GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2011

H                                                                                                                                                   D

HOUSE DRH70147-ME-76B*  (03/23)

Short Title:        Fair Compensation for Mortgage Broker/Lender.		(Public)
Sponsors:	Representative Stam.
Referred to:

A BILL TO BE ENTITLED

AN ACT To make home mortgage lending more competitive in north carolina.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S.  24-1.1A(c) is amended by adding a new subdivision to read:

"(3) The term "discount points" shall include any fees paid by or on behalf of a borrower to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association, the Veterans Administration, the United States Department of Agriculture, or any federal agency as loan level price adjustments, adverse market delivery charges, or other charges levied by such agency to compensate for increased risks and costs which vary based upon credit score, loan size, or property or housing types."

SECTION 2.  G.S. 24-1.1E(a)(5) reads as rewritten:

"(5)      "Points and fees" is defined as provided in this subdivision.

a.         The term includes all of the following:

1.         All items paid by a borrower at or before closing and that are required to be disclosed under sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal Regulations, as amended from time to time, except interest or the time-price differential. However, the meaning of the term "points and fees" shall not include either (i) the portion of the up-front fees collected and paid to the Federal Housing Administration, the Veterans' Administration, or the U.S. Department of Agriculture to insure or guarantee a home loan that exceeds one and one-quarter percent (1.25%) of the total loan amount or (ii) the portion of any up-front private mortgage insurance premium, charge, or fee that exceeds one and one-quarter percent (1.25%) of the total loan amount, provided that the private mortgage insurance premium, charge or fee is required to be refundable on a prorated basis, the refund is automatically issued upon notification of the satisfaction of the underlying mortgage loan, and the borrower has the right to request or receive a prorated refund in accordance with state or federal law.

2.         All charges paid by a borrower at or before closing and that are for items listed under section 226.4(c)(7) of Title 12 of the Code of Federal Regulations, as amended from time to time, but only if the lender receives direct or indirect compensation in connection with the charge or the charge is paid to an affiliate of the lender; otherwise, the charges are not included within the meaning of the phrase "points and fees".

3.         To the extent not otherwise included in sub-subdivision a.1. or a.2. of this subdivision, all compensation paid from any source to a mortgage broker, including compensation paid to a mortgage broker in a table-funded transaction. A bona fide sale of a loan in the secondary mortgage market shall not be considered a table-funded transaction, and a table-funded transaction shall not be considered a secondary market transaction.

4.         The maximum prepayment fees and penalties which may be charged or collected under the terms of the loan documents.

b.         Notwithstanding the remaining provisions of this subdivision, the term does not include (i) taxes, filing fees, recording and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest; and (ii) fees paid to a person other than a lender or an affiliate of the lender or to the mortgage broker or an affiliate of the mortgage broker for the following: fees for tax payment services; fees for flood certification; fees for pest infestation and flood determinations; appraisal fees; fees for inspections performed prior to closing; credit reports; surveys; attorneys' fees (if the borrower has the right to select the attorney from an approved list or otherwise); notary fees; escrow charges, so long as not otherwise included under sub-subdivision a. of this subdivision; title insurance premiums; and premiums for insurance against loss or damage to property, including hazard insurance and flood insurance premiums, provided that the conditions in section 226.4(d)(2) of Title 12 of the Code of Federal Regulations are met.

c.         For open-end credit plans, the term includes those points and fees described in sub-subdivisions a.1. through a.3. of this subdivision, plus (i) the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total loan amount, and (ii) the maximum prepayment fees and penalties which may be charged or collected under the terms of the loan documents.

d. Notwithstanding the other provisions of this subdivision, the term "points and fees" shall not include fees paid by a borrower to an agency of the United States Government in connection with a home loan, if (i) the home loan is made, insured, or guaranteed by such agency and (ii) the fee is for making, insuring, or guaranteeing the loan. A charge shall be considered to have been paid by a borrower if the charge is paid (i) by the borrower directly, (ii) by a settlement agent or lender on behalf of the borrower, or (iii) by a lender with respect to the borrower's loan from funds loaned to or received from the borrower. For purposes of this sub-subdivision, the term "agency of the United States Government" includes, without limitation, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, the Veterans Administration, the United States Department of Agriculture, or any federal agency."

SECTION 3.  G.S. 24-1.1E(a)(6) reads as rewritten:

"(6)      "Thresholds" means: means one of the following:

a.         Without regard to whether the loan transaction is or may be a "residential mortgage transaction" (as the term "residential mortgage transaction" is defined in section 226.2(a)(24) of Title 12 of the Code of Federal Regulations, as amended from time to time), the annual percentage rate of the loan at the time the loan is consummated is such that the loan is considered a "mortgage" under section 152 of the Home Ownership and Equity Protection Act of 1994 (Pub. Law 103-25, [15 U.S.C. § 1602(aa)]), as the same may be amended from time to time, and regulations adopted pursuant thereto by the Federal Reserve Board, including section 226.32 of Title 12 of the Code of Federal Regulations, as the same may be amended from time to time; time.

b.         The total points and fees, as defined in G.S. 24-1.1E(a)(5), exceed four percent (4%) of the total loan amount if the total loan amount is twenty thousand dollars ($20,000) or more, or (ii) the lesser of eight percent (8%) of the total loan amount or one thousand dollars ($1,000), if the total loan amount is less than twenty thousand dollars ($20,000); provided, the following discount points and prepayment fees and penalties shall be excluded from the calculation of the total points and fees payable by the borrower:

1.         Up to and including two bona fide loan discount points payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan's interest rate will be discounted does not exceed by more than one percentage point (1%) the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either Fannie Mae or the Federal Home Loan Mortgage Corporation, whichever is greater; greater.

2.         Up to and including one bona fide loan discount point payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan's interest rate will be discounted does not exceed by more than two percentage points (2%) the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either Fannie Mae or the Federal Home Loan Mortgage Corporation, whichever is greater; greater.

3.         For a closed-end loan, prepayment fees and penalties which may be charged or collected under the terms of the loan documents which do not exceed one percent (1%) of the amount prepaid, provided the loan documents do not permit the lender to charge or collect any prepayment fees or penalties more than 30 months after the loan closing; closing.

4.         For an open-end credit plan, prepayment fees and penalties which may be charged or collected under the terms of the loan documents which do not exceed one percent (1%) of the amount prepaid, provided the loan documents do not permit the lender to charge or collect any prepayment fees or penalties more than (i) 30 months after the loan closing if the borrower has no right or option under the loan documents to repay all or any portion of the outstanding balance of the open-end credit plan at a fixed interest rate over a specified period of time or, (ii) if the borrower has a right or option under the loan documents to repay all or any portion of the outstanding balance of the open-end credit plan at a fixed interest rate over a specified period of time, 30 months after the date the borrower voluntarily exercises that right or option; or option.

As used in this sub-subdivision, the term "discount points" shall not include any fees paid by or on behalf of a borrower to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association, the Veterans Administration, the United States Department of Agriculture, or any federal agency as loan level price adjustments, adverse market delivery charges, or other charges levied by such agency to compensate for increased risks and costs which vary based upon credit score, loan size, or property or housing types.

c.         If the loan is a closed-end loan, the loan documents permit the lender to charge or collect prepayment fees or penalties more than 30 months after the loan closing or which exceed, in the aggregate, more than two percent (2%) of the amount prepaid. If the loan is an open-end credit plan, the loan documents permit the lender to charge or collect prepayment fees or penalties (i) more than 30 months after the loan closing if the borrower has no right or option under the loan documents to repay all or any portion of the outstanding balance of the open-end credit plan at a fixed interest rate over a specified period of time or, (ii) if the borrower has a right or option under the loan documents to repay all or any portion of the outstanding balance of the open-end credit plan at a fixed interest rate over a specified period of time, more than 30 months after the date the borrower voluntarily exercises that right or option, or (iii) which exceed, in the aggregate, more than two percent (2%) of the amount prepaid."

SECTION 4.  G.S. 53-244.101 is amended by adding a new subsection to read:

"(f) The Commissioner may not refuse the renewal of a loan originator's license based on the credit score at the time of the renewal. The Commissioner may establish a desired minimum credit score for renewal, but the Commissioner may not refuse to renew the license of a loan originator with a credit score less than the minimum unless the loan originator has exhibited a credit history which reflects a material disregard for creditors' rights and debtors' obligations."

SECTION 5.  G.S. 53-244.103(b) reads as rewritten:

"(b)      Licensees shall be required to post a surety bond with the Commissioner at application to be subsequently adjusted as follows:

(1)        A mortgage broker shall post a minimum surety bond of seventy-five thousand dollars ($75,000). fifty thousand dollars ($50,000). Provided, however, if a mortgage broker has originated mortgage loans in North Carolina in a 12-month period ending December 31 in excess of ten million dollars ($10,000,000) but less than fifty million dollars ($50,000,000), then the mortgage broker's minimum bond amount shall be one hundred twenty-five thousand dollars ($125,000), seventy-five thousand dollars ($75,000), and if a mortgage broker has originated mortgage loans in North Carolina in a 12-month period ending December 31 of fifty million dollars ($50,000,000) or more, the mortgage broker's minimum bond shall be two hundred fifty thousand dollars ($250,000). one hundred thousand dollars ($100,000).

(2)        A mortgage lender or mortgage servicer shall post a minimum surety bond of one hundred fifty thousand dollars ($150,000). seventy-five thousand dollars ($75,000). Provided, however, if a mortgage lender has originated mortgage loans in North Carolina in a 12-month period ending December 31 in excess of ten million dollars ($10,000,000) but less than fifty million dollars ($50,000,000), then the mortgage lender's minimum bond amount shall be two hundred fifty thousand dollars ($250,000), one hundred twenty-five thousand dollars ($125,000), and if a mortgage lender has originated mortgage loans in North Carolina in a 12-month period ending December 31 of fifty million dollars ($50,000,000) or more, then the mortgage lender's minimum bond shall be five hundred thousand dollars ($500,000). two hundred thousand dollars ($200,000).

(3)        Any increased surety bond required under subdivision (1) or (2) of this subsection shall be filed with the Commissioner on or before May 31 immediately following the end of the 12-month December 31 period."

SECTION 6.  G.S. 53-244.115(b) reads as rewritten:

"(b)      For purposes of investigating violations or complaints arising under this Article, or for the purposes of examination, the Commissioner may review, investigate, or examine any licensee, individual, or person subject to this Article as often as necessary in order to carry out the purposes of this Article. The Commissioner may interview the officer, principals, person with control, qualified individual, mortgage loan originators, employees, independent contractors, agents, and customers of the licensee, individual, or person concerning their business. The Commissioner may direct, subpoena, or order the attendance of and examine under oath all persons whose testimony may be required about the loans or the business or subject matter of any examination or investigation and may direct, subpoena, or order the person to produce books, accounts, records, files, and any other documents the Commissioner deems relevant to the inquiry. The reasonable cost of the investigation or examination shall be charged against the licensee, individual, or person subject to this Article. The Commissioner shall notify the party examined of the findings of the examination when it has been completed, and the Commissioner shall be required to initiate disciplinary action, if any, under G.S. 53-244.116 within 12 months of the date of such notice or such action shall be barred."

SECTION 7.  This act becomes effective October 1, 2011.