6-903

6-903. Licensing of mortgage brokers required;
qualifications; application; bond; fees; renewal

A. A person shall not act as a mortgage broker if the person is not licensed under
this article. A person who brokers only commercial mortgage loans shall obtain either a
mortgage broker license or a commercial mortgage broker license. A person who brokers
residential mortgage loans shall obtain a mortgage broker license.

B. The superintendent shall not grant a mortgage broker's license or a commercial
mortgage broker's license to a person, other than a natural person, who is not registered
to do business in this state on the date of granting the license.

C. An applicant for an original mortgage broker's license shall:

1. Have not less than three years' experience as a mortgage broker, or equivalent
lending experience in a related business during the five years immediately preceding the
time of application.

2. Have satisfactorily completed a course of study approved by the superintendent
during the three years immediately preceding the time of application.

3. Have passed a mortgage broker's test, pursuant to section 6-908, not more than
one year before the granting of the license.

D. An applicant for an original commercial mortgage broker's license shall:

1. Have not less than three years' experience in the commercial mortgage broker
business or equivalent lending experience in a related business during the five years
immediately preceding the time of application.

2. Have made in the past or intend to make or negotiate or offer to make or
negotiate commercial mortgage loans.

3. Provide the superintendent with the following:

(a) A balance sheet prepared within the immediately preceding six months and
certified by the licensee. The superintendent may require a more recent balance sheet.

(b) If the applicant has begun operations, a statement of operations and retained
earnings and a statement of changes in financial position.

E. Notwithstanding subsection D, paragraph 3 of this section, commercial mortgage
broker licensees and commercial mortgage broker license applicants whose own resources
are derived exclusively from correspondent contracts with institutional investors shall
provide the superintendent with a current financial statement or that of its parent
company prepared according to generally accepted accounting principles, including:

1. A balance sheet prepared within the immediately preceding six months and
certified by the licensee. The superintendent may require a more recent balance sheet.

2. If the applicant has begun operations, a statement of operations and retained
earnings and a statement of changes in financial position.

3. Notes to the financial statement if applicable.

F. A person shall make an application for a license or for a renewal of a license
in writing on the forms, in the manner and accompanied by the information prescribed by
the superintendent. The superintendent may require additional information on the
experience, background, honesty, truthfulness, integrity and competency of the applicant
and any responsible individual designated by the applicant. If the applicant is a person
other than a natural person, the superintendent may require information as to the
honesty, truthfulness, integrity and competency of any officer, director, shareholder or
other interested party of the association, corporation or group.

G. The nonrefundable application fee and annual renewal fee are as prescribed in
section 6-126. The nonrefundable application fee shall accompany each application for an
original license only. The superintendent shall deposit, pursuant to sections 35-146 and
35-147, the monies in the state general fund.

H. If a licensee is a person other than a natural person, the license issued to it
entitles all officers, directors, members, partners, trustees and employees of the
licensed corporation, partnership, association or trust to engage in the mortgage
business if one officer, director, member, partner, employee or trustee of the person is
designated in the license as the individual responsible for the person under this
article. If a licensee is a natural person, the license entitles all employees of the
licensee to engage in the mortgage business. If the natural person is not a resident of
this state, an employee of the licensee shall be designated in the license as the
individual responsible for the licensee under the provisions of this article. For the
purposes of this subsection, an employee does not include an independent contractor. A
responsible individual shall be a resident of this state, shall be in active management
of the activities of the licensee governed by this article and shall meet the
qualifications set forth in subsection C or D of this section for a licensee.

I. A licensee shall notify the superintendent that its responsible individual will
cease to be in active management of the activities of the licensee within ten days of
learning that fact. The licensee has ninety days after the notification is received by
the superintendent within which to replace the responsible individual with a qualified
replacement and to so notify the superintendent. If the license is not placed under
active management of a qualified responsible individual and if notice is not given to the
superintendent within the ninety day period, the license of the licensee expires.

J. Every person licensed as a mortgage broker or a commercial mortgage broker shall
deposit with the superintendent, before doing business as a mortgage broker or a
commercial mortgage broker, a bond executed by the licensee as principal and a surety
company authorized to do business in this state as surety. The bond shall be conditioned
on the faithful compliance of the licensee, including the licensee's directors, officers,
members, partners, trustees and employees, with this article. The bond is payable to any
person injured by the wrongful act, default, fraud or misrepresentation of the licensee
or the licensee's employees and to this state for the benefit of the person
injured. Only one bond is required for any person, firm, association or corporation
irrespective of the number of officers, directors, members, partners or trustees who are
employed by or are members of such firm, association or corporation. No suit may be
commenced on the bond after the expiration of one year following the commission of the
act on which the suit is based, except that claims for fraud or mistake are limited to
the limitation period provided in section 12-543, paragraph 3. If an injured person
commences an action for a judgment to collect from the bond, the injured person shall
notify the superintendent of the action in writing at the time of the commencement of the
action and shall provide copies of all documents relating to the action to the
superintendent on request.

K. The bond required by this section shall be ten thousand dollars for licensees
whose investors are limited solely to institutional investors, and fifteen thousand
dollars for licensees whose investors include any noninstitutional investors.

L. For the purposes of subsection K of this section:

1. "Institutional investor" means a state or national bank, a state or federal
savings and loan association, a state or federal savings bank, a state or federal credit
union, a federal government agency or instrumentality, a quasi-federal government agency,
a financial enterprise, a licensed real estate broker or salesman, a profit sharing or
pension trust, or an insurance company.

2. "Investor" means any person who directly or indirectly provides to a mortgage
broker funds that are, or are intended to be, used in the making of a loan, and any
person who purchases a loan, or any interest therein, from a mortgage broker or in a
transaction that has been directly or indirectly arranged or negotiated by a mortgage
broker.

M. Notwithstanding section 35-155, in lieu of the bond described in this section,
an applicant for a license or a licensee may deposit with the superintendent a deposit in
the form of cash or alternatives to cash in the same amount as the bond required under
subsection J of this section. The superintendent may accept any of the following as an
alternative to cash:

1. Certificates of deposits or investment certificates that are payable or assigned
to the state treasurer, issued by banks or savings banks doing business in this state and
fully insured by the federal deposit insurance corporation or any successor institution.

2. Certificates of deposit, investment certificates or share accounts that are
payable or assigned to the state treasurer, issued by a savings and loan association
doing business in this state and fully insured by the federal deposit insurance
corporation or any successor institution.

3. Certificates of deposit, investment certificates or share accounts that are
payable or assigned to the state treasurer, issued by a credit union doing business in
this state and fully insured by the national credit union administration or any successor
institution.

N. The superintendent shall deposit the cash or alternatives to cash received under
this section with the state treasurer. The state treasurer shall hold the cash or
alternatives to cash in the name of this state to guarantee the faithful performance of
all legal obligations of the person required to post bond pursuant to this section. The
person is entitled to receive any accrued interest earned from the alternatives to
cash. The state treasurer may impose a fee to reimburse the state treasurer for
administrative expenses. The fee shall not exceed ten dollars for each cash or
alternatives to cash deposit and shall be paid by the applicant or licensee. The state
treasurer may prescribe rules relating to the terms and conditions of each type of
security provided by this section.

O. In addition to such other terms and conditions as the superintendent prescribes
by rule or order, the principal amount of the deposit shall be released only on written
authorization of the superintendent or on the order of a court of competent
jurisdiction. The principal amount of the deposit shall not be released before the
expiration of three years from the first to occur of any of the following:

1. The date of substitution of a bond for a cash alternative.

2. The surrender of the license.

3. The revocation of the license.

4. The expiration of the license.

P. A licensee or an employee of the licensee shall not advertise for or solicit
mortgage business in any manner without using the name and license number as issued on
the mortgage broker's principal place of business license, except that a licensee may
employ or refer to the commonly used name and any trademarks or service marks of any
affiliate. If a license is issued in the name of a natural person, nothing in the
advertising or solicitation may imply the license is in the name of another person or
entity. For the purposes of this subsection, "advertise" does not include business
cards, radio and television advertising directed at national or regional markets and
promotional items except if those items contain rates or terms on which a mortgage loan
may be obtained.

Q. A licensee shall not employ any person unless the licensee:

1. Conducts a reasonable investigation of the background, honesty, truthfulness,
integrity and competency of the employee before hiring.

2. Keeps a record of the investigation for not less than two years after
termination.

R. A license is not transferable or assignable and control of a licensee may not be
acquired through a stock purchase or other device without the prior written consent of
the superintendent. Written consent shall not be given if the superintendent finds that
any of the grounds for denial, revocation or suspension of a license as set forth in
section 6-905 are applicable to the acquiring person. For the purposes of this
subsection, "control" means the power to vote more than twenty per cent of outstanding
voting shares of a licensed corporation, partnership, association or trust.

S. The licensee is liable for any damage caused by any of the licensee's employees
while acting as an employee of the licensee.

T. A licensee shall comply with the requirements of section 6-114 relating to
balloon payments.

U. The examination and course of study requirements of this section shall be waived
by the superintendent for any person applying for a license who, within the six months
immediately prior to the submission of the application, has been a licensee or a
responsible person pursuant to this chapter.

V. If the applicant for renewal of a mortgage broker license is a natural person,
the applicant shall have satisfactorily completed twelve continuing education units by a
continuing education provider approved by the superintendent before submitting the
renewal application. If the applicant is other than a natural person, the designated
responsible individual shall have satisfactorily completed twelve continuing education
units by a continuing education provider approved by the superintendent before submitting
the renewal application. An applicant for renewal of a commercial mortgage broker license
is not subject to the continuing education requirements prescribed by this article.

W. A licensee who employs a loan originator shall comply with section 6-991.03.