AB830: Bill Text

Currently, mortgage brokers are not required to meet requirements similar to those discussed above for mortgage bankers. This bill establishes similar requirements for mortgage broker applicants. If the applicant is applying to be a mortgage broker who will maintain a bona fide office, the applicant must do one of the following: 1) to file a $10,000 commercial surety bond; 2) file a secured personal bond or secured 3rd party guarantee in the amount of $10,000; or 3) demonstrate a minimum net worth of $100,000. If the applicant is applying to be a mortgage broker that will not maintain a bona fide office, the applicant must file a $120,000 commercial surety bond and demonstrate a minimum net worth of $250,000.

The bill also specifies when the division may release security posted by a mortgage banker or mortgage broker applicant, if the mortgage banker or mortgage broker chooses to meet these registration requirements by posting a secured personal bond or guarantee. Under the bill, if the division determines that the security has become insufficient, or that a surety bond or an errors and omissions insurance policy has lapsed, the division may suspend the mortgage banker's or mortgage broker's registration.

The bill also modifies the procedures that the division uses to register mortgage bankers or mortgage brokers. Under current law, a mortgage banker applicant is granted a temporary certificate of registration for 6 months, after which the division may issue a regular registration. This bill eliminates the temporary certificate provisions. Current law specifies fees for applying for, renewing and transferring registrations as mortgage bankers, mortgage brokers and loan originators; the bill repeals these provisions and grants the division the authority to set these fees by rule.

Regulation

Under current law, registered mortgage bankers and mortgage brokers must submit a copy of an annual audit of the mortgage banker's or mortgage broker's operations to DFI within 20 days after the audit is completed. The bill specifies some additional requirements for the annual audit, requires mortgage bankers and mortgage brokers to submit an annual report in a form specified by the division and, if the division believes that a mortgage banker or mortgage broker may not have sufficient financial resources, allows the division to require the mortgage banker or mortgage broker have additional audits. Current law requires mortgage bankers and mortgage brokers to maintain certain records regarding loan applications; this bill adds some additional record-keeping requirements relating to loan servicing. The bill adds a requirement that a mortgage banker or mortgage broker shall, on request, provide a loan applicant with a copy of any written appraisal report, for which a fee was imposed, that relates to residential real estate owned or to be purchased by the loan applicant.

Current law allows a mortgage banker's, mortgage broker's or loan originator's registration to be revoked, suspended or limited if any of certain specified grounds are met. This bill provides that the same specified grounds may be used by the division to deny an application for initial registration. The bill also adds an additional ground for disciplinary action, permitting disciplinary action if a mortgage banker or mortgage broker fails to notify the division that its net worth has fallen below the minimum required amount. It allows the division to assess an administrative forfeiture of not more than $1,000 for each violation of one of these grounds for disciplinary action, except in those cases where current law requires mandatory revocation or suspension of the registration as a result of the violation. Finally, the bill sets forth appeal rights for persons who are assessed an administrative forfeiture or whose registrations are denied, suspended or revoked.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB830, s. 1 Section 1. Subchapter II (title) of chapter 224 [precedes 224.70] of the statutes is amended to read:

AB830,4,3 CHAPTER 224

AB830,4,4 SUBCHAPTER II

AB830,4,7 MORTGAGE BANKERS, LOAN ORIGINATORS AND LOAN SOLICITORS mortgage brokers

AB830, s. 2 Section 2. 224.70 of the statutes is repealed.

AB830, s. 3 Section 3. 224.71 (1b) of the statutes is created to read:

AB830,4,11 224.71 (1b) "Bona fide office" of a mortgage banker or mortgage broker means an office that meets all of the following conditions:

AB830,5,1 (a) Is located in this state.

AB830,5,2 (b) Has regular hours of operation.

AB830,5,3 (c) Is accessible to the public.

AB830,5,4 (d) Serves as an office for the transaction of business.

AB830,5,7 (e) Is staffed by an individual registered under this subchapter who is an employe of the mortgage banker or mortgage broker and is not shared with another business.

AB830,5,8 (f) Is separate from the offices of other entities.

AB830,5,12 (g) Contains the books and records of the mortgage banker or mortgage broker, or copies of the books and records, unless the mortgage banker or mortgage broker has agreed to furnish copies of its books and records, as soon as practicable, upon the request of the division.

AB830, s. 4 Section 4. 224.71 (1c) of the statutes is created to read:

AB830,5,14 224.71 (1c) "Division" means the division of banking.

AB830, s. 5 Section 5. 224.71 (1r) (a) of the statutes is renumbered 224.71 (1r) and amended to read:

AB830,5,19 224.71 (1r) "Loan originator" means a person who is not excluded by par. (b) and who, on behalf of employed by a mortgage banker, finds or mortgage broker to find a loan or negotiates negotiate a land contract, loan or commitment for a loan.

AB830, s. 6 Section 6. 224.71 (1r) (b) of the statutes, as affected by 1997 Wisconsin Act 27, is repealed.

AB830, s. 7 Section 7. 224.71 (2) of the statutes, as affected by 1997 Wisconsin Act 27, is renumbered 224.71 (4), and 224.71 (4) (a) and (b) (intro.), as renumbered, are amended to read:

AB830,6,4 224.71 (4) (a) "Loan solicitor" "Mortgage broker" means a person who is not excluded by par. (b) and who, on behalf of a loan applicant or an investor and for commission, money or other thing of value, finds a loan or negotiates a land contract, loan or commitment for a loan or engages in table funding.

AB830,6,6 (b) (intro.) "Loan solicitor" "Mortgage broker" does not include any of the following:

AB830, s. 8 Section 8. 224.71 (3) (a) 3. of the statutes is amended to read:

AB830,6,9 224.71 (3) (a) 3. Services loans or land contracts or provides escrow services, for another person and for commission, money or other thing of value.

AB830, s. 9 Section 9. 224.71 (3) (b) 6. of the statutes is created to read:

AB830,6,13 224.71 (3) (b) 6. A person who originates, sells, or services loans only with the person's own funds for the person's own investment and the person has originated, sold or serviced no more than 4 loans during the previous 12 months.

AB830, s. 10 Section 10. 224.71 (5) of the statutes is created to read:

AB830,6,17 224.71 (5) "Table funding" means a transaction in which a person conducts a loan closing in the person's name with funds provided by a 3rd party and the person assigns the loan to the 3rd party within 24 hours of the loan closing.

AB830, s. 11 Section 11. 224.72 (title) of the statutes is amended to read:

AB830,6,20 224.72 (title) Registration of mortgage bankers, loan originators and loan solicitors mortgage brokers .

AB830, s. 12 Section 12. 224.72 (1m) of the statutes is amended to read:

AB830,7,2 224.72 (1m) Registration required. A person may not act as a mortgage banker, loan originator or loan solicitor mortgage broker, use the title "mortgage banker", "loan originator" or "loan solicitor" "mortgage broker", or advertise or otherwise portray himself or herself as a mortgage banker, loan originator or loan solicitor mortgage broker, unless the person has been issued a certificate of registration from the department division.

AB830, s. 13 Section 13. 224.72 (2) (intro.) of the statutes is amended to read:

AB830,7,8 224.72 (2) Applying for registration. (intro.) A person desiring to act as a mortgage banker, loan originator or loan solicitor mortgage broker shall apply for a certificate of registration to the department division on forms prescribed by the department division and shall pay the fee specified in rules promulgated under sub. (8) (a). An application shall satisfy all of the following:

AB830, s. 14 Section 14. 224.72 (2) (b) of the statutes is amended to read:

AB830,7,13 224.72 (2) (b) Identity of partner, member or officer. If the applicant is a partnership, limited liability company or corporation, the application shall identify each partner, member or officer who will use the title "mortgage banker", "loan originator" or "loan solicitor" "mortgage broker".

AB830, s. 15 Section 15. 224.72 (3) of the statutes is amended to read:

AB830,7,18 224.72 (3) Additional requirement for loan originator applicant. In addition to the requirements of sub. (2), an applicant for registration as a loan originator shall include in the application the name of the mortgage banker or mortgage broker who will employ the loan originator.

AB830, s. 16 Section 16. 224.72 (4) (intro.) of the statutes is renumbered 224.72 (4) (a) (intro.) and amended to read:

AB830,7,23 224.72 (4) (a) (title) With a bona fide office. (intro.) In addition to the requirements of sub. (2), an applicant for registration as a mortgage banker who maintains a bona fide office shall do at least one of the following:

AB830, s. 17 Section 17. 224.72 (4) (a) of the statutes is renumbered 224.72 (4) (a) 1. (intro.) and amended to read:

AB830,8,4 224.72 (4) (a) 1. `Approval by federal agency.' (intro.) Submit evidence which shows, to the department's division's satisfaction, that the federal department of housing and urban development has one or more of the following have approved the applicant as a mortgagee.:

AB830, s. 18 Section 18. 224.72 (4) (a) 1. a. to d. of the statutes are created to read:

AB830,8,6 224.72 (4) (a) 1. a. The federal department of housing and urban development.

AB830,8,7 b. The Federal National Mortgage Association.

AB830,8,8 c. The Government National Mortgage Association.

AB830,8,9 d. The Federal Home Loan Mortgage Corporation.

AB830, s. 19 Section 19. 224.72 (4) (a) 3. of the statutes is created to read:

AB830,8,13 224.72 (4) (a) 3. `Other bond or guarantee.' File a personal bond or 3rd-party guarantee in the amount of $25,000 in a form acceptable to the division and secured by one of the following forms of security:

AB830,8,14 a. A certificate of deposit.

AB830,8,15 b. A debt security acceptable to the division.

AB830,8,17 c. An irrevocable bank letter of credit issued by a financial institution that is authorized to do business in this state or that is federally chartered.

AB830, s. 20 Section 20. 224.72 (4) (b) of the statutes is renumbered 224.72 (4) (a) 2. and amended to read:

AB830,9,2 224.72 (4) (a) 2. `File a bond.' File with the department a division a commercial surety bond which is in the amount of $25,000, is furnished issued by a surety company authorized to do business in this state and is approved by the department, secures the applicant's faithful performance of all duties and obligations of a mortgage banker, is payable to the division for the benefit of persons to whom the mortgage banker provided services as a mortgage banker, is issued on a form that is acceptable to the division and provides that the bond may not be terminated without at least 30 days' written notice to the division.

AB830, s. 21 Section 21. 224.72 (4) (c) of the statutes is renumbered 224.72 (4) (a) 4. and amended to read:

AB830,9,11 224.72 (4) (a) 4. `Minimum net worth.' Submit evidence that establishes, to the department's division's satisfaction, a minimum net worth of $25,000 and a warehouse line of credit of not less than $250,000 or a minimum net worth of $100,000. Evidence of net worth shall include the submission of a balance sheet that is accompanied by a written statement by an independent certified public accountant attesting that he or she has reviewed the balance sheet in accordance with generally accepted accounting principles.

AB830, s. 22 Section 22. 224.72 (4) (d) of the statutes is created to read:

AB830,9,15 224.72 (4) (d) Without a bona fide office. In addition to the requirements of sub. (2), an applicant for registration as a mortgage banker who does not maintain a bona fide office shall do all of the following:

AB830,9,22 1. `File a bond.' File with the division a commercial surety bond that is in the amount of $300,000, is issued by a surety company authorized to do business in this state, secures the applicant's faithful performance of all duties and obligations of a mortgage banker, is payable to the division for the benefit of persons to whom the mortgage banker provided services as a mortgage banker, is issued on a form that is acceptable to the division and provides that the bond may not be terminated without at least 30 days' written notice to the division.

AB830,9,25 2. `Minimum net worth.' Submit evidence that establishes, to the division's satisfaction, a minimum net worth of $250,000. Evidence of net worth shall include the submission of a balance sheet that is accompanied by a written statement by an independent certified public accountant attesting that he or she has reviewed the balance sheet in accordance with generally accepted accounting principles.

AB830, s. 23 Section 23. 224.72 (4m) of the statutes is created to read:

AB830,10,7 224.72 (4m) Additional requirement for mortgage broker applicant. (a) With a bona fide office. In addition to the requirements of sub. (2), an applicant for registration as a mortgage broker who maintains a bona fide office shall do at least one of the following:

AB830,10,14 1. `File a bond.' File with the division a commercial surety bond that is in the amount of $10,000, is issued by a surety company authorized to do business in this state, secures the applicant's faithful performance of all duties and obligations of a mortgage broker, is payable to the division for the benefit of persons to whom the mortgage broker provided services as a mortgage broker, is issued on a form that is acceptable to the division and provides that the bond may not be terminated without at least 30 days' written notice to the division.

AB830,10,17 2. `Other bond or guarantee.' File a personal bond or 3rd-party guarantee in the amount of $10,000 in a form acceptable to the division and secured by one of the following forms of security:

AB830,10,18 a. A certificate of deposit.

AB830,10,19 b. A debt security acceptable to the division.

AB830,10,21 c. An irrevocable bank letter of credit issued by a financial institution that is authorized to do business in this state or that is federally chartered.

AB830,11,2 3. `Minimum net worth.' Submit evidence that establishes, to the division's satisfaction, a minimum net worth of $100,000. Evidence of net worth shall include the submission of a balance sheet that is accompanied by a written statement by an independent certified public accountant attesting that he or she has reviewed the balance sheet in accordance with generally accepted accounting principles.

AB830,11,5 (b) Without a bona fide office. In addition to the requirements of sub. (2), an applicant for registration as a mortgage broker who does not maintain a bona fide office shall do all of the following:

AB830,11,12 1. `File a bond.' File with the division a commercial surety bond that is in the amount of $120,000, is issued by a surety company authorized to do business in this state, secures the applicant's faithful performance of all duties and obligations of a mortgage broker, is payable to the division for the benefit of persons to whom the mortgage broker provided services as a mortgage broker, is issued on a form that is acceptable to the division and provides that the bond may not be terminated without at least 30 days' written notice to the division.

AB830,11,17 2. `Minimum net worth.' Submit evidence that establishes, to the division's satisfaction, a minimum net worth of $250,000. Evidence of net worth shall include the submission of a balance sheet that is accompanied by a written statement by an independent certified public accountant attesting that he or she has reviewed the balance sheet in accordance with generally accepted accounting principles.

AB830, s. 24 Section 24. 224.72 (4n) of the statutes is created to read:

AB830,11,22 224.72 (4n) Security held by the division; release. The division or its agent shall hold security filed under subs. (4) (a) 3. and (4m) (a) 2. The security shall remain in effect, and the division may not release it, until all of the following conditions are met:

AB830,11,23 (a) A period of 180 days has elapsed since at least one of the following:

AB830,12,3 1. The date on which the mortgage banker or mortgage broker gives notice to the division that the mortgage banker or mortgage broker is no longer acting as a mortgage banker or mortgage broker.

AB830,12,5 2. The date on which the mortgage banker's or mortgage broker's registration expires or is revoked.

AB830,12,7 (b) The division determines that the mortgage banker or mortgage broker is no longer in business.

AB830,12,10 (c) The division determines that all claims of persons to whom the mortgage banker or mortgage broker provided services as a mortgage banker or mortgage broker have been satisfied.

AB830, s. 25 Section 25. 224.72 (4r) of the statutes is created to read:

AB830,12,16 224.72 (4r) Insufficient security; division order; suspension of registration. If the division finds that the surety bond, security or insurance policy filed by a mortgage banker or mortgage broker has been cancelled without the required notice to the division, the division may summarily suspend the mortgage banker's or mortgage broker's registration.