Financial institutions: mortgage brokers and lenders; residential mortgage licensing and…

Full Bill Text

HOUSE BILL NO. 6177 A bill to license and regulate mortgage brokers, mortgage lenders, mortgage servicers, and mortgage loan originators; to prohibit certain conduct related to residential mortgage loans; to prescribe remedies, penalties, and civil sanctions; to provide for the powers and duties of certain state and local governmental officers and entities; to provide for the promulgation of rules; to provide for the appointment of a conservator under certain circumstances; to create the residential mortgage industry advisory board and prescribe its powers and duties; to create funds; and to repeal acts and parts of acts. the people of the state of michigan enact: ARTICLE 1 GENERAL PROVISIONS Sec. 1. This act may be cited as the "residential mortgage licensing and supervision act". Sec. 2. For purposes of this act, the words and phrases defined in sections 3 to 6 have the meanings ascribed to them in those sections. These definitions, unless the context requires otherwise, apply to use of the defined terms in this act. Other definitions applicable to specific sections of this act are found in those sections. Sec. 3. (1) "Affiliate" means a person or group of persons that directly or indirectly, through 1 or more intermediaries, controls, is controlled by, or is under common control with another person and engaged in a business or transaction regulated under this act. (2) "Construction loan" means a residential mortgage loan to construct a 1- to 4-family dwelling that is approved and closed before completion of the improvement on the real property. (3) "Control person" means a shareholder, director, or executive officer of a mortgage broker, mortgage lender, or mortgage servicer applicant or licensee, or individual who has the authority to participate in the direction, directly or indirectly through 1 or more other persons, of the management or policies of a mortgage broker, mortgage lender, or mortgage servicer applicant or licensee. (4) "Department" means the department of insurance and financial services. (5) "Depository institution" means a bank, savings and loan association, savings bank, or credit union that is chartered under state or federal law , an entity of the federally chartered farm credit system, or any other institution whose deposits are insured by an agency of the federal government. (6) "Director" means the director of the department or the authorized agent of the director. (7) "Dwelling" means that term as defined in section 103 of the truth in lending act, 15 USC 1602. (8) "Employee" means an individual who has an employment relationship acknowledged by the individual and the mortgage broker, mortgage lender, or mortgage servicer licensee that engages the individual to originate, process, or underwrite residential mortgage loans in compliance with federal income tax laws . (9) "Executive officer" means an officer, member, or partner of a mortgage broker, mortgage lender, or mortgage servicer licensee. Executive officer includes the chief executive officer, president, vice president, chief financial officer, controller, trustee, compliance officer, or any other individual who holds any other similar position. (10) "Exempt person" means a person that meets all of the following: (a) Is not required to obtain a mortgage loan originator license or is exempt from licensing under this act or the consumer financial services act, 1988 PA 161, MCL 487.2051 to 487.2072. (b) Has a unique identifier . (c) Is approved by the director in the nationwide multistate licensing system and registry as an exempt person. Sec. 4. (1) "Federal banking agency" means the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the National Credit Union Administration, or the Federal Deposit Insurance Corporation. (2) "Financial licensing act" means any of the financial licensing acts as that term is defined in section 2 of the consumer financial services act, 1988 PA 161, MCL 487.2052. (3) "Firm commitment" means an underwriting in which a broker-dealer commits to buy a residential mortgage loan or an entire issue of securities based on or backed by 1 or more residential mortgage loans and assumes all financial responsibility for any unsold securities. (4) "First mortgage loan" means a residential mortgage loan in first lien position. (5) "Immediate family member" means a spouse, child, sibling, parent, grandparent, or grandchild. Immediate family member includes a stepparent, stepchild, stepsibling, and any adoptive relationship. (6) "Investor" means a person that resides in this state or has its principal place of business in this state . Investor does not include any of the following: (a) A bank. (b) A savings bank. (c) A savings and loan association. (d) A credit union. (e) A trust company. (f) An insurance company. (g) An investment company as that term is defined in section 3 of the investment company act of 1940, 15 USC 80a-3. (h) A pension or profit-sharing plan if the assets of the plan are managed by a bank or trust company or other institutional manager. (i) A financial institution. (j) An institutional manager. (k) A broker-dealer that is a member of the New York Stock Exchange or registered under the uniform securities act (2002), 2008 PA 551, MCL 451.2101 to 451.2703. ( l ) The Federal National Mortgage Association. (m) The Government National Mortgage Association. (n) The Federal Home Loan Mortgage Corporation. (o) A mortgage lender. (p) A mortgage servicer. (7) "License" means a license or other authority granted under this act. (8) "Licensee" means a person licensed or required to be licensed under this act. (9) "Loan processor or underwriter" means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of a person licensed or designated as exempt from licensing as a mortgage broker, mortgage lender, or mortgage servicer under this act or licensed or exempt from licensing under the consumer financial services act, 1988 PA 161, MCL 487.2051 to 487.2072. For purposes of this subsection, "clerical or support duties" may include any of the following after a residential mortgage loan application is received: (a) Receiving, collecting, distributing, and analyzing information common for the processing or underwriting of a residential mortgage loan. (b) Communicating with a consumer to obtain the information that is necessary for the processing or underwriting of a loan, to the extent that the communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms . (10) "Loan servicing customer" means a mortgagor whose residential mortgage loan is being serviced by a mortgage servicer. Sec. 5. (1) "Mortgage broker" means a person that, directly or indirectly, does any of the following: (a) Serves or offers to serve as an agent for a person in an attempt to obtain a residential mortgage loan. (b) Serves or offers to serve as an agent for a person that makes or offers to make a residential mortgage loan. (c) Serves or offers to serve as an independent contractor loan processor or underwriter for either of the following: ( i ) A person that engages, or offers to engage, in activities under subdivision (a) or (b). ( ii ) A person acting as a mortgage lender. (2) "Mortgage lender" means a person that, directly or indirectly, makes or offers to make a residential mortgage loan. (3) "Mortgage loan originator" means an individual who meets all of the following requirements : (a) Is an employee of a mortgage broker, mortgage lender, or mortgage servicer and who originates residential mortgage loans for the employing mortgage broker, mortgage lender, or mortgage servicer. (b) Is not an individual engaged solely as an employee loan processor or underwriter, unless the individual is engaged in behavior under section 49(2). (c) Is not a person that performs only real estate brokerage activities and is licensed or registered under the laws of this state, unless the person is directly or indirectly compensated by a mortgage broker, a mortgage lender, or any other mortgage loan originator. (d) Is not a person solely involved in extensions of credit relating to timeshare plans as that term is defined in 11 USC 101 . (e) Has a unique identifier. (4) "Mortgage servicer" means a person that, directly or indirectly, services or offers to service a residential mortgage loan. (5) "Nationwide multistate licensing system and registry" means a licensing system that is developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of the residential mortgage and nondepository financial services industry. (6) "Nontraditional mortgage product" means a mortgage product other than a 30-year fixed-rate mortgage. (7) "Open-end credit" means any credit extended under a plan in which both of the following apply: (a) The licensee reasonably contemplates repeated transactions. (b) The amount of credit that may be extended to the borrower during the term of the plan is generally made available to the extent that any part of the outstanding balance is repaid. (8) "Originate" means to directly or indirectly do any of the following for compensation or gain, or in the expectation of compensation or gain, in connection with a residential mortgage loan: (a) Take a residential mortgage loan application. (b) Offer or negotiate terms of a residential mortgage loan. (9) "Person" means an individual, corporation, limited liability company, partnership, association, governmental entity, or any other legal entity. Sec. 6. (1) "Real estate broker" means a real estate broker or associate real estate broker licensed under article 25 of the occupational code, 1980 PA 299, MCL 339.2501 to 339.2518. (2) "Real estate brokerage activity" means an activity that involves offering or providing real estate brokerage services to the public, including, but not limited to, any of the following: (a) Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property. (b) Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property. (c) On behalf of a party, negotiating any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to that contract. (d) Engaging in an activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law. (e) Offering to engage in an activity, or act in any capacity, described in subdivisions (a) to (d). (3) "Real estate salesperson" means a real estate salesperson licensed under article 25 of the occupational code, 1980 PA 299, MCL 339.2501 to 339.2518. (4) "Registered mortgage loan originator" means an individual who is both of the following: (a) A mortgage loan originator employed by any of the following: ( i ) A depository institution. ( ii ) A subsidiary of a depository institution that is owned and controlled by that depository institution and is regulated by a federal banking agency. ( iii ) An institution regulated by the Farm Credit Administration. (b) Registered with, and maintains a unique identifier through, the nationwide multistate licensing system and registry. (5) "Remote location" means a location other than the company address. (6) "Residential mortgage loan" means a loan or land contract that is made to a person for primarily personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate . Residential mortgage loan does not include a home improvement installment contract under the home improvement finance act, 1965 PA 332, MCL 445.1101 to 445.1431. (7) "Residential real estate" means any real property located in this state on which a person has constructed or intends to construct a dwelling. (8) "Secondary mortgage loan" means a residential mortgage loan that has a term of 90 days or more and that is subject to a lien of 1 or more outstanding residential mortgage loans. (9) "Service" means the collection or remittance, or the right or obligation to collect or remit, for a lender, noteowner, noteholder, or mortgage servicer, or for a licensee's own account , of 4 or more installment payments of principal, interest, or an amount placed in escrow under a residential mortgage loan, a residential mortgage servicing agreement, or an agreement with the mortgagor. (10) "Shareholder" means either of the following: (a) A person that owns, or is authorized to vote, directly or indirectly, any percentage of a class of voting interests of a mortgage broker, mortgage lender, or mortgage servicer applicant or licensee, if the applicant or licensee has less than 20 shareholders or owners. (b) A person that owns, or is authorized to vote, directly or indirectly, 10% or more of a class of voting securities or voting interests of a mortgage broker, mortgage lender, or mortgage servicer applicant or licensee if the applicant or licensee has 20 or more shareholders or owners. (11) "Sponsor" means a person that meets all of the following: (a) Has a unique identifier . (b) Is approved by the director in the nationwide multistate licensing system and registry as an exempt person or as a person licensed under this act as a mortgage broker, mortgage lender, or mortgage servicer or the consumer financial services act, 1988 PA 161, MCL 487.2051 to 487.2072. (c) Has indicated in the nationwide multistate licensing system and registry that an individual will act as a mortgage loan originator for the person under the person's specific license, or status as an exempt person . (12) "Unique identifier" means a number or other identifier assigned by the protocols established by the nationwide multistate licensing system and registry. ARTICLE 2 LICENSING PART 1 GENERAL REQUIREMENTS FOR MORTGAGE BROKER, MORTGAGE LENDER, MORTGAGE SERVICER, AND MORTGAGE LOAN ORIGINATOR LICENSING Sec. 7. (1) Unless a person is exempt from licensing or authorized to temporarily act without a license under this act, a person shall not act as a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee, or in any way hold out as being able to provide the services of a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee, without first obtaining and maintaining a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator license. (2) A person claiming an exemption from licensing as a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator bears the burden of establishing to the satisfaction of the director that the person qualifies for the exemption. (3) The director is authorized to establish a relationship or contract with the nationwide multistate licensing system and registry, or any other entity designated by the nationwide multistate licensing system and registry, to collect and maintain records and process fees under this act. Sec. 9. (1) Not later than 6 months after the effective date of this act, a person that is licensed or registered under the mortgage brokers, lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, the secondary mortgage loan act, 1981 PA 125, MCL 493.51 to 493.81, or the mortgage loan originator licensing act, 2009 PA 75, MCL 493.131 to 493.171, and that qualifies as a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator under this act , must apply to be licensed as a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator, as applicable, under this act. (2) Both of the following apply to a person that applies for a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator license in accordance with subsection (1): (a) The person may operate without a license as a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator, as applicable, between the date that is 6 months after the effective date of this act and the date that the director takes action on the application. (b) The person while engaged in activities regulated under this act is subject to the requirements of this act to the same extent as if the person was a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee. Sec. 11. (1) Except for a state or nationally chartered bank, savings bank, or an affiliate of a bank or savings bank, a mortgage broker, mortgage lender, or mortgage servicer licensee shall not include in its name or assumed name the words "bank", "banker", "banking", "banc", "bankcorp", or "bancorp", or any other words or phrases that would imply that the licensee is a bank, is engaged in the business of banking, or is affiliated with a bank or savings bank. (2) It is not a violation of subsection (1) for a mortgage broker, mortgage lender, or mortgage servicer licensee to use the term "mortgage banker" or "mortgage banking" in its name or assumed name. (3) A person licensed as a mortgage broker, mortgage lender, or mortgage servicer under the mortgage brokers, lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, whose name or assumed name complied with that act on the effective date of this act may use that same name or assumed name in its application for a mortgage broker, mortgage lender, or mortgage servicer license under this act. (4) A mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee may operate only under a name that is approved and licensed by the director. (5) A mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator license does not approve the use of or indemnify the licensee against claims for the improper use of the business name stated in the license. Sec. 13. (1) An application for a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator license , or a renewal thereof, must be made in the form and manner prescribed by the director and must be submitted with any fee required under section 15. (2) In addition to any requirement under subsection (1), an applicant for a mortgage loan originator license, and each control person of an applicant for a mortgage broker, mortgage lender, or mortgage servicer license, shall at a minimum furnish the nationwide multistate licensing system and registry with information and documentation concerning the mortgage loan originator applicant's or control person's identity, including, but not limited to, all of the following: (a) Subject to subsection (3), fingerprints for submission to both of the following: ( i ) The Federal Bureau of Investigation for performance of a criminal history check. ( ii ) Any other governmental agency or entity authorized to receive the fingerprints for a state, national, or international criminal history check. (b) Information relating to the personal history and experience of the individual, which must be furnished on a form prescribed by the nationwide multistate license system and registry. (c) Authorization for the nationwide multistate licensing system and registry and the director to obtain all of the following: ( i ) An independent credit report obtained from a consumer reporting agency as that term is defined in section 603 of the fair credit reporting act, 15 USC 1681a. ( ii ) Information related to any administrative, civil, or criminal findings by any governmental jurisdiction. (3) An individual who is subject to a criminal history check under subsection (2) shall do all of the following: (a) Have the individual's fingerprints taken by a law enforcement agency or other person that the director determines is qualified to take fingerprints. (b) Pay the agency or person taking the fingerprints any fee required by the Federal Bureau of Investigation for processing fingerprints and completing the criminal history check. (c) Request that the agency or person taking the fingerprints forward the fingerprints and fees through the nationwide multistate licensing system and registry to the Federal Bureau of Investigation for a criminal history check. (4) After receiving a proper request and the required fees under subsection (3), the Federal Bureau of Investigation shall conduct a criminal history check and provide the director and the mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator applicant with the results of the criminal history check. The results must include any criminal history record information concerning the individual subject to the criminal history check maintained by the Federal Bureau of Investigation's criminal history check. (5) The form described in subsection (1) must include the content established by rule, instruction, or procedure of the director, and the director may change or update the form and its contents as necessary in order to carry out the purpose of this act. (6) For purposes of this section, the director may use the nationwide multistate licensing system and registry for any of the following: (a) Requesting information from and distributing information to the Department of Justice or any other governmental agency. (b) Requesting and distributing information to and from any source as directed by the director. Sec. 15. (1) At the time of making an application for a mortgage broker, mortgage lender, or mortgage servicer license, and at the time of making the first application for a mortgage broker, mortgage lender, or mortgage servicer license after a nonrenewal , suspension, or revocation of the license, an applicant shall pay to the director both of the following: (a) A fee for investigating the applicant. (b) The annual operating fee established by the director under this section. (2) At the time of making an initial application for a mortgage loan originator license , at the time of making the first application for a mortgage loan originator license after nonrenewal, suspension, or revocation of the license, and at the time of making an application for the renewal of a mortgage loan originator license, an applicant shall pay to the director an annual fee. (3) At the time that a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee requests the amending or reissuing of the license, the licensee shall pay to the director a fee prescribed by the director. (4) A mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee shall pay the actual travel, lodging, and meal expenses incurred by staff of the department who travel out of state to examine the records of the licensee or investigate the licensee and the cost of independent investigators employed under this act. (5) The director shall annually establish fees under this section that are sufficient to pay, but must not exceed, the department's reasonably anticipated costs of administering and enforcing this act . In establishing fees under this subsection, the director shall comply with the following: (a) For the investigation of an applicant for a mortgage broker, mortgage lender, or mortgage servicer license under subsection (1), a fee of not less than $400.00 and not more than $1,000.00. (b) Subject to subsection (6), for the annual operating fee for a mortgage broker, mortgage lender, or mortgage servicer applicant under subsection (1) , the total of both of the following: ( i ) A base fee of not less than $250.00 and not more than $2,500.00. ( ii ) An operating fee based on all of the following: (A) The number of closed residential mortgage loans subject to this act that the mortgage broker, mortgage lender, or mortgage servicer licensee brokered to other parties. (B) The number of residential mortgage loans subject to this act closed by the licensee during the previous calendar year. (C) The dollar volume of residential mortgage loans subject to this act serviced by the licensee as of December 31 of the previous calendar year. (c) For amending or reissuing a mortgage broker, mortgage lender, mortgage servicer license, a fee of not less than $15.00 and not more than $200.00, plus the cost of an investigation under subdivision (a), as applicable. (6) The annual operating fee set by the director under subsection (5) must be based on information in a report required under section 61. (7) A fee received under this act is nonrefundable. (8) If any fees or penalties provided for in this act are not paid when required, the attorney general may maintain an action against the delinquent mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee for the recovery of the fees or penalties together with interest and costs. (9) A mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator licensee that does not submit to the director a report required under section 23 or 61 is subject to a late filing fee of $25.00 for each day that the report is delinquent or $1,000.00, whichever is less. (10) A mortgage loan originator, mortgage broker, mortgage lender, or mortgage servicer licensee whose license renewal fee is not received on or before December 31 is subject to a late renewal fee of $25.00 for each day the fee is delinquent or $1,000.00, whichever is less. (11) A mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator applicant or licensee shall pay any fee required by the nationwide multistate licensing system and registry , or similar related system, to maintain the applicant or licensee records. PART 2 LICENSING REQUIREMENTS SPECIFIC TO MORTGAGE BROKERS, MORTGAGE LENDERS, AND MORTGAGE SERVICERS Sec. 17. (1) On receipt of an application for a mortgage broker, mortgage lender, or mortgage servicer license, or a renewal thereof, payment of the fees required under section 15, and proof of financial responsibility required under section 19, the director shall conduct an investigation of the applicant and its control persons and affiliates. (2) If the director determines after investigating an applicant under subsection (1) that the applicant meets the qualifications under this act and that the experience, character, business reputation, and general fitness of the applicant, and its control persons and affiliates, command the confidence of the public and warrant the belief that the applicant, and its control persons and affiliates, will comply with the law, the director must grant or renew the license. Sec. 19. (1) Except as otherwise provided in this section, at the time of filing an application for a mortgage broker, mortgage lender, or mortgage servicer license, or a renewal thereof, the applicant shall provide proof of financial responsibility in the form of a corporate surety bond in 1 of the following amounts, as applicable: (a) For a mortgage broker or mortgage lender applicant that in the aggregate had an annual residential mortgage loan brokering or lending volume of $12,000,000.00 or less during the previous calendar year, $50,000.00. (b) For a mortgage broker or mortgage lender applicant that in the aggregate had an annual residential mortgage loan brokering or lending volume of not less than $12,000,000.01 and not more than $24,000,000.00 during the previous calendar year, $150,000.00. (c) For a mortgage broker or mortgage lender applicant that in the aggregate had an annual residential mortgage loan brokering or lending volume of $24,000,000.01 or more during the previous calendar year, $250,000.00. (d) For a mortgage servicer applicant, $500,000.00. (2) All of the following apply to the corporate surety bond required under subsection (1): (a) It must be on a form prescribed by the director. (b) It must be payable to the director. (c) It must be executed by a corporate surety approved by the director. (d) It must have a continuous term. (e) It must cover the employees, agents, and sponsored mortgage loan originators of the applicant described in subsection (1). (f) It must be conditioned on the applicant described in subsection (1), its employees, agents, and sponsored mortgage loan originators conducting business in accordance with this act and any rules promulgated under this act and the payment of any applicable fee or money that becomes due. (3) The director may promulgate rules under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328 , to implement requirements related to corporate surety bonds that the director determines are necessary to accomplish the purpose of this act . (4) If an action is commenced by the director on a corporate surety bond described in this section, the director may require the filing of a new corporate surety bond. If there is recovery in the action, the applicant described in subsection (1) must immediately provide to the director a new corporate surety bond that meets the requirements of this section. Sec. 21. (1) A mortgage broker licensee that does not receive funds from prospective borrowers before closing residential mortgage loans shall maintain a net worth of not less than $25,000.00. (2) A mortgage broker licensee that receives funds from prospective borrowers before closing residential mortgage loans shall maintain a net worth of not less than $50,000.00. (3) A mortgage lender licensee shall maintain a net worth of not less than $100,000.00. (4) A mortgage servicer licensee shall maintain a net worth of not less than $250,000.00. (5) An applicant for a mortgage broker, mortgage lender, or mortgage servicer license, or a renewal thereof, shall do both of the following: (a) Disclose its net worth on a form prescribed by the director or on a form prepared and reviewed by an independent certified public accountant. (b) Subject to subsection (6), compute its net worth in accordance with generally accepted accounting principles. (6) The following assets are excluded in the computation of net worth: (a) The portion of an applicant's assets pledged to secure obligations of any person other than that of the applicant. (b) Any asset except construction loans receivables, secured by first mortgages from related companies, due from officers or stockholders of the applicant or persons in which the applicant's officers or stockholders have interest. (c) An amount in excess of the lower of the cost or market value of residential mortgage loans in foreclosure, or real property acquired through foreclosure. (d) An investment shown on the balance sheet in joint ventures, subsidiaries, or affiliates that is greater than the market values of the assets. (e) Goodwill or other intangible assets. (f) Organization costs. Sec. 23. (1) The term of an initial mortgage broker, mortgage lender, or mortgage servicer license begins on the date that the application for the initial license is granted by the director and expires on December 31 of that year, unless the initial license was granted by the director between November 1 and December 31, in which case, the initial license expires on December 31 of the year following the year in which the initial license was granted by the director. (2) Except as otherwise provided in subsection (1) and subject to section 53, a mortgage broker, mortgage lender, and mortgage servicer license expires on December 31 of each year unless it is renewed. (3) A mortgage broker, mortgage lender, or mortgage servicer licensee may renew its license by filing an application for a license renewal and paying the fees described in section 15 for the succeeding year. (4) The application for renewal and payment of fees described in subsection (3) must be received by the director on or before a date prescribed by the director. (5) Not later than 90 days after the close of each fiscal year of a mortgage broker, mortgage lender, or mortgage servicer licensee, the licensee shall deliver to the director a financial statement for that fiscal year that is prepared from the licensee's books or records. (6) Subject to subsection (7), the financial statement described in subsection (5) may be any of the following: (a) On a form prescribed by the director. (b) A report substantially similar to the form prescribed by the director, which the licensee must represent to the director as true and complete. (c) In a format prepared and certified by an independent certified public accountant licensed by a regulatory authority of any state or political subdivision of the United States. (7) The financial statement described in subsection (5) must include the net worth information required under section 21. Sec. 25. (1) A person shall not transfer or assign a mortgage broker, mortgage lender, or mortgage servicer license without applying for and receiving the approval of the director for the transfer or assignment. (2) The cumulative sale, transfer, assignment, or conveyance of more than 25% of the outstanding voting stock of a mortgage broker, mortgage lender, or mortgage servicer licensee that is a corporation, or more than 25% of the ownership interest in a mortgage broker, mortgage lender, or mortgage servicer licensee that is a partnership, limited liability company, or other unincorporated legal entity, or the change in an executive officer, is a transfer of the license. (3) The calculation of the cumulative amount of a transfer or assignment includes all sales, transfers, assignments, and conveyances that occur after the date of licensure or after the date that a subsequent transfer or assignment is approved by the director. (4) A transfer or assignment of a mortgage broker, mortgage lender, or mortgage servicer license is subject to the background investigation of a control person required under section 53. (5) If the department receives an application for the transfer or assignment of a mortgage broker, mortgage lender, or mortgage servicer license on a form prescribed by the director and payment of all required fees, the director shall approve or deny the application within a reasonable time. PART 3 LICENSING REQUIREMENTS SPECIFIC TO MORTGAGE LOAN ORIGINATORS Sec. 27. (1) On receipt of an application for a mortgage loan originator license, or a renewal thereof, and payment of any fee required under section 15, the director shall conduct an investigation of the applicant. (2) If the director determines after investigating an applicant under subsection (1) that the applicant meets the qualifications under section 29, the director must grant or renew the mortgage loan originator license . Sec. 29. (1) The director shall not grant a mortgage loan originator license unless the director makes at a minimum all of the following findings: (a) The applicant is not subject to a prohibition order issued by the director under section 127 or under a financial licensing act. (b) The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that the director shall not consider a revocation that is formally vacated as a revocation for purposes of this subdivision. (c) Subject to subsection (2), the applicant has not been convicted of, or pled guilty or no contest to, any of the following in a state, federal, foreign, or military court: ( i ) Except as otherwise provided in subparagraph ( ii ), within the 10-year period preceding the date of the license application, a felony. ( ii ) At any time preceding the date of the license application, a felony or misdemeanor involving fraud, dishonesty, breach of trust, money laundering, embezzlement, forgery, a financial transaction, or securities. (d) The applicant has demonstrated financial responsibility, character, and general fitness that commands the confidence of the community and warrants a determination that the applicant will operate honestly, fairly, and efficiently under this act. (e) The applicant has completed the prelicensing education described in section 31. (f) The applicant has passed a written test that meets the requirements described in section 33. (g) The applicant is covered by a corporate surety bond that meets the requirements of section 19. (h) The applicant has a sponsor in the nationwide multistate licensing system and registry that is approved by the director. (2) The director shall not consider a conviction for which a pardon was granted for the purpose of subsection (1)(c). Sec. 31. (1) To meet the prelicensing education requirement under section 29, the mortgage loan originator applicant must complete at least 20 hours of education approved under subsection (2), including , but not limited to, all of the following: (a) Three hours of federal law and regulation. (b) Three hours of ethics, including instruction on fraud, consumer protection, and fair lending issues. (c) Two hours of training related to lending standards for the nontraditional mortgage product marketplace. (2) Only prelicensing education courses reviewed and approved by the nationwide multistate licensing system and registry may be used to satisfy the requirements of subsection (1), and the review and approval of a prelicensing education course must include review and approval of the course provider. (3) If approved by the nationwide multistate licensing system and registry, a prelicensing education course may be provided by the employer of the applicant, an entity that is affiliated with the applicant by an agency contract, or a subsidiary or affiliate of that employer or entity. (4) The prelicensing education may be offered in a classroom, online, or by any other means approved by the nationwide multistate licensing system and registry. (5) If a person completes any prelicensing education requirements described in subsection (1) that are approved by the nationwide multistate licensing system and registry for any state, the director must accept those hours of education as credit toward completion of the prelicensing education requirements. (6) If an unlicensed individual who formerly held a mortgage loan originator license under this act applies for a new mortgage loan originator license, the individual must prove that the individual completed all of the continuing education requirements under section 37 for the year in which the previous license was last held to be eligible for a new license. Sec. 33. (1) To meet the written test requirements under section 29, the mortgage loan originator applicant shall pass a qualified written test developed by the nationwide multistate licensing system and registry and administered by a test provider approved by the nationwide multistate licensing system and registry based on reasonable standards. (2) A written test is not considered a qualified written test for purposes of subsection (1) unless the test adequately measures the applicant's knowledge and comprehension in appropriate subject areas, including all of the following: (a) Ethics. (b) Federal law and regulation pertaining to mortgage origination and to mortgage lending, including, but not limited to, fraud, consumer protection, and fair lending issues and the nontraditional mortgage product marketplace. (c) State law and regulation pertaining to mortgage origination and to mortgage lending, including, but not limited to, fraud, consumer protection, and fair lending issues and the nontraditional mortgage product marketplace. (3) If the written test provided is approved by the nationwide multistate licensing system and registry, the test provider may provide a test at the location of the employer of the mortgage loan originator applicant, the location of any subsidiary or affiliate of the employer of the mortgage loan originator applicant, or the location of any entity with which the mortgage loan originator applicant holds an exclusive arrangement to conduct the business of a mortgage loan originator. (4) All of the following apply to a written test under this section: (a) A mortgage loan originator applicant is not considered to have passed a qualified written test unless the individual achieves a test score of 75% or more correct answers to questions. (b) A mortgage loan originator applicant may retake a test 3 consecutive times if each consecutive retaking occurs at least 30 days after the preceding test. (c) If a mortgage loan originator applicant fails 3 consecutive tests, the applicant must wait at least 6 months before taking the test again. (d) If an unlicensed individual who formerly held a mortgage loan originator license under this act applies for a new mortgage loan originator license, the individual must retake the test if at least 5 years have elapsed since the individual last held a valid mortgage loan originator license. Sec. 35. (1) The term of an initial mortgage loan originator license begins on the date that the application for the initial license is granted by the director and expires on December 31 of that year, unless the initial license was granted by the director between November 1 and December 31, in which case, the initial license expires on December 31 of the year following the year in which the initial license was granted by the director. (2) Except as otherwise provided in subsection (1), the director shall annually renew the license of a mortgage loan originator licensee if all of the following are met before the license expires: (a) The licensee continues to meet the requirements for licensure under section 29(1)(a) to (f). (b) The licensee has satisfied the annual continuing education requirements described in section 37. (c) The licensee has paid any fee required under section 15. (3) If a mortgage loan originator licensee does not satisfy the requirements of subsection (2) for the renewal of the license, the license expires. (4) The director may adopt procedures for the reinstatement of an expired mortgage loan originator license consistent with the standards established by the nationwide multistate licensing system and registry. Sec. 37. (1) To meet the annual continuing education requirement under section 35, a mortgage loan originator licensee must complete at least 8 hours of education approved under subsection (2), including , but not limited to, all of the following: (a) Three hours of federal law and regulation. (b) Two hours of ethics, including instruction on fraud, consumer protection, and fair lending practices. (c) Two hours of training related to lending standards for the nontraditional mortgage product marketplace. (2) Only continuing education courses reviewed and approved by the nationwide multistate licensing system and registry, based on reasonable standards, may be used to satisfy the requirement under subsection (1), and the review and approval of a continuing education course must include the review and approval of the course provider. (3) If approved by the nationwide multistate licensing system and registry, a continuing education course may be provided by the employer of the mortgage loan originator licensee, an entity that is affiliated with the mortgage loan originator licensee by an agency contract, or a subsidiary or affiliate of that employer or entity. (4) The continuing education may be offered in a classroom, online, or by any other means approved by the nationwide multistate licensing system and registry. (5) Both of the following apply to the continuing education requirements under this section: (a) Except as otherwise provided in subsection (9) and section 35, a mortgage loan originator licensee may receive credit for a continuing education course only in the year in which the course is taken. (b) A mortgage loan originator licensee may not take the same approved course in the same or successive years to meet the annual requirements for continuing education. (6) A mortgage loan originator licensee who is an approved instructor of an approved continuing education course may receive credit for the licensee's own annual continuing education requirement at the rate of 2 hours credit for every 1 hour taught. (7) If a person successfully completes any continuing education requirements described in subsection (1) that are approved by the nationwide multistate licensing system and registry for any state, the director must accept those hours of education as credit toward completion of the continuing education requirements. (8) If an unlicensed individual who formerly held a mortgage loan originator license applies for a new mortgage loan originator license, the individual must complete the continuing education requirements for the last year in which the license was held to be eligible for a new license. (9) The director may promulgate rules under the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, to establish a procedure by which an individual who meets the requirements of section 35(2)(a) and (c) may make up any deficiency in continuing education. Sec. 39. (1) A mortgage loan originator licensee shall be sponsored by a mortgage broker, mortgage lender, or mortgage servicer licensee and covered by a corporate surety bond that meets the requirements of section 19. (2) A mortgage loan originator licensee who does not meet the requirements of subsection (1) is automatically subject to a condition that the licensee may not originate a residential mortgage loan under this act and the licensee shall immediately cease originating residential mortgage loans and may not originate residential mortgage loans until the condition is removed by the director in accordance with section 19 . Sec. 41. (1) An individual who is a registered mortgage loan originator at the time of becoming employed by a person that is not a depository institution, a subsidiary of a depository institution that is owned and controlled by that depository institution and is regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration has temporary authority to act as a mortgage loan originator for the period described in subsection (2) without first obtaining a mortgage loan originator license if all of the following apply: (a) The mortgage loan originator is employed by a person that is licensed under this act or the consumer financial services act, 1988 PA 161, MCL 487.2051 to 487.2072. (b) The individual has not had an application for a mortgage loan originator license denied or a mortgage loan originator license revoked or suspended in this state or any other state. (c) The individual has not been subject to, or served with, a cease and desist order in this state or any other state, or under section 1514 of the secure and fair enforcement for mortgage licensing act of 2008, 12 USC 5113. (d) The individual has not been convicted of, or pled guilty or no contest to, a misdemeanor or felony that would preclude licensure under this act. (e) The individual has submitted an application for a mortgage loan originator license, has paid any fees required under section 15, and is covered by a corporate surety bond that meets the requirements of section 19. (f) The individual was registered in the nationwide multistate licensing system and registry as a mortgage loan originator during the year immediately preceding the date on which the individual submitted the application for a mortgage loan originator license. (g) The individual is not subject to a prohibition order issued by the director under section 127 or under a financial licensing act. (2) The period of temporary authority described in subsection (1) begins on the date that the individual submits the application for a mortgage loan originator license, pays any fee required under section 15, and is covered by a corporate surety bond that meets the requirements of section 19, and ends on the earliest of the following dates: (a) The date that the individual withdraws the application. (b) The date that the director denies, or issues a notice of intent to deny, the application. (c) The date that the director approves the application. (d) The date that is 120 days after the date that the individual submitted the application , if the application is listed in the nationwide multistate licensing system and registry as incomplete. (3) As used in this section, "state" means any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern Mariana Islands. Sec. 43. (1) An individual who is a mortgage loan originator licensed in another state has temporary authority to act as a mortgage loan originator in this state for the period described in subsection (2) without first obtaining a mortgage loan originator license under this act if all of the following apply: (a) The individual meets the requirements described in section 41(1)(a) to (g), as determined by the department. (b) The individual was licensed in another state during the 30-day period immediately preceding the date on which the individual submitted an application for a mortgage loan originator license under this act. (2) The period of temporary authority described in subsection (1) begins on the date that the individual submits an application for a mortgage loan originator license, pays any fee required under section 15, and is covered by a corporate surety bond that meets the requirements of section 19, and ends on the earliest of the following dates: (a) The date that the individual withdraws the application. (b) The date that the director denies, or issues a notice of intent to deny, the application. (c) The date that the director approves the application. (d) The date that is 120 days after the date that the individual submitted the application , if the application is listed