STAND

STAND. COM. REP. 2342

Honolulu, Hawaii

, 2004

RE: S.B. No. 3145

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 3145 entitled:

"A BILL FOR AN ACT RELATING TO LICENSING OF MORTGAGE BROKERS AND SOLICITORS,"

begs leave to report as follows:

The purpose of this measure is to enhance consumer protection in the area of mortgage financing by strengthening the licensing requirements for mortgage brokers and solicitors and the enforcement powers of the Department of Commerce and Consumer Affairs (DCCA).

The Hawaii Association of Mortgage Brokers testified in support of this measure. DCCA, State Farm Insurance Companies, Hawaii Financial Services Association, American Financial Services Association, Ameriquest Mortgage Company, Hawaii Credit Union League, Verizon, and Hawaii Bankers Association presented comments on the measure. The Hawaii Association of Realtors opposed the measure.

Your Committee finds that buying or refinancing a home is one of the most costly and complex consumer transactions and, therefore, it is important that the State ensure that mortgage originators are appropriately licensed and regulated. This measure strengthens and clarifies the standards for licensure as a mortgage broker or solicitor by, among other things:

(1) Requiring the passage of an examination as a condition of license issuance and the completion of continuing education courses as a condition of license renewal;

(2) Establishing requirements for advertising;

(3) Clarifying the activities undertaken by mortgage brokers and the license exemption for realtors;

(4) Increasing the bonding requirement from $15,000 to $50,000 and establishing a right of action for recovery on a bond;

(5) Requiring license applicants to certify that they have no convictions for fraud, embezzlement, misrepresentation, or theft;

(6) Authorizing DCCA to fine a licensee and condition the use of a license; and

(7) Authorizing the imposition of fines for each occurrence of a licensing violation.

Your Committee has amended this measure by:

(1) Requiring that a branch office advertisement include the parent company name in prominent and conspicuous type, rather than in twelve-point type;

(2) Deleting the requirement that advertising publishers refuse advertisements from unlicensed mortgage brokers and solicitors;

(3) Requiring that continuing education include instruction on relevant federal law;

(4) Revising the proposed definition of "mortgage broker" to avoid the inclusion of financial counselors;

(5) Deleting the proposed modification to the realtor exemption;

(6) Establishing license forfeiture requirements;

(7) Providing that, for licensing purposes, experience as a licensed insurance producer arranging mortgage loans solely with a single insured depository institution that is a subsidiary or affiliate of the insurer with whom the producer has an exclusive agency relationship, qualifies as experience equivalent to primary or subordinate mortgage financing;

(8) Clarifying that the misconduct of a licensee's employee, rather than the licensee's employer, may subject the licensee's license to suspension or revocation;

(9) Clarifying that "each violation" of the licensing law is subject to a $1,000 fine, rather than providing for a maximum fine of $1,000 "per occurrence", since the latter may be construed to establish a limit on the amount of fines that may be assessed based on a single incident; and

(10) Making technical, nonsubtantive amendments for purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 3145, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 3145, S.D. 1, and be referred to the Committee on Judiciary and Hawaiian Affairs.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection and Housing,

		____________________________ RON MENOR, Chair