Chapter 36 Oregon Laws 1999

Session Law

AN ACT

SB 44

Relating to mortgages; creating new provisions; and amending ORS 59.840, 59.845 and 59.850.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 59.840 is amended to read:

59.840. As used in ORS 59.840 to 59.965:

(1) "Director" means the Director of the Department of Consumer and Business Services.

(2) "Fraud," "deceit" and "defraud" are not limited to common-law deceit.

(3) "License" means a license issued to a mortgage banker or mortgage broker under ORS 59.840 to 59.965.

(4) "Mortgage banker":

(a) Means any person who for compensation or in the expectation of compensation:

(A) Either directly or indirectly makes, negotiates or offers to make or negotiate a mortgage banking loan or a mortgage loan; and

(B) Services or sells a mortgage banking loan.

(b) Does not include:

(A) A financial institution, as defined in ORS 706.008.

(B) A bank holding company, as defined in ORS 706.008, holding an institution described in subparagraph (A) of this paragraph; a savings and loan holding company as defined in section 408 of the National Housing Act, 12 U.S.C. 1730a (1982), holding an association described in subparagraph (A) of this paragraph; the subsidiaries and affiliates of the bank holding company or savings and loan holding company; or subsidiaries and affiliates of institutions described in subparagraph (A) of this paragraph, provided that the appropriate statutory regulatory authority is exercising control over or is regulating or supervising the persons listed in this subparagraph in their mortgage banking activities in accordance with the purposes of ORS 59.840 to 59.965.

(C) A person who makes a loan secured by an interest in real estate with the person's own moneys, for the person's own investment and who is not engaged in the business of making loans secured by an interest in real estate.

(D) An attorney licensed in this state who negotiates mortgage banking loans or mortgage loans in the ordinary course of business, unless the business of negotiating mortgage banking loans or mortgage loans constitutes substantially all of the attorney's professional activity.

(E) A person who, as seller of real property, receives one or more mortgages or deeds of trust as security for a separate money obligation.

(F) An agency of any state or of the United States.

(G) A person who receives a mortgage or deed of trust on real property as security for an obligation payable on an installment or deferred payment basis and arising out of materials furnished or services rendered in the improvement of that real property or any lien created without the consent of the owner of the real property.

(H) A person who funds a mortgage banking loan or mortgage loan which has been originated and processed by a licensee or by an exempt person and who does not maintain a place of business in this state in connection with funding mortgage banking loans or mortgage loans, does not directly or indirectly solicit borrowers in this state for the purpose of making mortgage banking loans or mortgage loans and does not participate in the negotiation of mortgage banking loans or mortgage loans. For the purpose of this subparagraph, "negotiation of mortgage banking loans or mortgage loans" does not include setting the terms under which a person may buy or fund a mortgage banking loan or a mortgage loan originated by a licensee or exempt person.

(I) A nonprofit federally tax exempt corporation certified by the United States Small Business Administration and organized to promote economic development within this state whose primary activity consists of providing financing for business expansion.

(J) A licensee licensed under ORS chapter 725 or a mortgage broker.

(K) A retirement or pension fund.

(L) An insurer as defined in ORS 731.106.

(M) A court appointed fiduciary.

(N) Any other person designated by rule or order of the director.

(5) "Mortgage banking loan" means a loan, extension of credit or a retail sales contract that is funded exclusively from the mortgage banker's own resources, which is directly or indirectly secured by a mortgage or deed of trust or any lien interest on real estate [in a residential mortgage transaction] and which is created with the consent of the owner of the real property. For purposes of this subsection, "own resources" means any of the following:

(a) Cash, corporate capital, warehouse credit lines at financial institutions defined in ORS 706.008 or other sources that are liability items of the mortgage banker's financial statements for which its assets are pledged;

(b) Correspondent contracts between the mortgage banker and a bank, savings bank, trust company, savings and loan association, credit union, profit sharing or pension trust, a licensee under ORS chapter 725 or an insurance company; or

(c) The mortgage banker's affiliates' cash, corporate capital, warehouse credit lines at financial institutions defined in ORS 706.008 or other sources that are liability items on the affiliates' financial statements for which the affiliates' assets are pledged. As used in this paragraph, "affiliates" means entities that, directly or indirectly, through one or more intermediaries controls, are controlled by or are under common control with the entity specified.

(6) "Mortgage broker":

(a) Means a person who:

(A) Engages all or part of the time, for the account of others or for the person's own account, in the business of selling real estate paper whether as issuer, agent or principal to persons other than persons enumerated in ORS 59.035 (4);

(B) Engages all or part of the time, for the account of others or for the person's own account, in the business of accepting funds from one or more persons other than persons enumerated in ORS 59.035 (4) for investment in real estate paper; or

(C) For compensation, or in the expectation of compensation, either directly or indirectly makes, negotiates or offers to make or negotiate a mortgage loan.

(b) Does not include:

(A) A financial institution, as defined in ORS 706.008.

(B) A bank holding company, as defined in ORS 706.008, holding an institution described in subparagraph (A) of this paragraph; a savings and loan holding company as defined in section 408 of the National Housing Act, 12 U.S.C. 1730a (1982), holding an association described in subparagraph (A) of this paragraph; the subsidiaries and affiliates of the bank holding company or savings and loan holding company; or subsidiaries and affiliates of institutions described in subparagraph (A) of this paragraph, provided that the appropriate statutory regulatory authority is exercising control over or is regulating or supervising the persons listed in this subparagraph in their mortgage brokering activities in accordance with the purposes of ORS 59.840 to 59.965.

(C) A person who purchases real property and issues an obligation to finance the transaction to the seller incidentally to the sale.

(D) A real estate licensee as defined in ORS 696.010 who performs services solely incidental to the practice of professional real estate activity as defined in ORS 696.010, unless the real estate licensee performs the functions of a mortgage banker or a mortgage broker as defined in this section.

(E) A person licensed under the provisions of ORS chapter 725 or a mortgage banker.

(F) A person who makes a loan secured by an interest in real estate with the person's own moneys, for the person's own investment and who is not engaged in the business of making loans secured by an interest in real estate.

(G) An attorney licensed in this state who negotiates mortgage loans in the ordinary course of business, unless the business of negotiating mortgage loans constitutes substantially all of the attorney's professional activity.

(H) A person who, as seller of real property, receives one or more mortgages or deeds of trust as security for a separate money obligation.

(I) An agency of any state or of the United States.

(J) A person who receives a mortgage or deed of trust on real property as security for an obligation payable on an installment or deferred payment basis and arising out of materials furnished or services rendered in the improvement of that real property or any lien created without the consent of the owner of the real property.

(K) A person who funds a mortgage loan which has been originated and processed by a licensee or by an exempt person and who does not maintain a place of business in this state in connection with funding mortgage loans, does not directly or indirectly solicit borrowers in this state for the purpose of making mortgage loans and does not participate in the negotiation of mortgage loans. For the purpose of this subparagraph, "negotiation of mortgage loans" does not include setting the terms under which a person may buy or fund a mortgage loan originated by a licensee or exempt person.

(L) A nonprofit federally tax exempt corporation certified by the United States Small Business Administration and organized to promote economic development within this state whose primary activity consists of providing financing for business expansion.

(M) A person licensed under ORS 822.020 who provides services customarily associated with the retail sales of manufactured dwellings, including communication of generally available information regarding mortgage loans, unless:

(i) The person receives from a purchaser a fee or commission as a mortgage broker or mortgage banker that is disclosed in the sales contract, purchase agreement or applicable federal documents;

(ii) For the benefit of a potential purchaser, the person completes a loan application form or other document that is part of a mortgage banking loan and completes a good faith estimate under the federal Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.);

(iii) The person solicits or receives credit information from a prospective purchaser for the purpose of making credit decisions; or

(iv) The person negotiates with a potential purchaser the terms of a mortgage loan including but not limited to points, interest rates, length of loan or other loan conditions.

(N) Any other person designated by rule or order of the director.

(7) "Mortgage loan" means a loan, extension of credit or retail sales contract, other than a mortgage banking loan, secured by a mortgage or deed of trust or any lien interest on real estate [in a residential mortgage transaction] that is created with the consent of the owner of the real estate.

(8) "Residential mortgage transaction" means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in [residential property, including individual units of condominiums and cooperatives, principally designed for the occupancy of one to four residents] property upon which four or fewer residential dwelling units are planned or situated, including but not limited to individual units or condominiums and cooperatives. As used in this subsection, "residential dwelling unit" means an improvement designed for residential occupancy.

SECTION 2. ORS 59.845 is amended to read:

59.845. (1) It is unlawful for any person to [transact business] engage in residential mortgage transactions in this state as a mortgage banker or mortgage broker unless the person is licensed under ORS 59.840 to 59.965. A person who is a mortgage banker or mortgage broker under ORS 59.840, but who does not engage in residential mortgage transactions in this state, is not required to obtain a license under ORS 59.840 to 59.965.

(2) For purposes of this section, a person ["transacts business] "engages in residential mortgage transactions in this state" when any act constituting the business of a mortgage banker or mortgage broker and involving a residential mortgage transaction originates from this state or is directed to and received in this state or when the real estate that is the subject of the activities of the mortgage banker or mortgage broker is located in this state.

SECTION 3. ORS 59.850 is amended to read:

59.850. (1) The Director of the Department of Consumer and Business Services by rule shall establish procedures for licensing mortgage bankers or mortgage brokers. The director may coordinate licensing with any national registration or licensing system.

(2) An applicant for a license as a mortgage banker or mortgage broker, or a managing partner, director, executive officer or other individual occupying a similar position or performing similar functions for the applicant, shall have, during the five years immediately preceding the time of application, not less than three years' experience in the mortgage business, three years' experience negotiating loans in a related business satisfactory to the director or three years' equivalent lending experience in a related business satisfactory to the director.

(3) If a license as a mortgage banker or mortgage broker is issued to a person other than an individual, at least one managing partner, director, executive officer or other individual occupying a similar position or performing similar functions for the person shall, at all times during the term of the license, satisfy the experience requirement described in subsection (2) of this section.

(4) Every applicant for a license as a mortgage banker or mortgage broker shall file with the director a corporate surety bond or irrevocable letter of credit issued by an insured institution as defined in ORS 706.008 as the director may approve by rule running to the State of Oregon in [the sum of $10,000] a sum to be determined by the director by rule.

(5) The total amount of the corporate surety bond or irrevocable letter of credit for a single applicant under subsection (4) of this section shall be not less than $25,000 but not more than $50,000, regardless of the number of offices of the applicant. If an applicant has more than one office in this state to engage in residential mortgage transactions as a mortgage banker or mortgage broker, the amount of the bond or letter of credit shall increase for each additional office in an amount determined by the director by rule. The amount of the increase in the bond or letter of credit for each additional office shall be not less than $5,000 but not more than $10,000. The director may adjust the minimum amount of the increase in the bond or letter of credit for additional offices as necessary to comply with the $50,000 limit.

[(5)] (6) If the application, surety bond or irrevocable letter of credit and fees are in order and the director is satisfied that the application should not be denied upon one or more of the grounds specified in ORS 59.865, 59.870 or 59.875, the director shall license the mortgage banker or mortgage broker.

[(6)] (7) A licensee shall amend the license application and, if necessary, increase the amount of the corporate surety bond or irrevocable letter of credit as described in subsection (5) of this section when there are material changes in the information contained in the original application.

[(7)] (8) The director shall:

(a) Charge and collect fees for initial and renewal license applications; [and]

(b) Set by rule all fees required under this section. Fees shall be set to reflect those amounts sufficient to meet the costs of administering ORS 59.840 to 59.965, including those amounts sufficient to establish and maintain a reasonable emergency fund[.]; and

(c) Set by rule the amounts of corporate surety bonds and irrevocable letters of credit required under this section.

[(8)] (9) The fees under this section are not refundable except for those fees that the director determines by rule may be refundable.

SECTION 4. (1) With the permission of the lender, note owner, note holder or other holder of an interest in a note, a mortgage banker or mortgage broker may service or collect any mortgage banking loan or mortgage loan in its own name or the name of the lender, note owner, note holder or other holder of an interest in the note.

(2) Except as provided in ORS 59.840 to 59.965, nothing in subsection (1) of this section is intended to grant the Director of the Department of Consumer and Business Services the authority to regulate the servicing or collection of any mortgage banking loan or mortgage loan by a mortgage banker or mortgage broker.

(3) As used in this section:

(a) "Mortgage banker" has the meaning given that term in ORS 59.840 (4)(a) but also includes those persons exempted from the definition of mortgage banker in ORS 59.840 (4)(b).

(b) "Mortgage banking loan" has the meaning given that term in ORS 59.840.

(c) "Mortgage broker" has the meaning given that term in ORS 59.840.

(d) "Mortgage loan" has the meaning given that term in ORS 59.840.

(e) "Service or collect any mortgage banking loan or mortgage loan" includes but is not limited to:

(A) Holding documents or written instruments and receiving and disbursing payments according to the instructions of the parties to the documents or written instruments;

(B) Collecting or remitting, or having the right or obligation to collect or remit, for any lender, note owner, note holder or other holder of an interest in a note or for a mortgage banker's or mortgage broker's own account, payments, interest, principal and trust items, including but not limited to hazard insurance and taxes, on a mortgage banking loan or mortgage loan in accordance with the terms of the loan, and includes loan payment follow-up, delinquency loan follow-up, loan analysis and any notifications to the borrower that are necessary to enable the borrower to keep the loan current and in good standing; and

(C) Bringing and maintaining any suit or action to collect any amounts owed on a mortgage banking loan or mortgage loan, including but not limited to the exercise of any contractual, statutory or common law remedies such as injunction, specific performance, judicial or nonjudicial foreclosure or receivership.

SECTION 5. (1) Nothing in the amendments to ORS 59.840 and 59.845 by sections 1 and 2 of this 1999 Act is intended to affect any license issued under ORS 59.840 to 59.965 (1997 Edition).

(2) The amendments to ORS 59.850 by section 3 of this 1999 Act apply to applications received by the Director of the Department of Consumer and Business Services on or after the effective date of this 1999 Act and to licenses renewed or amended on or after the effective date of this 1999 Act.

(3) Section 4 of this 1999 Act applies to mortgage banking loans and mortgage loans made prior to, on or after the effective date of this 1999 Act.

Approved by the Governor April 16, 1999

Filed in the office of Secretary of State April 19, 1999

Effective date October 23, 1999

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