GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

H	1 

HOUSE BILL 464

Short Title:  Amend Mortgage Banker Regis.	(Public)
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Sponsors: Representatives Smith and Brubaker.
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Referred to:  Financial Institutions.
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March 23, 1993

A BILL TO BE ENTITLED
AN ACT TO AMEND THE LAW REGULATING MORTGAGE BANKERS AND MORTGAGE BROKERS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 53-233(a) reads as rewritten:
"(a)	This Article shall be known and cited as the 'Residential Mortgage Loan Registration Act'."
Sec. 2.  G.S. 53-234 reads as rewritten:
"§ 53-234.  Definitions.
The following definitions apply in this Article:
(1)	'Commission' means the State Banking Commission.
(1a)	'Commissioner' means the Commissioner of Banks of this State.
	(1b)	'Mortgage loan' means a loan to a natural person or persons made primarily for personal, family or household use, primarily secured by either a mortgage or a deed of trust on residential real property.
(2)	'Residential real property' means real property located in this State upon which there is located or there is to be located one or more single family dwellings or dwelling units.
(3)	'Mortgage banker' means a person or entity who or which for compensation or gain, either directly or indirectly, advances funds, offers to advance funds, or makes a commitment to advance funds to an applicant for a mortgage loan.
(4)	'Mortgage broker' means a person or entity in the business of soliciting, processing, placing or negotiating mortgage loans for others or offering to process, place or negotiate mortgage loans for others.
(5)	'Soliciting, processing, placing or negotiating a mortgage loan' means for compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, assisting or offering to assist in the processing of an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a third party or negotiating or offering to negotiate the terms or conditions of a mortgage loan with a lender on behalf of a third party.
(6)	'Exempt person or organization' means any of the following:
a.	Any lender authorized to engage in business as a bank, a farm credit system, life insurance company, savings institution, or credit union, under the laws of the United States or any state and subsidiaries and affiliates of such lenders, which subsidiaries and affiliates are subject to the general supervision or regulation of the lender or subject to audit or examination by the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, or any successor to any of those financial institution regulatory agencies, or a financial institution regulatory agency created under state law; the entities listed in this sub-subdivision, and their officers and employees, are not subject to any of the provisions of this Article.
b.	Any licensed real estate agent or real estate broker, who is performing those activities subject to the regulation of the North Carolina Real Estate Commission.  Notwithstanding the above, an exempt person does not include a real estate agent or real estate broker who receives direct compensation or income in connection with the placement of a mortgage loan.
c.	Any person who, as seller, receives in one calendar year no more than ten mortgages, deeds of trust, or other security instruments on real estate as security for a purchase money obligation.
   c1.	Any person making two or less mortgage loans in any period of 12 consecutive months.
d.	The North Carolina Housing Finance Agency as established by Chapter 122A of the General Statutes and the North Carolina Agricultural Finance Authority as established by Chapter 122D of the General Statutes.
e.	Any agency of the federal government or any state or municipal government granting first mortgage loans under specific authority of the laws of any state or the United States.
     f.	Bona fide officers, partners, or employees of registrants.
(7)	'Registrant' means any person or entity who or which is registered pursuant to G.S. 53-236:
a.	Which engages in the business of making mortgage loans in this State; or
b.	Which engages in the business of soliciting, processing, placing or negotiating mortgage loans for others, or offering to process, place or negotiate mortgage loans for others.
	."
Sec. 3.  G.S. 53-235(c) reads as rewritten:
"(c)	Notwithstanding subsections (a) and (b) of this section, exempt persons or organizations as defined by G.S. 53-234 are not required to register with the Commissioner so long as they have received written confirmation of exemption from registration."
Sec. 4.  G.S. 53-236 reads as rewritten:
"§ 53-236.  Registration procedures.
(a)	An application to become registered as a mortgage banker or a mortgage broker shall be in writing, under oath, and in such form as shall be prescribed by the Commissioner.  Such application shall contain the name and complete business and residential address or addresses of the applicant, or if the applicant is a partnership, association, corporation or other form of business organization, the names and complete business and residential addresses of each member, director and principal officer thereof.
(b)	The application shall also include an affirmation of financial solvency noting compliance with the capitalization and bonding requirements that the Commission may prescribe by rule, and descriptions of the business activities, financial responsibility, educational background and general character and fitness of the applicant as may be required by the Commissioner. In addition, the Commissioner shall obtain, as prescribed by rule, a credit report with respect to each applicant for registration as a mortgage banker or mortgage broker.  The application shall be accompanied by a fee, payable to the Commissioner, of five hundred dollars ($500.00) together with the costs of any credit reports."
Sec. 5.  G.S. 53-237(a) reads as rewritten:
"(a)	Upon the filing of an application for registration, if the Commissioner finds that the financial responsibility, experience, knowledge of residential mortgage lending, character, and general fitness of the applicant, and of the members thereof if the applicant is a partnership or association, and of the officers and directors thereof if the applicant is a corporation, are such as to command the confidence of the community and to warrant belief that the business will be operated honestly and fairly, within the purposes of this Article, the Commissioner shall thereupon register the applicant as a mortgage banker or a mortgage broker, whichever is applicable, on a roll maintained for that purpose at the Commission of Banks, and shall issue a certificate attesting to such registration. The Commissioner shall transmit the certificate to the applicant. If the Commissioner does not so find, the Commissioner shall not register such applicant, and shall notify the applicant of the denial. "
Sec. 6.  G.S. 53-239 reads as rewritten:
"§ 53-239.  Enforcement of this Article; cease and desist; revocation of registration certificate.
(a)	Upon the finding that any action of a mortgage banker or a mortgage broker may be in violation of this Article, or of any rule adopted hereunder, the Commissioner, after reasonable notice to the mortgage banker or mortgage broker, and an opportunity for the mortgage banker or mortgage broker to be heard, shall order it to cease and desist from such action.
(b)	If the mortgage banker or mortgage broker fails to appeal such cease and desist order of the Commissioner in accordance with G.S. 53-240 hereof and continues to engage in such action in violation of the Commissioner's order to cease and desist such action, it shall be subject to a penalty of one thousand dollars ($1,000) for each such action it takes in violation of the Commissioner's order.  The penalty provision of this section shall be in addition to and not in lieu of any other provision of law applicable to a mortgage banker or a mortgage broker for the mortgage banker or mortgage broker's failure to comply with an order of the Commissioner.
(c)	Upon a finding that a mortgage banker or a mortgage broker has violated this Article or any rule adopted hereunder, or committed any act which would not support registration of the mortgage banker or mortgage broker under G.S. 53-137(a), the Commissioner may revoke the registration of the mortgage banker or mortgage broker temporarily or permanently, in the discretion of the Commissioner. 
(d)	Nothing in this Article shall limit any statutory or common law right of any person to bring any action in any court for any act, or the right of the State to punish any person for any violation of any law.
(e)	The Commissioner shall enforce this Article and may make investigations, subpoena witnesses, and conduct hearings as to violations of this Article or any rule adopted hereunder."
Sec. 7.  Chapter 53 of the General Statutes is amended by adding the following new section to read:
"§ 53-239.1.  Examinations; audits; books and records.
(a)	The Commissioner may conduct or cause to  be conducted an examination or audit of the books and records of any mortgage banker or mortgage broker at any time when the Commissioner deems it proper.  The mortgage banker or mortgage broker shall pay the cost of the examination or audit and such costs shall be prescribed by rule.  The refusal of access to the books and records of the mortgage banker or mortgage broker shall be cause for revocation of the certificate of registration.
(b)	A mortgage banker or mortgage broker shall keep and use in an office such books, accounts, and records as will enable the Commissioner to determine whether the mortgage banker or mortgage broker is complying with this Article and rules adopted pursuant to this Article."
Sec. 8.  G.S. 53-240 reads as rewritten:
"§ 53-240.  Appeal of Commissioner's decision.
An aggrieved party in a proceeding under this Article may, within 30 days after final decision of the Commissioner, appeal the decision to the Commission.  The Commission shall have the authority to approve, disapprove, or modify the Commissioner's decision.  Notwithstanding any other provision of law, an aggrieved party to a decision of the Commission shall be entitled to an appeal pursuant to G.S. 53-92."
Sec. 9.  G.S. 53-241 reads as rewritten:
"§ 53-241.  Rules.
The Commission may adopt such reasonable rules as may be necessary to effectuate the purpose of this Article, to provide for the protection of the borrowing public, and to instruct mortgage lenders in interpreting this Article."
Sec. 10.  G.S. 66-106 reads as rewritten:
"§ 66-106.  Definitions.
For purposes of this Article the following definitions apply:
(1)	A 'loan broker' is any person, firm, or corporation who, in return for any consideration from any person, promises to (i) procure for the person, or assist the person in procuring, a loan from any third party; or (ii) consider whether or not it will make a loan to the person.
(2)	A 'loan' is an agreement to advance money or property in return for the promise to make payments therefor, whether the agreement is styled as a loan, a lease or otherwise.
Provided, that this Article shall not apply to any party approved as a mortgagee by the Secretary of Housing and Urban Development, the Federal Housing Administration, the Veterans Administration, a National Mortgage Association or any federal agency; nor to any party currently designated and compensated by a North Carolina licensed insurance company as its agent to service loans it makes in this State; nor to any insurance company registered with and licensed by the North Carolina Insurance Commissioner; nor to any attorney-at-law, public accountant, or dealer registered under the North Carolina Securities Act, acting in the professional capacity for which the attorney-at-law, public accountant, or dealer is registered or licensed under the laws of the State of North Carolina. Provided further that subdivision (1)(ii) above shall not apply to any lender whose loans or advances to any person, firm or corporation in North Carolina aggregate more than one million dollars ($1,000,000) in the preceding calendar year.  Any person, firm, corporation, or other entity engaged exclusively in making or brokering residential mortgage loans and registered with and subject to the jurisdiction of the Commissioner of Banks under Article 19 of Chapter 53 of the General Statutes shall, unless otherwise exempted by this section, be subject to this Article but shall be exempt from the payment of any registration fees."
Sec. 11.  This act becomes effective October 1, 1993, and applies to mortgage loan applications submitted on or after that date.