may disclose the complaint to the person accused but shall not make public the name or identity of the person accused in the 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 the disclosure. The 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 in writing the identity of the employee and the facts and circumstances constituting the behavior. Neither the licensee nor any other official or employee of the licensee may be held liable for the report to the commissioner. The information in the 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. Notwithstanding any provision of this section, the commissioner may refer matters of possible criminal or civil 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 the 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 preapplication 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 preapplication disclosures, no residential mortgage broker or lender licensee shall take an application for a residential mortgage loan unless the applicant for the loan, through electronic signature, accepts the preapplication disclosures he or she has received electronically or acknowledges electronic receipt of the preapplication 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 preapplication disclosures, loan applications or other commitments obtained from a residential mortgage loan applicant, the broker or lender shall mail a hard copy of the 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 download and print the disclosures, applications, or commitments; and
(3) Every electronically transmitted disclosure, application or commitment form used by a licensed residential mortgage lender or broker shall include the e-mail address, physical address and telephone number 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 the 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 lender, broker or servicer not exempt from the provisions of this article 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 promulgate 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 may be subject to a periodic examination of the licensee's business records by the commissioner at the expense of the licensee: Provided, That no licensee shall be subject to audit more than once in a biannual period unless the commissioner has good cause for the examination. 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 up to 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 by regulated consumer lenders or other persons licensed or registered under this article may not:
(1) Be secured by any personal property unless the property is affixed to the residence or real estate;
(2) Be accelerated solely because of a decrease in the market value of the residence that is securing the loan;
(3) 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;
(4) 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 the borrower if, within that twenty-four month period: (A) The borrower seeks the refinancing without direct solicitation by the broker or lender; and (B) the borrower is required to pay combined fees and points, as permitted and described in subdivision (5) of this subsection, totaling no more than two percent of the loan amount financed in lieu of the five percent allowed by subdivision (5). To the extent this subdivision overrides the preemption on limiting points and other the 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.
(5) 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 a nonpurchase money residential mortgage loan that exceeds, 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: Provided, however, That yield spread premiums paid to the broker shall be included in this limitation. The financing of the fees and points shall be 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 shall apply.
(6) No residential mortgage loan contract regulated by this article may finance the sale of insurance products unless those products are listed in subsection (b), section one hundred nine, article three, chapter forty-six-a of this code.
(b) The combined fees and points allowed by this section may be paid to either the broker or the lender: Provided, That the fact of the 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 a violation of section one hundred twenty-one, article two, chapter forty-six-a of this code.
§31-17-31. Use of credit scoring standards and systems; disclosure.

 (a) Regulated consumer lenders and persons required to be licensed or registered under this article shall disclose the use of credit scoring systems in the process of underwriting residential mortgage loan applications.
(b) The disclosure must include:
(1) The credit score assigned by the credit bureau to the applicant;
(2) Whether the system is one created by the lender through internal procedures or whether it has been provided through a third party vendor of the credit scoring systems, which vendor shall be named; and
(3) Whether or not the applicant is being offered a loan with interest rate and fees within the range indicated by the assigned credit score.
 (c) If the loan being offered to the applicant contains a higher interest rate or higher comparable fees than those indicated by the credit scoring system used by the lender, the applicant must be informed in writing of the reason why he or she was not offered an interest rate or comparable fees within the scoring range unless the higher rate or fees result from a lower appraisal amount or other underwriting information that shall be disclosed to the borrower prior to the time the loan is executed.
(d) For purposes of this subdivision, "credit scoring" refers to a system of rating or categorizing borrowers which varies according to the degree of perceived risk of borrower default based on factors as the borrower's income, employment history, credit history, including the level of debt and debt service patterns, loan to collateral value ratio, prior bankruptcy, foreclosure experiences and other characteristics of the borrower.
(e) Nothing contained in this section shall prohibit a borrower from accepting or negotiating a loan outside his or her credit score range.
§31-17-32. 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 article six-c, chapter forty-six- a of this code.
(b) Residential mortgage lenders and servicers who are licensed or exempt from licensing under this article are not subject to the requirements of article sixteen, chapter forty-seven of this code.
§31-17-33. 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 the 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 the loan which have been paid by the borrower.
(b) If any residential mortgage loan is made in violation of any provision of section 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 the 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 the loan which have been paid by the borrower.
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) (a) 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) (b) 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) (c) 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) (d) 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, the 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 the 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, 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 the charges on first lien residential mortgages contained in Section 501 of the United States Depository Institutions Deregulation and Monetary Control Act of 1980, 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) (1) The loan finance charge may be calculated on the assumption that all scheduled payments will be made when due; and
(b) (2) 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) (e) 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) (f) With respect to a revolving loan account:
(a) (1) 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) (A) The average daily balance of the debt; or
(ii) (B) The balance of the debt at the beginning of the first day of the billing cycle, less all payments on and credits to the debt during the billing cycle and excluding all additional borrowings during the 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) (2) 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) (3) Notwithstanding subdivisions (1) and (2) 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) (g) As an alternative to the loan finance charges allowed by subsections (2) (b) and (4) (d) 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) (h) 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. The charges shall not be deemed considered 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) A regulated consumer lender shall not:
(a) (1) Accept or receive deposits or sell or offer for sale its secured or unsecured evidences or certificates of indebtedness; or
(b) (2) 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 not be included within this limitation and: Provided, however, That the financing of the 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, not constitute charging interest on interest; or
(c) (3) Fail to disclose the amount of a payoff of an existing loan within three business days of receiving a request for the information from either the borrower or an agent acting on behalf of the borrower.
(2) (b) 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) (c) 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 licensure and regulation of secondary mortgage lenders and brokers by establishing licensure 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.

§§31-17 has been substantially rewritten; therefore, strike-throughs and underscoring have been omitted.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.