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09.03.09 - Financial Regulation - Proposed Regulations

PROPOSED ACTION ON REGULATIONS
MARYLAND REGISTER, VOLUME 44, ISSUE 2,
FRIDAY, JANUARY 20, 2017

Subtitle 03 COMMISSIONER OF FINANCIAL REGULATION

09.03.09 Mortgage Loan Originators

Authority: Business Regulation Article, §2-105; Financial Institutions Article, §§2-105.1, 11-602, 11-603.1, 11-605, 11-606, 11-609, 11-612, 11-612.1, and 11-613(b); Annotated Code of Maryland

Notice of Proposed Action
[17-045-P]

The Commissioner of Financial Regulation proposes to amend Regulations .01—.05, repeal existing Regulation .06, recodify existing Regulation .07 to be Regulation .06, and adopt new Regulations .07—.09.

Statement of Purpose

The purpose of this action is to conform certain terminology and defined terms to parallel certain federal laws and regulations; clarify the prelicensing and continuing education requirements to parallel the federal requirements; clarify the application approval or denial process for obtaining a mortgage loan originator license; permit licensees to conduct mortgage lending business at certain limited locations different from the address appearing on the license; permit loan origination under an expired license in a limited situation where a consumer’s mortgage loan status may be jeopardized due to a change in a mortgage loan originator’s job status; prohibit the use of false, misleading or deceptive statements in advertising and/or solicitations; clarify the information required to be published with advertisements and/or solicitations; clarify the scope or requirements of specific regulations to prevent inconsistent interpretations or applications of those regulations; make corrections to and eliminate outdated or invalid provisions, terminology, references, and typographical errors.

Comparison to Federal Standards

There is a corresponding federal standard to this proposed action, but the proposed action is not more restrictive or stringent.

Estimate of Economic Impact

I. Summary of Economic Impact. The proposed action is expected to have a positive economic impact on licensees. The changes will bring clarity to licensees regarding certain obligations. The new regulations are expected to impose a very minimal burden for licensees and will make it easier to do business in Maryland.

Revenue (R+/R-)
 
II. Types of Economic
Impact.
Expenditure
(E+/E-)
Magnitude

A. On issuing agency: NONE  
 
B. On other State agencies: NONE  
 
C. On local governments: NONE
Benefit (+)
Cost (-)
Magnitude

D. On regulated industries or trade groups: (+) Indeterminable
 
E. On other industries or trade groups: NONE
 
F. Direct and indirect effects on public: NONE  

III. Assumptions. (Identified by Impact Letter and Number from Section II.)

D. By providing clarity to and simplifying the regulatory process, the proposed action should reduce compliance costs for licensees.

Economic Impact on Small Businesses

The proposed action has minimal or no economic impact on small businesses.

Impact on Individuals with Disabilities

The proposed action has no impact on individuals with disabilities.

Opportunity for Public Comment

Comments may be sent to Jedd Bellman, Assistant Commissioner, Office of the Commissioner of Financial Regulation, 500 N. Calvert Street, Baltimore, MD 21202, or call 410-230-6390, or email to jedd.bellman@maryland.gov, or fax to 410-333-0475. Comments will be accepted through March 6, 2017. A public hearing has not been scheduled.

.01 Scope.
This chapter governs the conduct of any individual employed as a mortgage loan originator with respect to residential real [property] estate located in this State.

.02 Definitions.
A. (text unchanged)
B. Terms Defined.
(1) (text unchanged)
(2) “Average prime offer rate” [means an annual percentage rate that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transactions that have low-risk pricing characteristics. The Board of Governors of the Federal Reserve publishes average prime offer rates for a broad range of types of transactions in a table updated at least weekly as well as the methodology the Board uses to derive these rates] has the meaning stated in 12 CFR Part 1026, as may be amended from time to time.
(3) — (5) (text unchanged)
(6) [Higher-Priced Mortgage Loan.
(a)] “Higher-priced mortgage loan” has the meaning stated in 12 CFR Part 1026 as may be amended from time to time. [means a mortgage loan for which the annual percentage rate exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by:
(i) 1.5 or more percentage points for loans secured by a first lien on residential real property; or
(ii) 3.5 or more percentage points for loans secured by a subordinate lien on residential real property.
(b) Notwithstanding §B(6)(a) of this regulation, the calculation set forth therein for determining whether a loan is a higher-priced mortgage loan shall adjust as may be necessary to be consistent with the final rule codified at 12 CFR §226.35, as it may be amended from time to time.
(c) “Higher-priced mortgage loan” does not include a:
(i) Transaction to finance the initial construction of a dwelling on residential real property;
(ii) Temporary loan with a term of 12 months or less, such as a loan to purchase residential real property where the borrower plans to sell a current residential real property within 12 months;
(iii) Reverse mortgage transaction subject to 12 CFR §226.33; or
(iv) Home equity line of credit subject to 12 CFR §226.5b.]
(7) — (8) (text unchanged)
(9) “Mortgage lending business” has the meaning state in Financial Institutions Article, §11-501, Annotated Code of Maryland.
[(9)] (10) — [(10)] (11) (text unchanged)
[(11)] (12) “NMLSR” [means the Nationwide Mortgage Licensing System and Registry established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators] has the meaning stated in Financial Institutions Article, §11-501, Annotated Code of Maryland.
[(12)] (13) (text unchanged)

.03 Education and Testing Requirements.
A. Prelicensing Education. [Subject to the NMLSR transition procedures under Regulation .06 of this chapter, to] To qualify for a license, a mortgage loan originator shall have:
(1) Successfully completed at least 20 hours of prelicensing education as required by Financial Institutions Article, §11-606, Annotated Code of Maryland, which shall include at least the following subjects in the number of hours indicated:
(a) Federal law and regulations relating to mortgage origination—3 hours;
(b) Ethics, including instruction on fraud, consumer protection, and fair lending issues—3 hours;
(c) Lending standards and loan terms for the nontraditional mortgage [products] product market—2 hours;
(d) Maryland law and regulations relating to [mortgage-related law] mortgage lending and origination—3 hours;
(e) Maryland finder’s fee law as stated in Commercial Law Article, §12-801 et seq., Annotated Code of Maryland—2 hours; and
(f) [Electives] Undefined or elective instruction on mortgage origination—7 hours; and
(2) (text unchanged)
B. Continuing Education. To renew a license, a mortgage loan originator shall have successfully completed in the 12 months immediately preceding the current renewal period at least 8 hours of continuing education in approved courses, as required by Financial Institutions Article, §11-612, Annotated Code of Maryland, which shall include at least the following subjects in the number of hours indicated:
(1) Federal law and regulations relating to mortgage origination—3 hours;
(2) (text unchanged)
(3) Lending standards and loan terms for the nontraditional mortgage product market—2 hours; and
(4) Maryland law and regulations relating to [mortgage-related laws] mortgage lending and origination—1 hour.
C. Reporting, Verification, and Record Keeping.
(1) (text unchanged)
(2) The Commissioner may [verify] require verification, on a random or other basis, of satisfactory completion of the requirements of this regulation.
(3) (text unchanged)
D. (text unchanged)

.04 Duty of Care.
A. (text unchanged)
B. Method to Determine Net Tangible Benefit.
(1) (text unchanged)
(2) A mortgage loan originator is considered to have conducted a reasonable inquiry of whether a refinance of a mortgage loan provides a net tangible benefit to a borrower if the mortgage loan originator has the borrower complete and sign a net tangible benefit worksheet on the form prescribed by the Commissioner for that purpose, or a form that is substantially similar to the form prescribed by the Commissioner.

.05 [Incomplete] Applications.
A. The Commissioner shall approve or deny an application for an initial license, a renewal license, or a license amendment within 60 days after the Commissioner receives a completed application, including a surety bond and all required fees.
B. If the Commissioner notifies an applicant that an application for an initial license, a renewal license, or a license amendment is incomplete, the Commissioner shall itemize the steps which the applicant must take to complete the application.
C. The application for an initial license, a renewal license, or a license amendment may not be approved until after the applicant completes all steps identified in the Commissioner’s notice.
D. If an application for an initial license, a renewal license, or a license amendment is incomplete when submitted and remains incomplete [for at least 60 days], the Commissioner may cease processing and deem the incomplete application withdrawn [and return it to the applicant], provided that the Commissioner has previously notified the applicant of the basis for incompleteness in accordance with §B of this regulation, and gives the applicant not less than 15 days to correct the incompleteness.
.07 Locations.
A. A mortgage loan originator may not conduct mortgage lending business at any location different from the address that appears on the license or licenses of the mortgage loan originator’s employer.
B. Notwithstanding §A of this regulation, a mortgage loan originator may take a loan application or offer or negotiate terms of a mortgage loan at a location other than the address that appears on the license or licenses of the mortgage loan originator’s employer if neither the mortgage loan originator nor the mortgage loan originator’s employer:
(1) Owns or leases the location for the purpose of conducting mortgage lending business;
(2) Indicates or suggests by use of signage that the mortgage loan originator or the mortgage loan originator’s employer utilizes the location for taking mortgage loan applications or offering or negotiating terms of mortgage loans;
(3) Advertises that the mortgage loan originator or the mortgage loan originator’s employer takes mortgage loan applications or offers or negotiates terms of mortgage loans at the location;
(4) Maintains work space, telephone service, or internet service at the location in the name of the mortgage loan originator or the mortgage loan originator’s employer for the purpose of conducting mortgage lending business;
(5) Receives mail relating to the mortgage lending business at the location; or
(6) Stores books or records relating to the mortgage lending business at the location.
.08 Loan Origination Under Expired License.
A. A person may not take or receive a mortgage loan application or offer or negotiate the terms of a mortgage loan without a license.
B. Notwithstanding §A of this regulation, a mortgage loan originator operating under an expired license resulting from a failure to timely renew may offer or negotiate the terms of a mortgage loan if:
(1) The application for the mortgage loan was taken or received before the deadline for renewal of the license; and
(2) The licensee’s employer does not employ any other mortgage loan originator licensed by the Commissioner.
.09 Advertising and Solicitation.
A. A mortgage loan originator may not publish, or cause to be published, any advertisement, or make or cause to be made any representation, that:
(1) Contains any false, misleading, or deceptive statements regarding the making, brokering, or servicing of mortgage loans; or
(2) Misrepresents terms, availability, rates, or charges incident to a mortgage loan.
B. Licensee Name and Address.
(1) A mortgage loan originator may not advertise under any name or address other than the name and address which appear on its license.
(2) Notwithstanding §B(1) of this regulation:
(a) An advertisement need not disclose any address of the advertiser; and
(b) A mortgage loan originator may advertise under any name:
(i) By which the mortgage loan originator is commonly known; and
(ii) Which is shown in the mortgage loan originator’s NMLSR record.
(3) In any advertisement, a mortgage loan originator must disclose:
(a) The name or approved trade name as required by COMAR 09.03.06.04L of the mortgage loan originator’s employer; and
(b) The mortgage loan originator’s NMLSR Unique Identifier.
(4) Notwithstanding §B(3) of this regulation, a mortgage loan originator who utilizes social media for advertising purposes need not disclose the name of the mortgage loan originator’s employer or the NMLSR Unique Identifier of the mortgage loan originator in each statement published through a social media platform, provided that such information is disclosed prominently on the mortgage loan originator’s home page within that social media platform.

GORDON COOLEY
Commissioner of Financial Regulation