AB 678

Under current law, with certain exceptions, a person may not engage in

business as, or otherwise act as, a mortgage banker, mortgage broker, or mortgage

loan originator unless the person is licensed as such with the Department of

Financial Institutions (DFI). A mortgage banker is, with certain exceptions, a

person who originates residential mortgage loans (loans) for itself or for another

person; sells loans or interests in loans to another person; or services loans or

provides escrow services. A mortgage broker is, with certain exceptions, a person

who, on behalf of a loan applicant or an investor and for commission or other

compensation, finds a loan or negotiates a loan or loan commitment. A mortgage loan

originator is, with certain exceptions, an individual who takes a loan application or

offers or negotiates terms of a loan for compensation or gain. State and federally

chartered financial institutions (depository institutions) are not mortgage bankers

or mortgage brokers and are not required to be licensed as such. Beginning on

January 1, 2010, provisions of the federal Secure and Fair Enforcement for Mortgage

Licensing Act of 2008 were adopted into state law, including provisions requiring

that certain state licensing and registration functions be conducted through the

Nationwide Mortgage Licensing System and Registry (NMLSR).

This bill modifies the definitions of mortgage loan originator, mortgage broker,

and mortgage banker. For purposes of the definition of mortgage loan originator, the

bill specifies circumstances under which an individual is considered to offer or

negotiate terms of a loan. Current law includes provisions that create exceptions to

the definition of mortgage loan originator and provisions that exempt a mortgage

loan originator from regulation. This bill eliminates exceptions to the definition of

mortgage loan originator and recreates them as licensing exemptions. The bill also

modifies certain of these exemptions and creates new ones, including for certain

employees of a government agency, housing finance agency, or bona fide nonprofit

organization. Also under the bill, an individual must be licensed as a mortgage loan

originator only if the individual regularly engages in business as a mortgage loan

originator, with the term "regularly engage" defined in the bill.

The bill recreates the definition of mortgage broker to mean a person who, for

compensation or gain or in the expectation of compensation or gain, does any of the

following but does not make an underwriting decision or close a loan: 1) assists a

person in obtaining or applying to obtain a loan; 2) holds oneself out as being able to

assist a person in obtaining or applying to obtain a loan; or 3) engages in table

funding. Current law provisions that are exceptions to the definition of mortgage

broker and mortgage banker are recreated in the bill as exemptions from regulation

and the bill also creates new exemptions, including for a government agency, housing

finance agency, or bona fide nonprofit organization or a mortgage banker with

limited transactions each year.

Under current law, DFI may not issue a mortgage loan originator license to an