No. 29997 (Amendment): R162-205. Residential Mortgage Unprofessional Conduct

DAR File No.: 29997
Filed: 05/31/2007, 10:18
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this amendment is: 1) to add to the list of unprofessional conduct ordering services from third party service providers such as appraisers, insurance agents, etc. in connection with the origination of residential mortgage loans and then failing to pay for those services; 2) to add a new subsection to the rule setting forth standards of good conduct; and 3) to list in the new Section R162-205-2, the standard for disclosure of licensed status to borrowers and how to document compliance with that standard.

Summary of the rule or change:

Subsection R162-205-1(205-1-3) is added defining as unprofessional conduct the ordering of mortgage-related services and then failing to pay for those services. A new written disclosure of licensed status will be required, and a mortgage officer will be required to document compliance with this disclosure requirement by placing a copy of the mortgage officer's license and the written disclosure of licensed status in each loan file.

State statutory or constitutional authorization for this rule:

Subsection 61-2c-103(3)(d)

Anticipated cost or savings to:

the state budget:

None--Identifying another type of behavior as "unprofessional conduct" has no impact on the State budget, nor does specifying that a written disclosure of license status must be made to potential borrowers and that documentation related to this disclosure be placed in the loan file.

local governments:

None--Local governments do not act as mortgage brokers or mortgage loan officers. Therefore, a rule requiring these persons to pay for services ordered has no impact on local governments, nor does a rule requiring written disclosure of licensed status and documentation that the written disclosure has been made.

other persons:

The only persons who are affected by defining as unprofessional conduct the failure to pay for mortgage-related services that one has ordered are the mortgage loan officer who has ordered the service and the third-party service provider who has provided the service. The mortgage loan officer is already contractually obligated to pay for services ordered, so this rule change would not impose an additional financial obligation on the mortgage loan officer. The third party service providers may benefit from this rule change because the mortgage officers may be more likely to voluntarily pay them for services ordered. With respect to the change requiring a written disclosure of licensed status and keeping proof of the disclosure in each mortgage loan file, the only persons who would be affected by this requirement would be the mortgage entities and mortgage loan officers who would have to comply with this requirement. The requirement would cost them, at most, a few cents on each loan file for the cost of an additional form and a xerox copy of the mortgage officer's license.

Compliance costs for affected persons:

As stated above, the only persons who would incur costs to comply with these rule changes would be the mortgage entities or individual mortgage loan officers who would need to make one additional written disclosure to potential borrowers, and who would need to keep a copy of this disclosure and a license copy in each mortgage loan file. The paper costs of this should be minimal, amounting to no more than a few cents for each loan file.

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

This rule filing clarifies that failure to pay for mortgage-related services from third party providers constitutes unprofessional conduct. It also adds a requirement for mortgage officers to provide written disclosure of their licensed status to their clients and to maintain a copy of the written disclosure in each loan file. No fiscal impact to businesses is anticipated beyond those discussed in the rule summary. 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 801-366-0145, by FAX at 801-366-0315, 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:

07/16/2007

This rule may become effective on:

07/24/2007

Authorized by:

Derek Miller, Director

RULE TEXT

R162. Commerce, Real Estate.

R162-205. Residential Mortgage [Unprofessional]Standards of Conduct.

R162-205-1. Residential Mortgage Unprofessional Conduct.

205.1 Unprofessional conduct includes the following acts:

205.1.1[(a)] conducting the business of residential mortgage lending under any name other than a name under which the entity or individual conducting such business is licensed with the Division;

205.1.2[(b)] failing to remit to [the appropriate ]third part[ies]y service providers the appraisal fees, inspection fees, credit reporting fees, insurance premiums, or similar fees which have been collected from a borrower;

205.1.3 failing to pay to third party service providers the fee for any service ordered by the licensee in connection with the business of residential mortgage loans, unless the potential borrower has contractually agreed to pay the third party service provider directly or unless a good faith dispute exists as to whether the service provided satisfies requirements established by state or federal law;

205.1.4[(c)] charging for services not actually performed;

205.1.5[(d)] charging a borrower more for third party services than the actual cost of those services;

205.1.6[(e)] filling out or altering any Real Estate Purchase Contract or other contract for the sale of real property, or any addenda thereto;

205.1.7[(f)] making any alteration to any appraisal of real property;

205.1.8[(g)] in the case of a principal lending manager, failing to exercise reasonable supervision over the activities of any unlicensed staff of the entity; and

205.1.9[(h)] unless acting as a real estate licensee and not as a mortgage licensee:

[(i)](a) providing a buyer or seller of real estate with comparative market analysis or otherwise assisting a buyer or seller to determine the offering price or sales price of real estate;

[(ii)](b) representing or assisting a buyer or seller of real estate in negotiations concerning a possible sale of real estate, except that a mortgage licensee may advise a borrower about the consequences that the terms of a purchase agreement may have on the terms and availability of various mortgage products;

[(iii)](c) performing any other acts that require a real estate license under Title 61, Chapter 2;

[(iv)](d) advertising the sale of real estate by use of any advertising medium, except that a mortgage licensee may:

[(1)](i) advertise real estate owned by the licensee as a "for sale by owner";

[(2)](ii) provide advertising to a property owner who has not signed an agency agreement with a real estate licensee and is selling the real estate "for sale by owner", so long as the advertising provides clear and distinguishable identification, contact information, function and responsibility of both the property owner and the mortgage licensee; or

[(3)](iii) advertise in conjunction with a real estate brokerage, so long as the advertising provides clear and distinguishable identification, contact information, function and responsibility of both the real estate licensee and the mortgage licensee.

 

R162-205-2. Residential Mortgage Standards of Practice.

205.2.1 As part of the loan application process, a mortgage officer shall provide a written disclosure to any prospective borrower, which includes the mortgage officer's name, signature, license number, and attestation that the license is active and in good standing, and shall request that the borrower sign a copy of the disclosure acknowledging that this disclosure has been made.

205.2.2 A mortgage officer shall place in every loan file:

(a) a copy of the mortgage officer's license; and

(b) a copy of the written disclosure required by Subsection 205.2.1.

 

KEY: residential mortgage loan origination

Date of Enactment or Last Substantive Amendment: [October 11, 2006]2007

Notice of Continuation: December 13, 2006

Authorizing, and Implemented or Interpreted Law: 61-2c-301(1)(k)