LRB-3059/2
RJM:kmg:rs
2003 - 2004 LEGISLATURE
October 21, 2003 - Introduced by Senators Schultz, S. Fitzgerald, Kanavas,
Lazich, Wirch, Lassa, Breske, Plale, M. Meyer, Stepp, Kedzie
and Roessler,
cosponsored by Representatives Jeskewitz, Montgomery, Ladwig,
Gunderson, Wieckert, Freese, Kreibich, Bies, Seratti, M. Lehman, Hines,
Kerkman, Kestell, Loeffelholz, Shilling, Vrakas, Van Roy, J. Fitzgerald,
Wasserman, Nischke, Krawczyk, Hahn, Townsend, Zepnick, LeMahieu
and
Olsen. Referred to Committee on Agriculture, Financial Institutions and
Insurance.
SB279,1,7 1An Act to renumber 224.71 (1c) and 224.72 (3); to amend 15.09 (6), 224.72 (3)
2(title), 224.72 (5) (a), 224.72 (7m) (intro.), 224.77 (1m) (a), 224.80 (1) and 224.80
3(2) (a) 1.; and to create 15.187, 224.71 (1d), 224.72 (3) (b), 224.72 (3) (c), 224.72
4(7) (d) and (e), 224.72 (7m) (am), 224.72 (7p), 224.755 and 224.79 of the statutes;
5relating to: qualifications of certain agents of mortgage bankers and mortgage
6brokers, consumer mortgage brokerage agreements, granting rule-making
7authority, and providing a penalty.
Analysis by the Legislative Reference Bureau
This bill makes various changes to the laws governing mortgage banking and
mortgage brokering. Significant changes include:
Competency examinations
This bill establishes competency examination and continuing education
requirements applicable to certain agents, called loan originators, of mortgage
bankers and mortgage brokers. Current law does not contain any such
requirements. A loan originator is generally a person who finds or negotiates a
mortgage loan for or on behalf of a mortgage banker or mortgage broker. With certain
exceptions, this bill requires an applicant for registration as a loan originator to pass
a written examination covering primary and subordinate mortgage financing
transactions and the laws regulating mortgage bankers and mortgage brokers. This

requirement must be satisfied as a condition of the Division of Banking (division)
approving an application for registration as a loan originator. This examination
requirement first applies to persons who have applications pending on July 2, 2004.
The bill also requires each loan originator, as a condition of renewing a
registration, to successfully complete at least 16 hours of education covering primary
and subordinate mortgage financing transactions and the laws regulating mortgage
bankers and mortgage brokers or to pass an examination or series of examinations
demonstrating satisfactory knowledge of these subjects. This requirement first
applies to persons who have applications pending on July 1, 2006.
The bill creates a loan originator council for the purpose of approving the
program of continuing education and the content of the competency examinations.
The division, by rule, must establish standards for the loan originator council to
follow in approving the program of continuing education and the content of the
competency examination.
Criminal background checks
The bill requires the employer of each applicant for registration as a loan
originator, or, in certain cases, for renewal of registration, to obtain a criminal history
search from the Department of Justice, showing the applicant's criminal arrest and
conviction record in this state. The employer must submit the results of the search
to the division. Under the bill, the division may not issue or renew a registration if
the results of the search indicate that the applicant has been convicted of a felony
and, as a result of the conviction, represents an unreasonable risk of violating the
subchapter of the statutes that generally governs mortgage bankers, mortgage
brokers, and loan originators.
Regulation of consumer brokerage agreements
Currently, the rules of DFI regulate the content of brokerage agreements. This
bill requires every brokerage agreement between a mortgage broker and a consumer
to be in writing, in the form prescribed by rule of the division, and to contain all
information required by rule of the division. Under the bill, the division must
promulgate these rules for the purpose of facilitating the comparison of similar
charges and total charges assessed by different mortgage brokers. The bill also
requires a mortgage broker to give a consumer a disclosure statement which contains
a brief explanation of the relationship between the consumer and the mortgage
broker under the brokerage agreement and the manner in which the mortgage
broker may be compensated, and any additional information required by rule of the
division. The mortgage broker must explain the content of the disclosure statement
and ensure that the consumer initials or signs the statement, acknowledging that
the consumer has read and understands the statement. Under the bill, a consumer
generally means an individual who seeks or acquires mortgage brokerage services
for personal, family, or household purposes. The rules required under these
provisions must be promulgated in consultation with the loan originator council.
Penalties and limitations on liability
This bill raises the maximum potential forfeiture (civil penalty) for certain
violations of the mortgage banking and mortgage brokering laws from $1,000 to
$2,000 and increases the maximum potential liability for these violations in certain

private causes of action from $1,000 to $2,000. The bill also raises the maximum
potential fine and imprisonment (criminal penalties) for violating a registration
requirement under the mortgage banking and mortgage brokering laws from $1,000
and six months to $2,000 and nine months.
Because this bill creates a new crime or revises a penalty for an existing crime,
the Joint Review Committee on Criminal Penalties may be requested to prepare a
report concerning the proposed penalty and the costs or savings that are likely to
result if the bill is enacted.
For further information see the state and local 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:
SB279, s. 1 1Section 1. 15.09 (6) of the statutes is amended to read:
SB279,3,102 15.09 (6) Reimbursement for expenses. Members of a council shall not be
3compensated for their services, but, except as otherwise provided in this subsection,
4members of councils created by statute shall be reimbursed for their actual and
5necessary expenses incurred in the performance of their duties, such reimbursement
6in the case of an elective or appointive officer or employee of this state who represents
7an agency as a member of a council to be paid by the agency which pays his or her
8salary. Members of the loan originator council under s. 15.187 (1) may not be
9reimbursed for their actual and necessary expenses incurred in the performance of
10their duties.
SB279, s. 2 11Section 2. 15.187 of the statutes is created to read:
SB279,3,15 1215.187 Same; councils. (1) Loan originator review council. There is
13created in the department of financial institutions a loan originator council. The
14council shall consist of the following members, appointed by the secretary of financial
15institutions for 4-year terms:
SB279,3,1616 (a) Three persons who are loan originators registered under s. 224.72 (1m).
SB279,4,2
1(b) One person who is an agent of a mortgage broker registered under s. 224.72
2(1m).
SB279,4,43 (c) One person who is an agent of a mortgage banker registered under s. 224.72
4(1m).
SB279,4,55 (d) One person who represents the public interest.
SB279,4,66 (e) The secretary of financial institutions or his or her designee.
SB279, s. 3 7Section 3. 224.71 (1c) of the statutes is renumbered 224.71 (1e).
SB279, s. 4 8Section 4. 224.71 (1d) of the statutes is created to read:
SB279,4,119 224.71 (1d) "Consumer" means a person other than an organization, as defined
10in s. 421.301 (28), who seeks or acquires mortgage brokerage services for personal,
11family, or household purposes.
SB279, s. 5 12Section 5. 224.72 (3) (title) of the statutes is amended to read:
SB279,4,1413 224.72 (3) (title) Additional requirement requirements for loan originator
14applicant.
SB279, s. 6 15Section 6. 224.72 (3) of the statutes is renumbered 224.72 (3) (a).
SB279, s. 7 16Section 7. 224.72 (3) (b) of the statutes is created to read:
SB279,4,2217 224.72 (3) (b) In addition to the requirements of sub. (2), each applicant for
18registration as a loan originator shall pass a written examination, approved by the
19loan originator council, covering primary and subordinate mortgage financing
20transactions and the provisions of this subchapter. The examination shall be
21administered by the technical college system board or a professional trade
22association whose members include loan originators.
SB279, s. 8 23Section 8. 224.72 (3) (c) of the statutes is created to read:
SB279,5,224 224.72 (3) (c) The employer of each applicant for registration as a loan
25originator shall obtain a criminal history search relating to the applicant from the

1records maintained by the department of justice and submit the results of the search
2to the division.
SB279, s. 9 3Section 9. 224.72 (5) (a) of the statutes is amended to read:
SB279,5,84 224.72 (5) (a) Loan originator. Except as provided in sub. (7m), upon receiving
5a properly completed application for registration as a loan originator and the fee
6specified in rules promulgated under sub. (8) and upon an applicant's compliance
7with sub. (3) (a) and, if required, sub. (3) (b)
, the division may issue to the applicant
8a certificate of registration as a loan originator.
SB279, s. 10 9Section 10. 224.72 (7) (d) and (e) of the statutes are created to read:
SB279,5,1510 224.72 (7) (d) 1. Except as provided in subd. 2., an applicant for renewal of a
11certificate of registration as a loan originator shall, as part of the application, submit
12evidence that is satisfactory to the division that, during the 2 years preceding the
13date of application, the applicant has successfully completed at least 16 hours of
14education approved by the loan originator council covering primary and subordinate
15mortgage financing transactions and the provisions of this subchapter.
SB279,5,2316 2. No later than June 30 annually, the technical college system board or a
17professional trade association whose members include loan originators shall
18administer an examination or series of examinations, approved by the loan
19originator council, on the educational subjects required under subd. 1. Any applicant
20who, as part of the application, submits evidence that is satisfactory to the division
21that the applicant has passed the examination or series of examinations under this
22subdivision during the 2 years immediately preceding the date of application is not
23required to comply with subd. 1.
SB279,6,324 (e) If an applicant for renewal of a certificate of registration as a loan originator
25has changed employers since his or her criminal history was last searched under this

1paragraph or sub. (3) (c), the applicant's current employer shall obtain a criminal
2history search relating to the applicant from the records maintained by the
3department of justice and submit the results of the search to the division.
SB279, s. 11 4Section 11. 224.72 (7m) (intro.) of the statutes is amended to read:
SB279,6,75 224.72 (7m) Denial of application for issuance or renewal of registration.
6(intro.) The department division may not issue or renew a certificate of registration
7under this section if any of the following applies:
SB279, s. 12 8Section 12. 224.72 (7m) (am) of the statutes is created to read:
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