PRIOR PRINTER'S NO. 529 PRINTER'S NO. 1613
No. 487 Session of 2007
INTRODUCED BY BROWNE, FERLO, BOSCOLA, PILEGGI, TOMLINSON, ERICKSON, FUMO, RHOADES, COSTA, BAKER, STACK, LOGAN AND ROBBINS, MARCH 15, 2007
SENATOR D. WHITE, BANKING AND INSURANCE, AS AMENDED, DECEMBER 4, 2007
AN ACT 1 Amending the act of December 22, 1989 (P.L.687, No.90), entitled 2 "An act providing for the regulation and licensing of 3 mortgage bankers and mortgage brokers; imposing additional 4 powers and duties on the Department of Banking and the State 5 Real Estate Commission; and providing penalties," further 6 providing for definitions, for license requirements and 7 exemptions, for application for license, for annual license 8 fee, for issuance of license, for license duration, for 9 licensee requirements, for licensee limitations, for 10 authority of department or commission, for fees, for 11 suspension, revocation or refusal, for penalties, for 12 referral fees and for Real Estate Recovery Fund. 13 The General Assembly of the Commonwealth of Pennsylvania 14 hereby enacts as follows: 15 Section 1. The definitions of "commission," "finder's fee," 16 "limited mortgage broker," "nonpurchase money mortgage loan" and 17 "person" in section 302 of the act of December 22, 1989 18 (P.L.687, No.90), known as the Mortgage Bankers and Brokers and 19 Consumer Equity Protection Act, amended June 25, 2001 (P.L.621, 20 No.55), are amended and the section is amended by adding 21 definitions to read:
1 Section 302. Definitions. 2 The following words and phrases when used in this chapter 3 shall have the meanings given to them in this section unless the 4 context clearly indicates otherwise: 5 * * * 6 "Applicant." A person who applies for a license under this 7 chapter. 8 "BANKING INSTITUTION." A STATE-CHARTERED BANK, BANK AND <-- 9 TRUST COMPANY, SAVINGS BANK, PRIVATE BANK, NATIONAL BANK, STATE 10 OR FEDERALLY CHARTERED SAVINGS ASSOCIATION OR A SUBSIDIARY OF 11 ANY OF THE ENTITIES UNDER THIS DEFINITION. 12 * * * 13 ["Commission." The State Real Estate Commission. 14 "Finder's fee" or "referral fee." Any payment of money or 15 other consideration for the referral of a mortgage loan to a 16 lender, but shall not include consideration paid for goods or 17 facilities actually furnished or services actually performed.] 18 * * * 19 ["Limited mortgage broker." An individual who directly or 20 indirectly negotiates or places nonpurchase money mortgage loans 21 for others in the primary market for consideration.] 22 * * * 23 "Mortgage originator." An individual not licensed as a 24 mortgage banker, mortgage broker or loan correspondent under 25 this chapter who solicits, accepts or offers to accept mortgage 26 loan applications or negotiates mortgage loan terms in other 27 than a clerical or ministerial capacity. The term does not 28 include directors, partners or ultimate equitable owners of 10% 29 or more of a licensee. 30 ["Nonpurchase money mortgage loan." A mortgage loan the 20070S0487B1613 - 2 -
1 proceeds of which are not used to finance the purchase of the 2 real property securing the mortgage loan.] 3 "Person." An individual, association, joint venture or 4 joint-stock company, partnership, limited partnership, limited 5 partnership association, limited liability company, business 6 corporation, nonprofit corporation, or any other group of 7 individuals, however organized. 8 * * * 9 Section 2. Sections 303, 304, 305, 306, 307, 308, 309 and 10 310 of the act, amended June 25, 2001 (P.L.621, No.55), are 11 amended to read: 12 Section 303. License requirements and exemptions. 13 (a) License required.--On and after the effective date of 14 this act, no person shall [act as a mortgage banker, loan 15 correspondent, mortgage broker or limited mortgage broker] 16 engage in the first mortgage loan business in this Commonwealth 17 without a license as provided for in this chapter.[, provided, 18 however, that any person licensed as a mortgage banker may also 19 act as a loan correspondent or mortgage broker and any person 20 licensed as a loan correspondent may also act as a mortgage 21 broker without a separate license. A person licensed as a 22 mortgage broker may only perform the services of a mortgage 23 broker.] A mortgage originator may not engage in the first 24 mortgage loan business unless the mortgage originator is 25 employed and supervised by a licensed mortgage banker, mortgage 26 broker or loan correspondent. 27 (a.1) Licensed activity exceptions.-- 28 (1) A mortgage banker may act as a mortgage broker or 29 loan correspondent without a separate mortgage broker or loan 30 correspondent license and, if licensed as an individual, may 20070S0487B1613 - 3 -
1 perform the services of a mortgage originator without a 2 separate mortgage originator license. 3 (2) A loan correspondent may act as a mortgage broker 4 without a separate mortgage broker license and, if licensed 5 as an individual, may perform the services of a mortgage 6 originator without a separate mortgage originator license. 7 (3) A person licensed as a mortgage broker may only 8 perform the services of a mortgage broker. If a mortgage 9 broker is licensed as an individual, a mortgage broker may 10 perform the services of a mortgage originator without a 11 separate mortgage originator license. 12 (b) Exceptions.--The following persons shall not be required 13 to be licensed under this chapter in order to conduct the first 14 mortgage loan business but shall be subject to those provisions 15 of this chapter as specifically provided in this section: 16 [(1) A State-chartered bank, bank and trust company, <-- 17 savings bank, private bank or national bank, a State or 18 federally chartered savings and loan association, a federally 19 chartered savings bank or a State or federally chartered 20 credit union.] <-- 21 (1) A BANKING INSTITUTION OR A STATE OR FEDERALLY <-- 22 CHARTERED CREDIT UNION IF THE PRIMARY REGULATOR OF THE 23 BANKING INSTITUTION OR STATE OR FEDERALLY CHARTERED CREDIT 24 UNION SUPERVISES THE BANKING INSTITUTION OR STATE OR 25 FEDERALLY CHARTERED CREDIT UNION. 26 (2) An attorney authorized to practice law in this 27 Commonwealth, who acts as a mortgage broker in negotiating or 28 placing a mortgage loan in the normal course of legal 29 practice. 30 [(3) A person licensed pursuant to the provisions of the 20070S0487B1613 - 4 -
1 act of February 19, 1980 (P.L.15, No.9), known as the Real 2 Estate Licensing and Registration Act, who is principally 3 engaged in a third-party real estate brokerage business, but 4 only to the extent that he provides information, verbal or 5 written, to or negotiates or places a mortgage loan for a 6 buyer of real estate and is not compensated by the buyer or 7 any other person for providing such information or 8 negotiating or placing such mortgage loan. If he is 9 compensated for providing such information or negotiating or 10 placing such mortgage loan, he shall be subject to the 11 provisions of sections 308, 310, 311 and 314(b), excluding 12 section 308(a)(1). 13 (4) A seller of a dwelling, if he has resided in the 14 dwelling at least one year and as part of the purchase price 15 receives a first mortgage executed by the purchaser.] 16 (5) A person who either originates or negotiates less 17 than three mortgage loans in a calendar year in this 18 Commonwealth unless he is otherwise deemed to be engaged in 19 the first mortgage loan business. 20 [(6) Builders, when obtaining mortgages for their own 21 construction or for the sale of their own construction.] 22 (7) Any agency or instrumentality of the Federal 23 Government or a corporation otherwise created by an act of 24 the United States Congress, including, but not limited to, 25 the Federal National Mortgage Association, the Government 26 National Mortgage Association, the Veterans' Administration, 27 the Federal Home Loan Mortgage Corporation and the Federal 28 Housing Administration. 29 (8) [The] Any agency or instrumentality of State or 30 local government, the District of Columbia or any territory, 20070S0487B1613 - 5 -
1 including the Pennsylvania Housing Finance Agency and other 2 government housing finance agencies. 3 (9) A licensee under the act of April 8, 1937 (P.L.262, 4 No.66), known as the Consumer Discount Company Act, except 5 that any such licensee who makes a mortgage loan other than 6 under the provisions of that act shall be subject to the 7 provisions of sections 304(b)(2) and (3), 308, 310 and 8 314(b), excluding section 308(a)(1). Employees of licensees 9 under the Consumer Discount Company Act that act as mortgage 10 originators shall be subject to the licensing requirements of 11 this chapter. Consumer discount companies that employ 12 mortgage originators shall be subject to the same 13 requirements as mortgage bankers in regard to the employment 14 and supervision of mortgage originators. 15 [(10) Except [for licensees described] as provided in <-- 16 paragraph (9), subsidiaries and affiliates of the following 17 institutions: State-chartered banks, bank and trust 18 companies, savings banks, private banks, savings and loan 19 associations and credit unions or national banks, federally 20 chartered savings and loan associations, federally chartered 21 savings banks and federally chartered credit unions, except 22 that such subsidiaries and affiliates [of institutions <-- 23 enumerated in this paragraph] shall: ENUMERATED IN THIS <-- 24 PARAGRAPH SHALL:]. 25 (10) SUBSIDIARIES AND AFFILIATES OF STATE OR FEDERALLY 26 CHARTERED CREDIT UNIONS EXCEPT THAT THE SUBSIDIARIES AND 27 AFFILIATES SHALL: 28 (i) be subject to the provisions of sections 308, 29 309(a)(3), 310 and 314(b), excluding section 308(a)(1); 30 (ii) deliver as required to the department annually 20070S0487B1613 - 6 -
1 copies of financial reports made to all supervisory 2 agencies; and 3 (iii) be registered with the department. 4 (11) Employees of a mortgage banker, mortgage broker and 5 loan correspondent licensee [or excepted persons acting for 6 their employers.] to the extent that such employees are not 7 otherwise required to be licensed as mortgage originators. 8 [(12) An insurance company, association or exchange 9 authorized to transact business in this Commonwealth under 10 the act of May 17, 1921 (P.L.682, No.284), known as The 11 Insurance Company Law of 1921, and any subsidiaries and 12 affiliates thereof, except that such subsidiaries and 13 affiliates shall: 14 (i) be subject to the provisions of sections 308, 15 309(a)(3), 310 and 314(b), excluding section 308(a)(1); 16 (ii) deliver as required to the department annually 17 copies of financial reports made to all supervisory 18 agencies; and 19 (iii) be registered with the department.] 20 (13) Any person who makes a mortgage loan to an employee 21 of that person as an employment benefit, given that person 22 does not hold himself out to the public as a first mortgage 23 lender. 24 (14) Nonprofit corporations making mortgage loans to 25 promote home ownership or improvements for the disadvantaged, 26 given that the corporation does not hold itself out to the 27 public as a first mortgage lender. 28 (15) A nonprofit corporation making not more than 12 29 mortgage loans a calendar year with its own funds, that shall 30 not include funds borrowed through warehouse lines of credit 20070S0487B1613 - 7 -
1 or other sources for the purpose of making mortgage loans, 2 which loans are retained in the corporation's own portfolios 3 and not regularly sold to others and are made to promote and 4 advance the cultural traditions and lifestyles of bona fide 5 religious organizations provided that the corporation does 6 not hold itself out to the public as a first mortgage lender. 7 (16) Employees of excepted persons enumerated in this 8 section, unless otherwise provided in this subsection. 9 (c) Loans for business or commercial purposes.--This chapter 10 shall not apply to mortgage loans made for business or 11 commercial purposes. 12 Section 304. Application for license. 13 (a) Contents.--An application for a license to act as a 14 mortgage banker, loan correspondent, mortgage broker or [limited 15 mortgage broker] mortgage originator shall be on such forms as 16 may be prescribed and provided by the department. [Each] In the 17 case of the mortgage banker, loan correspondent or mortgage 18 broker, the application shall include the address or addresses 19 where business is to be conducted, the full name, official title 20 and business address of each director and principal officer of 21 the business and any other information that may be required by 22 the department. In the case of a mortgage originator, the 23 application shall include the name of the applicant, the name of 24 the licensee employing the applicant and the location of the 25 employer licensee to which the applicant is assigned and any 26 other information that may be required by the department. An 27 applicant shall demonstrate to the department that policies and 28 procedures have been developed to receive and process customer 29 inquiries and grievances promptly and fairly. 30 (b) Mortgage banker's license.--The department shall issue a 20070S0487B1613 - 8 -
1 mortgage banker's license applied for pursuant to this chapter 2 if the applicant establishes that he has met the following 3 conditions: 4 (1) That he is approved by or meets the current criteria 5 for approval of at least one of the following: 6 (i) Federal National Mortgage Association. 7 (ii) Federal Home Loan Mortgage Corporation. 8 (iii) Federal Housing Administration. 9 (2) That he maintains or is approved for, and will 10 continue to maintain as a licensee, a line of credit, 11 repurchase agreement or equivalent mortgage-funding 12 capability of not less than $1,000,000. 13 (3) That he has a minimum tangible net worth of $250,000 14 at the time of application and will, at all times thereafter, 15 maintain such minimum net worth, provided, however, that 16 those applicants who were in business prior to June 20, 1990, 17 may be licensed with a minimum tangible net worth of $100,000 18 if, in the opinion of the department, the applicant has 19 established that it has an otherwise adequate financial 20 structure and operating history. 21 (4) That he will maintain fidelity bond coverage in 22 accordance with the guidelines established by the Federal 23 National Mortgage Association or the Federal Home Loan 24 Mortgage Corporation. 25 (b.1) Loan correspondent's license.--The department shall 26 issue a loan correspondent's license applied for pursuant to 27 this chapter if the applicant establishes that he has met the 28 following conditions: 29 (1) That he is eligible to and will obtain and maintain 30 a bond in the amount of $100,000, in a form acceptable to the 20070S0487B1613 - 9 -
1 department, prior to the issuance of the license, from a 2 surety company authorized to do business in this 3 Commonwealth. The bond shall run to the Commonwealth of 4 Pennsylvania and shall be for the use of the Commonwealth and 5 any person or persons who obtain a judgment against the loan 6 correspondent for failure to carry out the terms of any 7 provision for which advance fees are paid. No bond shall 8 comply with the requirements of this section unless it 9 contains a provision that it shall not be canceled for any 10 cause unless notice of intention to cancel is given to the 11 department at least 30 days before the day upon which 12 cancellation shall take effect. 13 (2) That he has a minimum tangible net worth of $100,000 14 at the time of application and will, at all times thereafter, 15 maintain such minimum net worth. 16 (3) Notwithstanding subparagraph (ii), an applicant who 17 was in the business as a mortgage banker, mortgage broker or 18 otherwise authorized to engage in the first mortgage loan 19 business by the department prior to the effective date of 20 this section who files an application within 90 days after 21 the effective date of this section may be licensed for one 22 year with a minimum tangible net worth of $50,000. 23 Thereafter, for a period of one year, the applicant may 24 continue to be licensed with a minimum tangible net worth of 25 $75,000. Following that period, the applicant may continue to 26 be licensed with a minimum tangible net worth of $100,000. 27 (c) Mortgage broker's license.-- 28 (1) The department shall issue a mortgage broker's 29 license applied for pursuant to this chapter if the applicant 30 establishes that he is eligible to and will obtain and 20070S0487B1613 - 10 -
1 maintain a bond in the amount of $100,000, in a form 2 acceptable to the department, prior to the issuance of the 3 license, from a surety company authorized to do business in 4 this Commonwealth. The bond shall be a penal bond conditioned 5 on compliance with this chapter and subject to forfeiture by 6 the department and shall run to the Commonwealth of 7 Pennsylvania for its use. The bond shall also be for the use 8 of any person against the mortgage broker for failure to 9 carry out the terms of any provision for which advance fees 10 are paid. If such person is aggrieved, he may, with the 11 written assent of the department, recover advance fees and 12 costs from the bond by filing a claim with the surety company 13 or maintaining an action on the bond. In the alternative, an 14 aggrieved person may recover advance fees and costs by filing 15 a formal complaint against the mortgage broker with the 16 department which shall adjudicate the matter. Such an 17 adjudication shall be binding upon the surety company and 18 enforceable by the department in Commonwealth Court and by an 19 aggrieved person in any court. Any aggrieved person seeking 20 to recover advance fees and costs from a bond that has 21 already been forfeited by the department or which the 22 department is in the process of forfeiting may recover 23 payment on such bond if, after filing a petition with the 24 department, the department assents to his requested payment 25 or portion thereof. The department may pay the aggrieved 26 person from the bond proceeds it recovered in such case. 27 Nothing in this section shall be construed as limiting the 28 ability of any court or district justice to award to any 29 aggrieved person other damages, court costs and attorney fees 30 as permitted by law, but those claims that are not advance 20070S0487B1613 - 11 -
1 fees or related costs may not be recovered from the bond. The 2 department, in its discretion, may assent to or order pro 3 rata or other recovery on the bond for any aggrieved person 4 if claims against the bond may or do exceed its full monetary 5 amount. No bond shall comply with the requirements of this 6 section unless it contains a provision that it shall not be 7 canceled for any cause unless notice of intention to cancel 8 is given to the department at least 30 days before the day 9 upon which cancellation shall take effect. Cancellation of 10 the bond shall not invalidate the bond regarding the period 11 of time it was in effect. 12 (2) Mortgage brokers who can demonstrate to the 13 satisfaction of the department that they do not accept 14 advance fees shall be exempt from the bond requirement of 15 this subsection. 16 [(c.1) Limited mortgage broker's license.--The department 17 shall issue a limited mortgage broker's license applied for 18 pursuant to this chapter if the applicant establishes that he is 19 an individual who operates from one location and maintains no 20 branch offices and can demonstrate to the satisfaction of the 21 department that he accepts or collects no advance fees.] 22 (c.2) Mortgage originator license.--A mortgage originator 23 shall be an employee of a single mortgage banker, mortgage 24 broker or loan correspondent licensed under this chapter, which 25 licensee shall directly supervise, control and maintain 26 responsibility for the acts and omissions of the mortgage 27 originator. A mortgage originator shall be assigned to a 28 licensed location of the employer licensee. 29 (d) [Foreign corporation.--] Requirements for out-of-State 30 applicants.-- 20070S0487B1613 - 12 -
1 (1) If the applicant is [a foreign corporation] not a 2 resident of this Commonwealth, that [corporation] applicant 3 shall be authorized to do business in this Commonwealth in 4 accordance with the law of this Commonwealth regulating 5 corporations and other entities conducting business in this 6 Commonwealth and shall maintain at least one office in this 7 Commonwealth which is the office that shall be licensed as 8 the principal place of business for the purposes of this 9 chapter. [A foreign corporation which will act only in the 10 capacity of a] A wholesale table funder shall be exempt from 11 the requirement that it maintain at least one office in this 12 Commonwealth. [The corporation] 13 (2) An applicant shall file with the application an 14 irrevocable consent, duly acknowledged, that suits and 15 actions may be commenced against that [licensee] person in 16 the courts of this Commonwealth by the service of process of 17 any pleading upon the department in the usual manner provided 18 for service of process and pleadings by the statutes and 19 court rules of this Commonwealth. The consent shall provide 20 that this service shall be as valid and binding as if service 21 had been made personally upon the [licensee] person in this 22 Commonwealth. In all cases where process or pleadings are 23 served upon the department pursuant to the provisions of this 24 section, such process or pleadings shall be served in 25 triplicate; one copy shall be filed in the [Office of the 26 Secretary of Banking] department and the others shall be 27 forwarded by the department, by certified or registered mail, 28 return receipt requested, to the last known principal place 29 of business in the Commonwealth and to the [corporation's] 30 person's principal place of business. 20070S0487B1613 - 13 -
1 [(e) Education.--To maintain a mortgage banker's, a loan 2 correspondent's or a mortgage broker's license, the applicant or 3 licensee shall demonstrate to the satisfaction of the secretary 4 that at least one individual from each licensed office has 5 attended a minimum of six hours of such continuing education 6 each year. To maintain a limited mortgage broker's license, the 7 licensee shall demonstrate to the satisfaction of the secretary 8 that he has attended at least two hours of continuing education 9 each year. The secretary shall delineate the requirements for 10 such continuing education by regulation within three years of 11 the effective date of this act. The secretary may review and 12 approve continuing education programs and providers to satisfy 13 the continuing education requirement. The secretary may charge 14 providers of continuing education programs a fee, to be 15 determined by the secretary, for department review of continuing 16 education programs and providers.] 17 (e) Education requirements.-- 18 (1) In order to obtain a license under this chapter, an 19 applicant shall submit to the department with its application 20 evidence that the applicant or an officer of the applicant 21 has successfully completed a minimum of 12 hours of 22 instruction and a testing program regarding the first 23 mortgage loan business and the provisions of this chapter, 24 the act of January 30, 1974 (P.L.13, No.6), referred to as 25 the Loan Interest and Protection Law, and relevant Federal 26 law including the Real Estate Settlement Procedures Act of 27 1974 (88 Stat. 1724, 12 U.S.C. §§ 2601-2617), the Truth in 28 Lending Act (82 Stat. 146, 15 U.S.C. §§ 1601-1667f), and the 29 Equal Credit Opportunity Act (88 Stat. 1521, 15 U.S.C. §§ 30 1691-1691f). 20070S0487B1613 - 14 -
1 (2) In order to maintain a license: 2 (i) A mortgage banker, mortgage broker or loan 3 correspondent shall demonstrate to the satisfaction of 4 the department that at least one individual from each 5 licensed office that is not a mortgage originator, and 6 all mortgage originators employed by the licensee, have 7 attended a minimum of six hours of continuing education 8 each year. 9 (ii) A mortgage originator licensee shall 10 demonstrate to the satisfaction of the department that he 11 has attended a minimum of six hours of continuing 12 education each year. 13 (3) The department shall delineate the requirements for 14 prequalification education, testing and continuing education 15 by regulation, including by permitting in-house 16 prequalification education, testing and continuing education. 17 The department may review and approve education programs and 18 providers to satisfy the education requirements. The 19 department may charge providers of education programs a fee, 20 to be determined by the department, for department review of 21 education programs and providers. 22 (f) Duty to update.--All applicants and licensees shall be 23 required to provide the department with written notice of the 24 change in any information contained in an application for a 25 license or for any renewal of a license within ten days of an 26 applicant or licensee becoming aware of such change. 27 (g) License renewals.--Licenses shall be issued for terms of 28 12 months and may be renewed by the department each year on a 29 schedule set by the department upon application by the licensee 30 and the payment of all applicable renewal fees. The licensee 20070S0487B1613 - 15 -
1 shall demonstrate to the department that it is conducting the 2 first mortgage loan business in accordance with the requirements 3 of this chapter and that the directors, officers, partners, 4 employees, agents and ultimate equitable owners of 10% or more 5 of the licensee continue to meet all of the initial requirements 6 for licensure required by this chapter unless otherwise 7 determined by the department. 8 Section 305. Annual license fee. 9 [(a) General rule.--A mortgage banker, mortgage broker or 10 applicant shall pay to the department at the time an application 11 is filed an initial license fee for the principal place of 12 business and an additional license fee for each branch office as 13 provided for in section 603-A of the act of April 9, 1929 14 (P.L.177, No.175), known as The Administrative Code of 1929. On 15 or before July 1 of each year and thereafter, a licensee shall 16 pay a license renewal fee for the principal place of business 17 and an additional license renewal fee for each branch office as 18 provided for in section 603-A of The Administrative Code of 19 1929. An applicant for a license to operate as a loan 20 correspondent shall pay the department the same fee for the 21 initial license for principal place of business, each branch 22 office and annual license renewal as provided for mortgage 23 bankers licensed under section 603-A of The Administrative Code 24 of 1929. An applicant for a license to operate as a limited 25 mortgage broker shall pay to the department at the time an 26 application is filed an initial license fee of $250. On or 27 before July 1 of each year thereafter, a limited mortgage broker 28 licensee shall pay a renewal fee of $200. 29 (b) Recovery of costs.--No abatement of any license fee 30 shall be made if the license is issued for a period of less than 20070S0487B1613 - 16 -
1 one year. The department shall be entitled to recover any cost 2 of investigation in excess of license or renewal fees from the 3 licensee or from any person who is not licensed under this 4 chapter but who is presumed to be engaged in business 5 contemplated by this chapter.] 6 (a) Initial application fees.--An applicant shall pay to the 7 department at the time an application is filed an initial 8 application fee as follows: 9 (1) for mortgage bankers and loan correspondents, $1,500 10 for the principal place of business in this Commonwealth and 11 an additional fee of $1,500 for each branch office; 12 (2) for mortgage brokers, $1,000 for the principal place 13 of business in this Commonwealth and an additional fee of 14 $250 for each branch office; or 15 (3) for mortgage originators, $200. 16 (b) Renewal application fees.--Prior to each annual renewal 17 of a license, a licensee shall pay to the department a license 18 renewal fee as follows: 19 (1) for mortgage bankers and loan correspondents, $750 20 for the principal place of business in this Commonwealth and 21 an additional fee of $750 for each branch office; 22 (2) for mortgage brokers, $500 for the principal place 23 of business in this Commonwealth and an additional fee of 24 $250 for each branch office; or 25 (3) for mortgage originators, $200 $100. <-- 26 (c) Fee limitation.--For a licensee that employs 50 or more 27 mortgage originators, the initial application fee and license 28 renewal fee shall be $50 per mortgage originator, to a maximum 29 of $10,000 total per year. 30 (d) No abatement of fee.--No abatement of a licensee fee 20070S0487B1613 - 17 -
1 shall be made if the license is issued for a period of less than 2 one year. 3 Section 306. Issuance of license. 4 (a) Time limit.--Within 60 days after a complete application 5 is received, the department shall either issue a license or, for 6 any reason for which the department may suspend, revoke or 7 refuse to renew a license as provided for by section 313, refuse 8 to issue a license. Upon receipt of an application for license, 9 the department shall conduct such investigation of the applicant 10 or a director, officer, partner, employee, agent or ultimate 11 equitable owner of 10% or more of the applicant as it deems 12 necessary. [to determine that the applicant and its officers, 13 directors and principals are of good character and ethical 14 reputation.] The 60-day time limit specified in this subsection 15 may be extended by the department for an additional 30 days if 16 the department determines that such extension is necessary. The 17 department shall provide written notification to any applicant 18 whose application review has been extended and include the final 19 date by which a decision shall be rendered regarding the 20 application. 21 (b) Appeal of denial.--If the department refuses to issue a 22 license, it shall notify the applicant, in writing, of the 23 denial and the reason therefor and of the applicant's right to 24 appeal from such action to the [Commonwealth Court] secretary. 25 An appeal from the department's refusal to approve an 26 application for a license shall be filed by the applicant within 27 30 days of notice thereof. 28 (c) Contents of license.--Each license issued by the 29 department shall specify: 30 (1) The name and address of the licensee, the address so 20070S0487B1613 - 18 -
1 specified to be that of the licensee's principal place of 2 business within this Commonwealth or, for a licensee acting 3 only in the capacity of a wholesale table funder, either in 4 or outside of this Commonwealth. 5 (2) The licensee's reference number, which may remain 6 the same from year to year despite variations in annual 7 license numbers which may result from the renewal of licenses 8 by mechanical techniques. 9 (3) Such other information as the department shall 10 require to carry out the purposes of this chapter. 11 (d) Denial of license due to conviction.-- 12 (1) The department may deny a license if it finds that 13 the applicant or any person who is a director, officer, 14 partner, agent, employee or ultimate equitable owner of 10% 15 or more of the applicant has been convicted of a 16 [misdemeanor] crime of moral turpitude or felony in any 17 jurisdiction or of a crime which, if convicted in this 18 Commonwealth, would constitute a [misdemeanor] crime of moral 19 turpitude or felony under the laws of this Commonwealth. For 20 the purposes of this chapter, a person shall be deemed to 21 have been convicted of a crime if the person: 22 (i) shall have pleaded guilty or nolo contendere to 23 a charge thereof before a court or Federal magistrate 24 [or]; or 25 (ii) shall have been found guilty thereof by the 26 decision or judgment of a court or Federal magistrate or 27 by the verdict of a jury, irrespective of the 28 pronouncement of sentence or the suspension thereof, 29 unless the pleas of guilty or nolo contendere or the 30 decision, judgment or verdict shall have been set aside, 20070S0487B1613 - 19 -
1 vacated, reversed or otherwise abrogated by lawful 2 judicial process. 3 (2) A license under this chapter shall be deemed to be a 4 covered license within the meaning of section 405 of the act 5 of May 15, 1933 (P.L.565, No.111), known as the Department of 6 Banking Code. The department shall notify a licensee if a 7 covered individual within the meaning of section 405 of the 8 Department of Banking Code that is or will be employed or 9 contracted by the licensee has a criminal background that 10 renders the employee unfit for employment in the first 11 mortgage loan business. 12 (e) Denial of license for other reason.--The department may 13 deny a license or otherwise restrict a license if it finds 14 [that, within two years prior to or from the date of the 15 application,] the applicant or any person who is a director, 16 officer, partner, agent, employee or ultimate equitable owner of 17 10% or more of the applicant: 18 (1) has had a license application or license issued by 19 the department denied, not renewed, suspended or revoked; 20 (2) is the subject of an order of the department; 21 [denying, suspending or revoking a license as a mortgage 22 banker, loan correspondent, mortgage broker or limited 23 mortgage broker; or] 24 (3) has violated or failed to comply with any provision 25 of this chapter or any [rule] regulation, statement of policy 26 or order of the department[.]; 27 (4) does not possess the financial responsibility, 28 character, reputation, integrity and general fitness to 29 command the confidence of the public and to warrant the 30 belief that the first mortgage loan business will be operated 20070S0487B1613 - 20 -
1 lawfully, honestly, fairly and within the legislative intent 2 of this chapter and in accordance with the general laws of 3 this Commonwealth; or 4 (5) has an outstanding debt to the Commonwealth or any 5 Commonwealth agency. 6 (f) Imposing conditions on licenses.--The department may 7 impose conditions on the issuance of any license under this 8 chapter. If the department determines that conditions imposed 9 upon a licensee have not been fulfilled, the department may take 10 any action authorized under this chapter against such licensee 11 that the department deems necessary. 12 (g) Conditional licenses.--In the case of mortgage 13 originator applicants, the department may issue mortgage 14 originator licenses effective immediately upon receipt of an 15 application, which licenses shall be conditional licenses issued 16 under this subsection. 17 Section 307. License duration. 18 A license issued by the department shall: 19 (1) Be renewed on [July 1 of each year upon payment of 20 the annual renewal fee and after a determination that the 21 licensee is conducting business in accordance with the 22 provisions of this chapter is made by the department.] 23 completion of the requirements of section 304(g). No refund 24 of any portion of the license fee shall be made if the 25 license is voluntarily surrendered to the department or 26 suspended or revoked by the department prior to its 27 expiration date. 28 (2) Be immediately invalid if the [mortgage banker's 29 corporate charter is voided in accordance with the provisions 30 of any law of this Commonwealth or any other state.] 20070S0487B1613 - 21 -
1 licensee's authority to conduct business is voided under any 2 law of this Commonwealth or any other state, unless the 3 licensee demonstrates to the satisfaction of the department 4 that the applicable court or governmental entity was clearly 5 erroneous in voiding the licensee's authority to conduct 6 business. 7 (3) Not be assignable or transferable by operation of 8 law or [otherwise without the written consent of the 9 department] in any other fashion. 10 Section 308. Licensee requirements. 11 (a) Requirements on licensee.--A licensee shall: 12 (1) [Conspicuously] In the case of a mortgage banker, 13 mortgage broker or loan correspondent, conspicuously display 14 [its license] at each licensed place of business[.] its 15 license and copies of the licenses of all mortgage 16 originators assigned to that location. In the case of a 17 mortgage originator, the license shall be maintained in the 18 immediate possession of the licensee whenever the licensee is 19 engaged in the mortgage loan business. 20 (2) Maintain, at its principal place of business within 21 this Commonwealth, or at such place within or outside this 22 Commonwealth if agreed to by the [Secretary of Banking or the 23 commission] department, either the original or a copy of such 24 books, accounts, records and documents, or electronic or 25 other similar access thereto, of the business conducted under 26 the license as may be prescribed by the department [or 27 commission] to enable [them] it to determine whether the 28 business of the licensee is being conducted in accordance 29 with the provisions of this chapter and the regulations, 30 statements of policy and orders[, rules and regulations] 20070S0487B1613 - 22 -
1 issued under this chapter. The department, at its 2 determination, shall have free access to and authorization to 3 examine records maintained within or outside of this 4 Commonwealth. The costs of the examination, including travel 5 costs, shall be borne by the licensee. The [secretary] 6 department may deny or revoke the authority to maintain 7 records outside of this Commonwealth for good cause in the 8 interest of consumer protection for Commonwealth borrowers, 9 including for the licensee's failure to provide books, 10 accounts, records or documents to the department upon 11 request. 12 (3) [Annually] In the case of a mortgage banker, <-- 13 mortgage broker or loan correspondent, annually [(3) <-- 14 ANNUALLY, before May 1, file a report with the department or 15 commission which shall set forth such information as the 16 department or commission shall require concerning the 17 business conducted as a licensee during the preceding 18 calendar year. The report shall be in writing, under oath, 19 and on a form provided by the department.] Licensees failing <-- 20 to file the required report by May 1 shall be subject to a 21 penalty of $100 each day after May 1 until the report is 22 filed. 23 (3) IN THE CASE OF A MORTGAGE BANKER, MORTGAGE BROKER OR <-- 24 LOAN CORRESPONDENT, ANNUALLY, ON A DATE DETERMINED BY THE 25 DEPARTMENT, FILE A REPORT WITH THE DEPARTMENT WHICH SHALL SET 26 FORTH THE INFORMATION AS THE DEPARTMENT SHALL REQUIRE 27 CONCERNING THE BUSINESS CONDUCTED AS A LICENSEE DURING THE 28 PRECEDING CALENDAR YEAR. THE REPORT SHALL BE ON A FORM 29 PROVIDED BY THE DEPARTMENT. LICENSEES FAILING TO FILE THE 30 REQUIRED REPORT ON THE DATE REQUIRED BY THE DEPARTMENT MAY BE 20070S0487B1613 - 23 -
1 SUBJECT TO A PENALTY OF $100 FOR EACH DAY AFTER THE DUE DATE 2 THE REPORT IS NOT FILED. 3 (4) Be subject to examination by the department [or 4 commission] at the discretion of the department [or 5 commission] at which time the department [or commission] 6 shall have free access, during regular business hours, to the 7 licensee's place or places of business in this Commonwealth 8 and to all instruments, documents, accounts, books and 9 records which pertain to a licensee's first mortgage loan 10 business, whether maintained in or outside of this 11 Commonwealth. The department [or commission] may examine a 12 licensee at any time if the department [or commission] deems 13 such examination to be necessary or desirable. The cost of 14 any such examination shall be borne by the licensee. 15 (5) Comply with all provisions of the act of January 30, 16 1974 (P.L.13, No.6), referred to as the Loan Interest and 17 Protection Law, provided, however, that this shall not be 18 deemed an override of section 501 of the Depository 19 Institutions Deregulation and Monetary Control Act of 1980 20 (94 Stat. 161, 12 U.S.C. § 1735f-7a) or the Alternative 21 Mortgage Transaction Parity Act of 1982 (96 Stat. 1545, 12 22 U.S.C. § 3801 et seq.). 23 (6) Comply with the provisions of the act of December 24 23, 1983 (P.L.385, No.91), entitled "An act amending the act 25 of December 3, 1959 (P.L.1688, No.621), entitled, as amended, 26 'An act to promote the health, safety and welfare of the 27 people of the Commonwealth by broadening the market for 28 housing for persons and families of low and moderate income 29 and alleviating shortages thereof, and by assisting in the 30 provision of housing for elderly persons through the creation 20070S0487B1613 - 24 -
1 of the Pennsylvania Housing Finance Agency as a public 2 corporation and government instrumentality; providing for the 3 organization, membership and administration of the agency, 4 prescribing its general powers and duties and the manner in 5 which its funds are kept and audited, empowering the agency 6 to make housing loans to qualified mortgagors upon the 7 security of insured and uninsured mortgages, defining 8 qualified mortgagors and providing for priorities among 9 tenants in certain instances, prescribing interest rates and 10 other terms of housing loans, permitting the agency to 11 acquire real or personal property, permitting the agency to 12 make agreements with financial institutions and Federal 13 agencies, providing for the purchase by persons of low and 14 moderate income of housing units, and approving the sale of 15 housing units, permitting the agency to sell housing loans, 16 providing for the promulgation of regulations and forms by 17 the agency, prescribing penalties for furnishing false 18 information, empowering the agency to borrow money upon its 19 own credit by the issuance and sale of bonds and notes and by 20 giving security therefor, permitting the refunding, 21 redemption and purchase of such obligations by the agency, 22 prescribing remedies of holders of such bonds and notes, 23 exempting bonds and notes of the agency, the income 24 therefrom, and the income and revenues of the agency from 25 taxation, except transfer, death and gift taxes; making such 26 bonds and notes legal investments for certain purposes; and 27 indicating how the act shall become effective,' providing for 28 homeowner's emergency assistance." 29 (7) Provide for periodic accounting of any escrow 30 accounts held by the licensee to the borrowers not less than 20070S0487B1613 - 25 -
1 annually, showing the amounts received from the borrower and 2 the amounts disbursed. 3 (8) Refund all fees, other than those fees paid by the 4 licensee to a third party, paid by an applicant borrower when 5 a mortgage loan is not produced within the time specified by 6 the mortgage banker, loan correspondent[,] or mortgage broker 7 [or limited mortgage broker] at the rate, term and overall 8 cost agreed to by the borrower, provided, however, that this 9 provision shall not apply when the failure to produce a loan 10 is due solely to the borrower's negligence, his refusal to 11 accept and close on a loan commitment or his refusal or 12 inability to provide information necessary for processing, 13 including, but not limited to, employment verifications and 14 verifications of deposits. The licensee shall disclose to the 15 borrower, in writing, at the time of a loan application which 16 fees paid or to be paid are nonrefundable. 17 (9) Ensure that all lock-in agreements shall be in 18 writing and shall contain at least the following provisions: 19 (i) The expiration date of the lock-in, if any. 20 (ii) The interest rate locked in, if any. 21 (iii) The discount points locked in, if any. 22 (iv) The [commitment] fee locked in, if any. 23 (v) The lock-in fee, if any. 24 (10) Include in all advertisements language indicating 25 that the licensee is licensed by the department. In the case 26 of a mortgage originator, include in all advertising the name 27 of the mortgage originator's employer. 28 (11) Allow for the evidence of any insurance required in 29 connection with a loan by a policy or binder or a copy of 30 either. 20070S0487B1613 - 26 -
1 (12) In the case of a mortgage broker, mortgage lender 2 or mortgage loan correspondent: 3 (i) maintain supervision and control of, and 4 responsibility for, the acts and omissions of all 5 mortgage originators employed by the licensee; 6 (ii) maintain a list of all current and former 7 mortgage originators employed by the licensee and the 8 dates of such employment; and 9 (iii) in the event that a licensee has evidence that 10 a mortgage originator employed by the licensee has 11 engaged in any activity that is illegal or in violation 12 of this chapter or any regulation or statement of policy 13 promulgated pursuant to this chapter, the licensee shall 14 provide the department with written notification of such 15 evidence and the licensee's proposed corrective measures 16 within 30 days. A licensee shall not be liable to a 17 mortgage originator in connection with such notification. 18 (b) Accounting records.--[After the effective date of this 19 act, the] The licensee's accounting records must be constructed 20 and maintained in compliance with generally accepted accounting 21 principles [if the licensee is a mortgage banker or in such 22 manner] or as may be provided by regulation [for all other 23 licensees, and all]. All of the aforementioned instruments, 24 documents, accounts, books and records shall be kept separate 25 and apart from the records of any other business conducted by 26 the licensee and shall be preserved and kept available for 27 investigation or examination by the department [or commission] 28 for at least two years after a mortgage loan has been paid in 29 full. The provisions of this subsection shall not apply to any 30 instrument, document, account, book or record that is assigned, 20070S0487B1613 - 27 -
1 sold or transferred to another person, nor shall the two-year 2 requirement apply to an instrument or document which must be 3 returned to a borrower at the time a mortgage loan is paid in 4 full. 5 (c) Copies.--If copies of instruments, documents, accounts, 6 books or records are maintained under subsection (a)(2), they 7 may be photostatic, microfilm or electronic copies or copies 8 provided in some other manner approved by the [Secretary of 9 Banking or the commission] department, as long as access to 10 information required by the [secretary or commission] department 11 exists electronically at all times within this Commonwealth. 12 [(d) Limited powers.--The powers conferred upon the 13 commission by this section, excluding subsection (a)(1), shall 14 only be exercised by the commission in relation to persons 15 licensed pursuant to the provisions of the act of February 19, 16 1980 (P.L.15, No.9), known as the Real Estate Licensing and 17 Registration Act, who are subject to this section under section 18 303(b)(3), and the exercise of such power by the commission in 19 relation to such persons shall be exclusive.] 20 Section 309. Licensee limitations. 21 (a) Prohibitions.--A licensee shall not: 22 (1) Transact any business subject to the provisions of 23 this chapter under any other name except those designated in 24 its license[.] or registered or otherwise qualified as a 25 fictitious name. A mortgage originator may not use any name 26 other than the mortgage originator's personal legal name. A 27 licensee that changes its name or place or places of business 28 shall [immediately] notify the department within ten days of 29 the change, which shall issue a certificate, if appropriate, 30 to the licensee which shall specify the licensee's new name 20070S0487B1613 - 28 -
1 or address. 2 (2) Conduct any business other than any business 3 regulated by the department in any place of business licensed 4 pursuant to this chapter without at least 90 days' prior 5 written notification to the department. 6 (3) Disburse the proceeds of a mortgage loan in any form 7 other than cash, electronic fund transfer, certified check or 8 cashier's check where such proceeds are disbursed by the 9 licensee to a closing agent. This paragraph shall not be 10 construed as requiring a lender to utilize a closing agent 11 and shall not apply to disbursements by check directly from 12 the licensee's account payable to the borrower, borrower 13 designees or other parties due funds from the closing. 14 (4) In the case of a loan correspondent, service 15 mortgage loans. 16 (5) In the case of a mortgage broker or [limited 17 mortgage broker] mortgage originator, commit to close or 18 close mortgage loans in its own name, service mortgage loans, 19 enter into lock-in agreements or collect lock-in fees, 20 provided, however, that a mortgage broker or [limited 21 mortgage broker] mortgage originator can provide a lender's 22 lock-in agreement to a borrower on behalf of that lender and 23 collect lock-in fees on the lender's behalf payable to that 24 lender. 25 (6) In the case of a mortgage originator, accept any 26 fees from consumers in the mortgage originator's own name. A 27 mortgage originator may accept fees payable to the mortgage 28 originator's employer licensee and fees payable to third- 29 party entities on behalf of the mortgage originator's 30 employer licensee. A mortgage originator may not accept 20070S0487B1613 - 29 -
1 advance fees payable to the mortgage originator's employer 2 licensee unless such licensee is authorized to collect 3 advance fees under this chapter. 4 (b) Authority to close loans in attorneys' and title 5 insurance companies or agencies' offices.--Nothing contained in 6 this chapter shall prohibit any licensee or person exempt from 7 licensure hereunder from closing any loans made under the 8 provisions of this chapter in the offices of attorneys-at-law 9 licensed by and located in this Commonwealth and title insurance 10 companies or agencies licensed by and located in this 11 Commonwealth. 12 Section 310. Authority of department or commission. 13 [(a) Department regulations.--Except as provided in 14 subsection (b), the department shall have the authority to issue 15 rules and regulations and orders as may be necessary for the 16 proper conduct of the business of a mortgage banker, loan 17 correspondent, a mortgage broker or limited mortgage broker and 18 for the enforcement of this chapter, including, but not limited 19 to, cease and desist orders, notices of fines and such other 20 orders as the department in its discretion may issue. 21 (b) Joint regulations.--The department and the commission 22 shall have the authority to jointly issue rules and regulations 23 as may be necessary to carry out the purposes of sections 308, 24 310 and 314(b), excluding section 308(a)(1). Initial rules and 25 regulations shall be jointly issued by the department and the 26 commission within 180 days after the effective date of this 27 subsection. 28 (c) Powers.--The department and the commission shall have 29 the authority to: 30 (1) Examine any instrument, document, account, book, 20070S0487B1613 - 30 -
1 record or file of a licensee or any other person, or make 2 such other investigation as may be necessary to administer 3 the provisions of this chapter. 4 (2) Conduct administrative hearings on any matter 5 pertaining to this chapter, issue subpoenas to compel the 6 attendance of witnesses and the production of instruments, 7 documents, accounts, books and records at any such hearing, 8 which may be retained by the department or commission until 9 the completion of all proceedings in connection with which 10 they were produced, and administer oaths and affirmations to 11 any person whose testimony is required. In the event a person 12 fails to comply with a subpoena issued by the department or 13 commission or to testify on any matter concerning which he 14 may be lawfully interrogated, on application by the 15 department or commission, the Commonwealth Court may issue an 16 order requiring the attendance of such person, the production 17 of instruments, documents, accounts, books or records or the 18 giving of testimony. 19 (3) Request and receive any information or records of 20 any kind, including a report of criminal history record 21 information, from any Federal, State, local or foreign 22 government entity, regarding any applicant for a license, 23 licensee or any person related in any way to the business of 24 such applicant or licensee, at a cost to be paid by the 25 applicant or licensee. 26 (d) Limited powers.--The powers conferred upon the 27 commission by subsection (c) shall only be exercised by the 28 commission in relation to persons licensed pursuant to the 29 provisions of the act of February 19, 1980 (P.L.15, No.9), known 30 as the Real Estate Licensing and Registration Act, who are 20070S0487B1613 - 31 -
1 subject to subsection (c) under section 303(b)(3) and the 2 exercise of such power by the commission in relation to such 3 persons shall be exclusive.] 4 (a) General authority.--The department shall have the 5 authority to: 6 (1) Examine any instrument, document, account, book, 7 record or file of a licensee or any person having a 8 connection to the licensee or make such other investigation 9 as may be necessary to administer the provisions of this 10 chapter. Pursuant to this authority, the department may 11 remove any instrument, document, account, book, record or 12 file of a licensee to a location outside of the licensee's 13 office location. The costs of the examination shall be borne 14 by the licensee or the entity subject to the examination. 15 (2) Conduct administrative hearings on any matter 16 pertaining to this chapter, issue subpoenas to compel the 17 attendance of witnesses and the production of instruments, 18 documents, accounts, books and records at any such hearing. 19 The instruments, documents, accounts, books and records may 20 be retained by the department until the completion of all 21 proceedings in connection with which the materials were 22 produced. A department official may administer oaths and 23 affirmations to a person whose testimony is required. In the 24 event a person fails to comply with a subpoena issued by the 25 department or to testify on a matter concerning which he may 26 be lawfully interrogated, on application by the department, 27 the Commonwealth Court may issue an order requiring the 28 attendance of the person, the production of instruments, 29 documents, accounts, books and records and the giving of 30 testimony. 20070S0487B1613 - 32 -
1 (3) Request and receive information or records of any 2 kind, including reports of criminal history record 3 information from any Federal, state, local or foreign 4 government entity regarding an applicant for a license, 5 licensee or person related in any way to the business of the 6 applicant or licensee, at a cost to be paid by the applicant 7 or licensee. 8 (4) Require a licensee or nonlicensee to pay the 9 department's costs incurred while conducting an investigation 10 of the licensee or nonlicensee for purposes of issuance or 11 renewal of a license or for any violation of this chapter, 12 regardless of whether such costs are in excess of license or 13 renewal fees paid by a licensee. 14 (5) Issue regulations, statements of policy or orders as 15 may be necessary for the proper conduct of the first mortgage 16 loan business by licensees, the issuance and renewal of 17 licenses and the enforcement of this chapter. 18 (6) Prohibit or permanently remove an individual 19 responsible for a violation of this chapter from working in 20 his present capacity or in any other capacity related to 21 activities regulated by the department. 22 (7) Order a person to make restitution for actual 23 damages to consumers caused by any violation of this chapter. 24 (8) Issue cease and desist orders that are effective 25 immediately, subject to a hearing as specified in subsection 26 (b) within 14 days of the issuance of the order. 27 (9) Impose such other conditions as the department deems 28 appropriate. 29 (b) Hearings.--A person aggrieved by a decision of the 30 department may appeal the decision of the department to the 20070S0487B1613 - 33 -
1 secretary. The appeal shall be conducted under 2 Pa.C.S Ch. 5 2 Subch. A (relating to practice and procedure of Commonwealth 3 agencies). 4 (c) Injunctions.--The department may maintain an action for 5 an injunction or other process against a person to restrain and 6 prevent the person from engaging in an activity violating this 7 chapter. 8 (d) Final orders.--A decision of the secretary shall be a 9 final order of the department and shall be enforceable in a 10 court of competent jurisdiction. The department may publish 11 final adjudications issued under this section, subject to 12 redaction or modification to preserve confidentiality. 13 (e) Appeals.--A person aggrieved by a decision of the 14 secretary may appeal the decision under 2 Pa.C.S. Ch. 7 Subch. A 15 (relating to judicial review of Commonwealth agency action). 16 (f) Orders affecting mortgage originators.--An order issued 17 against a licensee is applicable to the mortgage originators 18 employed by the licensee. 19 Section 3. Section 311 of the act, amended June 25, 2001 20 (P.L.621, No.55), is repealed: 21 [Section 311. Fees. 22 (a) Certain fees prohibited.--No real estate broker or 23 salesperson who has received a fee, commission or other valuable 24 consideration in connection with the sale or transfer of real 25 estate shall be paid or receive a fee or other compensation, 26 directly or indirectly, for providing mortgage brokering 27 services in connection with the origination of a mortgage loan 28 relative to such sale or transfer of real estate, but such 29 broker or salesperson may receive a fee in connection with such 30 mortgage loan transaction which shall not exceed an amount as 20070S0487B1613 - 34 -
1 established by the commission pursuant to this section. 2 (b) Regulations.--The commission shall, within 180 days of 3 the effective date of this subsection, promulgate rules and 4 regulations establishing the maximum fees which a real estate 5 broker or salesperson may charge for services rendered in 6 connection with mortgage brokering services. Said fees shall: 7 (1) Be for actual services rendered in connection with 8 the origination of a mortgage loan. 9 (2) Be expressed in terms of dollars or as a percentage 10 of the mortgage loan being created. 11 (c) Formulation procedure.--Prior to the publication of any 12 notice of proposed rulemaking under this section, the commission 13 shall hold public hearings to afford any interested party, 14 including the department, full opportunity to present testimony, 15 comment thereon and make recommendations regarding the 16 formulation of such rules and regulations. The department shall 17 also have 30 days following the close of the hearings to submit 18 further comments and recommendations to the commission. The 19 procedure contained in this section shall be in addition to the 20 requirements contained in the act of June 25, 1982 (P.L.633, 21 No.181), known as the Regulatory Review Act, and shall not 22 affect any right the department may have to participate in the 23 rulemaking process following the commission's publication of 24 proposed rules and regulations as permitted by that act. In 25 establishing the maximum fees allowable, the commission shall 26 consider the nature of the services performed by the real estate 27 broker or salesperson and the time required for the performance 28 thereof. 29 (d) Licensing option.--A real estate broker or salesperson 30 who is also a bona fide mortgage broker, mortgage banker or loan 20070S0487B1613 - 35 -
1 correspondent who holds himself out publicly as such shall have 2 the option of being licensed and regulated by the department, in 3 which case he shall not be subject to the fee limitations 4 provided for in this section or the rules and regulations 5 promulgated by the commission hereunder. 6 (e) Disclosure.--No real estate broker or salesperson shall 7 receive a fee, commission or other valuable consideration 8 pursuant to this section and the regulations promulgated 9 hereunder unless he makes the following written disclosure to 10 the buyer in at least ten-point boldface capital letters. 11 The real estate broker in this transaction who has 12 offered to assist me in obtaining a mortgage loan has 13 advised me of the following: 14 (1) He does not represent any particular mortgage 15 lender; or the name of the mortgage lender he represents 16 is......................... 17 (2) I am not required to obtain the mortgage for the 18 purchase of the real estate from the mortgage banker whom 19 the broker represents. 20 (3) The real estate broker has a fiduciary 21 obligation to the seller, from whom he will receive a 22 commission. 23 (4) Should the real estate broker violate any of the 24 provisions of the Real Estate Licensing and Registration 25 Act or the Mortgage Bankers and Brokers Act I may file a 26 complaint with the Pennsylvania Real Estate Commission.] 27 Section 4. Sections 313 and 314 of the act, amended June 25, 28 2001 (P.L.621, No.55), are amended to read: 29 Section 313. Suspension, revocation or refusal. 30 (a) Departmental action.--The department may suspend, revoke 20070S0487B1613 - 36 -
1 or refuse to renew any license issued pursuant to this chapter 2 [after giving 30 days' written notice forwarded to the 3 licensee's principal place of business, by registered or 4 certified mail, return receipt requested, stating the 5 contemplated action and the reason therefor, if the department 6 shall find, after the licensee has had an opportunity to be 7 heard, that the] if any fact or condition exists or is 8 discovered which, if it had existed or had been discovered at 9 the time of filing of the application for such license, would 10 have warranted the department in refusing to issue such license 11 or if a licensee or director, officer, partner, employee or 12 owner of a licensee has: 13 (1) Made any false or material misstatement in his 14 application or any report or submission required by this 15 chapter or department regulation, statement of policy or 16 order. 17 (2) Failed to comply with or violated any provision of 18 this chapter or any rule, regulation, statement of policy or 19 order promulgated or issued by the department pursuant to 20 this chapter. 21 (3) If licensed under section [304(c)] 304(b.1)(1)(i) or 22 (c), accepted an advance fee without having obtained the bond 23 required by section 304(b.1)(1)(i) or (c)(1). 24 (4) Become insolvent, meaning that the liabilities of 25 the applicant or licensee exceed the assets of the applicant 26 or licensee or that the applicant or licensee cannot meet the 27 obligations of the applicant or licensee as they mature, or 28 is in such financial condition that the applicant or licensee 29 cannot continue in business with safety to the customers of 30 the applicant or licensee. 20070S0487B1613 - 37 -
1 (5) Engaged in dishonest, fraudulent or illegal 2 practices or conduct in any business or unfair or unethical 3 practices or conduct in connection with the mortgage 4 business. 5 (6) Been convicted of [a misdemeanor or of a] or plead 6 guilty or nolo contendere to a crime of moral turpitude 7 felony. 8 [(7) Filed an application for a license which, as of the 9 date the license was issued or as of the date of an order 10 denying, suspending or revoking a license, was incomplete in 11 any material respect or contained any statement that was, in 12 light of the circumstances under which it was made, false or 13 misleading with respect to any material fact.] 14 (8) Permanently or temporarily been enjoined by a court 15 of competent jurisdiction from engaging in or continuing any 16 conduct or practice involving any aspect of the mortgage 17 business. 18 (9) Become the subject of an order of the department 19 denying, suspending or revoking a license [as a mortgage 20 banker, mortgage broker, limited mortgage broker or loan 21 correspondent] under the provisions of this chapter. 22 (10) Become the subject of a United States Postal 23 Service fraud order [that is currently effective and was 24 issued within the last five years]. 25 (11) Failed to comply with the requirements of this 26 chapter to make and keep records prescribed by [rule] 27 regulation, statement of policy or order of the department, 28 to produce such records required by the department or to file 29 any financial reports or other information the department by 30 [rule] regulation, statement of policy or order may require. 20070S0487B1613 - 38 -
1 (12) Become the subject of an order of the department 2 denying, suspending or revoking a license under the 3 provisions of any other law administered by the department. 4 [(13) Failed to comply with a cease and desist order 5 entered after notice and opportunity for hearing and issued 6 by the department within the last five years.] 7 (14) Demonstrated negligence or incompetence in 8 performing any act for which the licensee is required to hold 9 a license under this chapter. 10 [(15) In the case of a limited mortgage broker, 11 negotiated or placed, either directly or indirectly, a 12 mortgage loan other than a nonpurchase money mortgage loan as 13 defined in this chapter. 14 The hearing and notice provisions of this section shall not 15 apply if the licensee's corporate charter is voided in 16 accordance with the provisions of any law of this or any other 17 state, in which event the department may suspend or revoke the 18 license.] 19 (16) Failed to complete the qualifying or continuing 20 education as required by section 304(e). 21 (17) In the case of a mortgage banker, loan 22 correspondent or mortgage broker, conducted the first 23 mortgage loan business through an unlicensed mortgage 24 originator. 25 (18) Failed to comply with the terms of any agreement 26 under which the department authorizes a licensee to maintain 27 records at a place other than the licensee's principal place 28 of business. 29 (b) Reinstatement.--The department may subsequently 30 reinstate a license which has been suspended or revoked or renew 20070S0487B1613 - 39 -
1 a license which had previously been refused for renewal if the 2 condition which warranted the original action has been corrected 3 and the department has reason to believe that such condition is 4 not likely to occur again and the licensee satisfies the 5 requirements of this chapter. 6 Section 314. Penalties. 7 (a) Nonlicensees.--Any person who is not licensed by the 8 department or is not exempted from the licensing requirements in 9 accordance with the provisions of this chapter and who engages 10 in the first loan mortgage business [of a mortgage banker, loan 11 correspondent, mortgage broker or limited mortgage broker] 12 commits a felony of the third degree. 13 (b) Nonlicensees subject to the provisions of this 14 chapter.--Any person who is subject to the provisions of this 15 chapter, even though not licensed hereunder, or any person who 16 is not licensed by the department or is not exempt from the 17 licensing requirements, who violates any of the provisions to 18 which it is subject shall be subject to a fine levied by the 19 department or commission of up to [$2,000] $10,000 for each 20 offense. [Any such nonlicensed person who commits three or more 21 offenses may, at the discretion of the department or commission, 22 be prohibited from engaging in the first mortgage loan business 23 unless licensed under this chapter.] 24 (c) Violations by licensees.--Any person licensed under the 25 provisions of this chapter or any director, officer, employee or 26 agent of a licensee who shall violate the provisions of this 27 chapter or shall direct or consent to such violations shall be 28 subject to a fine levied by the department of up to [$2,000] 29 $10,000 for each offense. 30 [(d) Limited powers.--The powers conferred upon the 20070S0487B1613 - 40 -
1 commission by subsection (b) shall only be exercised by the 2 commission in relation to persons licensed pursuant to the 3 provisions of the act of February 19, 1980 (P.L.15, No.9), known 4 as the Real Estate Licensing and Registration Act, who are 5 subject to subsection (b) under section 303(b)(3) and the 6 exercise of such power by the commission in relation to such 7 persons shall be exclusive.] 8 Section 5. Sections 316 and 317 of the act, amended June 25, 9 2001 (P.L.621, No.55) are repealed: 10 [Section 316. Referral fees. 11 Nothing in this chapter shall permit a real estate broker or 12 salesperson, who receives a fee, commission or other valuable 13 consideration relating to the sale of residential real property, 14 to be paid or receive a finder's fee or a referral fee for the 15 referral of a mortgage loan to a lender in connection with that 16 sale, whether or not the real estate broker or salesperson is 17 licensed and regulated by the department. 18 Section 317. Real Estate Recovery Fund. 19 Any person injured by the wrongful act, default or 20 misrepresentation of a person engaged in the activities of a 21 mortgage broker who is exempt from licensure under this chapter 22 by virtue of being licensed pursuant to the act of February 19, 23 1980 (P.L.15, No.9), known as the Real Estate Licensing and 24 Registration Act, shall be entitled to seek recovery from the 25 Real Estate Recovery Fund established by the Real Estate 26 Licensing and Registration Act notwithstanding the fact that 27 such wrongful act, default or misrepresentation occurred in 28 conjunction with mortgage-brokering activities subject, however, 29 to all other terms and conditions of the Real Estate Licensing 30 and Registration Act regarding recovery from that fund.] 20070S0487B1613 - 41 -
1 Section 6. This act shall take effect in 60 days. B2L67MSP/20070S0487B1613 - 42 -