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First Substitute H.B. 107

Representative Gerry A. Adair proposes to substitute the following bill:


             1     
UTAH RESIDENTIAL MORTGAGE PRACTICES ACT

             2     
2000 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Gerry A. Adair

             5      AN ACT RELATING TO REAL ESTATE DIVISION; ENACTING THE UTAH RESIDENTIAL
             6      MORTGAGE PRACTICES ACT; DEFINING TERMS; ESTABLISHING POWERS AND
             7      DUTIES OF THE DIVISION OF REAL ESTATE; CREATING THE RESIDENTIAL
             8      MORTGAGE REGULATORY COMMISSION; PROVIDING SCOPE OF CHAPTER;
             9      REQUIRING REGISTRATION; PROVIDING GRANDFATHERING; PROVIDING
             10      EXEMPTIONS; PROVIDING REGISTRATION QUALIFICATIONS AND PROCEDURES;
             11      ADDRESSING OPERATIONAL RESTRICTIONS; REQUIRING RECORDKEEPING;
             12      PROVIDING FOR INVESTIGATIONS; PROVIDING FOR ENFORCEMENT; MAKING
             13      TECHNICAL CHANGES; AND PROVIDING AN EFFECTIVE DATE.
             14      This act affects sections of Utah Code Annotated 1953 as follows:
             15      AMENDS:
             16          61-2-5, as last amended by Chapter 146, Laws of Utah 1993
             17      ENACTS:
             18          61-2c-101, Utah Code Annotated 1953
             19          61-2c-102, Utah Code Annotated 1953
             20          61-2c-103, Utah Code Annotated 1953
             21          61-2c-104, Utah Code Annotated 1953
             22          61-2c-105, Utah Code Annotated 1953
             23          61-2c-106, Utah Code Annotated 1953
             24          61-2c-201, Utah Code Annotated 1953
             25          61-2c-202, Utah Code Annotated 1953


             26          61-2c-203, Utah Code Annotated 1953
             27          61-2c-204, Utah Code Annotated 1953
             28          61-2c-205, Utah Code Annotated 1953
             29          61-2c-301, Utah Code Annotated 1953
             30          61-2c-302, Utah Code Annotated 1953
             31          61-2c-401, Utah Code Annotated 1953
             32          61-2c-402, Utah Code Annotated 1953
             33          61-2c-403, Utah Code Annotated 1953
             34      Be it enacted by the Legislature of the state of Utah:
             35          Section 1. Section 61-2-5 is amended to read:
             36           61-2-5. Division of Real Estate created -- Functions -- Director appointed --
             37      Functions.
             38          (1) There is created within the Department of Commerce a Division of Real Estate. It is
             39      responsible for the administration and enforcement of:
             40          (a) this chapter;
             41          [(b) the Real Estate Education, Research, and Recovery Fund under Title 61, Chapter 2a;]
             42          [(c)] (b) Title 57, Chapter 11, Utah Uniform Land Sales Practices Act;
             43          [(d)] (c) Title 57, Chapter 19, Timeshare and Camp Resort Act;
             44          [(e)] (d) Title 57, Chapter 23, Real Estate Cooperative Marketing Act; [and]
             45          (e) Chapter 2a, Real Estate Education, Research, and Recovery Fund;
             46          (f) [Title 61,] Chapter 2b, Real Estate Appraiser [Registration] Licensing and Certification
             47      Act[.]; and
             48          (g) Chapter 2c, Utah Residential Mortgage Practices Act.
             49          (2) The division is under the direction and control of a director appointed by the executive
             50      director of the department with the approval of the governor. The director holds [his] the office
             51      of director at the pleasure of the governor.
             52          (3) The director, with the approval of the executive director, may employ personnel
             53      necessary to discharge the duties of the division at salaries to be fixed by the director according
             54      to standards established by the Department of Administrative Services.
             55          (4) On or before October 1 of each year, the director shall, in conjunction with the
             56      department, report to the governor and the Legislature concerning the division's work for the


             57      preceding fiscal year ending June 30.
             58          (5) The director, in conjunction with the executive director, shall prepare and submit to
             59      the governor and the Legislature a budget for the fiscal year next following the convening of the
             60      Legislature.
             61          Section 2. Section 61-2c-101 is enacted to read:
             62     
CHAPTER 2c. UTAH RESIDENTIAL MORTGAGE PRACTICES ACT

             63     
Part 1. General Provisions

             64          61-2c-101. Title.
             65          This chapter is known as the "Utah Residential Mortgage Practices Act."
             66          Section 3. Section 61-2c-102 is enacted to read:
             67          61-2c-102. Definitions.
             68          As used in this chapter:
             69          (1) "Affiliate" means a person that directly, or indirectly through one or more
             70      intermediaries, controls or is controlled by, or is under common control with, a specified person.
             71          (2) "Applicant" means a person applying for registration under this chapter.
             72          (3) "Business of residential mortgage loans" means for compensation to:
             73          (a) make or originate a residential mortgage loan;
             74          (b) directly or indirectly solicit, process, place, or negotiate a residential mortgage loan for
             75      another; or
             76          (c) render services related to the origination, processing, or funding of a residential
             77      mortgage loan including:
             78          (i) taking applications;
             79          (ii) obtaining verifications and appraisals; and
             80          (iii) communicating with the borrower and lender.
             81          (4) "Commission" means the Residential Mortgage Regulatory Commission created in
             82      Section 61-2c-104 .
             83          (5) "Compensation" means anything of economic value that is paid, loaned, granted, given,
             84      donated, or transferred to a person for or in consideration of:
             85          (a) services;
             86          (b) personal or real property; or
             87          (c) other thing of value.


             88          (6) "Control" means the power, directly or indirectly, to:
             89          (a) direct or exercise a controlling influence over:
             90          (i) the management or policies of an entity; or
             91          (ii) the election of a majority of the directors or managing partners of an entity;
             92          (b) vote 20% or more of any class of voting securities of an entity by an individual; or
             93          (c) vote more than 5% of any class of voting securities of an entity by a person other than
             94      an individual.
             95          (7) "Depository institution" is as defined in Section 7-1-103 .
             96          (8) "Director" means the director of the division.
             97          (9) "Division" means the Division of Real Estate.
             98          (10) "Dwelling" means a residential structure attached to real property that contains one
             99      to four units including any of the following if used as a residence:
             100          (a) a condominium unit;
             101          (b) a cooperative unit;
             102          (c) a manufactured home; or
             103          (d) a house.
             104          (11) "Executive director" means the executive director of the Department of Commerce.
             105          (12) "Record" means information that is:
             106          (a) prepared, owned, received, or retained by a person; and
             107          (b) (i) inscribed on a tangible medium; or
             108          (ii) (A) stored in an electronic or other medium; and
             109          (B) retrievable in perceivable form.
             110          (13) "Residential mortgage loan" means a loan or extension of credit, if:
             111          (a) the loan or extension of credit is secured by a:
             112          (i) mortgage;
             113          (ii) deed of trust; or
             114          (iii) lien interest; and
             115          (b) the mortgage, deed of trust, or lien interest described in Subsection (13)(a):
             116          (i) is on a dwelling located in the state; and
             117          (ii) created with the consent of the owner of the residential real property.
             118          (14) "State" means:


             119          (a) a state, territory, or possession of the United States;
             120          (b) the District of Columbia; or
             121          (c) the Commonwealth of Puerto Rico.
             122          Section 4. Section 61-2c-103 is enacted to read:
             123          61-2c-103. Powers and duties of the division.
             124          (1) The division shall administer this chapter.
             125          (2) In addition to any power or duty expressly provided in this chapter, the division may:
             126          (a) receive and act on complaints including:
             127          (i) taking action designed to obtain voluntary compliance with this chapter; or
             128          (ii) commencing administrative or judicial proceedings on the division's own initiative;
             129          (b) establish programs for the education of consumers with respect to residential mortgage
             130      loans;
             131          (c) (i) make studies appropriate to effectuate the purposes and policies of this chapter; and
             132          (ii) make the results of the studies described in Subsection (2)(c)(i) available to the public;
             133      and
             134          (d) employ any necessary hearing examiners, investigators, clerks, and other employees
             135      and agents.
             136          (3) The division shall make rules when authorized by this chapter in accordance with Title
             137      63, Chapter 46a, Utah Administrative Rulemaking Act.
             138          (4) (a) The division shall make available to the public a list of the names and addresses of
             139      all persons registered under this chapter.
             140          (b) The division may charge a fee established by the division in accordance with Section
             141      h [ 63-38-32.2 ] 63-38-3.2 h for obtaining the list described in Subsection (4)(a).
             142          Section 5. Section 61-2c-104 is enacted to read:
             143          61-2c-104. Residential Mortgage Regulatory Commission.
             144          (1) There is created within the division the Residential Mortgage Regulatory Commission
             145      consisting of:
             146          (a) the following members appointed by the executive director with the approval of the
             147      governor:
             148          (i) two members having at least three years of experience in transacting the business of
             149      residential mortgage loans; and


             150          (ii) two members from the general public; and
             151          (b) the commissioner of the Department of Financial Institutions or the commissioner's
             152      designee.
             153          (2) (a) Except as required by Subsection (2)(b), the executive director shall appoint each
             154      new member or reappointed member subject to appointment by the executive director to a
             155      four-year term ending June 30.
             156          (b) Notwithstanding the requirements of Subsection (2)(a), the executive director shall,
             157      at the time of appointment or reappointment, adjust the length of terms to ensure that the terms of
             158      commission members are staggered so that approximately half of the commission is appointed
             159      every two years.
             160          (c) If a vacancy occurs in the membership of the commission for any reason, the
             161      replacement shall be appointed for the unexpired term.
             162          (3) Members of the commission shall annually select one member to serve as chair.
             163          (4) (a) The commission shall meet at least quarterly.
             164          (b) The director may call a meeting in addition to the meetings required by Subsection
             165      (4)(a):
             166          (i) at the discretion of the director;
             167          (ii) at the request of the chair of the commission; or
             168          (iii) at the written request of three or more commission members.
             169          (5) (a) Three members of the commission constitute a quorum for the transaction of
             170      business.
             171          (b) The action of a majority of a quorum present is an action of the commission.
             172          (6) (a) (i) Members who are not government employees shall receive no compensation or
             173      benefits for their services, but may receive per diem and expenses incurred in the performance of
             174      the member's official duties at the rates established by the Division of Finance under Sections
             175      63A-3-106 and 63A-3-107 .
             176          (ii) Members who are not government employees may decline to receive per diem and
             177      expenses for their service.
             178          (b) (i) State government officer and employee members who do not receive salary, per
             179      diem, or expenses from their agency for their service may receive per diem and expenses incurred
             180      in the performance of their official duties from the commission at the rates established by the


             181      Division of Finance under Sections 63A-3-106 and 63A-3-107 .
             182          (ii) State government officer and employee members may decline to receive per diem and
             183      expenses for their service.
             184          (7) The commission shall:
             185          (a) concur in the registration of persons under this chapter in accordance with Part 2;
             186          (b) take disciplinary action with the concurrence of the director in accordance with Part
             187      4, Enforcement; and
             188          (c) advise the division concerning matters related to the administration and enforcement
             189      of this chapter.
             190          Section 6. Section 61-2c-105 is enacted to read:
             191          61-2c-105. Scope of chapter.
             192          (1) (a) This chapter applies to a closed-end residential mortgage loan secured by a first lien
             193      or equivalent security interest on a dwelling.
             194          (b) This chapter does not apply to a transaction covered by Title 70C, Utah Consumer
             195      Credit Code.
             196          (2) The following are exempt from this chapter:
             197          (a) the federal government;
             198          (b) a state;
             199          (c) a political subdivision of a state;
             200          (d) an agency of or entity created by a governmental entity described in Subsections (1)(a)
             201      through (c) including:
             202          (i) the Utah Housing Financing Agency created in Title 9, Chapter 4, Part 9, Utah Housing
             203      Finance Agency Act;
             204          (ii) the Federal National Mortgage Corporation;
             205          (iii) the Federal Home Loan Mortgage Corporation;
             206          (iv) the Federal Deposit Insurance Corporation;
             207          (v) the Resolution Trust Corporation;
             208          (vi) the Government National Mortgage Association;
             209          (vii) the Federal Housing Administration;
             210          (viii) the National Credit Union Administration;
             211          (ix) the Farmers Home Administration; and


             212          (x) the Department of Veterans Affairs;
             213          (e) a depository institution;
             214          (f) an affiliate of a depository institution;
             215          (g) an employee or agent of an entity described in Subsections (2)(a) through (f) when that
             216      person acts on behalf of the entity described in Subsections (2)(a) through (f);
             217          (h) a person:
             218          (i) who makes a loan:
             219          (A) secured by an interest in real property;
             220          (B) with the person's own money; and
             221          (C) for the person's own investment; and
             222          (ii) that does not engage in the business of making loans secured by an interest in real
             223      property;
             224          (i) a person who receives a mortgage, deed of trust, or lien interest on real property if the
             225      person:
             226          (i) is the seller of real property; and
             227          (ii) receives the mortgage, deed of trust, or lien interest on real property as security for a
             228      separate money obligation;
             229          (j) a person who receives a mortgage, deed of trust, or lien interest on real property if:
             230          (i) the person receives the mortgage, deed of trust, or lien interest as security for an
             231      obligation payable on an installment or deferred payment basis;
             232          (ii) the obligation described in Subsection h [ (1)(c)(i) ] (2)(j)(i) h arises from a person
             232a      providing
             233      materials or services used in the improvement of the real property that is the subject of the
             234      mortgage, deed of trust, or lien interest; and
             235          (iii) the mortgage, deed of trust, or lien interest was created without the consent of the
             236      owner of the real property that is the subject of the mortgage, deed of trust, or lien interest;
             237          (k) a nonprofit corporation that:
             238          (i) is exempt from paying federal income taxes;
             239          (ii) is certified by the United States Small Business Administration as a small business
             240      investment company;
             241          (iii) is organized to promote economic development in this state; and
             242          (iv) has as its primary activity providing financing for business expansion; h [ or ] h


             243          (l) a court appointed fiduciary h ; OR
             243a          (m) AN ATTORNEY ADMITTED TO PRACTICE LAW IN THIS STATE:
             243b          (i) IF THE ATTORNEY IS NOT PRINCIPALLY ENGAGED IN THE BUSINESS OF NEGOTIATING
             243c      RESIDENTIAL MORTGAGE LOANS; AND
             243d          (ii) WHEN THE ATTORNEY RENDERS SERVICES IN THE COURSE OF THE ATTORNEY'S
             243e      PRACTICE AS AN ATTORNEY.
             243f          (3)(a) NOTWITHSTANDING SUBSECTION (2)(m), AN ATTORNEY EXEMPT FROM THIS
             243g      CHAPTER MAY NOT ENGAGE IN CONDUCT DESCRIBED IN SECTION 61-2c-301 WHEN
             243h      TRANSACTING BUSINESS OF RESIDENTIAL MORTGAGE LOANS.
             243i          (b) IF AN ATTORNEY EXEMPT FROM THIS CHAPTER VIOLATES SUBSECTION (3)(a), THE
             243j      ATTORNEY:
             243k          (i) IS NOT SUBJECT TO ENFORCEMENT BY THE DIVISION UNDER PART 4, ENFORCEMENT;
             243l      AND
             243m          (ii) IS SUBJECT TO DISCIPLINARY ACTION GENERALLY APPLICABLE TO AN ATTORNEY
             243n      ADMITTED TO PRACTICE LAW IN THIS STATE.
             243o          (c) IF THE DIVISION RECEIVES A COMPLAINT ALLEGING AN ATTORNEY EXEMPT FROM
             243p      THIS CHAPTER IS IN VIOLATION SUBSECTION (3)(a), THE DIVISION SHALL FORWARD THE
             243q      COMPLAINT TO THE UTAH STATE BAR FOR DISCIPLINARY ACTION h .
             244          Section 7. Section 61-2c-106 is enacted to read:
             245          61-2c-106. Addresses provided the division.
             246          (1) In providing an address to the division under this chapter, a physical location or street
             247      address shall be provided.
             248          (2) A person registered under this chapter will be considered to have received any
             249      notification that is mailed to the last address furnished to the division by the person registered
             250      under this chapter.
             251          Section 8. Section 61-2c-201 is enacted to read:
             252     
Part 2. Registration

             253          61-2c-201. Registration required for persons engaged in the business of residential
             254      mortgage loans -- Grandfathering.
             255          (1) A person may not transact the business of residential mortgage loans in this state unless
             256      that person is:
             257          (a) registered under this chapter; or
             258          (b) exempt from this chapter under Section 61-2c-105 .
             259          (2) For purposes of this chapter, a person transacts business in this state if:
             260          (a) (i) the person engages in an act that constitutes the business of residential mortgage
             261      loans; and


             262          (ii) (A) the act described in Subsection (2)(a)(i) is directed to or received in this state; or
             263          (B) the real property that is the subject of the act described in Subsection (2)(a)(i) is
             264      located in this state; or
             265          (b) that person represents that the person transacts the business of residential mortgage
             266      loans in this state.
             267          (3) Unless otherwise exempted under this chapter, registration under this chapter is
             268      required of both:
             269          (a) the individual who directly transacts the business of residential mortgage loans; and
             270          (b) if the individual transacts business as an employee or agent of another person, the
             271      person for which the individual transacts the business of residential mortgage loans.
             272          (4) (a) Notwithstanding Subsection (1), a person described in Subsection (4)(b):
             273          (i) is not required to be registered under this chapter until July 1, 2001; and


             274          (ii) notwithstanding Subsection (4)(a)(i), on or after July 1, 2000, is subject to Parts 3 and
             275      4.
             276          (b) Subsection (4)(a) applies to a person that as of July 1, 2000, has:
             277          (i) filed written notification with the Department of Financial Institutions under Title 70D,
             278      Chapter 1, Mortgage Lending and Servicing Act; and
             279          (ii) paid the required fees to the Department of Financial Institutions in accordance with
             280      Section 70D-1-10 .
             281          Section 9. Section 61-2c-202 is enacted to read:
             282          61-2c-202. Registration procedures.
             283          (1) To apply for registration under this chapter a person shall:
             284          (a) submit to the division a registration statement that:
             285          (i) lists any name under which the person will transact business in this state;
             286          (ii) the address of the principal business location of the person;
             287          (iii) if the person is not an individual, lists the persons that exercise control of that person;
             288          (iv) demonstrates to the satisfaction of the division with the concurrence of the
             289      commission that the person meets the qualifications listed in Section 61-2c-203 ; and
             290          (v) includes any information required by the division by rule;
             291          (b) pay to the division:
             292          (i) an application fee established by the division in accordance with Section 63-38-3.2 ; and
             293          (ii) the reasonable expenses incurred in processing the application for registration
             294      including the costs incurred by the division under Subsection (4);
             295          (c) meet the requirements under Section 61-2c-204 for:
             296          (i) obtaining a surety bond;
             297          (ii) depositing assets; or
             298          (iii) providing a letter of credit; and
             299          (d) comply with Subsection (4).
             300          (2) The division, with the concurrence of the commission, shall grant a registration to a
             301      person if the division finds that the person:
             302          (a) meets the qualifications of Sections 61-2c-203 and 61-2c-204 ; and
             303          (b) complies with this section.
             304          (3) In accordance with Title 63, Chapter 46b, Administrative Procedures Act, a person who


             305      is denied registration under this chapter may submit a request for agency review to the executive
             306      director within 30 days following the issuance of the order denying the registration.
             307          (4) (a) An individual applying for registration under this chapter or any individual
             308      exercising control over the person applying for registration under this section shall:
             309          (i) submit a fingerprint card in a form acceptable to the division at the time the registration
             310      statement is filed; and
             311          (ii) consent to a fingerprint background check by:
             312          (A) the Utah Bureau of Criminal Identification; and
             313          (B) the Federal Bureau of Investigation.
             314          (b) The division shall request the Department of Public Safety to complete a Federal
             315      Bureau of Investigation criminal background check for each person applying for registration under
             316      this chapter through a national criminal history system.
             317          (c) The person applying for registration shall pay the cost of:
             318          (i) the fingerprinting required by this section; and
             319          (ii) the background check required by this section.
             320          (d) (i) A registration under this chapter is conditional pending completion of the criminal
             321      background check required by this Subsection (4).
             322          (ii) If a criminal background check discloses that the person applying for registration failed
             323      to accurately disclose a criminal history, the registration h [ is ] SHALL BE h immediately and
             323a      automatically revoked.
             324          (iii) A person whose conditional registration is revoked under Subsection (4)(d)(ii) may
             325      appeal the revocation in a hearing conducted:
             326          (A) after the revocation; and
             327          (B) in accordance with Title 63, Chapter 46b, Administrative Procedures Act.
             328          Section 10. Section 61-2c-203 is enacted to read:
             329          61-2c-203. Qualifications for registration.
             330          (1) To qualify for registration under this chapter, an individual shall:
             331          (a) have good moral character and the competency to transact the business of residential
             332      mortgage loans;
             333          (b) not have been convicted of a felony or misdemeanor involving moral turpitude in the
             334      five years preceding the date the individual applies for registration;
             335          (c) not have had a license or registration suspended, revoked, surrendered, canceled, or


             336      denied in the five years preceding the date the individual applies for registration if:
             337          (i) the registration or license is issued by this state or another jurisdiction; and
             338          (ii) the suspension, revocation, surrender, cancellation, or denial is based on misconduct
             339      in a professional capacity that relates to good moral character or the competency to transact the
             340      business of residential mortgage loans.
             341          (2) If the person is not an individual, to qualify for registration under this chapter the
             342      person shall:
             343          (a) at all times during the term of the registration, have at least one of the following meet
             344      the requirements of Subsection (1)(a):
             345          (i) a managing partner;
             346          (ii) a director; h [ or ] h
             347          (iii) an executive officer; or
             348          (iv) an individual occupying a position or performing functions similar to those described
             349      in Subsections (2)(a)(i) through (iii); and
             350          (b) not have a person that exercises control of the person registered under this chapter:
             351          (i) have been convicted of a felony or misdemeanor involving moral turpitude in the five
             352      years preceding the date the person applies for registration; or
             353          (ii) have had a license or registration suspended, revoked, surrendered, canceled, or denied
             354      in the five years preceding the date the person applies for registration if:
             355          (A) the registration or license is issued by this state or another jurisdiction; and
             356          (B) the suspension, revocation, surrender, cancellation, or denial is based on misconduct
             357      in a professional capacity that relates to good moral character or the competency to transact the
             358      business of residential mortgage loans.
             359          (3) (a) If a person described in Subsection (3)(b) provides evidence satisfactory to the
             360      division with the concurrence of the commission that the person has h [ the ] h good moral character
             360a      and h THE h
             361      competency to transact the business of residential mortgage loans, notwithstanding Subsections
             362      (1) and (2) and Section 61-2c-402 , the division may permit that person to be registered under this
             363      chapter.
             364          (b) Subsection (3)(a) applies to a person that meets the qualifications for registration
             365      except that the person or a person that exercises control of the person:
             366          (i) has been convicted of a felony or misdemeanor involving moral turpitude in the five


             367      years preceding the date the person applies for registration; or
             368          (ii) has had a license or registration suspended, revoked, surrendered, canceled, or denied
             369      in the five years preceding the date the person applies for registration if:
             370          (A) the registration or license is issued by this state or another jurisdiction; and
             371          (B) the suspension, revocation, surrender, cancellation, or denial is based on misconduct
             372      in a professional capacity that relates to good moral character or the competency to transact the
             373      business of residential mortgage loans.
             374          Section 11. Section 61-2c-204 is enacted to read:
             375          61-2c-204. Requirements for bonding, letter of credit, or deposit of assets.
             376          (1) If an applicant is an individual, the applicant shall:
             377          (a) file with the division a surety bond:
             378          (i) that meets the requirements of Subsection (3); and
             379          (ii) in the amount not less than $10,000; or
             380          (b) demonstrate to the satisfaction of the division that:
             381          (i) the applicant is an employee or agent of a person registered under this chapter; and
             382          (ii) the acts of the applicant are covered by a surety bond filed with the division under
             383      Subsection (2) by a person registered under this chapter for which the applicant is an employee or
             384      agent.
             385          (2) If the applicant is not an individual, the applicant shall file with the division a surety
             386      bond:
             387          (a) that meets the requirements of Subsection (4); and
             388          (b) in an amount not less than $25,000.
             389          (3) A surety bond filed under this section shall name as beneficiaries:
             390          (a) the state, for payment of costs incurred and charges made in connection with an
             391      enforcement action under Part 4 against the applicant including costs and charges relating to an
             392      examination or investigation; and
             393          (b) after all claims and charges of the state have been paid in full, any person who has a
             394      claim against the surety on the bond based on any default or violation of any duty or obligation of
             395      the applicant.
             396          (4) If an applicant is not an individual, a surety bond filed under this section shall:
             397          (a) comply with Subsection (3); and


             398          (b) cover the acts of:
             399          (i) the person registered under this chapter;
             400          (ii) any person exercising control of the person registered under this chapter; and
             401          (iii) any agent or employee of the person registered under this chapter.
             402          (5) If an individual registered under this chapter does not file a surety bond under this
             403      section because at the time of applying for registration that person met the requirements of
             404      Subsection (1)(b), the individual shall post a surety bond meeting the requirements of Subsections
             405      (1) and (3) by no later than 30 days from the day on which the person is not covered by a surety
             406      bond in accordance with Subsection (1)(b).
             407          (6) Notwithstanding the other provisions of this section, an applicant can comply with the
             408      requirements of this section, if the applicant deposits assets with or provides a letter of credit to
             409      the division:
             410          (a) in the amounts required for a surety bond; and
             411          (b) subject to the same surety conditions of Subsections (3) and (4).
             412          Section 12. Section 61-2c-205 is enacted to read:
             413          61-2c-205. Term of registration -- Renewal -- Reporting of changes.
             414          (1) (a) A registration under this chapter is valid for a two-year period.
             415          (b) Notwithstanding Subsection (1)(a), the time period of a registration may be extended
             416      or shortened by as much as one year to maintain or change a renewal cycle established by rule by
             417      the division.
             418          (2) To renew a registration, no later than 30 days before the date the registration expires,
             419      a person registered under this chapter shall:
             420          (a) file a registration statement meeting the requirements of Section 61-2c-202 ; and
             421          (b) pay a fee to the division established by the division in accordance with Section
             422      63-38-3.2 .
             423          (3) (a) A person registered under this chapter shall amend its registration statement filed
             424      with the division within ten days of the date on which there is a change in:
             425          (i) a name under which the person transacts the business of residential mortgage loans in
             426      this state;
             427          (ii) the address of the principal business location of the person;
             428          (iii) if the person is not an individual, the persons who exercise control of the person


             429      registered under this chapter; or
             430          (iv) any other information that is defined as material by rule made by the division.
             431          (b) Failure to notify the division of a change described in Subsection (3)(a) is separate
             432      grounds for disciplinary action against a person registered under this chapter.
             433          (4) A person licensed under this chapter shall notify the division in writing within ten
             434      business days of:
             435          (a) a conviction of any criminal offense; or
             436          (b) filing a personal bankruptcy or bankruptcy of a business that transacts the business of
             437      residential mortgage loans.
             438          Section 13. Section 61-2c-301 is enacted to read:
             439     
Part 3. Operational Restrictions

             440          61-2c-301. Prohibited conduct -- Violations of the chapter.
             441          (1) A person transacting the business of residential mortgage loans in this state may not:
             442          (a) give or receive compensation or anything of value in exchange for a referral of
             443      residential mortgage loan business unless the compensation or thing of value is h [ de minimus ]
             443a      DE MINIMIS h as
             444      defined by the division;
             445          (b) charge a fee in connection with a residential mortgage loan transaction:
             446          (i) that is excessive; or
             447          (ii) if the person does not comply with Section 70D-1-6 ;
             448          (c) give or receive compensation or anything of value in exchange for a referral of
             449      settlement or loan closing services related to a residential mortgage loan transaction;
             450          (d) make a false statement or representation for purposes of inducing a lender to extend
             451      credit as part of a residential mortgage loan transaction;
             452          (e) give or receive compensation or anything of value to influence the independent
             453      judgment of an appraiser in reaching a value conclusion in a residential mortgage loan transaction;
             454          (f) violate or not comply with:
             455          (i) this chapter;
             456          (ii) an order of the commission or division; or
             457          (iii) a rule made by the division;
             458          (g) fail to respond within the required time period to:
             459          (i) a notice or complaint of the division; or


             460          (ii) a request for information from the division;
             461          (h) make false representations to the division, including in a registration statement;
             462          (i) engage in unprofessional conduct as defined by rule; or
             463          (j) engage in an act or omission in transacting the business of residential mortgage loans
             464      that constitutes dishonesty, fraud, or misrepresentation.
             465          (2) A person violates this chapter if, for a criminal offense involving moral turpitude,
             466      whether or not the crime is related to the business of residential mortgage loans, that person while
             467      registered under this chapter:
             468          (a) is convicted;
             469          (b) h [ pleas ] PLEADS h guilty or nolo contendere;
             470          (c) enters a plea in abeyance; or
             471          (d) is subjected to a criminal disposition similar to the h [ one ] ONES h described in
             471a      Subsections (2)(a)
             472      through (c).
             473          Section 14. Section 61-2c-302 is enacted to read:
             474          61-2c-302. Record requirements.
             475          (1) For the time period specified in Subsection (2), a person registered under this chapter
             476      shall make or possess any record required for that person by a rule made by the division.
             477          (2) A person registered under this chapter shall maintain in its possession a record
             478      described in Subsection (1) until the later of 25 months from the date:
             479          (a) the final entry on a residential mortgage loan is made by that person;
             480          (b) if the residential mortgage loan is serviced by the person:
             481          (i) the residential mortgage loan is paid in full; or
             482          (ii) the person ceases to service the residential mortgage loan; or
             483          (c) if the residential mortgage loan is not serviced by the person, the residential mortgage
             484      loan is closed.
             485          Section 15. Section 61-2c-401 is enacted to read:
             486     
Part 4. Enforcement

             487          61-2c-401. Investigations -- Subpoena power of division.
             488          (1) The division may investigate or cause to be investigated the actions of:
             489          (a) a person registered under this chapter;
             490          (b) a person applying for registration under this chapter; or


             491          (c) a person who transacts the business of residential mortgage loans within this state.
             492          (2) In conducting an investigation, the division may:
             493          (a) subpoena witnesses;
             494          (b) take evidence;
             495          (c) require by subpoena duces tecum the production of books, papers, contracts, records,
             496      other documents, or information considered relevant to an investigation; and
             497          (d) serve a subpoena by certified mail.
             498          (3) A failure to respond to a subpoena served by the division is considered as a separate
             499      violation of this chapter.
             500          Section 16. Section 61-2c-402 is enacted to read:
             501          61-2c-402. Disciplinary action.
             502          (1) Subject to the requirements of this section, if a person required to be registered under
             503      this chapter violates this chapter, the commission with the concurrence of the director, may:
             504          (a) impose a civil penalty against the person in an amount not to exceed $500 per
             505      violation;
             506          (b) do any of the following to a registration under this chapter:
             507          (i) suspend;
             508          (ii) revoke;
             509          (iii) place on probation;
             510          (iv) deny renewal; or
             511          (v) deny reinstatement h ; OR
             511a          (c) DO BOTH SUBSECTIONS (1)(a) AND (b) h .
             512          (2) (a) Before the commission may take an action described in Subsection (1) against a
             513      person required to be registered under this chapter, the division shall:
             514          (i) give notice to that person; and
             515          (ii) schedule an adjudicative proceeding.
             516          (b) If after the adjudicative proceeding scheduled under Subsection (2)(a), the commission
             517      determines that a person required to be registered under this section has violated this chapter, the
             518      commission may take an action described in Subsection (1):
             519          (i) by written order of the commission; and
             520          (ii) with the concurrence of the director.
             521          (3) (a) In accordance with Title 63, Chapter 46b, Administrative Procedures Act, a person


             522      against whom disciplinary action is taken under this section may seek review h BY THE EXECUTIVE
             522a      DIRECTO R h of the disciplinary
             523      action.
             524          (b) If the person described in Subsection (3)(a) prevails in the appeal and the court finds
             525      that the state action was undertaken without substantial justification, the court may award
             526      reasonable litigation expenses to that person as provided under Title 78, Chapter 27a, Small
             527      Business Equal Access to Justice Act.
             528          (4) (a) An order issued under this section takes effect 30 days after the service of the order
             529      unless otherwise provided in the order.
             530          (b) If an appeal of an order issued under this section is taken by a person registered under
             531      this chapter, the division may stay enforcement of the commission's order in accordance with
             532      Section 63-46b-18 .
             533          (5) If ordered by the court of competent jurisdiction, the division shall promptly take an
             534      action described in Subsection (1)(b) against a registration granted under this chapter.
             535          (6) (a) If a person's registration under this chapter is revoked, the person may have its
             536      registration reinstated by complying with the requirements of Section 61-2c-202 for registration.
             537          (b) Notwithstanding Subsection (6)(a), if a person's registration under this chapter is
             538      revoked, that person may not apply for reinstatement of the registration sooner than five years after
             539      the date the registration is revoked in accordance with this section.
             540          Section 17. Section 61-2c-403 is enacted to read:
             541          61-2c-403. Cease and desists.
             542          (1) (a) The director may issue and serve on a person an order to cease and desist if:
             543          (i) the director has reason to believe that a person has been or is engaging in acts
             544      constituting a violation of this chapter; and
             545          (ii) it appears to the director that it would be in the public interest to stop the acts.
             546          (b) Within ten days after receiving the order, the person on whom the order is served may
             547      request an adjudicative proceeding to be held in accordance with Title 63, Chapter 46b,
             548      Administrative Procedures Act.
             549          (c) Pending the hearing, the cease and desist order shall remain in effect.
             550          (2) (a) After the hearing described in Subsection (1), if the commission with the
             551      concurrence of the director finds that the acts of the person violate this chapter, the director shall
             552      issue an order making the cease and desist order permanent.


             553          (b) (i) The director shall file suit in the name of h [ the Department of Commerce and ] h the
             554      division to enjoin and restrain a person on whom an order is served under this section from
             555      violating this chapter if:
             556          (A) (I) the person did not request a hearing under Subsection (1); or
             557          (II) a permanent cease and desist order is issued against the person following a hearing or
             558      stipulation; and
             559          (B) (I) the person fails to cease the acts; or
             560          (II) after discontinuing the acts, the person again commences the acts.
             561          (ii) The suit described in Subsection (2)(b)(i) shall be filed in the district court in the
             562      county:
             563          (A) in which the acts occurred;
             564          (B) where the person resides; or
             565          (C) where the person carries on business.
             566          (3) The cease and desist order issued under this section may not interfere with or prevent
             567      the prosecution of a remedy or action enforcement under this chapter.
             568          (4) A person who violates a cease and desist order issued under this section is guilty of a
             569      class A misdemeanor.
             570          Section 18. Effective date.
             571          This act takes effect on July 1, 2000.


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