HOUSE BUSINESS AND INDUSTRY COMMITTEE SUBSTITUTE FOR

HOUSE BILL 895

45th legislature - STATE OF NEW MEXICO - first session, 2001









AN ACT

RELATING TO LICENSING; LICENSING MORTGAGE LOAN COMPANIES, MORTGAGE BROKERS AND LOAN OFFICERS; CREATING AN ADVISORY COMMITTEE; DEFINING ITS POWERS; CREATING A FUND; PROVIDING FOR ENFORCEMENT; AMENDING, REPEALING AND ENACTING SECTIONS OF THE NMSA 1978; MAKING AN APPROPRIATION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 56-8-7 NMSA 1978 (being Laws 1912, Chapter 31, Section 1, as amended) is amended to read:

"56-8-7. PROCURING LOANS--RATE OF COMMISSION--EXCEPTIONS.--For negotiating or securing any loan, no person, association of persons or corporation shall charge, collect or receive in excess of the following amounts:

A. upon any loan not exceeding five hundred dollars ($500), four percent;

B. upon any loan exceeding five hundred dollars ($500) and not exceeding two thousand dollars ($2,000), four percent upon the first five hundred dollars ($500) and three percent upon the remainder; and

C. upon any loan exceeding two thousand dollars ($2,000), four percent upon the first one thousand dollars ($1,000) and two percent upon the remainder; provided that this section shall not apply to [any] a loan in excess of fifty thousand dollars ($50,000) when such loan is made for business, commercial or agricultural purposes [nor] or to [any] a loan negotiated or secured by a [registrant] licensee under the Mortgage [Loan Company and Loan] Broker Act. In such instances, broker's fees shall be negotiable but shall not exceed six percent of the principal amount of the loan."

Section 2. Section 58-21-1 NMSA 1978 (being Laws 1983, Chapter 86, Section 1, as amended) is amended to read:

"58-21-1. SHORT TITLE.--Chapter 58, Article 21 NMSA 1978 may be cited as the "Mortgage [Loan Company and Loan] Broker Act"."

Section 3. Section 58-21-2 NMSA 1978 (being Laws 1983, Chapter 86, Section 2, as amended) is amended to read:

"58-21-2. DEFINITIONS.--As used in the Mortgage [Loan Company and Loan] Broker Act:

A. "affiliate" means [any] a person who, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with another person;

B. "division" means the financial institutions division of the regulation and licensing department;

C. "director" means the director of the financial institutions division of the regulation and licensing department;

D. "dwelling" means a residential structure, including a home, individual condominium unit, manufactured home or modular home that contains one to four units and is permanently attached to real property;

E. "fund" means the mortgage broker recovery fund;

F. "loan officer" means a person sponsored by a licensed mortgage broker to perform the acts of a mortgage broker;

G. "mortgage applicant" means a person who is solicited to use or who uses a mortgage broker to obtain a mortgage loan;

[D. "loan] H. "mortgage broker" means [any] a person who acts as a finder or agent of a lender or borrower of money for the purpose of procuring a mortgage loan, or both;

[E.] I. "mortgage loan" means [any] a loan secured by a [mortgage, deed of trust or other lien on real or personal] dwelling permanently affixed to real property;

[F.] J. "mortgage loan company" means [any] a person who, directly or indirectly:

(1) holds himself out as [being] able to serve as an agent for [any] a person in an attempt to obtain a mortgage loan [which will be secured by a lien or mortgage on real or personal property];

(2) holds himself out as [being] able to serve as an agent for [any] a person [who has money to lend, which loan is or will be secured by a lien or mortgage on real or personal property] who makes mortgage loans; or

(3) holds himself out as [being] able to make mortgage loans; [secured by liens or mortgages on real or personal property; and

G.] K. "person" means an individual, corporation, partnership, association, joint-stock company, trust where the interests of the beneficiaries are evidenced by a security, unincorporated organization, government or political subdivision of a government; and

L. "real estate professional" means a licensed broker, qualifying broker, brokerage or real estate salesperson as defined in Chapter 61, Article 29 NMSA 1978."

Section 4. Section 58-21-3 NMSA 1978 (being Laws 1983, Chapter 86, Section 3) is amended to read:

"58-21-3. [REGISTRATION CERTIFICATE] LICENSE REQUIRED.--It is unlawful for [any] a person to transact business in the state of New Mexico, either directly or indirectly, as a [mortgage loan company, or loan] mortgage broker or loan officer without first filing an application with the director and obtaining a [registration certificate under] license pursuant to the Mortgage [Loan Company and Loan] Broker Act, unless [such] the person is exempt from the provisions of the Mortgage [Loan Company and Loan] Broker Act under the provisions of Section [6 of that act] 58-21-6 NMSA 1978."

Section 5. Section 58-21-4 NMSA 1978 (being Laws 1983, Chapter 86, Section 4, as amended) is amended to read:

"58-21-4. APPLICATION FOR [REGISTRATION] LICENSE OR RENEWAL.--

[Each] A. An application for [registration] a license or renewal as a [mortgage loan company or loan] mortgage broker shall be filed in writing with the director, shall be verified and shall contain the following:

[A.] (1) the name of the applicant and of each of the applicant's affiliates, engaged in the business of a [loan] mortgage broker [or a mortgage loan company] and the name under which the applicant will conduct business in New Mexico, together with the articles of incorporation or articles of partnership;

[B.] (2) the location of the applicant's principal office and of each branch office in New Mexico;

[C.] (3) the name, residence and business address of each person having an interest in the business as principal, partner, officer, trustee, director or manager, specifying the capacity and title of each;

[D. a certified financial statement of the applicant, and if the applicant is a corporation, the statement must be prepared by an independent certified public accountant or registered public accountant;]

(4) a financial statement of the applicant verified by a principal of the applicant;

[E.] (5) the length of time the applicant has been engaged in business in other jurisdictions;

[F.] (6) disclosure of any action or proceeding, civil or criminal, judicial or administrative, completed or in progress against the applicant or any director, officer, employee or affiliate of the applicant;

[G.] (7) the [registration] licensure fee; [and

H.] (8) such other information [and] or documentation as the director may require; and

(9) if the application is for a renewal, proof that the mortgage broker has completed at least fifteen hours of continuing education courses approved by the director, which courses shall include loan origination and servicing, finance trends and theory, relationships with financial markets and any other topic required by the director.

B. An application for a license or renewal as a loan officer shall be filed in writing with the director, shall be verified and shall contain the following:

(1) the name of the applicant and the name of the mortgage broker that is the sponsor of the applicant;

(2) the location of the applicant's principal office and of each branch office;

(3) the length of time the applicant has been engaged in business in New Mexico or other jurisdictions;

(4) disclosure of any action or proceeding, civil or criminal, judicial or administrative, completed or in progress, against the applicant or a director, officer, employee or affiliate of the applicant;

(5) the licensure fee;

(6) such other information or documentation as the director may require; and

(7) if the application is for a renewal, proof that the loan officer has completed at least fifteen hours of continuing education courses approved by the director, which courses shall include loan origination and servicing, finance trends and theory, relationships with financial markets and any other topic required by the director."

Section 6. Section 58-21-5 NMSA 1978 (being Laws 1983, Chapter 86, Section 5, as amended) is amended to read:

"58-21-5. [REGISTRATION] LICENSURE FEES--DURATION OF [REGISTRATION] LICENSE.--

A. Mortgage loan company and mortgage broker license applicants shall, at the time of application, pay to the division four hundred dollars ($400) for initial [registration and three hundred dollars ($300)] licensure and one hundred fifty dollars ($150) for each renewal [registration Additionally] license. The director shall charge and collect from an applicant a fee of ten dollars ($10.00) per day or three hundred dollars ($300), whichever is less, for the late [filings] filing of a renewal [registration or three hundred dollars ($300), whichever is less] license.

B. A [registration] mortgage loan company or mortgage broker license shall continue for a period of twelve months from the date of [registration Each registrant] licensure. A licensee shall submit a renewal application at least thirty days before the expiration of his existing [registration] license.

C. [Persons claiming exemption pursuant to Subsection H of Section 58-21-6 NMSA 1978 shall, at the time of such claim, pay to the division three hundred dollars ($300). Additionally, the director shall charge and collect from a claimant a fee of ten dollars ($10.00) per day for late filings of an exemption certification form or three hundred dollars ($300), whichever is less.] If a mortgage loan company or mortgage broker maintains more than one place of business in this state, application shall be made and a fee of fifty dollars ($50.00) for an additional license to be known as a branch office license shall be paid to the division for each additional office maintained.

D. A loan officer license shall continue for a period of twelve months from the date of licensure. A licensee shall submit a renewal application at least thirty days before the expiration of his existing license.

E. Loan officer license applicants shall, at the time of application, pay to the division one hundred seventy-five dollars ($175) for initial licensure and one hundred dollars ($100) for each renewal license. The director shall charge and collect from an applicant a fee of five dollars ($5.00) per day or one hundred fifty dollars ($150), whichever is less, for the late filing of a renewal license."

Section 7. Section 58-21-6 NMSA 1978 (being Laws 1983, Chapter 86, Section 6, as amended) is amended to read:

"58-21-6. PERSONS EXEMPT FROM [REGISTRATION] LICENSURE.--The following persons shall be exempt from all provisions of the Mortgage [Loan Company and Loan] Broker Act:

A. banks, trust companies, savings and loan associations, credit unions, consumer finance companies, insurance companies or real estate investment trusts as defined in 26 U.S.C. Sec. 856;

B. an attorney licensed to practice law in New Mexico who is not principally engaged in the business of negotiating loans secured by real or personal property, when such person renders services in the course of his practice as an attorney at law;

C. a [New Mexico-licensed real estate broker] real estate professional rendering service in the performance of his duties as a real estate [broker] professional who obtains financing for a real estate transaction involving an actual bona fide sale of real estate or real estate contract handled by such [broker] real estate professional and who receives only the customary real estate [broker's] professional's commission in connection with the transaction;

D. [any] a person doing [any] an act under order of [any] a court;

E. [any] a person making or acquiring a mortgage loan with his own funds for his own investment without the intent to resell the mortgage loan;

F. the United States of America, state of New Mexico or any of their branches, agencies, departments, boards, instrumentalities or institutions and all political subdivisions of the state and their agencies, instrumentalities and institutions; and

G. a company [which] that is licensed as a small business investment company under the federal Small Business Investment Act of 1958 [and

H. any person doing business in New Mexico who has as one of his principal purposes the brokering, making or originating of loans secured by real estate mortgages and who does not place or sell more than ten percent of such loans to persons other than institutional investors. For purposes of this subsection, an institutional investor is:

(1) any person exempt from the provisions of the Mortgage Loan Company and Loan Broker Act pursuant to Subsection A of this section;

(2) the federal national mortgage association, the government national mortgage association, the federal home loan mortgage corporation, the New Mexico mortgage finance authority and any other entity which is an instrumentality of or sponsored by the federal government or the state of New Mexico, and any successors to any of the foregoing, or the state itself; and

(3) any other person who in the twelve months immediately preceding any such transaction has acquired real estate mortgage loans in an aggregate principal amount equal to at least twenty-five million dollars ($25,000,000).

For the purposes of this subsection, a loan shall be considered placed or sold if all or a major part of the loan indebtedness, as evidenced by the delivery of the loan note itself or a certificate of loan participation, is sold directly to such institutional investor or is included in a pass-through certificate, collateralized mortgage obligation or similar instrument issued by such institutional investor.

In order to claim the exemption provided by this subsection, a mortgage loan company or loan broker must certify to the director, on a form acceptable to the director, on or before the later of June 30, 1985, or thirty days after the person first transacts business in New Mexico as a mortgage loan company or loan broker, that such person qualifies for the exemption. The director may require the person to identify on the certification form the institutional investors to whom the person brokers or sells its real estate mortgage loans. The director may require any person to recertify for this exemption in January of each calendar year, beginning with January, 1986 or at any other time as may be prescribed by rule or regulation.

Notwithstanding the foregoing, no person may rely in any calendar year on the exemption provided by this subsection if, during such calendar year, such person makes a loan secured by a real estate mortgage on the borrower's principal residence, the annual percentage rate computed in accordance with federal truth-in-lending laws on which exceeds twice the highest reported yield during the preceding four weeks from the date the loan disclosure statement is signed, as reported by the federal reserve system for the United States treasury securities calculated at thirty-year constant maturity]."

Section 8. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] QUALIFICATIONS FOR MORTGAGE BROKER'S LICENSE.--

A. A mortgage broker's license shall be granted only to a person deemed by the director to be of good repute and competent to transact the business of a mortgage loan company or mortgage broker in a manner that safeguards the interests of the public. The director may require information as he deems necessary from an applicant to determine the applicant's honesty, trustworthiness and competency.

B. An applicant for a mortgage broker's license shall be a legal resident of the United States, have reached the age of majority and provide the director evidence that the applicant:

(1) has successfully completed at least one hundred twenty hours of education courses approved by the director, which courses shall include instruction on all applicable state and federal laws and regulations relating to mortgage loans by a licensed mortgage broker;

(2) has received a bachelor's degree in an area relating to finance, banking or business administration from an accredited college or university and has twelve months of experience in the mortgage or lending field as evidenced by documentary proof of full-time employment as a mortgage broker or loan officer working with a mortgage broker or a person exempt under Section 58-21-6 NMSA 1978;

(3) has performed actively as a mortgage broker for at least twenty-four months out of the preceding thirty-six months immediately prior to filing the application as evidenced by documentary proof of full-time employment as a loan officer working with a mortgage broker or a person exempt under Section 58-21-6 NMSA 1978; or

(4) is a registered loan broker in good standing on June 30, 2001.

C. Corporations, partnerships or associations shall be entitled to hold a mortgage broker's license issued in the name of the corporation, partnership or association; provided that at least one member of the partnership or association or one officer or employee of a corporation who actively engages in the mortgage lending business first secures a mortgage broker's license. The license shall be issued in the name of the corporation, partnership or association, naming the partner, associate, officer or employee as qualifying broker for the corporation, partnership or association.

D. The licensee shall maintain a physical office in this state and designate that office in the application."

Section 9. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] QUALIFICATIONS FOR LOAN OFFICER'S LICENSE.--

A. A license shall be granted only to a person deemed by the director to be of good repute and competent to transact the business of a loan officer in a manner that safeguards the interests of the public. The director may require information as he deems necessary from an applicant to determine the applicant's honesty, trustworthiness and competency.

B. An applicant for a loan officer's license shall be a legal resident of the United States and have reached the age of majority. An applicant shall provide the director evidence that the applicant:

(1) has received a bachelor's degree in an area relating to finance, banking or business administration from an accredited college or university;

(2) has successfully completed sixty hours of education courses approved by the director. The courses shall include instruction on all applicable state and federal laws and regulations relating to mortgage loans by a licensed mortgage broker;

(3) has eighteen months' experience as a loan officer as evidenced by documentary proof of full-time employment as a loan officer working with a mortgage broker or person exempt under Section 58-21-6 NMSA 1978; or

(4) is employed as a loan officer on June 30, 2001."

Section 10. Section 58-21-7 NMSA 1978 (being Laws 1983, Chapter 86, Section 7) is amended to read:

"58-21-7. SURETY BOND.--

A. [Each] A mortgage loan company or [loan] mortgage broker shall post and maintain with the director a corporate surety bond in the amount of twenty-five thousand dollars ($25,000). [Every] The bond shall provide for suit thereon by [any] a person who has a cause of action under the Mortgage [Loan Company and Loan] Broker Act. In no event shall the total liability of the surety to all persons, cumulative or otherwise, exceed the amount specified in the bond. [Every] The bond shall provide that [no] a suit [shall] may not be maintained to enforce [any] liability on the bond unless brought within three years after the act upon which [it] the suit is based.

B. The bond shall be in substantially the form as the director prescribes."

Section 11. Section 58-21-8 NMSA 1978 (being Laws 1983, Chapter 86, Section 8, as amended) is amended to read:

"58-21-8. DENIAL, SUSPENSION OR REVOCATION OF [REGISTRATION] LICENSE.--The director may deny, suspend or revoke [any registration] a license when the applicant or [registrant] licensee, or [any] a director, officer, employee or affiliate of the applicant or [registrant] licensee:

A. lacks a good business reputation;

B. has violated [any] a provision of the Mortgage [Loan Company and Loan] Broker Act;

C. charges, collects or receives fees for procuring, negotiating or securing [any] a loan in excess of the [amounts] amount allowed by the Mortgage [Loan Company and Loan] Broker Act or by [regulations] rules issued by the director;

D. has committed fraud in connection with [any] a transaction subject to the Mortgage [Loan Company and Loan] Broker Act;

E. has made [any misrepresentations] a misrepresentation or false [statements] statement to or concealed [any] an essential or material fact from [any] a person in the course of the [loan] mortgage broker or mortgage loan company business;

F. has knowingly made or caused to be made [any] a false representation of material fact or has suppressed or withheld from the director [any] information [which] that the applicant or [registrant] licensee possesses and [which] that if submitted by him would have rendered the applicant or [registrant] licensee ineligible [to be registered] for licensure under the Mortgage [Loan Company and Loan] Broker Act;

G. has violated [any provisions] a provision of [any] a New Mexico statute relating to escrow agents or escrow companies;

H. has refused to permit an examination by the director of his books and records or has refused or failed, within a reasonable time, to furnish [any] information or make [any] a report [that may be] required by the director under the provisions of the Mortgage [Loan Company and Loan] Broker Act; or

I. has been convicted of a felony or [any] misdemeanor involving moral turpitude; subject, however, to the provisions of the Criminal Offender Employment Act."

Section 12. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] ISSUANCE OF LICENSE--DISPLAY OF LICENSE--PROVISIONAL LICENSE.--

A. The director shall issue a license to an applicant for a mortgage loan company license, mortgage broker's license or loan officer's license if the director finds that the applicant meets all of the requirements and conditions for the license as prescribed in the Mortgage Broker Act.

B. The address of the office shall be designated on the license certificate.

C. The license shall be at all times prominently displayed in the mortgage loan company's or mortgage broker's office. The branch office certificate shall be at all times prominently displayed in the mortgage broker's branch office.

D. The license of a loan officer shall be at all times prominently displayed in the office of the mortgage broker for whom the loan officer primarily conducts business.

E. In accordance with rules promulgated by the director under the Mortgage Broker Act, the director may issue a provisional license to an applicant if a significant delay is necessary to process the application, review information related to the application or obtain information related to the application. The director may revoke a provisional license for any reason he could have denied issuance of the license on the application."

Section 13. Section 58-21-9 NMSA 1978 (being Laws 1983, Chapter 86, Section 9, as amended) is amended to read:

"58-21-9. POWERS AND DUTIES OF DIRECTOR.--

A. The director shall exercise general supervision and control over mortgage loan companies, [and loan] mortgage brokers and loan officers doing business in New Mexico. In addition to the other duties imposed on him by law, and after consulting with the mortgage broker advisory committee, the director shall:

(1) make reasonable rules [and regulations] as may be necessary for [the] implementation of the Mortgage [Loan Company and Loan] Broker Act; provided that such rules [and regulations] shall be subject to [the] judicial review in the manner set forth in Section 12-8-8 NMSA 1978;

[(2) conduct such investigations as may be necessary to determine whether any person has engaged in or is about to engage in any act or practice constituting a violation of any provision of the Mortgage Loan Company and Loan Broker Act]; and

[(3)] (2) conduct examinations, investigations and hearings in addition to those specifically provided for by law as [may be] necessary and proper to the efficient administration of the Mortgage [Loan Company and Loan] Broker Act.

B. The director may conduct an investigation:

(1) upon complaint, when it appears that a mortgage loan company, [or loan] mortgage broker or loan officer is conducting business in a manner injurious to consumers or brokers, or when it appears that [any] a person has improperly claimed an exemption pursuant to [Subsection E or H of] Section 58-21-6 NMSA 1978; or

(2) as may be necessary to determine whether a person has engaged in or is about to engage in an act or practice constituting a violation of a provision of the Mortgage Broker Act."

Section 14. Section 58-21-10 NMSA 1978 (being Laws 1983, Chapter 86, Section 10) is amended to read:

"58-21-10. SUBPOENAS, OATHS AND EXAMINATION OF WITNESSES--PENALTIES.--

A. In the conduct of [any] an examination, investigation or hearing, the director may:

(1) compel the attendance of [any] a person or obtain [any] documents by subpoena;

(2) administer oaths; and

(3) examine [any] a person under oath concerning the business of any person subject to the provisions of the Mortgage [Loan Company and Loan] Broker Act and in connection therewith require the production of [any] books, records or papers relevant to the inquiry.

B. In case of refusal to obey a subpoena issued to [any] a person, the district court of the first judicial district of Santa Fe county, upon application by the director, may issue to the person an order requiring him to appear before the director or the staff member designated by the director [there] to produce documentary evidence if so ordered or to give evidence relating to the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as [a] contempt of court."

Section 15. Section 58-21-11 NMSA 1978 (being Laws 1983, Chapter 86, Section 11) is amended to read:

"58-21-11. KEEPING OF RECORDS AND FILING OF REPORTS.--[Every] Each mortgage loan company, [and loan] mortgage broker and loan officer shall make and keep [such] accounts, correspondence, memoranda, papers, books, data and other records as the director by rule prescribes. [All] Records so required shall be preserved for six years. [Every] Each mortgage loan company and [loan] mortgage broker shall file financial reports as the director by rule prescribes. If the information contained in [any] a document filed with the director is or becomes inaccurate or incomplete in [any] a material respect, the [registrant] licensee shall file a correcting amendment within thirty days."

Section 16. Section 58-21-12 NMSA 1978 (being Laws 1983, Chapter 86, Section 12, as amended) is amended to read:

"58-21-12. EXAMINATION OF RECORDS.--[All] The records required to be maintained [by] pursuant to the Mortgage [Loan Company and Loan] Broker Act are subject to [annual] investigations or examinations by representatives of the director, within or without New Mexico, [together with such special or other examinations] as the director deems necessary or appropriate in the public interest or for the protection of investors. The mortgage loan company, [or loan] mortgage broker or loan officer so examined shall pay a fee for each [such] examination at the rate of one hundred fifty dollars ($150) per day, or fraction thereof, for each authorized representative engaged in the examination. If the examination is conducted outside the state, the actual cost of travel for the examiners shall also be reimbursed to the state by the mortgage loan company, [or loan] mortgage broker or loan officer so examined."

Section 17. Section 58-21-13 NMSA 1978 (being Laws 1983, Chapter 86, Section 13) is amended to read:

"58-21-13. PUBLIC INSPECTION OF APPLICATIONS.--Applications for [registration] licensure or renewal and all papers, documents, reports and other written instruments filed with the director under the Mortgage [Loan Company and Loan] Broker Act are public documents and open to public inspection except for files on investigations relating to violations of that act, which investigations do not culminate, or have not yet culminated, in administrative, civil or criminal action."

Section 18. Section 58-21-14 NMSA 1978 (being Laws 1983, Chapter 86, Section 14) is amended to read:

"58-21-14. NOTICE OF PROPOSED ORDER OF SUSPENSION, REVOCATION OR DENIAL OF [REGISTRATION] LICENSE--HEARING.--

A. Notice of [any] a proposed order of suspension, revocation or denial of [registration] a license of [any] a mortgage loan company, [or loan] mortgage broker or loan officer, together with the grounds therefor, shall be given in writing, served personally or sent by certified mail to the person affected.

B. The mortgage loan company, [or loan] mortgage broker or loan officer, upon application, is entitled to a hearing; but if no such application is made within ten days after the receipt of or refusal to accept [such] the notice, the director shall enter a final order."

Section 19. Section 58-21-15 NMSA 1978 (being Laws 1983, Chapter 86, Section 15) is amended to read:

"58-21-15. INVESTIGATIONS BY DIRECTOR--INJUNCTIONS.--

A. [When] If the director has reason to believe that a mortgage loan company, [or loan] mortgage broker or loan officer is conducting its business in violation of the Mortgage [Loan Company and Loan] Broker Act or that [any] a person is engaging in the mortgage loan company or [loan] mortgage broker business without [being registered] a license under the provisions of the Mortgage [Loan Company and Loan] Broker Act, unless exempt therefrom under the provisions of Section [6 of that act] 58-21-6 NMSA 1978, he may [make such] conduct an investigation as he deems necessary.

B. On the signed written complaint of an individual, the director shall investigate the actions and records of a person licensed under the Mortgage Broker Act if the complaint, or the complaint and documentary or other evidence presented in connection with the complaint, provides reasonable cause as deemed by the director. The director shall notify a mortgage loan company, mortgage broker or loan officer in writing of the complaint and of the director's investigation of the complaint.

[B. When] C. If the director finds upon sufficient evidence that [any] a mortgage loan company, [or loan] mortgage broker, loan officer or other person has engaged in or is about to engage in [any] an act or practice in violation of the Mortgage [Loan Company and Loan] Broker Act, the director may:

(1) refer the evidence concerning alleged violations of the Mortgage [Loan Company and Loan] Broker Act to the appropriate district attorney, or to the attorney general, who may, with or without such reference, institute the appropriate criminal proceedings under the Mortgage [Loan Company and Loan] Broker Act; and

(2) summarily order the mortgage loan company, [or loan] mortgage broker, loan officer or other person to cease and desist from [such] the act or practice or apply to [any] a district court having venue to enjoin the act or practice and to enforce compliance with the Mortgage [Loan Company and Loan] Broker Act, or both. If the director applies to the court for relief, upon proper showing, a permanent or temporary injunction, restraining order or writ of mandamus shall be granted, a receiver or conservator may be appointed for the defendant or defendant's assets and the court may provide such other equitable relief as it may deem appropriate. The court shall not require the director to post a bond."

Section 20. Section 58-21-17 NMSA 1978 (being Laws 1983, Chapter 86, Section 17) is amended to read:

"58-21-17. ESCROW SERVICES.--[Any registrant] A licensee under the Mortgage [Loan Company and Loan] Broker Act who also performs [any acts] an act that [are] is within the scope of activities regulated by [any statutes] a statute of the state relating to escrow agents shall also comply with all provisions of those statutes, and [registration] licensure under the Mortgage [Loan Company and Loan] Broker Act shall not serve to relieve the [registrant] licensee from compliance with the provisions of such other statutes."

Section 21. Section 58-21-18 NMSA 1978 (being Laws 1983, Chapter 86, Section 18, as amended) is amended to read:

"58-21-18. [PROHIBITED] PERMITTED CHARGES.--In connection with [any] a loan originated, brokered, negotiated or made by a [registrant] licensee under the Mortgage [Loan Company and Loan] Broker Act, [no charges other than interest shall be made, except the following:

A. the actual and reasonable expenditures for an abstract of title, title examination, title insurance premiums, property survey, appraisal fees, notary fees, preparation of deeds, mortgages or other documents, credit reports and filing and recording fees;

B. broker's fees not in excess of six percent of the principal amount of the loan;

C. a one-time charge of an amount not to exceed fifteen dollars ($15.00) when the loan is made to a natural person, primarily for personal, family or household purposes, to help defray the actual cost of preparing truth-in-lending disclosure statements, equal credit opportunity disclosure statements and other disclosures required by law; and

D. such other fees as the director by regulation may permit] a broker may not collect, charge or receive broker fees in excess of six percent of the principal amount of the loan. A licensee may charge reasonable settlement, origination, transaction or other fees or charges not otherwise prohibited or limited by state or federal law."

Section 22. Section 58-21-19 NMSA 1978 (being Laws 1983, Chapter 86, Section 19, as amended) is amended to read:

"58-21-19. [PROHIBITED WITHHOLDING AND ESCROWING OF LOAN

PROCEEDS--DISCLOSURE--PENALTY] COMPLIANCE WITH FEDERAL LAW.--In connection with [any] a loan originated, brokered, negotiated or made by a [registrant under, and which loan is subject to] licensee pursuant to the Mortgage [Loan Company and Loan Broker Act:

A. the loan shall not require or provide

for the withholding or escrowing of any portion of the loan proceeds to cover any future payments, whether principal or interest or both, to the mortgagee or obligee of such loan;

B. the loan agreement shall not require or provide for the withholding or escrowing of any portion of the loan proceeds to cover any payments to be made in the future on any prior encumbrance or lien, except for a reasonable amount to be applied toward the next annual payment of property taxes;

C. prepaid interest in the nature of points, regardless of how characterized, shall not be charged; and

D. at least three business days prior to closing a loan, the registrant shall provide to the borrower disclosure in accordance with the provisions of Section 56-8-11.2 NMSA 1978. Any registrant who fails to comply with the disclosure requirements or who provides information which is substantially incorrect as to the rate or charge shall forfeit all interest, charges or other advantage for the loan to the borrower] Broker Act, a licensee shall comply with all applicable federal consumer lending laws."

Section 23. Section 58-21-20 NMSA 1978 (being Laws 1983, Chapter 86, Section 20) is amended to read:

"58-21-20. FALSE STATEMENT UNLAWFUL.--It is unlawful for [any] a person to make or cause to be made in [any] a document filed with the director in [any proceedings] a proceeding under the Mortgage [Loan Company and Loan] Broker Act [any] a statement [which] that is at the time and in the light of the circumstances under which it is made false or misleading in [any] a material respect."

Section 24. Section 58-21-21 NMSA 1978 (being Laws 1983, Chapter 86, Section 21) is amended to read:

"58-21-21. FRAUD UNLAWFUL.--It is unlawful for [any] a mortgage company, [or loan] mortgage broker or loan officer in connection with the origination, brokering or making of [any] a mortgage loan, directly or indirectly, to:

A. employ [any] a device, scheme or artifice to defraud; or

B. engage in [any] an act, practice or course of business [which] that operates or would operate as a fraud or deceit upon [any] a person."

Section 25. Section 58-21-22 NMSA 1978 (being Laws 1983, Chapter 86, Section 22) is amended to read:

"58-21-22. PENALTIES.--[Any] A person who violates [Sections 3, 18, 19 or 21 of the Mortgage Loan Company and Loan Broker Act] Section 58-21-3, 58-21-18, 58-21-19 or 58-21-21 NMSA 1978 or who violates Section [20 of that act] 58-21-20 NMSA 1978, knowing the statement to be false or misleading in [any] a material respect, [shall be] is guilty of a fourth degree felony and upon conviction shall be sentenced as provided [for] in the Criminal Sentencing Act."

Section 26. Section 58-21-23 NMSA 1978 (being Laws 1983, Chapter 86, Section 23) is amended to read:

"58-21-23. FILING AND DESTRUCTION OF DOCUMENTS.--A document is filed when it is received by the director. The director may permit the destruction of [any] a document filed under the Mortgage [Loan Company and Loan] Broker Act with the division or the director after:

A. six years from the date of filing documents; or

B. the reproduction of documents by photograph or microphotograph of a permanent nature."

Section 27. Section 58-21-24 NMSA 1978 (being Laws 1983, Chapter 86, Section 24) is amended to read:

"58-21-24. EFFECT ON EXISTING MORTGAGE LOAN COMPANIES OR [LOAN] MORTGAGE BROKERS.--

[Any] A. A mortgage loan company, [or loan] mortgage broker or loan officer engaged in activities covered by the Mortgage [Loan Company and Loan] Broker Act for a period of at least ninety days prior to the effective date of that act shall have thirty days from the effective date of the Mortgage [Loan Company and Loan] Broker Act in which to file a proper and complete application for a [registration certificate] license together with the surety bond required by Section [7 of that act] 58-21-7 NMSA 1978 and the required fee; [During the thirty-day period and] provided that the director may extend the thirty-day period for an additional thirty days if more time is required to process the application on or after July 1, 2001. Until the director acts on the application, the applicant shall be entitled to operate without a [registration certificate] license but shall otherwise comply with all other provisions of the Mortgage [Loan Company and Loan] Broker Act.

B. A mortgage loan company or mortgage broker registered under the Mortgage Broker Act as of June 30, 2001 shall, upon expiration of its current registration, comply with the provisions of Subsection A of this section."

Section 28. Section 58-21-25 NMSA 1978 (being Laws 1983, Chapter 86, Section 25) is amended to read:

"58-21-25. NO IMPAIRMENT OF OTHER REMEDIES.--The Mortgage [Loan Company and Loan] Broker Act is not intended to impair any remedies available to injured parties under other statutes or under common law."

Section 29. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] MORTGAGE BROKER ADVISORY COMMITTEE CREATED--MEMBERSHIP--POWERS.--

A. The "mortgage broker advisory committee" is created to advise and assist the director. The committee shall consist of five members who are New Mexico residents. Members of the committee shall be appointed by the governor. The governor shall make initial appointments of two two-year terms, two three-year terms and one four-year term to produce staggered terms. Thereafter, appointments shall be for terms of three years. Three members of the committee shall be public members who have not been licensed as mortgage brokers or loan officers and have no financial interest, direct or indirect, in the mortgage loan profession and two members of the committee shall be licensed mortgage brokers. The committee shall meet at least twice a year at the call of the director.

B. In the event of a vacancy during a term, the governor shall fill the vacancy for the unexpired remainder of the term with a person who meets the qualifications of the vacated position.

C. In addition to other powers and duties delegated to it by the director, the mortgage broker advisory committee shall advise the director with respect to the following:

(1) the proposal and adoption of rules relating to the licensing of mortgage brokers and loan officers;

(2) education and experience requirements for licensing mortgage brokers and loan officers;

(3) rules of conduct and ethics for mortgage brokers and loan officers, continuing education for licensed mortgage brokers and loan officers and the types of courses acceptable as continuing education courses pursuant to the Mortgage Broker Act;

(4) in response to a request by the director, the granting or denying of an application or request for renewal of a mortgage broker license or loan officer license;

(5) the form of or format for an application or other document under the Mortgage Broker Act; and

(6) in response to a request by the director, the interpretation, implementation or enforcement of the Mortgage Broker Act.

D. Each member of the mortgage broker advisory committee shall receive per diem and mileage as provided for nonsalaried public officers in the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance."

Section 30. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] MORTGAGE BROKER RECOVERY FUND CREATED.--The "mortgage broker recovery fund" is created in the state treasury. The fund shall be administered by the director in accordance with the provisions of the Mortgage Broker Act. All money received by the division pursuant to the Mortgage Broker Act shall be credited to the fund. The state treasurer may invest money in the fund in United States bonds or treasury certificates pursuant to rules as prescribed by the state board of finance; however that he may not make investments that impair the necessary liquidity required to satisfy judgment payments awarded pursuant to the Mortgage Broker Act. All interest earned from such investments shall be credited to the fund. All money in an amount in excess of one hundred fifty thousand dollars ($150,000) remaining in the fund at the end of a fiscal year shall revert to the general fund. If the fund falls below one hundred fifty thousand dollars ($150,000), the director may adjust the amount of fees to be charged licensees."

Section 31. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] JUDGMENT AGAINST MORTGAGE BROKER OR LOAN OFFICER.--

A. An aggrieved person who claims a pecuniary loss caused by a mortgage broker or loan officer may, within one year after obtaining a final judgment and the termination of all proceedings, including appeals in connection with the judgment, file a verified petition with the director for payment from the fund if:

(1) the loss is based upon fraud, knowing or willful misrepresentation or wrongful conversion of funds by the mortgage broker or loan officer;

(2) the loss arises out of a transaction for which a mortgage broker or loan officer license is required; and

(3) the loss arises out of a transaction involving a mortgage loan in which the cause of action arises on or after July 1, 2002.

B. The aggrieved person may receive payment for the actual damages included in the judgment and unpaid, but not in an amount exceeding ten thousand dollars ($10,000) per judgment, regardless of the number of persons aggrieved or mortgage loans involved in the transaction.

C. The aggregate amount recoverable per judgment by all claimants for losses caused by any one judgment debtor shall not exceed thirty thousand dollars ($30,000).

D. A copy of the petition shall be served upon the director in the manner provided by law for service of a civil summons.

E. After service of the petition upon the director, he shall conduct a hearing on the petition in substantially the same manner as set forth in the Uniform Licensing Act. Review of the director's decision shall be in the manner provided by Section 58-21-16 NMSA 1978. At the hearing, the petitioner shall be required to show that he:

(1) is not the spouse of the judgment debtor, the personal representative of the spouse or related to the third degree of consanguinity or affinity to the judgment debtor whose conduct is alleged to have caused the loss;

(2) has complied with the requirements of the Mortgage Broker Act;

(3) has obtained a judgment of the kind described in Subsection A of this section, including the amount awarded and the amount owing at the date of the petition;

(4) has had execution issued upon the judgment and that the officer executing the writ has made a return showing that the judgment debtor has no property within the state subject to execution. If execution is levied against the property of the judgment debtor, the petitioner shall show that the amount realized on the sale was insufficient to satisfy the judgment and shall set forth the amount realized from the sale and the balance remaining due on the judgment after application of the amount realized;

(5) has made reasonable searches and inquiries to ascertain whether the judgment debtor possesses real or personal property or other assets liable to be sold or applied in satisfaction of the judgment, including partnership assets, the judgment debtor's estate or any bond or insurance, and has exercised reasonable diligence to secure payment of the judgment from the assets of the judgment debtor; and

(6) has a judgment that is not:

(a) covered by a bond, insurance, surety agreement or indemnity agreement;

(b) a loss incurred by a partner, joint venturer, employer, employee or associate of the judgment debtor whose conduct is alleged to have caused the loss; or a corporate officer or director of a corporation in which the judgment debtor is also an officer, director or employee; or

(c) a loss incurred by a business or other entity in which the judgment debtor whose conduct is alleged to have caused the loss has an interest at the time of the conduct alleged to have caused the loss."

Section 32. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] INSUFFICIENT FUNDS.--If at any time the balance in the fund is insufficient to satisfy an authorized claim for payment from the fund, the director shall, when sufficient money has been deposited in the fund, satisfy unpaid claims in the order that they were originally filed, together with accumulated interest at the rate of eight percent per year."

Section 33. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] SUBROGATION.--When the director makes a payment from the fund to a judgment creditor, the director shall be subrogated to all rights of the judgment creditor for the amounts paid out of the fund and any amount and interest so recovered by the director shall be deposited in the fund. The director may, pursuant to the provisions of the Uniform Licensing Act, revoke, suspend or refuse to renew the license of a mortgage broker or loan officer for whom payment from the fund has been made in accordance with the provisions of the Mortgage Broker Act. Further, the director may refuse to issue or renew the license of a person for whom payment from the fund has been made until that person reimburses the fund for all payments made on his behalf."

Section 34. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] WAIVER.--The failure of a person to comply with the provisions of the Mortgage Broker Act shall constitute a waiver of all rights pursuant to that act."

Section 35. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] DISCIPLINARY ACTION NOT LIMITED.--Nothing in the Mortgage Broker Act shall limit the authority of the director to take disciplinary action against a licensee for a violation of a provision of that act or of the rules of the division, nor shall the repayment in full of all obligations to the fund by a licensee nullify or modify the effect of other disciplinary proceedings brought pursuant to the provisions of that act or the rules promulgated by the director."

Section 36. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] ENFORCEMENT.--

A. If the director reasonably believes, whether or not based upon an investigation conducted under Section 58-21-15 NMSA 1978, that a person has engaged, is engaging or is about to engage in an act or practice constituting a violation of any provision of the Mortgage Broker Act or any rule promulgated pursuant to that act, the director may, subject to the right of that person to obtain a subsequent hearing pursuant to Subsection B of Section 58-21-14 NMSA 1978, issue a cease and desist order without a prior hearing against the person engaged in the prohibited activity directing him to desist and refrain from further illegal activity.

B. When it appears to the director, whether or not based upon an investigation conducted under Section 58-21-15 NMSA 1978, that a person has violated the Mortgage Broker Act or a rule or order of the director pursuant to that act, the director, in addition to any specific power granted pursuant to that act, may, after notice and hearing in an administrative proceeding unless the right to notice and hearing is waived by the person against whom the sanction is imposed:

(1) issue a cease and desist order against the person;

(2) censure the person if that person is a registered mortgage loan company, mortgage broker or loan officer;

(3) bar or suspend that person from licensure as a mortgage loan company, mortgage broker or loan officer; or

(4) issue an order against an applicant, licensee or other person who violates that act, imposing a civil penalty up to a maximum of five thousand dollars ($5,000) for each violation."

Section 37. A new section of the Mortgage Broker Act is enacted to read:

"[NEW MATERIAL] POWER OF COURT TO GRANT RELIEF.--

A. Upon a showing by the director that a person has violated or is about to violate the Mortgage Broker Act or any rule or order of the director pursuant to that act, any district court may grant or impose one or more of the following appropriate legal or equitable remedies:

(1) a temporary restraining order, permanent or temporary prohibitory or mandatory injunction or a writ of prohibition or mandamus;

(2) a civil penalty up to a maximum of five thousand dollars ($5,000) for each violation;

(3) disgorgement;

(4) declaratory judgment;

(5) restitution to consumers;

(6) the appointment of a receiver or conservator for the defendant or the defendant's assets;

(7) recovery by the director of all costs and expenses for conducting an investigation or the bringing of an enforcement action under that act; or

(8) other relief as the court deems just.

B. In determining the appropriate relief to grant, the court may consider enforcement actions taken and sanctions imposed by the director pursuant to Section 36 of this 2001 act in connection with a violation of the Mortgage Broker Act.

C. The court shall not require the director to post bond in an action under this section."

Section 38. REPEAL.--Sections 58-21-26 and 58-21-27 NMSA 1978 (being Laws 1983, Chapter 86, Section 26 and Laws 1987, Chapter 343, Section 1) are repealed.

Section 39. EFFECTIVE DATE.--

A. The effective date of the provisions of Section 7 of this act is January 31, 2002.

B. The effective date of the provisions of Sections 1 through 6 and 8 through 38 of this act is July 1, 2001.

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