14 Hour Mortgage Broker 2008

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14 Hour Mortgage Broker 2008

  1. 1. Florida Mortgage Brokering/Lending 14-Hour Professonal Continuing Education Course 2 0 0 8 E d i t i o n
  2. 2. ii        Bert Rodgers Schools of Real Estate, Inc. Bert Rodgers Schools would like to inform you about recent changes to Chapter 494.0029, F.S., Chapter 494.00295, F.S., and Florida Office Financial Regulation Rule 69V-40.0271 that directly affect Mortgage Brokering/Lending professional continuing education and became effective October 1, 2007. This 14-hour course follows the new requirements and is accepted for professional continu- ing education rule by the Florida Office of Financial Regulation (OFR) for this course. The most significant change for the 14 hours of professional continuing education is the addition of a comprehensive (100-question) final examination for distance edu- cation courses. A minimum score of 75% must be achieved to pass this course. Another significant change—that does not affect Loan Originators or Principal Represent­ atives is the requirement for permitted schools to report the completion of professional con- tinuing education courses to the OFR for licensed Mortgage Brokers. The OFR is requiring that licensed Mortgage Brokers provide their Audit Number to the school where they are taking their professional education. Their reporting system requires Audit Numbers for accurate reporting. Bert Rodgers Schools is required to report education for Mortgage Broker licenses within 5 days of the completion date. And the final significant change affects electronically transmitted courses (Internet/online). All electronically transmitted courses are required to be timed to verify that 14 hours was spent on the course material. Due to these timing requirements Bert Rodgers Schools is not currently offering this course online. We appreciate your patience regarding these new requirements and be assured Bert Rodgers Schools will keep providing professional continuing education that meets Florida’s require- ments. Thank you for allowing Bert Rodgers Schools to provide your professional continuing education and we look forward to serving you now and in the future. Sincerely, Lori Rodgers, President Dear Mortgage Professional:
  3. 3. Florida Mortgage Brokering/Lending 14-Hour Professional Continuing Education Course        iii Welcome to Bert Rodgers Schools! It’s Easy to Meet Your Requirement with Bert Rodgers Schools! Let the ease of distance learning work for you. With this book, everything you need is at your finger- tips. Step 1 Read the material in this book. There are Module Review Exercises at the end of each Module to help reinforce your knowledge of the material. Step 2 Take the required Final Examination at the end of this book.* Step 3 Submit your Answer Sheet along with your Registration Form by mail or fax. *A 100-question final examination is now required per Chapter 494.00295(3)(b), F.S. and Florida Office of Financial Regulation Rule 69V-40.0271. How Do I Receive My Certificate of Completion? Mail: Use the enclosed envelope to send us your Answer Sheet, Registration Form, and pay- ment. We will grade your exam and mail your certificate of completion the following busi- ness day. Fax or For even faster results, choose one of our convenient Priority Grading Services and receive Email: your certificate of completion the same day or the next day. Important Note: Do not send your certificate of completion to the Office of Financial Regulation unless otherwise requested. Retain your certificate of completion for at least 4 years following the end of the renewal period. Need Help? Call us toll-free at 800-432-0320 and talk to a representative who will answer all your administrative questions quickly and professionally. For instructional questions, please leave a message for Instructor/ Author Janine Spiegelman at ext. 368 and she will respond within one business day. Florida statutes and department rules require all Loan Originators, Principal Representatives, and Mortgage Brokers to complete 14 hours of professional continuing education every 2 years. Loan Originators and Principal Representatives deadline is August 31, 2008. Mortgage Brokers and Associates deadline is August 31, 2009. Take full advantage of the benefits of distance education! Bert Rodgers Schools is permitted and accredited by the Florida Office of Financial Regulation. You can study on your own schedule, at home or work. There is no need to travel to attend class or seminars. This book contains every- thing you need! You will appreciate the affordability of the Bert Rodgers course. At $39.95 for 14 hours, it is a true value. Optional Module Review Exercises are provided to ensure your comprehension of the course material and the newly-required final examination is included! We have been providing high quality education to Florida professionals since 1958. Rely on our fast, friendly, professional service representatives to help with any questions you may have! We look forward to helping you meet your education needs.
  4. 4. iv        Bert Rodgers Schools of Real Estate, Inc. Frequently Asked Questions Is professional continuing education required before we can renew our current Mortgage Lender licenses by August 31, 2008? Yes. Mortgage Lenders, Correspondent Mortgage Lenders, and Mortgage Lenders pursuant to the Savings Clause, must certify that their Principal Representatives and Loan Originators have completed 14 hours of profes- sional continuing education at the time of their renewal in August 31, 2008. When are Principal Representatives and Loan Originators required to complete their 14 hours of professional continuing education? 14 hours of professional continuing education must be completed prior to submission of the Mortgage Lender’s renewal form, which is due August 31, 2008. At the time of the Mortgage Lender’s renewal, they must certify that their Principal Representatives and Loan Originators have had at least 14 hours of professional continuing education from an accredited Mortgage Business School within the past 2 years. These are the same persons that will be reported on licensee’s quarterly report when due. Do I submit my certificate to the Office of Financial Regulation? No. Do not send your certificate of continuing education to the Office. You will be required to certify at the time of renewal that you have satisfied the continuing education requirement. In accordance with Rule 69V-40.043(5), F.A.C., a mortgage broker is responsible for maintaining copies of the certificate of completion for all continuing education courses completed and supply them to the Office upon request. Chapter 494.00295(1), F.S., requires that licensees maintain records documenting compliance with this requirement for a period of 4 years. My mortgage broker license is currently inactive as I did not renew in August 2007. Is Continuing Education required before I can reactivate my inactive individual Mortgage Broker license for the period 2007-2009? Yes. You will need to obtain a reactivation form from the Office upon which you will be required to certify that you have satisfied the continuing education requirement. Completion of this process will only reactivate your license through August 31, 2009. Complete at least 14 hours of professional continuing education prior to the renewal deadline of 8/31/09. Also required during each 2 year renewal period thereafter. Certify completion of at least 14 hours of continuing education for the 2007 renewal. Also required for each 2 year renewal period thereafter. Note: The above information is subject to change without notice. Bert Rodgers Schools is not responsible for its content. Consult the source below for the most current information. *Internet filing and payment services available where indicated. Source: www.flofr.com/finance/mbbmlchart.htm and www.flofr.com/finance/mbchart.htm (Florida Office of Financial Regulation website) Ensure the Principal Representatives and Loan Originators have completed at least 14 hours of continuing education prior to submission of the renewal which is due 08/31/08 for the 2008-2010 renewal period. Certify the Principal Representatives, and every Loan Originator have completed at least 14 hours of professional continuing education prior to submission of your renewal which is due 08/31/08 for the 2008 - 2010 renewal period. Compliance Requirements MORTGAGE MORTGAGE LENDER BROKER CORRESPONDENT MORTGAGE SAVING CLAUSE MORTGAGE LENDER TYPE INDIVIDUALS LENDER/BRANCH LENDER/BRANCH TRANSFER/BRANCH SAVINGS CLAUSE LICENSE TYPE MB CL ML MLST MLS CONTINUING EDUCATION REQUIREMENTS RENEWAL FEE MAIN OFFICE* $150 $475 /$325 $575/$325 $575 /$325 $575 RENEWAL FORM* OFR-F-103 RENEWAL DEADLINE 8/31 of each odd 8/31 of each even 8/31 of each even numbered year numbered year numbered year RENEWAL/CONTINUING EDUCATION CERTIFICATION* REINSTATEMENT FEE* $100 + renewal fee $100 + renewal fee REINSTATEMENT DEADLINE 2 years after end 6 months after end 6 months after end of biennial period of biennial period of biennial period REINSTATEMENT RETROACTIVE No No No No No
  5. 5. Florida Mortgage Brokering/Lending 14-Hour Professional Continuing Education Course        Bert Rodgers Schools of Real Estate 1855 Porter Lake Drive, Sarasota, Florida 34240-7893 Tel. (941) 378-2900 • Fax (941) 378-3883 Toll Free (800) 432-0320 Instructor and Administrative Support Telephone Hours: M-F 8:30 a.m. - 5:15 p.m. Email: MBinfo@bertrodgers.com www.bertrodgers.com Florida Office of Financial Regulation Division of Finance 200 East Gaines Street Tallahassee, FL 32399-0376 (850) 410-9895 • Fax: (850) 410-9882 (Initial license or license renewal questions) Telephone Hours: M-F 8:00 a.m. – 5:00 p.m. For additional information, visit the Florida Office of Financial Regulation, Division of Finance website: www.flofr.com/Finance/index.htm Directory
  6. 6. vi        Bert Rodgers Schools of Real Estate, Inc. Acknowledgements Bert Rodgers Schools of Real Estate, Inc. expresses our gratitude and appreciation to the thousands of Mortgage Professionals who have completed our 14-hour course to fulfill their continuing education requirements. We would like to thank the author of this edition, Janine Spiegelman. We recognize her expertise and appreciate her participation. We also want the Student Services Department—both the customer contact employees and those “behind the scenes” processing all the paperwork—to know how much we appreciate their hard work, day after day, making sure our valued students are satisfied customers. And we certainly are grateful to our Publications Department staff. No matter what obsta- cles you encounter in putting together these editions, you always create a product that, year after year, our customers say is by far the best in the industry. Finally, Bert Rodgers Schools would like to thank Julie Wild of Wild Dezign for her typeset- ting expertise and patience, and Mark Mazzuki of Digital Ink Design Group for his cover design of this edition and his design of all our marketing materials. Lori J. Rodgers, President
  7. 7. Table of Contents Founder Bert Rodgers President Lori J. Rodgers Administrative Vice President William E. Giffard Director of Information Systems Alison Harner Director of Finance Aaron Pulone Director of Operations Kelli Finnigan Project managers Valerie Churchillo Lisa Lacey Instructor/AUTHOR Janine Spiegelman Project Coordinator Jerry Schmitt Student Services supervisor Patti Pasquini Student Services Colletta Finnigan Brenda Fletcher Mark Forsman Jenncie Grove Mary Killoran Shirley Samson Kayla Smillie Typesetting Wild Dezign Printing Action Printing 2008 FLORIDA MORTGAGE BROKERING/LENDING 14-Hour PROFESSIONAL Continuing Education Course w MODULE 1 Florida Mortgage Brokerage and Lending Act Rules and Regulations | 1 w MODULE 2 Credit Scores and Credit Scoring | 27 w MODULE 3 Exotic and Nontraditional Mortgages | 33 w MODULE 4 Subprime Loans and Prepayment Penalties | 41 w MODULE 5 Lack of Credit Documentation Promotes Mortgage Fraud | 49 w MODULE 6 Updates on Flood and Hazard Insurance | 55 w MODULE 7 Affordable Housing | 65 w MODULE 8 New and Updated Fannie Mae/Freddie Mac Appraisal and Property Report Forms | 71 Final Examination | 82 Instructions | 92 Registration Form Answer Sheet
  8. 8. viii     Bert Rodgers Schools of Real Estate, Inc. Janine Spiegelman has been a licensed Florida Mortgage Broker since 1987 and has taught the mortgage pre-licensure course since 1999. She has worked for the State of Florida, Department of Banking and Finance as a Financial Examiner/Analyst II. In the mortgage field, she has held every position possible–processor, closer, underwriter, post closer, mort- gage broker, and wholesale account executive. She has her own real estate brokerage and enjoys working with first-time home buyers. Janine is our continuing education instructor for real estate and mortgage brokering/lending. Bert Rodgers Schools of Real Estate, Inc. ©2007, 2008 All rights reserved, including the right to reproduce this manual or any portion of this manual in any form, or to use it for teaching purposes without the express written consent of the copyright holder. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Bert Rodgers Schools of Real Estate, Inc. shall not be liable in any way for failure to receive and/or process your Registration/Affidavit Form within any specific time period. It is your responsibility to ensure that you have complied with your license renewal requirements in a timely manner. Bert Rodgers Schools of Real Estate, Inc. recognizes and respects its students’ privacy. Course records are confidential, and the School does not sell or rent students’ names or other information to any company or organization. Cover design: Digital Ink Design Group ISBN: 1-891753-46-0 Printed in the United States of America Author Biography 14HourBroker.indb 8 5/1/08 10:30:22 AM
  9. 9. © 2008 Bert Rodgers Schools of Real Estate, Inc. Learning Objectives After completing this module, you should be able to: Florida Mortgage Brokerage and Lending Act Rules and Regulations M O D U L E 1 1. Summarize the changes made to Chapter 494 F.S. since October 1, 2006. 2. List the changes to Chapter 69V-40 Florida Administrative Code effective March 23, 2008. 3. Summarize the organizational structure of the Florida Department of Financial Services, including the Financial Services Commission and the Office of Financial Regulation. 4. Explain the powers and duties of the Financial Services Commission and the Office of Financial Regulation. 5. Explain the penalties, which could be imposed for a violation of Chapter 494, F.S. 6. Identify the prohibited practices pursuant to Chapter 494. 7. Explain the purpose for the enactment of the Florida Fair Lending Act. 8. Identify the types of transactions covered by the Florida Fair Lending Act. 9. Define a high-cost home loan. 10. Identify the acts prohibited by the Florida Fair Lending Act. 11. Identify the disclosure requirements of the Florida Fair Lending Act. 12. Explain the enforcement and penalties of any violation of the Florida Fair Lending Act. The Department of Financial Services regulates mortgage broker individuals (MB), mortgage broker- age businesses (MBB), mortgage lenders (ML), and correspondent mortgage lenders (CL) by the use of Florida Statutes (F.S.) and the Florida Administrative Code (F.A.C.). Chapter 494, F.S., is known as the Florida Mortgage Brokerage and Mortgage Lending Act Rules and Regulations. Chapter 494 originally became effective in October 1991, and several sig- nificant amendments have been made since 1991. Chapter 69V-40 of the Florida Administrative Code (formerly Chapter 3D-40 F.A.C.) is called Rules Regulation Mortgage Brokers. Certain minor changes to Chapter 69V-40 were made effective on August 2, 2002, and a few minor amendments were made between 2003 and 2004. The purpose of this module is to review Florida mortgage brokerage rules and regulations including major changes effective October 1, 2006 and October 1, 2007. In 2002, legislation placed the regulation of bank- ing, securities, and insurance under two appointed officials who are selected by the Financial Services Commission. The Financial Services Commission serves as agency head for the Office of Financial Regulation (OFR or Office) and the Office of Insurance Regulation (OIR). The commission is composed of the governor and Cabinet. The com- mission appoints the commissioner of the OFR and the commissioner of the OIR. Although both offices are administratively housed within the Department of Financial Services, they report directly to the Financial Services Commission, headed by the newly elected Chief Financial Officer, Alex Sink. The Office of Financial Regulation has offices located in Miami, Fort Lauderdale, West Palm Beach, Tampa, Orlando, Jacksonville, Pensacola, and Fort Myers. The regional offices are primarily responsible for conducting exam- inations to ensure regulatory compliance by financial institutions and financial service companies. The Office is dedicated to safeguarding the private financial interests of the public by licensing, char- tering, examining, and regulating financial institu- tions and financial service companies in the State of Florida. The Office strives to protect consumers from financial fraud while preserving the integrity of Florida’s markets and financial service industries. INTRODUCTION 14HourBroker.indb 1 5/1/08 10:30:22 AM
  10. 10.      Module 1 This is the Office’s mission statement found at www.flofr.com/Director/abouttheoffice.htm Within the Office are 2 Divisions. The first is the Division of Financial Institutions. This division licenses, examines, and regulates all state-authorized or state-chartered financial institutions to ensure they operate in a safe and sound manner and in compliance with applicable statutes and rules. Those institutions include commercial banks, credit card banks, credit unions, non-deposit trust companies, savings banks, savings and loans, and international bank offices. The second division within the Office is the Division of Securities and Finance. Within this division are three Bureaus— the Bureau of Financial Regulation; the Bureau of Securities Regulation; and the Bureau of Regulatory Review. The Bureau of Finance Regulation regulates retail installment sales busi- nesses, consumer finance companies, mortgage bro- kers and lenders, collection agencies, and money transmitters. The bureau provides consumer protec- tion from illegal or improper activities performed by these companies. The Bureau of Securities Regulation protects the public from investment and securities fraud. The Bureau of Regulatory Review reviews all applications for a financial services firm or a securi- ties firm, reviews individual applications, and either approves, places licensing restrictions, or denies licen- sure based upon its findings (See Figure 1.1). RECENT CHANGES IN FLORIDA STATUTES REGULATING MORTGAGE BROKERAGE AND MORTGAGE LENDING The revisions, amendments, and additions that became effective October 1, 2007. N E W F O R 2 0 0 7 Definitions Expands the definition of loan originator to include account executives/wholesale representatives. There­ fore, these individuals are required to be included in the licensee’s Quarterly Reports and these loan origina- tors must complete 14 hours of professional continuing education biennially (Chapter 494.001(2), F.S.). A mortgage loan application is a submission of the borrower’s financial information in anticipation of a credit decision regarding a specific property. If the submission does not identify a specific property, then the application is for a prequalification and not an application for a mortgage loan. Once a property has been identified, this converts it to an application for a mortgage loan (Chapter 494.001(32), F.S.). Clarifies that the mortgage brokerage fee includes the total compensation to be received by a mortgage brokerage business for acting as a mortgage broker (Chapter 494.001(33),F.S.). Business day means any calendar day except for Sunday or a legal holiday (Chapter 494.001(34), F.S.). Commissioner Financial Regulation Deputy Commissioner Financial Regulation Chief, Financial Investigations General Counsel Inspector General Director Division of Financial Institutions Director Division of Securities Office of Financial Regulation Chief, Bank Regulation District I Chief, Credit Union Regulation Chief, Securities Regulation Chief, Finance Regulation Chief, Regulatory Review Chief, Money Transmitter Director, Cabinet Legislative Affairs Director Division of Finance Chief, Bank Regulation District II Chief, Regulatory Review Director of Auditing SMA III Auditor Figure 1.1 Source: www.flofr.com/Director/OFRorgchart.pdf Office of Financial Regulation Flow Chart 14HourBroker.indb 2 5/1/08 10:30:23 AM
  11. 11. Florida Mortgage Brokerage and Lending Act Rules and Regulations     Cease and Desist Orders; Administrative Fines; Refund Orders Authorizing the Office to take administrative action against mortgage business schools similar to other license types (Chapters 494.0014(4) and 494.0029(1)(f), F.S.). Mortgage Business Schools Mortgage business schools must conduct classes on the basis of a 50-minute classroom hour (Chapter 494.0029(2)(g), F.S.). Each mortgage business school is responsible for developing procedures to confirm and for actually confirming the identity of each student attending any course offering (Chapter 494.0029(2)(h), F.S.). Professional Continuing Education Of the 14 hours of required professional continuing education, a minimum of 4 hours shall cover the pro- visions of Chapter 494, F.S. and the rules in Chapter 69V-40, F.A.C. The professional continuing educa- tion requirements are waived for the license renewal of a mortgage broker who completed the 24-hour pre- licensing classroom education requirements within 90 days of the biennial license period immediately follow- ing the period in which the person became licensed as a mortgage broker. Previously, the mortgage broker was exempt from professional continuing education for the biennial period in which they became licensed. Now, the time is reduced to 90 days prior to the expi- ration of the license (Chapter 494.00295(1), F.S.). Added that the Office can offer professional continu- ing education programs (Chapter 494.00295(2), F.S.). Electronically transmitted professional continuing education courses shall require that the course par- ticipant has logged the required number of hours for the particular timed module; has completed a test that comprehensively covers the course content for the particular timed module; and has correctly answered all test questions for the particular timed module (Chapter 494.00295(3)(a)1.2.3, F.S.). All distance education course participants shall suc- cessfully complete a 100 question test with a score of at least 75% in order to receive a certificate of course completion. The test shall comprehensively cover the course content (Chapter 494.00295(3)(b), F.S.). The commission shall adopt rules pursuant to ss.120.536(1) and 120.54 necessary to administer (Chapters 494.00295 and 494.00295(4), F.S.). Mortgage Broker’s License Added the requirement that an applicant for licen- sure as a mortgage broker needs to have a high school diploma or its equivalent. (Chapter 494.0033(2)(a), F.S.). Added that the commission may adopt rules prescrib- ing an additional fee not to exceed $50.00 for an appli- cant to review their completed and graded mortgage broker test. Also added that the commission may adopt rules regarding the administration of the test- ing process, including, but not limited to, procedures relating to the pretest registration, test security, scor- ing, content, result notification, retest procedures and fees, post examination review, and challenge provisions (Chapter 494.0033(2)(b), F.S.). Mortgage Broker Disclosures The mortgage brokerage business and the borrower must sign and date a written mortgage brokerage agreement in order for the mortgage brokerage busi- ness to receive a mortgage brokerage fee (Chapter 494.0038(1)(a)1, F.S.). On face-to-face interviews, the written mortgage bro- kerage agreement must be completed, signed, and dated, within 3 business days of receipt of an appli- cation. For mail away applications, the licensee bears the burden of proving that the borrower received and approved the written mortgage brokerage agreement and the written mortgage brokerage agreement was sent within 3 business days of the licensee’s acceptance of the application (Chapter 494.0038(1)(a)2., F.S.). If the mortgage brokerage business is to receive any payment of any kind from the lender, then the maxi- mum total dollar amount of the payment must be disclosed to the borrower in the written mortgage bro- kerage agreement as described in 494.0038(1)(a)1.2. Previously, it was disclosed as a percentage range and not a dollar amount. The mortgage brokerage agree- ment must state the nature of the relationship with the lender, describe how compensation is paid by the lender, and describe how the mortgage interest rate affects the compensation paid to the mortgage broker- age business (Chapter 494.0038(1)(b)1, F.S.). The exact amount of any payment of any kind by the lender to the mortgage brokerage business must be dis- closed in writing to the borrower within 3 business days after the mortgage brokerage business is made aware of the exact amount of the payment from the lender but not less than 3 business days before the execution of the closing or settlement statement. The licensee bears the burden of proving such notification was pro- vided to the borrower (Chapter 494.0038(1)(b)2, F.S.). 14HourBroker.indb 3 5/1/08 10:30:23 AM
  12. 12.      Module 1 Mortgage Broker Disclosures and Requirements of Licensees under Chapters 494.006-494.0077 A good faith estimate signed and dated by the bor- rower, which discloses the total amount of each of the fees which the borrower may reasonably expect to pay if the loan is closed, must be given within 3 busi- ness days of receipt of the application by the mortgage brokerage business or within a reasonable time for a correspondent or mortgage lender. The good faith estimate must identify the recipient of all payments charged the borrower and, except for all fees to be received by the mortgage brokerage business and the mortgage lender or the correspondent lender, may be disclosed in generic terms, such as but not limited to, paid to lender, appraiser, officials, title company, or any other third-party service provider. The licensee bears the burden of proving such disclosures were pro- vided to the borrower (Chapters 494.0038(2)(c) and 494.0067(8), F.S.). Within 3 business days of receipt of the application by the broker or lender, complete, written, signed and dated by the borrower, adjustable rate mortgage loan disclosures must be provided in a format prescribed by ss. 226.18 and 226.19 of Regulation Z of the Board of Governors of the Federal Reserve together with the Consumer Handbook on Adjustable Rate Mortgages (CHARM Booklet). The licensee bears the burden of proving such disclosures were provided to the bor- rower (Chapters 494.0038(3) and 494.0067(11), F.S.). In every mortgage loan transaction, each licensee under ss. 494.003-494.0043 or ss. 494.006-0077, shall notify a borrower of any material changes in the terms of a mortgage loan previously offered to the borrower within 3 business days after being made aware of such changes by the lender but not less than 3 business days before the signing of the settlement or closing state- ment. The licensee bears the burden of proving such notification was provided and accepted by the bor- rower. A waiver of this requirement can be granted by the borrower to meet a bona fide personal financial emergency. The imminent sale of the borrower’s home at foreclosure during the 3-day period before the sign- ing of the settlement or closing statement constitutes an example of a bona fide personal financial emer- gency. The borrower must provide the licensee with a dated written statement that describes the personal financial emergency, waives the right to receive the notice, bears the borrower’s signature, and is not on a printed form prepared by the licensee for the pur- pose of such a waiver (Chapters 494.004(8)(a)(b) and 494.0067(12)(a)(b), F.S.). Renewal of Mortgage Lender’s License; Branch Office License Renewal and Requirements of Licensees under Chapters 494.006-494.0077 Lenders must certify that they currently meet the minimum net worth requirements and that their prin- cipal representative and all of their loan originators who are not currently licensed as mortgage brokers have completed the 14 hours of professional continu- ing education requirements in order to renew their license (Chapters 494.0064(1) and 494.0067(10)(a), F.S.). Administrative Penalties, Fines and License Violations Any violation of the federal Real Estate Settlement Procedures Act or the federal Truth in Lending Act will also be a violation of Chapter 494, F. S. (Chapters 494.0041(2)(v) and 494.0072(2)(v), F.S.). Added that a principal representative of a mortgage lender or correspondent mortgage lender is subject to disciplinary action for violations by associates or employees in the course of an association or employ- ment with the correspondent mortgage lender or the mortgage lender. The principal representative is only subject to suspension or revocation for associate or employee actions if there is a pattern of repeated vio- lations by associates or employees or if the principal broker or principal representative had knowledge of the violations (Chapter 494.0072(5), F.S.). Mortgage Lender or Correspondent Mortgage Lender When Acting As a Mortgage Brokerage Business Added that when a mortgage lender or correspon- dent lender acts as a mortgage brokerage business, the provisions of ss. 494.004(8) apply (Chapter 494.0073, F.S.). Mortgage Fraud Created Florida Statute 817.545, Mortgage Fraud. Defined the term “mortgage lending process” to mean the process through which a person seeks or obtains a residential mortgage loan, including, but not limited to, the solicitation, application or origination, negotiation or terms, third-party provider services, underwriting, signing and closing, and funding of the loan. Documents involved in the mortgage lending process include, but are not limited to, mortgages, deeds, surveys, inspection reports, uniform residential loan applications, or other loan applications; appraisal reports; HUD-1 settlement statements; supporting personal documentation for loan applications such as W-2 forms, verifications of income and employ- ment, credit reports, bank statements, tax returns, and 14HourBroker.indb 4 5/1/08 10:30:24 AM
  13. 13. Florida Mortgage Brokerage and Lending Act Rules and Regulations     payroll stubs; and any required disclosures (Chapter 817.545(1), F.S.). A person commits the offense of mortgage fraud if, with the intent to defraud, the person knowingly: 1. makes any material misstatement, misrepresenta- tion, or omission during the mortgage lending process with the intention that the misstatement, misrepresentation, or omission will be relied on by a mortgage lender, borrower, or any other person or entity involved in the mortgage lending process; however, omission on a loan application regarding employment, income, or assets for a loan which does not require this information are not consid- ered a material omission for purposes of this sub- section. 817.545(2)(a) 2. uses or facilitates the use of any material misstate- ment, misrepresentation, or omission during the mortgage lending process with the intention that the material misstatement, misrepresentation, or omission will be relied on by a mortgage lender, borrower, or any other person or entity involved in the mortgage lending process; however, omis- sions on a loan application regarding employ- ment, income, or assets for a loan which does not require this information are not considered a material omission for purposes of this subsection. 817.545(2)(b) 3. receives any proceeds or any other funds in con- nection with the mortgage lending process that the person knew resulted from a violation of 817.545(2)(a) or 817.545(2)(b) 817.545(2)(c) 4. files or causes to be filed with the clerk of the cir- cuit court for any county of this state a document involved in the mortgage lending process which contains a material misstatement, misrepresenta- tion, or omission. 817.545(2)(d) An offense of mortgage fraud may not be predicated solely upon information lawfully disclosed under fed- eral disclosure laws, regulations, or interpretations related to the mortgage lending process (Chapter 817.545(3), F.S.). For the purpose of venue under 817.545 F.S., any violation of this section is considered to have been committed in the county in which the real property is located or in any county in which a material act was performed in furtherance of the violation (Chapter 817.545(4)(a)(b), F.S.). Any person who violates 817.545(2)(a-d) F.S. com- mits a felony of the third degree, punishable as pro- vided in s. 775.082, s. 775.083, or s. 775.084 (Chapter 817.545(5), F.S.). N E W F O R 2 0 0 6 Revisions, amendments, and additions that be­came effective October 1, 2006. Definition Control person means an individual, partnership, corporation, trust, or other organization that possesses the power, directly or indirectly, to direct the man- agement or policies of a company, whether through ownership of securities, by contract, or otherwise. A person is presumed to control a company if, with respect to a particular company, that person: (a) Is a director, general partner, or officer exercising executive responsibility or having similar status or functions; (b) Directly or indirectly may vote 10 percent or more of a class of voting securities or sell or direct the sale of 10 percent or more of a class of voting secu- rities; or (c) In the case of a partnership, may receive upon dis- solution or has contributed 10 percent or more of the capital (Chapter 494.001(9)(a-c), F.S.). Powers and Duties of the Commission and Office Allows the Office to require the electronic filing of applications, renewals, and fees, unless granted a waiver by OFR due to a hardship. Prior to this change, the only license type that could file an application online was a mortgage broker (Chapter 494.0011(2)(6), F.S.). Books, Accounts, and Records; Maintenance; Examinations by the Office Authorizes the commission to adopt rules for the requirements for the destruction of records main- tained by licensees after the retention period has expired ( Chapter 494.0016(4), F.S.). Mortgage Business Schools Requires permitted mortgage business schools to electronically report to the Office the names of pupils who have successfully completed required training courses (Chapter 494.0029(4), F.S.). Licensure as a Mortgage Brokerage Business; Mortgage Broker’s License Provides that applications are not deemed received until all required fees are received (Chapters 494.0031(2)(a); 494.0033(2)(c), F.S.). 14HourBroker.indb 5 5/1/08 10:30:24 AM
  14. 14.      Module 1 Renewal of Mortgage Brokerage Business License or Branch Office License The license for a branch office must be renewed in conjunction with the renewal of the mortgage broker- age business license (Chapter 494.0032(1)). Mortgage Broker’s License Allows the Office to contract with a third party ven- dor to administer the mortgage broker test. This will allow the test to be conducted electronically at mul- tiple locations several times a week versus the old once a month process at limited locations (Chapter 494.0033(2)(b), F.S.). Mortgage Brokerage Business Branch Offices; Principal Place of Business Requirements Deleted Chapter 494.0036(3), F.S. and Chapter 494.0039(3), F.S. Eliminated from the statute the requirement to display main office, branch office, and individual licenses. Requirements of Licensees Provides that each licensee shall report any change in the principal broker, principal representative, offi- cers, partners, members, joint venturers, directors, control persons or any individual who is the ultimate equitable owner of 10% or greater interest (Chapter 494.004(6). F.S.). Provides that a change of control whether through the power to direct management, ownership or oth- erwise shall require an application to be submitted to the OFR unless a waiver has been granted (Chapter 494.004(6)(a-d), F.S.). Administrative Penalties and Fines; License Violations Authorizes disciplinary action if fees are paid with a bad check. (Chapters 494.0041(2)(s) and 494.0072(2)(s), F.S.). Provides grounds for disciplinary action when a final judgment is entered against an applicant or licensee in a civil action upon grounds of fraud, embezzlement, misrepresentation, or deceit (Chapters 494.0041(2)(t) and 494.0072(2)(t), F.S.). Provides grounds for disciplinary action when action is taken by other federal and state regulatory organiza- tions located in or outside the State of Florida involving securities, insurance, real estate, mortgage brokers and lenders, or other related or similar industries (Chapters 494.0041(2)(u)1.2. and 494.0072(2)(u)1.2.,F.S.). Mortgage Lender’s License Requirements; Correspondent Mortgage Lender’s License Requirements; Savings Clause; Branch Offices Provides that applications are not deemed received until all required fees are received (Chapters 494.0061(2)(b), 494.0062(2)(b), 494.0065(3)(5)(b) and 494.0066(2), F.S.). Audited financial statements of all licensed lend- ers have to be in accordance with United States generally accepted accounting principles (Chapters 494.0061(2)(c), 494.0062(2)(c) and 494.0065(2)(5)(c), F.S.). Provides under certain conditions that existing principal representatives can be grandfathered in without class or testing requirements (Chapters 494.0061(2)(f)(8-9) and 494.0062(2)(f)(11-12) and 494.0065(4)(c)1.2.(10), F.S.). Renewal of Mortgage Lender’s License; Branch Office License Renewal Chapter 494.0064(1)(b), F.S. deleted. Eliminated the requirement to report the continuing education of loan associates when renewing a lender’s license. Requirements of Licensees Under Chapters 494.006-.0077 Chapter 494.0067(1), F.S. deleted. Eliminated from the statute the requirement to display main and branch office licenses. Provides that each licensee shall report any change in the officers, partners, members, joint venturers, direc- tors, or control persons. (Chapter 494.0067(4), F.S). Provides that a change of control whether through the power to direct management, ownership or oth- erwise shall require an application to be submitted to the OFR unless a waiver has been granted. (Chapter 494.0067(4)(a-d),F.S). Changes between 2002 and 2004 to the Rules of the Florida Administrative Code The most significant changes were that the Rules Regulation Mortgage Brokers were moved from 3D- 40 F.A.C. to a new chapter 69V-40 F.A.C. and all ref- erences to the Department of Banking and Finance were replaced with the Financial Services Commission and the Office of Financial Regulation, depending upon the specific division of responsibility between the departments. Table 1.1 summarizes the significant changes to the rules effective March 23, 2008 and Table 1.2 summa- rizes the forms that have been renamed and readopted effective March 23, 2008. 14HourBroker.indb 6 5/1/08 10:30:24 AM
  15. 15. Florida Mortgage Brokerage and Lending Act Rules and Regulations     Changes Effective March 23, 2008 to the Rules of the Florida Administrative Code Definitions 69V-40.001 Deleted the definition of Moral Turpitude (11) and renumbered remaining portion of rule. Adoption of Forms 69V-40.002 All the forms were readopted by the Office of Financial Regu- lation (OFR) and are available by mail from the OFR or on their website at www.flofr.com See Table 1.2 Filings received by the Office on or after March 23, 2008, with the old forms will be returned to the filer. Fees and Commissions 69V-40.008 Added that a good faith estimate does not supplant or substi- tute for the agreement required by Section 494.0038(1) F.S. Payment of Guaranty Fund Claims 69V-40.015 Repealed Change of Address 69V-40.020 Repealed Fictitious Name Registration 69V-40.021 Added that a mortgage business school, mortgage brokerage business, or mortgage lender will not be permitted to use a fictitious name unless they provide evidence to the OFR that such fictitious name is duly registered with the Florida Secre- tary of State pursuant to Section 865.09, F.S. Quarterly Report Filing Requirements 69V40.022 Required the quarterly report to be filed electronically on Form OFR-494-08 at the OFR’s website at www.flofr.com. Added that any person may petition for a waiver of this requirement by filing a petition pursuant to Rule 28-106.301, Florida Administrative Code (F.A.C.). The petition shall demonstrate a technological or financial hardship that entitles the person to file the quarterly report in a paper format. All reports must be filed with the OFR within 30 days after the last day of each calendar quarter. Previously, the rule stated that it must be received within 30 days. If the 30th day is a weekend or official holiday, then the next business day is considered timely filing. Any updates to the Quarterly Report for the quarter ending March 31, 2008, must be filed through the Regulatory Enforce- ment and Licensing (REAL) System by the filing deadline date of April 30, 2008. Mortgage Broker Examination 69V-40.025 Deleted that an applicant will be provided an official admis- sion notice to sit for the examination. Applicants will be re- sponsible for scheduling their own test and re-test, if necessary, through REAL. Added that specific instructions to complete the examination will be communicated prior to the examina- tion. Added that the OFR or its designee shall be responsible for determining that the student taking the examination is the actual person authorized to take the examination. Added that cheating on an examination or violating test center or exami- nation procedures shall be grounds for denial of licensure by the OFR. Added that candidates who fail the exam shall have right to access the examination questions, their examination respons- es, and the correct answers. Added that a passing score will be valid for a period of 2 years from the date of passing the examination. Previously it was 365 days. Deleted that only those answers indicated by the candidate on the answer sheet will be used in computing the examina- tion score and added that test scores will be derived from the number of correct responses. Deleted that the notification of examination results will be sent via U.S. Mail within 10 business days of the examination date. Mortgage Broker Pre-licensing Education Requirement 69V-40.027 The full name and social security number of each student who completes the 24 hour mortgage broker course along with the school’s license number and the completion date was added to the requirements and also added that this information shall be submitted electronically to the OFR at their website www. flofr.com 14HourBroker.indb 7 5/1/08 10:30:24 AM
  16. 16.      Module 1 Table 1.1 cont. Deleted the wording of 24 hour pre-licensing. Added that an instructor who teaches a pre-licensing course may use it towards the satisfactory completion of the pre-licensing educa- tion requirement. Professional Continuing Education Requirements for Mortgage Brokers, Loan Originators, and Principal Representatives 69V-40.0271 Added the word “professional” to continuing education re- quirements. Added the requirement that each loan originator of a mortgage lender, correspondent mortgage lender, or mort- gage lender pursuant to the savings clause shall satisfactorily complete 14 hours of professional continuing education. Deleted that the continuing education requirements are waived for the initial license renewal for mortgage brokers and principal representatives. Added the requirement that each permitted school shall submit within 5 days of completion of each professional continuing education course to the OFR at their website www. flofr.com the full name and mortgage broker license number or social security number of each student, the school’s name and license number, the number of hours completed by the student, and the completion date for individuals licensed as mortgage brokers. Increased the retention period of student course completion records from 3 years to 4 years from the date of completion. Permit for Mortgage Business School 69V-40.028 Renamed the application for Mortgage Business School Permit to OFR-494-04. Added that an applicant shall file an amendment to a pend- ing application for a Mortgage Business School if the informa- tion in the application becomes inaccurate for any reason. The applicant has 30 days from the receipt of the application by the OFR to file the amendment on Form OFR-494-04. Otherwise, prior written permission from the OFR is required. Material changes to the application may be deemed grounds for denial by the OFR and a new application accompanied by the appropriate filing fees may be required. Added that a withdrawal of application will be deemed ef- fective upon receipt by the OFR and that all fees are non-re- fundable if withdrawn. Also, all fees are non-refundable if the application is denied. Added that Form OFR-494-04 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Mortgage Business Schools Prohibited Practices and Advertising/Publicity 69V-40.0281 Because 494.0029 was renumbered, prohibited practices are now a violation of 494.0029(2)(c) and (d) and (f) Mortgage Business School Permit Renewal 69V-40.029 Because the Mortgage Business School Permit Renewal form was repealed, the requirement to submit it with a renwal was deleted. Added that schools teaching the 24-hour pre-licens- ing course submit all training materials that the applicant plans to distribute to course participants including a copy of all teaching aids, such as flash cards, hand-outs, audio/video materials, computer disks/cd’s, and any computer based train- ing. Added the the OFR shall deem a renewal received upon receipt of the requisite fees and training materials at such time as it has been dated stamped by the Cashier’s Office of the De- partment of Financial Services or the date the renewal process has been completed on the OFR’s website. All renewal fees and training materials must be received by September 30th of the year in which the permit expires. If September 30th falls on a Saturday, Sunday, or legal holiday pursuant to Section 110.117, F.S., the renewals received on the next business day will be considered timely received. Application Procedure for Mortgage Broker License 69V-40.031 Renamed the Application for Licensure as a Mortgage Bro- ker, Form OFR-494-03. Gave the Fingerprint card a name, FL921050Z, and increased the fingerprint card processing fee to $42.25 from $23.00. Added the requirement that the ap- plicant has passed the mortgage broker examination as defined 14HourBroker.indb 8 5/1/08 10:30:24 AM
  17. 17. Florida Mortgage Brokerage and Lending Act Rules and Regulations     Table 1.1 cont. in Rule 69V-40.025 to be included with the Application for Licensure as a Mortgage Broker. If the information in the Application for Licensure as a Mortgage Broker or any amendment thereto becomes inac- curate, the applicant shall file an amendment correcting such information within 30 days of the change on Form OFR-494- 03. Previously, it was 10 days. An applicant may amend the application at any time within 30 days from the receipt of the application by the Office. Prior to a determination of the application, an applicant may withdraw their application by written request and is deemed effective upon receipt by the Office of the written request. Except for the fingerprint card, all applications, fees, data, and forms required under this rule shall be filed electronically at www.flofr.com The Office will issue a confirmation of re- ceipt of submission and payment upon successful submission by the applicant on the website. Any person may petition for waiver of the electronic submission of applications, fees, data and forms by filing a petition pursuant to Rule 28-106.301, F.A.C. Such petition shall demonstrate a technological or fi- nancial hardship that entitles the person to file the application, fees, data or form in a paper format. Added that Form OFR-494-03 and Form FL921050Z are incorporated by reference in subsection 69V-40.002(1), F.A.C. Mortgage Broker License Renewal and Reactivation 69V-40.043 Renamed the Mortgage Broker License Renewal and Reactiva- tion Form to OFR-494-07. All applications, fees, data and forms required to be filed un- der this rule shall be filed electronically at www.flofr.com Any person may petition for waiver of the electronic sub- mission of applications, fees, data and forms by filing a peti- tion pursuant to Rule 28-106.301, F.A.C. Such petition shall demonstrate a technological or financial hardship that entitles the person to file the application, fees, data or form in a paper format. The Office will issue a confirmation of receipt of submis- sion of renewal payment upon successful submission by the applicant on the website. Added that Form OFR-494-07 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Application Procedure for Mortgage Brokerage Business License 69V-40.051 Renamed form to Application for Mortgage Brokerage Business and Lender License, Form OFR-494-01. Added the require- ment for each chief executive officer, each chief financial officer, chief operations officer, chief legal officer, chief compli- ance officer, control person, member, partner, and/or joint ven- turer shall submit completed fingerprint card FL921050Z and form OFR-494-01 to the OFR along with the nonrefundable $42.25 fee unless they already hold an active mortgage broker’s license with the OFR. If an entity holds an active license under Chapter 494, F.S. it is exempt from these provisions when it applies for a different type of license under Chapter 494 F.S. unless there has been a change of control of 25% or more of the ownership interest or in the controlling interest since the initial license was approved by the OFR. Previously the change in control was 50%. If any information contained in the Application for Licensure or any amendment thereto becomes inaccurate for any reason, then the applicant shall file an amendment correcting such information within 30 days of the change on Form OFR-494- 01. Previously, it was 10 days. An applicant may amend the application at any time within 30 days from the receipt of the application by the Office. Prior to a determination of the application, an applicant may withdraw their application by written request and is 14HourBroker.indb 9 5/1/08 10:30:24 AM
  18. 18. 10     Module 1 Table 1.1 cont. deemed effective upon receipt by the Office of the written request. Deleted Restoration of Civil Rights. Added that Form OFR-494-01 and Form FL921050Z are incorporated by reference in subsection 69V-40.002(1), F.A.C. Mortgage Brokerage Business License and Branch Office License Renewal and Reactivation 69V-40.053 Deleted the requirement to submit a completed renewal and reactivation form. A renewal fee filed electronically on the Office’s website shall be considered received on the date the Office issues a confirmation of payment to the licensee via the Office’s web- site. A confirmation is issued by the Office upon successful submission of the renewal payment. All applications, fees, data and forms required to be filed under this rule shall be filed electronically at www.flofr.com Any person may petition for waiver of the electronic sub- mission of applications, fees, data and forms by filing a peti- tion pursuant to Rule 28-106.301, F.A.C. Such petition shall demonstrate a technological or financial hardship that entitles the person to file the application, fees, data or form in a paper format. If the renewal payment is received in a paper format, then the received date shall be the date stamped on the pay- ment when received by the Department of Financial Services’ Cashier’s Office in Tallahassee, Florida. Mortgage Brokerage Business License and Branch Office License Renewal and Reactivation 69V-40.053 Deleted the requirement to submit a completed renewal and reactivation form. A renewal fee filed electronically on the Office’s website shall be considered received on the date the Office issues a confirmation of payment to the licensee via the Office’s web- site. A confirmation is issued by the Office upon successful submission of the renewal payment. All applications, fees, data and forms required to be filed under this rule shall be filed electronically at www.flofr.com Any person may petition for waiver of the electronic sub- mission of applications, fees, data and forms by filing a peti- tion pursuant to Rule 28-106.301, F.A.C. Such petition shall demonstrate a technological or financial hardship that entitles the person to file the application, fees, data or form in a paper format. If the renewal payment is received in a paper format, then the received date shall be the date stamped on the pay- ment when received by the Department of Financial Services’ Cashier’s Office in Tallahassee, Florida. Application Procedure for Mortgage Brokerage Business Branch Office License 69V-40.058 Added to operate a branch, the applicant must complete Form OFR-494-02, Application for Branch Office License. Added that amendments to pending applications shall be filed within 30 days of the change and within 30 days from receipt of the application by the Office on Form OFR-494-02. Previously, it was 10 days to notify the Office of an amendment. Prior to a determination of the application, an applicant may withdraw their application by written request and is deemed effective upon receipt by the Office of the written request. Added that Form OFR-494-02 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Amendments, Change of Name, Change of Entity and Change in Con- trol or Ownership 69V-40.099 Added the word “Amendments” to the rule. Each person licensed as a mortgage broker, mortgage brokerage business, mortgage lender, correspondent mortgage lender, or permit- ted mortgage business school which proposes to change its name, form of business organization, or any other informa- tion contained in any initial application form or any amend- ment thereto, must file an amendment pursuant to Sections 494.004(6) and 494.0067(4), F.S. not later than 30 days after the effective date of the change on Form OFR-494-01 for Mort- gage Brokerage Businesses and Lenders, From OFR-494-02 for Branch Offices, Form OFR-494-03 for Mortgage Brokers, 14HourBroker.indb 10 5/1/08 10:30:25 AM
  19. 19. Florida Mortgage Brokerage and Lending Act Rules and Regulations     11 Table 1.1 cont. and Form OFR-494-04 for Mortgage Business Schools. Any licensee pursuant to Sections 494.0061 or 494.0062, F.S., shall additionally provide a completed surety bond, on Form OFR- 494-05, Mortgage Brokerage and Mortgage Lending Act Surety Bond, executed in the new name of the licensee as docu- mented by the requirements of this subsection. Name changes pursuant to this subsection shall not involve any change in controlling interest of the licensed entity. Each licensed mortgage brokerage business, mortgage lender, or correspondent mortgage lender which proposes to change any personnel described in Sections 494.004 and 494.0067, F.S., listed in any initial application form or any amendment thereto must file an amendment not later than 30 days prior to the effective date of the change or within 2 business days after the date the licensee first received notice of the change on Form OFR-494-01 for Mortgage Brokerage Businesses and Lender. In the event the change in personnel in Sections 494.004 and 494.0067, F.S., listed in any initial application or any amendment thereto results in the addition of anyone referenced in this subsection, such persons must comply with Subsections 494.0031(2)(c) (d), 494.0061(2)(g) (h), 494.0062(2)(g) (h), or 494.0065(5)(e) (f), F.S. unless such person has previously complied with an entity currently licensed under this chapter and the person is currently affili- ated with such entity. Applications for licensure as a mortgage brokerage business, mortgage lender or correspondent mortgage lender required as a result of an acquisition of a controlling interest in a licensee pursuant to Subsection 494.004(6) 494.0067(4), F.S., must be filed in a timely manner as to allow the Office to complete its review of the application prior to the effective date of the acquisition, but no later than 30 days prior to the date of such acquisition. Such applications must be filed in accordance with Section 494.0031, 494.0061, or 494.0062, F.S. The Office shall waive the requirement for a licensee to file a new application pursuant to subsections 494.004(6) 494.0067(4), F.S. when a person or group of persons propos- ing to purchase or acquire a controlling interest in a licensee has previously filed the information with the Office required in Subsections 494.0031(2)(c) (d), 494.0061(2)(g) (h), 494.0062(2)(g) (h), or 494.0065(5)(e) (f), F.S., with a mortgage brokerage business or lender currently licensed to the office, provided that such person is currently affiliated with the mortgage brokerage business or lender licensee or when the acquirer is currently licensed with the office as a mortgage broker, mortgage brokerage business or lender. If the requirement to file a new application for a change in controlling interest is waived pursuant to this rule, the licensee must file an amendment as prescribed in this rule to report the change in controlling interest. Restoration of Civil Rights was deleted. Added that Form OFR-494-01, Form OFR-494-02, Form OFR-494-03, Form OFR-494-04, and Form OFR-494-05 are incorporated by reference in subsection 69V-40.002(1), F.A.C. Application Procedure for Transfer in Ownership or Control of Saving Clause Mortgage Lender 69V-40.100 Deleted the word “Change” in the rule and replaced it with “Transfer”. Each person who seeks to obtain a controlling ownership or voting interest in a mortgage lender licensed pursuant to the saving clause shall apply to the OFR by submitting a complet- ed Application for Mortgage Brokerage Business and Lender License, Form OFR-494-01. Each ultimate equitable owner of 10% or greater interest, principal representative, chief executive officer, chief financial officer, chief operations officer, chief legal officer, chief com- 14HourBroker.indb 11 5/1/08 10:30:25 AM
  20. 20. 12     Module 1 Table 1.1 cont. pliance officer, director, control person, member, partner, or joint venturer of an entity applying for licensure as a mortgage lender licensed pursuant to the savings clause, shall submit a completed fingerprint card FL921050Z and Biographical Sum- mary from Form OFR-494-01, to the OFR along with a $42.25 nonrefundable processing fee. If the individual owner, director, principal representative, chief executive officer, chief financial officer, chief operations officer, chief legal officer, chief compliance officer, princi- pal representative, control person, member, partner, or joint venturer holds an active mortgage broker’s license with the OFR, then he or she is exempt for the provisions to complete the Biographical Summary, the fingerprint card, and process- ing fee. Reduced the percentage of change in controlling interest from 50% to 25% or more to comply with the Biographical Summary, fingerprint card, and processing fee. Added that amendments to pending application for a license for a Saving Clause Mortgage Lender must be filed within 30 days of the change on Form OFR-494-01 within 30 days from receipt of the application by the Office. Otherwise, the application may be amended only with prior written per- mission from the Office. Requests to make changes which are material to the application may be deemed by the Office to be grounds for denial and a new application, accompanied by the appropriate filing fees, may be required. Prior to a determination of the application, an applicant may withdraw their application by written request and is deemed effective upon receipt by the Office of the written request. Added that Form OFR-494-01 and Form FL921050Z are incorporated by reference in subsection 69V-40.002(1), F.A.C. Branch Office License for Transfer in Ownership or Control of Saving Clause Mortgage Lender 69V-40.105 Deleted the word “Change” in the rule and replaced it with “Transfer”. Each person applying for a transfer in ownership or control of a saving clause mortgage lender shall apply to the OFR for a license to operate a branch office by submitting a completed Form OFR-494-02. Added that amendments to pending applications for a branch office license for a Saving Clause Mortgage Lender must be filed within 30 days of the change on Form OFR- 494-02 within 30 days from receipt of the application by the Office. Otherwise, the application may be amended only with prior written permission from the Office. Requests to make changes which are material to the application may be deemed by the Office to be grounds for denial and a new application, accompanied by the appropriate filing fees, may be required. Prior to a determination of the application, an applicant may withdraw their application by written request and is deemed effective upon receipt by the Office of the written request. Added that Form OFR-494-02 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Third-party fee Accounts 69V-40.156 Renamed Mortgage Brokerage Deposit Account Form OFR- 494-09 and incorporated by reference in subsection 69V- 40.002(1), F.A.C. Principal Brokers 69V-40.160 Added the word “Representative” to the Principal Broker Designation section of Form OFR-494-01. It is now called Principal Broker/Representative Designation. Changed the requirement from each principal broker noti- fying the OFR to each licensee shall notify the OFR in writing within 30 days of the termination or resignation of a principal broker. Previously, the notification was just for termination. Added that Form OFR-494-01 is incorporated by reference in subsection 69V-40.002(1), F.A.C. 14HourBroker.indb 12 5/1/08 10:30:25 AM
  21. 21. Florida Mortgage Brokerage and Lending Act Rules and Regulations     13 Table 1.1 cont. Branch Brokers 69V-40.165 Added the words “Employee in Charge” to the Branch Broker Designation form OFR-494-02. It is now called Branch Bro- ker/Employee in Charge. Changed the requirement from each branch broker notify- ing the OFR to each licensee shall notify the OFR in writing within 30 days of termination or resignation of the branch broker. Previously, it was just for termination. Added that Form OFR-494-02 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Books and Records 69V-40.170 Changed the zip code for notification to 32399-0376 Mortgage Brokerage and Lending Transaction Journal 69V-40.177 Changed the form number that the journal should be main- tained in a format substantially similar to Form OFR-494-10. Added that Form OFR-494-10 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Application Procedure for Mortgage Lender License 69V-40.200 Renamed form to Application for Mortgage Brokerage Business and Lender License, Form OFR-494-01. Required new form for the $10,000 surety bond, on Form OFR-494-05, Mortgage Brokerage and Mortgage Lending Act Surety Bond. Added the requirement for each principal representative, chief executive officer, each chief financial officer, chief opera- tions officer, chief legal officer, chief compliance officer, con- trol person, member, partner, joint venturer, and each director of an entity applying for licensure as a mortgage lender shall submit completed fingerprint card FL921050Z and Biographi- cal Summary from form OFR-494-01 to the OFR along with the nonrefundable $42.25 processing fee. If any ultimate equitable owner of 10% or greater interest, principal representative, chief executive officer, chief financial officer, chief operations officer, chief legal officer, chief com- pliance officer, control person, member, partner, joint venturer, or director of the applicant holds an active mortgage broker’s license with the OFR, then they are exempt from the provi- sions of the fingerprint card, Biographical Summary, and the $42.25 nonrefundable processing fee. If an entity holds an active license under Chapter 494, F.S. it is exempt from these provisions when it applies for a dif- ferent type of license under Chapter 494 F.S. unless there has been a change of control of 25% or more of the ownership interest or in the controlling interest since the initial license was approved by the OFR. Previously the change in control was 50%. If any information contained in the Application for Licen- sure or any amendment thereto becomes inaccurate for any reason, then the applicant shall file an amendment correcting such information within 30 days of the change on Form OFR- 494-01. Previously, it was 10 days. An applicant may amend the application at any time within 30 days from the receipt of the application by the Office. Prior to a determination of the application, an applicant may withdraw their application by written request and is deemed effective upon receipt by the Office of the written request. Deleted Restoration of Civil Rights. Added that Forms OFR-494-01, Form OFR-494-05, and Form FL921050Z are incorporated by reference in subsection 69V-40.002(1), F.A.C. Mortgage Lender License, Mortgage Lender License Pursuant to Saving Clause, and Branch Office License Renewal and Reactivation 69V-40.205 Renamed renewal form to Form OFR-494-06. Deleted refer- ence to branch office renewal form. Added the requirement that all applications, fees, data and forms required to be filed under this rule shall be filed elec- tronically at www.flofr.com Any person may petition for waiver of the electronic sub- mission of applications, fees, data and forms by filing a peti- tion pursuant to Rule 28-106.301, F.A.C. Such petition shall 14HourBroker.indb 13 5/1/08 10:30:25 AM
  22. 22. 14     Module 1 Table 1.1 cont. demonstrate a technological or financial hardship that entitles the person to file the application, fees, data or form in a paper format. If the renewal payment is received in a paper format, then the received date shall be the date stamped on the pay- ment when received by the Department of Financial Services’ Cashier’s Office in Tallahassee, Florida. The Office will issue a confirmation of receipt of submis- sion and renewal fee payment upon successful submission by the applicant on the website. Added that Form OFR-494-06 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Application Procedure for Correspon- dent Mortgage Lender License 69V-40.220 Renamed form to Application for Mortgage Brokerage Business and Lender License, Form OFR-494-01. Required new form for the $10,000 surety bond, on Form OFR-494-05, Mortgage Brokerage and Mortgage Lending Act Surety Bond. Added the requirement for each principal representative, each chief executive officer, each chief financial officer, chief operations officer, chief legal officer, chief compliance officer, control person, member, partner, joint venturer, and each director of an entity applying for licensure as a correspon- dent mortgage lender shall submit completed fingerprint card FL921050Z and Biographical Summary from form OFR-494- 01 to the OFR along with the nonrefundable $42.25 process- ing fee. If any ultimate equitable owner of 10% or greater interest, principal representative, chief executive officer, chief financial officer, chief operations officer, chief legal officer, chief com- pliance officer, control person, member, partner, joint venturer, or director of the applicant holds an active mortgage broker’s license with the OFR, then they are exempt from the provi- sions of the fingerprint card, Biographical Summary, and the $42.25 nonrefundable processing fee. If any ultimate equitable owner of 10% or greater interest, principal representative, chief executive officer, chief financial officer, chief operations officer, chief legal officer, chief com- pliance officer, control person, member, partner, joint venturer, or director of the applicant holds an active mortgage broker’s license with the OFR, then they are exempt from the provi- sions of the fingerprint card, Biographical Summary, and the $42.25 nonrefundable processing fee. If an entity holds an active license under Chapter 494, F.S. it is exempt from these provisions when it applies for a dif- ferent type of license under Chapter 494 F.S. unless there has been a change of control of 25% or more of the ownership interest or in the controlling interest since the initial license was approved by the OFR. Previously the change in control was 50%. If any information contained in the Application for Licen- sure or any amendment thereto becomes inaccurate for any reason, then the applicant shall file an amendment correcting such information within 30 days of the change on Form OFR- 494-01. Previously, it was 10 days. An applicant may amend the application at any time within 30 days from the receipt of the application by the Office. Prior to a determination of the application, an applicant may withdraw their application by written request and is deemed effective upon receipt by the Office of the written request. Deleted Restoration of Civil Rights. Added that Form OFR-494-01, Form OFR-494-05, and Form FL921050Z are incorporated by reference in subsection 69V-40.002(1), F.A.C. 14HourBroker.indb 14 5/1/08 10:30:25 AM
  23. 23. Florida Mortgage Brokerage and Lending Act Rules and Regulations     15 Table 1.1 cont. Correspondent Mortgage Lender License and Branch Office License Renewal and Reactivation 69V-40.225 Renamed renewal form to Form OFR-494-06. Deleted refer- ence to branch office renewal form. Added the requirement that all applications, fees, data and forms required to be filed under this rule shall be filed elec- tronically at www.flofr.com Any person may petition for waiver of the electronic sub- mission of applications, fees, data and forms by filing a peti- tion pursuant to Rule 28-106.301, F.A.C. Such petition shall demonstrate a technological or financial hardship that entitles the person to file the application, fees, data or form in a paper format. If the renewal payment is received in a paper format, then the received date shall be the date stamped on the pay- ment when received by the Department of Financial Services’ Cashier’s Office in Tallahassee, Florida. The Office will issue a confirmation of receipt of submis- sion and renewal fee payment upon successful submission by the applicant on the website. Added that Form OFR-494-06 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Application Procedure for Mortgage Lender or Correspondent Mortgage Lender Branch Office License 69V-40.240 Added to operate a branch, the applicant must complete Form OFR-494-02, Application for Branch Office License. Added that amendments to pending applications shall be filed within 30 days of the change and within 30 days from receipt of the application by the Office on Form OFR-494-02. Previously, it was 10 days to notify the Office of an amendment. Prior to a determination of the application, an applicant may withdraw their application by written request and is deemed effective upon receipt by the Office of the written request. Added that Form OFR-494-02 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Principal Representative 69V-40.242 Added the word “Broker” to the Principal Representative Designation section of Form OFR-494-01. It is now called Principal Broker/Representative Designation. Changed the requirement from each principal representa- tive notifying the OFR to each licensee shall notify the OFR in writing within 30 days of the termination or resignation of a principal broker. Previously, the notification was just for termination. Added that Form OFR-494-01 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Mortgage Brokerage and Lending Transaction Journal 69V-40.265 Changed the form number that the journal should be main- tained in a format substantially similar to Form OFR-494-10. Added that Form OFR-494-10 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Financial Guaranty in Lieu of Uniform Single Audit 69V-40.270 A lender electing to provide a financial guaranty in lieu of the single line audit shall document monthly the aggregate value of mortgage loans serviced on the renamed Form OFR-494-11. Added that Form OFR-494-11 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Noninstitutional Investor Funds Account 69V-40.285 The licensee shall maintain an updated and accurate record of account activity on renamed Form OFR 494-12. Added that Form OFR-494-12 is incorporated by reference in subsection 69V-40.002(1), F.A.C. Compiled by Author Note: This table only includes the rules that were updated effective March 23, 2008. This table only includes the changes/ additions/deletions to the respective rule affected. For a complete copy of the rules, go to https://www.flrules.org/gateway/ ChapterHome.asp?Chapter=69V-40 14HourBroker.indb 15 5/1/08 10:30:25 AM
  24. 24. 16     Module 1 PART I: GENERAL PROVISIONS (494.001-494.00295) The Financial Services Commission As introduced at the beginning of this module, the Financial Services Commission serves as agency head for the Office of Financial Regulation (OFR or Office) andtheOfficeofInsuranceRegulation(OIR).OFRand OIR are administratively housed within the Depart­- ment of Financial Services, headed by the Chief Financial Officer. The Office is responsible for con- ducting financial investigations into allegations of sus- pected illegal financial activities within its jurisdiction. Powers and Duties of the Commission and Office The Office of Financial Regulation is responsible for the administration and enforcement of Chapter 494.001-494.0077, F.S. The Financial Services Com­­mission may adopt rules pursuant to Chapters 120.563(1), F.S and 120.54, F.S to implement Chapters 494.001-494.0077, F.S. The Commission may adopt rules requiring electronic submission of any forms, documents, or fees required by this act if such rules reasonably accommodate technological or financial hardship. The Commission may prescribe by rule requirements and procedures for obtaining an exemption due to a technological hardship. The Commission may also adopt rules to accept certifica- tion of compliance with requirements of Chapter 494, F.S. in lieu of requiring submission of documents. The grant or denial of any license under this chapter must be in accordance with Chapter 120.60, F.S. The Office: has the power to issue and to serve subpoenas and subpoenas duces tecum to compel the attendance of witnesses and the production of all books, accounts, records, and other documents and materials rel- evant to an examination or investigation. or its duly authorized representative, has the power to administer oaths and affirmations to any person. may conduct an investigation of any person when- ever the Office has reason to believe, either upon complaint or otherwise, that any violation of 494.001-494.0077 F.S. has been committed or is about to be committed. may, at intermittent periods, conduct examinations of any licensee or other person under the provi- • • • • MORTGAGE BROKERAGE LICENSE LAW Chapter 494, F.S., is divided into five parts: Part I, General Provisions (494.001-494.00295); Part II, Mortgage Brokers (494.003-494.0043); Part III, Mortgage Lenders (494.006-494.0077); Part IV, Florida Fair Lending Act (494.0078-494.00797); and Part V, Loans Under the Florida Uniform Land Sales Practices Law (494.008). Source: Compiled by Author Table 1.2 Forms Readopted Effective March 23, 2008 NAME FORM NO. Application for Mortgage Brokerage Business and Lender License OFR-494-01 Application for Branch Office License OFR-494-02 Application for Licensure as a Mortgage Broker OFR-494-03 Application for a Mortgage Business School Permit OFR-494-04 Mortgage Brokerage and Mortgage Lending Act Surety Bond OFR-494-05 Mortgage Lender License Renewal and Reactivation Form OFR-494-06 Mortgage Broker License Renewal and Reactivation Form OFR-494-07 Quarterly Report Form OFR-494-08 Mortgage Brokerage Deposit Account Form OFR-494-09 Mortgage Brokerage Transaction and Lending Journal OFR-494-10 Calculation of Aggregate Value of Mortgage Loans Serviced OFR-494-11 Non-Institutional Investor’s Funds Account Form OFR-494-12 Florida Fingerprint Card FL921050Z 14HourBroker.indb 16 5/1/08 10:30:25 AM
  25. 25. Florida Mortgage Brokerage and Lending Act Rules and Regulations     17 sions of 494.001-494.0077 F.S. may bring action through its own counsel in the name and on behalf of the state against any person who has violated or is about to violate any provi- sion of 494.001-494.0077 F.S. or any rule of the commission or order of the Office issued under 494.001-494.0077 F.S. to enjoin the person from continuing in or engaging in any act in furtherance of the violation. has the power to issue and serve upon any person an order to cease and desist and to take corrective action whenever it has reason to believe the per- son is violating, has violated, or is about to violate any provision of 494.001-494.0077 F.S., any rule or order issued under 494.001-494.0077 F.S., or any written agreement between the person and the Office. All procedural matters relating to issuance and enforcement of such a cease and desist order are governed by the Administrative Procedure Act. has the power to order the refund of any fee directly or indirectly assessed and charged on a mortgage loan transaction which is unauthorized or exceeds the maximum fee specifically authorized in 494.001-494.0077 F.S. may prohibit the association by a mortgage broker business, or the employment by a mortgage lender or correspondent mortgage lender, of any person who has engaged in a pattern of misconduct while an associate of a mortgage brokerage business or an employee of a mortgage lender or correspon- dent mortgage lender. For the purpose of this sub- section, the term “pattern of misconduct” means the commission of three or more violations of ss. 494.001-494.0077 or the provisions of Chapter 494 in effect prior to October 1, 1991, during any one year period or any criminal conviction for violating ss. 494.001-494.0077 or the provisions of Chapter 494 in effect prior to October 1, 1991. Penalties Chapter 494.0018 provides whoever knowingly vio- lates any provision of Chapters 494.0041(2)(e), (f), or (g); 494.0072 (2)(e), (f), or (g); or 494.0025 (1), (2), (3), (4), or (5), is guilty of a felony of the third degree, except that any person convicted of a violation of any provision of 494.001-494.0077 F.S., in which viola- tion the total value of money and property unlawfully obtained exceeded $50,000 and there were five or more victims, is guilty of a felony of the first degree. All the violations are punishable as provided in Chapters 775.082 F.S., 775.083 F.S., or 775.084 F.S. Each such violation constitutes a separate offense. In addition, if a mortgage transaction is made in violation of any pro- vision of Chapters 494.001-494.0077 F.S., the person making the transaction and every licensee, director, • • • • or officer who participated in making the transaction are jointly and severally liable to every party to the transaction in an action for damages incurred by the party or parties. However, a person is not liable under this section upon showing that such person’s licens- ees, officers, and directors who participated in making the transaction, if any, acted in good faith and with- out knowledge and, with the exercise of due diligence, could not have known of the act committed in viola- tion of Chapters 494.001-494.0077, F.S. Prohibited Practices Chapter 494.0025 F.S. provides that it is unlawful for any person: (1) To act as a mortgage lender in this state without a current, active license issued by the Office pur- suant to 494.006-494.0077, F.S. (2) To act as a correspondent mortgage lender in this state without a current, active license issued by the Office pursuant to 494.006-494.0077, F.S. (3) To act as a mortgage broker in this state without a current, active license issued by the Office pur- suant to 494.003-494.0043, F.S. (4) In any practice or transaction or course of busi- ness relating to the sale, purchase, negotiation, promotion, advertisement, or hypothecation of mortgage transactions, directly or indirectly: (a) To knowingly or willingly employ any device, scheme, or artifice to defraud; (b) To engage in any transaction, practice, or course of business which operates as a fraud upon any person in connection with the pur- chase or sale of any mortgage loan; or (c) To obtain property by fraud, willful misrep- resentation of a future act, or false promise. (5) In any matter within the jurisdiction of the Office, to knowingly and willfully falsify, con- ceal, or cover up by a trick, scheme, or device a material fact, make any false or fraudulent state- ment or representation, or make or use any false writing or document, knowing the same to con- tain any false or fraudulent statement or entry. (6) To violate 655.922(2) F.S., subject to 494.001- 494.0077 F.S. (7) Who is required to be licensed under ss. 494.006 - 494.0077, to fail to report to the Office the failure to meet the net worth requirements of 494.0061 F.S., 494.0062 F.S., or 494.0065 F.S. within 48 hours after the person’s knowledge of such failure or within 48 hours after the person should have known of such failure. 14HourBroker.indb 17 5/1/08 10:30:26 AM
  26. 26. 18     Module 1 (8) To pay a fee or commission in any mortgage loan transaction to any person or entity other than a mortgage brokerage business, mortgage lender, or correspondent mortgage lender, operating under an active license, or a person exempt from licensure under this chapter. (9) To record a mortgage brokerage agreement or any other document, not rendered by a court of competent jurisdiction, which purports to enforce the terms of the mortgage brokerage agreement. (10) To use the name or logo of a financial institution, as defined in 655.005(1), F.S., or its affiliates or subsid- iaries when marketing or soliciting existing or prospective customers if such marketing materials are used without the written consent of the financial institution and in a manner that would lead a reasonable person to believe that the material or solicitation originated from, was endorsed by, or is related to or the responsi- bility of the financial institution or its affiliates or subsidiaries. PART II AND III: MORTGAGE BROKERS AND MORTGAGE LENDERS In 494.0078, F.S. the Florida Legislature found that: “abusive mortgage lending has become a problem in this state even though most high-cost home loans do not involve abusive mortgage practices. One of the most common forms of abusive lending is the making of loans that are equity-based rather than income-based. The financing of points and fees in these loans provides immediate income to the originator and encourages creditors to repeatedly refinance home loans. As long as there is sufficient equity in the home, an abusive creditor benefits even if the borrower is unable to make the payments and is forced to refinance. The financing of high points and fees causes the loss of equity in each refinanc- ing and often leads to foreclosure. Abusive lending has threatened the viability of Allows the Office to contract with a third party ven- dor to administer the mortgage broker test. Provides that applications are not deemed received until all required fees are received. Authorizes dis- ciplinary action if fees are paid with a bad check. Provides that each licensee shall report any change in the principal broker, principal representative, officers, partners, members, joint venturers, direc- tors, control persons or any individual who is the ultimate equitable owner of 10% or greater inter- est. Provides that a change of control whether through the power to direct management, ownership or oth- erwise shall require an application to be submitted to OFR unless a waiver has been granted. Audited financial statements of all licensed lend- ers have to be in accordance with U.S. generally accepted accounting principles. Provides under certain conditions that existing • • • • • • principal representatives can be grandfathered in without class or testing requirements. Eliminates the requirement to display main and branch office licenses. Eliminates the requirement to display individual mortgage broker licenses. Eliminates the requirement to report the continu- ing education of loan “Associates” when renewing a lender’s license. Provides grounds for disciplinary action when a final judgment is entered against an applicant or licensee in a civil action upon grounds of fraud, embezzlement, misrepresentation, or deceit. Provides grounds for disciplinary action when action is taken by other federal and state regula- tory organizations located in or outside the State of Florida involving securities, insurance, real estate, and lending activities. • • • • • All the relevant changes made to Chapter 494, F.S. were discussed at the beginning of this module. Included here is a brief recap of the changes to Chapter 494.003-494.0077, F.S. PART IV: FLORIDA FAIR LENDING ACT ABUSIVE MORTGAGE LENDING 14HourBroker.indb 18 5/1/08 10:30:26 AM
  27. 27. Florida Mortgage Brokerage and Lending Act Rules and Regulations     19 many communities and caused decreases in home ownership. While the marketplace appears to oper- ate effectively for conventional mortgages, too many homeowners find themselves victims of overreach- ing creditors who provide loans with unnecessarily high costs and terms that are unnecessary to secure repayment of the loan. The Legislature finds that as competition and self-regulation have not eliminated the abusive terms from home-secured loans, the consumer protection provisions of this act are neces- sary to encourage fair lending.” DEFINITIONS Chapter 494.0079, F.S. sets forth the following defini- tions. Affliate: Any company that controls, is controlled by, or is in common control with another company, as set forth in 12 U.S.C. 1841 et seq. and the regulations adopted thereunder. Annual percentage rate (APR): The annual percent- age rate for the loan calculated according to the provi- sions of 15 U.S.C. 1606 and the regulations adopted thereunder by the Federal Reserve Board. Borrower: Any natural person obligated to repay a loan, including, but not limited to, a co-borrower, co- signor, or guarantor. Bridge loan: A loan with a maturity of less than 18 months that only requires the payment of interest until such time as the entire unpaid balance is due and payable. Commission: The Financial Services Commission. Office: The Office of Financial Regulation of the commission. Lender: Any person who makes a high-cost home loan or acts as a mortgage broker or lender, finance company, or retail installment seller with respect to a high-cost home loan, but shall not include any entity chartered by the United States Congress when engag- ing in secondary market mortgage transactions as an assignee or otherwise. Residential mortgage transaction: A transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling. (15 U.S.C.) 1602(w) HIGH-COST HOME LOANS Definition The provisions of the Florida Fair Lending Act deal primarily with high-cost home loans. High-cost home loans are defined by 15 U.S.C. 1602(aa), which provides in pertinent part as follows: (1) A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumer’s principal dwelling, other than a resi- dential mortgage transaction, a reverse mortgage transaction, or a transaction under an open end credit plan, if— (A) the annual percentage rate at consummation of the transaction will exceed by more than 10 percentage points the yield on Treasury secu- rities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or (B) the total points and fees payable by the con- sumer at or before closing will exceed the greater of— (i) 8 percent of the total loan amount; or (ii) $547.00, for the year 2007. (2) (A) After the 2-year period beginning on the effective date of the regulations promulgated under section 155 of the Riegle Community Development and Regulatory Improvement Act of 1994, and no more frequently than bien- nially after the first increase or decrease under this subparagraph, the Board may by regula- tion increase or decrease the number of per- centage points specified in paragraph (1)(A), if the Board determines that the increase or decrease is— (i) consistent with the consumer protections against abusive lending provided by the amendments made by subtitle B of title I of the Riegle Community Development and Regulatory Improve­ment Act of 1994; and (ii) warranted by the need for credit. (B) An increase or decrease under subparagraph (A) may not result in the number of percent- age points referred to in subparagraph (A) being— (i) less that 8 percentage points; or (ii) greater than 12 percentage points. (C) In determining whether to increase or decrease the number of percentage points referred to in subparagraph (A), the Board shall consult with representatives of consumers, including low-income consumers, and lenders. (3) The amount specified in paragraph (1)(B)(ii) shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index, as reported on June 1 of the year preceding such adjustment. 14HourBroker.indb 19 5/1/08 10:30:26 AM
  28. 28. 20     Module 1 (4) For purposes of paragraph (1)(B), points and fees shall include— (A) all items included in the finance charge, except interest or the time-price differential; (B) all compensation paid to mortgage brokers; (C) each of the charges listed in section1605(e) of this title (except an escrow for future payment of taxes), unless— (i) the charge is reasonable; (ii) the creditor receives no direct or indirect compensation; and (iii) the charge is paid to a third party unaffili- ated with the creditor; and (D) such other charges as the Board determines to be appropriate. PROHIBITED ACTS Chapter 494.00791,F.S. provides for prohibited acts involving high-cost loans. (1) Prepayment Penalties (a) A high-cost home loan may not contain terms that require a borrower to pay a pre- payment penalty for paying all or part of the loan principal before the date on which the payment is due. (b) Notwithstanding paragraph (a), a lender making a high-cost home loan may include in the loan contract a prepayment fee or penalty, for up to the first 36 months after the date of consummation of the loan, if: 1. The borrower has also been offered a choice of another product without a pre- payment penalty. 2. The borrower has been given, at least 3 business days prior to the loan consum- mation, a written disclosure of the terms of the prepayment fee or penalty by the lender, including the benefit the bor- rower will receive for accepting the pre- payment fee or penalty through either a reduced interest rate on the loan or reduced points or fees. (2) Default Interest Rate A high-cost home loan may not provide for a higher interest rate after default on the loan. However, this prohibition does not apply to interest rate changes in a variable rate loan oth- erwise consistent with the provisions of the loan documents, provided the change in interest rate is not triggered by a default or the acceleration of the interest rate. (3) Balloon Payments A high-cost home loan having a term of less than 10 years may not contain terms under which the aggregate amount of the regular periodic pay- ments would not fully amortize the outstanding principal balance. However, this prohibition does not apply when the payment schedule is adjusted to account for the seasonal or irregular income of the borrower or if the loan is a bridge loan. (4) Negative Amortization A high-cost home loan may not contain terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of the interest due. (5) Prepaid Payments A high-cost home loan may not include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower. (6) Extending Credit Without Regard To The Payment Ability Of The Borrower A lender making a high-cost home loan shall not engage in any pattern or practice of extending high-cost home loans to borrowers based upon the borrowers’ collateral without regard to the borrowers’ ability to repay the loan, including the borrowers’ current and expected income, current obligations, and employment. (7) Payments To A Home Contractor A lender shall not make any payments to a con- tractor under a home improvement contract from amounts of a high-cost home loan other than: (a) In the form of an instrument that is payable to the borrower or jointly to the borrower and the contractor; or (b) At the election of the borrower by a third- party escrow agent in accordance with terms established in a written agreement signed by the borrower, the lender, and the contractor prior to the date of payment. (8) Due-On-Demand Clause A high-cost home loan may not contain a provi- sion that permits the lender, in its sole discre- tion, to call or accelerate the indebtedness. This provision does not prohibit acceleration of the loan due to the borrower’s failure to abide by the terms of the loan, or due to fraud or material misrepresentation by the consumer in connec- tion with the loan. (9) Refinancing Within an 18-Month Period (a) A lender, its affiliate, or an assignee shall not refinance any high-cost home loan to the same borrower within the first 18 months of the loan when the refinancing does not have a reasonable benefit to the borrower 14HourBroker.indb 20 5/1/08 10:30:26 AM
  29. 29. Florida Mortgage Brokerage and Lending Act Rules and Regulations     21 considering all of the circumstances, includ- ing, but not limited to, the terms of both the new and refinanced loans, the cost of the new loan, and the borrower’s circumstances. (b) A lender or assignee shall not engage in acts or practices to evade this requirement, including a pattern or practice of arrang- ing for the refinancing of the lender’s or assignee’s own loans by affiliated or unaffili- ated lenders or modifying a loan agreement, whether or not the existing loan is satisfied and replaced by the new loan, and charging a fee. (10) Open-Ended Loans A lender shall not make any loan as an open- ended loan in order to evade the provisions of this act unless such open-ended loans meet the definition in 12 C.F.R. s. 226.2(a)(20). (11) Recommendation of Default A lender shall not recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a high-cost home loan that refinances all or any portion of such existing loan or debt. (12) Prohibited Door-To-Door Loans A high-cost home loan may not be made as a direct result of a potential or future lender or its representative offering or selling a high-cost home loan at the residence of a potential bor- rower without a prearranged appointment with the potential borrower or the expressed invita- tion of the potential borrower. This subsection does not apply to mail solicitations that may be received by the potential borrower. (13) Late Payment Fees A lender may not charge a late payment fee for a high-cost home loan except as provided in this subsection. A late payment fee: (a) may not be in excess of 5 percent of the amount of the payment past due. (b) may only be assessed for a payment past due for 15 days or more. (c) may not be charged more than once with respect to a single late payment. If a late payment fee is deducted from a payment made on the loan and such deduction causes a subsequent default on a subsequent pay- ment, no late payment fee may be imposed for such default. If a late payment fee has been imposed once with respect to a par- ticular late payment, no such fee shall be imposed with respect to any future payment which would have been timely and suffi- cient, but for the previous default. (14) Modification or Deferral Fees A lender may not charge a borrower any fees or other charges to modify, renew, extend, or amend a high-cost home loan or to defer any payment due under the terms of a high-cost home loan on a minimum of one modifica- tion, renewal, extension, or deferral per each 12 months of the length of the loan. HIGH-COST LOAN DISCLOSURES Chapter 494.00792 F. S. provides: (1) In addition to other disclosures required by law and in conspicuous type: (a) Notice to borrower. A lender making a high-cost home loan shall provide a notice to a borrower in substantially the following form: If you obtain this high-cost home loan, the lender will have a mortgage on your home. You could lose your home and any money you have put into it if you do not meet your obligations under the loan. Mortgage loan rates and closing costs and fees vary based on many factors, includ- ing your particular credit and financial circumstances, your employment history, the loan-to-value requested, and the type of property that will secure your loan. The loan rate and fees could also vary based upon which lender or broker you select. As a borrower, you should shop around and compare loan rates and fees. You should also consider consulting a quali- fied independent credit counselor or other experienced financial adviser regarding the rates, fees, and provisions of this mort- gage loan before you proceed. You should contact the United States Department of Housing and Urban Development for a list of credit counselors available in your area. You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. Borrowing for the purpose of debt consolidation can be an appropriate financial management tool. However, if you continue to incur sig- nificant new credit card charges or other debts after this high-cost home loan is closed and then experience financial dif- ficulties, you could lose your home and any equity you have in it if you do not meet your mortgage loan obligations. Remember that property taxes and home- owners’ insurance are your responsibility. Not all lenders provide escrow services for these payments. You should ask your lender about these services. Also, your payments on existing debts contribute to your credit rating. You should not accept any advice to ignore your regular pay- ments to your existing creditors. 14HourBroker.indb 21 5/1/08 10:30:26 AM

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