GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
SESSION LAW 2001-393
SENATE BILL 904
AN ACT TO ENACT THE MORTGAGE LENDING ACT TO GOVERN MORTGAGE
BROKERS AND BANKERS.
The General Assembly of North Carolina enacts:
SECTION 1. Article 19 of Chapter 53 of the
General Statutes is repealed.
SECTION 2. Chapter 53 of the General Statutes is
amended by adding a new Article to read:
"Article 19A.
"Mortgage Lending Act.
"§ 53-243.01. Definitions.
The following definitions apply in this Article:
(1) Act as a mortgage broker. - To act,
for compensation or gain, or in the expectation of
compensation or gain, either directly or
indirectly, by accepting or offering to accept an
application for a mortgage loan, soliciting or
offering to solicit a mortgage loan, negotiating
the terms or conditions of a mortgage loan, issuing
mortgage loan commitments or interest rate
guarantee agreements to borrowers, or engaging in
tablefunding of mortgage loans, whether such acts
are done through contact by telephone, by
electronic means, by mail, or in person with the
borrowers or potential borrowers.
(2) Act as a mortgage lender. - To engage
in the business of making mortgage loans for
compensation or gain.
(3) Branch manager. - The individual whose
principal office is physically located in, who is
in charge of, and who is responsible for the
business operations of a branch office of a
mortgage broker or mortgage banker.
(4) Branch office. - An office of the
licensee acting as a mortgage broker or mortgage
banker that is separate and distinct from the
licensee's principal office.
(5) Commissioner. - The North Carolina
Commissioner of Banks and the Commissioner's
designees. For purposes of compliance with this
Article by credit unions, Commissioner means the
Administrator of the Credit Union Division of the
Department of Commerce.
(6) Control. - The power to vote more than
twenty percent (20%) of outstanding voting shares
or other interests of a corporation, partnership,
limited liability company, association, or
trust.
(7) Employee. - An individual, who has an
employment relationship, acknowledged by both the
individual and the mortgage broker or mortgage
banker and is treated as an employee for purposes
of compliance with the federal income tax laws.
(8) Exempt person. - The term includes any
of the following:
a. Any agency of the federal government
or any state or municipal government granting
mortgage loans under specific authority of the
laws of any state or the United States.
b. Any employee of a licensee whose
responsibilities are limited to clerical and
administrative tasks for his or her employer
and who does not solicit borrowers, accept
applications, or negotiate the terms of loans
on behalf of the employer.
c. Any person authorized to engage in
business as a bank or a wholly owned
subsidiary of a bank, a farm credit system,
savings institution, or a wholly owned
subsidiary of a savings institution, or credit
union or a wholly owned subsidiary of a credit
union, under the laws of the United States,
this State, or any other state. Except for
G.S. 53-243.11 and G.S. 53-243.15, this
Article does not apply to the exempt persons
set forth in this sub-subdivision (8)c.
d. Any licensed real estate agent or
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 broker
who receives compensation of any kind in
connection with the referral, placement, or
origination of a mortgage loan.
e. Any officer or employee of an exempt
person described in sub-subdivision c. of this
subdivision when acting in the scope of
employment for the exempt person.
f. Any person who, as seller, receives in
one calendar year no more than five mortgages,
deeds of trust, or other security instruments
on real estate as security for a purchase
money obligation.
g. The North Carolina Housing Finance
Agency as established by Article 122A of the
General Statutes and the North Carolina
Agricultural Finance Authority as established
by Article 122D of the General Statutes.
h. Any nonprofit corporation qualifying
under section 501(c)(3) of the Internal
Revenue Code which makes mortgage loans to
promote home ownership or home improvements
for the disadvantaged, provided that such
corporation is not primarily in the business
of soliciting or brokering mortgage loans.
i. Any life insurance companies licensed
to do business in North Carolina with regard
to provisions concerning mortgage lenders.
(9) Licensee. - A loan officer, mortgage
broker, or mortgage banker who is licensed pursuant
to this Article.
(10) Loan officer. - An individual who, in
exchange for compensation as an employee of another
person, accepts or offers to accept applications
for mortgage loans. The definition of loan officer
shall not include any exempt person described in
sub-subdivision (8)b. of this section.
(11) Make a mortgage loan. - To close a
mortgage loan, to advance funds, to offer to
advance funds, or to make a commitment to advance
funds to a borrower under a mortgage loan.
(12) Managing principal. - A person who
meets the requirements of G.S. 53-243.05(c) and who
agrees to be primarily responsible for the
operations of a licensed mortgage broker or
mortgage banker.
(13) Mortgage banker. - A person who acts
as a mortgage lender as that term is defined in
subdivision (2) of this section. However, the
definition does not include a person who acts as a
mortgage lender only in tablefunding
transactions.
(14) Mortgage broker. - A person who acts
as a mortgage broker as that term is defined in
subdivision (1) of this section.
(15) Mortgage loan. - A loan made to a
natural person or persons primarily for personal,
family, or household use, primarily secured by
either a mortgage or a deed of trust on residential
real property located in North Carolina.
(16) Person. - An individual, partnership,
limited liability company, limited partnership,
corporation, association, or other group engaged in
joint business activities, however organized.
(17) Qualified lender. - A person who is
engaged as a mortgage lender in North Carolina and
is either a supervised or a nonsupervised
institution, as these terms are defined in 24
C.F.R. § 202.2, approved by the United States
Department of Housing and Urban Development.
(18) Qualified person. - A person who is
employed as a loan officer by a qualified lender,
or by a mortgage banker or broker registered with
the Commissioner under former Article 19 of this
Chapter, or who is a general partner, manager, or
officer of a qualified lender, registered mortgage
banker, or registered mortgage broker.
(19) Residential real property. - Real
property located in the State of North Carolina
upon which there is located or is to be located one
or more single-family dwellings or dwelling
units.
(20) Tablefunding. - A transaction where a
licensee closes a loan in its own name with funds
provided by others, and the loan is assigned
simultaneously to the mortgage lender providing the
funding within one business day of the funding of
the loan.
"§ 53-243.02. License required; licensee records.
(a) Other than an exempt person, it is
unlawful for any person in this State to act as a mortgage
broker or mortgage banker, or directly or indirectly to engage
in the business of a mortgage broker or a mortgage banker,
without first obtaining a license from the Commissioner under
the provisions of this Article.
(b) It is unlawful for any natural person to
engage in the solicitation and acceptance of applications for
mortgage loans without first obtaining a license as a loan
officer, mortgage banker, or mortgage broker issued by the
Commissioner under the provisions of this Article. It is
unlawful for any person to employ, to compensate, or to appoint
as its agent a loan officer unless the loan officer is licensed
as a loan officer under this Article. Exempt persons shall not
be subject to this subsection.
(c) The license of a loan officer is not effective
during any period when that person is not employed by a mortgage
broker or mortgage banker licensed under this Article. When a
loan officer ceases to be employed by a mortgage broker or
mortgage banker licensed under this Article, the loan officer
and the mortgage broker or mortgage banker licensed under this
Article by whom that person is employed shall promptly notify
the Commissioner in writing. A loan officer shall not be
employed simultaneously by more than one mortgage broker or
mortgage banker licensed under this Article.
(d) Each mortgage broker and mortgage banker
licensed under this Article shall maintain on file with the
Commissioner a list of all loan officers who are employed with
the mortgage broker or mortgage banker.
(e) No person, other than an exempt person, shall
hold himself or herself out as a mortgage banker, a mortgage
broker, or loan officer unless such person is licensed in
accordance with this Article.
"§ 53-243.03. Review by Banking Commission.
The Banking Commission may review any rule,
regulation, order, or article of the Commissioner adopted
pursuant to or with respect to the provisions of this Article,
and any person aggrieved by any rule, regulation, order, or
article may appeal to the Banking Commission for review upon
giving notice in writing 20 days after the rule, regulation,
order, or article that is the subject of the complaint is
adopted or issued. Notwithstanding any other provision of law,
any party aggrieved by a decision of the Banking Commission
shall be entitled to an appeal pursuant to G.S. 53-92.
"§ 53-243.04. Rule-making authority.
The Banking Commission may adopt any rules when it
deems necessary to carry out the provisions of this Article, to
provide for the protection of the borrowing public, and to
instruct mortgage lenders or brokers in interpreting this
Article.
"§ 53-243.05. Qualifications for licensure; issuance.
(a) Any person, other than an exempt person,
desiring to obtain a license as a loan officer, mortgage banker,
or mortgage broker shall make written application for licensure
to the Commissioner on forms prescribed by the Commissioner. In
accordance with rules adopted by the Commission, the application
shall contain any information the Commissioner deems necessary
regarding the following:
(1) The applicant's name and address and
social security number.
(2) The applicant's form and place of
organization, if applicable.
(3) The applicant's proposed method of and
locations for doing business, if applicable.
(4) The qualifications and business
history of the applicant and, if applicable, the
business history of any partner, officer, or
director, any person occupying a similar status or
performing similar functions, or any person
directly or indirectly controlling the applicant,
including: (i) a description of any injunction or
administrative order by any state or federal
authority to which the person is or has been
subject; (ii) a conviction of a misdemeanor
involving fraudulent dealings or moral turpitude or
relating to any aspect of the residential mortgage
lending business; (iii) any felony convictions.
(5) With respect to an application for
licensing as a mortgage banker or broker, the
applicant's financial condition, credit history,
and business history; and with respect to the
application for licensing as a loan officer, the
applicant's credit history and business
history.
(b) In addition to the requirements imposed by the
Commissioner under subsection (a) of this section, each
individual applicant for licensure as a loan officer shall:
(1) Be at least 18 years of age.
(2) Have satisfactorily completed, within
the three years immediately preceding the date
application is made, a mortgage lending
fundamentals course approved by the Commissioner.
The course shall consist of at least eight hours of
classroom instruction in subjects related to
mortgage lending approved by the Commissioner. In
addition, the applicant shall have satisfactorily
completed a written examination approved by the
Commissioner or possess residential mortgage
lending education or experience in residential
mortgage lending transactions that the Commissioner
deems equivalent to the course.
(c) In addition to the requirements under
subsection (a) of this section, each applicant for licensure as
a mortgage broker or mortgage banker at the time of application
and at all times thereafter shall comply with the following
requirements:
(1) If the applicant is a sole proprietor,
the applicant shall have at least three years of
experience in residential mortgage lending or other
experience or competency requirements as the
Commissioner may impose.
(2) If the applicant is a general or
limited partnership, at least one of its general
partners shall have the experience as described
under subdivision (1) of this subsection.
(3) If the applicant is a corporation, at
least one of its principal officers shall have the
experience as described under subdivision (1) of
this subsection.
(4) If the applicant is a limited
liability company, at least one of its managers
shall have the experience as described under
subdivision (1) of this subsection.
(d) Each applicant shall identify one person
meeting the requirements of subsection (c) of this section to
serve as the applicant's managing principal.
(e) Every applicant for initial licensure shall
pay a filing fee of one thousand dollars ($1,000) for licensure
as a mortgage broker or mortgage banker or fifty dollars
($50.00) for licensure as a loan officer.
(f) A mortgage banker shall post a surety bond in
the amount of one hundred fifty thousand dollars ($150,000), and
a mortgage broker shall post a surety bond in the amount of
fifty thousand dollars ($50,000). The surety bond shall be in a
form satisfactory to the Commissioner and shall run to the State
for the benefit of any claimants against the licensee to secure
the faithful performance of the obligations of the licensee
under this Article. The aggregate liability of the surety shall
not exceed the principal sum of the bond. A party having a claim
against the licensee may bring suit directly on the surety bond,
or the Commissioner may bring suit on behalf of any claimants,
either in one action or in successive actions. Consumer claims
shall be given priority in recovering from the bond. Any
appropriate deposit of cash or securities shall be accepted in
lieu of any bond that is required. An audited financial
statement from a qualified lender showing a net worth of two
hundred fifty thousand dollars ($250,000) or more shall be
accepted in lieu of any bond required.
(g) Any general partner, manager of a limited
liability company, or officer of a corporation who individually
meets the requirements under subsection (b) of this section
shall, upon payment of the applicable fee, meet the
qualifications for licensure as a loan officer subject to the
provisions of subsection (i) of this section.
(h) Each principal office and each branch office
of a mortgage broker or mortgage banker licensed under the
provisions of this Article shall be issued a separate license. A
licensed mortgage broker or mortgage banker shall file with the
Commissioner an application on a form prescribed by the
Commissioner that identifies the address of the principal office
and each branch office and branch manager. A filing fee of one
hundred dollars ($100.00) shall be assessed by the Commissioner
for each office issued a license.
(i) If the Commissioner determines that an
applicant meets the qualifications for licensure and finds that
the financial responsibility, character, and general fitness of
the applicant are such as to command the confidence of the
community and to warrant belief that the business will be
operated honestly and fairly, the Commissioner shall issue a
license to the applicant.
"§ 53-243.06. License renewal; termination.
(a) All licenses issued by the Commissioner
under the provisions of this Article shall expire annually on
the 30th day of June following issuance or on any other date
that the Commissioner may determine. The license shall become
invalid after that date unless renewed. A license may be renewed
45 days prior to the expiration date by paying to the
Commissioner a renewal fee as follows:
(1) Licensed mortgage bankers shall pay an
annual fee of five hundred dollars ($500.00) and
one hundred dollars ($100.00) for each branch
office.
(2) Licensed mortgage brokers shall pay an
annual fee of five hundred dollars ($500.00) and
one hundred dollars ($100.00) for each branch
office.
(3) Licensed loan officers shall pay an
annual fee of fifty dollars ($50.00).
(b) If a license is not renewed prior to the
applicable expiration date, then an additional two hundred fifty
dollars ($250.00) in addition to the renewal fee under
subsection (a) of this section shall be assessed as a late fee
to any renewal. In the event a licensee fails to obtain a
reinstatement of the license within 90 days after the date the
license expires, the Commissioner may require the licensee to
comply with the requirements for the initial issuance of a
license under the provisions of this Article.
(c) Licenses issued under this Article are not
assignable. Control of a licensee shall not be acquired through
a stock purchase or other device without the prior written
consent of the Commissioner. The Commissioner shall not give
written consent if the Commissioner finds that any of the
grounds for denial, revocation, or suspension of a license
pursuant to G.S. 53-243.12 are applicable to the acquiring
person.
"§ 53-243.07. Continuing education.
(a) As a condition of license renewal, the
Commissioner may adopt rules to require continuing education of
licensees under this Article for the purpose of enhancing the
professional competence and professional responsibility of
mortgage bankers, mortgage brokers, and loan officers. The rules
may include criteria for:
(1) The content of continuing education
courses.
(2) Accreditation of continuing education
sponsors and programs.
(3) Accreditation of videotape or other
audiovisual programs.
(4) Computation of credit.
(5) Special cases and exemptions.
(6) General compliance procedures.
(7) Sanctions for noncompliance.
(b) Annual continuing professional education
requirements shall be determined by the Commissioner. However,
the requirements shall not exceed eight credit hours within a
one-year period.
"§ 53-243.08. Managing principals and branch
managers.
Each mortgage broker or mortgage banker licensed under
this Article shall have a managing principal who operates the
business under that person's full charge, control, and
supervision. Each principal and branch office of a mortgage
broker or mortgage banker licensed under this Article shall have
a manager who meets the experience requirements under G.S. 53-
243.05(c)(1). The managing principal for a licensee's business
may also serve as the branch manager of one of the licensee's
branch offices. Each mortgage broker or mortgage banker licensed
under this Article shall file a form as prescribed by the
Commissioner indicating the business's designation of managing
principal and branch manager for each branch and each
individual's acceptance of the responsibility. Each mortgage
broker or mortgage banker licensed under this Article shall
notify the Commissioner of any change in its managing principal
or branch manager designated for each branch. Any licensee who
does not comply with this provision shall have the licensee's
license suspended pursuant to G.S. 53-243.12 until the licensee
complies with this section. Any individual licensee who operates
as a sole proprietorship shall be considered a managing
principal for the purposes of this Article.
"§ 53-243.09. Offices; address changes; display of
license.
(a) Each mortgage broker licensee shall
maintain and transact business from a principal place of
business in this State. A principal place of business in this
State shall consist of at least one enclosed room or building of
stationary construction in which negotiations of mortgage loan
transactions of others may be conducted and carried on in
privacy and in which all of the books, records, and files
pertaining to mortgage loan transactions relating to borrowers
in this State are maintained. However, the Commissioner may, by
rule, impose terms and conditions under which the records and
files may be maintained outside of this State.
(b) A mortgage banker or mortgage broker licensee
shall report any change of address of the principal place of
business or any branch office within 15 days after the
change.
(c) Each mortgage broker or mortgage banker
licensed under this Article shall display in plain view the
certificate of licensure issued by the Commissioner in its
principal office and in each branch office. Each loan officer
licensed under this Article shall display in each branch office
in which the officer acts as a loan officer the certificate of
licensure issued by the Commissioner.
"§ 53-243.10. Mortgage broker duties.
A mortgage broker, including any mortgage broker
licensee and any person required to be licensed as a mortgage
broker under this Article, shall, in addition to duties imposed
by other statutes or at common law:
(1) Safeguard and account for any money
handled for the borrower;
(2) Follow reasonable and lawful
instructions from the borrower;
(3) Act with reasonable skill, care, and
diligence; and
(4) Make reasonable efforts, with lenders
with whom the broker regularly does business to
secure a loan that is reasonably advantageous to
the borrower considering all the circumstances,
including the rates, charges, and repayment terms
of the loan and the loan options for which the
borrower qualifies with such lenders.
"§ 53-243.11. Prohibited activities.
In addition to the activities prohibited under other
provisions of this Article, it shall be unlawful for any person
in the course of any mortgage loan transaction:
(1) To misrepresent or conceal the
material facts or make false promises likely to
influence, persuade, or induce an applicant for a
mortgage loan or a mortgagor to take a mortgage
loan, or to pursue a course of misrepresentation
through agents or otherwise.
(2) To refuse improperly to issue a
satisfaction of a mortgage.
(3) To fail to account for or to deliver
to any person any funds, documents, or other thing
of value obtained in connection with a mortgage
loan, including money provided by a borrower for a
real estate appraisal or a credit report, which the
mortgage banker, broker, or loan officer is not
entitled to retain under the circumstances.
(4) To pay, receive, or collect in whole
or in part any commission, fee, or other
compensation for brokering a mortgage loan in
violation of this Article, including a mortgage
loan brokered by any unlicensed person other than
an exempt person.
(5) To charge or collect any fee or rate
of interest or to make or broker any mortgage loan
with terms or conditions or in a manner contrary to
the provisions of Chapter 24 of the General
Statutes.
(6) To advertise mortgage loans, including
rates, margins, discounts, points, fees,
commissions, or other material information,
including material limitations on the loans, unless
the person is able to make the mortgage loans
available to a reasonable number of qualified
applicants.
(7) To fail to disburse funds in
accordance with a written commitment or agreement
to make a mortgage loan.
(8) To engage in any transaction,
practice, or course of business that is not in good
faith or fair dealing or that constitutes a fraud
upon any person, in connection with the brokering
or making of, or purchase or sale of, any mortgage
loan.
(9) To fail promptly to pay when due
reasonable fees to a licensed appraiser for
appraisal services that are:
a. Requested from the appraiser in
writing by the mortgage broker or mortgage
banker or an employee of the mortgage broker
or mortgage banker; and
b. Performed by the appraiser in
connection with the origination or closing of
a mortgage loan for a customer or the mortgage
broker or mortgage banker.
(10) To broker a mortgage loan which
contains a prepayment penalty if the principal
amount of the loan is one hundred fifty thousand
dollars ($150,000) or less.
"§ 53-243.12. Disciplinary authority.
(a) The Commissioner may, by order, deny,
suspend, revoke, or refuse to issue or renew a license of a
licensee or applicant under this Article or may restrict or
limit the activities relating to mortgage loans of any licensee
or any person who owns an interest in or participates in the
business of a licensee, if the Commissioner finds both of the
following:
(1) That the order is in the public
interest.
(2) That any of the following
circumstances apply to the applicant, licensee, or
any partner, member, manager, officer, director,
loan officer, managing broker, or any person
occupying a similar status or performing similar
functions or any person directly or indirectly
controlling the applicant or licensee. The
person:
a. Has filed an application for license
that, as of its effective date or as of any
date after filing, contained any statement
that, in light of the circumstances under
which it was made, is false or misleading with
respect to any material fact.
b. Has violated or failed to comply with
any provision of this Article, rule adopted by
the Commissioner, or order of the
Commissioner.
c. Has been convicted of any felony, or,
within the past 10 years, has been convicted
of any misdemeanor involving mortgage lending
or any aspect of the mortgage lending
business, or any offense involving breach of
trust, moral turpitude, or fraudulent or
dishonest dealing.
d. Is permanently or temporarily enjoined
by any court of competent jurisdiction from
engaging in or continuing any conduct or
practice involving any aspect of the mortgage
lending business.
e. Is the subject of an order of the
Commissioner denying, suspending, or revoking
that person's license as a mortgage broker or
mortgage banker.
f. Is the subject of an order entered
within the past five years by the authority of
any state with jurisdiction over that state's
mortgage brokerage or mortgage banking
industry denying or revoking that person's
license as a mortgage broker or mortgage
banking industry or denying or revoking that
person's license as a mortgage broker or
mortgage banker.
g. Does not meet the qualifications or
the financial responsibility, character, or
general fitness requirements under G.S. 53-
243.05 or any bond or capital requirements
under this Article.
h. Has been the executive officer or
controlling shareholder or owned a controlling
interest in any mortgage broker or mortgage
banker who has been subject to an order or
injunction described in sub-subdivision d.,
e., or f. of this subdivision.
i. Has failed to pay the proper filing or
renewal fee under this Article. However, the
Commissioner may enter only a denial order
under this sub-subdivision, and the
Commissioner shall vacate the order when the
deficiency has been corrected.
(b) The Commissioner may, by order, summarily
postpone or suspend the license of a licensee pending final
determination of any proceeding under this section. Upon
entering the order, the Commissioner shall promptly notify the
applicant or licensee that the order has been entered and the
reasons for the order. The Commissioner shall calendar a hearing
within 15 days after the Commissioner receives a written request
for a hearing. If a licensee does not request a hearing and the
Commissioner does not request a hearing, the order will remain
in effect until it is modified or vacated by the Commissioner.
If a hearing is requested or ordered by the Commissioner, after
notice of and opportunity for hearing, the Commissioner may
modify or vacate the order or extend it until final
determination.
(c) The Commissioner may, by order, impose a civil
penalty upon a licensee or any partner, officer, director, or
other person occupying a similar status or performing similar
functions on behalf of a licensee for any violation of this
Article. The civil penalty shall not exceed ten thousand dollars
($10,000) for each violation of this Article by a mortgage
broker or mortgage banker. The Commissioner may impose a civil
penalty of up to ten thousand dollars ($10,000) for each
violation of this Article by a person other than a licensee or
exempt person.
(d) In addition to other powers under this
Article, upon finding that any action of a person is in
violation of this Article, the Commissioner may order the person
to cease from the prohibited action. If the person subject to
the order fails to appeal the order of the Commissioner in
accordance with G.S. 53-243.03, or if the person appeals and the
appeal is denied or dismissed, and the person continues to
engage in the prohibited action in violation of the
Commissioner's order, the person shall be subject to a civil
penalty of up to twenty-five thousand dollars ($25,000) for each
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 licensee for the
licensee's failure to comply with an order of the
Commissioner.
(e) Unless otherwise provided, all actions and
hearings under this Article shall be governed by Chapter 150B of
the General Statutes.
(f) When a licensee is accused of any act,
omission, or misconduct that would subject the licensee to
disciplinary action, the licensee, with the consent and approval
of the Commissioner, may surrender the license and all the
rights and privileges pertaining to it for a period of time
established by the Commissioner. A person who surrenders a
license shall not be eligible for or submit any application for
licensure under this Article.
(g) If the Commissioner has reasonable grounds to
believe that a licensee or other person has violated the
provisions of this Article or that facts exist that would be the
basis for an order against a licensee or other person, the
Commissioner may at any time, either personally or by a person
duly designated by the Commissioner, investigate or examine the
loans and business of the licensee and examine the books,
accounts, records, and files of any licensee or other person
relating to the complaint or matter under investigation. The
reasonable cost of this investigation or examination shall be
charged against the licensee.
(h) The Commissioner may issue subpoenas to
require the attendance of and to examine under oath all persons
whose testimony the Commissioner deems relative to the person's
business.
(i) The Commissioner may from time to time, at the
expense of the Commissioner's office, conduct routine
examinations of the books and records of any licensee in order
to determine the compliance with this Article and any rules
adopted pursuant to the authority of G.S. 53-243.04.
(j) In addition to the rights described under this
section, the Commissioner may require a licensee to pay to a
borrower or other individual any amounts received by the
licensee or its employees in violation of Chapter 24 of the
General Statutes.
(k) If the Commissioner finds that the managing
principal, branch manager, or loan officer of a licensee had
knowledge of or reasonably should have had knowledge of, or
participated in, any activity that results in the entry of an
order under this section suspending or withdrawing the license
of a licensee, the Commissioner may prohibit the managing broker
or loan officer from serving as a managing broker or loan
officer for any period of time the Commissioner deems
necessary.
"§ 53-243.13. Records; escrow funds or trust
accounts.
(a) The Commissioner shall keep a list of all
applicants for licensure under this Article that includes the
date of application, name, and place of residence and whether
the license was granted or refused.
(b) The Commissioner shall keep a current roster
showing the names and places of business of all licensees that
shows their respective loan officers and a roster of exempt
persons required to file a notice under G.S. 53-243.02. The
rosters shall: (i) be kept on file in the office of the
Commissioner; (ii) contain information regarding all orders or
other action taken against the licensees, loan officers, and
other persons; and (iii) be open to public inspection.
(c) Every licensee shall make and keep the
accounts, correspondence, memoranda, papers, books, and other
records as prescribed in rules adopted by the Commissioner. All
records shall be preserved for three years unless the
Commissioner, by rule, prescribes otherwise for particular types
of records. The recordkeeping requirements imposed by the
Commissioner or this subsection shall not be greater than those
imposed by applicable federal law.
(d) If the information contained in any document
filed with the Commissioner is or becomes inaccurate or
incomplete in any material respect, the licensee shall promptly
file a correcting amendment to the information contained in the
document.
(e) A licensee shall maintain in a segregated
escrow fund or trust account any funds which come into the
licensee's possession, but which are not the licensee's property
and which the licensee is not entitled to retain under the
circumstances. The escrow fund or trust account shall be held on
deposit in a federally insured financial institution.
"§ 53-243.14. Criminal penalty.
A violation of G.S. 53-243.02 is a Class I felony.
Each transaction involving the unlawful making or brokering of a
mortgage loan is a separate offense.
"§ 53-243.15. Filing required for exempt persons; civil
penalty.
(a) All exempt persons described in G.S. 53-
243.01(8) who are engaged in the mortgage brokerage or mortgage
banking business on October 1, 2002, shall be required to file a
form with the Commissioner on or before that date. All exempt
persons, who commence mortgage brokerage or mortgage banking
business in this State after October 1, 2002, shall file the
form with the Commissioner upon commencement of the business.
This form, prescribed by the Commissioner, shall contain all of
the following information:
(1) The name of the respective exempt
person.
(2) The basis of the exempt status of the
exempt person.
(3) The principal business address of the
exempt person.
(4) The State or federal regulatory
authority responsible for the exempt person's
supervision, examination, or regulation, if
any.
(b) In addition to any other measures the exempt
person may be subject to under this Article, failure by an
exempt person to file the required form shall not affect the
exempt status of the person. However, the exempt person shall be
subject to a civil penalty set by the Commissioner that shall
not exceed the sum of two hundred fifty dollars ($250.00) for
each year the form is not filed. No person required to file
under this section may transact business in this State as a
mortgage banker or mortgage broker unless the person has filed
the prescribed form with the Commissioner in accordance with
this section."
SECTION 3. G.S. 53-99(b)(7b) reads as
rewritten:
"(7b) Records of examinations and investigations of
registrants under the Mortgage Bankers and
Brokers Act, Article 19 of this
Chapter;Lending Act, Article 19A of
this Chapter;".
SECTION 4. G.S. 66-106 reads as rewritten:
"§ 66-106. Definitions.
(a) 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 such person, or
assist such person in procuring, a loan from any
third party; or (ii) consider whether or not it
will make a loan to such person.
(2) A "loan" is an agreement to advance money or
property in return for the promise to make payments
therefor, whether such agreement is styled as a
loan, credit card, line of credit, a lease or
otherwise.
(b) Provided, that Except for
mortgage loans as defined in G.S. 53-243.01(15), 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, with respect to residential mortgage loans, to any
residential mortgage banker or mortgage broker
registered with the Commissioner of Banks pursuant to Article 19
of Chapter 53 or exempt from such registration pursuant to G.S.
53-234(6); licensed pursuant to Article 19A
of Chapter 53 of the General Statutes or exempt from licensure
pursuant to G.S. 53-243.01(8) and G.S. 53-243.02; nor to any
attorney-at-law, public accountant, or dealer registered under
the North Carolina Securities Act, acting in the professional
capacity for which such 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."
SECTION 5.(a) Any person who, on the effective
date of this act, is engaged in business and registered as a
mortgage broker or mortgage banker shall not be required to file
an application under G.S. 53-243.05, enacted by Section 2 of
this act, and shall be entitled to issuance of a license under
Article 19A of Chapter 53 of the General Statutes, enacted by
Section 2 of this act.
SECTION 5.(b) Any qualified person who files,
within 90 days after this act becomes effective, a sworn
application with the Commissioner stating that he or she has met
the definition of a qualified person under G.S. 53-243.01(18),
enacted by Section 2 of this act, including a statement that he
or she has not been convicted of any felony or any misdemeanor
involving moral turpitude, shall be issued a license as a loan
officer from the Commissioner without having to meet the
training requirements for licensure under G.S. 53-243.05(b),
enacted by Section 2 of this act.
SECTION 5.(c) Any qualified lender who files,
within 90 days after this act becomes effective, a sworn
statement with the Commissioner that consists of a list of its
loan officers in North Carolina, the addresses of its principal
office and each of its branches, and the names and addresses of
the managing principal and each of its branch managers and
states that no employee, loan officer, or individual with a
controlling interest in the lender has been convicted of any
felony or any misdemeanor involving moral turpitude, shall be
issued a license as a mortgage banker from the Commissioner
without having to meet the experience requirements for licensure
under G.S. 53-243.05(c), enacted by Section 2 of this act.
SECTION 6. On or after July 1, 2003, any
individual mortgage banker, mortgage broker, or loan officer
desiring to renew a license shall offer evidence satisfactory to
the Commissioner that he or she has complied with the continuing
professional education requirements approved by the Commissioner
pursuant to G.S. 53-243.07, enacted by Section 2 of this act.
SECTION 7. Unless inconsistent with the provisions
of Article 19 of Chapter 53 of the General Statutes as enacted
in Section 2 of this act, the rules adopted pursuant to former
Article 19 of Chapter 53 of the General Statutes governing
mortgage bankers and brokers shall remain in effect until
superseded by rules adopted under Article 19A of Chapter 53 of
the General Statutes as enacted in Section 2 of this act.
SECTION 8. The Legislative Research Commission may
study the implementation and enforcement of this act, and the
Act to Prohibit Predatory Lending enacted in the 1999 Session of
the General Assembly, (S.L. 1999-332), to determine whether they
have successfully reduced predatory lending practices and
whether further reforms may be necessary or appropriate. The
Commission may report its findings and recommendations to the
2001 General Assembly, 2002 Regular Session, or to the 2003
General Assembly.
SECTION 9. Sections 1 through 7 of this act
become effective July 1, 2002. The remainder of this act is
effective when it becomes law.
In the General Assembly read three times and ratified
this the 23rd day of August, 2001.
s/ Beverly E. Perdue
President of the Senate
s/ James B. Black
Speaker of the House of
Representatives
s/ Michael F. Easley
Governor
Approved 11:50 a.m. this 29th day of August, 2001