AB678: Bill Text

In addition to requiring registered entities to submit to the NMLSR reports of condition, this bill eliminates the requirement that reports of condition be submitted to the NMLSR annually, leaving unspecified the frequency of submissions. The bill also eliminates the annual audit requirement for mortgage brokers. Under the bill, a mortgage broker must instead annually submit reviewed financial statements for the mortgage broker's operations during the prior fiscal year. The reviewed financial statements must include certain materials, including a written statement by an independent CPA attesting that he or she conducted his or her review in accordance with GAAP.

The bill also specifies that principal offices and branch offices of mortgage bankers and mortgage brokers must be located in this state or another state and that a branch office, but not a principal office, may be located in a residence. A mortgage loan originator must be assigned to and work out of a licensed or registered office or branch office of the sponsoring mortgage banker, mortgage broker, or registered entity and the office must be the mortgage loan originator's residence or within 100 miles of this residence. There must be at least one licensed mortgage loan originator assigned to and working out of each branch office of a mortgage broker or of a mortgage banker or registered entity where loans are originated.

The bill also prohibits a mortgage banker, mortgage broker, or mortgage loan originator from using any solicitation or advertisement that: 1) misrepresents that the provider is, or is affiliated with, any governmental entity or other organization; 2) misrepresents that the product is or relates to a government benefit, or is endorsed, sponsored by, or affiliated with any government or government-related program; or 3) does not clearly and conspicuously identify the name of the mortgage broker or mortgage banker or, if a mortgage loan originator is sponsored by a registered entity, the registered entity. The bill also repeals a provision prohibiting an individual engaging solely in loan processor or underwriter activities from representing to the public that the individual can or will perform the activities of a mortgage loan originator.

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:

AB678,1 Section 1. 224.71 (1br) of the statutes is created to read:

AB678,5,2 224.71 (1br) "Bona fide nonprofit organization" means an organization that is described in section 501 (c) (3) of the Internal Revenue Code and exempt from federal income tax under section 501 (a) of the Internal Revenue Code, that is certified by the federal department of housing and urban development or the Wisconsin Housing and Economic Development Authority, and that does all of the following:

AB678,5,4 (a) Promotes affordable housing or provides home ownership education or similar services.

AB678,5,6 (b) Conducts its activities in a manner that serves public or charitable purposes.

AB678,5,9 (c) Receives funding and revenue and charges fees in a manner that does not create an incentive for itself or its employees to act other than in the best interests of its clients.

AB678,5,11 (d) Compensates its employees in a manner that does not create an incentive for its employees to act other than in the best interests of its clients.

AB678,5,14 (e) Provides to, or identifies for, the borrower residential mortgage loans with terms favorable to the borrower and comparable to residential mortgage loans and housing assistance provided under government housing assistance programs.

AB678,2 Section 2. 224.71 (1c) of the statutes is amended to read:

AB678,5,19 224.71 (1c) "Branch office" means an office or place of business, other than the principal office, located in this state or another state, where a mortgage loan originator, mortgage banker, or mortgage broker conducts business with residents of this state engages in the mortgage loan business subject to this subchapter.

AB678,3 Section 3. 224.71 (1f) of the statutes is amended to read:

AB678,5,21 224.71 (1f) "Dwelling" has the meaning given in 15 USC 1602 (v) (w).

AB678,4 Section 4. 224.71 (1g) of the statutes is created to read:

AB678,6,2 224.71 (1g) "Employee" means an individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person, and whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by the controlling person.

AB678,5 Section 5. 224.71 (1gh) of the statutes is created to read:

AB678,6,6 224.71 (1gh) (a) Except as provided in par. (b), "expungement" means to have stricken or obliterated from a record of criminal conviction all references to the defendant's name and identity.

AB678,6,8 (b) For a criminal conviction entered in another state, "expungement" has the meaning given under the laws of the state where the criminal conviction is entered.

AB678,6 Section 6. 224.71 (1h) of the statutes is amended to read:

AB678,6,13 224.71 (1h) "Federal banking agency" means the board of governors of the federal reserve system, the U.S. office of the comptroller of the currency, the U.S. office of thrift supervision, the national credit union administration, or the federal deposit insurance corporation.

AB678,7 Section 7. 224.71 (1r) of the statutes is created to read:

AB678,6,16 224.71 (1r) "Housing finance agency" means any authority that is all of the following:

AB678,6,18 (a) Chartered by a state to help meet the affordable housing needs of the residents of the state.

AB678,6,19 (b) Supervised directly or indirectly by the state government.

AB678,6,20 (c) Subject to audit and review by the state in which it operates.

AB678,8 Section 8. 224.71 (2) (intro.) of the statutes is amended to read:

AB678,7,2 224.71 (2) (intro.) "Loan processor or underwriter" means an individual who, as an employee, performs clerical or support duties at the direction of and subject to the supervision and instruction of a mortgage loan originator licensed under s. 224.725 or exempt from licensing under s. 224.726 (1) 224.725 (1m), which clerical or support duties may include any of the following occurring subsequent to the receipt of a residential mortgage loan application:

AB678,9 Section 9. 224.71 (3) (a) (intro.), 1., 2. and 3. of the statutes are renumbered 224.71 (3) (intro.), (c), (d) and (e), and 224.71 (3) (intro.), as renumbered, is amended to read:

AB678,7,7 224.71 (3) (intro.) "Mortgage banker" means a person who is not excluded by par. (b) and who does any of the following:

AB678,10 Section 10. 224.71 (3) (b) (intro.) and 7. of the statutes are repealed.

AB678,11 Section 11. 224.71 (3) (b) 8. of the statutes is renumbered 224.72 (1r) (a).

AB678,12 Section 12. 224.71 (3) (b) 9. of the statutes is renumbered 224.72 (1r) (b).

AB678,13 Section 13. 224.71 (3) (b) 10. of the statutes is renumbered 224.72 (1r) (d).

AB678,14 Section 14. 224.71 (3) (b) 11. of the statutes is renumbered 224.72 (1r) (g).

AB678,15 Section 15. 224.71 (3) (b) 12. of the statutes is renumbered 224.72 (1r) (h).

AB678,16 Section 16. 224.71 (4) of the statutes is repealed and recreated to read:

AB678,7,17 224.71 (4) "Mortgage broker" means a person who, for compensation or gain or in the expectation of compensation or gain, does any of the following but does not make an underwriting decision or close a residential mortgage loan:

AB678,7,19 (a) Assists a person in obtaining or applying to obtain a residential mortgage loan.

AB678,7,21 (b) Holds himself, herself, or itself out as being able to assist a person in obtaining or applying to obtain a residential mortgage loan.

AB678,7,22 (c) Engages in table funding.

AB678,17 Section 17. 224.71 (6) (a) (intro.), 1. and 2. of the statutes are renumbered 224.71 (6) (intro.), (c) and (d) (intro.), and 224.71 (6) (intro.) and (d) (intro.), as renumbered, are amended to read:

AB678,8,3 224.71 (6) (intro.) "Mortgage loan originator" means an individual who is not excluded by par. (b) and who, for compensation or gain or in the expectation of compensation or gain, does any of the following:

AB678,8,6 (d) (intro.) Offers or negotiates terms of a residential mortgage loan. For purposes of this paragraph, an individual offers or negotiates terms of a residential mortgage loan if the individual does any of the following:

AB678,18 Section 18. 224.71 (6) (b) (intro.) and 4. of the statutes are repealed.

AB678,19 Section 19. 224.71 (6) (b) 1. of the statutes is renumbered 224.725 (1m) (c) and amended to read:

AB678,8,15 224.725 (1m) (c) An individual engaged solely as a loan processor or underwriter, unless the individual is an independent contractor or represents to the public, through advertising or another means of communication such as the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that the individual can or will perform any of the activities of a mortgage loan originator.

AB678,20 Section 20. 224.71 (6) (b) 2. of the statutes is renumbered 224.725 (1m) (d).

AB678,21 Section 21. 224.71 (6) (b) 3. of the statutes is renumbered 224.725 (1m) (e).

AB678,22 Section 22. 224.71 (6) (d) 1., 2. and 3. of the statutes are created to read:

AB678,8,20 224.71 (6) (d) 1. Discusses, explains, or presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms.

AB678,8,23 2. Communicates directly or indirectly with a borrower or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms.

AB678,8,25 3. Recommends, or refers a borrower or prospective borrower to, a particular lender or recommends a set of residential mortgage loan terms.

AB678,23 Section 23. 224.71 (7) of the statutes is amended to read:

AB678,9,8 224.71 (7) "Nationwide mortgage licensing system and registry" means the licensing and registration system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for licensed mortgage loan originators and mortgage loan originators exempt from licensing under s. 224.726 (1) 224.725 (1m) or, if this system is no longer maintained, any system established by the secretary of the federal department of housing and urban development under P.L. 110-289, Title V, section 1509.

AB678,24 Section 24. 224.71 (8) of the statutes is repealed.

AB678,25 Section 25. 224.71 (13) (c) of the statutes is amended to read:

AB678,9,15 224.71 (13) (c) Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing for the transaction. For purposes of this paragraph, providing financing for the transaction does not include use by a licensee under s. 452.03 of forms approved under s. REEB 16.03, Wis. Adm. Code.

AB678,26 Section 26. 224.71 (13c) of the statutes is created to read:

AB678,9,20 224.71 (13c) "Registered entity" means a depository institution that voluntarily registers with the division for the purpose of sponsoring licensed mortgage loan originators that are under the depository institution's direct supervision and control.

AB678,27 Section 27. 224.71 (13g) (intro.) of the statutes is created to read:

AB678,9,23 224.71 (13g) "Registered mortgage loan originator" means any individual who is all of the following:

AB678,28 Section 28. 224.71 (13m) of the statutes is created to read:

AB678,10,2 224.71 (13m) "Regularly engage," with respect to an individual, means that any of the following applies:

AB678,10,7 (a) The individual engaged in the business of a mortgage loan originator on more than 5 residential mortgage loans, in this state or another state, in the previous calendar year or expects to engage in the business of a mortgage loan originator on more than 5 residential mortgage loans, in this state or another state, in the current calendar year.

AB678,10,10 (b) The individual is acting on behalf of a person who is, or is required to be, licensed as a mortgage lender, mortgage banker, or mortgage broker in this state or another state.

AB678,10,11 (c) The individual is acting on behalf of a registered entity.

AB678,29 Section 29. 224.72 (1m) of the statutes is amended to read:

AB678,10,17 224.72 (1m) License required. A Except as provided in sub. (1r), a person may not conduct business or act as a mortgage banker or mortgage broker, use the title "mortgage banker" or "mortgage broker," or advertise or otherwise portray himself, herself, or itself as a mortgage banker or mortgage broker, unless the person has been issued a mortgage banker or mortgage broker license by the division.

AB678,30 Section 30. 224.72 (1r) (intro.), (c), (e) and (f) of the statutes are created to read:

AB678,10,21 224.72 (1r) License exemptions. (intro.) The following persons shall not be required to be licensed under this section or comply with the other provisions of this subchapter:

AB678,10,22 (c) A federal, state, or local government agency or housing finance agency.

AB678,11,4 (e) A bona fide nonprofit organization that does not operate in a commercial context and that is exempt under this paragraph. To qualify for an exemption under this paragraph, an organization shall certify, on a form prescribed by the division, that it is a bona fide nonprofit organization and shall provide documentation as required by the division. To maintain this exemption, the organization shall file the prescribed certification and accompanying documentation with the division by December 31 of each year.

AB678,11,5 (f) A mortgage banker that meets all of the following criteria:

AB678,11,7 1. The mortgage banker engaged in the business of a mortgage banker on 5 or fewer residential mortgage loans during the previous calendar year.

AB678,11,10 2. The mortgage banker expects to serve as the prospective source of financing, or to perform other phases of origination or servicing, on 5 or fewer residential mortgage loans in the current calendar year.

AB678,11,12 3. The mortgage banker does not advertise or otherwise hold himself, herself, or itself out as a "mortgage banker."

AB678,31 Section 31. 224.72 (2) (c) 2. of the statutes, as affected by 2013 Wisconsin Act 36, is amended to read:

AB678,11,16 224.72 (2) (c) 2. The department division may not disclose any information received under subd. 1. to any person except as follows:

AB678,11,20 a. The department division may disclose information under subd. 1. to the department of revenue for the sole purpose of requesting certifications under s. 73.0301 and to the department of workforce development for the sole purpose of requesting certifications under s. 108.227.

AB678,11,23 b. The department division may disclose information under subd. 1. a. to the department of children and families in accordance with a memorandum of understanding under s. 49.857.

AB678,32 Section 32. 224.72 (2m) of the statutes is renumbered 224.72 (2m) (a).

AB678,33 Section 33. 224.72 (2m) (b) and (c) of the statutes are created to read:

AB678,12,3 224.72 (2m) (b) A principal office of a mortgage banker or mortgage broker shall be located in either this state or another state. A principal office may not be located in a residence.

AB678,12,5 (c) A branch office of a mortgage banker or mortgage broker shall be located in either this state or another state. A branch office may be located in a residence.

AB678,34 Section 34. 224.72 (4) (a) 2. of the statutes is amended to read: