Professions; Mortgage Brokers
Requires mortgage brokers to provide borrowers with a written summary of the borrower's rights and obligations not longer than one page in length and in 12-point font on consumer caution and home ownership counseling. Prohibits a continued course of misrepresentation that targets a particular type of borrower. Authorizes the department of commerce and consumer affairs to adopt rules regarding disclosures of a mortgage broker's marketing, commercial, and investment strategies. Increases penalties for violations of the laws. Raises the licensure bond from $15,000 to $50,000. Gives the commissioner adjudicatory powers.
HOUSE OF REPRESENTATIVES
TWENTY-SECOND LEGISLATURE, 2004
STATE OF HAWAII
A BILL FOR AN ACT
relating to mortgage brokers and solicitors.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 454-3, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:
"(c) Every person licensed as a mortgage broker shall deposit with the commissioner, prior to doing business, a bond in the amount of [
$15,000,] $50,000, executed by the mortgage broker as principal and a surety company authorized to do business in the State as a surety. The bond shall be conditioned upon the faithful compliance of the broker of this chapter. The bond shall run to the State for the benefit of any person injured by the wrongful act, default, fraud, or misrepresentation of the broker or the solicitors; 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' notice in writing to the commissioner and shall thereafter be relieved of any liability for any breach of condition occurring after the effective date of cancellation. A mortgage broker's license shall not be in effect at any time when the bond is not in full force and effect."
SECTION 2. Section 454-3.1, Hawaii Revised Statutes, is amended to read as follows:
§454-3.1[ ]] Written agreements. For any transaction between a mortgage broker or a mortgage solicitor and a borrower, the following requirements shall apply:
(1) A mortgage broker and a mortgage solicitor shall comply with all provisions of the Real Estate Settlement Procedures Act, the Truth in Lending Act, and the Equal Credit Opportunity Act, as those laws currently exist or as they may be amended.
(2) Any written commitment letter to make a mortgage loan with specified terms, including loan amount, interest rate, points, and payment terms, which is issued by a mortgage broker or solicitor and accepted by a borrower, must be honored by the mortgage broker or solicitor 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) No mortgage transaction shall be valid unless the mortgage broker or mortgage solicitor provides the borrower with the following notice (or substantially similar notice) of the borrower's rights and obligations, not longer than one page in length and in 12-point font, regarding the terms of the mortgage transaction not later than the time the notice is required under the notice provision contained in title 12 Code of Federal Regulation section 226.31(c) as amended from time to time:
"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's counseling hotline at 1-888-466-3487 or go to www.hud.gov/fha/sfh/hcc 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."
The lender or mortgage broker shall secure a signed acknowledgment of receipt by the obligor of a copy of the notice."
SECTION 3. Section 454-4, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:
"(a) The commissioner may suspend a license for any of the following acts or conduct of a licensee:
(1) Making a false promise tending to influence, persuade, or induce, or pursuing a course of misrepresentation or false promises through agents, solicitors, advertising, or otherwise;
(2) Misrepresentation or concealment of any material fact with respect to any transaction resulting in injury to any party;
(3) Failure to disburse funds in accordance with an agreement;
(4) Failure to account or deliver to any person any personal property such as money, fund, 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, and at the time which has been agreed upon, or is required by law, or, in the absence of a fixed time, upon demand of the person entitled to the accounting or delivery;
(5) Failure to place, within a reasonable time upon receipt, any money, fund, deposit, check, or draft, entrusted to the licensee by any person dealing with the licensee as a broker, in escrow pursuant to a written agreement, or to deposit the funds in a trust or escrow bank account maintained by the licensee with a bank located and doing business in the State, wherein the funds shall be kept until disbursement thereof is authorized; [
(6) Pursuing a continued course of misrepresentation that targets a particular type or category of borrowers; or
(6)] (7) Failure to comply with this chapter or any order or rule made under the authority of this chapter.
(b) The commissioner may revoke a license if the application for the license contains a material misstatement, or the licensee demonstrates by a course of conduct negligence or incompetence in performing any act for which the licensee is required to be licensed under this chapter[
, or the licensee for a second time is responsible for misconduct which warrants suspension under subsection (a)].
SECTION 4. Section 454-5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) If the commissioner has reason to believe that a licensee or any person has violated this chapter, or the rules adopted pursuant thereto, or that any license issued under this chapter may be subject to suspension or revocation, the commissioner may make an investigation as the commissioner deems necessary and may examine the books, records, accounts, and files of any licensee or person. [
If the commissioner finds from satisfactory evidence that any licensee 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 licensee or person to enjoin the licensee or person from continuing the violation or engaging therein or doing any act or acts in furtherance thereof.] In every case where it is proposed: to revoke or suspend the exercise of any license; fine any person holding a license; terminate any registration or certificate; or take any other action authorized by law, for any of the causes enumerated in section 454-4, the person concerned shall be given notice and hearing in conformity with chapter 91.
In all proceedings before it, the commissioner shall have the same powers as are possessed by circuit courts, respecting administering oaths, compelling the attendance of witnesses and the production of documentary evidence, and examining witnesses. In cases of disobedience by any person of any order of the commissioner, or of any subpoena issued by the commissioner, or the refusal of any witness to testify to any matter to which the witness may be questioned lawfully, any circuit judge, on application by the commissioner, shall compel obedience as in the case of disobedience of the requirements of a subpoena issued by a circuit court or a refusal to testify therein."
SECTION 5. Section 454-6, Hawaii Revised Statutes, is amended to read as follows:
"§454-6 Power of commissioner. The commissioner may adopt rules pursuant to chapter 91, as amended, as the commissioner deems necessary for the administration of this chapter. The rules shall include, but not be limited to the following:
(2) Solicitation; [
(3) Specifications as to the forms and procedures to be used in the making of any mortgage loan[
(4) Full disclosures with regard to the investment, commercial, and marketing strategies of licensees; provided that the commissioner shall establish strict policies and guidelines to prevent the disclosure of any proprietary information."
SECTION 6. Section 454-8, Hawaii Revised Statutes, is amended to read as follows:
"§454-8 Penalty, contracts void. Violation of this chapter shall be punishable by a fine of not more than [
$1,000] $2,000 per occurrence or imprisonment of not more than one year, or both. Any contract entered into by any person with any unlicensed mortgage broker or solicitor shall be void and unenforceable."
SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.
SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 9. This Act shall take effect upon its approval.