Senate Bill 5077 — State of Washington, 67th Legislature, 2021 Regular Session (Department of Financial Institutions)

Summary

Senate Bill 5077, State of Washington, 67th Legislature, 2021 Regular Session, prefiled January 5, 2021 by Senators Dozier, Mullet, Brown, Das, Warnick, and Wilson, C., by request of the Department of Financial Institutions. The bill is an act relating to providing authority to licensed companies to allow licensed mortgage loan originators to work from their residences without the company licensing the residence as a branch office. It amends RCW 31.04.027, 31.04.075, 19.146.0201, and 19.146.265. The amended text treats a licensed mortgage loan originator's residence as a place of business when the originator and licensed sponsoring company comply with information security requirements. It was read the first time on January 11, 2021 and referred to the Committee on Business, Financial Services & Trade.

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     Z-0187.1

                               SENATE BILL 5077


     State of Washington       67th Legislature       2021 Regular Session

     By Senators Dozier, Mullet, Brown, Das, Warnick, and Wilson, C.; by
     request of Department of Financial Institutions

     Prefiled 01/05/21. Read first time 01/11/21.    Referred to Committee
     on Business, Financial Services & Trade.




1        AN ACT Relating to providing authority to licensed companies to
2    allow licensed mortgage loan originators to work from their
3    residences without the company licensing the residence as a branch
4    office of the company; and amending RCW 31.04.027, 31.04.075,
5    19.146.0201, and 19.146.265.


6    BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:


 7       Sec. 1.   RCW 31.04.027 and 2018 c 62 s 11 are each amended to
 8   read as follows:
 9       (1) It is a violation of this chapter for a licensee, its
10   officers, directors, employees, or independent contractors, or any
11   other person subject to this chapter to:
12       (a) Directly or indirectly employ any scheme, device, or artifice
13   to defraud or mislead any borrower, to defraud or mislead any lender,
14   or to defraud or mislead any person;
15       (b) Directly or indirectly engage in any unfair or deceptive
16   practice toward any person;
17       (c) Directly or indirectly obtain property by fraud or
18   misrepresentation;
19       (d) Solicit or enter into a contract with a borrower that
20   provides in substance that the consumer loan company may earn a fee
21   or commission through the consumer loan company's best efforts to
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 1   obtain a loan even though no loan is actually obtained for the
 2   borrower;
 3       (e) Solicit, advertise, or enter into a contract for specific
 4   interest rates, points, or other financing terms unless the terms are
 5   actually available at the time of soliciting, advertising, or
 6   contracting;
 7       (f) Fail to make disclosures to loan applicants as required by
 8   RCW 31.04.102 and any other applicable state or federal law;
 9       (g) Make, in any manner, any false or deceptive statement or
10   representation with regard to the rates, points, or other financing
11   terms or conditions for a residential mortgage loan or engage in bait
12   and switch advertising;
13       (h) Negligently make any false statement or knowingly and
14   willfully make any omission of material fact in connection with any
15   reports filed with the department by a licensee or in connection with
16   any investigation conducted by the department;
17       (i) Make any payment, directly or indirectly, to any appraiser of
18   a property, for the purposes of influencing the independent judgment
19   of the appraiser with respect to the value of the property;
20       (j) Accept from any borrower at or near the time a loan is made
21   and in advance of any default an execution of, or induce any borrower
22   to execute, any instrument of conveyance, not including a mortgage or
23   deed of trust, to the lender of any ownership interest in the
24   borrower's primary dwelling that is the security for the borrower's
25   loan;
26       (k) Obtain at the time of closing a release of future damages for
27   usury or other damages or penalties provided by law or a waiver of
28   the provisions of this chapter;
29       (l) Advertise any rate of interest without conspicuously
30   disclosing the annual percentage rate implied by that rate of
31   interest;
32       (m) Violate any applicable state or federal law relating to the
33   activities governed by this chapter; or
34       (n) Make or originate loans from any unlicensed location. It is
35   not a violation for a licensed mortgage loan originator to originate
36   loans from an unlicensed location if that location is the licensed
37   mortgage loan originator's residence and the licensed mortgage loan
38   originator and licensed sponsoring company comply with RCW 31.04.075.
39       (2) It is a violation of this chapter for a student education
40   loan servicer to:
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 1       (a) Conduct licensable activity from any unlicensed location;
 2       (b) Misrepresent or omit any material information in connection
 3   with the servicing of a student education loan including, but not
 4   limited to, misrepresenting the amount, nature, conditions, or terms
 5   of any fee or payment due or claimed to be due on a student education
 6   loan, the terms and conditions of the loan agreement, the
 7   availability   of   loan  discharge   or  forgiveness    options, the
 8   availability and terms of and process for enrolling in income-driven
 9   repayment, or the borrower's obligations under the loan;
10       (c) Provide inaccurate information to a credit bureau, thereby
11   harming a student education loan borrower's creditworthiness,
12   including failing to report both the favorable and unfavorable
13   payment history of the student education loan;
14       (d) Fail to report to a consumer credit bureau at least annually
15   if the student education loan servicer regularly reports information
16   to a credit bureau;
17       (e) Refuse to communicate with an authorized representative of
18   the student education loan borrower who provides a written
19   authorization signed by the student education loan borrower. However,
20   the student education loan servicer may adopt procedures reasonably
21   related to verifying that the representative is in fact authorized to
22   act on behalf of the student education loan borrower;
23       (f) Refuse to communicate with the student education loan
24   borrower or an authorized representative of the student education
25   loan borrower;
26       (g) Apply payments made by a borrower to the outstanding balance
27   of a student education loan, or allocate a payment across a group of
28   student education loans, in a manner that does not conform with the
29   borrower's stated intent. However, this subsection (2)(g) does not
30   require application of a student education loan in a manner contrary
31   to the express terms of the promissory note;
32       (h)   Fail   to   respond  within   fifteen   calendar  days   to
33   communications from the student loan advocate, or within such
34   shorter, reasonable time as the student loan advocate may request in
35   his or her communication; or
36       (i) Fail to provide a response within fifteen calendar days to a
37   consumer complaint submitted to the servicer by the student loan
38   advocate. If necessary, a licensee may request additional time up to
39   a maximum of forty-five calendar days, provided that such request is


                                     p. 3                          SB 5077
1    accompanied by an explanation why such additional time is reasonable
2    and necessary.
3        (3) The director's obligations or duties under chapter 62, Laws
4    of 2018 are subject to section 21, chapter 62, Laws of 2018.


 5       Sec. 2.   RCW 31.04.075 and 2015 c 229 s 23 are each amended to
 6   read as follows:
 7       (1) The licensee may not maintain more than one place of business
 8   under the same license((, but the)) unless:
 9       (a) The director ((may issue)) authorizes more than one license
10   to the same licensee upon approval of an application by the licensee
11   in a form and manner established by the director; or
12       (b) The place of business is a licensed mortgage loan
13   originator's residence and the licensed mortgage loan originator and
14   licensed sponsoring company comply with state and federal information
15   security requirements and all other requirements set forth in rule
16   for mortgage loan originators working from their residences as
17   provided in this chapter and in rule, consistent with the purposes of
18   this section.
19       (2) Whenever a licensee wishes to change the place of business to
20   a street address other than that reported in the nationwide mortgage
21   licensing system and registry, the licensee must give prior written
22   notice to the director, pay the fee, and obtain the director's
23   approval.


24       Sec. 3. RCW 19.146.0201 and 2015 c 229 s 7 are each amended to
25   read as follows:
26       It is a violation of this chapter for loan originators, mortgage
27   brokers, officers, directors, employees, independent contractors, or
28   any other person subject to this chapter to:
29       (1) Directly or indirectly employ any scheme, device, or artifice
30   to defraud or mislead borrowers or lenders or to defraud any person;
31       (2) Directly or indirectly engage in any unfair or deceptive
32   practice toward any person;
33       (3) Directly or indirectly obtain property by fraud or
34   misrepresentation;
35       (4) Solicit or enter into a contract with a borrower that
36   provides in substance that the mortgage broker may earn a fee or
37   commission through the mortgage broker's "best efforts" to obtain a
38   loan even though no loan is actually obtained for the borrower;
                                     p. 4                          SB 5077
 1       (5) Solicit, advertise, or enter into a contract for specific
 2   interest rates, points, or other financing terms unless the terms are
 3   actually available at the time of soliciting, advertising, or
 4   contracting   from  a   person   exempt  from  licensing   under  RCW
 5   19.146.020(1)(f) or a lender with whom the mortgage broker maintains
 6   a written correspondent or loan broker agreement under RCW
 7   19.146.040;
 8       (6)   Fail   to   make   disclosures  to   loan  applicants   and
 9   noninstitutional investors as required by RCW 19.146.030 and any
10   other applicable state or federal law;
11       (7) Make, in any manner, any false or deceptive statement or
12   representation with regard to the rates, points, or other financing
13   terms or conditions for a residential mortgage loan or engage in bait
14   and switch advertising;
15       (8) Negligently make any false statement or knowingly and
16   willfully make any omission of material fact in connection with any
17   reports filed by a licensee or in connection with any investigation
18   conducted by the department;
19       (9) Make any payment, directly or indirectly, to any appraiser of
20   a property, for the purposes of influencing the independent judgment
21   of the appraiser with respect to the value of the property;
22       (10) Advertise any rate of interest without conspicuously
23   disclosing the annual percentage rate implied by such rate of
24   interest;
25       (11) Fail to comply with state and federal laws applicable to the
26   activities governed by this chapter;
27       (12) Fail to pay third-party providers no later than thirty days
28   after the recording of the loan closing documents or ninety days
29   after completion of the third-party service, whichever comes first,
30   unless otherwise agreed or unless the third-party service provider
31   has been notified in writing that a bona fide dispute exists
32   regarding the performance or quality of the third-party service;
33       (13) Collect, charge, attempt to collect or charge or use or
34   propose any agreement purporting to collect or charge any fee
35   prohibited by RCW 19.146.030 or 19.146.070;
36       (14)(a) Except when complying with (b) and (c) of this
37   subsection, act as a loan originator in any transaction (i) in which
38   the loan originator acts or has acted as a real estate broker or
39   salesperson or (ii) in which another person doing business under the


                                     p. 5                          SB 5077
1    same licensed real estate broker acts or has acted as a real estate
2    broker or salesperson;
3        (b) Prior to providing mortgage services to the borrower, a loan
4    originator, in addition to other disclosures required by this chapter
5    and other laws, must provide to the borrower the following written
6    disclosure:

 7      THIS IS TO GIVE YOU NOTICE THAT I OR ONE OF MY ASSOCIATES
 8      HAVE/HAS ACTED AS A REAL ESTATE BROKER OR SALESPERSON
 9      REPRESENTING THE BUYER/SELLER IN THE SALE OF THIS PROPERTY TO
10      YOU. I AM ALSO A LOAN ORIGINATOR, AND WOULD LIKE TO PROVIDE
11      MORTGAGE SERVICES TO YOU IN CONNECTION WITH YOUR LOAN TO
12      PURCHASE THE PROPERTY.
13      YOU ARE NOT REQUIRED TO USE ME AS A LOAN ORIGINATOR IN
14      CONNECTION WITH THIS TRANSACTION. YOU ARE FREE TO COMPARISON
15      SHOP WITH OTHER MORTGAGE BROKERS AND LENDERS, AND TO SELECT
16      ANY MORTGAGE BROKER OR LENDER OF YOUR CHOOSING; and

17       (c) A real estate broker or salesperson licensed under chapter
18   18.85 RCW who also acts as a mortgage broker must carry on such
19   mortgage broker business activities and must maintain such person's
20   mortgage broker business records separate and apart from the real
21   estate broker activities conducted pursuant to chapter 18.85 RCW.
22   Such activities are separate and apart even if they are conducted at
23   an office location with a common entrance and mailing address, so
24   long as each business is clearly identified by a sign visible to the
25   public, each business is physically separated within the office
26   facility, and no deception of the public as to the separate
27   identities of the broker business firms results. This subsection
28   (14)(c) does not require a real estate broker or salesperson licensed
29   under chapter 18.85 RCW who also acts as a mortgage broker to
30   maintain a physical separation within the office facility for the
31   conduct of its real estate and mortgage broker activities where the
32   director determines that maintaining such physical separation would
33   constitute an undue financial hardship upon the mortgage broker and
34   is unnecessary for the protection of the public;
35       (15) Fail to comply with any provision of RCW 19.146.030 through
36   19.146.080 or any rule adopted under those sections;
37       (16) Originate loans from any unlicensed location. It is not a
38   violation for a licensed mortgage loan originator to originate loans
39   from an unlicensed location if that location is the licensed mortgage

                                     p. 6                          SB 5077
 1   loan originator's residence and the licensed mortgage loan originator
 2   and licensed sponsoring company comply with RCW 19.146.265;
 3       (17) Solicit or accept from any borrower at or near the time a
 4   loan application is taken, and in advance of any foreclosure of the
 5   borrower's   existing  residential   mortgage  loan   or  loans,  any
 6   instrument of conveyance of any interest in the borrower's primary
 7   dwelling that is the subject of the residential mortgage loan or
 8   loans; or
 9       (18) Make a residential mortgage loan unless the loan is table
10   funded.


11       Sec. 4. RCW 19.146.265 and 2015 c 229 s 16 are each amended to
12   read as follows:
13       A ((licensed mortgage broker may apply to the)) licensee may not
14   maintain more than one place of business under the same license
15   unless:
16       (1) The director ((for authority)) approves the licensed mortgage
17   broker's application, made in a form and manner established in rule,
18   to establish one or more branch offices under the same or different
19   name as the main office ((upon the payment of a fee as prescribed by
20   the director by rule)). The applicant must be in good standing with
21   the department, as defined in rule by the director, and the director
22   must promptly issue a license for each of the branch offices showing
23   the location of the main office and the particular branch; or
24       (2) The place of business is a licensed mortgage loan
25   originator's residence and the licensed mortgage loan originator and
26   licensed sponsoring company comply with state and federal information
27   security requirements and other requirements as provided in this
28   chapter and in rule, consistent with the purposes of this section.

                                  --- END ---




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