Bureau of Financial Institutions

Virginia Mortgage Law

and Regulation Overview

Revised November 2010

Compliance Basics

 Laws of Virginia Related to Non-Depository

Financial Services – Title 6.2 Financial
Institutions and Services
 Virginia Administrative Code – also known as
Regulations
 Administrative Letters
Laws

 Enacted by the Virginia General Assembly.

 Virginia Financial Institutions and Services
statutes are found in Title 6.2 of the Code of
Virginia
Virginia Administrative Code

 Regulations are administrative rules. Chapter

16 of Title 6.2 titled Mortgage Lenders and
Mortgage Brokers (“MLB Act”) gives the
Commission authority to promulgate rules and
regulations to help it carry out its statutory
responsibilities.
 Proposed Regulations are sent to licensees
and other interested parties providing an
opportunity for comments to be filed on the
proposed Regulation and for a hearing to be
requested
Administrative Letters (“AL”)

 Method by which the Commissioner of

Financial Institutions formally communicates
with entities regulated by the Bureau of
Financial Institutions (“BFI”) to provide
helpful direction, guidance, instructions,
interpretations, or general information
 AL are not regulations or laws, but are
positions taken by the BFI on issues affecting
financial institutions
Code of Virginia

 Title 55 Property and Conveyances

– Chapter 27.2 Real Estate Settlements

 Title 6.2 Financial Institutions and Services

– Chapter 3 Interest and Usury
– Chapter 4 Certain Lending Practices
– Chapter 16 Mortgage Lenders and Mortgage
Brokers
– Chapter 17 Mortgage Loan Originators
Title 55 Property and Conveyances
Chapter 27.2 Real Estate Settlements

 § 55-525.8 Definitions
– Disbursement of loan funds – delivery of loan
funds by lender to settlement agent
– Disbursement of settlement proceeds – payment
of all proceeds of transaction by settlement agent
to persons entitled thereto
– Loan closing – time agreed upon when execution
of loan documents occur
Title 55 Property and Conveyances
Chapter 27.2 Real Estate Settlements

 Definitions (continued)
– Settlement – when settlement agent receives the
executed deed, loan funds, loan documents and
other documents and funds required to carry out
the terms of the contract between the parties and
pre-recordation conditions have been met
Title 55 Property and Conveyances
Chapter 27.2 Real Estate Settlements

 § 55-525.9 Applicability; effect of

noncompliance
– Applies to all first mortgage transactions secured by
real estate containing not more than four
residential dwelling units – purchase and refinance
– Failure to comply with the provisions of this chapter
shall not affect the validity or enforceability of any
loan documents.
Title 55 Property and Conveyances
Chapter 27.2 Real Estate Settlements

 § 55-525.10 Duty of Lender

– At or before loan closing, lender must disburse
loan funds to settlement agent, unless right of
rescission applies
– Lender cannot receive interest on the loan until
disbursement of the loan funds and loan closing
has occurred
Title 55 Property and Conveyances
Chapter 27.2 Real Estate Settlements

 § 55-525.11 Duty of Settlement Agent

– Must cause recordation of loan documents and
disburse settlement proceeds within two business
days of settlement
Title 6.2
Chapter 3 Interest and Usury

 § 6.2-326 Fees and charges in connection

with loans by real estate lenders…
– Applies to first mortgage loans and allows lenders
to charge a loan fee as agreed to by the borrower
– Allows the lender to require the borrower to pay
the reasonable and necessary charges in
connection with making the loan (refer to
Administrative Letter 1606 regarding assignment
fees)
Title 6.2
Chapter 3 Interest and Usury

 Administrative Letter 1606

– States “assignment fee” is not a fee incurred “in
connection with making the loan” and cannot be
passed on to the borrower
– Collection of this fee will be cited as a violation
and reimbursement will be required
Title 6.2
Chapter 3 Interest and Usury

 § 6.2-327 Certain loans secured by a

subordinate deed of trust or mortgage.
– Paragraph D (2) limits the loan fee to not more than
5% of the principal amount of the loan. Refer to
Administrative Letter 0702 and the April 1988 issue
of the Compliance Connection
Title 6.2
Chapter 3 Interest and Usury

 § 6.2.327 D (2)
– Loan fee permitted cannot be imposed more often
than once each 18 months, except to extent that
“new money” is advanced by a renewal or
additional loan by the same lender
Administrative Letter 0702

 “loan fee” also known as “points”

 Points charged on subordinate loans must
not exceed 5% of the principal amount of the
loan (meaning a loan amount that does not
include points)
 Refer to April 1998 issue of the Compliance
Connection for further information and
examples
Title 6.2
Chapter 3 Interest and Usury

 § 6.2-328 Charges allowed on loan secured

by subordinate mortgage
– Specifically lists the 3rd party fees that borrowers
may be required to pay. If a fee is not listed in
this section, it cannot be charged to the borrower
– allows for the actual cost of a credit report, title
examination, title insurance, mortgage guaranty
insurance, recording fees, surveys, attorney fees,
appraisal fees and a fee to determine if property
is located in flood hazard area
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-400 Amount of late charge; when

charge can be made
– Lender can impose late charge for failure to make
“timely payment”
– Late charge cannot exceed 5%
– “timely payment” is defined as one made by the
date fixed for payment or within 7 calendar days
of the due date
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-406 Disclosure of terms of mortgage

application
– Written disclosure required to be given to first
mortgage applicants at the time of application
– Must be initialed or signed by applicants and
broker/lender
Title 6.2
Chapter 4 Certain Lending Practices

 §6.2-406 (continued)
 Disclosure must include:
– Statement describing when, if ever, the interest,
points and fees will be locked in;
– Statement that any terms not legally locked in are
subject to change until settlement; and
– A good faith estimate of the processing time
required for the loan, taking into account time
needed for inspections & and other functions
necessary to close the loan.
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-407 Lenders to furnish borrower with

copy of appraisal
– Lender must provide borrower with copy of written
appraisal within 10 business days of borrower’s
request, if borrower is required to pay for
appraisal in connection with his loan application
– If no written appraisal exists, provide a statement
of appraised value
– NOTE: Also see Regulation B § 202.14 Rules on
Providing Appraisal Reports
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-410 Borrowers not to be required to

employ particular professionals
– Prohibits the lender from requiring the borrower to
use the services of a particular attorney, surveyor
or insurer
– Lender has right to approve any attorney,
surveyor or insurer selected by borrower as long
as approval is not unreasonably withheld
Title 6.2
Chapter 4 Certain Lending Practices

 §6.2-412 Fire insurance coverage under

certain loans not to exceed replacement
value of improvements
 §6.2-407 Lenders to furnish borrower with
copy of appraisal (also refer to Federal
Regulation B § 202.14)
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-414 Obligation of lender to pay taxes,

insurance; penalties
– Banks or lenders maintaining escrow accounts for
payment of taxes and insurance who fail to make
timely payments and incur a penalty or late charge
shall be liable for the penalty/late charge assessed
– Bank or lender must send written notice to obligor
of the payment of any penalty/late charge within 5
days after such payment is made
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-418 Property owner entitled to written

statement of payoff amount.
– Borrower entitled to written payoff statement
within 10 business days of receipt of written
request from the property owner/designee
– First payoff request in a 12 month period must be
at no charge. For each additional request, fee
cannot exceed $15
– A fax is considered a written request
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-421 Certain contracts to permit

prepayment; amount of prepayment penalty
– Except for loans secured by deed of trust on home
occupied (or to be occupied) in whole or in part by a
borrower, loans secured by first deeds of trust on
real estate, where the principal amount of the loan is
less than $75,000, prepayment may be made at any
time and maximum penalty is 1% of the unpaid
balance
– Applicable to non-owner occupied residential loans
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-422 Prepayment penalty for loan

secured by home occupied by borrower
– Applies to first mortgages, owner occupied
residential properties in VA
– Penalty cannot exceed 2% of the amount of the
prepayment
– Includes “alternative mortgage transactions”
made after 7/1/03 (refer to Administrative Letter
1610)
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-423 Prepayment of loans secured by

certain subordinate mortgages or deeds of trust
– Applies to subordinate mortgages
– Borrowers can prepay loan in whole or in part at any
time
– Lender can contract for a prepayment penalty but fee
cannot exceed 2% of the principal amount prepaid
– Includes “alternative mortgage transactions” made
after 7/1/03 (refer to Administrative Letter 1610)
Title 6.2
Chapter 4 Certain Lending Practices

 § 6.2-423 (continued)
– Penalty cannot be imposed if:
 Loan is refinanced or consolidated with the same lender
or subsequent note holder;
 If loan is accelerated due to default, or
 If a partial prepayment is made or in the case of an open
end credit line where there is a payment of the balance
without a demand to release the deed of trust
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1600 Definitions
– Mortgage broker – any person who directly or
indirectly negotiates, places or finds mortgage
loans for others, or offers to negotiate, place or
find loans for others.
 Includes loan modification companies and intermediate
mortgage activities such as loan processing,
telemarketing and lead generation companies – they
“indirectly negotiate, place or find mortgage loans for
others”
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1600 Definitions (continued)

– Mortgage broker
 If loan processor or telemarketer is a bona fide
employee of a licensed mortgage company, then no
separate license is necessary
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1600 Definitions (continued)

– Mortgage lender – any person who directly or
indirectly makes mortgage loans
 Administrative Letter 1601 states the Bureau’s position
that the payee named in the mortgage loan note is
presumed to be the mortgage lender
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1600 Definitions (continued)

– Mortgage loan – loan made to individual, proceeds of which
are to be used primarily for personal, family or household
purposes, secured by a mortgage or deed of trust upon any
interest in 1 to 4 family residential property located in VA
 Includes renewals or refinances
 Excludes loans made by sellers of property; loans to persons
related by blood or marriage; loans to bona fide employees of the
lender
 Does not include loans on commercial or agricultural property
 NOTE: effective 7/1/08 definition includes owner and non-owner
occupied 1- 4 residential property
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1602 Persons Exempt

– Include but are not limited to:
 Lenders who make 3 or fewer mortgage loans in period
of 12 consecutive months
 Banks, savings institutions, credit unions, industrial loan
associations, financial institution holding companies
 Subsidiaries and affiliates (as defined in VAC 5-160-10)
of banks, savings institutions, credit unions
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1604 and Administrative Letter 1609

– Bonds must be continuously maintained
– Minimum Bond Amounts:
 Mortgage brokers -- $25,000 bond
 Mortgage lenders and lender/brokers-- $50,000 bond
– Bond amounts can increase based on loan
origination volume (see schedule in 10 VAC 5-
161-50)
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1604 Bond Requirement and

Administrative Letter 1609
– Surety company is required to provide SCC with
90 days notice of cancellation
– Bureau sends notice to licensee before bond
coverage lapses, with warning that failure to
maintain bond will result in revocation of license
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1606 & Administrative Letter 1604

– Lenders must continuously maintain a minimum
of $200,000 for the operation of the business
– Must be in the form of cash or line of credit with
depository institution (bank, savings institution,
credit union) or combination of cash on deposit
and line of credit
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1606 and AL 1604 (continued)

– Acceptable evidence of compliance
 Copy of bank statements since last examination (or date
of licensure)
 Copy of current executed line of credit agreement –
must be in the name of the licensee and not expired

FAILURE TO PROVIDE ACCEPTABLE EVIDENCE CAN

LEAD TO REVOCATION OF THE MORTGAGE
LENDER LICENSE
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1609 Retention of books, accounts and

records
– Books, accounts and records must be kept
separate and apart from any other business and
in a licensed location
– Three year retention requirement
– Records may be electronically maintained but
they must be readily available for examination
(except for mortgage broker agreements which
must be maintained in their original form)
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1609 Record Retention (continued)

– Brokers must retain
 the original contract for compensation (broker
agreement)
 HUD-1 Settlement Statement
 Accounting of fees received in connection with the loan
 other papers as required
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1609 Record Retention (continued)

– Lenders must retain:
 Copy of note
 HUD-1 Settlement Statement
 Final Truth in Lending Disclosure
 Other papers as required

NOTE: Federal Regulation B § 202.12 requires retention

of canceled and denied files for 25 months
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1611 Investigations; examinations

– Commission may conduct exams as often as it
deems necessary
– Bureau examines each mortgage licensee at least
once in every three year period
– Advance notice of examination is not required –
can show up unannounced
What to Expect when
Examiner Arrives

 Provide adequate work space, access to

phone, internet, copy and fax machine
 Introduce to key personnel
 Direct them to where files are maintained
 Provide copy of previous exam and response
(if applicable)
 Provide blank copy of standard forms
Examination Questionnaire

 Available on disk, via e-mail or hard copy

 Complete while examiners are in your office
or prior to their arrival
 Include all attachments (forms, advertising,
broker/lender lists, financial statements
(audited, if available)
 Examiners are not attorneys and cannot give
legal advice, but they will try to assist with
compliance questions you may have
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1612 Annual Fees

– Defray the costs of regulated industries
examination, supervision, and regulation
– Schedule of annual fees set by the Commission
– Assessed on or before April 25 each year
– Assessments due on or before May 25 each year
– See 10 VAC 5-160-40 for details
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1612 Annual Fees (continued)

– If examination or investigation is conducted
outside the Commonwealth, mortgage licensee is
liable for and must pay actual travel and living
expenses
– Itemized statement will be provided and payment
is due within 30 days of the date of the invoice
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1614 Prohibitions applicable to MLs and

MBs
– Mortgage Lenders and Brokers are prohibited from,
among other things:
 Obtaining borrower’s signatures on agreements that contain
blanks
 Taking an interest in collateral other than the real estate or
residential property securing a mortgage loan
 Obtaining exclusive dealing/agency agreement from any
borrower
 Delaying a mortgage loan closing for the purpose of
increasing interest, costs, fees or borrower paid charges
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1614 Prohibitions applicable to MLs and

MBs (continued)
– MLs and MBs are prohibited from, among other things:
 Obtaining any agreement executed by borrower containing an
acceleration clause permitting unpaid balance of mortgage
loan to be declared due for any reason other than:
– Failure to make timely payment
– Submitting false information on the application
– Breaching any representation or covenant made in the
agreement or instrument
– Failing to perform any other obligations undertaken in the
agreement of instrument
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 6.2-1614 Prohibitions applicable to MLs and

MBs (continued)
– MLs and MBs are prohibited from, among other things:
● Recommending or encouraging a person to default on an
existing loan if the default adversely affects the person’s
creditworthiness, in connection with soliciting a mortgage loan
that refinances all or any portion of the existing loan
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1614 Prohibitions applicable to MLs

and MBs (continued)
– “Flipping” prohibited
 A flipped loan is one in which the new loan does not
result in a benefit to the borrower considering the terms
of both the new and refinanced loan, cost of the new
loan, and the borrower’s circumstances
 “flipping” a mortgage loan means refinancing a
mortgage loan within 12 months following the date the
refinanced loan was originated, unless the refinancing is
in the borrower’s best interest
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1614 Prohibitions applicable to MLs

and MBs (continued)
– Flipping prohibited
 Factors to be considered in determining whether flipping
occurred would include, but not be limited to:
– the borrower’s new monthly payment is lower than the
total of all monthly obligations being financed, taking into
account the costs and fees;
– There is a change in the amortization period of the new
loan;
– The borrower receives cash in excess of the costs and
fees of the refinancing;
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1614 Prohibitions applicable to MLs

and MBs (continued)
– Flipping prohibited
 Factors (continued):
– The borrower’s note rate is reduced;
– There is a change from an adjustable to a fixed rate loan,
taking into account costs and fees, and
– The refinancing is necessary to respond to a bona fide
personal need or an order of a court of competent
jurisdiction
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1614 Prohibitions applicable to MLs

and MBs (continued)
– Flipping prohibited
 No mortgage lender or broker shall knowingly or
intentionally engage in the act or practice of “flipping” a
mortgage loan
Chapter 16
Mortgage Lender and Broker Act

 §6.2-1614 Prohibitions applicable to MLs and

MBs
– Advertising
 Advertisements shall not:
– Contain false, misleading or deceptive statements or
representations
– Identify the lender or broker by any name other than
the name set forth on the license
SEE ADDITIONAL RULES IN 10 VAC 5-160-60
NOTE: Refer to Federal Regulation Z Truth in Lending
Act § 226.24 for additional advertising provisions
Title 6.2 Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1615 Prohibitions applicable to MLs

– No mortgage lender required to be licensed shall fail to
require the person closing the mortgage loan to provide the
borrower (prior to closing) a settlement statement and the
truth in lending disclosure
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1616 Other prohibitions applicable to MBs

– Brokers are prohibited from:
 Receiving compensation , other than actual cost of
credit report and appraisal, prior to borrower receiving a
written commitment from the lender
 Receiving compensation from a mortgage lender of
which he is a principal, partner, trustee, director, officer
or employee
 Receiving compensation from borrower in connection
with any mortgage loan transaction in which he is the
lender or principal, partner, trustee, director or officer of
the lender
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1616 Other prohibitions applicable to MBs

– Receiving compensation that is not specified in a
written agreement signed by the borrower(s).
 Cannot use terms such as “not to exceed” or “not more than”
when stating the fee in the contract for compensation (see
also Administrative Letter 1607)
 Violations of this statute will result in overcharges which will
require reimbursement to affected borrowers
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1616 Other prohibitions applicable to MBs

– Brokers are also prohibited from receiving
compensation as a mortgage broker in a transaction
where they or anyone affiliated with the mortgage
broker (defined in next slide) acted as a real estate
broker, agent or salesman in connection with the
property securing the loan and has or will receive
compensation for the sale of the property. “Dual
compensation” is prohibited unless mortgage broker
was licensed on or before February 25, 1989
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1616 Other prohibitions applicable to MBs (con’t)

– “Affiliated person of a mortgage broker” means any person

which is a subsidiary, stockholder, partner, trustee, director,
officer or employee of a mortgage broker, and any
corporation 10% or more of the capital stock of which is
owned by a mortgage broker or by any person which is a
subsidiary, stockholder, partner, trustee, director, officer, or
employee of a mortgage broker.
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1616 Other prohibitions applicable to MBs (con’t)

– For mortgage brokers licensed prior to February 25,
1989 where they have acted as a mortgage broker
on the same transaction where they were involved in
the real estate transaction, mortgage broker fees
may be received as long as the
“Notice” is provided to the borrower when the
mortgage broker services were first offered. “Notice”
is found in § 6.2-1616 B (5)
Chapter 16
Mortgage Lenders and Mortgage Brokers

 § 6.2-1617 Application to certain real estate

brokers
– Does not prohibit a real estate broker, who is
either an owner of an interest in a real estate firm
or acts as a real estate broker in a sole
proprietorship, from having an ownership interest
in a mortgage broker or lender or from receiving
returns on their investment or from receiving
compensation for services performed, excluding
mortgage broker activities.
Virginia Regulation
10 VAC 5-160

 Section 10 Definitions
– This section provides definitions of many terms
found in the regulations
– Be sure staff is aware of these definitions as they
pertain to the Virginia regulations
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (1) Operating Rules

– Licensee shall not misrepresent qualification
requirements or any material loan terms or make
false or misleading statements to induce an
applicant to apply or enter into a commitment or
lock-in agreement or pay a commitment fee
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (2) Operating Rules

– No licensee shall retain any portion of any fees or
charges imposed upon consumers for goods or
services provided by third parties
– 3rd party fees received from an applicant (fees for
appraisal, courier, credit report, etc.) must be
supported by adequate documentation
(bill/invoice)
– 3rd party fees must be deposited in escrow
account in bank, savings institution, credit union,
segregated from the licensee’s other funds
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (3) Operating Rules

– Mortgagor who obtains the loan is entitled to
continue to make payments to the transferor of the
servicing rights under a mortgage loan until the
mortgagor receives written notice of the transfer of
servicing rights
– Notice must specify name and address to which
future payments should be made and mailed or
delivered at least 10 calendar days before the first
payment affected by the notice
NOTE: See also Regulation X § 3500.21
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (4) Operating Rules

– If a person is or was engaged in business of
mortgage lending or brokering, surety bond
(required by § 6.2-1604) shall be retained by the
Commissioner in spite of the occurrence of the
following events:
 Person’s application for a license is withdrawn or denied
 Person’s license is surrendered, suspended or revoked
 Person ceases engaging in business as mortgage
lender or broker
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (5) Operating Rules

– Within 15 days of becoming aware of any of the
following events, licensee must file a written
report with the Commissioner describing the
event and any expected impact on the licensee’s
activities in VA:
 Licensee files for bankruptcy or reorganization
 Any government authority institutes revocation,
suspension proceedings against the licensee, or
revokes or suspends a mortgage-related license held or
formally held by licensee
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (5) Operating Rules

– Written Reports must be filed (continued)
 any governmental authority takes
– (i) formal regulatory or enforcement action against a
licensee relating to its mortgage business
– (ii) any other action against the licensee relating to
its mortgage business where the total amount of
restitution or other payment from the licensee
exceeds $20,000
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (5) Operating Rules

– Written Reports must be filed (continued)
 Based on allegations by any governmental authority that
the licensee violated any law or regulation applicable to
the conduct of its licensed mortgage business, the
licensee enters into, or otherwise agrees to the entry of,
a settlement or consent order, decree, or agreement
with a governmental authority
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (5) Operating Rules

– Written Reports must be filed (continued)
 Licensee surrenders its license to engage in
any mortgage-related business in another
state in lieu of threatened or pending license
revocation, license suspension or other
regulatory or enforcement action
 Licensee is denied a license to engage in any
mortgage-related business in another state
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (5) Operating Rules

– Written Reports must be filed (continued)
 Licensee or any of its employees, officers,
directors or principals is indicted for a felony
 Licensee or any of its employees, officers,
directors or principals is convicted of a felony
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (6) Operating Rules

– No licensee shall inform consumer that such
consumer has been or will be “preapproved” or
“pre-approved” for a mortgage loan unless the
licensee at the same time provides consumer with
a separate written disclosure (in at least 10-point
type)
Virginia Regulation
10 VAC 5-160

 10 VAC 5-160-20 (6) Operating Rules

– Disclosure must:
 Explain what preapproved means
 Inform consumer that the loan application has not yet
been approved
 State a written commitment to make a mortgage loan
has not yet been issued
 Advise consumer what needs to occur before the loan
application can be approved
Virginia Regulation
10 VAC 5-160

 Section 30 Commitment agreements and

lock-in agreements
– If utilized, commitment and lock-in agreements
must contain certain information as outlined in the
regulation
Virginia Regulation
10 VAC 5-160

 Section 30 Commitment agreements and

lock-in agreements
– Commitment agreements must include:
 Identity of property
 Principal amount and term of the loan
 Interest rate & points if the agreement is also used as a
lock-in agreement or statement that rate & points will be
made at lender’s prevailing rate
 Amount of any commitment fee and time in which fee
must be paid
Virginia Regulation
10 VAC 5-160

 Section 30 Commitment agreements and lock-in

agreements
– Commitment agreements must include:
 Whether or not funds will be escrowed and for what
purpose
 Whether or not PMI is required
 Length of commitment period
 Statement that if the loan is not closed within the
commitment period, lender is no longer obligated by the
agreement
 Any other terms of the commitment required by the
lender
Virginia Regulation
10 VAC 5-160

 Section 30 Lock-in agreements

– Lock-in agreements must be signed by a
representative of the lender or broker and must
contain:
 Interest rate & points, and if ARM loan, the initial rate
and brief description of the method to determine rate
 Amount of any lock-in fee
 Length of lock-in period
 Statement that if the loan is not closed within the lock-in
period, lender is no longer obligated by the agreement
Virginia Regulation
10 VAC 5-160

 Section 30 Lock-in agreements

– Lock-in agreements must contain:
 A statement that any terms not locked-in by
the agreement are subject to change until the
loan is closed at settlement
 Any other terms and conditions required by the
lender
Virginia Regulation
10 VAC 5-160

 Section 40 Schedule prescribing annual fees

for the examination, supervision & regulation
of mortgage lenders and brokers
– Sets schedule for annual fees (base amount plus
per loan fee)
 $400 MB; $800 ML; $1,200 MLB; plus $6.60 per loan
made or brokered
– Sets dates for assessment (April 25th) and
payment due date (May 25th)
Virginia Regulation
10 VAC 5-160

 Section 50 Responding to requests from

Bureau of Financial Institutions
– Requires response to Bureau requests within the
time period specified and clarifies that failure to
do so could result in a fine, suspension, and/or
revocation of license
– If no time period is specified, requested
information must be provided no later than 30
days from the date of the request
Virginia Regulation
10 VAC 5-160

 Section 10 defines “advertisement” as

– a commercial message in any medium that
promotes, directly or indirectly, a mortgage loan.
The term includes a communication sent to a
consumer as part of a solicitation of business, but
excludes messages on promotional items such as
pens, pencils, notepads, hats, calendars, etc., as
well as rate sheets or other information distributed
or made available solely to other businesses.
Virginia Regulation
10 VAC 5-160

 Section 60 (A) Advertising

– Every advertisement used by or published on
behalf of a licensed mortgage lender and/or
mortgage broker shall clearly and conspicuously
disclose the following:
 Name of mortgage company as set forth on the license
 Statement that the company is licensed by the “Virginia
State Corporation Commission”
 License number assigned by the SCC (i.e.: MC – XXX)
Virginia Regulation
10 VAC 5-160

 Section 60 (A) Advertising

– If an ad contains an interest rate, a statement that
stated rate may change or not be available at the
time of loan commitment or lock-in
– If an ad contains specific information about a
consumer’s existing mortgage loan and the
information was not obtained from the consumer,
a statement identifying the source of the
information (i.e.: public records, credit reporting
agency)
Virginia Regulation
10 VAC 5-160

 Section 60 (B) Advertising

– No mortgage licensee shall deceptively advertise
a mortgage loan, make false or misleading
statements or representation, or misrepresent the
terms, conditions, or charges incident to obtaining
a mortgage loan
Virginia Regulation
10 VAC 5-160

 Section 60 (C) Advertising

– No mortgage licensee shall use or cause to be published an
ad that states or implies:
 The mortgage licensee is affiliated with, or an agent or division
of, a governmental agency, depository institution, or other
entity with which no such relationship exists
 A consumer has been or will be “pre-approved” for a mortgage
loan, unless the ad
– Discloses on the face of the ad in at least 14-point, bold
type that “THIS IS NOT A LOAN APPROVAL”
– Clearly and conspicuously discloses the conditions and
qualifications associated with the pre-approval
Virginia Regulation
10 VAC 5-160

 Section 60 (D) Advertising

– Mortgage licensee shall not use or cause to be
published any ad that gives a consumer the false
impression that the ad is being sent by the
consumer’s current note holder
– If ad contains name of consumer’s current note
holder or lien holder, it shall not be more
conspicuous than the name of the licensee
publishing the ad
Virginia Regulation
10 VAC 5-160

 Section 60 (E) Advertising

– Mortgage licensee shall not deliver or cause to be
delivered to a consumer any envelope or other
written material that gives the false impression
that the mailing or written material is an official
communication from a governmental entity
Virginia Regulation
10 VAC 5-160

 Section 60 (F) Advertising

– If ad states or implies that consumer can reduce
his monthly payment by refinancing current loan,
but as a result of the refinancing, the consumer’s
total finance charges may be higher over the life
of the loan, a mortgage licensee shall clearly and
conspicuously disclose to the consumer that by
refinancing, the consumer’s total finance charges
may be higher over the life of the loan
Virginia Regulation
10 VAC 5-160

 Section 60 (G) Advertising

– Every ad used by, or published on behalf of, a
licensed mortgage company shall comply with the
disclosure requirements of Regulation Z and the
Truth in Lending Act
Virginia Regulation
10 VAC 5-160

 Section 60 (H) Advertising

– “Clearly and conspicuously” means that a
required disclosure is reasonably understandable,
prominently located, and readily noticeable by a
potential borrower of ordinary intelligence
Virginia Regulation
10 VAC 5-160

 Section 60 (I) Advertising

– An example of every ad used (including
solicitation letters, commercial scripts, and
recordings of radio and television broadcasts but
excluding copies of internet web pages) must be
retained for at least 3 years after it is last
published, delivered, transmitted, or made
available
Surety Bond Claims

 Bureau can file claim against the licensee’s

surety bond for damages resulting from
noncompliance (by a licensed MC) of any
condition of the bond
– Since mid 1998, bond claims totaling $438,398
have been filed against mortgage licensees and
paid by their surety companies for consumer
overcharges, billed and unpaid travel expenses;
unpaid annual assessments (this does not include
claims made by 3rd parties)
Examination Timeline

 Examiner conducts examination of records

 Examiner completes Report of Examination
 Report of Examination is reviewed by review
examiners
 Report of Examination is sent to licensee for
response
 Response is reviewed and licensee is
contacted if any additional information is
needed
Tips for Preparing Response

 Include documentation to support corrective

action taken and compliance procedures
implemented (revised forms/disclosures, copy
of canceled refund checks, copy of 3rd party
fee invoices, revisions to compliance
procedures)
 Thoroughly read cover letter and respond to all
issues addressed in Report and cover letter
 Respond within time frame given
Regulatory Action

 Imposition of civil penalty per § 6.2-1624 of

the Code of Virginia
– Up to $2,500 for each violation of Chapter 16,
Title 6.2 (Mortgage Lenders and Mortgage
Brokers) and any applicable law or regulation
pertaining to the mortgage business
Regulatory Action

 Suspension or revocation of license pursuant

to § 6.2-1619 of the Code of Virginia
– Grounds for suspension or revocation
 Any ground for denial of a license under Chapter 16
(Mortgage Lenders and Mortgage Brokers)
 Any violation of any law or regulations applicable to the
conduct of the licensee’s business
 Course of conduct of failing to perform written
agreements with borrowers
 Failure to account for fees received or disbursed to the
satisfaction of the person supplying or receiving funds
Regulatory Action

 Suspension or revocation of license pursuant

to § 6.2-1619 of the Code of Virginia
– Grounds for suspension or revocation
 Failure to pay when due, reasonable fees to a licensed
appraiser for appraisal services 1) requested from
appraiser in writing by licensee or employee of licensee,
2) performed, in accordance with terms of contract with
appraiser and all regulatory requirements related to the
appraiser and appraisal, by the appraiser in connection
with the origination or closing
Regulatory Action

 Suspension or revocation of license pursuant

to § 6.2-1619 of the Code of Virginia
– Grounds for suspension or revocation
 Failure to disburse funds in accordance with any
agreement connected with, and promptly upon closing of
a mortgage loan, taking into account any applicable right
of rescission
 Conviction of a felony or misdemeanor involving fraud,
misrepresentation or deceit
 Entry of judgment against lender or broker involving
fraud, misrepresentation or deceit
Regulatory Action

 Suspension or revocation of license pursuant

to § 6.2-1619 of the Code of Virginia
– Grounds for suspension or revocation
 Entry of federal or state administrative order against
licensee for violation of any law or any regulation
applicable to the conduct of the licensed business
 Refusal to permit an investigation or examination by the
Commission
 Failure to pay any fee or assessment imposed by SCC
 Failure to comply with any order of the Commission
Regulatory Action

 Suspension or revocation of license pursuant

to § 6.2-1619 of the Code of Virginia
– Grounds for suspension or revocation
 Acts of any officer, director, member, partner or principal
shall be deemed acts of the mortgage licensee
Regulatory Action

 § 6.2-1620 (A) Censuring, suspending or

barring person
– Provides the Commission authority (after
providing notice and an opportunity for a hearing)
to censure, suspend (for a defined period of time)
or bar a person from any position of employment,
management or control of any licensee if it is
found that:
Regulatory Action

 § 6.2-1620 (A) Censuring, suspending or

barring persons
 The censure, suspension or bar is in the public interest and
that the person has committed or caused a violation of the
Mortgage Lender and Broker Act or any rule, regulation, or
order of the Commission; or
 The person, after July 1, 2003 has either been (i) convicted
of, or pled nolo contendere to, any crime, or (ii) held liable in
any civil action by final judgment or administrative judgment
by any public agency, and the criminal, civil or administrative
judgment involves an offense reasonably related to the
qualifications, functions or duties of a person engaged in the
mortgage lender or broker business
Regulatory Action

 § 6.2-1620 (B) Censuring, suspending or

barring persons
– Prohibits persons suspended or barred from
participating in any business activity of a licensee
and from engaging in any activity at the location
where a licensee conducts its business
Regulatory Action

 § 6.2-1622 A Cease and desist orders

– If Commission determines that any mortgage
licensee required to be licensed has violated any
provision of Chapter 16 of Title 6.2 (Mortgage
Lenders and Mortgage Brokers) or any regulation,
Commission may order person to cease and desist
from such practices and comply with the law
 Commission must give 21 day notice in writing
 Send notice via certified mail to principal place of business
 State grounds for the contemplated action
Regulatory Action

 § 6.2-1622 B Cease and desist orders

– Person(s) may, within 14 days of date of notice,
file a written request for a hearing with the Clerk
of the Commission
Regulatory Action

 § 6.2-1624 Civil Penalties

– In addition authority to revoke and file cease and
desist order, the Commission can impose a penalty
or fine not exceeding $2,500 for each violation of
Chapter 16 of Title 6.2 (Mortgage Lenders and
Mortgage Brokers) or any other law or regulation
applicable to the conduct of the mortgage
company’s business
– Each separate violation shall be subject to the civil
penalty
New Legislation and Regulation
Mortgage Loan Originators

 Chapter 17 Mortgage Loan Originators

– Effective July 1, 2009

 Virginia Regulation 10 VAC 5-161

– Effective August 17, 2009
Chapter 17
Mortgage Loan Originators

 § 6.2-1700 Definitions
– MLO defined as an individual who takes an
application or offers or negotiates the terms of a
residential mortgage loan, as defined in the SAFE
Act, that is secured by real property located in VA.
– MLOs employed by a bank, credit union, savings
institution or a subsidiary owned and controlled by
a depository institution and regulated by a federal
banking agency have to be registered in the
NMLS but do not have to be licensed.
Chapter 17
Mortgage Loan Originators

 § 6.2-1700 Definitions
– Also defines terms such as:
 Administrative or clerical tasks
 Loan processor or underwriter
 Nationwide Mortgage Licensing System and Registry
 Registered mortgage loan originator
 Unique identifier
Chapter 17
Mortgage Loan Originators

 § 6.2-1701 License Requirement

– Requires mortgage loan originators (MLOs) to be
registered in the Nationwide Mortgage Licensing
System and Registry (“NMLS”) and licensed by
the SCC by July 1, 2010
Chapter 17
Mortgage Loan Originators

 § 6.2-1702 Application for license; form;

content; fee
– Fee is $180 (VA application fee of $150 and
NMLS processing fee of $30)
– Application must include
 Name and residential address of the applicant
 Address of employer or address where applicant will act
as MLO
 Other information concerning financial responsibility,
background, experience and activities of applicant
Chapter 17
Mortgage Loan Originators

 § 6.2-1707 Other conditions for mortgage

loan originators licensing:
– Applicant has not been convicted of, or pled guilty
or nolo-contendere to a felony in the 7 years
preceding the application for licensing or at any
time preceding the application date if the felony
involved fraud, dishonesty, breech of trust or
money laundering (as evidenced by a criminal
background check)
Chapter 17
Mortgage Loan Originators

 § 6.2-1707 Other conditions for mortgage loan

originators licensing: (continued)
– Applicant has never had a MLO license revoked by
any governmental authority
– Applicant has completed pre-licensing education
requirements
– Applicant has passed written national and state test
– Applicant has registered and received unique
identifier from NMLS
Chapter 17
Mortgage Loan Originators

 § 6.2-1708 Pre-licensing education of MLOs:

– Applicant has completed 20 hours of pre-licensing
education to include:
 3 hours of federal law and regulations
 3 hours of ethics, including instruction about fraud,
consumer protection and fair lending
 2 hours related to nontraditional lending products
– Courses can be classroom, online, or other means
as long as they are approved by NMLS
– Successful completion of approved courses taken
for other states will be accepted in VA
Chapter 17
Mortgage Loan Originators

 § 6.2-1709 Testing of MLO applicants

– National and state component
– Developed by Registry
– Administered by test provider approved by
Registry
– Minimum passing score: 75
Chapter 17
Mortgage Loan Originators

 § 6.2-1710 Continuing education for MLOs

– 8 hours yearly including
 3 hours on federal laws and regulations
 2 hours on ethics
 2 hours related to lending standards for nontraditional mortgage
products, is required
– Courses can be classroom, online, or other means as long as
they are approved by NMLS
– Successful completion of approved courses taken for other
states will be accepted in VA
– Courses will count for credit in the calendar year taken
Chapter 17
Mortgage Loan Originators

 § 6.2-1711 Licenses; places of business;

changes
– Each MLO license will state the full name and
address of record of licensee
– Licensee must display proof of licensing upon
request
– Must prominently display telephone number and
internet addresses for the Registry and Commission
– Licenses are not transferable or assignable
Chapter 17
Mortgage Loan Originators

 § 6.2-1711 Licenses; places of business;

changes (continued)
– Must use name as set forth on the license
– MLOs must notify Commissioner within 10 days
and in writing of any change of residential or
business address
– MLO licenses expire at the end of each calendar
year
Chapter 17
Mortgage Loan Originators

 § 6.2-1713 Investigations; examinations

– Commission can investigate and examine
business activities, premises, and records of any
individual required to be licensed as a MLO
– Individual must afford full access to all persons,
premises, books, records and information as
examiner deems necessary
Chapter 17
Mortgage Loan Originators

 § 6.2-1714 Annual fees

– Cost of renewal for VA MLO licensees is $130
 $100 renewal fee
 $30 processing fee to NMLS
– If necessary to conduct examination of MLO
located outside VA, MLO is liable for costs
incurred by Bureau
Chapter 17
Mortgage Loan Originators

 § 6.2-1715 Advertising
– MLOs may not use or cause publication of any
advertisement that
 Contains false, misleading or deceptive statements or
representations
 Identifies a MLO by any name other than the name set
forth on the license issued by the Commission.
Chapter 17
Mortgage Loan Originators

 Regulatory Action
– § 6.2-1716 Suspension or revocation of license
 Sets forth basis for pursuing these actions
– § 6.2-1718 Notice of proposed suspension or
revocation
 Must give notice and opportunity for a hearing
– § 6.2-1719 Civil penalties
 Maximum civil penalty $2,500 per violation of Chapter
17
Chapter 17
Mortgage Loan Originators

 Annual Renewal (Ref. 10 VAC 5-161-40)

– MLO licenses expire at the end of each calendar
year
– MLO licenses are subject to annual renewal
unless granted 90 days before calendar year end
– Licenses will be renewed through NMLS
beginning November 1, 2010
Chapter 17
Mortgage Loan Originators

 General Information
– Virginia Bureau of Financial Institutions began
accepting applications through the NMLS August
3, 2009
– If MLO answers “yes” to any question on the MU4
questionnaire (MLO application), a complete
detailed written explanation must be provided and
a copy of any pertinent documentation
Chapter 17
Mortgage Loan Originators

 General Information
– Important to review the MU4 form and the
jurisdiction specific requirements for Virginia in
the NMLS Resource Center prior to submission
– Pursuant to VA law, each day after July 1, 2010
that an unlicensed individual acts as or holds
himself out to the general public as a MLO shall
constitute a separate violation of law and each
violation is subject to a $2500 civil penalty
Chapter 17
Mortgage Loan Originators

 Specific VA Forms:
– Virginia Jurisdiction – Specific Document Checklist
– Surety Bond Form CCB-8813 or CCB-8814 (if not
previously submitted by employer
– Employment Verification Form CCB-8815
– Mortgage Business Certification Form CCB-8816 (if
not previously submitted)
Chapter 17
Mortgage Loan Originators

 Surety Bond Form CCB-8813

– Covers MLOs that are employees or exclusive
agents of mortgage lenders/companies licensed or
exempt from licensing pursuant to Chapter 16 of
Title 6.2 (Mortgage Lenders and Mortgage Brokers)
– Must be submitted by employer at the time its first
MLO applies for a Virginia license
– Will replace our current surety bond form CCB-8802
for licensed mortgage lenders/brokers
Chapter 17
Mortgage Loan Originators

 Surety Bond Amounts (Ref. 10 VAC 5-160-50)

Loan Volume (previous year) Bond Amount
$0 - $5 million $25,000
$5,000,001 - $20 million $50,000
$20,000,001 - $50 million $75,000
$50,000,001 - $100 million $100,000
Over $100 million $150,000
Note: the minimum bond amount for entities required to be licensed as
mortgage lenders and mortgage lender/brokers is still $50,000
Chapter 17
Mortgage Loan Originators

 Employment Verification Form CCB-8815

– Must be completed by each employer for which
the MLO originates Virginia loans and submitted
to BFI by the MLO applicant
– Used by BFI to verify the MLO is eligible to be
covered by employer’s surety bond
– At least one employment verification form must be
submitted by all individuals applying for a Virginia
MLO license
Chapter 17
Mortgage Loan Originators

 Mortgage Business Certification Form CCB-8816

– Only required when a new bond on CCB-8813 or
CCB-8814 is being submitted with the MLO
application (should only be submitted one time for
each entity filing the bond)
– Must be completed by the entity filing the bond
(usually the MLO’s employer)
– Used to determine the required amount of bond
coverage
Chapter 17
Mortgage Loan Originators

 Questions regarding VA MLO Licensing?

– Visit our website at www.scc.virginia.gov/bfi
– Contact our Licensing Section at 804-371-0484 or
via email at mlo@scc.virginia.gov/bfi
– Visit NMLS website at:
http://mortgage.nationwidelicensingsystem.org
BFI Web site

 www.scc.virginia.gov/bfi
– Link to NMLS
– VA laws, regulations, letters
– List of regulatory action taken – fines,
revocations, denials
– Past issues of the Compliance Connection
– List of licensed mortgage lenders and brokers
– Application forms
– How to file a complaint
HUD - RESPA

 www.hud.gov/offices/hsg/rmra/res/respa_hm.cfm
– Statutes, Rules & Regulations, Statements of
Policy, FAQ’s, Settlement Agreements
 Office of RESPA (202) 708-0502
Federal Trade Commission

 http://business.ftc.gov/
– Topics include Advertising; Credit; Identity
Theft, Privacy and Security
– Site provides
 Rules and Acts
 Business Alerts
Federal Reserve Bank

 For printed copies of federal regulations

contact the closest Federal Reserve Bank,
Publications Office
 Ask for the Regulation and the Commentary
(Commentary provides more explanations
than the regulation does)
Bureau of Financial Institutions

 Consumer Finance and Mortgage Section

1300 E. Main Street, Suite 800
Richmond, Virginia 23219
(804) 371-9701
(804) 371-9416 facsimile
Commissioner E. J. “Joe” Face, Jr.
Deputy Commissioner Susan E. Hancock