SB 441

Under current law, a person may not act as a mortgage banker, mortgage

broker, or mortgage loan originator unless the person is licensed as such with the

Division of Banking in the Department of Financial Institutions (division). 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 are not mortgage

bankers or mortgage brokers. 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) developed and maintained by the

Conference of State Bank Supervisors and the American Association of Residential

Mortgage Regulators.

Current law requires each mortgage banker, mortgage broker, and mortgage

loan originator to annually submit to the NMLSR, by the date and in the form

required by the NMLSR, an annual report of condition, which must contain any

information required by the NMLSR. In addition, no later than six months after the

end of a fiscal year, each mortgage banker or mortgage broker must annually submit

a copy of an audit of the mortgage banker's or mortgage broker's operations during

the prior fiscal year. The audit must be conducted by an independent certified public

accountant (CPA) in accordance with generally accepted auditing standards. The

financial statements in the audit report must be prepared in accordance with

generally accepted accounting principles (GAAP). The division may also request a

mortgage banker or mortgage broker to obtain an audit of the mortgage banker's or

mortgage broker's operations if the division has reason to believe that the mortgage

banker or mortgage broker may not have sufficient financial resources to meet its

obligations.

This bill eliminates the annual audit requirement for a mortgage broker that

employed five or fewer employees and had less than $750,000 in gross revenues in

the prior fiscal year (small mortgage broker). The bill instead requires that a small

mortgage broker annually submit a prepared financial statement of the small

mortgage broker's operations for the prior fiscal year. This financial statement must

be prepared by an independent CPA in accordance with GAAP. An officer of the small

mortgage broker must also attest in writing and certify that the financial statement

is complete and accurate.