act-2008-0-56•Pennsylvania Act 2008-56 — BANKS AND BANKING (7 PA.C.S.) - REGULATING MORTGAGE LOAN INDUSTRY PRACTICE, LICENSURE AND PENALTIES, AND UNLICENSED MORTGAGE LOAN ACTIVITY
Pennsylvania Act 2008-56 — BANKS AND BANKING (7 PA.C.S.) - REGULATING MORTGAGE LOAN INDUSTRY PRACTICE, LICENSURE AND PENALTIES, AND UNLICENSED MORTGAGE LOAN ACTIVITY
act-2008-0-562008 Pa. Act 56Law
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BANKS AND BANKING (7 PA.C.S.) - REGULATING MORTGAGE LOAN INDUSTRY
PRACTICE, LICENSURE AND PENALTIES, AND UNLICENSED MORTGAGE LOAN ACTIVITY
Act of Jul. 8, 2008, P.L. 796, No. 56 Cl. 07
Session of 2008
No. 2008-56
HB 2179
AN ACT
Amending Titles 7 (Banks and Banking) and 18 (Crimes and
Offenses) of the Pennsylvania Consolidated Statutes,
regulating the mortgage loan industry in terms of practice,
licensure and penalties; providing for unlicensed mortgage
loan activity; and making related repeals.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Title 7 of the Pennsylvania Consolidated Statutes
is amended by adding parts to read:
PART I
PRELIMINARY PROVISIONS
(Reserved)
PART II
LICENSING
Ch.
61. Mortgage Loan Industry Licensing and Consumer Protection
CHAPTER 61
MORTGAGE LOAN INDUSTRY LICENSING AND CONSUMER PROTECTION
Subch.
A. Preliminary Provisions
B. License Requirements and Exceptions
C. Mortgage Loan Business Restrictions and Requirements
D. Administrative and Licensure Provisions
E. Miscellaneous Provisions
SUBCHAPTER A
PRELIMINARY PROVISIONS
Sec.
6101. Scope of chapter.
6102. Definitions.
§ 6101. Scope of chapter.
This chapter relates to mortgage loan industry licensing and
consumer protection. This chapter does not apply to a banking
institution or federally chartered or State-chartered credit
union, if the primary regulator of the banking institution or
federally or State-chartered credit union supervises the banking
institution or federally or State-chartered credit union.
§ 6102. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Advance fee." Any funds requested by or to be paid to a
person in advance of or during the processing of a mortgage loan
application, excluding those fees paid by a consumer directly to
a credit agency reporting bureau, title company or real estate
appraiser.
"Applicant." A person who applies for a license under this
chapter.
"Banking institution." Any of the following:
(1) A State-chartered bank, bank and trust company,
savings bank or private bank.
(2) A national bank.
(3) A federally chartered or State-chartered savings
association.
(4) A subsidiary of any of the entities listed under
this definition.
"Billing cycle." In respect to open-end mortgage loans, the
time interval between periodic billing dates. A billing cycle
shall be considered to be a monthly cycle if the closing date of
the cycle is the same date each month or does not vary by more
than four days from that date.
"Branch." An office or other place of business, other than
the principal place of business, located in this Commonwealth or
any other state, where a person engages in the mortgage loan
business subject to this chapter.
"Consumer discount company." A licensee under the act of
April 8, 1937 (P.L.262, No.66), known as the Consumer Discount
Company Act.
"Department." The Department of Banking of the Commonwealth.
"Finder's fee" or "referral fee." Any payment of money or
other consideration for the referral of a mortgage loan to a
licensee, except for consideration paid for goods or facilities
actually furnished or services actually performed.
"First mortgage loan." A loan which is secured in whole or
in part by a first lien upon any interest in real property
created by a security agreement, including a mortgage,
indenture, deed of trust or any other similar instrument or
document, which real property is used as a one-family to four-
family dwelling, a portion of which may be used for
nonresidential purposes.
"First mortgage loan business." The mortgage loan business
as applied to first mortgage loans.
"Licensee." A person who is licensed under this chapter.
"Lock-in agreement." An agreement between a mortgage lender
and a consumer whereby the mortgage lender guarantees, until a
specified date, the availability of a specified rate of interest
or specified formula by which the rate of interest and a
specific number of discount points will be determined, if the
mortgage loan is approved and closed by the specified date. If a
specified date is not determinable, the mortgage lender may
fulfill the requirement of this definition by setting forth with
specificity the method by which the duration of the lock-in
period will be determined.
"Mortgage broker." A person who engages in the mortgage loan
business by directly or indirectly negotiating or placing
mortgage loans for others in the primary market for
consideration.
"Mortgage lender." A person who engages in the mortgage loan
business by directly or indirectly originating and closing
mortgage loans with its own funds in the primary market for
consideration.
"Mortgage loan." A first or secondary mortgage loan, or
both, as the context may require.
"Mortgage loan business." The business of advertising,
causing to be advertised, soliciting, negotiating or arranging
in the ordinary course of business or offering to make or making
mortgage loans.
"Mortgage loan correspondent." A person who engages in the
mortgage loan business by directly or indirectly originating and
closing mortgage loans in his or her own name utilizing funds
provided by a wholesale table funder or other funding sources
under the circumstances described under section 6123(6)
(relating to mortgage loan business prohibitions) and
simultaneously assigning the mortgage loans to the wholesale
table funder.
"Mortgage originator." An individual not licensed as a
mortgage lender, mortgage broker or loan correspondent under
this chapter who solicits, accepts or offers to accept mortgage
loan applications, or negotiates mortgage loan terms, in other
than a clerical or ministerial capacity and who is personally in
direct contact, in writing, including electronic messaging, or
by voice communication, with consumers with regard to the
solicitations, acceptances, offers or negotiations. The term
does not include directors, partners or ultimate equitable
owners of 10% or more of a licensee.
"Open-end loan." A mortgage loan made by a mortgage lender
under this chapter pursuant to an agreement between the mortgage
lender and the consumer whereby all of the following apply:
(1) The mortgage lender may permit the consumer to
obtain advances of money from the licensee from time to time
or the mortgage lender may advance money on behalf of the
consumer from time to time as directed by the consumer.
(2) The amount of each advance, interest and permitted
charges and costs are debited to the consumer's account and
payments and other credits are credited to the same account.
(3) Interest is computed on the unpaid principal balance
or balances of the account outstanding from time to time.
(4) The consumer has the privilege of paying the account
in full at any time or, if the account is not in default, in
monthly installments of fixed or determinable amounts as
provided in the open-end loan agreement.
"Person." An individual, association, joint venture or
joint-stock company, partnership, limited partnership, limited
partnership association, limited liability company, business
corporation, nonprofit corporation or any other group of
individuals, however organized.
"Primary market." The market wherein mortgage loans are
originated between a lender and a consumer.
"Principal place of business." The primary office of a
person located in this Commonwealth, which is staffed on a full-
time basis and at which the person's books, records, accounts
and documents are maintained.
"Secondary mortgage loan." A loan which is secured in whole
or in part by a lien upon any interest in real property created
by a security agreement, including a mortgage, indenture, deed
of trust or any other similar instrument or document, which real
property is subject to a prior lien and which is used as a one-
family to four-family dwelling, a portion of which may be used
for nonresidential purposes.
"Secondary mortgage loan business." The mortgage loan
business as applied to secondary mortgage loans.
"Tangible net worth." Net worth less the following assets:
(1) That portion of any assets pledged to secure
obligations of any person other than that of the applicant.
(2) Any asset, except construction loan receivables
secured by first mortgages from related companies, due from
officers or stockholders of the applicant or related
companies in which the applicant's officers or stockholders
have an interest.
(3) That portion of the value of any marketable
security, listed or unlisted, not shown at the lower of the
cost or market value, except for any shares of Federal
National Mortgage Association stock required to be held under
a servicing agreement, which are carried at cost.
(4) Any amount in excess of the lower of the cost or
market value of mortgages in foreclosures, construction loans
or foreclosed property acquired by the applicant through
foreclosure.
(5) Any investment shown on the balance sheet in the
applicant's joint ventures, subsidiaries, affiliates or
related companies which is greater than the value of the
assets at equity.
(6) Goodwill.
(7) The value placed on insurance renewals or property
management contract renewals or other similar intangibles of
the applicant.
(8) Organization costs of the applicant.
(9) The value of any servicing contracts held by the
applicant not determined in accordance with the American
Institute of Certified Public Accountants Statement of
Position 76-2, dated August 25, 1976, or subsequent revisions
thereto.
(10) Any real estate held for investment where
development will not start within two years from the date of
its initial acquisition.
(11) Any leasehold improvements not being amortized over
the lesser of the expected life of the asset or the remaining
term of the lease.
(12) Any fees paid or collected which are not
recoverable through the closing or selling of loans.
"Wholesale table funder." A licensed mortgage lender or
person exempt under section 6112(1) or (7) (relating to
exceptions to license requirements) who, in the regular course
of business, provides the funding for the closing of mortgage
loans through mortgage loan correspondents and who by assignment
obtains title to the mortgage loans.
SUBCHAPTER B
LICENSE REQUIREMENTS AND EXCEPTIONS
Sec.
6111. License requirements.
6112. Exceptions to license requirements.
§ 6111. License requirements.
(a) General rule.--Except as provided under subsections (b)
and (c) and section 6112 (relating to exceptions to license
requirements), on and after the effective date of this section,
no person shall engage in the mortgage loan business in this
Commonwealth without being licensed as a mortgage broker,
mortgage lender, mortgage loan correspondent or mortgage
originator as provided under this chapter. A mortgage originator
may not engage in the mortgage loan business unless the mortgage
originator is employed and supervised by a licensed mortgage
broker, mortgage lender or mortgage loan correspondent.
(b) Licensed activity exceptions.--
(1) A mortgage lender may act as a mortgage broker or
mortgage loan correspondent without a separate mortgage
broker or mortgage loan correspondent license and, if
licensed as an individual, may perform the services of a
mortgage originator without a separate mortgage originator
license.
(2) A mortgage loan correspondent may act as a mortgage
broker without a separate mortgage broker license and, if
licensed as an individual, may perform the services of a
mortgage originator without a separate mortgage originator
license.
(3) A person licensed as a mortgage broker may only
perform the services of a mortgage broker. If a mortgage
broker is licensed as an individual, a mortgage broker may
perform the services of a mortgage originator without a
separate mortgage originator license.
(c) Loans for business or commercial purposes.--This chapter
shall not apply to mortgage loans made for business or
commercial purposes.
§ 6112. Exceptions to license requirements.
The following persons shall not be required to be licensed
under this chapter in order to conduct the mortgage loan
business:
(1) A banking institution or a federally chartered or
State-chartered credit union, if the primary regulator of the
banking institution or federally chartered or State-chartered
credit union supervises the banking institution or federally
chartered or State-chartered credit union.
(2) An attorney authorized to practice law in this
Commonwealth not otherwise engaged in or holding himself or
herself out to the public as being engaged in the mortgage
loan business who acts as a mortgage broker in negotiating or
placing a mortgage loan in the normal course of legal
practice.
(3) A person who either originates, negotiates or
services less than three mortgage loans in a calendar year in
this Commonwealth, unless the person is otherwise deemed to
be engaged in the mortgage loan business by the department.
(4) Any agency or instrumentality of the Federal
Government or a corporation otherwise created by an act of
the United States Congress, including the Federal National
Mortgage Association, the Government National Mortgage
Association, the Veterans' Administration, the Federal Home
Loan Mortgage Corporation and the Federal Housing
Administration.
(5) Any agency or instrumentality of a state or local
government, the District of Columbia or any territory of the
United States, including the Pennsylvania Housing Finance
Agency and other government housing finance agencies.
(6) Consumer discount companies, except that a consumer
discount company that acts as a mortgage broker, mortgage
lender or mortgage loan correspondent other than under the
provisions of the act of April 8, 1937 (P.L.262, No.66),
known as the Consumer Discount Company Act, shall be subject
to the provisions of Subchapter C (relating to mortgage loan
business restrictions and requirements) and sections
6131(c)(2) and (3) (relating to application for license),
6135 (relating to licensee requirements), 6138 (relating to
authority of department) and 6140(b) (relating to penalties).
Employees of licensees under the Consumer Discount Company
Act that act as mortgage originators shall be subject to the
licensing requirements of this chapter. Consumer discount
companies that employ mortgage originators shall be subject
to the same requirements as mortgage lenders in regard to the
employment and supervision of mortgage originators.
(7) Except for consumer discount companies, affiliates
of banking institutions and subsidiaries and affiliates of
federally chartered or State-chartered credit unions, except
that such subsidiaries and affiliates shall:
(i) be subject to the provisions of Subchapter C and
sections 6135(a)(2), (3) and (4), (b) and (c), 6138 and
6140(b);
(ii) deliver as required to the department annually
copies of financial reports made to all supervisory
agencies; and
(iii) be registered with the department.
(8) Employees of a mortgage broker, mortgage lender or
mortgage loan correspondent, to the extent that the employees
are not otherwise required to be licensed as mortgage
originators.
(9) Employees of excepted persons enumerated under this
section, unless otherwise provided under this subsection.
(10) A person that makes a mortgage loan to the person's
employee as an employment benefit if the person does not hold
itself out to the public as a mortgage lender.
(11) Nonprofit corporations not otherwise engaged in or
holding themselves out to the public as being engaged in the
mortgage loan business making mortgage loans to promote home
ownership or improvements for the disadvantaged.
(12) A nonprofit corporation not otherwise engaged in or
holding itself out to the public as being engaged in the
mortgage loan business which meets all of the following:
(i) Does not make more than 12 mortgage loans in a
calendar year with its own funds, not including funds
borrowed through warehouse lines of credit or other
sources for the purpose of making mortgage loans.
(ii) Makes mortgage loans which are retained in the
corporation's own portfolios and not regularly sold to
others and are made to promote and advance the cultural
traditions and lifestyles of bona fide religious
organizations.
SUBCHAPTER C
MORTGAGE LOAN BUSINESS RESTRICTIONS AND REQUIREMENTS
Sec.
6121. General requirements.
6122. Powers conferred on certain licensees engaged in the
mortgage loan business.
6123. Mortgage loan business prohibitions.
6124. Prohibited clauses in mortgage loan documents.
6125. Mortgage lending authority.
6126. Requirements as to open-end loans.
§ 6121. General requirements.
A licensee shall do all of the following:
(1) Comply with all provisions of the act of January 30,
1974 (P.L.13, No.6), referred to as the Loan Interest and
Protection Law (Usury Law). This paragraph shall not
supersede section 501 of the Depository Institutions
Deregulation and Monetary Control Act of 1980 (94 Stat. 161,
12 U.S.C. § 1735f-7a) or the Alternative Mortgage Transaction
Parity Act of 1982 (96 Stat. 1545, 12 U.S.C. §§ 3801-3806 et
seq.).
(2) Comply with the provisions of the act of December 3,
1959 (P.L.1688, No.621), known as the Housing Finance Agency
Law, that are applicable to the licensee.
(3) Comply with all applicable Federal law, including
the Real Estate Settlement Procedures Act (88 Stat. 1724, 12
U.S.C. §§ 2601 et seq.), the Truth in Lending Act (82 Stat.
146, 15 U.S.C. §§ 1601 et seq.) and the Equal Credit
Opportunity Act (88 Stat. 1521, 15 U.S.C. §§ 1691 et seq.).
(4) Give to the consumer a copy of the promissory note
evidencing the mortgage loan and any mortgage loan agreement,
mortgage instrument or other document evidencing a mortgage
loan signed by the consumer.
(5) Give to the consumer written evidence of credit
life, credit accident and health, credit unemployment and
property insurance, if any, provided by the licensee to the
consumer.
(6) If a payment is made in cash on account of a
mortgage loan, give to the consumer at the time the payment
is actually received a written receipt which shall show the
account number or other identification mark or symbol, date,
amount paid and, upon request of the consumer, the unpaid
balance of the account prior to and after the cash payment.
(7) Upon written request from the consumer, give or
forward to the consumer within ten days from the date of
receipt of the request a written statement of the consumer's
account which shall show the dates and amounts of all
installment payments credited to the consumer's account, the
dates, amounts and an explanation of all other charges or
credits to the account and the unpaid balance of the account.
A licensee shall not be required to furnish more than two
statements in any 12-month period.
(8) If a mortgage loan is paid in full and, in the case
of an open-end loan, the mortgage lender is no longer
obligated to make future advances to the consumer, the
mortgage lender shall do all of the following:
(i) Cancel any insurance provided by the licensee in
connection with the mortgage loan and refund to the
consumer, in accordance with regulations promulgated by
the Insurance Department, any unearned portion of the
premium for the insurance.
(ii) Stamp or write on the face of the mortgage loan
agreement or promissory note evidencing the mortgage loan
"Paid in Full" or "Canceled," the date paid and, within
60 days, return the mortgage loan agreement or promissory
note to the consumer.
(iii) Release any lien on real property and cancel
the same of record and, at the time the mortgage loan
agreement or promissory note evidencing the mortgage loan
is returned, deliver to the consumer good and sufficient
assignments, releases or any other certificate,
instrument or document as may be necessary to evidence
the release.
(9) Provide for periodic accounting of any escrow
accounts held by the mortgage lender to the consumer not less
than annually, showing the amounts received from the consumer
and the amounts disbursed from the accounts.
(10) Refund all fees, other than those fees paid by the
licensee to a third party, paid by a consumer when a mortgage
loan is not produced within the time specified by the
mortgage broker, mortgage lender or mortgage loan
correspondent at the rate, term and overall cost agreed to by
the consumer. This paragraph shall not apply if the failure
to produce a mortgage loan is due solely to the consumer's
negligence, his or her refusal to accept and close on a loan
commitment or his or her refusal or inability to provide
information necessary for processing, including employment
verifications and verifications of deposits. The licensee
shall disclose to the consumer, in writing, at the time of a
loan application which fees paid or to be paid are
nonrefundable.
(11) Ensure that all lock-in agreements shall be in
writing and shall contain at least the following provisions:
(i) The expiration date of the lock-in, if any.
(ii) The interest rate locked in, if any.
(iii) The discount points locked in, if any.
(iv) The fee locked in, if any.
(v) The lock-in fee, if any.
(12) Upon written request from the consumer or a person
authorized by the consumer, provide, within ten days from the
date of receipt of the request, a written statement regarding
the unpaid balance of a consumer's mortgage loan or account.
The statement shall contain the total amount required to pay
off a mortgage loan and a specific expiration date for the
payoff information. A licensee shall not be required to
furnish more than two statements in any 12-month period.
(13) In the case of a mortgage broker, mortgage lender or
mortgage loan correspondent, do all of the following:
(i) Maintain supervision and control of and
responsibility for the acts and omissions of all mortgage
originators employed by the licensee.
(ii) Maintain a list of all current and former
mortgage originators employed by the licensee and the
dates of the employment.
(iii) In the event that a licensee believes that a
mortgage originator employed by the licensee has engaged
in any activity that is illegal or in violation of this
chapter or any regulation or statement of policy
promulgated under this chapter, the licensee shall
provide the department with written notification of the
belief and the licensee's proposed corrective measures
within 30 days. A licensee shall not be liable to a
mortgage originator in connection with the notification.
§ 6122. Powers conferred on certain licensees engaged in the
mortgage loan business.
(a) Mortgage lenders.--If they are in compliance with the
provisions of this chapter, mortgage lenders shall have the
power and authority:
(1) To make first and secondary mortgage loans and,
subject to the limitations of this chapter, to charge and
collect application fees for the loans.
(2) To collect fees or premiums for title examination,
abstract of title, title insurance, credit reports, surveys,
appraisals, notaries, postage, including messenger and
express carrier, tax service or other costs or fees actually
related to the processing of a mortgage loan application or
making of a mortgage loan, when the fees are actually paid or
incurred by the licensee and to collect fees or charges
prescribed by law which actually are or will be paid to
public officials for determining the existence of or for
perfecting or releasing or satisfying any security related to
the mortgage loan and include these in the principal of the
mortgage loan.
(3) To provide access to credit life, credit disability,
credit accident and health and credit unemployment insurance.
A consumer shall not be compelled to purchase credit life,
credit disability, credit accident and health or credit
unemployment insurance as a condition of the making of a
mortgage loan, and all contracts utilized shall reflect a
clear disclosure that the purchase of credit life, credit
disability, credit accident and health or credit unemployment
insurance is not a prerequisite to obtaining a mortgage loan.
If, however, the consumer elects to obtain credit life,
credit disability, credit accident and health or credit
unemployment insurance through the licensee, the consumer
shall consent thereto in writing. If consumers desire joint-
life or joint accident and health insurance, all consumers
shall consent thereto in writing. The insurance shall be
obtained from an insurance company authorized by the laws of
this Commonwealth to conduct business in this Commonwealth.
Any benefit or return to the licensee from the sale or
provision of the insurance shall not be included in the
computation of the maximum charge authorized for mortgage
loans under this chapter and shall not be deemed a violation
of this chapter when the insurance is written pursuant to the
laws of this Commonwealth governing insurance.
(4) To require property insurance on security against
reasonable risks of loss, damage and destruction and to
provide access to the insurance to the consumer. The amount
and term of the insurance shall be reasonable in relation to
the amount and term of the mortgage loan contract and the
value of the security. This requirement shall be satisfied if
the consumer demonstrates at the time the mortgage loan is
made that the consumer has valid and collectible insurance
covering the property to be insured and has furnished the
licensee with a loss payable endorsement sufficient for the
protection of the licensee. If the consumer elects to obtain
property insurance through the licensee, the consumer shall
consent thereto in writing, and the insurance shall be
obtained from an insurance company authorized by the laws of
this Commonwealth to conduct business in this Commonwealth.
Any benefit or return to the licensee from the sale or
provision of property insurance shall not be included in the
computation of the maximum charge authorized for mortgage
loans under this chapter and shall not be deemed a violation
of this chapter when the insurance is written pursuant to the
laws of this Commonwealth governing insurance. The premium
for any property insurance may be included in the principal
amount of the mortgage loan requested by the consumer.
However, the premium shall be disclosed as a separate item on
the face of the principal contract document and the
licensee's individual consumer ledger records.
(5) To collect a fee for a subsequent dishonored check
or instrument taken in payment, not to exceed the service
charge permitted to be imposed under 18 Pa.C.S. § 4105
(relating to bad checks).
(b) Mortgage brokers and loan correspondents.--Provided they
are in compliance with the provisions of this chapter, mortgage
brokers and mortgage loan correspondents shall have the power
and authority:
(1) To collect title examination, credit report and
appraisal fees actually related to the making of a mortgage
loan when the fees are actually paid or incurred by the
licensee and to include the fees in the principal of the
mortgage loan which is being negotiated or arranged.
(2) To charge a broker's fee if the fee is disclosed to
the consumer for whom the loan is being negotiated or
arranged.
(3) To accept from a licensee a fee or premium for
brokering or cobrokering a mortgage loan, provided that the
payment and acceptance of the fee or premium is in compliance
with Federal law, including the Real Estate Settlement
Procedures Act of 1974 (Public Law 93-533, 88 Stat. 1724).
§ 6123. Mortgage loan business prohibitions.
A licensee engaging in the mortgage loan business shall not:
(1) Charge, contract for, collect or receive charges,
fees, premiums, commissions or other considerations in excess
of the limitations of those contained in this chapter.
(2) Disburse the proceeds of a mortgage loan in any form
other than cash, electronic funds transfer, certified check
or cashier's check where the proceeds are disbursed by the
licensee to a closing agent. This paragraph shall not be
construed as requiring a lender to utilize a closing agent
and shall not apply to disbursements by check directly from
the licensee's account payable to the consumer, consumer
designees or other parties due funds from the closing.
(3) Advertise, cause to be advertised or otherwise
solicit whether orally, in writing, by telecast, by broadcast
or in any other manner any statement or representation which
is false, misleading or deceptive.
(4) Require a consumer to pay, to the licensee or any
other person, a broker's fee, finder's fee, commission,
premium or any other charges for obtaining, procuring or
placing of a mortgage loan, except as provided under this
chapter. This restriction shall not prohibit a mortgage
lender from paying a fee to a mortgage broker in connection
with the placement or procurement of a mortgage loan nor
prohibit a consumer from requesting or directing a mortgage
lender licensee to pay a fee from the proceeds of a mortgage
loan or include it in the amount to be financed.
(5) Make any mortgage loan on the condition, agreement
or understanding that the consumer contract with any specific
person or organization for insurance services as agent,
broker or underwriter.
(6) In the case of a mortgage loan correspondent,
service mortgage loans or close mortgage loans utilizing
funding other than a wholesale table funder, except in an
emergency circumstance where wholesale table funding is not
available.
(7) In the case of a mortgage broker or mortgage
originator, commit to close or close mortgage loans in its
own name, service mortgage loans, enter into lock-in
agreements or collect lock-in fees, provided, however, that a
mortgage broker or mortgage originator can provide a lender's
lock-in agreement to a consumer on behalf of that lender and
collect lock-in fees payable to that lender on the lender's
behalf.
(8) In the case of a mortgage originator, accept any
fees from consumers in the mortgage originator's own name. A
mortgage originator may accept fees payable to the mortgage
originator's employer licensee and fees payable to third-
party entities on behalf of the mortgage originator's
employer licensee. A mortgage originator may not accept
advance fees payable to the mortgage originator's employer
licensee unless the licensee is authorized to collect advance
fees under this chapter.
§ 6124. Prohibited clauses in mortgage loan documents.
No writing of any kind executed in connection with a mortgage
loan shall contain:
(1) An agreement whereby the consumer waives any rights
accruing to the consumer under the provisions of this
chapter.
(2) An irrevocable wage assignment of, or order for the
payment of, any salary, wages, commissions or any other
compensation for services, or any part thereof, earned or to
be earned.
(3) An agreement to pay any amount other than the unpaid
balance of the mortgage loan agreement or promissory note or
any other charge authorized by this chapter.
§ 6125. Mortgage lending authority.
(a) First mortgage loans.--Mortgage lenders engaged in the
first mortgage loan business may make first mortgage loans
pursuant to:
(1) the act of January 30, 1974 (P.L.13, No.6), referred
to as the Loan Interest and Protection Law; or
(2) if the licensee is qualified, applicable Federal
law, including the Alternative Mortgage Transaction Parity
Act of 1982 (96 Stat. 1545, 12 U.S.C. § 3801 et seq.) and
section 501 of the Depository Institution Deregulation and
Monetary Control Act of 1980 (94 Stat. 161, 12 U.S.C. §
1735f-7a).
(b) Secondary mortgage loans.--Mortgage lenders engaged in
the secondary mortgage loan business may:
(1) if the licensee is qualified, make secondary
mortgage loans on terms as are permissible under applicable
Federal law, including the Alternative Mortgage Transaction
Parity Act of 1982; or
(2) (i) make secondary mortgage loans repayable in
installments and charge, contract for and receive thereon
interest at a rate not exceeding 1.85% per month. No
interest shall be paid, deducted or received in advance,
except that interest from the date of disbursement of
funds to the consumer to the first day of the following
month shall be permitted in the event the first
installment payment is more than 30 days after the date
of disbursement. Interest shall not be compounded and
shall be computed only on unpaid principal balances.
However, the inclusion of earned interest in a new note
shall not be considered compounding. For the purpose of
computing interest, a month shall be any period of 30
consecutive days;
(ii) charge and collect an application fee not
exceeding 3% of the original principal amount of the
secondary mortgage loan. The fee shall be fully earned at
the time the secondary mortgage loan is made and may be
added to the principal amount of the secondary mortgage
loan. No application fee may be collected on subsequent
advances made pursuant to an open-end loan if the full
fee of 3% of the credit limit was collected at the time
the open-end loan was made; or
(iii) charge and collect a delinquency charge of $20
or 10% of each payment, whichever is greater, for a
payment which is more than 15 days late.
§ 6126. Requirements as to open-end loans.
The following shall apply:
(1) A mortgage lender may make open-end loans and may
contract for and receive thereon interest and charges as set
forth under this chapter.
(2) A mortgage lender shall not compound interest by
adding any unpaid interest authorized by this section to the
unpaid principal balance of the consumer's account, provided,
however, that the unpaid principal balance may include the
additional charges authorized by this subchapter.
(3) Interest authorized by this section shall be deemed
not to exceed the maximum interest permitted by this
subchapter if the interest is computed in each billing cycle
by any of the following methods:
(i) by converting the monthly rate to a daily rate
and multiplying the daily rate by the applicable portion
of the daily unpaid principal balance of the account, in
which case the daily rate shall be 1/30 of the monthly
rate;
(ii) by multiplying the monthly rate by the
applicable portion of the average monthly unpaid
principal balance of the account in the billing cycle, in
which case the average daily unpaid principal balance is
the sum of the amount unpaid each day during the cycle
divided by the number of days in the cycle; or
(iii) by converting the monthly rate to a daily rate
and multiplying the daily rate by the average daily
unpaid principal balance of the account in the billing
cycle, in which case the daily rate shall be 1/30 of the
monthly rate.
(4) For all of the methods of computation in paragraph
(3)(i), (ii) and (iii), the billing cycle shall be monthly,
and the unpaid principal balance on any day shall be
determined by adding to any balance unpaid as of the
beginning of that day all advances and other permissible
amounts charged to the consumer and deducting all payments
and other credits made or received that day.
(5) The consumer may at any time pay all or any part of
the unpaid balance in the consumer's account without
prepayment penalty or, if the account is not in default, the
consumer may pay the unpaid principal balance in monthly
installments. Minimum monthly payment requirements shall be
determined by the licensee and set forth in the agreement
evidencing the open-end loan.
(6) A mortgage lender may contract for and receive the
fees, costs and expenses permitted by this subchapter on
other first or secondary mortgage loans, subject to all the
conditions and restrictions set forth in this subchapter,
with the following variations:
(i) If credit life or disability insurance is
provided and if the insured dies or becomes disabled when
there is an outstanding open-end loan indebtedness, the
insurance shall be sufficient to pay the total balance of
the loan due on the date of the consumer's death in the
case of credit life insurance or all minimum payments
which become due on the loan during the covered period of
disability in the case of credit disability insurance.
The additional charge for credit life insurance or credit
disability insurance shall be calculated in each billing
cycle by applying the current monthly premium rate for
insurance, as the rate may be determined by the Insurance
Commissioner, to the unpaid balances in the consumer's
account, using any of the methods specified in paragraph
(3) for the calculation of loan charges.
(ii) No credit life or disability insurance written
in connection with an open-end loan shall be canceled by
the licensee because of delinquency of the consumer in
the making of the required minimum payments on the loan
unless one or more of the payments is past due for a
period of 90 days or more, and the licensee shall advance
to the insurer the amounts required to keep the insurance
in force during the period, which amounts may be debited
to the consumer's account.
(iii) The amount, terms and conditions of any
insurance against loss or damage to property must be
reasonable in relation to character and value of the
property insured and the maximum anticipated amount of
credit to be extended.
(7) Notwithstanding any other provisions in this chapter
to the contrary, a mortgage lender may retain any security
interest in real or personal property until the open-end loan
is terminated, provided that, if there is no outstanding
balance in the account and there is no commitment by the
licensee to make advances, the mortgage lender shall, within
ten days following written demand by the consumer, deliver to
the consumer a release of the mortgage, indenture, deed of
trust or any other similar instrument or document on any real
property taken as security for the open-end loan. The
mortgage lender shall include on all billing statements
provided in connection with an open-end loan a statement that
the licensee retains a security interest in the consumer's
real property whenever the security interest has not been
released.
(8) A mortgage lender may charge, contract for, receive
or collect on any open-end loan account an annual fee not to
exceed $50 per year.
SUBCHAPTER D
ADMINISTRATIVE AND LICENSURE PROVISIONS
Sec.
6131. Application for license.
6132. License fees.
6133. Issuance of license.
6134. License duration.
6135. Licensee requirements.
6136. Licensee limitations.
6137. Surrender of license.
6138. Authority of department.
6139. Suspension, revocation or refusal.
6140. Penalties.
§ 6131. Application for license.
(a) Contents.--An application for a license under this
chapter shall be on a form prescribed and provided by the
department.
(1) In the case of a mortgage broker, mortgage lender or
mortgage loan correspondent, the application shall include
the following:
(i) The name of the applicant.
(ii) The address of the principal place of business
of the applicant and the address or addresses where the
applicant's mortgage loan business is to be conducted.
(iii) The full name, official title and business
address of each director and principal officer of the
mortgage loan business.
(iv) Any other information that may be required by
the department.
(2) In the case of a mortgage originator, the
application shall include the following:
(i) The name of the applicant.
(ii) The name of the employer licensee of the
applicant and location of the employer licensee to which
the applicant is assigned.
(iii) Any other information that may be required by
the department.
(3) An applicant shall demonstrate to the department
that policies and procedures have been developed to receive
and process consumer inquiries and grievances promptly and
fairly.
(b) Duty to update.--All applicants and licensees shall be
required to provide the department with written notice of the
change in any information contained in an application for a
license or for any renewal of a license within ten days of an
applicant or licensee becoming aware of the change.
(c) Mortgage lender license.--The department shall issue a
mortgage lender license applied for under this chapter if the
applicant has:
(1) Been approved by or meets the current criteria for
approval of at least one of the following:
(i) Federal National Mortgage Association.
(ii) Federal Home Loan Mortgage Corporation.
(iii) Federal Housing Administration.
(2) Been approved for and will continue to maintain as a
licensee a line of credit, repurchase agreement or equivalent
mortgage-funding capability of not less than $1,000,000.
(3) Established a minimum tangible net worth of $250,000
at the time of application and will, at all times thereafter,
maintain the minimum tangible net worth.
(4) Been approved for and will continue to maintain as a
licensee fidelity bond coverage in accordance with the
guidelines established by the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation.
(d) Mortgage loan correspondent license.--The department
shall issue a loan correspondent's license applied for under
this chapter if the applicant:
(1) Obtains and will maintain a bond in the amount of
$100,000, in a form acceptable to the department, prior to
the issuance of the license, from a surety company authorized
to do business in this Commonwealth. The bond shall run to
the Commonwealth and shall be for the use of the Commonwealth
and any person or persons who obtain a judgment against the
mortgage loan correspondent for failure to carry out the
terms of any provision for which advance fees are paid. No
bond shall comply with the requirements of this section
unless it contains a provision that it shall not be canceled
for any cause unless notice of intention to cancel is given
to the department at least 30 days before the day upon which
cancellation shall take effect.
(2) Establishes a minimum tangible net worth of $100,000
at the time of application and will, at all times thereafter,
maintain the minimum tangible net worth.
(e) Mortgage broker license.--
(1) The department shall issue a mortgage broker license
applied for under this chapter if the applicant obtains and
will maintain a bond in the amount of $100,000, in a form
acceptable to the department, prior to the issuance of the
license, from a surety company authorized to do business in
this Commonwealth. The bond shall be a penal bond conditioned
on compliance with this chapter and subject to forfeiture by
the department and shall run to the Commonwealth for its use.
The bond shall also be for the use of any person against the
mortgage broker for failure to carry out the terms of any
provision for which advance fees are paid. If the person is
aggrieved, the person may, with the written consent of the
department, recover advance fees and costs from the bond by
filing a claim with the surety company or maintaining an
action on the bond. In the alternative, an aggrieved person
may recover advance fees and costs by filing a formal
complaint against the mortgage broker with the department
which shall adjudicate the matter. The adjudication shall be
binding upon the surety company and enforceable by the
department in Commonwealth Court and by an aggrieved person
in any court. Any aggrieved person seeking to recover advance
fees and costs from a bond that has already been forfeited by
the department or which the department is in the process of
forfeiting may recover payment on the bond if, after filing a
petition with the department, the department consents to the
aggrieved person's requested payment or portion thereof. The
department may pay the aggrieved person from the bond
proceeds it recovers. Nothing in this section shall be
construed as limiting the ability of any court or magisterial
district judge to award to any aggrieved person other
damages, court costs and attorney fees as permitted by law,
but those claims that are not advance fees or related costs
may not be recovered from the bond. The department, in its
discretion, may consent to or order pro rata or other
recovery on the bond for any aggrieved person if claims
against the bond may or do exceed its full monetary amount.
No bond shall comply with the requirements of this section
unless it contains a provision that it shall not be canceled
for any cause unless notice of intention to cancel is given
to the department at least 30 days before the day upon which
cancellation shall take effect. Cancellation of the bond
shall not invalidate the bond regarding the period of time it
was in effect.
(2) Mortgage brokers who can demonstrate to the
satisfaction of the department that they do not and will not
accept advance fees shall be exempt from the bond requirement
of this subsection.
(f) Mortgage originator license.--A mortgage originator
shall be an employee of a single mortgage broker, mortgage
lender or mortgage loan correspondent licensed under this
chapter, which licensee shall directly supervise, control and
maintain responsibility for the acts and omissions of the
mortgage originator. A mortgage originator shall be assigned to
and work out of a licensed location of the employer licensee.
(g) Education.--
(1) In order to obtain a license under this chapter, an
applicant shall submit to the department with its application
evidence that the applicant, in the case of a mortgage
originator applicant, or a director, partner or ultimate
equitable owner of at least 10% of a licensee, in the case of
any other license applicant, has successfully completed a
minimum of 12 hours of instruction and a testing program
regarding the first and secondary mortgage loan businesses
and the provisions of this chapter, the act of January 30,
1974 (P.L.13, No.6), referred to as the Loan Interest and
Protection Law (Usury Law) and relevant Federal law including
the Real Estate Settlement Procedures Act of 1974 (88 Stat.
1724, 12 U.S.C. § 2601 et seq.), Truth in Lending provisions
of Title I of the Consumer Credit Protection Act (Public Law
90-321, 15 U.S.C. § 1601 et seq.) and the Equal Credit
Opportunity Act (Public Law 93-495, 15 U.S.C. § 1691 et
seq.).
(2) In order to maintain a license:
(i) A mortgage broker, mortgage lender or mortgage
loan correspondent shall demonstrate to the satisfaction
of the department that at least one individual from each
licensed office that is not a mortgage originator, and
all mortgage originators employed by the licensee, have
attended a minimum of six hours of continuing education
each year.
(ii) A mortgage originator licensee shall
demonstrate to the satisfaction of the department that
the licensee has attended a minimum of six hours of
continuing education each year.
(3) The department shall delineate the requirements for
prequalification education and testing and continuing
education by regulation. The department may review and
approve education programs and providers to satisfy the
education requirements. Providers of prequalification
education and testing and continuing education programs may
include the licensee or a subsidiary or affiliate of the
licensee. The department may charge providers of education
programs a fee, to be determined by the department, for
department review of education programs and providers.
(h) License renewals.--Licenses shall be issued for terms of
12 months and may be renewed by the department each year on a
schedule set by the department upon application by the licensee
and the payment of any and all applicable renewal fees. The
licensee shall demonstrate to the department that it is
conducting the mortgage loan business in accordance with the
requirements of this chapter and that the directors, officers,
partners, employees, agents and ultimate equitable owners of 10%
or more of the licensee continue to meet all of the initial
requirements for licensure required by this chapter unless
otherwise determined by the department.
(i) Out-of-State applicants.--
(1) If an applicant is not a resident of this
Commonwealth, as a condition to receiving a license under
this chapter, the applicant shall be authorized to do
business in this Commonwealth in accordance with the laws of
this Commonwealth regulating corporations and other entities
conducting business in this Commonwealth and shall maintain
at least one office in this Commonwealth which is the office
that shall be licensed as the principal place of business for
the purposes of this chapter. Wholesale table funders shall
be exempt from the requirement to maintain at least one
office in this Commonwealth.
(2) Out-of-State applicants shall file with the license
application an irrevocable consent, duly acknowledged, that
suits and actions may be commenced against that person in the
courts of this Commonwealth by the service of process of any
pleading upon the department in the usual manner provided for
service of process and pleadings by the laws and court rules
of this Commonwealth. The consent shall provide that this
service shall be as valid and binding as if service had been
made personally upon the person in this Commonwealth. In all
cases where process or pleadings are served upon the
department under the provisions of this section, the process
or pleadings shall be served in triplicate; one copy shall be
filed in the department's offices and the others shall be
forwarded by the department, by certified or registered mail,
return receipt requested, to the last known principal place
of business of the person.
§ 6132. License fees.
(a) Initial application fees.--An applicant shall pay to the
department at the time an application is filed an initial
nonrefundable application fee as set forth under this
subsection.
(1) For mortgage lenders and mortgage loan
correspondents, $1,500 for the principal place of business in
this Commonwealth and an additional fee of $1,500 for each
branch office.
(2) For mortgage brokers, $1,000 for the principal place
of business in this Commonwealth and an additional fee of
$250 for each branch office.
(3) For mortgage originators, $200.
(b) Renewal fees.--Prior to each annual renewal of a
license, a licensee shall pay to the department a nonrefundable
license renewal fee as set forth under this subsection.
(1) For mortgage lenders and mortgage loan
correspondents, $750 for the principal place of business in
this Commonwealth and an additional fee of $750 for each
branch office.
(2) For mortgage brokers, $500 for the principal place
of business in this Commonwealth and an additional fee of
$250 for each branch office.
(3) For mortgage originators, $100.
(c) No abatement of fee.--No abatement of a licensee fee
shall be made if the license is issued for a period of less than
one year.
§ 6133. Issuance of license.
(a) Time limit.--Within 60 days after a completed
application is received, the department shall either issue a
license or, for any reason which the department may refuse to
issue a license under this section or for which the department
may suspend, revoke or refuse to renew a license under section
6139 (relating to suspension, revocation or refusal), refuse to
issue a license. The 60-day time limit specified in this
subsection may be extended by the department for an additional
30 days if the department determines that the extension is
necessary. The department shall provide written notification to
any applicant whose application review has been extended and
include the final date by which a decision shall be rendered
regarding the application.
(a.1) Investigations.--Upon receipt of an application for a
license, the department may conduct an investigation of the
applicant or a director, officer, partner, employee, agent or
ultimate equitable owner of 10% or more of the applicant as it
deems necessary.
(b) Appeal of denial.--If the department refuses to issue a
license, it shall notify the applicant in writing of the denial,
the reason for the denial and the applicant's right to appeal
the denial to the Secretary of Banking. An appeal from the
department's refusal to approve an application for a license
must be filed by the applicant within 30 days of notice of
refusal.
(c) Contents of license.--Each license issued by the
department shall specify:
(1) The name and address of the licensee and the address
or addresses covered by the license, the address so specified
to be that of the licensee's principal place of business
within this Commonwealth or for a licensee acting only in the
capacity of a wholesale table funder, either in or outside of
this Commonwealth.
(2) The licensee's reference number.
(3) Any other information the department shall require
to carry out the purposes of this chapter.
(d) Denial of license due to conviction.--
(1) The department may deny a license if it finds that
the applicant or a director, officer, partner, employee,
agent or ultimate equitable owner of 10% or more of the
applicant has been convicted of a crime of moral turpitude or
felony in any jurisdiction or of a crime which, if committed
in this Commonwealth, would constitute a crime of moral
turpitude or felony. For the purposes of this subsection, a
person shall be deemed to have been convicted of a crime if
the person:
(i) pleads guilty or nolo contendere to a criminal
charge before a court or Federal magistrate; or
(ii) is 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 sentence or
the suspension thereof, unless the plea of guilty or nolo
contendere or the decision, judgment or verdict is set
aside, vacated, reversed or otherwise abrogated by lawful
judicial process.
(2) A license under this chapter shall be deemed to be a
covered license within the meaning of section 405 of the act
of May 15, 1933 (P.L.565, No.111), known as the Department of
Banking Code. The department shall notify a licensee if a
covered individual within the meaning of section 405 of the
Department of Banking Code that is or will be employed or
contracted by the licensee has a criminal background that
renders the employee unfit for employment in the mortgage
loan business.
(e) Denial of license for other reason.--The department may
deny a license or otherwise restrict a license if it finds that
the applicant or a director, officer, partner, employee, agent
or ultimate equitable owner of 10% or more of the applicant:
(1) has had a license application or license issued by
the department denied, not renewed, suspended or revoked;
(2) is the subject of an order of the department;
(3) has violated or failed to comply with any provision
of this chapter or any regulation, statement of policy or
order of the department;
(4) does not possess the financial responsibility,
character, reputation, integrity and general fitness to
command the confidence of the public and to warrant the
belief that the mortgage loan business will be operated
lawfully, honestly, fairly and within the legislative intent
of this chapter and in accordance with the general laws of
this Commonwealth; or
(5) has an outstanding debt to the Commonwealth or any
Commonwealth agency.
(f) Conditional licenses.--The department may impose
conditions on the issuance of any license under this chapter. If
the department determines that conditions imposed upon a
licensee have not been fulfilled, the department may take any
action authorized under this chapter against the licensee that
the department deems necessary. In the case of mortgage
originator applicants, the department may issue mortgage
originator licenses effective immediately upon receipt of an
application, which licenses shall be conditional licenses issued
under this subsection.
§ 6134. License duration.
A license issued by the department shall be subject to all of
the following limitations:
(1) Be renewed on the licensee's renewal date each year
upon completion of the requirements of section 6131(h)
(relating to application for license). No refund of any
portion of the license fee shall be made if the license is
voluntarily surrendered to the department or suspended or
revoked by the department prior to its expiration date.
(2) Be invalid if the licensee's authority to conduct
business is voided under any law of this Commonwealth or any
other state, unless the licensee demonstrates to the
satisfaction of the department that the applicable court or
governmental entity was clearly erroneous in voiding the
licensee's authority to conduct business.
(3) Not be assignable or transferable by operation of
law or otherwise.
§ 6135. Licensee requirements.
(a) Requirements of licensee.--
(1) A licensee who is a mortgage broker, mortgage lender
or mortgage loan correspondent shall conspicuously display,
at each licensed place of business, its license and copies of
the licenses of all mortgage originators assigned to that
location. A licensee who is a mortgage originator shall keep
the license in the immediate possession of the licensee
whenever the licensee is engaged in the mortgage loan
business.
(2) Each licensee shall maintain at its principal place
of business within this Commonwealth, or at such place within
or outside this Commonwealth if agreed to by the department,
the original or a copy of any books, accounts, records and
documents, or electronic or similar access thereto, of the
business conducted under the license as prescribed by the
department to enable the department to determine whether the
business of the licensee is being conducted in accordance
with the provisions of this chapter and the regulations,
statements of policy or orders issued under this chapter. The
department shall have free access to and authorization to
examine records maintained within or outside this
Commonwealth by the licensee. The costs of the examination,
including travel costs, shall be borne by the licensee. The
department may deny or revoke the authority to maintain
records within or outside this Commonwealth for good cause in
the interest of protection for Commonwealth consumers,
including for the licensee's failure to provide books,
accounts, records or documents to the department upon
request.
(3) A mortgage broker, mortgage lender or mortgage loan
correspondent, on a date determined by the department, shall
file annually a report with the department setting forth such
information as the department shall require concerning the
first or secondary mortgage loan business conducted by the
licensee during the preceding calendar year. The report shall
be on a form provided by the department. Licensees who fail
to file the required report at the date required by the
department may be subject to a penalty of $100 for each day
after the due date until the report is filed.
(4) Each licensee shall be subject to examination by the
department at its discretion, at which time the department
shall have free access, during regular business hours, to the
licensee's place or places of business in this Commonwealth
and to all instruments, documents, accounts, books and
records which pertain to a licensee's first or secondary
mortgage loan business, whether maintained in or outside this
Commonwealth. The department may examine a licensee at any
time if the department deems the examination to be necessary
or desirable. The cost of any such examination shall be borne
by the licensee.
(5) Each licensee shall include in all advertisements
language indicating that the licensee is licensed by the
department. In the case of a mortgage originator, all
advertising shall include the name of the mortgage
originator's employer.
(b) Accounting records.--The licensee's accounting records
must be constructed and maintained in compliance with generally
accepted accounting principles or as provided by department
regulation. All instruments, documents, accounts, books and
records relating to the mortgage loan business shall be kept
separate and apart from the records of any other business
conducted by the licensee. Records of first and secondary
mortgage loans shall be easily distinguishable and easily
separated. All records shall be preserved and kept available for
investigation or examination by the department for a period
determined by the department.
(c) Copies.--If copies of instruments, documents, accounts,
books or records are maintained under subsection (a)(2), they
may be photostatic, microfilm or electronic copies or copies
provided in some other manner approved by the department.
§ 6136. Licensee limitations.
(a) Name and changes to name.--A licensee cannot transact
any business under this chapter under any other name or names
except those names designated in its license. A mortgage
originator may not use any other name other than the mortgage
originator's personal legal name. A licensee that changes its
name or place or places of business shall notify the department
within ten days of the change, and the department shall issue a
certificate to the licensee, if appropriate, which shall specify
the licensee's new name or address.
(b) Other businesses.--A licensee cannot conduct a business
other than the mortgage loan business licensed by the department
under this chapter without at least 30 days' prior written
notification to the department.
§ 6137. Surrender of license.
Upon satisfying the department that all creditors of a
licensee have been paid or that other arrangements satisfactory
to the creditors and the department have been made, a licensee
may voluntarily surrender its license to the department by
delivering its license to the department with written notice
that the license is being voluntarily surrendered, but an action
by a licensee shall not affect the licensee's civil or criminal
liability for acts committed.
§ 6138. Authority of department.
(a) General authority.--The department shall have the
authority to:
(1) Examine any instrument, document, account, book,
record or file of a licensee or any person having a
connection to the licensee or make other investigation as may
be necessary to administer the provisions of this chapter.
Pursuant to this authority, the department may remove any
instrument, document, account, book, record or file of a
licensee to a location outside of the licensee's office
location. The costs of the examination shall be borne by the
licensee or the entity subject to the examination.
(2) Conduct administrative hearings on any matter
pertaining to this chapter, issue subpoenas to compel the
attendance of witnesses and the production of instruments,
documents, accounts, books and records at any hearing. The
instruments, documents, accounts, books and records may be
retained by the department until the completion of all
proceedings in connection with which the materials were
produced. A department official may administer oaths and
affirmations to a person whose testimony is required. In the
event a person fails to comply with a subpoena issued by the
department or to testify on a matter concerning which he may
be lawfully interrogated, on application by the department,
the Commonwealth Court may issue an order requiring the
attendance of the person, the production of instruments,
documents, accounts, books and records and the giving of
testimony.
(3) Request and receive information or records of any
kind, including reports of criminal history record
information from any Federal, State, local or foreign
government entity regarding an applicant for a license,
licensee or person related in any way to the business of the
applicant or licensee, at a cost to be paid by the applicant
or licensee.
(4) Issue regulations, statements of policy or orders as
may be necessary for the proper conduct of the mortgage loan
business by licensees, the issuance and renewal of licenses
and the enforcement of this chapter.
(5) Prohibit or permanently remove a person or licensee
responsible for a violation of this chapter from working in
the present capacity or in any other capacity of the person
or licensee related to activities regulated by the
department.
(6) Order a person or licensee to make restitution for
actual damages to consumers caused by any violation of this
chapter.
(7) Issue cease and desist orders that are effective
immediately, subject to a hearing as specified in subsection
(b) within 14 days of the issuance of the order.
(8) Impose such other conditions as the department deems
appropriate.
(b) Hearings.--A person aggrieved by a decision of the
department may appeal the decision of the department to the
Secretary of Banking. The appeal shall be conducted under 2
Pa.C.S. Ch. 5 Subch. A (relating to practice and procedure of
Commonwealth agencies).
(c) Injunctions.--The department may maintain an action for
an injunction or other process against a person to restrain and
prevent the person from engaging in an activity violating this
chapter.
(d) Final orders.--A decision of the Secretary of Banking
shall be a final order of the department and shall be
enforceable in a court of competent jurisdiction. The department
may publish final adjudications issued under this section,
subject to redaction or modification to preserve
confidentiality.
(e) Appeals.--A person aggrieved by a decision of the
Secretary of Banking may appeal the decision under 2 Pa.C.S. Ch.
7 Subch A. (relating to judicial review of Commonwealth agency
action).
(f) Orders affecting mortgage originators.--An order issued
against a licensee is applicable to the mortgage originators
employed by the licensee.
§ 6139. Suspension, revocation or refusal.
(a) Departmental action.--The department may suspend, revoke
or refuse to renew a license issued under this chapter if any
fact or condition exists or is discovered which, if it had
existed or had been discovered at the time of filing of the
application for the license, would have warranted the department
in refusing to issue the license or if a licensee or director,
officer, partner, employee or owner of a licensee has:
(1) Made a material misstatement in an application or
any report or submission required by this chapter or any
department regulation, statement of policy or order.
(2) Failed to comply with or violated any provision of
this chapter or any regulation or order promulgated or issued
by the department under this chapter.
(3) Engaged in dishonest, fraudulent or illegal
practices or conduct in a business or unfair or unethical
practices or conduct in connection with the mortgage loan
business.
(4) Been convicted of or pleaded guilty or nolo
contendere to a crime of moral turpitude or felony.
(5) Permanently or temporarily been enjoined by a court
of competent jurisdiction from engaging in or continuing
conduct or a practice involving an aspect of the mortgage
loan business.
(6) Become the subject of an order of the department
denying, suspending or revoking a license applied for or
issued under this chapter.
(7) Become the subject of a United States Postal Service
fraud order.
(8) Failed to comply with the requirements of this
chapter to make and keep records prescribed by regulation,
statement of policy or order of the department, to produce
records required by the department or to file financial
reports or other information that the department by
regulation, statement of policy or order may require.
(9) Become the subject of an order of the department
denying, suspending or revoking a license under the
provisions of any other law administered by the department.
(10) Demonstrated negligence or incompetence in
performing an act for which the licensee is required to hold
a license under this chapter.
(11) Accepted an advance fee without having obtained the
bond required by section 6131(d)(1) or (e)(1) (relating to
application for license).
(12) Become insolvent, meaning that the liabilities of
the applicant or licensee exceed the assets of the applicant
or licensee or that the applicant or licensee cannot meet the
obligations of the applicant or licensee as they mature or is
in such financial condition that the applicant or licensee
cannot continue in business with safety to the customers of
the applicant or licensee.
(13) Failed to complete the qualifying or continuing
education as required by section 6131(g).
(14) In the case of a mortgage broker, mortgage lender
or mortgage loan correspondent, conducted the mortgage loan
business through an unlicensed mortgage originator.
(15) Failed to comply with the terms of any agreement
under which the department authorizes a licensee to maintain
records at a place other than the licensee's principal place
of business.
(b) Reinstatement.--The department may reinstate a license
which was previously revoked or denied renewal if all of the
following exist:
(1) The condition which warranted the original action
has been corrected to the department's satisfaction.
(2) The department has reason to believe that the
condition is not likely to occur again.
(3) The licensee satisfies all other requirements of
this chapter.
§ 6140. Penalties.
(a) Persons operating without licenses.-A person subject to
the provisions of this chapter and not licensed by the
department who violates any provision of this chapter or who
commits any action which would subject a license to suspension,
revocation or nonrenewal under section 6139 (relating to
suspension, revocation or refusal) may be fined by the
department up to $10,000 for each offense.
(b) Violation by licensee.--A person licensed under this
chapter or director, officer, owner, partner, employee or agent
of a licensee who violates a provision of this chapter or who
commits any action which would subject the licensee to
suspension, revocation or nonrenewal under section 6139 may be
fined by the department up to $10,000 for each offense.
SUBCHAPTER E
MISCELLANEOUS PROVISIONS
Sec.
6151. Applicability.
6152. Relationship to other laws.
6153. Preservation of existing contracts.
§ 6151. Applicability.
The provisions of this chapter shall apply to:
(1) Any mortgage loan which is:
(i) negotiated, offered or otherwise transacted
within this Commonwealth, in whole or in part, whether by
the ultimate lender or any other person;
(ii) made or executed within this Commonwealth; or
(iii) notwithstanding the place of execution,
secured by real property located in this Commonwealth.
(2) Any person who engages in the mortgage loan business
in this Commonwealth.
§ 6152. Relationship to other laws.
The following apply:
(1) A political subdivision may not enact or enforce any
ordinance, resolution or regulation pertaining to the
financial or lending activities of a person that:
(i) is subject to the jurisdiction of the
department, including activities subject to this chapter;
(ii) is subject to the jurisdiction or regulatory
supervision of the Board of Governors of the Federal
Reserve System, the Office of the Comptroller of the
Currency, the Office of Thrift Supervision, the National
Credit Union Administration, the Federal Deposit
Insurance Corporation, the Federal Trade Commission or
the United States Department of Housing and Urban
Development; or
(iii) originates, purchases, sells, assigns,
securitizes or services any property interest or
obligation created by a financial transaction or loan
made, executed or originated by a person referred to in
subparagraph (i) or (ii) or assists or facilitates such a
transaction or loan.
(2) This section applies to any ordinance, resolution or
regulation pertaining to financial or lending activity,
including any ordinance, resolution or regulation:
(i) disqualifying a person from doing business with
a political subdivision based upon financial or lending
activity; or
(ii) imposing reporting requirements or any other
obligations upon a person regarding financial or lending
activity.
§ 6153. Preservation of existing contracts.
Nothing contained in this chapter shall be construed to
impair or affect first or secondary mortgage loans executed
prior to the effective date of this chapter.
Section 2. Title 18 is amended by adding a section to read:
§ 7331. Unlicensed mortgage loan business.
A person that operates without a license in violation of 7
Pa.C.S. § 6111 (relating to license requirements) commits a
felony of the third degree.
Section 3. Repeals.
(a) Intent.--The General Assembly declares that the repeals
under subsection (b) are necessary to effectuate the provisions
of 7 Pa.C.S. Ch. 61.
(b) Provision.--The following acts and parts of acts are
repealed:
(1) Chapter 3 of the act of December 22, 1989 (P.L.687,
No.90), known as the Mortgage Bankers and Brokers and
Consumer Equity Protection Act.
(2) The act of December 12, 1980 (P.L.1179, No.219),
known as the Secondary Mortgage Loan Act.
Section 4. This act shall take effect in 120 days.
APPROVED--The 8th day of July, A. D. 2008.
EDWARD G. RENDELL
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