Report Title:
Residential Mortgages; Broker Regulations
Description:
Replaces existing provisions regulating mortgage brokers & solicitors with provisions that provides for more specialized regulation of residential mortgage brokers by the division of financial institutions rather than the professional & vocational licensing division. (SD1)
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THE SENATE |
S.B. NO. |
2279 |
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TWENTY-THIRD LEGISLATURE, 2006 |
S.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO MORTGAGE BROKERS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
"CHAPTER
MORTGAGE BROKERS
§ -1 Definitions. In this chapter, unless the context or subject matter otherwise requires:
"Applicant" means a person applying for a mortgage broker license.
"Commissioner" means the commissioner of financial institutions of this State.
"Employee" means an individual engaged in the service of a licensed mortgage broker for compensation or gain. An employee is subject to withholding, the Federal Income Contribution Act, and other lawful deductions by the licensed mortgage broker as a condition of employment and is subject to the right of the licensed mortgage broker to direct and control the actions of the employee.
"Institutional investor" means (1) banks, savings and loan institutions, savings banks, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit sharing trusts, any of the classes of persons permitted to qualify as foreign lenders under section 207-11, or other financial institutions or institutional buyers, whether acting for themselves or as fiduciaries; and (2) the United States or any foreign government, or any agency or corporate or other instrumentality of the United States, a foreign government, or political subdivision thereof.
"License" means a license issued under this chapter.
"Licensee" means a person licensed under this chapter.
"Mortgage broker" means a person not exempt under section -2 who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly makes, negotiates, acquires, or offers to make, negotiate, or acquire a residential mortgage loan on behalf of a borrower seeking a residential mortgage loan.
"Person" means an individual, partnership, corporation, association, or other organization.
"Residential mortgage loan" means a first mortgage loan on residential real property that will be used primarily for personal, family, or household use and primarily secured by a security interest on such residential real property.
§ -2 Exemptions. This chapter shall not apply to the following:
(1) Banks, trust companies, savings and loan institutions, savings banks, pension trusts, credit unions, insurance companies, financial services loan companies, or federally licensed small business investment companies, authorized under any law of this State or of the United States to do business in this State;
(2) A person making or acquiring a residential mortgage loan with one's own funds for one's own investment without intent to resell the residential mortgage loan;
(3) A person licensed to practice law in this State, not actively and principally engaged in the business of negotiating residential mortgage loans, when the person renders services in the course of the person's practice as an attorney;
(4) A person licensed as a real estate broker or salesperson in this State, not actively and principally engaged in the business of negotiating residential mortgage loans, when the person renders services in the course of the person's practice as a real estate broker or salesperson;
(5) An institutional investor negotiating, entering into, or performing under a residential mortgage loan purchase agreement for its portfolio, for subsequent resale to other institutional investors, or for placement of the residential mortgage loans into pools or packaging them into mortgage-backed securities. As used in this paragraph, "loan purchase agreement" means an agreement or arrangement under which a bank, savings and loan institution, credit union, financial services loan company, or other financial institution authorized to do business in this State agrees to sell residential mortgage loans or obtain funding therefor, with or without the transfer of servicing rights, to an institutional investor; and
(6) A foreign lender conducting business in accordance with part II of chapter 207.
§ -3 Prohibited acts. (a) No person required to be licensed under this chapter shall act, attempt to act, or hold oneself out as a mortgage broker without a license as required in this chapter. No person required to be licensed under this chapter who acts, attempts to act, or holds oneself out as a mortgage broker without a license shall charge or receive any commission, fee, bonus, salary, hourly wage, remuneration, compensation, or gain in connection with arranging for, negotiating, or selling a residential mortgage loan.
(b) It shall also be unlawful for any person required to be licensed under this chapter to:
(1) Provide or offer to provide any service requiring a license pursuant to this chapter unless the person has been issued the appropriate license or is exempt from licensing;
(2) Disburse the residential mortgage loan proceeds to a closing agent in any form other than, as applicable, direct deposit to a customer's account, wire, bank or certified check, attorney's check drawn on a trust account, or such other form as specifically authorized by applicable law;
(3) Disburse the proceeds of a residential mortgage loan without sufficient collected funds on hand at the time of the disbursement in the account upon which the funds are drawn;
(4) Fail to disburse funds in accordance with a residential mortgage loan commitment to make a residential mortgage loan that has been accepted by the borrower;
(5) Accept any fees at closing which were not disclosed as required by law;
(6) Retain third party fees at closing in excess of the actual cost of third party services;
(7) Require the borrower to be represented by a third party service provider except under the terms permitted by applicable federal law;
(8) Use any agreement or instrument in which blanks are left to be filled in after execution;
(9) Participate in any exclusive dealing or exclusive agency agreement with any borrower;
(10) Delay closing of any residential mortgage loan for the purpose of increasing interest, costs, fees, or charges payable by the borrower;
(11) Engage in unfair, deceptive, or fraudulent residential mortgage loan practices;
(12) Make payment of any kind, whether directly or indirectly, to any appraiser for the purpose of influencing the independent judgment of the appraiser with respect to the value of any real estate which is to be covered by a residential mortgage loan;
(13) Knowingly make to the borrower any misrepresentation or false promise likely to influence, persuade, or induce, or pursue a course of misrepresentation or false promises, through officers, directors, independent contractors, employees, partners, agents, and members, or through advertising, or otherwise;
(14) Knowingly misrepresent, circumvent, or conceal, through any subterfuge or device, any of the material facts or terms of a residential mortgage loan;
(15) Record a residential mortgage brokerage agreement or similar document without a judgment issued by a court of competent jurisdiction; or
(16) Make any untrue statement of a material fact in any document filed with the commissioner under this chapter or rules adopted thereunder, or to omit any material fact that is required to be stated in any document.
§ -4 Licensing requirements, scope of license. (a) No mortgage broker license shall be granted to any individual who is not eighteen years of age or older. If the applicant is a person other than an individual, no license shall be granted unless the applicant first registers to do business in this State with the business registration division of the department of commerce and consumer affairs.
If the applicant is an individual, the license entitles all employees of the licensed mortgage broker to engage in the mortgage broker business.
(b) If the applicant is a person other than an individual, the license issued to it entitles all officers, directors, employees, partners, and members of the licensed corporation, partnership, association, or other organization to engage in the business of mortgage brokering if one officer, director, employee, partner, or member is designated in the license as the individual responsible for the person licensed under this section. The mortgage broker shall be responsible for informing the commissioner, in writing, of any change in the designation of the responsible officer, director, employee, partner, or member of a mortgage broker or of changes in the licensed mortgage broker in charge of a branch office.
§ -5 Application, renewal. (a) Each application for and renewal of a license shall be made in writing on the forms and in the manner prescribed by the commissioner. In order to obtain and renew a license, the applicant must satisfy the following requirements:
(1) The applicant must have paid the fees as required by law;
(2) The applicant must have complied with section -7;
(3) The applicant, or in the case of an applicant that is not an individual, any of its officers, directors, employees, partners, or members, shall not have had a license issued under this chapter or any similar state statute suspended or revoked within five years of the filing of the present application;
(4) The applicant, or in the case of an applicant that is not an individual, any of its officers, directors, employees, partners, or members shall not have been convicted of a misdemeanor involving dishonesty or financial misconduct or a felony within seven years of the filing of the present application as determined in a criminal background investigation which the commissioner may request in accordance with section 846-2.7;
(5) The applicant, or in the case of an applicant that is not an individual, the designated officer, director, employee, partner, or member shall have at least two years of experience in financial transactions involving primary or subordinate residential mortgage loan financing as: (A) a mortgage broker; (B) a mortgage banker or responsible individual of a mortgage banking business; (C) a loan officer with responsibility primarily for loans secured by a lien on real estate; (D) a branch manager of a lender with responsibility primarily for loans secured by a lien on real estate; or (E) a mortgage broker with a mortgage broker or similar license from another state with licensing standards substantially similar to those in this State, as determined by the commissioner; and
(6) The applicant, or in the case of an applicant that is not an individual, its designated officer, director, employee, partner, or member shall have passed a written examination, the content of which shall be established by the commissioner.
(b) For the purposes of subsection (a), the commissioner shall permit the substitution of two years of experience as a licensed insurance producer under chapter 431 in place of the experience requirements set forth herein, provided that:
(1) The licensed insurance producer only arranges mortgage loans with one insured depository institution, as defined in 12 U.S.C. section 1813(c)(2), that is a wholly owned subsidiary of an insurer, or an affiliate of an insurer with which such insurance producer has an exclusive insurance agency relationship;
(2) The licensed insurance producer and the insured depository institution shall certify that the insurance producer only arranges mortgage loans with the insured depository institution and no other; and
(3) The license shall be terminated as of the date the insurance producer ceases to exclusively arrange mortgage loans with the insured depository institution.
(c) If the commissioner finds that any one of these conditions has not been met, the commissioner shall not issue or renew the license. In the event the commissioner orders denial of issuance or of renewal of a license, the order shall be made only pursuant to chapter 91.
(d) Each license must be renewed biennially and the renewal application shall be made on a form and in the manner prescribed by the commissioner.
§ -6 Inspection of license, principal place of business, branch office, change of address. (a) Upon request, the licensed mortgage broker or designated officer, director, employee, partner, or member shall make available for inspection the mortgage broker's license.
(b) Every licensed mortgage broker shall have and maintain a principal place of business in this State for the transaction of business. In the event the licensed mortgage broker maintains a branch office, the commissioner, upon application and payment of a fee by the licensed mortgage broker, shall issue a license for each branch office. The licensee shall designate a licensed mortgage broker to be in charge of each branch office.
(c) In the event that the location of the principal place of business or any branch office is changed, the licensed mortgage broker shall notify the commissioner of the change.
§ -7 Bond requirement, claims against bond. (a) Every person licensed as a mortgage broker shall deposit with the commissioner, prior to doing business, a bond in the amount of $50,000 executed by the licensed mortgage broker as principal and a surety company authorized to do business in this State as a surety. The bond shall be conditioned upon the faithful compliance of the licensed mortgage broker with this chapter and the rules adopted under this chapter. The bond shall run to the State for the benefit of any person injured by any violation of this chapter or the rules adopted under this chapter by the licensed mortgage broker or any officer, director, employee, partner, or member; provided that the aggregate liability of the surety shall not exceed the sum of the bond. The surety may cancel the bond by giving sixty days' written notice to the commissioner prior to the cancellation date of the bond and shall thereafter be relieved of any liability occurring after the effective date of cancellation. A license shall not be in effect at any time when the licensed mortgage broker's bond is not in full force and effect.
(b) The commissioner or any person injured by a violation of this chapter or rules adopted under this chapter, may bring an action against the surety bond of the licensed mortgage broker who committed the violation.
(c) The commissioner or any person who is damaged by the licensed mortgage broker's violation of this chapter or rules adopted under this chapter, may bring suit upon the surety bond in the circuit court in which jurisdiction over the licensed mortgage broker may be obtained. In the event valid claims against a bond exceed the amount of the bond, each claimant shall only be entitled to a pro rata amount, based on the amount of the claim as it is valid against the bond, without regard to the date of filing of any claim or action. In no event shall the surety bond provide payment for any trebled or punitive damages.
(d) The remedies provided under this section are cumulative and nonexclusive and do not affect any other remedy available at law.
§ -8 Fees, failure to pay fees. (a) All fees shall be established and adopted by the commissioner in accordance with chapter 91 and shall be deposited into the compliance resolution fund established pursuant to section 26-9(o).
(b) Failure of any licensed mortgage broker to pay the renewal fee on or before the due date shall constitute an automatic forfeiture of the license. The forfeited license may be restored; provided that application for restoration is made within six months of the forfeiture and a penalty fee is paid in addition to the delinquent license fee. A licensed mortgage broker who fails to restore a forfeited license as provided in this subsection shall apply as a new applicant.
§ -9 Continuing education requirement. (a) Prior to license renewal under this chapter, the licensed mortgage broker or the designated officer, director, employee, partner, or member must satisfactorily complete twelve hours of approved continuing education courses during the two-year period preceding the application for renewal. Each licensed mortgage broker must file a certificate of satisfactory completion of approved continuing education courses by the licensed mortgage broker no later than one month prior to the license expiration date. Failure to satisfy the continuing education requirement prior to one month before the license expiration date shall constitute an automatic forfeiture of the license. The forfeited license may be restored; provided that the continuing education requirement of this section is satisfied and application for restoration is made within six months of the forfeiture, and a penalty fee as may be prescribed by rule is paid in addition to the delinquent license fee. A licensed mortgage broker who fails to restore a forfeited license as provided in this subsection shall apply as a new applicant.
(b) In order to receive approval of a continuing education course, the course provider must file an application with the commissioner, which includes the following items:
(1) The title and a description of the proposed course;
(2) A description of the proposed course provider's experience in offering this type of course; and
(3) A complete listing of all instructors for the proposed course, including their qualifications and experience teaching courses similar to this course.
(c) The commissioner shall review the applications filed and determine whether to approve or deny the proposed course. If the commissioner approves the proposed course, the commissioner shall issue a certificate of approval that will be effective for two years from the date of its issuance.
(d) The commissioner shall keep a list of approved courses that will be provided to the public upon request.
§ -10 Record keeping requirements. (a) Each licensed mortgage broker shall maintain at its designated principal place of business in this State all books, accounts, records, and documents necessary to determine the licensed mortgage broker's compliance with this chapter. All such books, accounts, records, and documents shall be kept available for review and examination by the commissioner for a period of six years.
(b) The commissioner may authorize the maintenance of books, accounts, records, and documents at a location other than the designated principal place of business in this State, provided that the licensed mortgage broker ensures that the books, accounts, records, and documents shall be kept in a secure location under conditions which will not lead to the damage or destruction of the books, accounts, records, and documents. The commissioner may require the books, accounts, records, and documents to be produced and available at a reasonable and convenient location in this State.
(c) If the commissioner determines that it is more effective or cost-efficient to perform a review or examination of the books, accounts, records, and documents at the licensed mortgage broker's out-of-state location, the licensed mortgage broker shall pay the reasonable travel expenses and per diem for each member of the commissioner's staff who participates in the review.
(d) The commissioner may prescribe the minimum information to be shown in the books, accounts, records, and documents of a licensed mortgage broker so that these will enable the commissioner to determine the licensed mortgage broker's compliance with this chapter.
(e) Nothing in this section shall prohibit a licensed mortgage broker from the use of document imaging or other electronic means in maintaining books, accounts, records, and documents; provided that the licensed mortgage broker can ensure adequate safeguards against alteration, damage, or destruction of the books, accounts, records, and documents.
§ -11 Examinations, confidentiality. (a) The commissioner may conduct examinations of licensed mortgage brokers under this chapter for the purpose of assuring that the licensed mortgage broker is in compliance with all laws, rules, or orders issued by the commissioner.
(b) The commissioner shall have full access to the vaults, books, accounts, records, and documents of the licensed mortgage broker and may make any inquiries as may be necessary to ascertain the condition of the licensed mortgage broker. All officers, directors, employees, partners, and members of the licensed mortgage broker being examined shall cooperate fully with the commissioner and the commissioner's staff, and shall answer all inquiries and furnish all information pertaining to the same, to the best of their knowledge and ability.
(c) The commissioner may charge an examination fee based upon the cost per hour per examiner for all licensed mortgage brokers examined by the commissioner or the commissioner's staff. The hourly fee shall be $40 or such amount as the commissioner shall establish by rule pursuant to chapter 91. In addition to the examination fee, the commissioner may charge any licensed mortgage broker examined or investigated by the commissioner or the commissioner's staff additional amounts for travel, per diem, mileage, and other reasonable expenses incurred in connection with the examination or investigation.
(d) Notwithstanding chapter 92F, the examination process and related information and documents, including the reports of examination, are confidential and are not subject to discovery in civil and criminal lawsuits or disclosure under federal or state law.
§ -12 Written agreements. (a) For any transaction between a licensed mortgage broker and a borrower seeking a residential mortgage loan, the following requirements shall apply:
(1) A licensed mortgage broker shall comply with all provisions of the Real Estate Settlement Procedures Act (12 U.S.C. § 1261), the Truth in Lending Act (15 U.S.C. § 1601), the Equal Credit Opportunity Act( 15 U.S.C. § 1691), and any other applicable federal and state requirements, as those laws currently exist or as they may be amended.
(2) Any written commitment letter to make a residential mortgage loan with specified terms, including loan amount, interest rate, points, and payment terms, which is issued by a licensed mortgage broker and accepted by a borrower, must be honored by the licensed mortgage broker if the borrower has completely satisfied all of the conditions of the commitment in a timely manner and prior to the specified expiration date of the commitment.
(3) The mortgage broker shall provide the borrower with the following notice of the borrower's rights and obligations, not longer than one page in length and in twelve-point font, regarding the terms of the residential mortgage loan not later than within three business days of a borrower signing a completed residential mortgage loan application and before the borrower gives the licensed mortgage broker any consideration:
"CONSUMER CAUTION AND HOME OWNERSHIP COUNSELING NOTICE
If you obtain this 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, including your particular credit and financial circumstances, your earnings 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 on which lender or mortgage broker you select.
If you are uncertain about your rights and obligations under this agreement, you should consider consulting a qualified independent credit counselor or other experienced financial adviser regarding the rate, fees, and provisions of this mortgage loan before you proceed. For information on contacting a qualified credit counselor, call the United States Department of Housing and Urban Development for a list of counselors.
You are not required to complete any loan agreement merely because you have received these disclosures or have signed a loan application. If you proceed with this mortgage loan, you should also remember that you may face serious financial risks if you use this loan to pay off debts and then later incur significant new debts.
Property taxes and homeowner's insurance are your responsibility. Not all lenders provide escrow services for these payments. You should ask your lender about these services. Your payments on existing debts contribute to your credit ratings. You should not accept any advice to ignore your regular payments to your existing creditors."
(b) The licensed mortgage broker shall secure a signed acknowledgment of receipt by the borrower of a copy of the notice.
§ -13 Disclosure of mortgage brokerage fees. (a) Within three business days of receipt of a borrower's completed residential mortgage loan application by the licensed mortgage broker, and before the borrower gives the licensed mortgage broker any consideration, the licensed mortgage broker shall execute with the borrower a residential mortgage brokerage agreement. The residential mortgage brokerage agreement shall be in writing, and signed and dated by both the borrower and the licensed mortgage broker whose services to the borrower constitute mortgage brokering.
(b) The residential mortgage brokerage agreement shall include a clear and conspicuous statement:
(1) That, upon request, a copy shall be made available to the borrower or the borrower's attorney for review prior to signing;
(2) Explaining whether the licensed mortgage broker serves as an agent for the borrower;
(3) Explaining the nature of the licensed mortgage broker's compensation, including whether the licensed mortgage broker may receive compensation from the borrower, the lender, or both;
(4) Describing the services the licensed mortgage broker agrees to perform for the borrower;
(5) As to the conditions under which the borrower is obligated to pay the fees to the licensed mortgage broker; and
(6) That provides that if the licensed mortgage broker makes materially false or misleading statements or omissions in such agreement, the borrower may, upon written notice:
(A) Void the agreement;
(B) Recover moneys paid to the licensed mortgage broker for which no services have been performed; and
(C) Recover actual costs, including attorney fees, for enforcing the borrower's rights under the residential mortgage brokerage agreement.
(c) A copy of the fully executed residential mortgage brokerage agreement shall be given to the borrower by the licensed mortgage broker within three business days from the receipt of a borrower's completed residential mortgage loan application and before accepting any consideration from the borrower thereafter.
(d) The residential mortgage brokerage agreement shall be the only agreement between the borrower and licensed mortgage broker with respect to a single residential mortgage loan transaction prior to the acceptance of the residential mortgage loan commitment by the borrower; except that the licensed mortgage broker shall also provide to the borrower disclosure statements necessary to comply with the federal Truth-in-Lending Act (15 U.S.C. § 1601) and its associated regulations, the federal Real Estate Settlement Procedures Act (12 U.S.C. § 1261) and its associated regulations, and any other applicable federal and state requirements.
(e) A licensed mortgage broker shall not require a borrower to pay any fees or charges prior to the residential mortgage loan closing, except:
(1) Charges to be incurred by the licensed mortgage broker on behalf of the borrower for services from third parties necessary to process the residential mortgage loan application, such as credit reports and appraisals; and
(2) An application fee.
(f) A licensed mortgage broker shall not charge any fee that inures to the benefit of the licensed mortgage broker if it exceeds the fee disclosed on the most recent good faith estimate, when required by the federal Real Estate Settlement Procedures Act, unless:
(1) The need to charge the higher fee was not reasonably foreseeable at the time the good faith estimate was written; and
(2) The licensed mortgage broker has provided to the borrower, no less than three business days prior to the signing of the residential mortgage loan closing documents, a clear written explanation of the increase in the fee and the reason for charging a fee that exceeds that which was previously disclosed.
§ -14 Disclosure of loan terms. Prior to accepting any consideration from the borrower, a licensed mortgage broker shall disclose in writing to any applicant for a residential mortgage loan the following information:
(1) That the licensed mortgage broker may not make residential mortgage loans or issue residential mortgage loan commitments in the licensed mortgage broker's name, unless said licensed mortgage broker is the residential mortgage loan lender. The mortgage broker may issue a residential mortgage loan commitment and may furnish a lock-in of the interest rate and program on behalf of the residential mortgage loan lender when the licensed mortgage broker has obtained a written or electronically transmitted residential mortgage loan commitment or lock-in for the residential mortgage loan from the residential mortgage loan lender on behalf of the borrower for the residential mortgage loan. The residential mortgage loan commitment issued by the licensed mortgage broker to the borrower on behalf of the residential mortgage loan lender shall be in the same form and substance as issued by the residential mortgage loan lender and shall identify the residential mortgage loan lender by name.
(2) That the licensed mortgage broker cannot guarantee acceptance into any particular residential mortgage loan program or promise any specific residential mortgage loan terms or conditions.
(3) A good faith estimate of the fees to be collected, when required by the federal Real Estate Settlement Procedures Act, including a credit report fee, property appraisal fee, or any other third-party fee.
(4) The terms and conditions for obtaining a refund of fees or arranging for the transfer of third-party service work products to another residential mortgage loan lender or mortgage broker, if any. Any amount collected in excess of the actual cost shall be returned within thirty days after rejection, withdrawal, or closing.
§ -15 Establishment of trust account for borrower funds to pay third-party providers. Each licensed mortgage broker shall as trustee hold all funds received from borrowers seeking a residential mortgage loan for payment to third-party providers. The funds may not be used for the benefit of the licensed mortgage broker or any person not entitled to any benefit, except as may be expressly permitted by law. Each licensed mortgage broker shall deposit the funds in a trust account maintained by the licensed mortgage broker with a bank or other financial institution located and authorized to accept deposits or engage in the business of a trust company in this State. Each licensed mortgage broker is responsible for depositing, holding, disbursing, accounting for, and otherwise dealing with the funds.
§ -16 Suspension, revocation, denial, or condition of license, and refusal to renew, reinstate, or restore. (a) In addition to any other actions authorized by law, the commissioner may suspend, revoke, deny, condition in any manner, or refuse to renew, reinstate, or restore, any license issued under this chapter, or fine any person holding a license issued under this chapter, for any cause authorized by law, including any of the following acts or conduct on the part of a licensed mortgage broker or the applicant thereof:
(1) Failure to meet or maintain the conditions and requirements necessary to qualify for the granting of a license;
(2) Procuring or attempting to procure a license through fraud, misrepresentation, or deceit;
(3) Knowingly making any misrepresentation or false promise likely to influence, persuade, or induce, or pursuing a course of misrepresentation or false promises through officers, directors, independent contractors, employees, partners, agents, and members, or through advertising, or otherwise;
(4) Misrepresentation or concealment of any material fact with respect to any transaction resulting in injury to any party;
(5) Failure to disburse funds in accordance with an agreement;
(6) Failure to account or deliver to any person any personal property including money, funds, deposit, check, draft, mortgage, or other document or thing of value which has come into the person's hands and which is not the person's property or which the person is not in law or equity entitled to retain;
(7) Failure to place, within a reasonable time upon receipt, any money, funds, deposit, check, draft, or thing of value, entrusted to the licensed mortgage broker by any person dealing with the licensed mortgage broker as a broker, in escrow pursuant to a written agreement, or to deposit the money, funds deposit, check, or draft in a trust or escrow bank account maintained by the licensed mortgage broker with a bank or other financial institution located and authorized to accept deposits or engage in the business of a trust company in this State, wherein the funds shall be kept until disbursement thereof is authorized;
(8) Engaging in false, fraudulent, or deceptive advertising, or making untruthful or improbable statements;
(9) Being a habitual user of a narcotic, barbiturate, amphetamine, hallucinogen, opium, or cocaine, or other drugs or derivatives of a similar nature;
(10) Practicing the licensed profession of mortgage broker while impaired by alcohol, drugs, or mental instability;
(11) Aiding and abetting an unlicensed person to directly or indirectly perform activities requiring a license;
(12) Professional misconduct, incompetence, gross negligence, or manifest incapacity in the practice of the licensed profession of mortgage broker;
(13) Failure to maintain a record or history of competency, trustworthiness, fair dealing, and financial integrity;
(14) Conduct or practice contrary to recognized standards of ethics for the licensed profession of mortgage broker;
(15) Engaging in business under a past or present license issued pursuant to the licensing laws, in a manner causing injury to one or more members of the public;
(16) Failure to comply, observe, or adhere to any law in a manner such that the commissioner deems the applicant or holder to be an unfit or improper person to hold a license;
(17) Revocation, suspension, or other disciplinary action by another state or federal agency against a licensed mortgage broker or applicant for any reason provided by the licensing laws or this section;
(18) Criminal conviction, whether by nolo contendere or otherwise, of a penal crime directly related to the qualifications, functions, or duties of the licensed profession of mortgage broker;
(19) Failure to report in writing to the commissioner any disciplinary decision issued against the licensed mortgage broker or the applicant in another jurisdiction within thirty days of the disciplinary decision;
(20) Employing, utilizing, or attempting to employ or utilize at any time any person not licensed under the licensing laws where licensure is required; or
(21) Failure to comply with this chapter, the applicable licensing laws, or any rule or order made under the authority of this chapter.
(b) For a licensed mortgage broker other than an individual, it shall be sufficient cause for the suspension or revocation of the license if any officer, director, employee, partner, or member of the licensed corporation, partnership, association, or other organization has so acted as would be cause for suspension or revocation of the license of an individual.
(c) Orders for suspension or revocation shall be made only pursuant to chapter 91.
§ -17 Power to investigate and enjoin. (a) If the commissioner has reason to believe that a licensed mortgage broker or any person has violated this chapter, the rules adopted pursuant thereto, or an order of the commissioner or that any license issued under this chapter may be subject to suspension, revocation, or other sanction the commissioner may make an investigation as the commissioner deems necessary and may examine the books, accounts, records, and documents of any licensed mortgage broker or person. If the commissioner finds from satisfactory evidence that any licensed mortgage broker or person has violated this chapter, the commissioner may bring an action in the name of the State in any court of competent jurisdiction against the licensed mortgage broker or person to enjoin the licensed mortgage broker or person from continuing the violation or engaging therein or doing any act or acts in furtherance thereof.
(b) Any person having reason to believe that this chapter or the rules adopted pursuant thereto have been violated or that a license issued under this chapter is subject to suspension, revocation, or other sanction may file with the commissioner a written complaint setting forth the details of the alleged violation or grounds for suspension, revocation, or other sanction.
§ -18 Cease and desist orders, grounds for issuance. (a) Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any:
(1) Provision of this chapter;
(2) Rule adopted or order issued under this chapter; or
(3) Condition of an approval of request or application by the commissioner or a written agreement between such person and the commissioner,
the commissioner may, in the commissioner's discretion, issue a cease and desist order to enforce compliance with this chapter, with any rule adopted or order issued under this chapter, or with the conditions of such approval or written agreement. The commissioner shall have the discretion to include in the order an assessment of an administrative fine against any person who violates this chapter or who has knowingly violated a written agreement with, or a rule or order of, the commissioner made pursuant to this chapter.
(b) The commissioner may issue a cease and desist order to any mortgage broker, or any other person including the mortgage broker's officers, directors, employees, partners, or members, that the commissioner finds or has reasonable cause to believe:
(1) Is violating, has violated, or is about to violate this chapter or any rules adopted pursuant to this chapter;
(2) Is violating, has violated, or is about to violate any written condition imposed or order issued by the commissioner on the mortgage broker, its officers, directors, employees, partners, or members, or any condition of a written agreement between the mortgage broker, its officers, directors, employees, partners, or members and the commissioner;
(3) Is engaging, has engaged, or is about to engage in an illegal or unauthorized practice; or
(4) Is failing to maintain books, accounts, records and documents as required by this chapter.
§ -19 Cease and desist orders, procedure, hearing, enforcement. (a) The notice of charges and proposed cease and desist order shall be in writing and shall be served upon the mortgage broker at its principal office in this State and upon any other affected party wherever that person can be located and served by the commissioner. The notice of charges shall state the alleged violations or wrongful practices and a summary of the facts in support of the allegations. The notice shall be accompanied by a proposed order that states the commissioner's intent to require discontinuance of the violation or practice and the immediate compliance with all requirements of any applicable agreement, conditions of approval, order, or law. The proposed order may also direct affirmative action as may be necessary to correct the alleged violation or wrongful practice. The notice of charges shall set forth a time and place for a hearing to determine whether the proposed order shall be issued.
(b) Within twenty days after service of a notice of charges, unless an earlier date or later date is set by the commissioner upon request of the affected party, the commissioner or the commissioner’s delegate shall hold a hearing in accordance with chapter 91. If no appearance is made at the scheduled hearing by the party or its duly authorized representative, the party shall be deemed to have consented to the issuance of the cease and desist order and the commissioner may issue the order. Any cease and desist order issued after a hearing held in accordance with this subsection shall become effective after service upon the affected party and shall remain effective until modified or terminated by the commissioner. Any appeal of a cease and desist order shall be made to the circuit court in accordance with chapter 91.
(c) On or after the effective date of any cease and desist order, the commissioner may apply for enforcement of the order to the circuit court. The application may also contain a petition for such other relief or remedies as may be appropriate in the circumstances. The application shall be given preference over other cases pending in court, and shall in every way be expedited.
§ -20 Consent cease and desist orders. Any affected party may waive its rights to a hearing on any notice of charges by stipulating and consenting to the issuance of a cease and desist order. Any cease and desist order issued by consent shall be effective as of the date specified therein and shall remain effective until modified or terminated by the commissioner.
§ -21 Powers of commissioner. In addition to any other acts or conditions provided by law, the commissioner may:
(1) Adopt, amend, or repeal rules, issue declaratory rulings or informal non-binding interpretations, and conduct contested case proceedings pursuant to chapter 91;
(2) Grant, deny, forfeit, renew, reinstate, or restore the license of any mortgage broker;
(3) Revoke, suspend, or otherwise limit the license of any mortgage broker for any violation of the provisions in this chapter, or any rule or order of, or agreement with the commissioner;
(4) Develop requirements for licensure through rules;
(5) Investigate and conduct hearings regarding any violation of this chapter, and any rule or order of or agreement with the commissioner;
(6) Prepare, administer, and grade examinations; provided that the commissioner may contract with a testing agency to provide those services, and the commissioner may also reserve the right to modify, amend, change, or regrade the examination;
(7) Create fact-finding committees that may make recommendations to the commissioner for the commissioner’s deliberations;
(8) Request a criminal history record check of the applicant and any of its officers, directors, employees, partners, and members in accordance with Section 846-2.7;
(9) Contract with qualified persons including investigators who may be exempt from chapter 76 and who shall assist the commissioner in exercising the commissioner’s powers and duties; and
(10) Subpoena witnesses and documents, administer oaths, and receive affidavits and oral testimony, including telephonic communications, and do any and all things necessary or incidental to the exercise of the commissioner's power and duties, including the authority to conduct contested case proceedings under chapter 91.
§ -22 Summary suspension. (a) Notwithstanding any law to the contrary, the commissioner or delegate may cause the immediate suspension or restriction of a license, subject to subsequent notice and hearing or other adequate procedures, upon a specific determination that the failure to take such an action may result in: (1) an immediate and unreasonable threat to personal safety; or (2) fraud or misrepresentation upon consumers, and that, for the protection of the public from the possible consequences of practices, the licensed mortgage broker's license should be immediately suspended or restricted.
(b) The commissioner or delegate may order the summary suspension of the license for a period not to exceed twenty days. The order of suspension shall be served upon the licensed mortgage broker at the same time as the notice of hearing for disciplinary action, and the hearing shall be scheduled prior to the expiration of the order of suspension. The period of suspension prior to the hearing shall not be extended beyond twenty days except upon request of the licensed mortgage broker for a reasonable continuance to adequately prepare the licensed mortgage broker's defense. Any attempt by the licensed mortgage broker to continue the licensed activity while the license has been summarily suspended shall of itself be sufficient to warrant a permanent revocation of the license and shall subject the licensed mortgage broker to all penalties prescribed by this chapter, or any rule or order of the commissioner.
§ -23 Fees, commissions, and charges. The commissioner may also adopt rules concerning maximum brokerage fees, commissions, and charges on brokered residential mortgage loan transactions. The commissioner may also adopt rules concerning the full disclosure of the brokerage fees, commissions, and charges.
§ -Private right of action. Nothing in this chapter shall be construed to preclude any individual or entity who suffers loss as a result of a violation of this chapter from maintaining a civil action to recover damages and, as provided by statute, attorney fees.
§ -25 Penalty. Any person who violates any one provision of this chapter shall be subject to an administrative fine of not more than $5,000 for each violation."
SECTION 2. Chapter 454, Hawaii Revised Statutes, is repealed.
SECTION 3. This Act shall take effect on July 1, 2050.