STAND. COM. REP. NO. 2849

Honolulu, Hawaii

RE:    H.B. No. 2501

       H.D. 1

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2012

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred H.B. No. 2501, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO MORTGAGE LOAN ORIGINATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to amend the Secure and Fair Enforcement for Mortgage Licensing Act, chapter 454F, Hawaii Revised Statutes, to reflect recent changes in federal law and adjust fees in consideration of new regulatory requirements.

     Your Committee received testimony in support of this measure from the Division of Financial Institutions of the Department of Commerce and Consumer Affairs and Hawaii Association of Mortgage Brokers.  Your Committee received testimony in opposition to this measure from the Hawaii Credit Union League.

     Your Committee finds that this measure adds fees for newly established regulatory services and adjusts fees for initial application and annual license renewals for mortgage loan originators, mortgage loan originator companies, and exempt sponsoring mortgage loan originator companies.  The fee structure for mortgage loan originator initial application and license renewal is the result of a compromise between the Division of Financial Institutions and interested parties affected by chapter 454F, Hawaii Revised Statutes.

     The Division of Financial Institutions testified that the provisions in this measure that increase the mortgage loan originator initial application and license renewal fees will generate approximately $66,000.

     Your Committee notes that there has been ongoing discussion about the effects this measure may have on sole proprietors who are licensed as a mortgage loan originator company and a mortgage loan originator.  Small mortgage loan originating companies in the State may be comprised of sole owners who must pay renewal fees for themselves and their company.  This measure establishes a one-time application fee for mortgage loan originators who are sole proprietors and exempts these individuals from annual license renewal fees.  However, according to the Division of Financial Institutions, the Nationwide Mortgage Licensing System collects fees for each state based on set parameters for mortgage loan originators, mortgage loan originator companies, branches, and exempt mortgage loan originating companies.  The Division indicated that while the Nationwide Mortgage Licensing System is not able to easily program special fees for states to charge for specialized licensees, such as sole proprietors, a fee adjustment could be possible if sole proprietors paid all required fees through the Nationwide Mortgage Licensing System then requested the State to reimburse any fees the Division chose to waive.

     If sole proprietors are reimbursed for the cost of the mortgage loan originator initial application and annual license renewal fees, the Division estimates a projected total loss of revenue of $23,000.  Taking into account all adjustments, including reimbursement of fees for sole proprietors, the Division estimates $43,000 of projected net additional revenue to be collected with the new fee structure.

     Your Committee has amended this measure by:

     (1)  Requiring the Division of Financial Institutions to reimburse every mortgage loan originator company that consists of a non-exempt single individual who is engaged in the business of a mortgage loan originator as a sole proprietorship for fees paid for the mortgage loan originator initial application and annual license renewal fees;

     (2)  Deleting language that would have established a one-time application fee for mortgage loan originators who are sole proprietorships and would have exempted these individuals from annual license renewal fees; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2501, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2501, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.

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

____________________________

ROSALYN H. BAKER, Chair