1     
SAFE ACT EXEMPTIONS

2     
2018 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Brad M. Daw

5     
Senate Sponsor: Daniel Hemmert

6     

7     LONG TITLE
8     General Description:
9          This bill amends the Utah Residential Mortgage Practices and Licensing Act.
10     Highlighted Provisions:
11          This bill:
12          ▸     defines terms;
13          ▸     exempts certain nonprofit corporations from licensing requirements under the Utah
14     Residential Mortgage Practices and Licensing Act; and
15          ▸     makes technical changes.
16     Money Appropriated in this Bill:
17          None
18     Other Special Clauses:
19          None
20     Utah Code Sections Affected:
21     AMENDS:
22          61-2c-102, as last amended by Laws of Utah 2017, Chapter 182
23          61-2c-105, as last amended by Laws of Utah 2017, Chapter 182
24     

25     Be it enacted by the Legislature of the state of Utah:
26          Section 1. Section 61-2c-102 is amended to read:
27          61-2c-102. Definitions.
28          (1) As used in this chapter:
29          (a) "Affiliation" means that a mortgage loan originator is associated with a principal
30     lending manager in accordance with Section 61-2c-209.
31          (b) "Applicant" means a person applying for a license under this chapter.
32          (c) "Approved examination provider" means a person approved by the nationwide
33     database or by the division as an approved test provider.
34          (d) "Associate lending manager" means an individual who:
35          (i) qualifies under this chapter as a principal lending manager; and
36          (ii) works by or on behalf of another principal lending manager in transacting the
37     business of residential mortgage loans.
38          (e) "Balloon payment" means a payment in a mortgage transaction:
39          (i) that the creditor requires the debtor to make during the term of the mortgage;
40          (ii) that represents the entire amount of the outstanding balance of the mortgage; and
41          (iii) the entire amount of which is due no later than a date on which the aggregate
42     amount of the remaining minimum periodic payments required under the mortgage would not
43     fully amortize the outstanding balance of the mortgage.
44          [(e)] (f) "Branch lending manager" means an individual who is:
45          (i) licensed as a lending manager; and
46          (ii) designated in the nationwide database by the individual's sponsoring entity as being
47     responsible to work from a branch office and to supervise the business of residential mortgage
48     loans that is conducted at the branch office.
49          [(f)] (g) "Branch office" means a licensed entity's office:
50          (i) for the transaction of the business of residential mortgage loans regulated under this
51     chapter;
52          (ii) other than the main office of the licensed entity; and
53          (iii) that operates under:
54          (A) the same business name as the licensed entity; or
55          (B) another trade name that is registered with the division under the entity license.
56          [(g)] (h) "Business day" means a day other than:
57          (i) a Saturday;
58          (ii) a Sunday; or
59          (iii) a federal or state holiday.
60          [(h)] (i) (i) "Business of residential mortgage loans" means for compensation or in the
61     expectation of compensation to:
62          (A) engage in an act that makes an individual a mortgage loan originator;
63          (B) make or originate a residential mortgage loan;
64          (C) directly or indirectly solicit a residential mortgage loan for another;
65          (D) unless exempt under Section 61-2c-105 or excluded under Subsection
66     (1)[(h)](i)(ii), render services related to the origination of a residential mortgage loan including:
67          (I) preparing a loan package;
68          (II) communicating with the borrower or lender;
69          (III) advising on a loan term;
70          (IV) receiving, collecting, or distributing information common for the processing or
71     underwriting of a loan in the mortgage industry; or
72          (V) communicating with a consumer to obtain information necessary for the processing
73     or underwriting of a residential mortgage loan; or
74          (E) engage in loan modification assistance.
75          (ii) "Business of residential mortgage loans" does not include:
76          (A) ownership of an entity that engages in the business of residential mortgage loans if
77     the owner does not personally perform the acts listed in Subsection (1)[(h)](i)(i);
78          (B) acting in one or more of the following capacities:
79          (I) a loan wholesaler;
80          (II) an account executive for a loan wholesaler;
81          (III) a loan closer; or
82          (IV) funding a loan; or
83          (C) if employed by a person who owns or services an existing residential mortgage
84     loan, the direct negotiation with the borrower for the purpose of loan modification.
85          [(i)] (j) "Certified education provider" means a person who is certified under Section
86     61-2c-204.1 to provide one or more of the following:
87          (i) Utah-specific prelicensing education; or
88          (ii) Utah-specific continuing education.
89          [(j)] (k) "Closed-end" means a loan:
90          (i) with a fixed amount borrowed; and
91          (ii) that does not permit additional borrowing secured by the same collateral.
92          [(k)] (l) "Commission" means the Residential Mortgage Regulatory Commission
93     created in Section 61-2c-104.
94          [(l)] (m) "Community development financial institution" means the same as that term
95     is defined in 12 U.S.C. Sec. 4702.
96          [(m)] (n) "Compensation" means anything of economic value that is paid, loaned,
97     granted, given, donated, or transferred to an individual or entity for or in consideration of:
98          (i) services;
99          (ii) personal or real property; or
100          (iii) another thing of value.
101          [(n)] (o) "Concurrence" means that entities given a concurring role must jointly agree
102     for the action to be taken.
103          [(o)] (p) "Continuing education" means education taken by an individual licensed
104     under this chapter in order to meet the education requirements imposed by Sections
105     61-2c-204.1 and 61-2c-205 to renew a license under this chapter.
106          [(p)] (q) "Control," as used in Subsection 61-2c-105(2)(f), means the power to directly
107     or indirectly:
108          (i) direct or exercise a controlling interest over:
109          (A) the management or policies of an entity; or
110          (B) the election of a majority of the directors, officers, managers, or managing partners
111     of an entity;
112          (ii) vote 20% or more of a class of voting securities of an entity by an individual; or
113          (iii) vote more than 5% of a class of voting securities of an entity by another entity.
114          [(q)] (r) (i) "Control person" means an individual identified by an entity registered with
115     the nationwide database as being an individual directing the management or policies of the
116     entity.
117          (ii) "Control person" may include one of the following who is identified as provided in
118     Subsection (1)[(q)](r)(i):
119          (A) a manager;
120          (B) a managing partner;
121          (C) a director;
122          (D) an executive officer; or
123          (E) an individual who performs a function similar to an individual listed in this
124     Subsection (1)[(q)](r)(ii).
125          [(r)] (s) "Depository institution" means the same as that term is defined in Section
126     7-1-103.
127          [(s)] (t) "Director" means the director of the division.
128          [(t)] (u) "Division" means the Division of Real Estate.
129          [(u)] (v) "Dwelling" means a residential structure attached to real property that contains
130     one to four family units including any of the following if used as a residence:
131          (i) a condominium unit;
132          (ii) a cooperative unit;
133          (iii) a manufactured home; or
134          (iv) a house.
135          [(v)] (w) "Employee":
136          (i) means an individual:
137          (A) whose manner and means of work performance are subject to the right of control
138     of, or are controlled by, another person; and
139          (B) whose compensation for federal income tax purposes is reported, or is required to
140     be reported, on a W-2 form issued by the controlling person; and
141          (ii) does not include an independent contractor who performs duties other than at the
142     direction of, and subject to the supervision and instruction of, another person.
143          [(w)] (x) "Entity" means:
144          (i) a corporation;
145          (ii) a limited liability company;
146          (iii) a partnership;
147          (iv) a company;
148          (v) an association;
149          (vi) a joint venture;
150          (vii) a business trust;
151          (viii) a trust; or
152          (ix) another organization.
153          [(x)] (y) "Executive director" means the executive director of the Department of
154     Commerce.
155          [(y)] (z) "Federal licensing requirements" means Secure and Fair Enforcement for
156     Mortgage Licensing, 12 U.S.C. Sec. 5101 et seq.
157          [(z)] (aa) "Foreclosure rescue" means, for compensation or with the expectation of
158     receiving valuable consideration, to:
159          (i) engage, or offer to engage, in an act that:
160          (A) the person represents will assist a borrower in preventing a foreclosure; and
161          (B) relates to a transaction involving the transfer of title to residential real property; or
162          (ii) as an employee or agent of another person:
163          (A) solicit, or offer that the other person will engage in an act described in Subsection
164     (1)[(z)](aa)(i); or
165          (B) negotiate terms in relationship to an act described in Subsection (1)[(z)](aa)(i).
166          [(aa)] (bb) "Inactive status" means a dormant status into which an unexpired license is
167     placed when the holder of the license is not currently engaging in the business of residential
168     mortgage loans.
169          [(bb)] (cc) "Lending manager" means an individual licensed as a lending manager
170     under Section 61-2c-206 to transact the business of residential mortgage loans.
171          [(cc)] (dd) "Licensee" means a person licensed with the division under this chapter.
172          [(dd)] (ee) "Licensing examination" means the examination required by Section
173     61-2c-204.1 or 61-2c-206 for an individual to obtain a license under this chapter.
174          [(ee)] (ff) "Loan modification assistance" means, for compensation or with the
175     expectation of receiving valuable consideration, to:
176          (i) act, or offer to act, on behalf of a person to:
177          (A) obtain a loan term of a residential mortgage loan that is different from an existing
178     loan term including:
179          (I) an increase or decrease in an interest rate;
180          (II) a change to the type of interest rate;
181          (III) an increase or decrease in the principal amount of the residential mortgage loan;
182          (IV) a change in the number of required period payments;
183          (V) an addition of collateral;
184          (VI) a change to, or addition of, a prepayment penalty;
185          (VII) an addition of a cosigner; or
186          (VIII) a change in persons obligated under the existing residential mortgage loan; or
187          (B) substitute a new residential mortgage loan for an existing residential mortgage
188     loan; or
189          (ii) as an employee or agent of another person:
190          (A) solicit, or offer that the other person will engage in an act described in Subsection
191     (1)[(ee)](ff)(i); or
192          (B) negotiate terms in relationship to an act described in Subsection (1)[(ee)](ff)(i).
193          [(ff)] (gg) (i) "Mortgage loan originator" means an individual who, for compensation or
194     in expectation of compensation:
195          (A) (I) takes a residential mortgage loan application;
196          (II) offers or negotiates terms of a residential mortgage loan for the purpose of:
197          (Aa) a purchase;
198          (Bb) a refinance;
199          (Cc) a loan modification assistance; or
200          (Dd) a foreclosure rescue; or
201          (III) directly or indirectly solicits a residential mortgage loan for another person; and
202          (B) is licensed as a mortgage loan originator in accordance with this chapter.
203          (ii) "Mortgage loan originator" does not include a person who:
204          (A) is described in Subsection (1)[(ff)](gg)(i), but who performs exclusively
205     administrative or clerical tasks as described in Subsection (1)[(h)](i)(ii)(A);
206          (B) (I) is licensed under Chapter 2f, Real Estate Licensing and Practices Act;
207          (II) performs only real estate brokerage activities; and
208          (III) receives no compensation from:
209          (Aa) a lender;
210          (Bb) a lending manager; or
211          (Cc) an agent of a lender or lending manager; or
212          (C) is solely involved in extension of credit relating to a timeshare plan, as defined in
213     11 U.S.C. Sec. 101(53D).
214          [(gg)] (hh) "Nationwide database" means the Nationwide Mortgage Licensing System
215     and Registry, authorized under federal licensing requirements.
216          [(hh)] (ii) "Nontraditional mortgage product" means a mortgage product other than a
217     30-year fixed rate mortgage.
218          [(ii)] (jj) "Person" means an individual or entity.
219          [(jj)] (kk) "Prelicensing education" means education taken by an individual seeking to
220     be licensed under this chapter in order to meet the education requirements imposed by Section
221     61-2c-204.1 or 61-2c-206 for an individual to obtain a license under this chapter.
222          [(kk)] (ll) "Principal lending manager" means an individual:
223          (i) licensed as a lending manager under Section 61-2c-206; and
224          (ii) identified in the nationwide database by the individual's sponsoring entity as the
225     entity's principal lending manager.
226          [(ll)] (mm) "Prospective borrower" means a person applying for a mortgage from a
227     person who is required to be licensed under this chapter.
228          [(mm)] (nn) "Record" means information that is:
229          (i) prepared, owned, received, or retained by a person; and
230          (ii) (A) inscribed on a tangible medium; or
231          (B) (I) stored in an electronic or other medium; and
232          (II) in a perceivable and reproducible form.
233          [(nn)] (oo) "Referral fee":
234          (i) means any fee, kickback, other compensation, or thing of value tendered for a
235     referral of business or a service incident to or part of a residential mortgage loan transaction;
236     and
237          (ii) does not include:
238          (A) a payment made by a licensed entity to an individual employed by the entity under
239     a contractual incentive program according to rules made by the division in accordance with
240     Title 63G, Chapter 3, Utah Administrative Rulemaking Act; or
241          (B) a payment made for reasonable promotional and educational activities that is not
242     conditioned on the referral of business and is not used to pay expenses that a person in a
243     position to refer settlement services or business related to the settlement services would
244     otherwise incur.
245          [(oo)] (pp) "Residential mortgage loan" means an extension of credit, if:
246          (i) the loan or extension of credit is secured by a:
247          (A) mortgage;
248          (B) deed of trust; or
249          (C) consensual security interest; and
250          (ii) the mortgage, deed of trust, or consensual security interest described in Subsection
251     (1)[(oo)](pp)(i):
252          (A) is on a dwelling located in the state; and
253          (B) is created with the consent of the owner of the residential real property.
254          [(pp)] (qq) "Settlement" means the time at which each of the following is complete:
255          (i) the borrower and, if applicable, the seller sign and deliver to each other or to the
256     escrow or closing office each document required by:
257          (A) the real estate purchase contract;
258          (B) the lender;
259          (C) the title insurance company;
260          (D) the escrow or closing office;
261          (E) the written escrow instructions; or
262          (F) applicable law;
263          (ii) the borrower delivers to the seller, if applicable, or to the escrow or closing office
264     any money, except for the proceeds of any new loan, that the borrower is required to pay; and
265          (iii) if applicable, the seller delivers to the buyer or to the escrow or closing office any
266     money that the seller is required to pay.
267          [(qq)] (rr) "Settlement services" means a service provided in connection with a real
268     estate settlement, including a title search, a title examination, the provision of a title certificate,
269     services related to title insurance, services rendered by an attorney, preparing documents, a
270     property survey, rendering a credit report or appraisal, a pest or fungus inspection, services
271     rendered by a real estate agent or broker, the origination of a federally related mortgage loan,
272     and the processing of a federally related mortgage.
273          [(rr)] (ss) "Sponsorship" means an association in accordance with Section 61-2c-209
274     between an individual licensed under this chapter and an entity licensed under this chapter.
275          [(ss)] (tt) "State" means:
276          (i) a state, territory, or possession of the United States;
277          (ii) the District of Columbia; or
278          (iii) the Commonwealth of Puerto Rico.
279          [(tt)] (uu) "Uniform state test" means the uniform state content section of the qualified
280     written test developed by the nationwide database.
281          [(uu)] (vv) "Unique identifier" means the same as that term is defined in 12 U.S.C. Sec.
282     5102.
283          [(vv)] (ww) "Utah-specific" means an educational requirement under this chapter that
284     relates specifically to Utah.
285          (2) (a) If a term not defined in this section is defined by rule, the term shall have the
286     meaning established by the division by rule made in accordance with Title 63G, Chapter 3,
287     Utah Administrative Rulemaking Act.
288          (b) If a term not defined in this section is not defined by rule, the term shall have the
289     meaning commonly accepted in the business community.
290          Section 2. Section 61-2c-105 is amended to read:
291          61-2c-105. Scope of chapter -- Exemptions.
292          (1) (a) Except as to an individual who will engage in an activity as a mortgage loan
293     originator, this chapter applies to a closed-end residential mortgage loan secured by a first lien
294     or equivalent security interest on a dwelling.
295          (b) This chapter does not apply to a transaction covered by Title 70C, Utah Consumer
296     Credit Code.
297          (2) The following are exempt from this chapter:
298          (a) the federal government;
299          (b) a state;
300          (c) a political subdivision of a state;
301          (d) an agency of or entity created by a governmental entity described in Subsections
302     (2)(a) through (c) including:
303          (i) the Utah Housing Corporation created in Section 63H-8-201;
304          (ii) the Federal National Mortgage Corporation;
305          (iii) the Federal Home Loan Mortgage Corporation;
306          (iv) the Federal Deposit Insurance Corporation;
307          (v) the Resolution Trust Corporation;
308          (vi) the Government National Mortgage Association;
309          (vii) the Federal Housing Administration;
310          (viii) the National Credit Union Administration;
311          (ix) the Farmers Home Administration; and
312          (x) the United States Department of Veterans Affairs;
313          (e) a depository institution;
314          (f) an entity that controls, is controlled by, or is under common control with a
315     depository institution;
316          (g) an employee or agent of an entity described in Subsections (2)(a) through (f):
317          (i) when that person acts on behalf of the entity described in Subsections (2)(a) through
318     (f); and
319          (ii) including an employee of:
320          (A) a depository institution;
321          (B) a subsidiary of a depository institution that is:
322          (I) owned and controlled by the depository institution; and
323          (II) regulated by a federal banking agency, as defined in 12 U.S.C. Sec. 5102; or
324          (C) an institution regulated by the Farm Credit Administration;
325          (h) except as provided in Subsection (3), a person who:
326          (i) makes a loan:
327          (A) secured by an interest in real property;
328          (B) with the person's own money; and
329          (C) for the person's own investment; and
330          (ii) that does not engage in the business of making loans secured by an interest in real
331     property;
332          (i) except as provided in Subsection (3), a person who receives a mortgage, deed of
333     trust, or consensual security interest on real property if the individual or entity:
334          (i) is the seller of real property; and
335          (ii) receives the mortgage, deed of trust, or consensual security interest on real property
336     as security for a separate money obligation;
337          (j) a person who receives a mortgage, deed of trust, or consensual security interest on
338     real property if:
339          (i) the person receives the mortgage, deed of trust, or consensual security interest as
340     security for an obligation payable on an installment or deferred payment basis;
341          (ii) the obligation described in Subsection (2)(j)(i) arises from a person providing
342     materials or services used in the improvement of the real property that is the subject of the
343     mortgage, deed of trust, or consensual security interest; and
344          (iii) the mortgage, deed of trust, or consensual security interest is created without the
345     consent of the owner of the real property that is the subject of the mortgage, deed of trust, or
346     consensual security interest;
347          (k) a nonprofit corporation that:
348          (i) (A) is exempt from paying federal income taxes;
349          (B) is certified by the United States Small Business Administration as a small business
350     investment company;
351          (C) is organized to promote economic development in this state; and
352          (D) has as [its] the nonprofit corporation's primary activity providing financing for
353     business expansion; [or]
354          (ii) is a community development financial institution; or
355          (iii) (A) is exempt from paying federal income taxes;
356          (B) has as the nonprofit corporation's primary purpose serving the public by helping
357     low-income individuals and families build, repair, or purchase housing;
358          (C) does not require, under the terms of a mortgage, a balloon payment;
359          (D) to perform loan originator activities, uses only unpaid volunteers or employees
360     whose compensation is not based on the number or size of the mortgage transactions that the
361     employees originate; and
362          (E) does not charge a loan origination fee in connection with a mortgage transaction;
363          (l) an employee or volunteer for a nonprofit corporation described in Subsection
364     (1)(k)(ii) or (iii), working within the scope of the nonprofit corporation's business;
365          [(l)] (m) except as provided in Subsection (3), a court appointed fiduciary; or
366          [(m)] (n) an attorney admitted to practice law in this state:
367          (i) if the attorney is not principally engaged in the business of negotiating residential
368     mortgage loans when considering the attorney's ordinary practice as a whole for all the
369     attorney's clients; and
370          (ii) when the attorney engages in loan modification assistance in the course of the
371     attorney's practice as an attorney.
372          (3) An individual who will engage in an activity as a mortgage loan originator is
373     exempt from this chapter only if the individual is an employee or agent exempt under
374     Subsection (2)(g).
375          (4) (a) A loan processor or loan underwriter who is not a mortgage loan originator is
376     not required to obtain a license under this chapter when the loan processor or loan underwriter
377     is:
378          (i) employed by, and acting on behalf of, a person or entity licensed under this chapter;
379     and
380          (ii) under the direction of and subject to the supervision of a person licensed under this
381     chapter.
382          (b) A loan processor or loan underwriter who is an independent contractor is not
383     exempt under Subsection (4)(a).
384          (5) (a) Notwithstanding Subsection (2)(m), an attorney exempt from this chapter may
385     not engage in conduct described in Section 61-2c-301 when transacting business of residential
386     mortgage loans.
387          (b) If an attorney exempt from this chapter violates Subsection (5)(a), the attorney:
388          (i) is not subject to enforcement by the division under Part 4, Enforcement; and
389          (ii) may be subject to disciplinary action generally applicable to an attorney admitted to
390     practice law in this state.
391          (c) If the division receives a complaint alleging an attorney exempt from this chapter is
392     in violation of Subsection (5)(a) or that an attorney subject to this chapter has violated this
393     chapter, the division shall forward the complaint to the Utah State Bar for disciplinary action.
394          (6) (a) An individual who is exempt under Subsection (2), (3), or (4) may voluntarily
395     obtain a license under this chapter by complying with Part 2, Licensure.
396          (b) An individual who voluntarily obtains a license under this Subsection (6) shall
397     comply with all the provisions of this chapter.




Legislative Review Note
Office of Legislative Research and General Counsel