SENATE BILL 675
47th legislature - STATE OF NEW MEXICO - first session, 2005
INTRODUCED BY
James G. Taylor
AN ACT
RELATING TO LICENSING; CREATING LICENSING REQUIREMENTS FOR MORTGAGE LENDERS AND MORTGAGE BROKERS; PROVIDING POWERS TO THE DIRECTOR OF THE FINANCIAL INSTITUTIONS DIVISION OF THE REGULATION AND LICENSING DEPARTMENT; IMPOSING FEES; ENACTING THE MORTGAGE LENDERS AND BROKERS LICENSURE ACT; REPEALING THE MORTGAGE LOAN COMPANY AND LOAN BROKER ACT; PROVIDING PENALTIES; DECLARING AN EMERGENCY.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. SHORT TITLE.--This act may be cited as the "Mortgage Lenders and Brokers Licensure Act".
Section 2. LEGISLATIVE FINDINGS.--The legislature finds that:
A. the activities of mortgage lenders and mortgage brokers and the offering of financing for residential real property have a direct and immediate impact upon the housing industry, neighborhoods and communities and homeowners and potential homeowners in this state; and
B. it is essential for the protection of the residents of this state and the stability of the state's economy to establish reasonable standards governing the business practices of mortgage lenders and mortgage brokers and to provide for adequate supervision and regulation of mortgage lenders and mortgage brokers.
Section 3. DEFINITIONS.--As used in the Mortgage Lenders and Brokers Licensure Act:
A. "affiliate" means a person who, directly or indirectly, through one or more intermediaries, controls or is controlled by another person;
B. "audit" means a certified audit of a licensee's books or records and systems of internal control performed by an independent certified public accountant that is in accordance with generally accepted accounting principles and generally accepted auditing standards and that includes a statement of the licensee's financial condition;
C. "borrower" means a person who seeks to obtain a mortgage loan, including an applicant for a mortgage loan;
D. "branch office" means a location, other than a licensee's principal place of business, from which a licensee conducts business:
(1) at which the licensee makes or brokers mortgage loans;
(2) at which the licensee's advertising, promotional material or signage suggests that the licensee makes or brokers mortgage loans; or
(3) that, due to the actions of the licensee or an employee or independent contractor hired by the licensee, may be reasonably construed by the public as a place of business from which the licensee makes or brokers mortgage loans;
E. "company" means a corporation, limited liability company, partnership, business trust, association or other similar organization;
F. "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a company, whether through the ownership of voting stock of the company, the ownership of voting stock of an entity that possesses that power or otherwise, and is presumed to exist if a person, directly or indirectly owns, controls or holds twenty-five percent or more of the voting stock of a company or of an entity that owns, controls or holds with power to vote twenty-five percent or more of the voting stock of the company;
G. "conviction" means conviction of a crime if a person has pleaded guilty, no contest or nolo contendere before a court or federal magistrate or if that person has been found guilty by the decision or judgment of a court or federal magistrate or by the verdict of a jury, irrespective of the pronouncement of the sentence or the suspension of that sentence; but does not include a conviction that has been set aside, reversed or otherwise abrogated by lawful judicial process or a conviction for which a person has received a pardon from the president of the United States, or any other pardoning authority in the jurisdiction where the person was convicted;
H. "depository institution" means:
(1) a bank defined in the federal Bank Holding Company Act of 1956;
(2) a savings association or savings bank defined in the Federal Deposit Insurance Act; or
(3) an insured credit union defined in the Federal Credit Union Act;
I. "director" means the director of the division;
J. "division" means the financial institutions division of the regulation and licensing department;
K. "employee" means a person who is employed in the service of a mortgage lender or a mortgage broker for wages, salary, commissions or other direct compensation and is subject to income tax withholding or other lawful deductions by the mortgage lender or mortgage broker as a condition of employment;
L. "holding company" means a bank holding company or financial holding company pursuant to Section 12 USCA 1841, as may be amended or renumbered;
M. "independent contractor" means a person who contracts with a mortgage lender, mortgage broker or an exempt person to perform a service and is not directed or controlled by the other person and is not required to maintain separate records regarding the contract for services with respect to accounting, taxes and other matters;
N. "license" means a license issued by the director pursuant to the Mortgage Lenders and Brokers Licensure Act that authorizes a person to act as a mortgage lender, a mortgage broker or both a mortgage lender and a mortgage broker;
O. "licensee" means a person who obtains a license pursuant to the Mortgage Lenders and Brokers Licensure Act;
P. "managing broker" means a person in charge of or responsible for the operation of a principal place of business or a branch office of a licensed mortgage broker, including supervision of all employees of the licensed mortgage broker at that location;
Q. "managing loan officer" means a person in charge of and responsible for the operation of the principal place of business or a branch office of a licensed mortgage lender, including supervision of all employees of the licensed mortgage lender at that location;
R. "misrepresent" means to make a false statement of a substantive fact with reckless disregard for the truth of the statement or with knowledge that the statement is false, or to engage, with the intent to deceive or mislead, in any conduct that leads to a false belief that is material to the transaction;
S. "mortgage broker" means a person who performs mortgage brokering services and includes a person who closes a mortgage loan in that person's own name with funds provided by another person in a table funded mortgage loan transaction;
T. "mortgage brokering" means negotiating or attempting to negotiate the placement, location or obtainment of a mortgage loan for a borrower from a third-party mortgage lender in return for compensation or in anticipation of compensation to be paid, either directly or indirectly, by the borrower or the mortgage lender or both the borrower and the mortgage lender;
U. "mortgage lender" means a person who holds himself out to the borrower or to the general public as a mortgage lender or who makes a mortgage loan; and in a table funded mortgage loan transaction originated by a mortgage broker who closes the mortgage loan in the mortgage broker's own name, the mortgage lender is the person who advances the loan funds, and to whom the obligation is initially assigned at or after settlement;
V. "mortgage loan" means a loan made to a borrower that is sought by the borrower primarily for personal, family or household purposes and that is primarily secured by a mortgage or deed of trust upon an interest in real property located in this state upon which there is located or there is to be located a one-to-four family dwelling occupied or to be occupied by the borrower as the borrower's principal dwelling, regardless of where the loan is made; but does not include a loan that is made primarily for a business, commercial or agricultural purpose;
W. "net worth" means the assets of a person that are computed in accordance with generally accepted accounting principles and that are reported annually on a certified statement of financial condition;
X. "person" means an individual, sole proprietorship, estate, trust, firm, corporation, limited liability company, partnership, association, legal or commercial entity or organized group of individuals;
Y. "principal" means a director, manager, general partner, principal officer of a company, principal broker, managing broker, principal loan officer or managing loan officer or an individual who owns a controlling interest in a company;
Z. "principal broker" means the person in charge of and responsible for the mortgage brokering activities of a licensed mortgage broker, including supervision of all managing brokers and other employees of the licensed mortgage broker;
AA. "principal loan officer" means a person in charge of and responsible for the mortgage lending activities of a licensed mortgage lender, including supervision of all managing loan officers and other employees of the licensed mortgage lender;
BB. "principal place of business" means a licensee's primary business office as designated on an original application or amended application for a license;
CC. "subsidiary" means a company in which another company owns a majority or controlling interest directly, indirectly or through one or more intermediaries; and
DD. "table funded mortgage loan transaction" means a settlement at which a mortgage loan is funded by an advance of loan funds and a subsequent assignment of the loan from the person identified as the lender in the loan documents to the person advancing the funds.
Section 4. PERSONS EXEMPT FROM ACT.--
A. The following are not subject to any of the provisions of the Mortgage Lenders and Brokers Licensure Act:
(1) a depository institution or subsidiary of a depository institution;
(2) the United States or the state of New Mexico or any of their branches, agencies, departments, boards, instrumentalities or political subdivisions, including quasi-governmental agencies and government-sponsored enterprises;
(3) a person acting pursuant to a court order; and
(4) a company licensed as a small business investment company under the federal Small Business Investment Act of 1958.
B. The following are not subject to the provisions of the Mortgage Lenders and Brokers Licensure Act, except for Sections 6, 22 and 28 of that act:
(1) an insurance company licensed in New Mexico or an employee of the insurance company;
(2) a pension plan that provides mortgage loans exclusively to plan participants or plan assets;
(3) a corporation or employee of the corporation that provides mortgage loans to promote home ownership or improvements for the disadvantaged and that has been granted exemption from the federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended or renumbered;
(4) a person who provides three or fewer mortgage loans in a calendar year with that person's own funds for the person's own investment and who does not hold himself out to the general public as a mortgage lender or mortgage broker;
(5) a person or employee of the person who makes a mortgage loan while acting in a fiduciary capacity conferred by authority of a court;
(6) a person or employee of the person who sells purchase money obligations and receives as security for those obligations not more than ten deeds of trust;
(7) a person or employee of the person who makes a mortgage loan to that person's employee as a benefit of employment; and
(8) a person or employee of the person who makes a mortgage loan to a borrower related to the lender by blood or marriage.
C. The following are not subject to the provisions of the Mortgage Lenders and Brokers Licensure Act except for Sections 6, 22 and 27 of that act:
(1) an attorney licensed to practice law in New Mexico, or an employee of the attorney; provided that the attorney does not hold himself out to the general public as a mortgage broker;
(2) a licensed real estate salesperson or broker when rendering services as a real estate salesperson or broker subject to regulation and supervision by the New Mexico real estate commission, or an employee of the commission; provided that the real estate salesperson or broker does not receive any fee, commission or other payment for mortgage brokering services or hold himself out to the general public as a mortgage broker; and
(3) a person who brokers three or fewer mortgage loans in New Mexico in a calendar year, or an employee thereof, provided that the person is licensed as a mortgage broker under the laws of another state.
D. An employee of a holding company, a subsidiary of a holding company or an affiliate of a depository institution that provides mortgage brokering services to a borrower in the course and scope of employment is exempt from the provisions of the Mortgage Lenders and Brokers Licensure Act except for Sections 8, 22 and 27 of that act; provided that the lender involved in the loan for which the mortgage brokering services are provided is an affiliate of the employee's employer and that affiliate is:
(1) a licensed mortgage lender;
(2) a depository institution; or
(3) a subsidiary of a depository institution.
E. Notwithstanding the provisions of this section, a person who is not exempt from the provisions of the Mortgage Lenders and Brokers Licensure Act pursuant to Subsection A of this section who holds himself out to a borrower or to the general public as a mortgage broker shall be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act.
F. An employee of a licensed mortgage broker is exempt from the provisions of the Mortgage Lenders and Brokers Licensure Act except for Sections 21, 22 and 25 through 27 of that act, provided that the employee:
(1) performs only clerical and ministerial tasks;
(2) is under the direct and continuous supervision of a principal broker or managing broker who has a current mortgage broker license;
(3) does not hold himself out to the general public as a mortgage broker; and
(4) acts within the scope of employment.
G. The burden of establishing the right to an exemption from a provision of the Mortgage Lenders and Brokers Licensure Act rests upon the party claiming the benefit of the exemption.
Section 5. VALIDITY OF MORTGAGE LOANS.--The provisions of the Mortgage Lenders and Brokers Licensure Act shall not be construed to alter the validity or enforceability of any existing or future mortgage loan under common or other statutory laws; provided that this section shall not be construed as a limitation of the rights of a borrower to pursue all available remedies for violations of the provisions of the Mortgage Lenders and Brokers Licensure Act.
Section 6. MORTGAGE LOANS SUBJECT TO ACT.--A mortgage loan is subject to the provisions of the Mortgage Lenders and Brokers Licensure Act notwithstanding the method or location in which the mortgage loan is provided. A person who provides a mortgage brokering service or a mortgage lending service by mail, telephone or electronic means in connection with a mortgage loan is subject to the Mortgage Lenders and Brokers Licensure Act. A person who solicits or provides a mortgage loan by mail, telephone or electronic means is subject to the provisions of the Mortgage Lenders and Brokers Licensure Act.
Section 7. LICENSE REQUIREMENT.--
A. It is unlawful for a person to act as a mortgage lender or to hold himself out to a borrower or to the general public as a mortgage lender without a current mortgage lender license issued by the director.
B. It is unlawful for a person to act as a mortgage broker or to hold himself out to a borrower or to the general public as a mortgage broker without a current mortgage broker license issued by the director.
Section 8. APPLICATION FOR LICENSE.--
A. An application for a license pursuant to the Mortgage Lenders and Brokers Licensure Act shall be in writing, under oath and in a form prescribed by the director.
B. The director may require each applicant for a license to provide information reasonably necessary for the director to make a determination of the applicant's eligibility for a license and to provide appropriate supervision of the applicant if the license is granted.
C. An applicant for a license shall:
(1) complete, within three years immediately preceding the date of the application:
(a) a mortgage lending fundamentals course approved by the director, which consists of at least twenty-four hours of classroom instruction in subjects related to mortgage lending; and
(b) a written examination approved by the director; or
(2) obtain approval from the director of residential mortgage lending of the applicant's education or experience in residential mortgage lending transactions.
D. A complete license application form shall be accompanied by the following:
(1) evidence of the applicant's compliance with the financial responsibility requirements of the Mortgage Lenders and Brokers Licensure Act;
(2) an application for a branch office permit, if applicable;
(3) evidence that the applicant and its employees and agents satisfy the education or experience requirements of the director pursuant to Subsection C of this section;
(4) if the applicant is a company, documentation that the company is incorporated, registered or otherwise formed as a lawful entity pursuant to the laws of the state in which it was organized and that the company is authorized to transact business in this state; and
(5) any fees required pursuant to the Mortgage Lenders and Brokers Licensure Act.
Section 9. LICENSE RENEWAL.--
A. On or before March 1 of each year, a person shall apply to renew a license issued to that person pursuant to the Mortgage Lenders and Brokers Licensure Act by submitting a license renewal application in a form prescribed by the director.
B. The director may require an applicant for license renewal to provide any information reasonably necessary for the director to make a determination that the applicant continues to be eligible for a license.
C. As a condition of license renewal, the director shall adopt rules requiring and administering annual continuing education of licensees consisting of at least eight hours of courses each year for the purpose of enhancing the professional competence and professional responsibility of all licensees. The rules may include criteria for:
(1) the content of continuing education courses;
(2) accreditation of continuing education sponsors and programs;
(3) computation of credit for courses;
(4) special cases and exemptions;
(5) general compliance procedures; and
(6) sanctions for noncompliance.
D. A completed license renewal application shall be accompanied by the following:
(1) evidence of the applicant's compliance with the financial responsibility requirements pursuant to the Mortgage Lenders and Brokers Licensure Act;
(2) an application for a branch office permit, if applicable; and
(3) any fee required pursuant to the Mortgage Lenders and Brokers Licensure Act.
E. A person who has a license and submits a completed license renewal application in a timely manner, including all supporting documents and supplemental information and all applicable fees, shall be permitted to continue to operate pending final approval or disapproval of the license renewal application if final approval or disapproval is not granted before May 1 following submission of the license renewal application.
F. A person who has a license and does not file a complete license renewal application on or before March 1 but files a complete license renewal application before April 1 may be required by the director to pay, in addition to a license renewal fee, a late filing fee pursuant to the Mortgage Lenders and Brokers Licensure Act.
G. A license issued pursuant to the Mortgage Lenders and Brokers Licensure Act shall expire immediately and automatically on April 30 without further action by the director if the licensee fails to file a proper license renewal application pursuant to this section.
Section 10. EDUCATION PROVIDERS--REQUIREMENTS--FEES.--
A. The director may require a provider of a mortgage lending fundamentals course required of a license applicant or a continuing education course required of a license renewal applicant pursuant to the Mortgage Lenders and Brokers Licensure Act to file information regarding the contents of course materials.
B. The director may require a provider of a mortgage lending fundamentals course or a continuing education course required of license applicants or license renewal applicants pursuant to the Mortgage Lenders and Brokers Licensure Act to pay a filing fee:
(1) for the initial review of courses for which credit hours will be granted in an amount not to exceed five hundred dollars ($500); and
(2) for the continued annual review of courses in an amount not to exceed two hundred fifty dollars ($250).
Section 11. INVESTIGATION OF APPLICANTS--APPROVAL AND DENIAL OF APPLICATIONS.--
A. Upon receipt of an application for a license or for the renewal of a license, the director shall conduct any investigation the director deems necessary to determine whether the applicant qualifies for the issuance or renewal of the requested license. The director's investigation may include matters relating to the financial responsibility, criminal record, credit history, experience, training, character and general fitness of the applicant and its principals and employees.
B. The director shall not approve an application for a license or for renewal of a license unless the director makes the following findings:
(1) the financial responsibility, criminal record, credit history, experience, training, character or general fitness of the applicant and its principals and employees demonstrate that:
(a) the applicant will command the confidence of the community; and
(b) the business of the applicant will be operated honestly, fairly and in an ethical manner consistent with the laws of this state;
(2) the applicant is in material compliance with all provisions of the Mortgage Lenders and Brokers Licensure Act; and
(3) grounds do not exist to justify disciplinary action against the applicant pursuant to the Mortgage Lenders and Brokers Licensure Act.
C. If an application for a license or for the renewal of a license is denied, the director shall promptly notify the applicant of the denial and reasons for the denial.
Section 12. LICENSES.--A license issued pursuant to the Mortgage Lenders and Brokers Licensure Act shall state the name of the licensee and the address of the principal place of business of the licensee. The licensee shall post a copy of the license in a conspicuous place in the licensee's principal place of business. A license shall not be transferred or assigned, by operation of law or otherwise. A licensee shall not transact business as a mortgage lender or as a mortgage broker under any name other than that designated on the license. A license shall remain valid until it expires or is surrendered, revoked or suspended. The expiration, surrender, revocation or suspension of a license shall not affect any preexisting legal right or obligation of a licensee.
Section 13. CHANGE OF CONTROL.--
A. Except as provided in this section, a person shall not acquire a twenty-five percent interest or larger controlling interest in a licensee that is a company unless that person first:
(1) files an application for change of control with the director in a form prescribed by the director;
(2) delivers to the director information required by the director concerning the financial responsibility, criminal record, credit history, experience, training, character and general fitness of the applicant or of the applicant and its principals;
(3) provides evidence that the licensee satisfies the financial responsibility requirements of the Mortgage Lenders and Brokers Licensure Act; and
(4) pays fees required pursuant to the Mortgage Lenders and Brokers Licensure Act.
B. Upon receipt of an application for a change of control, the director shall conduct any investigation that the director deems necessary to determine whether the application should be approved or denied. The director's investigation may include matters relating to the financial responsibility, criminal record, credit history, experience, training, character and general fitness of the applicant and its principals and employees.
C. Unless otherwise provided by Subsection D of this section, the director shall approve an application for a change of control and permit the applicant for a change of control to acquire the interest in the licensee if the director finds that the applicant and its principals demonstrate the financial responsibility, criminal record, credit history, experience, training, character and general fitness required to command the confidence of the community and to operate honestly, fairly and in an ethical manner consistent with the laws of this state.
D. The director may deny an application for change of control if:
(1) the applicant or the licensee is not in material compliance with the provisions of the Mortgage Lenders and Brokers Licensure Act;
(2) requirements for approval of a change in control are not met; and
(3) any ground exists to justify disciplinary action against the applicant or licensee pursuant to the Mortgage Lenders and Brokers Licensure Act.
E. The director shall grant or deny an application for change of control within sixty days from the date a completed application for change of control accompanied by the required information and fee is filed, unless the director by order extends that period and states the reasons for the extension. If the application is denied, the director shall promptly notify the applicant of the denial and the reasons for the denial.
F. The provisions of this section do not apply to:
(1) the acquisition of an interest in a licensee by merger or consolidation with:
(a) a person affiliated through common ownership or control with the licensee; or
(b) a person licensed pursuant to the Mortgage Lenders and Brokers Licensure Act or a person exempt from the provisions of that act; or
(2) the acquisition of an interest in a licensee by a person by bequest, descent or survivorship or by operation of law.
Section 14. FINANCIAL RESPONSIBILITY REQUIREMENTS.--
A. A licensee pursuant to the Mortgage Lenders and Brokers Licensure Act shall have and continuously maintain the following as long as the license remains in effect:
(1) for a licensee who holds both a mortgage lender license and a mortgage broker license, a surety bond in an amount set by the director, but not less than two hundred thousand dollars ($200,000) and not more than five hundred thousand dollars ($500,000);
(2) for a licensee who holds a mortgage lender license, a surety bond in an amount set by the director, but not less than two hundred thousand dollars ($200,000) and not more than four hundred thousand dollars ($400,000);
(3) for a licensee who holds a mortgage broker license, a surety bond in an amount set by the director, but not less than one hundred thousand dollars ($100,000) and not more than two hundred fifty thousand dollars ($250,000); and
(4) for a licensee that is a company and that employs one or more licensed mortgage brokers, a surety bond in the name of the company that covers the licensed mortgage brokers and that is in an amount equal to or in excess of the total of the bond amounts required by this section for each broker covered by the surety bond.
B. If a person is licensed as a mortgage lender or as both a mortgage lender and mortgage broker, that person shall obtain a surety bond required pursuant to Subsection A of this section in that person's own name and that meets the requirements of Subsection E of this section.
C. If a person is licensed solely as a mortgage broker, that person shall obtain a surety bond required pursuant to Subsection A of this section in that person's own name and that meets the requirements of Subsection E of this section or shall be covered under the terms of a surety bond issued to that person's employer that is issued in accordance with Subsection D of this section.
D. A company employing a mortgage broker may obtain a bond in the name of the company that by its terms covers certain named persons who are licensed as mortgage brokers employed by the company and the amount of the bond shall be equal to the aggregate bond amounts pursuant to this section for each broker covered by the company bond.
E. A surety bond required pursuant to this section shall be issued by a bonding company or an insurance company authorized to conduct business in this state. The bond shall be in a form prescribed by the director. The licensee shall be the obligor. The aggregate liability for a claim on a bond shall not exceed the face amount of the bond. A surety obligation on a bond shall not be terminated unless ninety days of prior written notice is given by the surety to the obligor and the director. The bond shall run to the director for the benefit of the state and persons damaged by the failure of the obligor or the obligor's employees to comply with the provisions of the Mortgage Lenders and Brokers Licensure Act. The bond shall be conditioned upon the licensee conducting business in accordance with the Mortgage Lenders and Brokers Licensure Act. A person damaged by noncompliance of a licensee or employee of the licensee with a condition of the bond may proceed on the bond against the principal or surety or both, to recover damages. That proceeding shall not preclude any other remedy available to that person.
F. The director may waive the requirements of Subsections A and E of this section for a licensee that has maintained a net worth of at least one million dollars ($1,000,000) for at least three years before the date of application for a license or application for renewal.
Section 15. PRINCIPAL LOAN OFFICER AND MANAGING LOAN OFFICER REQUIREMENTS.--
A. A licensed mortgage lender shall designate a principal loan officer. The principal loan officer shall be responsible for the mortgage lending activities of the licensee, including general supervision of all managing loan officers and other employees of the licensee. The principal loan officer may be designated as the managing loan officer for the principal place of business or for one branch office. Each licensed mortgage lender shall maintain on file with the director a form prescribed by the director designating the principal loan officer and confirming the principal loan officer's acceptance of that responsibility.
B. A principal loan officer and a managing loan officer shall have at least three years of mortgage-related experience. The director may prescribe additional qualifications for principal brokers and managing brokers.
C. A licensed mortgage lender shall report a change in the identity of a designated principal loan officer or managing loan officer to the director in writing and in a form prescribed by the director within thirty days following the change.
Section 16. PRINCIPAL BROKER AND MANAGING BROKER REQUIREMENTS.--
A. A licensee that is a mortgage broker shall designate as its principal broker a mortgage broker licensed pursuant to the Mortgage Lenders and Brokers Licensure Act. The principal broker shall be responsible for the mortgage brokering activities of the licensee, including general supervision of all managing brokers and other employees of the licensee. The principal broker may be designated as the managing broker for the principal place of business or for one branch office. If the licensee operates as a sole proprietor or independent contractor, the principal broker shall be the licensee. A licensed mortgage broker shall maintain on file with the director a form prescribed by the director designating the principal broker and confirming the principal broker's acceptance of the responsibility.
B. A licensee that is a mortgage broker shall designate a separate managing broker for the principal place of business and for each branch office. A designated managing broker shall be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act as a mortgage broker. A managing broker shall not be designated for more than one location. The managing broker shall have an office at that location and shall be responsible for the direct control and continuous supervision of the licensee's business and employees at that location. A licensed mortgage broker shall maintain a form on file with the director as prescribed by the director designating the identity and location of the principal place of business or branch office, the name and address of the designated managing broker assigned to that location and the designated managing broker's acceptance of that responsibility.
C. A principal broker or a managing broker shall have at least three years of mortgage-related experience. The director may issue rules prescribing additional qualifications for principal brokers and managing brokers.
D. A licensed mortgage broker shall report a change in the identity of a designated principal broker or managing broker to the director in writing and in a form prescribed by the director within thirty days following the change.
Section 17. RECORD-KEEPING REQUIREMENTS.--
A. A licensee shall maintain books, accounts, records and documents regarding mortgage loans subject to the Mortgage Lenders and Brokers Licensure Act prescribed by the director to enable the director to determine the licensee's compliance with that act.
B. A licensee shall keep the books, accounts, records and documents in a secure location under conditions that will not lead to their damage or destruction. The director may require production of those books, accounts, records and documents at any reasonable and convenient location in this state for inspection and examination.
C. If the director determines that it is effective and cost-efficient to perform a review or examination of the books, accounts, records and documents of a licensee at an out-of-state location, the director may require production of the books, accounts, records and documents at that location.
D. A licensee shall satisfy the record retention requirements prescribed by the director. A licensee may dispose of any record that has been retained for the prescribed period.
E. A licensee may record, copy or reproduce a book, account, record or document kept by the licensee by any document imaging or other electronic means or by other photographic, photostat or miniature photographic or reproduction process of a kind that is capable of conversion into written form within a reasonable time and that correctly, accurately and permanently copies, reproduces or forms a medium for copying or reproducing the original book, account, record or document on film or other durable material.
F. An electronic imaging, photographic, photostat or miniature photographic copy or reproduction of any kind, including electronic or computer-generated data that is capable of conversion into written form within a reasonable time, is an original record for all purposes and shall be treated as an original record in all courts and administrative agencies for the purpose of its admissibility in evidence. A facsimile, exemplification or certified copy of a photographic copy or reproduction shall, for all purposes, be deemed a facsimile, exemplification or certified copy of the original record.
Section 18. REPORTING REQUIREMENTS.--
A. A licensee shall by March 31 of each year file a written report with the director containing information required by the director as necessary to determine the licensee's compliance with the Mortgage Lenders and Brokers Licensure Act and other information required by the director concerning the licensee's business and operations during the preceding calendar year. Reports shall be under oath and in a form prescribed by the director.
B. A mortgage lender or a mortgage broker licensed pursuant to the Mortgage Lenders and Brokers Licensure Act shall file with the director an audit of that licensee's operations during the licensee's preceding fiscal year and the licensee's financial condition at the end of the preceding fiscal year within one hundred twenty days after the end of the licensee's fiscal year.
C. A licensee that does not comply with the filing date requirements of this section shall pay a late filing fee pursuant to the Mortgage Lenders and Brokers Licensure Act.
Section 19. BRANCH OFFICES.--
A. A licensee is responsible for the administration, operation, control and oversight of that licensee's branch offices.
B. A licensee shall not open a branch office without first obtaining a branch office permit for that branch office from the director.
C. An application for a branch office permit shall be in writing and in a form prescribed by the director. The director may require each applicant for a branch office permit to provide information reasonably necessary for the director to supervise the branch office effectively. An application for a branch office permit of a licensed mortgage lender shall include the name and address of the managing loan officer who will have responsibility for supervision of the branch office. An application for a branch office permit of a licensed mortgage broker shall include the name and address of the managing broker who will be responsible for the supervision of the branch office. A completed application for a branch office permit shall be accompanied by a fee required pursuant to the Mortgage Lenders and Brokers Licensure Act.
D. An application for a branch office permit submitted with an application for a license shall be considered with the license application. If the application for a license is approved, the director may approve the application for a branch office permit. If the application for a license is denied, the director shall deny the application for a branch office permit. If the application is approved, the applicant shall give written notice to the director within thirty days after the licensee commences business at the branch office.
E. The director may deny an application for a branch office permit if the director finds that:
(1) the applicant has not conducted business pursuant to the Mortgage Lenders and Brokers Licensure Act efficiently, fairly, ethically, in the public interest and in accordance with the laws of this state;
(2) the licensee's surety bond is insufficient to cover the licensee's employees and activities;
(3) the licensee's staff at the branch office does not satisfy training and experience requirements prescribed by the director;
(4) the licensee has not accepted full financial responsibility for the operation and activities of the branch office;
(5) the applicant is not in material compliance with the provisions of the Mortgage Lenders and Brokers Licensure Act;
(6) requirements for the issuance of the branch office permit have not been met; or
(7) grounds exist to justify disciplinary action against the applicant pursuant to the Mortgage Lenders and Brokers Licensure Act.
F. An application for a branch permit shall be deemed approved if notice to the contrary has not been mailed by the director to the applicant within thirty days after the date the completed application, accompanied by all required information and the required fees, is filed, unless the period is extended by the order of the director. The director shall promptly notify the applicant of the denial and the reasons for the denial.
G. A branch office permit shall be renewed with the renewal of a license issued pursuant to the Mortgage Lenders and Brokers Licensure Act. A fee shall be paid for renewal of a licensee's branch office permit in accordance with the Mortgage Lenders and Brokers Licensure Act.
H. A licensee shall notify the director in writing of the closing or relocation of that licensee's branch office within thirty days of the closing or relocation. The notice shall be in writing, in a form prescribed by the director and accompanied by a fee in accordance with the Mortgage Lenders and Brokers Licensure Act.
I. A licensee that possesses a branch office permit shall post a copy of the branch office permit in a conspicuous place in the branch office.
J. A branch office permit shall not be transferred or assigned.
K. A licensee's personal residence shall not be considered a branch office unless that licensee's personal residence is specifically designated as a branch office.
Section 20. RESPONSIBILITIES OF LICENSEES.--A licensee has a continuing obligation and responsibility to:
A. maintain a staff with training and experience required by the director;
B. promptly report to the director the conviction of that licensee or of a principal or employee of that licensee of:
(1) a crime in any jurisdiction that involves fraud, dishonest dealing or any other act of moral turpitude; or
(2) a felony in any jurisdiction;
C. account for any fund, document or other item of value that comes into the licensee's possession and that is not property owned by the licensee and that the licensee is not entitled to retain under the circumstances;
D. submit a written notice of the following actions or proceedings to the director within thirty days after the commencement of those actions or proceedings:
(1) an administrative proceeding or order that is initiated or entered against the licensee or a principal or employee of the licensee related to mortgage brokering or the provision of mortgage loans;
(2) an action or proceeding that is brought against the licensee or a principal or employee of the licensee by a person when the action is brought pursuant to the Mortgage Lenders and Brokers Licensure Act or that involves a claim against the surety bond filed with the director to satisfy the requirements of the Mortgage Lenders and Brokers Licensure Act;
(3) a judgment that is entered against the licensee or any principal or employee of the licensee arising out of an action brought pursuant to the Mortgage Lenders and Brokers Licensure Act or that involves a claim against the surety bond filed with the director to satisfy the requirements of the Mortgage Lenders and Brokers Licensure Act; or
(4) a bankruptcy or insolvency proceeding that is instituted by or against the licensee or a principal or employee of the licensee;
E. notify the director in writing of a material change to the information required on the most recent application for a license or license renewal within thirty days of the change; and
F. comply with the provisions of the Mortgage Lenders and Brokers Licensure Act.
Section 21. MORTGAGE BROKER DUTIES.--A mortgage broker licensed pursuant to the Mortgage Lenders and Brokers Licensure Act in addition to duties imposed by other statutes or at common law shall act as a fiduciary of the borrower and:
A. safeguard and account for money handled for the borrower;
B. follow reasonable and lawful instructions from the borrower;
C. act with reasonable skill, care and diligence;
D. disclose to the borrower information reasonably accessible to the mortgage broker that may reasonably be expected to influence the borrower's decision;
E. make reasonable efforts to secure a mortgage loan with rates, charges and repayment terms that are advantageous to the borrower; and
F. if the mortgage broker presents the borrower with a loan that contains a prepayment penalty, the mortgage broker shall advise the borrower in writing, at or before the time that a good faith estimate is given to the borrower, whether the borrower qualifies for a loan on comparable terms without a prepayment penalty.
Section 22. MORTGAGE LENDERS AND MORTGAGE BROKERS--PROHIBITED ACTIVITIES.--It is unlawful for a mortgage lender, mortgage broker or any person required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act to:
A. misrepresent the material facts or knowingly make a false promise likely to influence, persuade or induce a borrower to take a mortgage loan or pursue a course of misrepresentation through agents or otherwise;
B. misrepresent to or conceal from a borrower material factors, terms or conditions of a mortgage loan transaction;
C. participate in a transaction in which a disclosure mandated by the federal Truth in Lending Act or the federal Real Estate Settlement Procedures Act is not made;
D. fail to disburse funds in accordance with agreements;
E. refuse to issue a satisfaction of a mortgage loan in violation of Section 48-7-4 NMSA 1978;
F. fail to account for any fund, document or other item of value that comes into the possession of the mortgage lender or mortgage broker that is not the property of the mortgage lender or mortgage broker and that the mortgage lender or mortgage broker is not entitled to retain under the circumstances;
G. engage in a transaction, practice or course of business that is not in good faith or fair dealing, that operates a fraud upon a person or that violates the Unfair Practices Act;
H. advertise a mortgage loan product unless the product will be available to a significant number of borrowers responding to the advertisement;
I. fraudulently or deceitfully advertise a mortgage loan or misrepresent the terms, conditions or charges incident to a mortgage loan in an advertisement;
J. recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a mortgage loan that refinances all or a portion of that existing loan or debt;
K. hold himself out to the general public as a mortgage lender or as a mortgage broker without possessing a valid license in accordance with the Mortgage Lenders and Brokers Licensure Act;
L. fail to disclose, at the first significant contact with borrowers, all fees to be paid to the mortgage broker by the borrower or lender, including the amount and method of calculation, in writing on a form prescribed by the director;
M. knowingly and intentionally engage in the unfair act or practice of flipping a home loan in violation of Section 58-21A-4 NMSA 1978 when engaged in mortgage brokering;
N. broker a loan that includes a prepayment penalty in violation of the Home Loan Protection Act;
O. fail to pay promptly for completed appraisals or other services ordered by or for the mortgage lender or mortgage broker; or
P. influence or attempt to influence through direct or indirect means, the outcome of a real estate appraisal sought in connection with a mortgage loan or to otherwise engage in a practice or course of business that induces or attempts to induce a real estate appraiser to violate the Uniform Standards of Professional Appraisal Practice in connection with a mortgage loan.
Section 23. COMPLAINTS--INVESTIGATIONS--EXAMINATIONS.--
A. A person who has reason to believe that the Mortgage Lenders and Brokers Licensure Act has been violated by a person who is required to be licensed pursuant to that act may file a written complaint with the director setting forth details of the alleged violation.
B. The director shall refer a written complaint relating to a person exempt from any of the provisions of the Mortgage Lenders and Brokers Licensure Act to state or federal regulatory agencies responsible for regulation or oversight of that person or to federal or state law enforcement authorities. The division shall notify the complainants of those referrals.
C. The director shall conduct a public or private investigation of a licensee or of a person who is required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act when the director has reason to believe, either upon complaint or otherwise, that the person has violated or is about to violate that act.
D. Upon reasonable notice, the director may conduct examinations of a licensee or of a person required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act to determine that person's compliance with the provisions of that act.
E. If the director finds as a result of an investigation that the person investigated has materially violated the Mortgage Lenders and Brokers Licensure Act, the person investigated shall pay the cost of the investigation and reimburse the director who conducted the investigation.
F. The director shall annually determine examination costs and may include in those costs reimbursement of all expenses, including salaries for each examiner designated by the director who participates in the examination. The person examined shall pay to the director costs of all examinations.
G. The payment of investigation and examination costs are due within thirty days after receipt of an invoice from the director. If the person who receives the invoice does not pay the costs of an investigation or examination, the director may bring an action for the recovery of the costs in a court of competent jurisdiction.
Section 24. POWERS OF THE DIRECTOR.--The director shall administer and enforce the provisions the Mortgage Lenders and Brokers Licensure Act. In furtherance of that duty, and in addition to any other powers of the director pursuant to the Mortgage Lenders and Brokers Licensure Act, the director may:
A. issue and serve subpoenas for witnesses and documents relevant to an inquiry authorized by the Mortgage Lenders and Brokers Licensure Act and to administer oaths in connection with those subpoenas;
B. require information with regard to an application, report, investigation or examination as the director deems necessary, with due regard to the paramount interest of the public to the experience, training, background, criminal record, credit history, honesty, truthfulness, integrity and competency of the person and its principals, employees and agents;
C. institute proceedings in a court of competent jurisdiction in furtherance of the purposes of the Mortgage Lenders and Brokers Licensure Act;
D. appoint designees, investigators, supervisors, experts, special assistants and other agents needed to effectively and efficiently administer the Mortgage Lenders and Brokers Licensure Act; provided that any of those appointees shall have any power of the director, which is delegated by the director; and
E. conduct checks of criminal records and credit records for a licensee, applicant or employee or agent of a licensee or applicant.
Section 25. DISCIPLINARY ACTION--LICENSE VIOLATIONS.--
A. In addition to any other power or authority granted to the director pursuant to the Mortgage Lenders and Brokers Licensure Act, when the director finds that grounds for disciplinary action exist pursuant to this section, the director may impose one or more of the following disciplinary measures against a person required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act and the person's principals and employees:
(1) deny an application or approve an application under reasonable conditions determined by the director;
(2) revoke a license or branch office permit;
(3) suspend a license or branch office permit, subject to reinstatement upon satisfaction of all reasonable conditions specified by the director;
(4) place a licensee on provisional status for a period of time and subject to all reasonable conditions that the director specifies;
(5) issue a public letter of warning or a public reprimand;
(6) issue cease and desist orders;
(7) require an increase in a licensee's surety bond in accordance with the Mortgage Lenders and Brokers Licensure Act;
(8) enter into consent agreements;
(9) require a person to disgorge profits; and
(10) impose civil penalties in an amount not to exceed five thousand dollars ($5,000) for each incident or violation of the Mortgage Lenders and Brokers Licensure Act.
B. The director may take disciplinary actions against a person pursuant to Subsection A of this section on the basis of the following independent grounds:
(1) conviction of:
(a) a crime in any jurisdiction that involves fraud, dishonest dealing or any other act of moral turpitude; or
(b) a felony in any jurisdiction;
(2) fraud, misrepresentation, deceit, negligence or incompetence in providing mortgage brokering services, making a mortgage loan or in connection with any mortgage loan transaction;
(3) material misstatement of fact on a license renewal application;
(4) failure to place immediately upon receipt or to maintain until authorized to disburse, money entrusted to the licensee by a person dealing with the licensee as a mortgage broker or mortgage lender in a trust account or a segregated account in a federally insured financial institution;
(5) failure to account for a fund, document or other item of value that comes into the licensee's possession, that is not the licensee's property and that the licensee cannot legally retain;
(6) failure to disburse finds in accordance with agreements;
(7) misuse, misapplication or misappropriation of funds or other personal property entrusted to the care of the person required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act and to which that person does not have a property right at the time of entrustment;
(8) having a license or the equivalent of a license to practice any profession or occupation revoked, suspended or otherwise acted against, including the denial of licensure by a licensing authority of this state or any other state or the federal government for fraud, dishonest dealing or other act of moral turpitude;
(9) failure to comply with an order or consent agreement made or issued pursuant to the Mortgage Lenders and Brokers Licensure Act;
(10) acting as a mortgage broker in violation of the Mortgage Lenders and Brokers Licensure Act;
(11) acting as a mortgage lender in violation of the Mortgage Lenders and Brokers Licensure Act;
(12) failure to timely pay a fee, charge or civil penalty pursuant to the Mortgage Lenders and Brokers Licensure Act;
(13) failure to maintain, preserve or keep available for examination all books, accounts records and other documents required pursuant to the Mortgage Lenders and Brokers Licensure Act;
(14) refusal to permit an investigation or examination of books or records;
(15) refusal to comply with a lawful subpoena;
(16) repeatedly and materially underestimating closing costs in communication to borrowers;
(17) violation of a provision of the Mortgage Lenders and Brokers Licensure Act;
(18) fraud, misrepresentation, concealment, dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in a business transaction; or aiding, assisting or conspiring with another person engaged in that misconduct; and
(19) failure to continuously satisfy the financial responsibility requirements of the Mortgage Lenders and Brokers Licensure Act.
C. An employee of a person required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act is subject to the disciplinary action specified in this section arising from the employee's own conduct.
Section 26. NOTICE AND HEARING.--
A. A party shall be afforded notice and a hearing before enforcement or opportunity for hearing before any of the enforcement or disciplinary actions pursuant to the Mortgage Lenders and Brokers Licensure Act are concluded by the director; provided that, in cases involving extraordinary circumstances requiring immediate action, including, without limitation, an effort to prevent imminent loss or damage to a consumer or to the general public, the director may take action without notice or a hearing, but the director shall promptly afford, upon written request, a subsequent hearing to rescind or modify an action taken.
B. On an enforcement or disciplinary action taken or proposed to be taken by the director, the person against whom the action is taken or proposed to be taken shall be entitled to an informal hearing in writing within twenty days after the director has mailed or otherwise delivered notice of the action. In the event of an informal hearing, which shall be held with reasonable promptness in the office of the director, the director shall reconsider the matter and, after the informal hearing, issue a written order affirming, modifying or cancelling the enforcement or disciplinary action. The right of a person to an informal hearing pursuant to this subsection is in addition to and not in derogation of the person's rights to an administrative hearing and judicial review.
Section 27. ENFORCEMENT BY BORROWERS.--
A. A licensee found by a preponderance of the evidence to have violated the Mortgage Lenders and Brokers Licensure Act is liable to the borrower for:
(1) actual damages, including consequential and incidental damages; provided that the borrower is not required to demonstrate reliance to receive actual damages;
(2) statutory damages not less than three times the fees received by the licensee;
(3) punitive damages, when the violation is malicious or reckless; and
(4) any other legal or equitable relief.
B. In a suit in which a borrower prevails on a claim that a licensee violated the Mortgage Lenders and Brokers Licensure Act, the borrower shall be awarded costs, including reasonable attorney fees, in addition to other relief to which the borrower is entitled.
C. Upon a showing that a mortgage lender or a mortgage broker required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act was not licensed at the time the mortgage lender provided a mortgage loan to a borrower or at the time the mortgage broker provided mortgage brokering services to a borrower, the unlicensed mortgage lender or mortgage broker shall not be entitled to recover or retain fees or charges connected with the loan.
D. For conduct that constitutes a violation of the Mortgage Lenders and Brokers Licensure Act, the Home Loan Protection Act and the Unfair Practices Act, the borrower may recover damages pursuant to the Mortgage Lenders and Brokers Licensure Act, the Home Loan Protection Act and the Unfair Practices Act.
E. The duties imposed on mortgage brokers or mortgage lenders pursuant to the Mortgage Lenders and Brokers Licensure Act or pursuant to common or statutory law are not subject to waiver or disclaimer unless otherwise provided by law.
F. A remedy available to a borrower pursuant to the Mortgage Lenders and Brokers Licensure Act is supplemental to the power of the division to impose disciplinary action or otherwise enforce the provisions of that act.
G. Without regard to whether a borrower acts individually or on behalf of others similarly situated, a provision of an agreement with a licensee that allows a party to require a borrower to assert a claim or defense in a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute than a judicial forum established in this state when the borrower may otherwise properly bring a claim or defense or that limits in any way any claim or defense the borrower may have is unconscionable and void.
Section 28. MAKING OR BROKERING LOANS WITHOUT A LICENSE--FELONY.--A person who provides a mortgage loan or mortgage brokering services without a license required pursuant to the Mortgage Lenders and Brokers Licensure Act is guilty of a fourth degree felony.
Section 29. DIRECTOR AUTHORITY TO ISSUE RULES.--The director may adopt rules to administer the provisions of the Mortgage Lenders and Brokers Licensure Act.
Section 30. FEES.--The director may prescribe:
A. a mortgage lender license application fee not to exceed one thousand dollars ($1,000);
B. a mortgage lender license issuance fee not to exceed eight hundred dollars ($800);
C. a mortgage broker license application fee not to exceed two hundred dollars ($200);
D. a mortgage broker license issuance fee not to exceed two hundred dollars ($200);
E. a mortgage lender and mortgage broker license application fee not to exceed one thousand one hundred dollars ($1,100);
F. a mortgage lender and mortgage broker license issuance fee not to exceed nine hundred dollars ($900);
G. a mortgage lender license renewal fee not to exceed eight hundred dollars ($800);
H. a mortgage broker license renewal fee not to exceed two hundred dollars ($200);
I. a mortgage lender and mortgage broker license renewal fee not to exceed nine hundred dollars ($900);
J. a branch office permit issuance fee not to exceed two hundred dollars ($200);
K. a branch office permit renewal fee not to exceed two hundred dollars ($200) for each branch office, not to exceed a total of five thousand dollars ($5,000) per calendar year for all branch offices;
L. a change of control application fee not to exceed five hundred dollars ($500);
M. a change of principal place of business notice filing fee not to exceed fifty dollars ($50.00);
N. a closing or relocation of a branch office notice filing fee not to exceed fifty dollars ($50.00); and
O. a late filing penalty fee not to exceed one hundred dollars ($100).
Section 31. LICENSURE OF MORTGAGE BROKERS.--
A. A mortgage broker required to be licensed pursuant to the Mortgage Lenders and Brokers Licensure Act shall have until July 1, 2005 to become licensed pursuant to that act for the period beginning May 1, 2005.
B. A mortgage lender or a mortgage broker who, upon the effective date of the Mortgage Lenders and Brokers Licensure Act, is registered with the director under the former Mortgage Loan Company and Loan Broker Act shall be automatically licensed pursuant to the Mortgage Lenders and Brokers Licensure Act for the period ending July 1, 2005, provided that the mortgage lender or mortgage broker:
(1) is not an adverse part to a pending administrative proceeding, enforcement proceeding, civil or criminal action or other legal proceeding with the director or attorney general;
(2) is not subject to the terms of a consent agreement, final agency decision or court order limiting the mortgage lender's or mortgage broker's authority to engage in that business in this state;
(3) complies with the provisions of Section 8 of the Mortgage Lenders and Brokers Licensure Act before May 1, 2005; and
(4) designates, in the case of a mortgage lender, its principal loan officer and managing loan officer of each branch office required pursuant to the Mortgage Lenders and Brokers Licensure Act and in the case of a mortgage broker, designates its principal mortgage broker and the managing mortgage broker of each branch office required pursuant to that act.
Section 32. LIBERAL INTERPRETATION.--The Mortgage Lenders and Brokers Licensure Act shall be liberally construed to carry out its purpose.
Section 33. REPEAL.--Sections 58-21-1 through 58-21-29 NMSA 1978 (being Laws 1983, Chapter 86, Sections 1 through 23, 25 and 26; Laws 2001, Chapter 251, Section 15 and Laws 2001, Chapter 264, Section 15; and Laws 2001, Chapter 251, Section 16 and Laws 2001, Chapter 264, Section 16, as amended) are repealed.
Section 34. SEVERABILITY.--If any part or application of the Mortgage Lenders and Brokers Licensure Act is held invalid, the remainder or its application to other situations or persons shall not be affected.
Section 35. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.
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