FAQs Prior to Rulemaking on SB 6471 (chapter 78, Laws of 2008)
In order to assist individuals and entities affected by SB 6471 DFI makes the following pre-rulemaking interpretations. Any of the following interpretations may change as a result of the rulemaking process. If you rely in good faith on these interpretations and the interpretations change as a result of the rulemaking process, DFI will not take action against you for your good faith compliance with these interpretations before the final rules are filed.
What activities can a licensed mortgage broker engage in under the Mortgage Broker Practices Act (MBPA) without triggering the license requirements of the Consumer Loan Act (CLA)?
As a licensed mortgage broker you may act in these capacities:
Broker – assisting borrowers, or holding yourself out as able to assist borrowers, in obtaining a residential mortgage loan. Loans close in the name of the lender.
Table Fund – "Table-funding" means a settlement at which a mortgage loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. The mortgage broker originates the loan and closes the loan in its own name with funds provided contemporaneously by a lender to whom the closed loan is assigned. WAC 208-660-006.
Non-delegated Correspondent – You close loans in your name with funds provided by a lender or other loan purchaser through a line of credit. The lender or other loan purchaser provides the underwriting criteria the borrower must meet and that lender or other loan purchaser makes the final underwriting decision.
What are the bonding requirements under the Consumer Loan Act (CLA)?
The CLA requires a minimum bond amount of $400,000 for the main office. In order to obtain a license under the CLA, you must, at a minimum, be able to obtain a bond in this amount. Under the current rules, adding 1-4 additional licensed locations requires an additional $100,000 of bonding for each location. Thereafter, additional locations require an additional $10,000 of bonding for each location.
Recognizing the rapidly approaching deadline for licensure, the impact of the bonding requirements upon small businesses and the difficulty the industry is having in obtaining a bond, DFI is rulemaking to amend the current rules to reduce the bond amounts. Under the proposed rules, the main office and four additional branches would require a $400,000 bond. For the sixth location and each location beyond that, an additional $10,000 of bonding is required. The proposed rules become effective August 22, 2008. Companies with more than 35 offices must contact Cindy Fazio, 360-902-8800 for bond instructions.
If your company is having trouble obtaining a bond at the current level required in the rules, and you can only obtain a bond in the amount required under the proposed rules, which begins at $400,000, DFI will consider your request for a delayed implementation of the current rules, and will allow you to obtain a bond based on the amounts in the proposed rules. The minimum bond amount begins at $400,000.
Your request for the delayed implementation must include a statement of the financial difficulty of obtaining a bond based on the current rules and any other information that would justify delayed implementation of the current requirements. A letter from the surety bond company attesting to the difficulty in obtaining the bond and your financial statements evidencing financial difficulty will be required. Financial statements evidencing the latter will be required. You must also declare that your company is not currently the subject of litigation involving a residential mortgage loan transaction in the state of Washington. If you are granted a delayed implementation, your company may be under enhanced scrutiny by DFI which may include offsite monitoring and more frequent examinations.
Current licensees with bonds set for reissuance between May 30 and August 22, 2008, should contact Cindy Fazio, 360-902-8800 for bond instructions.
If I am a currently licensed mortgage broker and have to transition over to the CLA license, will I get any fee adjustment to do so?
If your business model requires you to be licensed under the CLA, DFI will consider your request for a waiver of the DFI portion of the fees to get a CLA license. We are not able to waive the system fees of the NMLS for the CLA license.
What loan types are considered exempt from the CLA?
Business, commercial, agriculture, and organizational purpose lending is exempt from the CLA. See the Fair Debt Collection Practices Act, 15 U.S.C. Sec. 1603 (Truth in Lending), and Regulation Z that implements the act at 12 C.F.R. Part 226.3, for a description of each of these loan types.
Can private lenders make a de minimis number of loans each year without having to obtain a license under the CLA?
After requesting and receiving an exemption letter from the department, private lenders do not need a license under the CLA to:
a. Make five or fewer loans each year not secured by residential real estate.
b. Make five or fewer loans each year secured by residential real estate, for any amount, made solely with their own funds, without intending to resell the residential mortgage loan.
c. Make a loan, secured or unsecured, to an immediate family member.
d. The usury limit of 12 percent applies to these loans. Any lender must have a license under the CLA to make loans at interest rates in excess of the usury limit for personal or household use purpose loans.
Do Check Cashers and Sellers licensed under chapter 31.45 RCW have to license under the CLA?
No. Licensees under the Check Cashers and Sellers Act, chapter 31.45 RCW, do not need a license under the CLA.
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