No. 29237 (Amendment): R162-202. Initial Application

DAR File No.: 29237
Filed: 11/16/2006, 04:27
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

It is necessary to update the rule to conform with statutory changes made by S.B. 178 (2004 General Session) and S.B. 172 (2005 General Session), which replaced the concept of an unlicensed "Control Person" for a licensed mortgage entity with a licensed "Principal Lending Manager" effective 05/01/2006. Outdated references to deadlines that have already passed are no longer needed and are therefore deleted. Finally, the rule is also changed so that an applicant for licensure by reciprocity no longer has to supply a copy of the applicant's home jurisdiction's licensing law and rules to demonstrate that the home state's laws are "substantially equivalent" to Utah's. Instead, the applicant will be required to submit proof of successful completion of pre-licensing education and a pre-licensing examination. (DAR NOTES: S.B. 178 (2004) is found at Chapter 297, Laws of Utah 2004, and was effective 05/03/2004. S.B. 172 (2005) is found at Chapter 199, Laws of Utah 2005, and was effective 05/02/2005.)

Summary of the rule or change:

The rule is changed to delete references to "Control Person" and to substitute "Principal Lending Manager" where applicable and to substitute directors, executive officers, managers, managing partners, etc. where applicable. Outdated references to deadlines that have already passed are deleted. The subsection on Reciprocal Licenses is also changed to require an applicant to submit proof of successful completion of pre-licensing education and proof of having passed a pre-licensing examination.

State statutory or constitutional authorization for this rule:

Subsection 61-2c-103(3)(a)(i)

Anticipated cost or savings to:

the state budget:

Any cost or savings to the state budget because of the change from "Control Person" to "Principal Lending Manager" are attributable to S.B. 174 (2004) and S.B. 172 (2005) and not to these rule changes updating the rules to conform to those statutory changes. It is anticipated that the change to the subsection on reciprocal licensing will save the State budget because it will no longer be necessary for Division of Real Estate staff to analyze another state's laws and rules when someone from that state applies for a license by reciprocity. However, since the number of reciprocal license applicants cannot be anticipated, the amount of possible savings cannot be calculated.

local governments:

Any cost or savings to local governments because of the change from "Control Person" to "Principal Lending Manager" are attributable to S.B. 174 (2004) and S.B. 172 (2005) and not to these rule changes updating the rules to conform to those statutory changes. With respect to the change to the subsection on reciprocal licensing, local governments do not obtain licenses from the Division of Real Estate to engage in the business of residential mortgage loans, and therefore, the rule change regarding obtaining reciprocal licenses will neither cost nor save local governments any money.

other persons:

Any cost or savings to other persons because of the change from "Control Person" to "Principal Lending Manager" are attributable to S.B. 174 (2004) and S.B. 172 (2005) and not to these rule changes updating the rules to conform to those statutory changes. With respect to the rule change regarding reciprocal licenses, the only other persons affected would be applicants for reciprocal licenses and the licensing agencies in their home states. The applicants will be required to submit only proof of prelicensing education and examination instead of copies of the statutes and rules from their homes states. This should be less costly for the applicants and for their home state licensing agencies.

Compliance costs for affected persons:

The only persons who are affected by the change from "Control Person" to "Principal Lending Manager" are licensed mortgage entities, those persons who were formerly "control persons," and those persons who are "Principal Lending Managers." However, any costs incurred by these parties in complying with the rule changes are attributable to S.B. 174 (2004) and S.B. 172 (2005) and not to these rule changes updating the rules to conform to those statutory changes. With respect to the change to the subsection involving reciprocal license applications, it is not anticipated that the rule change will cost them any money. If anything, it should save applicants for reciprocal licenses since it decreases the amount of information that must be obtained from the home state and submitted to the Division of Real Estate.

Comments by the department head on the fiscal impact the rule may have on businesses:

This filing updates the rule to meet recent statutory amendments. It also simplifies the requirements for reciprocal license applicants. No fiscal impact to businesses is anticipated. Francine A. Giani, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Commerce
Real Estate
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY UT 84111-2316

Direct questions regarding this rule to:

Shelley Wismer at the above address, by phone at 801-530-6761, by FAX at 801-530-6749, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

01/15/2007

This rule may become effective on:

01/23/2007

Authorized by:

Derek Miller, Director

RULE TEXT

R162. Commerce, Real Estate.

R162-202. Initial Application.

R162-202-1. Licensing Examination.

202.1 Except as provided in Subsection 202-8, [effective January 1, 2004, ]an individual applying for an initial license is required to have passed the licensing examination approved by the commission before making application to the division for a license.

202.1.1 All examination results are valid for 90 days after the date of the examination. If the applicant does not submit an application for licensure within 90 days after successful completion of the examination, the examination results shall lapse and the applicant shall be required to retake and successfully pass the examination again in order to apply for a license.

 

R162-202-2. Form of Application.

202.2 All applications must be made in the form required by the division and shall include the following information:

202.2.1 Any name under which the individual will transact business in this state;

202.2.2 The address of the principal business location of the applicant;

202.2.3 The home street address and home telephone number of any individual applicant[ or control person of an entity applicant];

202.2.4 A mailing address for the applicant;

202.2.5 The date of birth and social security number of any individual applicant[ or control person of an entity applicant];

202.2.6 Answers to a "Licensing Questionnaire" supplying information about present or past mortgage licensure in other jurisdictions, past license sanctions or surrenders, pending disciplinary actions, pending investigations, past criminal convictions or pleas, and/or civil judgments based on fraud, misrepresentation, or deceit;

202.2.7 A "Letter of Waiver" authorizing the division to obtain the fingerprints of the applicant[ or control person], review past and present employment and education records, and to conduct a criminal history background check;

202.2.8 If an individual applicant or a [control person]director, executive officer, manager, or a managing partner of an entity applicant, or anyone who occupies a position or performs functions similar to a director, executive officer, manager or managing partner of an entity that has applied for a license, has been convicted of any felonies or misdemeanors involving moral turpitude within the ten years preceding application, the charging document, the judgment and sentencing document, and the case docket on each such conviction must be provided with the application; and

202.2.9 If an individual or entity applicant or a [control person]director, executive officer, manager, or a managing partner of an entity applicant, or anyone who occupies a position or performs functions similar to a director, executive officer, manager or managing partner of an entity that has applied for a license, has had a license or registration suspended, revoked, surrendered, canceled or denied in the five years preceding application based on misconduct in a professional capacity that relates to good moral character or the competency to transact the business of residential mortgage loans, the documents stating the sanction taken against the license or registration and the reasons therefore must be provided with the application.

202.2.10 [On or after January 1, 2005, a]Applicants for a mortgage officer license shall submit proof in the form required by the Division of successful completion of the 20 hours of approved prelicensing education required by Section 61-2c-202(4)(a)(i)(C) taken within one year prior to application; or

202.2.11 [On or after September 1, 2005,]Except as provided in Section 61-2c-206(2)(b), applicants for a principal [lender]lending manager license shall submit proof in the form required by the Division of successful completion of the 40 hours of approved prelicensing education required by Section 61-2c-206(1)(c) taken within one year prior to application.

 

R162-202-5. Determining Fitness for Licensure.

202.5.1 Good Moral Character. The Commission and the Division will consider information necessary to determine whether an applicant for a license or [the control person]a director, executive officer, manager, or a managing partner of an entity that has applied for a license, or anyone who occupies a position or performs functions similar to a director, executive officer, manager or managing partner of an entity that has applied for a license, meets the requirement of good moral character, which may include the following in addition to whether the individual has been convicted of a felony or misdemeanor involving moral turpitude in the ten years preceding the application:

(a) The circumstances that led to any criminal convictions considered by the Commission and the Division;

(b) The amount of time that has passed since the individual's last criminal conviction;

(c) Any character testimony presented at the hearing and any character references submitted by the individual;

(d) Past acts related to honesty or moral character involving the business of residential mortgage loans;

(e) Whether the individual has been guilty of dishonest conduct in the five years preceding the application that would have been grounds under Utah law for revocation or suspension of a registration or license had the individual then been registered or licensed;

(f) Whether a civil judgment based on fraud, misrepresentation, or deceit has been entered against the individual, or whether a finding of fraud, misrepresentation or deceit by the individual has been made in a civil suit, regardless of whether related to the residential mortgage loan business, and whether any money judgment has been fully satisfied;

(g) Whether fines and restitution ordered by a court in a criminal proceeding have been fully satisfied, and whether the individual has complied with court orders in the criminal proceeding;

(h) Whether a probation agreement, plea in abeyance, or diversion agreement entered into in a criminal proceeding in the ten years preceding the application has been successfully completed;

(i) Whether any tax and child support arrearages have been paid; and

(j) Whether there has been good conduct on the part of the individual subsequent to the individual's offenses.

202.5.2 Competency to Transact the Business of Residential Mortgage Loans. The Commission and the Division will consider information necessary to determine whether an applicant for a license or [the control person]director, executive officer, manager, or a managing partner of an entity that has applied for a license, or anyone who occupies a position or performs functions similar to a director, executive officer, manager or managing partner of an entity that has applied for a license, meets the requirement of competency to transact the business of residential mortgage loans, which shall include the following:

(a) Past acts related to competency to transact the business of residential mortgage loans;

(b) Whether a civil judgment involving the business of mortgage loans has been entered against the individual, and whether the judgment has been fully satisfied, unless the judgment has been discharged in bankruptcy;

(c) The failure of any previous mortgage loan business in which the individual engaged, and the reasons for any failure;

(d) The individual's management and employment practices in any previous mortgage loan business, including whether or not employees were paid the amounts owed to them;

(e) The individual's training and education in mortgage lending, if any was available to the applicant;

(f) The individual's training, education, and experience in the mortgage loan business or in management of a mortgage loan business, if any was available to the individual;

(g) A lack of knowledge of the Utah Residential Mortgage Practices Act on the part of the individual;

(h) A history of disregard for licensing laws;

(i) A prior history of drug or alcohol dependency within the last five years, and any subsequent period of sobriety; and

(j) Whether the individual has demonstrated competency in business subsequent to any past incompetence by the individual in the mortgage loan business.

202.5.3 Age. All applicants shall be at least 18 years old.

 

[R162-202-6. Conversion of Existing Registrations.

202.6 In order to comply with Section 61-2c-201(1), the division shall convert all existing registrations to licenses on January 1, 2004. The licenses issued to individuals under the authority of this rule shall be issued subject to Section 61-2c-202(4)(a)(ii).

]

R162-202-[7]6. Registration of Assumed Business Name.

202.[7]6.1 An individual or entity licensed to engage in the business of residential mortgage loans who intends to conduct business under an assumed business name instead of the individual's own name shall register the assumed business name with the Division.

202.[7]6.2 To register an assumed business name, the applicant shall pay the applicable non-refundable fee and submit proof in the form required by the Division of a current filing of that assumed business name with the Division of Corporations and Commercial Code.

202.[7]6.3 Misleading or deceptive business names. The Division shall not register an assumed business name if there is a substantial likelihood that the public will be misled by the name into thinking that they are not dealing with an individual or entity engaged in the residential mortgage loan business.

 

R162-202-[8]7. Reciprocal Licenses.

202.[8]7.1 An applicant who is a legal resident of a state with which the Division has entered into a written reciprocity agreement and who applies for a Utah license shall submit to the Division:

(a) An application for a reciprocal license on the form required by the Division;

(b) All applicable licensing fees and the Residential Mortgage Loan Education, Research, and Recovery Fund fee;

(c) An official license history from the licensing agency in the applicant's state of legal residence containing the dates of the applicant's licensure and any complaint or disciplinary history; and

(d) The information required by Subsections 202.2.1 through 202.2.9.

202.[8]7.2 An applicant who is a legal resident of a state with which the Division has not entered into a written reciprocity agreement and who applies for a Utah license shall submit to the Division:

(a) An application for a reciprocal license on the form required by the Division;

(b) All applicable licensing fees and the Residential Mortgage Loan Education, Research, and Recovery Fund fee;

(c) A signed, notarized affidavit attesting that the applicant has at least five years experience in the business of residential mortgage loans;

(d) An official license history from the licensing agency in the applicant's state of legal residence, and any other state(s)in which the experience referred to in Subsection 202.[8]7.2(c) was obtained, that includes the dates of the applicant's licensure and any complaint or disciplinary history; and

(e) [A copy of the licensing statute or rules from any jurisdiction in which residential mortgage experience is claimed that demonstrate that the jurisdiction's licensing requirements are substantially equivalent to those of Utah]Proof of having successfully completed state-required pre-licensing education and having passed a state-required competency examination; and

(f) Those items required by Subsections 202.2.1 through 202.2.9.

 

R162-202-[9]8. Branch Office.

202.[9]8 A branch office shall be registered with the Division prior to operation. To register the branch office, the [control person]principal lending manager of the entity must submit to the Division, on the forms required by the Division, the location of the branch office and the names of all licensees assigned to the branch, along with the fee for registering the branch office.

 

R162-202-[10]9. Principal Lending Manager Experience Requirement.

202.[10]9 Equivalent Experience. Experience in originating loans or directly supervising individuals who originate loans shall be considered to be "equivalent experience" for the purposes of Section 61-2c-206(1)(e).

 

KEY: residential mortgage loan origination

Date of Enactment or Last Substantive Amendment: [April 5, 2006]2007

Authorizing, and Implemented or Interpreted Law: 61-2c-103(3)