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F I S C A L I M P A C T R E P O R T

SPONSOR

Boitano

ORIGINAL DATE

LAST UPDATED

2/20/07

HB

SHORT TITLE

Mortgage Loan Originator Licensing Act

SB 1055

ANALYST C. Sanchez

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

None

None

$219

$219 Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Regulation and Licensing Department (RLD)

Office of the Attorney General (AGO)

SUMMARY

Synopsis of Bill

Senate Bill 1055 enacts the “Mortgage Loan Originator Licensing Act" which would regulate

persons who are engaged in the business of making, originating, soliciting, placing, negotiating,

acquiring, selling or arranging mortgage loans in the primary market for others, or offering to

solicit, place, negotiate, acquire, sell or arrange those loans. A mortgage loan is defined as a loan

or agreement to extend credit made to a natural person that is secured by a first or second

mortgage, deed of trust, contract for deed or other similar instrument or document representing a

security interest or lien upon any lot intended for residential purposes or a one-to-four family

dwelling, located in this state, including the renewal or refinancing of any such loan.

Specifically, the bill:

1.

Requires a license to originate mortgage loans, with exceptions for banks, government

agencies, and a person who, with the person's own funds for the person's own investment,

makes a purchase money mortgage or finances the sale of the person's own property.

However, a person who enters into more than three such investments or sales in any

twelve-month period would be subject to the provisions of the Mortgage Loan Originator

Licensing Act.

2.

Limits mortgage loan origination activities by mortgage loan originators to those on

behalf of one mortgage loan company or broker;

3.

Imposes a $5000 fine on persons violating the terms of the Act;

Senate Bill 1055 – Page

2

4.

Authorizes the Director of the Financial Institutions Division of the Regulation and

Licensing Department to issue, deny, suspend, or revoke mortgage loan originator

licenses and sets fees for those licenses;

5.

Requires licensees to obtain twelve hours of continuing professional education each year;

6.

Amends provisions of the current Mortgage Loan Company and Loan Broker Act to

increase license application and renewal fees licensees under that Act;

7.

Amends provisions of the Mortgage Loan Company and Loan Broker Act to prohibit

licensees under that act (mortgage loan companies and brokers) from paying

compensation to, contracting with or employing a person in the capacity of a mortgage

loan originator who does not have a license in good standing pursuant to the Mortgage

Loan Originator Licensing Act.

FISCAL IMPLICATIONS

There is no initial appropriation or recurring budgetary consideration in the Mortgage Loan

Originator Licensing Act for sustaining the licensing, education, examination and background

checks, hearings and enforcement requirements. There are, however, anticipated increased costs

to the agency. The bill would require 4.5 FTEs, an industry manager, an examiner, and two

licensing specialists, a part time attorney, computers, office space, per-diem and vehicle costs.

1 Industry Manager @ 55,000 + 30% $ 71,500

1 Part time attorney .5 FTE @ 45,000 + 30% $ 29,250

1 Examiner @ $43,000 + 30% benefits $ 55,900

1 Clerk @ $26,000 + 30% benefits $ 33,800

3 computers @ 2000 ea. $ 6,000

Office space 4 additional employees @ 150/sf per employee@ $20/sf $ 12,000

Per Diem @ $211 per week times 26 weeks times 1 examiner $ 5,486

1 car $ 5,000

$218,936

Although this law would not go into effect until FY2010 (7/1/09), these funds would be needed

in FY 2009 to have the staff and infrastructure in place to enforce this law.

The Division would receive no additional revenue in FY 07, 08 or 09. The amount of additional

revenue the Division would receive in FY 2010 is not known, since it is not known the number

of loan officers there are in the state. However, at a minimum, if every company had at least

one mortgage loan originator there would be approximately 1600 mortgage loan originators

requiring licensure at $200 each, which would translate to $320,000 in additional revenue.

Additionally, a fee increase for renewal licenses of $100 would result in an additional $160,000.

Senate Bill 1055 – Page

3

This would total a $480,000 revenue increase at a minimum, assuming that the number of

mortgage companies remained at 1600. This revenue estimation would affect FY 2010.

SIGNIFICANT ISSUES

This act appears intended to require licensure of persons who work for or with mortgage loan

companies or brokers, or their clients. However, there also appears to be some overlap between

the current Mortgage Loan Company and Loan Broker Act and the new Mortgage Loan

Originator Act proposed by this bill with regard to the persons licensed or registered and the

activities covered. For example, the current Mortgage Loan Company and Loan Broker Act,

NMSA Sections 58-21-1 to 58-21-29 already requires “registration" of mortgage loan companies

and loan brokers with the Director of the Financial Institutions Division. Those companies are

defined in current law as persons who, directly or indirectly, holds themselves out as being able

to serve as an agent for any person in an attempt to obtain a mortgage loan; or who hold

themselves out as being able to serve as an agent for a person who makes mortgage loans; or

who hold themselves out as being able to make mortgage loans. NMSA Section 58-21-2I. That

section also defines “loan broker" as any person who acts as a finder or agent of a lender or

borrower of money for the purpose of procuring a mortgage loan. NMSA Section 58-21-2G. The

definition of “mortgage loan originator" in the new act proposed by this bill also appears to

include persons who serve as agents for mortgage loan companies or their clients, and who may

also be involved in making loans.

The provisions of the bill take effect on July 1, 2009. However, it does not provide any

“grandfather" provisions or grace periods for becoming licensed. The Director will not be

authorized to issue licenses until that date. However, persons engaged in the mortgage loan

brokerage business on or after that date without such licenses will automatically be in violation

of the Act.

PERFORMANCE IMPLICATIONS

Without an initial and recurring appropriation, it would be difficult at the current level of

staffing, for the Financial Institutions Division to fulfill the statutory mandate to license, educate,

administer examinations and conduct background checks, hearings and enforcement actions as

set forth in the Mortgage Loan Originator Licensing Act.

ADMINISTRATIVE IMPLICATIONS

Page 4, line 25 through page 5, line 15 - The Director may be required to write a regulation that

clarifies how to evaluate an applicant’s character, qualifications and fitness that will warrant the

belief that the business of the applicant will be conducted competently, honestly, fairly and in

accordance with all applicable state and federal laws.

Page 5, lines 16 through 20 – The Director will be required to establish or adopt a “mortgage

lending study" curriculum program.

Page 5, lines 24 through 25 – The Director may be required to establish or adopt a background

check program.

Page 6, lines 7 through 9 - The Director will be required to monitor a “mortgage lending study"

Senate Bill 1055 – Page

4

continuing education program.

Page 6, lines 13 through 17 - The Director will be required to establish or adopt a hearing and

appeals process when an initial or renewal application has been denied. This may require the use

of court stenographers without an associated fee provided in the Bill to offset the cost.

Page 8, lines 6 through 8 - The Director may be required to write a regulation that establishes a

reasonable period of time for an applicant or licensee to furnish information required by the

director.

Page 8, lines 19 through 22 - The Director may be required to write a regulation that clarifies

what constitutes activities and practices that are deceptive, dishonest or unduly harmful to the

interests of the public for the purpose of ordering a licensee to cease such activity or practice.

The director will not have the ultimate authority in determining violations of federal law.

Page 8, lines 23 through Page 9 line 2 - The Director will be required to establish or adopt a

process that will facilitate in the exchange of any information regarding the administration of the

Mortgage Loan Originator Licensing Act with any agency of the United States or an agency of

any state that regulates the licensee or administers statutes, rules or programs related to mortgage

loans.

Page 9, lines 3 through 5 - The Director will be required to establish or adopt a process that will

facilitate in the disclosure that an applicant’s or licensee’s application or license has been denied,

suspended or revoked or refused renewal.

TECHNICAL ISSUES

Page 2, Lines 8 through 14 – The definition of a “mortgage loan" is different from the definition

contained in the Mortgage Loan Company and Loan Broker Act, Chapter 58, Article 21, NMSA

1978. The definition appearing in this bill may be construed to include loans on vacant land and

exclude subordinate lien mortgages after the second lien. The definition in the Mortgage Loan

Company and Loan Broker Act covers only improved property and is silent about lien position.

Page 2, line 23 through page 3, line 7 – The definition of a “mortgage loan originator" includes

certain duties that are clerical and may result in licensing requirements for loan processors and

anyone involved in the mortgage loan process whose duties are strictly clerical.

Page 4, lines 2 through 3 – The line that reads “…or finances the sale of the person’s own

property,…" is unclear. There may be an unintended licensing requirement because of the

language.

Page 4, lines 9 and 10 conflicts with page 4, line 24 – use of the word “registrant" (singular) in

the former vs. “registrants" (plural) in the latter.

Page 6, line 18 through page 7, line 25 – The following verbiage appears in subsections D, E, F,

G and H, “or an employee of the applicant or licensee". There is no other reference or

indication that an applicant or a licensee may have an employee in the Mortgage Loan Originator

Licensing Act.

Senate Bill 1055 – Page

5

Page 10, lines 2 and 3 – “affirmative action" is not defined.

Page 11, Section 12 – there will be court costs associated with hearings and enforcement matters

such as stenographers, and fees. A provision providing that court costs and fees may be passed

on to an applicant or a licensee would be appropriate.

Page 10, Section 12 - A provision providing that electronic payment fees for applications may be

passed on to an applicant or a licensee would be appropriate. Without this language the Division

will not be able to accept credit card payments without absorbing the fee charged by the credit

card company.

Page 12, lines 5 through 12 – the continuing education requirement after failure to timely renew

a license is not clear. It appears that the requirement for obtaining delinquent continuing

professional education hours is not to exceed the annual requirement of 12 hours.

OTHER SUBSTANTIVE ISSUES

As mentioned previously, there is no initial or continuing appropriation to fulfill the statutory

mandate to license, educate, administer examinations and conduct background checks, hearings

and enforcement actions as set forth in this proposed legislation.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Status Quo

CS/mt