Commerce, Real Estate

Rule R162-205

Residential Mortgage Unprofessional Conduct

Notice of Proposed Rule

(Repeal)

DAR File No.: 33377
Filed: 02/11/2010 09:40:45 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Rule R162-205 is repealed in light of the Division's proposed new Rule R162-2c, which incorporates the provisions of the existing rule into a new numbering system and organizational scheme. (DAR NOTE: The proposed new Rule R162-2c is under DAR No. 33372 in this issue, March 1, 2010, of the Bulletin.)

Summary of the rule or change:

Rule R162-205 is repealed in its entirety.

State statutory or constitutional authorization for this rule:

• Subsection 61-2c-103(3)

Anticipated cost or savings to:

the state budget:

The substantive provisions of this rule are incorporated into the new rule. There is no change in the costs to the state.

local governments:

Local governments have never been subject to the rules governing the conduct of mortgage licensees. Repealing this rule will have no fiscal impact to local governments.

small businesses:

The substantive provisions of this rule are incorporated into the new rule. There is no change in the costs to small businesses, which have always been, and remain, subject to oversight for unprofessional conduct.

persons other than small businesses, businesses, or local governmental entities:

The substantive provisions of this rule are incorporated into the new rule. There is no change in the costs to affected persons, which have always been, and remain, subject to oversight for unprofessional conduct.

Compliance costs for affected persons:

In repealing this rule, the division relieves affected persons of any obligation to comply with it. There are no compliance costs.

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

No fiscal impact to businesses is anticipated from this rule repeal as a substitute rule amendment containing the substance of these provisions is also proposed by the Division.

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
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Jennie Jonsson at the above address, by phone at 801-530-6706, by FAX at 801-526-4387, or by Internet E-mail at jjonsson@utah.gov

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:

03/31/2010

This rule may become effective on:

04/07/2010

Authorized by:

Deanna Sabey, Director

R162. Commerce, Real Estate.

[R162-205. Residential Mortgage Unprofessional Conduct.

R162-205-1. Residential Mortgage Unprofessional Conduct.

205.1 Unprofessional conduct includes the following acts:

205.1.1 conducting the business of residential mortgage loans, including soliciting or marketing, in the licensee's individual name, the principal lending manager's individual name, or any name other than the name of the licensed mortgage entity with which the individual's principal lending manager is affiliated;

205.1.2 failing to remit to third party service providers the appraisal fees, inspection fees, credit reporting fees, insurance premiums, or other similar fees which have been collected from a borrower;

205.1.3 withholding payment owed, as determined by a court of competent jurisdiction to a third party service provider in connection with the business of residential mortgage loans;

205.1.4 charging for services not actually performed;

205.1.5 charging a borrower more for third party services than the actual cost of those services;

205.1.6 filling out or altering any Real Estate Purchase Contract or other contract for the sale of real property, or any addenda to the contract;

205.1.7 making any alteration to any appraisal of real property;

205.1.8 unless acting as a real estate licensee and not as a mortgage licensee:

(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;

(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;

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

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

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

(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

(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.

205.1.9 disposing of records in violation of R162-204.1.3

 

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

205.2.1 Supervision of licensees and unlicensed staff. Principal lending managers shall exercise reasonable supervision by controlling and directing the details and means of the work activities of all licensees affiliated with the principal lending manager and all unlicensed staff. To exercise reasonable supervision, a principal lending manager shall:

(a) establish, maintain, and provide to all licensees affiliated with the principal lending manager and all unlicensed staff written policies setting out the office procedures for complying with federal and state laws governing residential mortgage lending, including the Utah Residential Mortgage Practices Act and the rules promulgated thereunder;

(b) ensure that each person affiliated with the principal lending manager and all unlicensed staff have read the Utah Residential Mortgage Practices Act and the rules promulgated thereunder;

(c) ensure that the business of residential mortgage loans conducted by an entity is conducted only by individuals who hold active mortgage officer or associate lending manager licenses issued by the Division of Real Estate;

(d) ensure that the licensees affiliated with the principal lending manager conduct all residential mortgage loan business, as defined in Utah Code Section 61-2c-102(1)(e), in the name of the licensed mortgage entity with which the principal lending manager is affiliated, and not in the licensee's own name or any other name;

(e) establish and enforce written policies and procedures for ensuring the independent judgment of any underwriter employed by the entity which employs the principal lending manager;

(f) establish and follow procedures for responding to all consumer complaints, and personally review any complaint relating to conduct that could constitute a violation of federal or state law governing residential mortgage lending by a licensee affiliated with the principal lending manager or by any unlicensed staff;

(g) establish and maintain a quality control plan that includes at a minimum procedures for performing pre-closing and post-closing auditing of at least ten percent of all loan files and taking corrective action for problems identified through the audit process. Quality control plans which comply with HUD/FHA or Freddie Mac requirements shall be deemed to be in compliance with this rule; and

(h) review for compliance with applicable federal and state laws all advertising and marketing materials and all marketing methods to be used by the entity and licensees affiliated with the principal lending manager.

205.2.1.1 Assistance from associate lending managers. A principal lending manager may employ associate lending managers to assist in performing the duties listed in Subsection 205.2.1. The principal lending manager shall actively supervise such associate lending managers and will remain personally responsible for adequate supervision of all licensees affiliated with the principal lending manager and all unlicensed staff.

205.2.2 Reasonable supervision. A principal lending manager will not be held responsible for failing to exercise reasonable supervision if:

(a) a licensee affiliated with the principal mortgage officer or an unlicensed staff member violates a provision of federal or state law, including the Utah Residential Mortgage Practices Act, in contravention of the principal lending manager's specific written policies;

(b) the principal lending manager's current written policies were provided to the licensee or unlicensed staff prior to the violation;

(c) the principal lending manager took reasonable steps intended to enforce the written policies;

(d) upon learning of the violation, the principal lending manager reported the violation to the Division and attempted to prevent or mitigate the damage;

(e) the principal lending manager did not participate in or implicitly or explicitly condone the violation; and

(f) the principal lending manager did not attempt to avoid learning of the violation.

 

KEY: residential mortgage loan origination

Date of Enactment or Last Substantive Amendment: June 1, 2009

Notice of Continuation: December 13, 2006

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