Legislative Updates

Tennessee Legislature Passes Long Awaited 2008 Mortgage Originator Reform Bill
The Tennessee General Assembly has passed legislation allowing the Commissioner of Financial Institutions to make changes in the licensing of mortgage loan originators, servicers, brokers and lenders. This sweeping legislation passed the Senate on March 17 and passed the House on April 14. As of press time, it has been transmitted to the governor for his signature. 

Additionally, it authorizes the commissioner to require continuing education as a condition to license renewal. All of these requirements will be spelled out by rules issued by the department in the coming months. TNAMB will be working with the commissioner in the development of these proposed rules.

A summary of the legislation prepared by legislative staff is outlined below.

Bill Summary for SB4160 / *HB4116

This bill revises various portions of the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, as follows:

(1) This bill authorizes the commissioner of commerce and insurance to require the following persons to consent to a criminal history records check and to provide a set of fingerprints:

(A) Persons applying to be licensed or registered as a mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator;
(B) Any individual who is a director, officer, partner, managing member, managing principal branch manager, or ultimate equitable owner of 10 percent or more of an applicant described in (A) and any individual who directs the affairs of the company or establishes policy;
(C) Any person who is subject to licensing, supervision, or auditing by the federal national mortgage association, the United States veterans administration, the federal home loan mortgage corporation, or the United States department of housing and urban development and who is required under present law to file an annual registration statement with the commissioner, even though they are exempt from the other licensing and registration requirements; and
(D) Registered mortgage loan originators seeking to continue registration.

(2) This bill requires the following to have successfully completed an education training course approved by the commissioner:

(A) Persons applying to be licensed or registered as a mortgage lender, mortgage loan broker, mortgage loan servicer, or mortgage loan originator. The commissioner may also require completion of an education training course by each individual who is a director, officer, partner, managing member, managing principal, or branch manager, as well as any individual who directs the affairs of the applicant, establishes policy, or possesses control of the applicant. This requirement will not apply to renewals of existing licenses; and
(B) Any person who is subject to licensing, supervision, or auditing by the federal national mortgage association, the United States veterans administration, the federal home loan mortgage corporation, or the United States department of housing and urban development and who is required under present law to file an annual registration statement with the commissioner, even though they are exempt from the other licensing and registration requirements. The commissioner may also require completion of an education training course by each individual who is a director, officer, partner, managing member, managing principal, or branch manager, as well as any individual who directs the affairs of the applicant, establishes policy, or possesses control of the applicant. This requirement will not apply to renewals of existing licenses.

(3) This bill authorizes the commissioner to require continuing education of licensees and registrants as a condition of license and registration.

(4) Present law requires any corporate applicant for licensure or registration to submit the name and address of each stockholder owning or controlling through voting trust or other agreement 25 percent or more of the outstanding capital stock of the corporation. This bill revises this requirement to require such information of those stockholders owning or controlling 10 percent or more, instead of 25 percent or more, of the outstanding capital stock.

(5) Under present law, any person who is subject to licensing, supervision, or auditing by the federal national mortgage association, the United States veterans administration, the federal home loan mortgage corporation, or the United States department of housing and urban development is exempt from the licensure requirements but must file an annual registration statement with the commissioner. This bill adds as an additional requirement for registration that applicants have financial responsibility, experience, and character to warrant the belief that the business of the person will be operated lawfully. This bill also requires the applicant to pay an investigation fee of $100.

This bill requires the commissioner to approve or deny a registration statement within 90 days of its submission and to provide notice of the grounds for a denial. A person whose registration statement is denied may seek an administrative review of the denial.

(6) This bill allows an applicant for registration as a mortgage loan originator to act in that capacity provisionally until the commission has acted on the application. This bill requires the commissioner to investigate each registration form to the extent deemed necessary. If the commissioner refuses to register the applicant, this bill clarifies that the commissioner must give the applicant notice of the grounds for refusal and inform the applicant of the right to seek administrative review of the refusal. This bill specifies that the commissioner may refuse registration if the applicant has failed to comply with any criminal background check or educational requirements imposed by the commissioner or if the commissioner finds that the applicant does not have the character or general fitness to warrant the belief that the person will act lawfully.

(7) Under present law, if the services of a mortgage loan originator are terminated, the licensee or registrant for whom such services have been provided must return the original registration certificate within 14 days after the cessation of the provision of such services. This bill adds that failure of a licensee or registrant to timely return the original registration certificate would constitute a violation, which may result in the commissioner ordering the person to cease and desist the violation, require the refund of any interest, fees, or charges collected by the person in violation, or order the person to pay a civil monetary penalty of up to $10,000 for each violation.

(8) This bill clarifies that the commissioner may suspend or revoke any mortgage loan originator registration certificate if the commissioner finds, after notice and hearing, that the mortgage loan originator engaged in certain prohibited activities (as detailed in present law), such as making a false statement in any application or report filed with the commissioner or accepting any fees at closing that were not disclosed.

(9) This bill authorizes the commissioner to participate in the establishment and implementation of a multi-state automated licensing system for persons subject to licensing or registration as mortgage lenders, mortgage loan servicers, mortgage loan brokers, and mortgage loan originators.