VIRGINIA

Is a license required? Yes. The Commonwealth of Virginia requires a Mortgage Broker License.The Virginia State Corporation Commission, Bureau of Financial Institutions (the “SCC”) has deemed that persons providing loan modification services in the Commonwealth of Virginia are required to first obtain a Mortgage Broker License (see Administrative Letter BFI-AL-1603 – Compensating, or Offering to Compensate, Unlicensed Mortgage Brokers attached in relevant part as Schedule A). Although nothing currently exists within Virginia’s statutes which specifically states that “mortgage modification businesses” must obtain a Mortgage Broker License, according to the SCC, it has been determined that loan modification services involve “a person negotiating mortgage loans for others” and is therefore captured within the definition of a Mortgage Broker.§6.1-409 Va. Stat.states in part as follows:“Mortgage Broker” means any person who directly or indirectly negotiates, places or finds mortgage loans for others, or offers to negotiate, place or find mortgage loans for others. . .§6.1-410 Va. Stat. provides in relevant part that no person shall engage in business as a . . . mortgage broker, or hold himself out to the general public to be a . . . mortgage broker unless such person has first obtained a license. . .

Therefore, because mortgage modification services fall within the definition of what is considered to be a Mortgage Broker, a company must obtain a Mortgage Broker License in Virginia if it wishes to provide mortgage modification services within the Commonwealth.

Effect of becoming a licensed Mortgage Broker? A company would be subject to the provisions of Virginia’s Mortgage Lender and Broker Act (attached as Schedule B)As stated above, because mortgage modification services fall within the definition of what is considered to be a Mortgage Broker, a company must obtain a Mortgage Broker License in Virginia if it wishes to provide mortgage modification services within the Commonwealth. As a result, a company would be subject to the provisions of Virginia’s Mortgage Lender and Broker Act.
Is an advanced fee permitted? No.On March 8, 2008, the General Assembly of Virginia approved certain amendments to the Virginia Consumer Protection Act (attached in relevant part as Schedule C) (the “Act”). These amendments directly targeted suppliers of “foreclosure rescue” services.§59.1-200.1 (A) Va. Stat. prohibits “suppliers” from performing the following fraudulent acts or practices in the case of owner-occupied primary dwelling units:

  1. a supplier of services to avoid or prevent foreclosure is to be paid a fee prior to settlement of the sale of the property,

 

  1. the supplier of the services does not make the mortgage payments (if the supplier has agreed to do so) and applies the rent payments for his own use,

 

  1. the supplier of the services represents that the seller has the option to repurchase the residence after the supplier takes title, unless there is a written contract providing for such option on terms and at a price stated therein, or

 

  1. the supplier of the services advertises or offers any of the above described prohibited services.

Possibly relevant is subsection (a) above which prohibits a fee paid by the client to a company prior to settlement of the sale of the property. However, those companies offering “foreclosure rescue” services should be aware of the prohibitions contained in subsection (b), (c) and (d) as well. Subsection (a) is poorly drafted and difficult to interpret. For example, if a company successfully prevents a foreclosure through the modification of a loan, the company would be unable to collect a fee because a settlement on a sale of the subject property would never take place. It appears that the intent would be to prohibit “advance” fees, however as stated this is unclear.

§59.1-200.1 (B) Va. Stat. does provide an exemption from the above described prohibited acts. This exemption states that §59.1-200.1 Va. Stat., in its entirety, shall not apply to any mortgage lender or servicer. Unfortunately, this exemption does not include a “mortgage broker.”

Additionally, pursuant to Virginia’s Mortgage Lender and Broker Act (§6.1-422 (B) (1) Va. Stat.), even if there were an exemption for a mortgage broker, mortgage brokers may not, except for documented costs of a credit report and appraisals, receive compensation from a borrower until a written commitment to make a mortgage loan is given to the borrower by a mortgage lender.

Therefore even if a company were exempt from subsection (a) above, because a company is subject to Mortgage Lender and Broker Act, as discussed above, Company would be prohibited from collecting such a fee.

State Corporation Commission Website http://www.scc.virginia.gov/bfi/index.aspx

Schedule A

Schedule B

Code of Virginia

§ 6.1-408. Short title.

This chapter may be cited as the Mortgage Lender and Broker Act.

(1987, c. 596.)

§ 6.1-409. Definitions.

As used in this chapter, the following words and terms shall have the following meanings unless the context requires a different meaning:

“Commissioner” means the Commissioner of the Bureau of Financial Institutions.

“Mortgage broker” means any person who directly or indirectly negotiates, places or finds mortgage loans for others, or offers to negotiate, place or find mortgage loans for others. Any licensed mortgage lender that, pursuant to an executed originating agreement with the Virginia Housing Development Authority, acts or offers to act as an originating agent of the Virginia Housing Development Authority in connection with a mortgage loan shall not be deemed to be acting as a mortgage broker with respect to such mortgage loan but shall be deemed to be acting as a mortgage lender with respect to such mortgage loan, notwithstanding that the Virginia Housing Development Authority is or would be the payee on the note evidencing such mortgage loan and that the Virginia Housing Development Authority provides or would provide the funding of such mortgage loan prior to or at the settlement thereof.

“Mortgage lender” means any person who directly or indirectly originates or makes mortgage loans.

“Mortgage loan” means a loan made to an individual, the proceeds of which are to be used primarily for personal, family or household purposes, which loan is secured by a mortgage or deed of trust upon any interest in one- to four-family residential property located in the Commonwealth, regardless of where made, including the renewal or refinancing of any such loan, but excluding (i) loans or extensions of credit to buyers of real property for any part of the purchase price of such property by persons selling such property owned by them, (ii) loans to persons related to the lender by blood or marriage, and (iii) loans to persons who are bona fide employees of the lender. “Mortgage loan” shall not include any loan secured by a mortgage or deed of trust upon any interest in a more than four-family residential property or property used for a commercial or agricultural purpose.

“Person” means any individual, firm, corporation, partnership, association, trust, or legal or commercial entity or group of individuals however organized.

“Principal” means any person who, directly or indirectly, owns or controls (i) ten percent or more of the outstanding stock of a stock corporation or (ii) a ten percent or greater interest in a nonstock corporation or a limited liability company.

“Residential property” means improved real property used or occupied, or intended to be used or occupied, for residential purposes.

(1987, c. 596; 1993, c. 183; 2006, c. 422; 2008, c. 863.)

§ 6.1-410. License requirement.

No person shall engage in business as a mortgage lender or a mortgage broker, or hold himself out to the general public to be a mortgage lender or a mortgage broker unless such person has first obtained a license under this chapter. However, subject to such conditions as the Commission may prescribe, an individual who is a bona fide employee or exclusive agent of a person licensed under this chapter may negotiate, place or find mortgage loans without being licensed as a mortgage broker.

(1987, c. 596; 1990, c. 4; 2001, c. 24.)

§ 6.1-411. Persons exempt from chapter.

The following shall be exempt from the licensing and other provisions of this chapter:

1. Lenders making three or fewer mortgage loans in any period of 12 consecutive months;

2. Any person subject to the general supervision of or subject to examination by the Commissioner pursuant to Chapter 2 (§ 6.1-3 et seq.), Chapter 3.01 (§ 6.1-194.1 et seq.), Chapter 4.01 (§ 6.1-225.1 et seq.), Chapter 5 (§ 6.1-227 et seq.) or Chapter 13 (§ 6.1-381 et seq.) of this title;

3. Any lender authorized to engage in business as a bank, savings institution or credit union under the laws of the United States, any state or territory of the United States, or the District of Columbia, and subsidiaries and affiliates of such entities which lender, subsidiary or affiliate is subject to the general supervision or regulation of or subject to audit or examination by a regulatory body or agency of the United States, any state or territory of the United States, or the District of Columbia;

4. Nonprofit corporations making mortgage loans to promote home ownership or improvements for the disadvantaged;

5. Agencies of the federal government, or any state or municipal government, or any quasi-governmental agency making or brokering mortgage loans under the specific authority of the laws of any state or the United States;

6. Persons acting as fiduciaries with respect to any employee pension benefit plan qualified under the Internal Revenue Code who make mortgage loans solely to plan participants from plan assets;

7. Any insurance company;

8. Persons licensed by the Commonwealth as attorneys, real estate brokers, or real estate salesmen, not actively and principally engaged in negotiating, placing or finding mortgage loans, when rendering services as an attorney, real estate broker or real estate salesman; however, a real estate broker or real estate salesman who receives any fee, commission, kickback, rebate or other payment for directly or indirectly negotiating, placing or finding a mortgage loan for others shall not be exempt from the provisions of this chapter;

9. Persons acting in a fiduciary capacity conferred by authority of any court;

10. Persons licensed as small business investment companies by the Small Business Administration; and

11. The Virginia Housing Development Authority and persons who (i) are approved by the Virginia Housing Development Authority pursuant to its rules and regulations to act as field originators with respect to mortgage loans made under its programs and (ii) are not engaged in any other activities for which a license is required to be obtained under this chapter.

(1987, c. 596; 1989, cc. 411, 667; 1992, c. 156; 1995, c. 62; 1996, c. 126; 2003, c. 386.)

§ 6.1-412. Application for license; form; content; fee.

A. An application for a license under this chapter shall be made in writing, under oath and on a form provided by the Commissioner.

B. The application shall set forth:

1. The name and address of the applicant;

2. If the applicant is a firm or partnership, the name and address of each member of the firm or partnership;

3. If the applicant is a corporation or a limited liability company, the name and address of each officer, director, registered agent and each principal;

4. The addresses of the locations of the business to be licensed;

5. Whether the applicant seeks a license to act as a mortgage lender, mortgage broker, or both; and

6. Such other information concerning the financial responsibility, background, experience and activities of the applicant and its members, officers, directors and principals as the Commissioner may require.

C. The application shall be accompanied by payment of the following fees:

1. In the case of an application for a license to act as a mortgage lender, a mortgage broker, but not both, an application fee of $500; or

2. In the case of an application for a license to act as both mortgage lender and mortgage broker, an application fee of $1,000.

D. The application fee shall not be refundable in any event. The fee shall not be abated by surrender, suspension or revocation of the license.

(1987, c. 596; 1989, c. 411; 1992, c. 283; 1993, c. 183.)

§ 6.1-413. Bond required.

The application for a license shall also be accompanied by a bond filed with the Commissioner with corporate surety authorized to execute such bond in this Commonwealth, in the sum of $25,000, or such greater sum as the Commissioner may require, the form of which shall be approved by the Commission. Such bond shall be continuously maintained thereafter in full force. Such bond shall be conditioned upon the applicant or such licensed lender or broker performing all written agreements with borrowers or prospective borrowers, correctly and accurately accounting for all funds received by him in his licensed business, and conducting his licensed business in conformity with this chapter and all applicable law. Any person who may be damaged by noncompliance of a licensed broker or lender with any condition of such bond may proceed on such bond against the principal or surety thereon, or both, to recover damages. The aggregate liability under the bond shall not exceed the penal sum of the bond.

(1987, c. 596; 1989, c. 411; 2001, c. 511.)

§ 6.1-414. Investigation of applications; criminal background checks.

A. The Commissioner may make such investigations as he deems necessary to determine if the applicant has complied with all applicable provisions of law and regulations promulgated thereunder.

B. For the purpose of investigating individuals who are members, senior officers, directors, and principals of an applicant, such persons shall consent to a national and state criminal history records check and submit to fingerprinting by a local or state law-enforcement agency. Each member, senior officer, director, and principal shall pay for the cost of such fingerprinting and criminal records check. Upon receipt of the records check fees along with such individuals’ fingerprints and their personal descriptive information, the Commissioner or his designee shall forward these items to the Central Criminal Records Exchange. The Central Criminal Records Exchange shall conduct a search of its own criminal history records and forward such individuals’ fingerprints and personal descriptive information to the Federal Bureau of Investigation for the purpose of obtaining national criminal history record information regarding such individuals. The Central Criminal Records Exchange shall forward the results of the state and national records search to the Commissioner or his designee, who shall be an employee of the Commission.

C. If any member, senior officer, director, or principal of an applicant fails to submit his fingerprints, personal descriptive information, or records check fees to the Commissioner or his designee in accordance with subsection B, the application to engage in business as a mortgage lender or mortgage broker shall be denied.

(1987, c. 596; 2008, c. 863.)

§ 6.1-415. Qualifications.

A. Upon the filing and investigation of an application for a license, and compliance by the applicant with the provisions of §§ 6.1-412 and 6.1-413, the Commission shall issue and deliver to the applicant the license or licenses applied for to engage in business under this chapter at the locations specified in the application if it finds:

1. That the financial responsibility, character, reputation, experience and general fitness of the applicant and its members, senior officers, directors and principals are such as to warrant belief that the business will be operated efficiently and fairly, in the public interest and in accordance with law; and

2. That, in the case of an application for a license to act as a mortgage lender, the applicant has funds available for the operation of the business of at least $200,000.

B. If the Commission fails to make such findings, no license shall be issued and the Commissioner shall notify the applicant of the denial and the reasons for such denial.

(1987, c. 596; 1988, c. 303; 1993, c. 183.)

§ 6.1-416. Licenses; places of business; changes.

A. Each license shall state the address or addresses at which the business is to be conducted and shall state fully the name of the licensed broker or lender. Each license shall be prominently posted in each place of business of the licensee. Licenses shall not be transferable or assignable, by operation of law or otherwise. No mortgage lender or mortgage broker shall use any name other than the name set forth on the license issued by the Commission.

B. No licensed mortgage lender or mortgage broker shall open an additional office or relocate any office without prior approval of the Commission. Applications for such approval shall be made in writing on a form provided by the Commissioner and shall be accompanied by payment of a $150 nonrefundable application fee. The applicants shall be approved unless the Commission finds that the applicant has not conducted business under this chapter efficiently, fairly, in the public interest, and in accordance with law. The application shall be deemed approved if notice to the contrary has not been mailed by the Commission to the applicant within thirty days of the date the application is received by the Commission. After approval, the applicant shall give written notice to the Commissioner within ten days of the commencement of business at the additional or relocated office.

C. Every licensed mortgage lender or mortgage broker shall within ten days notify the Commissioner, in writing, of the closing of any office and of the name, address and position of each new senior officer, member, partner, or director and provide such other information with respect to any such change as the Commissioner may reasonably require.

D. Every license shall remain in force until it has been surrendered, revoked or suspended. The surrender, revocation or suspension of a license shall not affect any preexisting legal right or obligation of such lender or broker.

(1987, c. 596; 1988, c. 303; 1990, c. 8; 1992, c. 283.)

§ 6.1-416.1. Acquisition of control; application.

A. Except as provided in this section, no person shall acquire directly or indirectly twenty-five percent or more of the voting shares of a corporation or twenty-five percent or more of the ownership of any other entity licensed to conduct business under this chapter unless such person first:

1. Files an application with the Commission in such form as the Commissioner may prescribe from time to time;

2. Delivers such other information to the Commissioner as the Commissioner may require concerning the financial responsibility, background, experience, and activities of the applicant, its directors, senior officers, principals and members, and of any proposed new directors, senior officers, principals or members of the licensee; and

3. Pays such application fee as the Commission may prescribe.

B. Upon the filing and investigation of an application, the Commission shall permit the applicant to acquire the interest in the licensee if it finds that the applicant, its members if applicable, its directors, senior officers and principals, and any proposed new directors, members, senior officers and principals have the financial responsibility, character, reputation, experience and general fitness to warrant belief that the business will be operated efficiently and fairly, in the public interest, and in accordance with law. The Commission shall grant or deny the application within sixty days from the date a completed application accompanied by the required fee is filed unless the period is extended by order of the Commissioner reciting the reasons for the extension. If the application is denied, the Commission shall notify the applicant of the denial and the reasons for the denial.

C. The provisions of this section shall not apply to (i) the acquisition of an interest in a licensee directly or indirectly including an acquisition by merger or consolidation by or with a person licensed by this chapter or a person exempt from this chapter under the provisions of subdivisions 2 through 11 of § 6.1-411, (ii) the acquisition of an interest in a licensee directly or indirectly including an acquisition by merger or consolidation by or with a person affiliated through common ownership with the licensee, or (iii) the acquisition of an interest in a licensee by a person by bequest, descent, or survivorship or by operation of law. The person acquiring an interest in a licensee in a transaction which is exempt from filing an application by this subsection shall send written notice to the Commissioner of such acquisition within thirty days of its closing.

(1988, c. 303; 1993, c. 183; 1998, c. 33.)

§ 6.1-417. Retention of books, accounts and records.

A. Every lender or broker required to be licensed under this chapter shall maintain in its licensed offices such books, accounts and records as the Commission may reasonably require in order to determine whether such lender or broker is complying with the provisions of this chapter and rules and regulations adopted in furtherance thereof. Such books, accounts and records shall be maintained apart and separate from any other business in which the lender or broker is involved.

B. Each mortgage lender required to be licensed under this chapter shall retain for at least three years after final payment is made on any mortgage loan or the mortgage loan is sold, whichever first occurs, copies of the note, settlement statement, truth-in-lending disclosure and such other papers or records relating to the loan as may be required by rule or regulation. Each mortgage broker required to be licensed under this chapter shall retain for at least three years after a mortgage loan is made the original contract for his compensation, a copy of the settlement statement, and an account of fees received in connection with the loan, and such other papers or records as may be required by rule or regulation.

(1987, c. 596; 1995, c. 62.)

§ 6.1-418. Annual report.

Each lender or broker required to be licensed under this chapter shall annually, on or before March 1, file a written report with the Commissioner containing such information as the Commissioner may require concerning his business and operations during the preceding calendar year as to each licensed place of business. Reports shall be made under oath and shall be in the form prescribed by the Commissioner, who shall make and publish annually an analysis and recapitulation of the reports.

(1987, c. 596; 1996, c. 30.)

§ 6.1-419. Investigations; examinations.

The Commission may, by its designated officers and employees, as often as it deems necessary, investigate and examine the affairs, business, premises and records of any lender or broker required to be licensed under this chapter insofar as they pertain to any business for which a license is required by this chapter. Examinations of such mortgage lenders shall be conducted at least once in each three-year period. In the course of such investigations and examinations, the owners, members, officers, directors, partners and employees of such lender or broker being investigated or examined shall, upon demand of the person making such investigation or examination, afford full access to all premises, books, records and information which the person making such investigation or examination deems necessary. For the foregoing purposes, the person making such investigation or examination shall have authority to administer oaths, examine under oath all the aforementioned persons, and compel the production of papers and objects of all kinds.

(1987, c. 596.)

§ 6.1-420. Annual fees.

A. In order to defray the costs of their examination, supervision and regulation, every mortgage lender required to be licensed under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the business volume of such individual mortgage lenders, the actual costs of their examinations, and to other factors relating to their supervision and regulation. Every mortgage broker required to be licensed under this chapter shall pay an annual fee calculated in accordance with a schedule set by the Commission. The schedule shall bear a reasonable relationship to the volume of business transacted by such mortgage broker, to the actual cost of examination and to other factors relating to their supervision and regulation. All such fees shall be assessed on or before April 25 for every calendar year. All such fees shall be paid by the licensed mortgage lenders and mortgage brokers to the State Treasurer on or before May 25 following each assessment.

B. In addition to the annual fee prescribed in subsection A of this section, when it becomes necessary to examine or investigate the books and records of a mortgage lender or mortgage broker required to be licensed under this chapter at a location outside the Commonwealth, the mortgage lender or mortgage broker shall be liable for and shall pay to the Commission within thirty days of the presentation of an itemized statement, the actual travel and reasonable living expenses incurred on account of its examination, supervision and regulation, or shall pay at a reasonable per diem rate approved by the Commission.

(1987, c. 596; 1988, c. 303; 1990, c. 32; 1996, c. 524.)

§ 6.1-421. Rules and regulations.

The Commission shall promulgate such rules and regulations as it deems appropriate to effect the purposes of this chapter. Before promulgating any such regulation, the Commission shall give reasonable notice of its content and shall afford interested parties an opportunity to present evidence and be heard, in accordance with the Rules of Practice and Procedure of the Commission.

(1987, c. 596.)

§ 6.1-422. Prohibited predatory practices.

A. No lender or broker required to be licensed under this chapter shall:

1. Obtain any agreement or instrument in which blanks are left to be filled in after execution;

2. Take an interest in collateral other than the real estate or residential property securing a mortgage loan, including any fixtures and appliances thereon and any mobile or manufactured home placed on such real estate even if such mobile or manufactured home is not permanently affixed thereto;

3. Obtain any exclusive dealing or exclusive agency agreement from any borrower;

4. Delay closing of any mortgage loan for the purpose of increasing interest, costs, fees, or charges payable by the borrower;

5. Obtain any agreement or instrument executed by a borrower which contains an acceleration clause permitting the unpaid balance of a mortgage loan to be declared due for any reason other than failure to make timely payments of interest and principal, submitting false information in connection with an application for the mortgage loan, breaching any representation or covenant made in the agreement or instrument, or failing to perform any other obligations undertaken in the agreement or instrument;

6. If acting as a mortgage lender, fail to require the person closing the mortgage loan to provide to the borrower prior to closing of the mortgage loan, a (i) settlement statement and (ii) disclosure which conforms to that required by the provisions of 15 U.S.C. (§ 1601 et seq.) and Regulation Z, 12 CFR Part 226; or

7. Recommend or encourage a person to default on an existing loan or other debt, if such default adversely affects such person’s creditworthiness, in connection with the solicitation or making of a mortgage loan that refinances all or any portion of such existing loan or debt.

B. No mortgage broker required to be licensed under this chapter shall:

1. Except for documented costs of credit report and appraisals, receive compensation from a borrower until a written commitment to make a mortgage loan is given to the borrower by a mortgage lender;

2. Receive compensation from a mortgage lender of which he is a principal, partner, trustee, director, officer or employee;

3. Receive compensation from a borrower in connection with any mortgage loan transaction in which he is the lender or a principal, partner, trustee, director or officer of the lender;

4. Receive compensation from the borrower other than that specified in a written agreement signed by the borrower; or

5. Receive compensation for negotiating, placing or finding a mortgage loan where such mortgage broker, or any person affiliated with such mortgage broker, has otherwise acted as a real estate broker, agent or salesman in connection with the sale of the real estate which secures the mortgage loan and such mortgage broker or affiliated person has received or will receive any other compensation or thing of value from the lender, borrower, seller or any other person, unless the borrower is given the following notice in writing at the time the mortgage broker services are first offered to the borrower:


                              NOTICE
WE HAVE OFFERED TO ASSIST YOU IN OBTAINING A MORTGAGE LOAN. IF WE ARE
SUCCESSFUL IN OBTAINING A LOAN FOR YOU, WE WILL CHARGE AND COLLECT FROM YOU A
FEE OF  ..... % OF THE LOAN AMOUNT.
WE DO NOT REPRESENT ALL OF THE LENDERS IN THE MARKET AND THE LENDERS WE DO
REPRESENT MAY NOT OFFER THE LOWEST INTEREST RATES OR BEST TERMS AVAILABLE TO
YOU. YOU ARE FREE TO SEEK A LOAN WITHOUT OUR ASSISTANCE, IN WHICH EVENT YOU
WILL NOT BE REQUIRED TO PAY US A FEE FOR THAT SERVICE.
IF YOU ARE A MEMBER OF A CREDIT UNION YOU SHOULD COMPARE OUR INTEREST RATES
AND TERMS WITH THE MORTGAGE LOANS AVAILABLE THROUGH YOUR CREDIT UNION.
                         ....................
                         BORROWER'S SIGNATURE
                         ....................
                         BORROWER'S SIGNATURE

The foregoing notice shall be in at least 10-point type and the prospective borrower shall acknowledge receipt of the written notice.

As used in this subdivision, the term “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 ten percent 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.

C. Notwithstanding the provisions of subdivision 5 of subsection B, no person shall act as a mortgage broker in connection with any real estate sales transaction in which such person, or any person affiliated with such person (as defined in subdivision 5 of subsection B), has acted as a real estate broker, agent or salesman and has received or will receive compensation in connection with such transaction, unless such person was regularly engaged in acting as a mortgage broker in the Commonwealth as of February 25, 1989. However, the provisions of this chapter shall not be construed to prohibit a real estate broker, as defined in § 54.1-2100, 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 mortgage lender, as defined in this chapter, or from receiving returns on investment arising from such ownership interest or payment of compensation for services actually performed for such mortgage broker or lender.

(1987, c. 596; 1989, c. 667; 1993, c. 183; 1997, c. 228; 2001, cc. 502, 511.)

§ 6.1-422.1. “Flipping” prohibited.

A. As used in this section, “flipping” a mortgage loan means refinancing a mortgage loan within 12 months following the date the refinanced mortgage loan was originated, unless the refinancing is in the borrower’s best interest. Factors to be considered in determining the same would include but not be limited to whether:

1. The borrower’s new monthly payment is lower than the total of all monthly obligations being financed, taking into account the costs and fees;

2. There is a change in the amortization period of the new loan;

3. The borrower receives cash in excess of the costs and fees of refinancing;

4. The borrower’s note rate of interest is reduced;

5. There is a change from an adjustable to a fixed rate loan, taking into account costs and fees; or

6. The refinancing is necessary to respond to a bona fide personal need or an order of a court of competent jurisdiction.

B. No mortgage lender or broker shall knowingly or intentionally engage in the act or practice of “flipping” a mortgage loan. This provision shall apply regardless of whether the interest rate, points, fees, and charges paid or payable by the borrower in connection with the refinancing exceed any limitation established pursuant to Article 9 (§ 6.1-330.69 et seq.) of Chapter 7.3 of this title.

C. The Attorney General, the Commission, or any party to a mortgage loan may enforce the provisions of this section or § 6.1-422.

D. In any suit instituted by a borrower who alleges that the defendant violated this section or § 6.1-422, the presiding judge may, in the judge’s discretion, allow reasonable attorneys’ fees to the attorney representing the prevailing party, such attorneys’ fees to be taxed as a part of the court costs and payable by the losing party, upon a finding by the presiding judge that (i) the party charged with the violation has willfully engaged in the act or practice with which he was charged; or (ii) the party instituting the action knew, or should have known, that the action was frivolous and malicious.

E. The provisions of this section shall be in addition to, and shall not impair, the rights of and remedies available to borrowers in mortgage loans otherwise provided by law.

(2001, c. 510; 2003, c. 386.)

§ 6.1-423. Escrow accounts.

All moneys required by a mortgage lender required to be licensed under this chapter to be paid by borrowers in escrow to defray future taxes or insurance premiums, or for other lawful purposes, shall be kept in accounts segregated from accounts of the lender, and shall not be commingled with other funds of the lender. No licensed mortgage lender shall require any borrower to pay any moneys in escrow to defray future taxes and insurance premiums, or for any other purpose, in connection with a subordinate mortgage loan as referred to in Chapter 7.3 (§ 6.1-330.49 et seq.) of this title, except where escrows for such purposes are not being maintained in connection with the mortgage loan superior to such subordinate mortgage loan. Mortgage lenders holding money in escrow for insurance premiums shall notify the insurer in writing within thirty days of a change of the mortgage lender’s billing address, or sixty days prior to the renewal date of the insurance policy, whichever is later.

(1987, c. 596; 2001, c. 504.)

§ 6.1-423.1. Employee background checks.

A licensee shall not employ an individual who may have access to or process personal identifying or financial information from a member of the public unless the licensee has found, upon completion of an investigation of the individual, including a criminal records check as provided in subdivision A 37 of § 19.2-389, that the individual has not been convicted in any court of any felony, or any misdemeanor involving fraud, misrepresentation or deceit, under the laws of any state or of the United States. The licensee may seek approval from the Commission to permit an exception from such prohibition when such conviction does not relate to such individual’s ability to properly originate loans by filing a petition pursuant to the Commission’s Rules of Practice and Procedure. The Commission shall adopt regulations specifying the requirements for a licensee’s investigation of an individual pursuant to this section and the criteria and the process for seeking an exception to the prohibition established by this section.

(2008, c. 863.)

§ 6.1-423.2. Employee training programs.

Each licensee shall ensure that employees are properly trained in applicable state and federal laws and regulations applicable to mortgage lending. The Commission shall adopt regulations prescribing the scope of such proper employee training.

(2008, c. 863.)

§ 6.1-424. Advertising.

No mortgage lender or broker required to be licensed under this chapter shall use or cause to be published any advertisement which:

1. Contains any false, misleading or deceptive statement or representation; or

2. Identifies the lender or broker by any name other than the name set forth on the license issued by the Commission.

(1987, c. 596; 1995, c. 62.)

§ 6.1-425. Suspension or revocation of license.

A. The Commission may suspend or revoke any lender’s or broker’s license issued under this chapter upon any of the following grounds:

1. Any ground for denial of a license under this chapter;

2. Any violation of the provisions of this chapter or regulations promulgated by the Commission pursuant thereto, or a violation of any other law or regulation applicable to the conduct of the lender’s or broker’s business;

3. A course of conduct consisting of the failure to perform written agreements with borrowers;

4. Failure to account for funds received or disbursed to the satisfaction of the person supplying or receiving such funds;

5. Failure to pay when due reasonable fees to a licensed appraiser for appraisal services that are (i) requested from the appraiser in writing by the mortgage broker or mortgage lender or an employee of the mortgage broker or mortgage lender and (ii) performed, in accordance with the terms of the contract with the appraiser and all regulatory requirements related to such appraiser and appraisal, by the appraiser in connection with the origination or closing of a mortgage loan for a customer of the mortgage broker or mortgage lender;

6. 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;

7. Conviction of a felony or misdemeanor involving fraud, misrepresentation or deceit;

8. Entry of a judgment against such lender or broker involving fraud, misrepresentation or deceit;

9. Entry of a federal or state administrative order against such lender or broker for violation of any law or any regulation applicable to the conduct of his business;

10. Refusal to permit an investigation or examination by the Commission;

11. Failure to pay any fee or assessment imposed by this chapter; or

12. Failure to comply with any order of the Commission.

B. For the purposes of this section, acts of any officer, director, member, partner or principal shall be deemed acts of the lender or broker.

(1987, c. 596; 1993, c. 183; 2008, c. 863.)

§ 6.1-425.1. Suspension.

A. The Commission, after providing notice and an opportunity for a hearing, may censure, suspend for a defined period or bar a person from any position of employment, management or control of any licensee or registrant, if the Commission finds that:

1. The censure, suspension or bar is in the public interest and that the person has committed or caused a violation of this chapter or any rule, regulation or order of the Commissioner; or

2. The person has been (i) convicted of or pled guilty to or pled nolo contendere to any crime; or (ii) held liable in any civil action by final judgment, or any administrative judgment by any public agency, if the criminal, civil or administrative judgment involved any offense reasonably related to the qualifications, functions or duties of a person engaged in the business in accordance with the provisions of this chapter.

B. Persons suspended or barred under this section are prohibited from participating in any business activity of a registrant and from engaging in any business activity on the premises where a registrant is conducting its business. This subsection shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a registrant.

C. This section shall apply to any violation, conviction, plea, or judgment after July 1, 2003.

(2003, c. 386.)

§ 6.1-425.2. Filing of written report with Commissioner; events impacting activities of registrant.

Within 15 days of becoming aware of the occurrence of any of the events listed below, a registrant shall file a written report with the Commissioner describing such event and its expected impact on the activities of the registrant in the Commonwealth:

1. The filing for bankruptcy or reorganization by the registrant;

2. The institution of revocation or suspension proceedings against the registrant by any state or governmental authority;

3. The denial of the opportunity to engage in business by any state or governmental authority;

4. Any felony indictment of the registrant or any of its employees, officers, directors or principals;

5. Any felony conviction of the registrant or any of its employees, officers, directors, or principals; and

6. Such other events as the Commissioner may determine and identify by rule.

(2003, c. 386.)

§ 6.1-426. Cease and desist orders.

If the Commissioner determines that any lender or broker required to be licensed hereunder has violated any provision of this chapter or any regulation adopted pursuant to thereto, he may, upon twenty-one days’ notice in writing, order such person to cease and desist from such practices and to comply with the provisions of this chapter. The notice shall be sent by certified mail to the principal place of business of such lender or broker and shall state the grounds for the contemplated action. Within fourteen days of mailing the notice, the person or persons named therein may file with the Clerk of the Commission a written request for a hearing. If a hearing is requested, the Commissioner shall not issue a cease and desist order except based upon findings made at such hearing. Such hearing shall be conducted in accordance with the provisions of Title 12.1. The Commission may enforce compliance with any such order issued under this section by imposition and collection of such fines and penalties as may be prescribed by Commission regulations.

(1987, c. 596.)

§ 6.1-427. Notice of proposed suspension or revocation.

The Commission may not revoke or suspend the license of any lender or broker licensed under this chapter upon any of the grounds set forth in § 6.1-425 until it has given the lender or broker twenty-one days’ notice in writing of the reasons for the proposed revocation or suspension and has given the lender or broker an opportunity to introduce evidence and be heard. The notice shall be sent by certified mail to the principal place of business of such lender or broker and shall state with particularity the grounds for the contemplated action. Within fourteen days of mailing the notice, the person or persons named therein may file with the Clerk of the Commission a written request for a hearing. If a hearing is requested, the Commission shall not suspend or revoke the license except based upon findings made at such hearing. The hearing shall be conducted in accordance with the provisions of Title 12.1.

(1987, c. 596.)

§ 6.1-428. Fines for violations.

In addition to the authority conferred under §§ 6.1-425 and 6.1-426, the Commission may impose a fine or penalty not exceeding $2,500 upon any lender or broker required to be licensed under this chapter who it determines, in proceedings commenced in accordance with the Rules of Practice and Procedure of the Commission, has violated any of the provisions of this chapter, or any other law or regulation applicable to the conduct of the lender’s or broker’s business. For the purposes of this section, each separate violation shall be subject to the fine or penalty herein prescribed, and each day after the date of notification, excluding Sundays and holidays, as prescribed in § 2.2-3300, that an unlicensed person engages in the business or holds himself out to the general public as a mortgage lender or mortgage broker shall constitute a separate violation.

(1987, c. 596; 1990, c. 4; 2001, c. 511; 2008, c. 863.)

§ 6.1-429. Criminal penalties.

Any person not exempt from licensing under this chapter who shall act as a mortgage lender or mortgage broker in this Commonwealth without having obtained a license shall be guilty of a Class 6 felony. For the purposes of this section, each violation shall constitute a separate offense.

(1987, c. 596.)

§ 6.1-430. Authority of the Attorney General; referral by Commission to Attorney General.

A. If the Commission determines that a mortgage lender or broker licensed under this chapter is in violation, or has violated, any provision of Articles 3 (§ 6.1-330.53 et seq.) through 12 (§ 6.1-330.80 et seq.) of Chapter 7.3 of this title or § 6.1-422.1, the Commission may refer the information to the Attorney General and may request that the Attorney General investigate such violations. In the case of such referral, the Attorney General is hereby authorized to seek to enjoin violations of such laws. The circuit court having jurisdiction may enjoin such violations notwithstanding the existence of an adequate remedy at law.

Upon such referral of the Commission, the Attorney General may also seek, and the circuit court may order or decree damages and such other relief allowed by law, including restitution to the extent available to borrowers under applicable law. Persons entitled to any relief as authorized by this section shall be identified by order of the court within 180 days from the date of the order permanently enjoining the unlawful act or practice.

In any action brought by the Attorney General by virtue of the authority granted in this provision, the Attorney General shall be entitled to seek attorney’s fees and costs.

B. The Attorney General shall be authorized to bring an action to enjoin violations of the Real Estate Settlement Procedures Act of 1974 (RESPA), 12 U.S.C. § 2601 et seq., to the extent authorized by §§ 8 and 16 of RESPA, 12 U.S.C. §§ 2607 and 2614.

(1987, c. 596; 2001, c. 510; 2008, c. 863.)

§ 6.1-431. Private action still maintainable.

Nothing in this article shall be construed to preclude any individual or entity who suffers loss as a result of a violation of Articles 3 (§ 6.1-330.53 et seq.) through 12 (§ 6.1-330.80 et seq.) of Chapter 7.3 of this title from maintaining an action to recover damages or restitution and, as provided by statute, attorney’s fees. However, in any matter in which the Attorney General has exercised his authority pursuant to § 6.1-430, an individual action shall not be maintainable if the individual has received damages or restitution pursuant to § 6.1-430.

(1987, c. 596.)

Schedule C

§ 59.1-200.1. Prohibited practices; foreclosure rescue.

A. In addition to the provisions of § 59.1-200, the following fraudulent acts or practices committed by a supplier, as defined in § 59.1-198, in a consumer transaction involving residential real property owned and occupied as the primary dwelling unit of the owner, are prohibited:

1. The supplier of service to avoid or prevent foreclosure is to be paid a fee prior to the settlement on a sale of such residential real property, regardless of whether the fee is charged or collected as part of the transaction involving a sale of such residential real property;

2. The supplier of such services (i) fails to make payments under the mortgage or deed of trust that is a lien on such residential real property as the payments become due, where the supplier has agreed to do so, regardless of whether the purchaser is obligated on the loan, and (ii) applies rents received from such dwellings for his own use;

3. The supplier of such services represents to the seller of such residential real property that the seller has an option to repurchase such residential real property, after the supplier of such services takes legal or equitable title to such residential real property, unless there is a written contract providing such option to repurchase on terms and at a price stated in such contract; or

4. The supplier advertises or offers such services as are prohibited by this section.

B. This section shall not apply to any mortgage lender or servicer regularly engaged in making or servicing mortgage loans that is subject to the supervisory authority of the State Corporation Commission, a comparable regulatory authority of another state, or a federal banking agency.

C. Any provision in an agreement with the owner of such residential real property that requires the owner to submit to mandatory arbitration shall be null and void, and notwithstanding any such provisions, the owner of such residential real property shall have the rights and remedies under this chapter.

 


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