WISCONSIN MORTGAGE LENDING REGULATIONS

Transcription

1 WISCONSIN MORTGAGE LENDING REGULATIONS

2 Wisconsin State Law Introduction This course is to cover statutes of Wisconsin law as related to Loan Originators for the State of Wisconsin. The statutes covered in this class are required to be learned to renew your Loan Originator license, and for the ethical practice of mortgage origination in Wisconsin. Even though you may have an understanding of the State Law, this is the first time that the State has required you to review the statutes that are covered in this class. This module addresses the following topics: Basic Information for Wisconsin Mortgage Origination Money & Rates of Interest as Covered in Chapter 138 of the Wisconsin Statutes Licensing Law-Mortgage Bankers, Brokers and Loan Originators as Covered in Chapter 224 Section III of the Wisconsin Statutes High Cost Lending-First Lien Real Estate as Covered in Chapter 428 of the Wisconsin Statutes Definitions & Applicability Requirements for Mortgage Banking Regulation as Covered in DFI-BKG 40 of the Wisconsin Statutes Fees & Registration for Mortgage Bankers, Brokers and Originators as Covered in DFI-BKG 41 of the Wisconsin Statutes Mortgage Banking Audit Reports & Trust Accounts as Covered in DFI- BKG 42 of the Wisconsin Statutes Ethical & Competent Practice for Mortgage Bankers, Originators & Solicitors as Covered in DFI-BKG 43 of the Wisconsin Statutes Mortgage Broker Agreements & Consumer Disclosure Statements as Covered in DFI-BKG 44 of the Wisconsin Statutes Responsible High Cost Mortgage Lending as Covered in DFI-BKG 46 of the Wisconsin Statutes Wisconsin Mortgage Lending Regulations 2

3 Key Terms Bona fide office of a Mortgage Banker or Mortgage Broker It means an office that meets the following requirements: Located in the state Regular hours of operation Accessible to the public Serves as an office for the transaction of business. Staffed by an individual registered (licensed) under this chapter who is an employee of the Mortgage Banker or Broker. Is not shared by any other business. Bridge Loan A loan with a maturity of less than 18 months which requires only payments of interest until the time that the unpaid balance is due. Business Day Monday through Friday, excluding holidays and weekends. For Right of Rescission purposes, Saturday also counts as a business day. Contract Rate The rate contracted to be paid from time to time on the principal of a loan. Covered Loan A high cost consumer credit mortgage loan transaction other than a HELOC or reverse mortgage in which all of the following apply: These types of loans are not readily available in the market. There are many lenders that will not fund a high cost loan. Customer is a natural person (Individual). Debt is for primary personal, family or household purposes. The loan is secured by a mortgage on or an equivalent security interest in residential real property which will be occupied by the borrower as the borrower s principal dwelling. The terms of the loan provide any of the following: o That the loan is considered a mortgage. o That the points and fees payable by the borrower at or before the close exceed six percent of the total loan amount. Wisconsin Mortgage Lending Regulations 3

4 o Total points and fees do not include reasonable affiliate or nonaffiliate fees paid to affiliates or non-affiliates of the lender for bona fide services. Customer An individual to whom a covered loan is offered or made. Customer does not include a surety, guarantor, co-signer, or endorser. Department The Department of Financial Institutions Depository Institution A bank, savings bank, savings and loan association or credit union which is authorized to do business in Wisconsin or that is federally chartered. Division The Division of Banking Finds a Loan Means to assist a loan applicant in locating a lender for the purpose of obtaining a loan for the applicant and to make arrangements for a loan applicant to obtain a loan. Interest of the Customer What is proper and prudent for the customer under the circumstances. Factors to be considered in determining the interest of the customer shall include: The terms of the refinanced loan. The borrower s economic and non-economic circumstances. The purpose of the refinanced loan. The cost of the refinanced loan. Any other similar factors. Investor A mortgagee or a land contract vendor Loan A loan secured by a first lien real estate mortgage on, or an equivalent security interest in, a one-to-four family dwelling which the borrower uses as his or her principal place of residence and which is made, refinanced, renewed, extended, or modified on or after November 1, 1981, but does not include a mobile home transaction. Wisconsin Mortgage Lending Regulations 4

5 Loan Administration A lender s processing of a loan. Includes review, underwriting and evaluation of the loan application, document processing, and preparation and administration of the loan closing, but does not include appraisals, inspections, surveys, credit reports or other activities incidental to loan origination and normally taking place outside the office of the lender or performed by third persons. Loan Application Fee A fee collected at the time of application to pay for services in advance. Typically the appraisal and/or credit report. Loan Commitment A written statement signed by a lender, setting forth the terms and conditions upon which the lender is obligated to make a particular mortgage loan to a particular applicant. Loan Commitment Fee A fee charged by a registrant to an applicant in exchange for a promise to make a loan pursuant to a loan commitment. Loan Originator A person who, on behalf of a Mortgage Banker or Broker, finds a loan or negotiates a land contract, loan, or commitment for a loan. Loan Solicitor A type of Loan Originator who has limited duties. Mortgage Banker Originates loans for itself, as payee on the note evidencing the loan, or for another person. Sells loans or interest in loans to another person. Services loans or land contracts or provides escrow services Mortgage Broker A person who on behalf of a loan applicant or an investor, and for commission, money or other thing of value, finds a loan or negotiates a land contract, loan or commitment for a loan, or engages in Table Funding. Natural Person Is a legal term that means an individual person only? Non-Resident Aliens Not a Wisconsin resident. The primary factors which determine the division's jurisdiction over nonresident persons who engage in activities are as follows: Wisconsin Mortgage Lending Regulations 5

6 Whether the person's activity relates to real property located in Wisconsin which serves or may serve as security for a loan or a land contract. Whether the activity occurs in Wisconsin or the activity involves a resident of Wisconsin. In this section "activity occurs in Wisconsin" includes, but is not limited to, telephone calls into Wisconsin and correspondence sent into Wisconsin. Negotiate To discuss, explain, or present the terms and conditions of a loan or a land contract with or to a loan applicant. "Negotiate" does not include making an underwriting decision on a loan or closing a loan. Net worth The total tangible assets less total liabilities of a person, or, if the person is a natural person, (individual) total tangible assets less total liabilities not including the person s principal residence and its furnishings and personal use vehicles. Originate To make an underwriting decision on a loan and to close a loan. Person Person is a legal term that can either mean a company, corporation, other legal entity, or an individual. Persons Related to with Respect to a Natural Person The spouse of the natural person, a brother, brother-in-law, sister, or sister-in-law of the natural person. An ancestor or lineal descendant, by blood or adoption, of the natural person or that person s spouse or any other relative, by blood, marriage or adoption, of the natural person or that person s spouse who shares the same home with the natural person. Pre-payment Penalties Pre-payment is when more than 20 percent of the original loan amount is paid within a 12 month period. Pre-payment penalties are only allowed during the first five years for a fixed rate loan. Adjustable Rate Mortgage s only allow prepayment penalties for the first three years. Maximum pre-payment penalties can not exceed 60 days of interest. Registration Means to have a license Regular Hours of Operation At least 20 hours each week that a registrant is available either by walk-in or by appointment to meet with customers. Wisconsin Mortgage Lending Regulations 6

7 Right of Rescission Right of Rescission is a three-day window starting on the date of closing during which the borrower may rescind the loan and only applies in a refinance of an owner occupied primary residence. This gives the borrower time to review the costs and loan terms after the closing. Servicer or Provider A person who services loans or land contracts or provides escrow services for another person and for commission, money, or other thing of value and who does not perform acts as a Mortgage Banker, Broker, or Loan Originator is required to register the sole proprietor-owner, the corporation, the limited liability company, or the partnership as a Mortgage Banker. Other officers, members, partners, or employees who do not use the title "Mortgage Banker" or "Loan Originator" and do not advertise or otherwise portray themselves as Mortgage Bankers or Loan Originators are not required to register. Services Mortgage Loans or Land Contracts The receipt of payments on a note or a land contract from the borrower or vendee and distribution of such payments in accordance with the terms of the note, land contract, or servicing agreement. Source of Financing for a Loan A person who provides funding for a loan must be registered as a Mortgage Banker if the person is in the business of originating loans directly with loan applicants. If the person who provides funding engages the services of a registered Mortgage Banker or other lending institution that is lawfully engaged in the practice of originating loans, then the person providing funding is not required to be registered as a Mortgage Banker. Table Funding A transaction in which a lender conducts a loan closing in the lender s name with funds provided by a third party and the lender assigns the loan to the third party within 24 hours of the loan closing. Trust Account An account in a depository institution in which funds are held for the benefit of a third party. A trust account may also be known as a custodial or escrow account. Wisconsin Mortgage Lending Regulations 7

8 Trust Funds All monies other than nonrefundable fees which a registrant receives on behalf of any person pending disbursement of the funds in accordance with instructions from the person on whose behalf the funds are deposited. Trust funds are not loan application fees that a registrant has disclosed to a loan applicant as being nonrefundable, even though the registrant may actually refund all or part of these fees later. Warehouse Line of Credit A line of credit to fund loans held for sale to other persons. Wisconsin Mortgage Lending Regulations 8

9 Table of Contents LESSON 1: BASIC INFORMATION FOR WISCONSIN MORTGAGE ORIGINATION Lesson Topics: Regulating Body Exam Administration License Information License Renewal LESSON 2: MONEY & RATES OF INTEREST AS COVERED IN CHAPTER 138 OF THE WISCONSIN STATUTES Lesson Topics: Chapter Residential Mortgage Loans Chapter Variable Rate Contracts Chapter Variable Rate Loans Chapter Penalties Chapter Reverse Mortgage Loans LESSON 3: LICENSING LAW - MORTGAGE BANKERS, BROKERS AND LOAN ORIGINATORS AS COVERED IN CHAPTER 224 SECTION III OF THE WISCONSIN STATUTES Lesson Topics: Definitions Registration Relationship between a Loan Originator and either a Mortgage Banker or Mortgage Broker Division s Review of Operations Record Keeping Requirements Continuing Education and Examination Records Trust Accounts Wisconsin Mortgage Lending Regulations 9

10 Discipline Fee Splitting Consumer Mortgage Brokerage Agreements and Consumer Disclosures Penalties and Cause of Action Limitation on Actions for Commissions and Other Compensation Compensation Presumed LESSON 4: HIGH COST LENDING - FIRST LIEN REAL ESTATE AS COVERED IN CHAPTER 428 OF THE WISCONSIN STATUTES Lesson Topics: Definitions Prohibitions on and Requirements of Lenders and Assignees False Statements Recommending Default Pre-payment Disclosures to Customers Exclusive State Regulation Authority Property Exempt From Debt Collection Administration and Penalties Parity for Federally Insured Depository Institutions LESSON 5: DEFINITIONS & APPLICABILITY REQUIREMENTS FOR MORTGAGE BANKING REGULATION AS COVERED IN DFI- BKG 40 OF THE WISCONSIN STATUTES Lesson Topics: DFI-Bkg Definitions DFI-Bkg Applicability Requirements DFI-Bkg Loan Solicitor Activities Wisconsin Mortgage Lending Regulations 10

11 LESSON 6: FEES & REGISTRATION FOR MORTGAGE BANKERS, BROKERS AND ORIGINATORS AS COVERED IN DFI- BKG 41 OF THE WISCONSIN STATUTES Lesson Topics: Chart of Fees and Charges for Licensees DFI-Bkg Registration and Renewal of Registration Fees DFI-Bkg Registration Periods LESSON 7: MORTGAGE BANKING AUDIT REPORTS & TRUST ACCOUNTS AS COVERED IN DFI-BKG 42 OF THE WISCONSIN STATUTES Lesson Topics: DFI-Bkg Annual Reports DFI-Bkg Trust Accounts LESSON 8: MORTGAGE BROKER AGREEMENTS & CONSUMER DISCLOSURE STATEMENTS AS COVERED IN DFI-BKG 44 OF THE WISCONSIN STATUTES Lesson Topics: DFI-Bkg Authority and Intent DFI-Bkg Improper, Fraudulent or Dishonest Dealing DFI-Bkg Incompetency to Act as a Mortgage Banker, Mortgage Broker, or Loan Originator LESSON 9: MORTGAGE BROKER AGREEMENTS & CONSUMER DISCLOSURE STATEMENTS AS COVERED IN DFI-BKG 44 OF THE WISCONSIN STATUTES Lesson Topics: DFI-Bkg Mortgage Broker Agreement DFI-Bkg Consumer Disclosure Statement Wisconsin Mortgage Lending Regulations 11

12 Lesson 10: RESPONSIBLE HIGH COST MORTGAGE LENDING AS COVERED IN DFI-BKG 46 OF THE WISCONSIN STATUTES Lesson Topics: DFI-Bkg Definitions DFI-Bkg Ability to Repay DFI-Bkg Disclosure Forms Wisconsin Mortgage Lending Regulations 12

13 Lesson 1: BASIC INFORMATION FOR WISCONSIN MORTGAGE ORIGINATION This lesson focuses on the following topics: Regulating Body Exam Administration License Information License Renewal Regulating Body Regulating body is the Wisconsin Department of Financial Institutions ( The Wisconsin Department of Financial Institutions mission is to ensure the safety and soundness of Wisconsin s financial institutions, to protect the consumers of financial services, and to facilitate economic growth. The agency regulates and licenses financial service providers who do business in Wisconsin. Exam Administration Exam administrator is Pearson Vue ( This is for originators to receive their initial license. Loan originators in the State of Wisconsin must pass this test to be licensed. You must be licensed in order to originate loans or to refer to yourself as a Loan Originator. License Information You can go to the Pulse Portal at to check on the status of your license, change your address, or check on your continuing education credits. Originators can renew their licenses at this portal by using a credit card. Companies with a Mortgage Bankers or Mortgage Brokers license can use the portal to obtain license numbers, renew their licenses, or check on the Originators that are licensed to their office. The portal also allows access to consumers to check if a party has an active license to originate loans. Wisconsin Mortgage Lending Regulations 13

14 License Renewal The license period is two years for all licenses. The expiration date will be the 1 st day of the month you originally received your license. You must renew your license prior to the expiration date. There is a grace period of 30 days from the date of expiration for late renewal, but an additional fee will be charged. To renew your Loan Originator s license, continuing education credits are required. You must have a total of 16 hours of continuing education, which includes two hours of new developments, or you must pass a test-out exam that is provided by Pearson Vue. Continuing Education credits must be entered into the Pulse Portal by the approved education provider PRIOR to your expiration date. You do not have a 30-day grace period to get your CE credits. If you do not have the CE credits or pass a test-out exam prior to your expiration date, then you have to start over. You would need to pass the initial exam and receive a new license. It is important to note that you cannot originate any loans or promote yourself as an Originator until you have the new license. There are two renewal options for licenses: Option 1: Licensees can renew by going to the Pulse Portal and entering credit card information. Once your payment and CE credits from the approved provider are verified, you will be renewed. When renewing a Mortgage Banker or Mortgage Broker license, credits are not required to renew these licenses. You simply enter credit card information into the Pulse Portal and you are renewed. Option 2: Renewing by mail. You go to and print off the renewal form for the appropriate license. Complete the form; send it in with a paper check and either a copy of your CE completion certificate or certification that you passed the Pearson Vue test-out exam. To renew a Mortgage Bankers or Mortgage Brokers license by mail, you have to print out the form and send in a paper check. This concludes lesson one. Wisconsin Mortgage Lending Regulations 14

15 Lesson 2: MONEY AND RATES OF INTEREST AS COVERED IN CHAPTER 138 OF THE WISCONSIN STATUTES This lesson focuses on the following topics: Chapter Residential Mortgage Loans Chapter Variable Rate Contracts Chapter Variable Rate Loans Chapter Penalties Chapter Reverse Mortgage Loans This chapter deals with information regarding interest rates, pre-payment penalties and Variable Rate Mortgages (ARM s). There are some people who felt that pre-payment penalties were not allowed in Wisconsin, and as you will see, that is not the case. Definitions Chapter Residential Mortgage Loans Contract Rate The rate contracted to be paid from time to time on the principal of a loan. Loan A loan secured by a first lien real estate mortgage on, or an equivalent security interest in, a one-to-four family dwelling which the borrower uses as his or her principal place of residence and which is made, refinanced, renewed, extended, or modified on or after Nov. 1, 1981, but does not include a mobile home transaction. Loan Administration A lender s processing of a loan. Includes review, underwriting, and evaluation of the loan application, document processing, and preparation and administration of the loan closing, but does not include appraisals, inspections, surveys, credit reports or other activities incidental to loan origination and normally taking place outside the office of the lender or performed by third persons. Person Person is a legal term that can either mean a company, corporation, other legal entity or an individual. Natural Person means an individual person only. Wisconsin Mortgage Lending Regulations 15

16 Persons Related to with Respect to a Natural Person The spouse of the natural person, a brother, brother-in-law, sister or sister-in-law of the natural person. An ancestor or lineal descendant, by blood or adoption, of the natural person or that person s spouse or any other relative, by blood, marriage or adoption, of the natural person or that person s spouse who shares the same home with the natural person. Pre- Payment Penalties Pre-payment is when more than 20 percent of the original loan amount is paid within a 12-month period. Pre-payment penalties are only allowed during the first five years for a fixed rate loan. Adjustable Rate Mortgages only allow prepayment penalties for the first three years. Maximum pre-payment penalties can not exceed 60 days of interest. A bank, credit union, savings bank, savings and loan association, or Mortgage Banker that originates a loan on or after Jan. 1, 1994, that requires an escrow to assure the payment of taxes or insurance shall pay interest on the outstanding principal balance of the escrow at the variable interest rate unless the escrow funds are held by a third party in a non-interest-bearing account. Chapter Variable Rate Contracts This section does not apply to loans or forbearances to corporations or limited liability companies. No loan may contain a variable interest rate clause unless the contract provides that: When an increase in the interest rate is permitted by a movement upward of a prescribed index, a decrease in the interest rate is also required by a downward movement of the prescribed index. Interest rates can only be adjusted once every six months, or twice a year. Interest rates cannot change by more than two percent per year. Decreases required by the downward movement of the prescribed index shall be mandatory. Increases permitted by the upward movement of the prescribed index shall be optional. The fact that a lender may not have invoked an increase, in whole or in part, shall not be deemed a waiver of the lender s right to invoke an increase at any time thereafter within the limits imposed by this section. Wisconsin Mortgage Lending Regulations 16

17 Changes in the interest rate shall only be made when the prescribed index changes a minimum of one-tenth of one percent. The borrower may prepay the loan, in whole or in part, within 90 days of notification of any increase in the rate of interest without a pre-payment charge. A disclosure must be provided to the borrower. Prior to execution of the loan documents of a loan containing a variable interest rate, the lender must in writing clearly and conspicuously disclose to the borrower all of the following: The loan contract contains a variable interest rate. The identification of the index used and the current base of the index. The pre-payment rights of the borrower upon receiving notice of any change. Notice of Interest Adjustment When a change in the interest rate is required or permitted by a movement in the prescribed index, the lender shall give notice to the borrower by mail, addressed to the borrower s last known post office address, not less than 30 days prior to any change in interest rate, which notice shall clearly and concisely disclose: The effective date of the interest rate change. The amount of the interest rate change. The change in the index which caused the interest rate change. The amount of the borrower s monthly principal and interest payments before and after the effective date of the change in the interest rate. Whether as a result of an increase in the interest rate, a lump sum payment may be necessary at the end of the loan term. The borrower s right to prepay the loan within 90 days after said notice without a pre-payment charge if the notice required an increase in the interest rate. Chapter Variable Rate Loans Approved index means any of the following: An index that is readily identifiable by the public that is available in a public format such as the Wall Street Journal. An index readily verifiable by borrowers and beyond the control of an individual lender and approved by: Wisconsin Mortgage Lending Regulations 17

18 o The office of credit unions, if the lender is a credit union. o The commissioner of insurance, if the lender is an insurance company. o The division of banking for all other lenders. A variable rate loan contract: May not be amortized longer than 40 years. Must use an approved index. May not increase more than one percent every six months. A lender may not include a pre-payment penalty in a variable rate loan using an approved index unless ALL of the following are satisfied: The lender provides the borrower with a written statement that the lender also makes variable rate loans without pre-payment penalties. Borrower must acknowledge in writing receipt of this statement at the time the loan is offered. The penalty is limited to pre-payment that is made within three years of the date of the loan. The pre-payment is not made in connection with the sale of a dwelling securing the loan. Negative Amortization Occurs when loan payments are not enough to cover the amount of interest due, resulting in an increased loan balance. The principal balance of a variable rate loan may be increased to implement an interest rate adjustment only if: Within 10 years after the loan is closed, and at least every five years thereafter, the payment amount is adjusted to a level that will allow the loan to be paid off at the then-existing interest rate over the remaining term of the loan. The payment amount shall be maintained at least at that level until subsequently adjusted, except that the payment amount shall be decreased to reflect any decrease in the interest rate. Wisconsin Mortgage Lending Regulations 18

19 Chapter Penalties Any lender who intentionally violates the statutes is liable to the borrower for all excess interest collected, plus interest thereon at the rate of five percent per year. In addition, the borrower may recover actual damages, including incidental and consequential damages, sustained by reason of the violation. Chapter Reverse Mortgage Loans Qualified Lender means a lender approved by the Federal Department of Housing and Urban Development (HUD) to enter into a loan insured by the federal government. Reverse mortgage loan means a loan or an agreement to lend that is secured by a first mortgage on the borrower s principal residence, is insured by the federal government, and requires repayment as specified in the loan agreement under any of the following conditions: All the borrowers have died. All the borrowers have sold the residence or conveyed title to the residence or all the borrowers have moved permanently from the residence. Reverse mortgage loan payments made to a borrower shall be treated as proceeds from a loan and not as income for the purpose of determining eligibility and benefits under means-tested programs of aid to individuals. (Social Security and Medicare) This concludes lesson two. Wisconsin Mortgage Lending Regulations 19

20 Lesson 3: LICENSING LAW - MORTGAGE BANKERS, BROKERS AND LOAN ORIGINATORS AS COVERED IN CHAPTER 224 SECTION III OF THE WISCONSIN STATUTES This lesson focuses on the following topics: Definitions Registration Relationship between a Loan Originator and either a Mortgage Banker or Mortgage Broker Division s Review of Operations Record Keeping Requirements Continuing Education and Examination Records Trust Accounts Discipline Fee Splitting Consumer Mortgage Brokerage Agreements and Consumer Disclosures Penalties and Cause of Action Limitation on Actions for Commissions and Other Compensation Compensation Presumed This chapter deals with the requirements and responsibilities of being licensed as a Mortgage Banker, Mortgage Broker or Loan Originator in the State of Wisconsin. Wisconsin does not have different levels of licensing. Even if you only intend to originate loans and never own a company you have to know the requirements and responsibilities of having a Mortgage Banker or Mortgage Broker license. A person with a license as a Mortgage Banker or Mortgage Broker cannot originate mortgage loans unless he also has a Loan Originator license. The Loan Originator license is only a license that gives one the right to originate loans. Wisconsin Mortgage Lending Regulations 20

21 Definitions Bona fide office of a Mortgage Banker or Mortgage Broker It means an office that meets the following requirements: Located in the state Regular hours of operation Accessible to the public Serves as an office for the transaction of business. Staffed by an individual registered (licensed) under this chapter who is an employee of the Mortgage Banker or Broker. Is not shared by any other business. This office contains all the records and books of the Mortgage Broker or Banker, or copies of the books and records, unless the Mortgage Banker or Broker has agreed to furnish copies of its books and records as soon as practicable, upon the request of the division. Division The Division of Banking Loan Originator A person who, on behalf of a Mortgage Banker or Broker, finds a loan or negotiates a land contract, loan or commitment for a loan. Loan Solicitor A type of Loan Originator who has limited duties. Mortgage Banker Originates loans for itself, as payee on the note evidencing the loan, or for another person. Sells loans or interest in loans to another person. Services loans or land contracts or provides escrow services. Mortgage Broker A person who on behalf of a loan applicant or an investor, and for commission, money or other thing of value, finds a loan or negotiates a land contract, loan or commitment for a loan or engages in Table Funding. Table Funding A transaction in which a lender conducts a loan closing in the lender s name with funds provided by a third party and the lender assigns the loan to the third party within 24 hours of the loan closing. Wisconsin Mortgage Lending Regulations 21

22 Mortgage Banker or Mortgage Broker do not include the following: Bank, Trust Company, Savings Bank, Savings and Loan, Insurance Company, Community Based Organization/Housing Authority, Credit Union, Licensed Attorney, employees of an exempt entity if performing required duties or any person who originates, sells, or services loans only with their own funds for their own investment and who has not done more than four loans during the previous 12 months Registration Use of the term Registration refers to having a license. Net worth The total tangible assets less total liabilities of a person, or, if the person is a natural person, (individual) total tangible assets less total liabilities not including the person s principal residence and its furnishings and personal use vehicles. Warehouse Line of Credit A line of credit to fund loans held for sale to other persons. Registration (licensing) is required. A person may not act as a Mortgage Banker, Mortgage Broker or Loan Originator, use the title Mortgage Banker, Mortgage Broker or Loan Originator, or advertise or otherwise portray himself or herself as a Mortgage Banker, Mortgage Broker or Loan Originator, unless the person has been issued a certificate of registration (license) from the division. A person desiring to act as a Mortgage Banker, Mortgage Broker, or Loan Originator shall apply for a certificate of registration to the division on forms prescribed by the division and shall pay the fee specified in the rules. An application shall satisfy all of the following: The applicant shall verify (sign) the application. If the applicant is a partnership, Limited Liability Company or corporation, the application shall be verified as follows: o By at least two partners of the partnership or by at least two officers of the corporation who have authority to verify the application or by at least two members of the limited liability company. o If the applicant is a partnership, limited liability company or corporation, the application shall identify each partner, member or officer who will use the title Mortgage Banker, Mortgage Broker, or Loan Originator. Wisconsin Mortgage Lending Regulations 22

23 Social Security and federal employer identification numbers. If an applicant who is an individual does not have a Social Security number, then they shall submit a statement made or subscribed under oath or affirmation to the division that the applicant does not have a Social Security number. The form of the statement shall be prescribed by the Department of Workforce Development. The department may not disclose any information to any person except as follows: The department may disclose information to the department of revenue for the sole purpose of requesting certifications. The department may disclose information to the department of workforce development in accordance with a memorandum of understanding. Any certificate of registration issued or renewed in reliance upon a false statement submitted by an applicant is invalid. Additional Requirements for Loan Originator Applicants Submit to the division a $ license fee. The application must include the name of the Mortgage Banker or Mortgage Broker who will employ the Loan Originator. Each applicant for registration as a Loan Originator, other than an applicant employed by an affiliate of a credit union, shall pass a written examination, approved by the Loan Originator Council, covering primary and subordinate mortgage financing transactions and the provisions of this subchapter. This exam is provided by Pearson Vue. The employer of each applicant for registration as a Loan Originator, other than an applicant employed by an affiliate of a credit union, shall obtain a criminal history search relating to the applicant from the records maintained by the Department of Justice and submit the results of the search to the division. Additional Requirements for Mortgage Banker Applicants Submit to the division a $1, license fee. With a Bona Fide Office One of the following items: An approval letter from HUD, GNMA, FNMA or FHLMC. $25,000 Commercial Surety Bond filed with the division. Wisconsin Mortgage Lending Regulations 23

24 $25,000 Line of Credit, Personal Bond or 3rd party guarantee filed with the division in a form acceptable to the division and secured by one of the following forms of security: o A Certificate of Deposit o A debt security acceptable to the division. o An irrevocable bank letter of credit issued by a financial institution that is authorized to do business in this state or that is federally chartered. Submit evidence that establishes to the division s satisfaction either of the following: o A minimum net worth of $25,000 and a warehouse line of credit of not less than $250,000. o A minimum net worth of $100,000 Without a Bona Fide Office ALL of the following items: $300,000 Commercial Surety Bond filed with the division. Submit evidence that establishes, to the division s satisfaction, a minimum net worth of $250,000. Additional requirements for Mortgage Broker Applicants Submit to the division a $ license fee. With a Bona Fide Office ONE of the following items: $10,000 Commercial Surety Bond filed with the division. $10,000 Line of Credit, Personal Bond or 3rd party guarantee filed with the division in a form acceptable to the division and secured by one of the following forms of security: o A Certificate of Deposit o A debt security acceptable to the division. o An irrevocable bank letter of credit issued by a financial institution that is authorized to do business in this state or that is federally chartered. Submit evidence that establishes, to the division s satisfaction, a minimum net worth of $100,000. Wisconsin Mortgage Lending Regulations 24

25 Without a Bona Fide Office ALL of the following items: $120,000 Commercial Surety Bond filed with the division. Submit evidence that establishes, to the division s satisfaction, a minimum net worth of $120,000. Release of Security Held by the Division The division or its agent shall hold security (Surety bond or other required documentation), the security shall remain in effect, and the division may not release it, until all of the following conditions are met: A period of 180 days has elapsed since at least one of the following: The date on which the division is given notice that the Mortgage Banker or Mortgage Broker is no longer acting as a Mortgage Banker or Mortgage Broker. The date on which the Mortgage Banker s or Mortgage Broker s registration expires or is revoked. The division determines that the Mortgage Banker or Mortgage Broker is no longer in business. The division determines that all claims of persons to whom the Mortgage Banker or Mortgage Broker provided services have been satisfied. Insufficient Security If the division finds that the surety bond, security, or insurance policy filed by a Mortgage Banker or Mortgage Broker has been cancelled without the required notice to the division, then the division may summarily suspend the Mortgage Banker s or Mortgage Broker s registration or license. A registration for a license shall be considered complete upon receipt of the following: Loan Originator An applicant will be registered as a Loan Originator upon the department s receipt of the following: Passing a written test A properly completed application for registration as a Loan Originator. A fee specified in the rules The applicant providing the employer information. Wisconsin Mortgage Lending Regulations 25

26 Mortgage Banker and Mortgage Broker An applicant will be registered as a Mortgage Banker or Mortgage Broker upon the department s receipt of the following: A properly completed application for registration as a Mortgage Banker or Broker. A fee specified in the rules. Satisfactory evidence of compliance with all requirements. Renewal of Registration A Loan Originator, Mortgage Banker, or Mortgage Broker may renew their registration by submitting to the division the following on or before the renewal date specified on their license: The renewal fee Additional renewal requirements for loan originators and loan solicitors include: Successfully complete at least 16 hours of continuing education for loan originators and 12 hours for loan solicitors or pass a test-out exam based on the educational subjects set by the division which is administered by an instructor approved by Pearson Vue. If the Loan Originator has changed employer s since his or her criminal history was last searched, then the applicant s current employer shall obtain a criminal history search relating to the applicant from the records maintained by the Department of Justice and submit the results of the search to the division. Denial of Application for Issuance or Renewal of Registration The division may not issue or renew a certificate of registration under this section if any of the following applies: Applicant fails to provide information required by the division. Information provided to the division indicates that the applicant has been convicted of a felony and, as a result of the conviction; the applicant represents an unreasonable risk of violating this subchapter, in the opinion of the division. The department of revenue has certified that the applicant is liable for delinquent taxes. The applicant for the issuance or renewal is an individual who fails to comply, after appropriate notice, with a subpoena or warrant issued by the department of workforce development or a county child support agency Wisconsin Mortgage Lending Regulations 26

27 related to paternity or child support proceedings or who is delinquent in making court-ordered payments of child or family support, maintenance, birth expenses, medical expenses, or other expenses related to the support of a child or former spouse as provided in a memorandum of understanding Relationship between a Loan Originator and either a Mortgage Banker or Mortgage Broker Responsibility for Loan Originators A Mortgage Banker or Mortgage Broker is responsible for, and shall supervise the actions of, a Loan Originator or any other person who otherwise acts on behalf of the Mortgage Banker or Broker as an employee. Restriction on Loan Originator If the division suspends or revokes a Mortgage Banker s or Mortgage Broker s certificate of registration (license), a Loan Originator may not act on behalf of that Mortgage Banker or Mortgage Broker during the period of suspension or revocation. Transfer by Loan Originator A registered Loan Originator may at any time apply, on forms prescribed and provided by the division, to transfer employment to another registered Mortgage Banker or Mortgage Broker. The Loan Originator will have to pay a $40 transfer fee Division s Review of Operations Each year on a date specified and on a form required by the division, a Mortgage Banker or Mortgage Broker shall submit to the division an annual report relating to the Mortgage Banker s or Mortgage Broker s operations during its most recently completed fiscal year. Each year no later than six months following the end of its most recently completed fiscal year, a Mortgage Banker or Mortgage Broker shall submit a copy of an audit of their operations during that fiscal year. An audit shall be conducted by an independent certified public accountant in accordance with generally accepted auditing standards. The financial statements in the audit report shall be prepared in accordance with generally accepted accounting principals. Wisconsin Mortgage Lending Regulations 27

28 The division may request that a Mortgage Banker or Mortgage Broker obtain an audit of their operations if the division has reason to believe that the Mortgage Banker or Mortgage Broker may not have sufficient financial resources to meet its obligation to its clients or investors or to other persons directly affected by the activities conducted by the Mortgage Banker or Mortgage Broker under the certificate of registration granted by the division. If the division requests an audit, then the Mortgage Banker or Mortgage Broker shall have the audit completed no later than 90 days after the date of the division s request. The Mortgage Banker or Mortgage Broker shall submit the audit report to the division no later than five days after the date on which the audit is completed. An audit shall be conducted by an independent certified public accountant in accordance with generally accepted auditing standards. The financial statements in the audit report shall be prepared in accordance with generally accepted accounting principals. The division may at any time on its own motion or upon complaint, examine the books of account, records, condition, and affairs of a Mortgage Banker, Mortgage Broker, or Loan Originator. The division shall prepare a report of each examination conducted. As part of the examination or preparation of the report, the division may examine under oath any of the members, officers, directors, agents, employees or customers of the Mortgage Banker, Mortgage Broker or Loan Originator. The division may require a Mortgage Banker, Mortgage Broker or Loan Originator who is examined to pay to the division a reasonable fee for the costs of conducting the examination. Examination reports and correspondence regarding the reports are confidential, except that the division may release examination reports and correspondence in connection with a disciplinary proceeding conducted by the division, a liquidation proceeding or a criminal investigation or proceeding. Wisconsin Mortgage Lending Regulations 28

29 Record Keeping Requirements Fee Record System A Broker or Banker must establish and maintain a record system showing all fees charged to a loan applicant, as well as the application and disposition of those fees. The Mortgage Broker or Mortgage Banker must maintain a log that contains: The application date Name of the applicant(s) Address of the property to be managed Disposition of the application and the reason for the disposition. The type of loan A Mortgage Banker or Mortgage Broker shall maintain for each mortgage loan application all of the following documents, if used by the Mortgage Banker or Mortgage Broker in connection with the mortgage loan application file: Completed loan application Copy of the loan commitment Federal loan disclosures Loan closing statement Copy of the Mortgage, Note or Bond A copy of the letter rejecting the application, if applicable. A copy of the appraisal report and credit report. Any other documents, records, or forms shown to or signed by the loan applicant. Period of Record Retention A Mortgage Banker or Mortgage Broker shall keep for at least 25 months copies of: All deposit receipts Cancelled checks Trust account records Other relevant documents or correspondence received or prepared by the Mortgage Banker or Mortgage Broker in connection with a loan or loan application. Wisconsin Mortgage Lending Regulations 29

30 The retention period begins on the date the loan is closed or, if the loan is not closed, the date of the loan application. If the loan is serviced by a Mortgage Banker, then the retention period commences on the date that the loan is paid in full. The Mortgage Banker or Mortgage Broker shall make the records available for inspection and copying by the division. If the records are not kept within this state, the Mortgage Banker or Mortgage Broker shall, upon request of the division, promptly send exact and complete copies of requested records to the division. Contents of Credit Report If a Mortgage Banker or Mortgage Broker charges a loan applicant a separate fee for a credit report, then the credit report shall consist of, at a minimum, a written statement indicating the name of the credit reporting agency that investigated the credit history of the applicant. Contents of the Appraisal Report If a Mortgage Banker or Mortgage Broker charges a loan applicant a separate fee for an appraisal report, then the appraisal report shall consist of, at a minimum, a written statement indicating the appraiser s opinion of the value of the property with the basis for that opinion and the name of the person who conducted the appraisal. If requested by a loan applicant, a Mortgage Banker or Mortgage Broker shall provide the loan applicant with a copy of any written appraisal report held by the Mortgage Banker or Mortgage Broker if the loan applicant paid a fee for the report and the report relates to residential real estate that the loan applicant owns or has agreed to purchase. A Mortgage Banker or Mortgage Broker is responsible for the preparation and correctness of all entries on forms, documents, and records which are under the Mortgage Banker s or Mortgage Broker s control and which are not dependent on information provided by the loan applicant or a 3rd party. A Mortgage Banker or Mortgage Broker shall maintain books and records in accordance with generally accepted accounting principles. Wisconsin Mortgage Lending Regulations 30

31 Continuing Education and Examination Records CE and Exam Records must be kept by the Originator and the approved provider for a period of four years. A person who administers examinations or provides education shall maintain records documenting attendance and examination performance for at least four years Trust Accounts A Mortgage Banker, Mortgage Broker, or Loan Originator shall deposit in one or more trust accounts all funds other than nonrefundable fees that it receives on behalf of any person, pending disbursement of the funds in accordance with instructions from the person on whose behalf the funds are deposited. A Mortgage Banker or Mortgage Broker shall maintain trust accounts in a bank, savings bank, savings and loan association, or credit union that is authorized to do business in this state or whose accounts are insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. The Mortgage Banker or Mortgage Broker shall notify the division of the location of its trust accounts Discipline Prohibited Conduct The division may deny an application, revoke, suspend, or limit the registration of a Mortgage Banker, Mortgage Broker, or Loan Originator, or may reprimand a Mortgage Banker, Mortgage Broker, or Loan Originator if it finds that they have: Made a material misstatement in an application for registration, or in the information furnished to the division. Made a substantial misrepresentation in the course of practice injurious to one or more of the parties to a transaction. Made a false promise that influences, persuades or induces a client to act in a way that is to his or her injury or damage. Pursued a continued and flagrant course of misrepresentation, or made false promises, whether directly or through agents or advertising. Wisconsin Mortgage Lending Regulations 31

32 Acted for more than one party in a transaction without the knowledge and consent of all parties on whose behalf the Mortgage Banker, Mortgage Broker, or Loan Originator is acting. Accepted a commission, money or other thing of value for performing an act as a Loan Originator from anyone other than their employer. As a Loan Originator, represented or attempted to represent a Mortgage Banker or Mortgage Broker other than their employer. Failed, within a reasonable time, to account for or remit any monies coming into the Mortgage Banker s, Mortgage Broker s, or Loan Originator s possession which belong to another person. Demonstrated a lack of competency to act as a Mortgage Banker, Mortgage Broker, or Loan Originator in a way which safeguards the interests of the public. Paid or offered to pay a commission, money or other thing of value to any person for acts or services in violation of this subchapter. Violated any provision of this subchapter or any federal or state statute, rule or regulation which relates to practice as a Mortgage Banker, Mortgage Broker, or Loan Originator. Engaged in conduct which violates a standard of professional behavior which, through professional experience, has become established for Mortgage Bankers, Mortgage Brokers, or Loan Originators. Engaged in conduct, whether of the same or a different character than specified elsewhere in this section, which constitutes improper, fraudulent, or dishonest dealing. In the course of practice as a Mortgage Banker, Mortgage Broker, or Loan Originator, except in relation to housing designed to meet the needs of elderly individuals, treated a person unequally solely because of sex, race, color, handicap, sexual orientation, religion, national origin, age, or ancestry, the person s lawful source of income, or the sex or marital status of the person maintaining the household. Intentionally encouraged or discouraged any person from purchasing or renting real estate on the basis of race. Because of the age or location of the property or the race of the loan applicant, rather than because of the credit worthiness of the applicant and the condition of the property securing the loan: o Refused to negotiate, to offer, or to attempt to negotiate a land contract, loan or commitment for a loan, or refused to find a loan. o Found a loan or negotiated a loan on terms less favorable than are usually offered. Wisconsin Mortgage Lending Regulations 32