PROPOSED RULEMAKING
DEPARTMENT OF BANKING
[ 10 PA. CODE CH. 44 ]
Mortgage Licensee Education
[39 Pa.B. 2805]
[Saturday, June 6, 2009]The Department of Banking (the Department), is soliciting input regarding the Department's proposed rulemaking regarding prelicensure education and testing and continuing education requirements for licensees under 7 Pa.C.S. Chapter 61 (relating to mortgage loan industry licensing and consumer protection) (known as the Mortgage Act).
Purpose of Proposed Rulemaking
The Department is promulgating this regulation as a result of the passage of the Mortgage Act which on November 5, 2008, enacted a new regulatory scheme for mortgage professionals and repealed Chapter 3 of the Mortgage Brokers and Bankers and Consumer Equity Protection Act (the MBBCEPA), 63 P. S. §§ 456.101--456.521 and the Secondary Mortgage Loan Act (the SMLA), 7 P. S. §§ 6601--6626. The Mortgage Act imposes prelicensure education and testing requirements as well as continuing education requirements for all licensees under the act. This proposed rulemaking will amend the currently existing continuing education regulation promulgated under the MBBCEPA at 10 Pa. Code Chapter 44.
Explanation of Proposed Regulatory Requirements
Under the Mortgage Act, the proposed regulation requires the following:
(a) Applicants who are seeking a license as a mortgage broker, mortgage lender and mortgage loan correspondent must have: (i) an individual who is a director, partner or ultimate equitable owner of 10% or more of an applicant successfully complete at least 12 hours of education and testing prior to licensure; and (ii) all mortgage originators to be employed by the licensee to have successfully completed the prelicensing education and testing requirements of the Mortgage Act. Once these applicants have received a mortgage broker, mortgage lender or mortgage loan correspondent license, they must have: (i) at least one individual at each licensed office, who is not a mortgage originator, successfully complete at least 6 hours of education per annual renewal license period; and (ii) ensure that all mortgage originators employed by the licensee successfully complete at least 6 credit hours of education per annual renewal license period; and,
(b) Applicants for a mortgage originator license must successfully complete at least 12 hours of prelicensure education and testing. After licensure, mortgage originators must successfully complete 6 hours of education per annual renewal license period.
Entities Affected
All existing and future licensees under the Mortgage Act will be affected by the proposed rulemaking at the time the regulation is effective. It is anticipated that there will be approximately 9,149 licensees under the Mortgage Act.
Costs and Paperwork Requirements
The proposed rulemaking will have no fiscal impact on the Department, the Commonwealth and its political subdivisions.
Applicants under the Mortgage Act will be required to pay fees and costs associated with taking 12 credit hours of prelicensure education and testing programs and licensees will be required to pay fees and costs associated with taking 6 hours of continuing education programs. Costs may include the tuition for each credit hour of education, testing, travel and travel-related expenses. It is unclear at this time what the credit hour/testing charges by education providers will be. However, for comparison, under the MBBCEPA, licensees were required to annually complete 6 credit hours of continuing education offered by Department approved providers. The cost for 6 hours of continuing education credit ranged from $95--$225. Assuming education providers charge in the same range for prelicensure education and testing, the prelicensure education requirement costs will range from $190--$450 per licensee.
The ultimate cost to licensees will depend upon variables such as the number of licensed offices the licensee operates (an individual at each licensed office who is not a mortgage originator must complete the continuing education requirements) and whether companies will assume the costs of the education and testing requirements for their mortgage originator employees. The education costs may be mitigated for licensees who are licensed in multiple jurisdictions because the regulation allows for reciprocity with other states' education courses for the non-Pennsylvania specific education programs. Therefore, licensees that have completed non-Penn- sylvania specific courses approved by another states' mortgage regulator or by the National Mortgage Licensing System and Registry will receive the equivalent education credit in this Commonwealth. Applicants and licensees that do not comply with the regulation may suffer penalties, including the revocation or suspension of their license or denial of their application.
Lastly, relating to costs, the Department will charge a fee to educate providers for review and approval of their education courses. Under the MBBCEPA, the Department charged a $750 annual fee to education providers for reviewing and approving proposed education programs. The Department does not intend to increase this fee for the 2009 annual renewal period.
Regarding recordkeeping, promulgation of the regulation will generally increase reporting, recordkeeping and other paperwork requirements for the industry as well as the Department. Licensees will be required to demonstrate to the satisfaction of the Department that they have met all prelicensure and continuing education requirements by maintaining records of successfully completed programs for 2 years after the completion of each program, not counting the year in which the program was completed. The increase in recordkeeping is entirely attributable to the Mortgage Act's creation of a new license type and the imposition of education requirements on licensees that did not previously have mandatory education or testing, or both requirements. Only licensees that were licensed under the MBBCEPA were previously required to maintain records of continuing education programs. Licensees under the SMLA did not have any education requirements and mortgage originators are a new class of licensee and, therefore, the Mortgage Act's education requirements naturally impose new recordkeeping responsibilities.
Effectiveness/Sunset Date
All provisions of the proposed rulemaking will be effective 14 days from the date of publication of the final-form regulation in the Pennsylvania Bulletin. There is no sunset date.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on May 27, 2009, the Department submitted a copy of this proposed rulemaking and a copy of the Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and the Chairperson of the House Committee on Commerce and the Senate Committee on Banking and Insurance. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey comments, recommendations or objections to the proposed rulemaking within 30 days after the close of the public comment period, specifying the regulatory review criteria that have not been met. The Regulatory Review Act sets forth procedures that permit the General Assembly and the Governor to review IRRC's comments, recommendations or objections prior to final adoption of the proposed rulemaking.
Public Comments
Interested persons are invited to submit written comments, suggestions or objections regarding the proposed rulemaking within 30 days after publication in the Pennsylvania Bulletin to the Office of Chief Counsel, Department of Banking, Attention: Public Comment on Regulation 3-44, 17 North Second Street, Suite 1300, Harrisburg, PA 17101-2290, (717) 787-1471, (717) 783-8427.
STEVEN KAPLAN,
Secretary
Annex A
TITLE 10. BANKS AND BANKING
PART IV. BUREAU OF CONSUMER CREDIT AGENCIES
CHAPTER 44. MORTGAGE [BANKERS AND BROKERS AND CONSUMER EQUITY PROTECTION] LICENSEE EDUCATION § 44.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings unless the context clearly indicates otherwise:
Act--[The Mortgage Bankers and Brokers and Consumer Equity Protection Act (63 P. S. §§ 456.101--456.3101.)] 7 Pa.C.S. Chapter 61 (relating to mortgage loan industry licensing and consumer protection).
Annual renewal date--[July] January 1 of each calendar year.
Annual renewal period--The licensing term commencing [July 1 of 1-calendar year] on the annual renewal date and ending on [June 30] December 31 of the [following] same calendar year.
Applicant--As defined in 7 Pa.C.S. § 6102 (relating to definitions).
[Continuing education program--
(i) An educational program as required by section 304(e) of the act (63 P. S. § 456.304(e)) which contributes directly to the enhancement of the professional competence of a mortgage professional to engage in the first mortgage loan business.
(ii) The term does not include programs which instruct in matters such as office or business management, personnel management or similar subjects not directly related to the first mortgage loan business.
Continuing education provider--A provider of a continuing education program that has been approved by the Department.]
* * * * * Education program--
(i) A program providing education and a written or electronic testing component as required under 7 Pa.C.S. § 6131(g) (relating to application for license) offered by an education provider to the public or to its own employees which contributes directly to the enhancement of the professional competence of an applicant, licensee or individual to engage in the mortgage loan business and which has been approved by the Department.
(ii) The term does not include programs which instruct in matters such as office or business management, personnel management or similar subjects not directly related to the mortgage loan business.
Education provider--A provider of an education program. A licensee, other than a mortgage originator, may be an education provider.
[First mortgage loan business--The first mortgage loan business as defined in section 302 of the act (63 P. S. § 456.302).]
Instructor--An individual responsible for teaching [a continuing] an education program that has been approved by the Department.
Licensee--A [person licensed under the act] licensee as defined in 7 Pa.C.S. § 6102.
[Limited mortgage broker--A limited mortgage broker as defined in section 302 of the act.
Loan correspondent--A loan correspondent as defined in section 302 of the act.
Mortgage banker--A mortgage banker as defined in section 302 of the act.
Mortgage broker--A mortgage broker as defined in section 302 of the act.]
Mortgage loan business--The mortgage loan business as defined in 7 Pa.C.S. § 6102.
Mortgage originator--A mortgage originator as defined in 7 Pa.C.S. § 6102.
[Mortgage professional--
(i) A manager of each licensed office maintained by a licensee; any owner, director, officer or W-2 employee of a licensee who has the authority to underwrite or approve loans, either individually or in combination with other individuals as members of a committee; or any owner, director, officer or W-2 employee of a licensee who, as part of his official duties, directly contacts borrowers to present, negotiate or advise regarding loan terms.
(ii) A mortgage professional does not include any individual who engages solely in processing loan applications or other administrative or clerical functions, or both.]
Nationwide Mortgage Licensing System and Registry--As defined in 12 U.S.C. § 5103 (relating to definitions).
Person--A person as defined in [section 302 of the act] 7 Pa.C.S. § 6102.
§ 44.2. Requirements for applicant education and testing.
(a) [Except as provided in subsection (b), to renew a license, a licensee shall demonstrate to the satisfaction of the Department that:
(1) In the case of a mortgage banker, mortgage broker or loan correspondent, the licensee maintains at least one separate mortgage professional at each licensed office who has successfully completed during the annual renewal period at least 6 credit hours of continuing education programs which shall include 1 credit hour of Pennsylvania residential mortgage law, including the act and the Loan Interest and Protection Law (41 P. S. §§ 101--605), 1 credit hour of business ethics and 4 credit hours from among one or more of the following subject areas:
(i) Federal residential mortgage law, including the Real Estate Settlement Procedures Act (12 U.S.C.A. §§ 2601--2617), the Truth in Lending Act (15 U.S.C.A. §§ 1601--1667e) and the Equal Credit Opportunity Act (15 U.S.C.A. §§ 1691--1691f).
(ii) The first mortgage loan business.
(2) In the case of a limited mortgage broker, the licensed individual has successfully completed during the annual renewal period at least 2 credit hours of continuing education programs which shall include 1 credit hour of Pennsylvania residential mortgage law, including the act and the Loan Interest and Protection Law and 1 credit hour from among one or more of the following subject areas:
(i) Business ethics.
(ii) Federal residential mortgage law, including the Real Estate Settlement Procedures Act, the Truth in Lending Act and the Equal Credit Opportunity Act.
(iii) The first mortgage loan business.
(b) The continuing education requirements imposed by this chapter shall apply to all renewals of licenses except when an initial licensee has been licensed by the Department for less than 6 months prior to its first annual renewal date, in which case the licensee shall be in compliance with this chapter within 6 months after its first annual renewal date.
(c) A mortgage professional who acts as an instructor shall be credited with 2 credit hours of continuing education for every 1 credit hour taught per annual renewal period.
(d) Continuing education program credit hours earned in excess of the minimum requirement established by this section during any annual renewal period may not be carried over to a successive annual renewal period.]
To qualify for a license, an applicant shall demonstrate to the satisfaction of the Department that one of the following applies:
(1) In the case of a mortgage originator license applicant, the applicant has successfully completed at least 12 credit hours of education programs as delineated under subsection (b).
(2) In the case of any other license applicant:
(i) An individual who is a director, partner or ultimate equitable owner of 10% or more of an applicant has successfully completed at least 12 credit hours of education programs as delineated under subsection (b).
(ii) All of the mortgage originators to be employed by the applicant have successfully completed at least 12 credit hours of education programs as delineated under subsection (b).
(b) The 12 credit hours of education programs required under subsection (a) must consist of 2 credit hours of Pennsylvania residential mortgage law, including the act and the Loan Interest and Protection Law (41 P. S. §§ 101--605), 1 credit hour of business ethics and 9 credit hours from among one or more of the following subject areas:
(1) Federal residential mortgage law, including the Real Estate Settlement Procedures Act (12 U.S.C. §§ 2601--2617), the Truth in Lending Act (15 U.S.C. §§ 1601--1667e) and the Equal Credit Opportunity Act (15 U.S.C. §§ 1691--1691f).
(2) The mortgage loan business.
(c) Testing components of the education programs required by subsection (a) shall address the subjects delineated by subsection (b).
(d) Other than the 2 credit hours of Pennsylvania residential mortgage law education programs delineated by subsection (b) and the testing requirements set forth in subsection (c), education credit hours and testing completed pursuant to another state mortgage regulator's requirements will be accepted by the Department as fulfilling the requirements of this section, subject to the following conditions:
(1) The education credit hours have been approved by another state mortgage regulator or the Nationwide Mortgage Licensing System and Registry.
(2) The education credit hours have been successfully completed within the 12 months immediately preceding the date of the submission of the applicant's license application.
§ 44.2a. Requirements for licensee continuing education.
(a) Except as provided in subsection (c), to renew a license, a licensee shall demonstrate to the satisfaction of the Department that one of the following applies:
(1) In the case of a mortgage originator, the licensee has successfully completed at least 6 credit hours of education programs during the annual renewal period immediately preceding each annual renewal date.
(2) In the case of any other licensee the following apply:
(i) At least one individual at each licensed office who is not licensed as a mortgage originator has successfully completed at least 6 credit hours of education programs delineated under subsection (b) during the annual renewal period immediately preceding each annual renewal date, unless all of the nonclerical staff of a particular licensed office are licensed as mortgage originators.
(ii) All of the mortgage originators employed by the licensee have successfully completed the education programs as delineated under subsection (b).
(b) The 6 credit hours of education programs required under subsection (a) shall consist of 1 credit hour of Pennsylvania residential mortgage law, including the act and the Loan Interest and Protection Law (41 P. S. §§ 101--605), 1 credit hour of business ethics and 4 credit hours from among one or more of the following subject areas:
(1) Federal residential mortgage law, including the Real Estate Settlement Procedures Act (12 U.S.C. §§ 2601--2617), the Truth in Lending Act (15 U.S.C. §§ 1601--1667e) and the Equal Credit Opportunity Act (15 U.S.C. §§ 1691--1691f).
(2) The mortgage loan business.
(c) The education requirements imposed by this chapter are waived for the first annual renewal period for licensees that received an initial license from the Department less than 2 months prior to the licensee's first annual renewal date.
(d) Education program credit hours earned in excess of the minimum requirement established by this section during any annual renewal period may not be carried over to a successive annual renewal period.
(e) Other than the credit hour of Pennsylvania residential mortgage law delineated under subsection (b), education credit hours completed pursuant to another state mortgage regulator's requirements will be accepted by the Department as fulfilling the requirements of this section, subject to the following conditions:
(1) The education credit hours have been approved by another state mortgage regulator or the Nationwide Mortgage Licensing System and Registry.
(2) The education credit hours have been completed during the annual renewal period.
§ 44.3. Reporting, verification and recordkeeping.
(a) [Except as provided in § 44.2(b) (relating to requirements), a licensee shall include as part of its renewal application a statement that the requirements of this chapter have been completed by at least one separate mortgage professional at each licensed office, or in the case of a limited mortgage broker, by the licensed individual. The statement shall include a list of continuing education programs completed by the designated mortgage professional for each licensed office or the individual limited mortgage broker licensee. The list shall include:
(1) The name of continuing education providers.
(2) The name of continuing education programs.
(3) The number of credit hours attended by the mortgage professional.
(4) The locations and dates attended.]
Applicants and licensees shall provide evidence of the completion of the requirements of this chapter on a form prescribed by the Department.
(b) The Department may verify satisfactory completion of the requirements of this chapter [by methods including examination of the licensee] under its authority under 7 Pa.C.S. § 6138(a)(1) (relating to authority of Department).
(c) The Department may assess licensees [examination] the costs [for examinations made under subsection (b) consistent with section 308(a)(4) of the act (63 P. S. § 456.308(a)(4))] of verifying a licensees' compliance with this chapter under its authority under 7 Pa.C.S. § 6138(a)(1).
(d) A licensee shall retain all original documents relating to the successful completion of each [continuing] education program by [each mortgage professional] the licensee for [3] the 4 annual renewal periods immediately following the annual renewal period during which the licensee successfully completed the education program.
§ 44.4. Review and approval of education programs.
(a) Approval of programs. The Department will have the sole authority to approve or deny continuing education programs. The Department [does] may not approve or endorse continuing education providers. Education programs that are approved by another state mortgage regulator or the National Mortgage Licensing System and Registry and do not relate to Pennsylvania residential mortgage law are deemed approved by the Department.
(b) Applying for program approval. A prospective [continuing] education provider may apply for [continuing] education program approval on an application provided by the Department. The application shall be submitted to the Department at least [90] 60 days prior to the first date [that] of the annual renewal period in which the [proposed continuing] education program [will] is proposed to be offered. The [applicant] prospective education provider shall attach:
(1) An outline of the proposed [continuing] education program, and the method of instruction and testing, either in-person or through interactive technology.
* * * * * (c) Program requirements.
(1) The proposed [continuing] education program is required to satisfy the following criteria to be considered. The program shall be:
[(1)] (i) A formal program of learning and testing which contributes directly to the professional competence of [a mortgage professional] an applicant, licensee or individual to engage in the mortgage loan business.
[(2)] (ii) At least 1 credit hour.
[(3)] (iii) Conducted by one or more individuals qualified to be [instructors] an instructor. The following individuals are not qualified to be an instructor, unless the Department determines otherwise:
[(i)] (A) An individual who has had his license suspended or revoked by the Department.
[(ii)] (B) An individual who has been the owner, director, member, partner or officer of a licensee that has had its license suspended or revoked by the Department.
[(iii)] (C) An individual who has been a party, or who has been the owner, director, member, partner or officer of a licensee which has been a party to a Department order or agreement prohibiting the individual from engaging in the [first] mortgage loan business in this Commonwealth or acting in any other capacity related to activities regulated by the Department.
(D) An individual who has pled guilty, been convicted of or pled nolo contendre to a crime of moral turpitude or felony.
(2) The Department shall be notified in writing at least 10 days prior to any change in instructors. Any new instructor is subject to the criteria contained in paragraph (1)(iii).
(3) A licensee or individual who acts as an instructor shall be credited with 2 credit hours of education for every 1 credit hour taught per annual renewal period.
(4) Education programs offered solely to satisfy the requirements of § 44.2a (relating to requirements for licensee continuing education) are not required to include a testing component.
(d) The Department will have [60] 45 days from receipt of a completed application to approve or deny the proposed [continuing] education program. An application will be deemed completed when the requirements of subsections (b) and (c) have been fulfilled. If the Department fails to approve or deny an application submitted by a prospective [continuing] education provider within [60] 45 days of its receipt, the [continuing] education program will be deemed approved by the Department. The Department may deny an application submitted by a prospective [continuing] education provider if the [continuing] education program or provider fails to satisfy any of the conditions or requirements contained in this chapter or the act.
(e) Approval of [a continuing] an education program by the Department is valid for 1 annual renewal period and does not constitute permanent approval of the [continuing] education program.
(f) [Continuing education] Education providers shall provide free access to Department personnel to monitor their [continuing] education programs. To ensure the Department's access to education programs, education providers shall provide the Department with notification of the date, time and location of each education program that is offered by the education provider during the annual renewal period.
(g) [Continuing education ] Education providers shall retain original records of attendance for each [continuing] education program conducted by the [continuing] education provider for [3] the 4 annual renewal periods immediately following the annual renewal period during which the education program was conducted and shall provide the Department access to the records upon request.
§ 44.5. Enforcement.
(a) [The Department may levy a fine of up to $2,000 for each offense under section 314(c) of the act (63 P. S. § 456.314.(c)) or suspend, revoke or refuse to renew a license under section 313(a) of the act (63 P. S. § 456.313(a)), if a licensee fails to comply with any requirements of this chapter] Violations of this chapter shall be violations of the act.
(b) The Department may revoke its approval of [a continuing] an education provider's [continuing] education program if the [continuing] education provider fails to comply with any requirement of this chapter or the act.
[Pa.B. Doc. No. 09-1023. Filed for public inspection June 5, 2009, 9:00 a.m.]
No part of the information on this site may be reproduced for profit or sold for profit.This material has been drawn directly from the official Pennsylvania Bulletin full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.
