HB 714 -- Residential Mortgages

Sponsor:  Curls

This bill changes the laws regarding the Guaranteed Home Equity
Program, the Residential Mortgage Brokers License Act, and the
Reverse Mortgage Act.

GUARANTEED HOME EQUITY PROGRAM

A governing commission, with no less than $4 million in its
guarantee fund, is allowed, if authorized by a referendum adopted
by a majority of the voters, to establish a foreclosure
prevention loan fund to provide low-interest emergency loans to
eligible applicants who might be otherwise forced into
foreclosure proceedings.

The commission will administer the fund subject to the following
conditions:

(1)  Cumulative loans and loan guarantees cannot exceed $3
million;

(2)  Only eligible applicants can apply for loans as established
by the commission;

(3)  Loans are to be used to prevent foreclosure proceedings;

(4)  Eligible applicants cannot borrow more than the equity value
in their residence;

(5)  Loans must be issued as a second lien on the property;

(6)  Interest will be charged at a rate below the market rate
available to the applicant; and

(7)  A one-time application fee can be imposed for the
administration of the program.

Commissioners and their family members will not be eligible to
receive any financial benefit from the program.

An annual independent audit must be conducted and made available
to the public.

RESIDENTIAL MORTGAGE BROKERS LICENSE ACT

The bill:

(1)  Authorizes the Director of the Division of Finance within
the Department of Insurance, Financial Institutions and
Professional Registration to issue orders against any person for
violations of the Residential Mortgage Brokers License Act and to
examine and report the business affairs of any licensee as
required under the provisions of Sections 443.800 - 443.893,
RSMo, regarding mortgage brokers;

(2)  Requires the Residential Mortgage Board within the division
to make recommendations to the division director for the
efficient administration of Sections 443.800 - 443.893 regarding
mortgage brokers and to perform other duties prescribed by the
division director;

(3)  Changes the requirements for the issuance of a mortgage
broker's license by requiring applicants to:

(a)  Provide the division director with a listing of judgments
entered against and bankruptcy petitions by the applicant for the
preceding 10 years instead of the current seven years;

(b)  Provide an audited balance sheet showing that the applicant
meets the net worth requirements of Section 443.859; and

(c)  File proof when applying for a new license of at least three
years of experience in real estate finance or proof of the
completion of a program of education in real estate finance and
fair lending unless exempted by the division director;

(4)  Allows the division director to impose conditions on a
license if he or she determines it is necessary;

(5)  Allows a licensee, upon written request, to provide an
affidavit when renewing a license stating that the information
submitted on a previous renewal is still true and accurate;

(6)  Requires each application or renewal to affirm positively
that the applicant will not knowingly make any false promises to
influence or persuade or pursue any course of misrepresentation
and false promises through agents, solicitors, advertising, or
otherwise;

(7)  Requires the licensee or license applicant to advise the
division director in writing within 30 days when requesting a
license to repurchase a loan or when requested by another entity
to repurchase a loan and the circumstances;

(8)  Increases the fee when a licensee fails to submit a
completed renewal application form and the proper fees in a
timely manner from $500 to $750 if the licensee is 30 days late
and from $1,000 to $1,500 for each month thereafter;

(9)  Allows the division director to require a licensee to
provide a plan for the disposition of any residential mortgage
loans not closed or funded when the license becomes inactive and
allows a licensee with an inactive license to assist borrowers in
the closing or funding of loans that were made when the license
was active;

(10)  Allows the division director to waive licensing fees if a
firm services 100 or fewer real estate loans.  Currently, the
fees are waived for servicing 25 or fewer loans;

(11)  Changes the bonding requirements for applicants from a
$20,000 surety bond to a $100,000 fidelity bond for the purpose
of protecting against any loss sustained by the commission of any
dishonest or criminal act or omission.  Licensees must also
maintain a bond of $100,000;

(12)  Allows a licensee that is a first-tier subsidiary to submit
audited consolidated financial statements of its parent company
which must be filed within 90 days.  A licensee who solely
brokers residential mortgage loans may provide compilation
financial statements in lieu of the audit;

(13)  Requires all advertisements by licensees to include the
words "Missouri Residential Mortgage Licensee";

(14)  Requires a licensee's full-service office to be in
compliance with any applicable zoning laws or ordinances and home
office or business regulations.  A licensee whose principal place
of business is located outside Missouri must have assets of at
least $100,000 and maintain a fidelity bond in the amount of
$100,000;

(15)  Requires mortgage brokers when creating an agency
relationship with the borrower to:

(a)  Act in the borrower's best interest and use reasonable care
in performing duties;

(b)  Not accept, give, or charge undisclosed remuneration at the
cost of the borrower;

(c)  Carry out all lawful instructions given by the borrower;

(d)  Disclose all material facts that may reasonably affect the
borrower; and

(e)  Account for all of the borrower's money and property
received as the agent;

(16)  Allows a mortgage broker to contract for or collect fees
for services rendered if disclosed in advance;

(17)  Requires licensees to verify a borrower's ability to pay
all the costs of a residential mortgage loan including the
principal and interest, real estate taxes, homeowner's insurance,
assessments, and mortgage insurance premiums;

(18)  Prohibits a licensee from providing a loan with a
prepayment penalty unless a loan without a prepayment penalty is
offered.  Section 443.880 specifies what prepayment penalties may
be charged;

(19)  Requires licensees to timely notify borrowers of any
material changes in the terms of the loan or of any increases in
fees by more than 10% or $100.  Timely notice is within three
days after learning of the change or within 24 hours before the
residential mortgage loan is closed, whichever is earlier.  If
the increase in fees is not disclosed, the broker must refund the
amount of the increase plus any interest paid;

(20)  Requires licensees to provide a complete copy of any
appraisal to the borrower within three business days of receipt
but not less than 24 hours prior to the day of closing;

(21)  Prohibits licensees from financing credit life, disability,
or unemployment insurance through a residential loan;

(22)  Prohibits licensees from recommending or encouraging a
borrower to default or fail to make timely payments on any
existing loan or debt prior to and in connection with the closing
or planned closing of a residential mortgage loan that refinances
all or any portion of an existing loan or debt;

(23)  Allows the division director to suspend a license for a
period not to exceed 180 days pending an investigation.  If a
licensee has not met the required experience or educational
requirements, the division director can suspend the license until
those requirements have been met.  When a license is suspended,
the division director will post notice of the order on an agency
Internet web site maintained by the division director;

(24)  Allows the division director to impose a fine of up to
$25,000 for each separate offense for a violation of Section
443.881;

(25)  Requires the division director to obtain semiannually from
the United States Department of Housing and Urban Development the
default claim rates for endorsements issued by the federal
department.  Any licensee having a default rate equal to or
greater than 5% will be examined to determine whether the default
rate is the result of practices which deviate from sound and
accepted mortgage underwriting practices.  Public hearings may be
held accordingly.  Any licensee examined must implement a plan,
approved by the division director, designed to reduce the default
rate and report default rates as required;

(26)  Requires any information received through a hearing being
conducted regarding residential mortgage brokers to be strictly
confidential and made available only as part of the record of a
hearing when required for purposes of judicial review or upon the
express written consent of the individual served or his or her
personal representative;

(27)  Allows any person or entity affected by a decision of the
division director to obtain a review of the decision; and

(28)  Makes it unlawful, beginning August 28, 2009, for any
person, unless specifically exempted, to act as a loan originator
without being registered with the division director.

REVERSE MORTGAGE ACT

The bill requires a licensee to act in good faith in all
relations with a borrower when transferring, dealing in,
offering, or making a reverse mortgage loan under the provisions
of the Reverse Mortgage Act.  No licensee can employ fraudulent
or deceptive acts or practices in making a reverse mortgage loan,
including deceptive marketing and sales efforts.

Missouri House of Representatives
95th General Assembly, 1st Regular Session
Last Updated November 17, 2009 at 9:25 am