CHAPTER 45
SENATE BILL No. 241
An Act concerning banks and trusts companies; relating to mortgage
business and mortgage
loans; amending K.S.A. 1998 Supp. 9-2201, 9-2202, 9-2203, 9-2204,
9-2205, 9-2206, 9-
2207, 9-2208, and 9-2209 and repealing the existing
sections.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 1998 Supp. 9-2201
is hereby amended to read as
follows: 9-2201. As used in this act:
(a) ``Bona fide office'' means a
registrant's physical office which meets
all of the following requirements:
(1) The office is located in this
state;
(2) the office is not located in a
personal residence;
(3) the office has regular hours of
operation;
(4) the office is accessible to the
public;
(5) the office serves as an office for
the transaction of mortgage busi-
ness;
(6) the office is staffed by the
registrant or an employee of the regis-
trant;
(7) the office is separate from any
office of another registrant; and
(8) the office contains the books and
records of the registrant or copies
of the books and records.
(a)
(b) ``Commissioner'' means the Kansas state bank
commissioner.
(c) ``Employee'' means any
individual:
(1) Who is employed solely by a
registrant or applicant, and who is
not acting as an independent contractor;
(2) who conducts mortgage business
activities only in the name of the
registrant or applicant; and
(3) whose conduct of mortgage business
is the responsibility of the
registrant or applicant.
(b)
(d) ``Mortgage business'' means engaging in, or holding
out to the
public as willing to engage in, for compensation or gain, or in the
expec-
tation of compensation or gain, directly or indirectly, the
business of mak-
ing, originating, servicing, soliciting, placing, negotiating,
acquiring, sell-
ing, or arranging for others, or offering to solicit, place,
negotiate, acquire,
sell or arrange for others, five or more mortgage
loans in a calendar year
the primary market.
(c)
(e) ``Mortgage loan'' means a loan made to a natural
person which
is secured by a first or second mortgage or other similar
instrument or
document, and which creates a first lien on a
one-to-four family dwelling,
located in this state, occupied or intended to be occupied for
residential
purposes by the owner, including the renewal or refinancing of such
a
loan.
(d)
(f) ``Person'' means any individual, sole
proprietorship, corpora-
tion, partnership, trust, association, joint venture, pool
syndicate, unin-
corporated organization or other form of entity, however
organized.
(g) ``Primary market'' means the
market wherein mortgage loans are
originated between a lender and a borrower, whether or not
through a
mortgage broker or other means.
(h) ``Promotional items'' means pens,
pencils, hats and other such nov-
elty items.
(i) ``Registrant'' means any
individual or other entity who holds a
valid certificate of registration to conduct mortgage business
in this state.
Sec. 2. K.S.A. 1998 Supp. 9-2202 is
hereby amended to read as fol-
lows: 9-2202. The following are exempt from the registration
require-
ments of this act:
(a) Any bank, bank holding company,
savings bank, trust company,
savings and loan association, building and loan association,
industrial loan
company or credit union or any other financial
institution regulated by
an agency of the United States or of any state;
(b) any entity directly or indirectly
regulated by an agency of the
United States or of Kansas any state which
is a subsidiary or affiliate of
any entity listed in subsection (a) if 25% or more of
such entity's common
stock is owned by any entity listed in subsection (a);
(c) any person who is registered with the
Kansas securities commis-
sioner as a loan broker pursuant to K.S.A. 50-1001 et seq. and
amend-
ments thereto or who is licensed by the Kansas consumer credit
com-
missioner as a supervised lender pursuant to K.S.A. 16a-2-301 et
seq. and
amendments thereto; and
(d) the United States of America, the
state of Kansas, any other state,
or any agency or instrumentality of any governmental
entity.; and
(e) a registrant's employee.
Sec. 3. K.S.A. 1998 Supp. 9-2203 is
hereby amended to read as fol-
lows: 9-2203. On and after November 1, 1996, no person
shall conduct
mortgage business in Kansas unless registered with the
office of the state
bank commissioner pursuant to this act. It
shall be unlawful for any per-
son to engage in or to advertise, publish or otherwise hold out
to the public
that such person is engaged in the mortgage business without
first being
registered with the commissioner as required by this act. Any
such indi-
vidual or member or officer of any such corporation or other
entity vio-
lating this section shall be guilty of a misdemeanor, and upon
conviction
shall be punished by a definite term of confinement in the
county jail
which shall be fixed by the court and shall not exceed one year,
or a fine
not exceeding $5,000 or both.
Sec. 4. K.S.A. 1998 Supp. 9-2204 is
hereby amended to read as fol-
lows: 9-2204. (a) Any person required to register pursuant to this
act shall
submit to the commissioner an application for registration on forms
pre-
scribed and provided by the commissioner. The application shall
contain
information the commissioner deems necessary to adequately
identify:
(1) The location and nature of the
business to be conducted;
(2) the identity, character and
qualifications of an individual appli-
cant;
(3) the identity, character and
qualifications of the officers and, di-
rectors, partners and employees of the entity, if the
applicant is a part-
nership, corporation or other business entity;
(4) the name under which the applicant
intends to conduct business;
and
(5) other information the commissioner
requires to evaluate the fi-
nancial responsibility and condition, character,
qualifications and, fitness
of the applicant and compliance with the provisions of this
act.
(b) Each application for registration
shall be accompanied by a non-
refundable fee of not less than $100, which may be increased by
rules
and regulations pursuant to K.S.A. 1998 Supp. 9-2209.
(c) An application for registration shall
be approved, and a nonas-
signable certificate of registration shall be issued to the
applicant by the
commissioner provided:
(1) The commissioner has received the
complete application and fee
required by this section; and
(2) the commissioner determines the
financial responsibility and con-
dition, character, qualifications and fitness of the
applicant warrants a
belief that the business of the applicant will be conducted
competently,
honestly, fairly and within the purposes of this
act in accordance with all
applicable state and federal laws.
Sec. 5. K.S.A. 1998 Supp. 9-2205 is
hereby amended to read as fol-
lows: 9-2205. (a) A certificate of registration shall become
effective as of
the date specified on the face of the original
certificate and is effective
for one year.
(b) The registration shall be
renewed annually in each odd-numbered
year by filing with the commissioner, at least 30 days prior
to the expi-
ration of the registration, a renewal application, containing
information
the commissioner requires to determine the existence of material
changes
from the information contained in the applicant's original
registration
application or prior renewal applications.
(b) (c) Each
renewal application shall be accompanied by a nonre-
fundable fee which shall be established by rules and regulations
pursuant
to K.S.A. 1998 Supp. 9-2209 and amendments thereto.
(d) Any renewal application received
by the commissioner after the
expiration date of the registrant's current certificate shall be
treated as an
original application and be subject to all reporting and fee
requirements
contained in K.S.A. 1998 Supp. 9-2204 and amendments
thereto.
Sec. 6. K.S.A. 1998 Supp. 9-2206 is
hereby amended to read as fol-
lows: 9-2206. If the commissioner notifies the applicant,
in writing, that
any application has been denied, or the
commissioner fails to issue a
certificate of registration within 60 days or grant a renewal
within 30 days
after a filed application is deemed complete by the commissioner,
the
applicant may make written request for an appeal on the issue of
the
applicant's registration or renewal qualifications. The
commissioner shall
conduct a hearing in accordance with the Kansas administrative
proce-
dure act.
Sec. 7. K.S.A. 1998 Supp. 9-2207 is
hereby amended to read as fol-
lows: 9-2207. (a) The commissioner may deny,
suspend or, revoke, or
refuse to renew the registration of a mortgage business
issued pursuant
to this act, if the commissioner finds, after notice and
opportunity for a
hearing conducted in accordance with the provisions of the
administrative
procedures act, that:
(1) (a) The
applicant or registrant has repeatedly or willfully violated
any section of this act or any rule and regulation or order
lawfully made
pursuant to this act;
(2) (b) facts or
conditions exist which would have justified the denial
of the registration or renewal had these facts or conditions
existed or been
known to exist at the time the application for registration or
renewal was
made;
(3) (c) the
applicant or registrant has filed with the commissioner any
document or statement containing any false representation of a
material
fact or fails to state a material fact; or
(4) (d) the
applicant or registrant has been convicted, within 10
years
before the date of an application, renewal or
review of any crime involving
fraud, dishonesty or deceit.;
(b) The commissioner shall not
revoke a registration until the regis-
trant is provided written notice of the facts or conduct
the commissioner
believes to form the basis for the proposed revocation and
of the regis-
trant's right to request a hearing in accordance with the
Kansas admin-
istrative procedure act.
(e) the applicant or registrant has
engaged in or is engaging in de-
ceptive business practices;
(f) the applicant or registrant has
been the subject of any disciplinary
action by this agency or any other state or federal regulatory
agency; or
(g) a final judgment has been entered
against the applicant or regis-
trant in a civil action and the commissioner finds, based upon
the conduct
on which the judgment is based, that registration of such person
would
be contrary to the public interest.
Sec. 8. K.S.A. 1998 Supp. 9-2208 is
hereby amended to read as fol-
lows: 9-2208. (a) Every certificate of registration shall be
properly dis-
played in a prominent place within the registrant's place of
business in a
way that reasonably assures recognition by customers and members
of
the general public who enter the registrant's place of
business.
(b) Prior to entering into any contract
for the provision of services or
prior to the registrant receiving any compensation or promise of
com-
pensation for a mortgage loan the registrant shall acquire
from the cus-
tomer a signed acknowledgment that contains only the
following items:
(1) The name and address of the
mortgage business;
(2) the name and position of the
individual presenting the acknow-
ledgment to the customer for a signature;
(3) a statement in at least 10
point boldface letters which reads
``[name of the registrant] is a mortgage business
registered with the Kan-
sas Office of the State Bank Commissioner in accordance
with the laws
of the state of Kansas. This registration does not
represent an endorse-
ment or recommendation of the registrant's products or
services by the
Office of the State Bank Commissioner. As a consumer, you
may submit
a complaint or inquiry about this mortgage business by
delivering a writ-
ten statement to the Office of the State Bank Commissioner,
700 Jackson,
Suite 300, Topeka, Kansas 66603''; and
(4) an original signature of the
customer(s) and the date such signa-
ture(s) was attached containing such
information as the commissioner
may prescribe by rule and regulation.
(c) The registrant shall identify that
such registrant is registered un-
der this act in all advertising or solicitations directed to
Kansas residents,
including internet solicitations. For the purpose of this
subsection, ``ad-
vertising'' does not include business cards or promotional
items.
(d) No registrant shall conduct
mortgage business in this state using
any name other than the name or names stated on the certificate
of reg-
istration.
Sec. 9. K.S.A. 1998 Supp. 9-2209 is
hereby amended to read as fol-
lows: 9-2209. The commissioner may exercise the following
powers:
(a) Adopt rules and regulations as
necessary to carry out the intent
and purpose of this act;
(b) make investigations and examinations
of the registrant's opera-
tions, books and records as the commissioner deems necessary
for:
(1) Determining the adequacy or
acceptability of any application for
registration;
(2) pursuing a complaint or
information which forms reasonable
grounds for belief that an investigation or examination is
necessary or
advisable for more complete protection of the interests of
the public the
protection of the public;
(c) charge reasonable costs of
investigation or examination to be paid
by the registrant under investigation or examination;
(d) order any registrant to cease any
activity or practice which the
commissioner deems to be deceptive, dishonest, violative of state
or fed-
eral law or unduly harmful to the interests of the public;
and
(e) exchange any information regarding
the administration of this act
with any agency of the United States or any state which regulates
the
registrant or administers statutes, rules and regulations or
programs re-
lated to mortgage loans.; and
(f) disclose to any person or entity
that an applicant's or registrant's
certificate of registration has been denied, suspended, revoked
or refused
renewal.
New Sec. 10. (a) Each applicant or
registrant who maintains a bona
fide office shall comply with at least one of the following:
(1) Submit written evidence which
establishes, to the commissioner's
satisfaction, that the applicant or registrant is approved as a
mortgagee
by:
(A) The federal department of housing and
urban development;
(B) the federal national mortgage
association; or
(C) the federal home loan mortgage
corporation.
(2) (A) File with the commissioner
a surety bond or irrevocable letter
of credit in the amount of $25,000, in a form acceptable to the
commis-
sioner, issued by an insurance company or financial institution
authorized
to conduct business in this state, securing the applicant's or
registrant's
faithful performance of all duties and obligations of a registrant
meeting
the following requirements:
(i) The bond or letter of credit shall be
payable to the office of the
state bank commissioner;
(ii) the terms of the bond or irrevocable
letter of credit shall provide
that it may not be terminated without 30 days prior written notice
to the
commissioner; and
(iii) the bond or irrevocable letter of
credit shall be available for the
recovery of expenses, fines and fees levied by the commissioner
under
this act, and for losses or damages which are incurred by any
borrower
or consumer as a result of the applicant's or registrant's failure
to comply
with the requirements of this act; and
(B) submit evidence that establishes, to
the commissioner's satisfac-
tion, that the applicant or registrant shall at all times maintain
not less
than $10,000 in liquid assets acceptable to the commissioner.
(3) Submit evidence that establishes, to
the commissioner's satisfac-
tion, that the applicant or registrant shall at all times maintain
a minimum
net worth of $100,000. Evidence of net worth shall include the
submission
of a balance sheet accompanied by a written statement by an
independent
certified public accountant attesting that the balance sheet has
been re-
viewed in accordance with generally accepted accounting
principles.
(b) Each applicant or registrant who does
not maintain a bona fide
office shall comply with both of the following:
(1) File with the commissioner a surety
bond or irrevocable letter of
credit in the amount of $100,000, in a form acceptable to the
commis-
sioner, issued by an insurance company or financial institution
authorized
to conduct business in this state, securing the applicant's or
registrant's
faithful performance of all duties and obligations of a
registrant.
(A) The bond or letter of credit shall be
payable to the office of the
state bank commissioner.
(B) The terms of the bond or irrevocable
letter of credit shall provide
that it may not be terminated without 30 days prior written notice
to the
commissioner.
(C) The bond or irrevocable letter of
credit shall be available for the
recovery of expenses, fines and fees levied by the commissioner
under
this act, and for losses or damages which are incurred by any
borrower
or consumer as a result of the applicant's or registrant's failure
to comply
with the requirements of this act.
(2) Submit evidence that establishes, to
the commissioner's satisfac-
tion, that the applicant or registrant shall at all times maintain
a minimum
net worth of $50,000. Evidence of net worth shall include the
submission
of a balance sheet accompanied by a written statement by an
independent
certified public accountant attesting that the balance sheet has
been re-
viewed in accordance with generally accepted accounting
principles.
New Sec. 11. Except for those
persons meeting the requirements of
K.S.A. 1998 Supp. 9-2202 and amendments thereto, a registrant shall
not
pay compensation to, contract with or employ as an independent
con-
tractor any person engaged in mortgage business who does not hold
a
valid certificate of registration.
New Sec. 12. (a) Within three
business days of receipt a registrant
shall deposit all fees and money received from a borrower prior to
the
time a loan is consummated in an escrow account in a bank, savings
bank,
savings and loan association or credit union incorporated under the
laws
of this state, or organized under the laws of the United States or
another
state and which has a main or branch office in this state.
(b) For each borrower the registrant
shall maintain a separate record
of all money received for any service performed or to be
performed,
including any payment to a third party, setting forth:
(1) The date the money was received;
(2) the amount of money received;
(3) the date the money was deposited in
the escrow account; and
(4) the date, description, and
justification for each disbursement.
(c) Upon the request of a borrower, a
copy of the record required by
subsection (b) shall be provided to the borrower:
(1) Within five business days of
consummation of the loan; or
(2) within five business days of receipt
of written notice of the bor-
rower's intention to withdraw from the loan transaction.
New Sec. 13. All original documents
provided to the registrant by
the borrower or at the expense of the borrower, including any
appraisals,
are the property of the borrower and at the borrower's request,
shall be
returned to the borrower without further expense if the loan is not
con-
summated.
New Sec. 14. (a) A registrant shall
provide written notice to the com-
missioner within 10 business days of the occurrence of any of the
follow-
ing events:
(1) A change in the registrant's main
office address;
(2) the opening, closing or relocation of
any branch office of the reg-
istrant located in this state;
(3) a change in the registrant's name or
legal entity status; or
(4) the addition of an officer, partner
or director to the registrant's
business.
(b) The commissioner may request
additional information concerning
any written notice received pursuant to subsection (a).
New Sec. 15. (a) A registrant shall
keep for at least 25 months copies
of all deposit receipts, canceled checks, trust account records,
required
federal and state disclosures and other relevant documents or
correspon-
dence received or prepared by the registrant in connection with a
loan
or loan application. If the loan is not serviced by a registrant,
the retention
period commences on the date the loan is closed or, if the loan is
not
closed, the date of the loan application. If the loan is serviced
by a reg-
istrant, the retention period commences on the date the loan is
paid in
full or the date the registrant ceases to service the loan.
(b) All books, records and any other
documents held by the registrant
shall be made available for examination and inspection by the
commis-
sioner or the commissioner's designee. Certified copies of all
records not
kept within this state shall be delivered to the commissioner
within three
business days of the date such documents are requested.
New Sec. 16. Examination reports
and correspondence regarding
the reports made by the commissioner or the commissioner's
examiners
are confidential, except that the commissioner may release
examination
reports and correspondence regarding the reports in connection with
a
disciplinary proceeding conducted by the commissioner, a
liquidation
proceeding or a criminal investigation or proceeding. Additionally,
the
commissioner may furnish to federal or other state regulatory
agencies
or any officer or examiner thereof, a copy of any or all
examination reports
and correspondence regarding the reports made by the commissioner
or
the commissioner's examiners.
New Sec. 17. (a) If the
commissioner determines after notice and
opportunity for a hearing pursuant to the Kansas administrative
proce-
dure act that any registrant has engaged, is engaging or is about
to engage
in any act or practice constituting a violation of any provision of
this act
or any rule and regulation or order hereunder, the commissioner by
order
may require any or all of the following:
(1) That the registrant cease and desist
from the unlawful act or prac-
tice;
(2) that the registrant pay a fine not to
exceed $5,000 per incident
for the unlawful act or practice; or
(3) that the registrant take such
affirmative action as in the judgment
of the commissioner will carry out the purposes of this act.
(b) If the commissioner makes written
findings of fact that the public
interest will be irreparably harmed by delay in issuing an order
under
subsection (a), the commissioner may issue an emergency cease and
desist
order.
(1) Such emergency order, even when not
an order within the mean-
ing of K.S.A. 77-502, and amendments thereto, shall be subject to
the
same procedures as an emergency order issued under K.S.A. 77-536,
and
amendments thereto.
(2) Upon the entry of such an emergency
order, the commissioner
shall promptly notify the registrant subject to the order that it
has been
entered, of the reasons, and that a hearing will be held upon
written
request by the registrant.
(3) If the registrant requests a hearing,
or in the absence of any re-
quest, if the commissioner determines that a hearing should be
held, the
matter will be set for a hearing which shall be conducted in
accordance
with the provisions of the Kansas administrative procedure act.
Upon
completion of the hearing the commissioner shall by written
findings of
fact and conclusions of law vacate, modify or make permanent the
emer-
gency order.
(4) If no hearing is requested and none
is ordered by the commis-
sioner, the emergency order will remain in effect until it is
modified or
vacated by the commissioner.
New Sec. 18. Whenever it appears to
the commissioner that any per-
son has engaged or is about to engage in any act or practice
constituting
a violation of any provision of this act or any rule and regulation
or order
hereunder, the commissioner may bring an action in any court of
com-
petent jurisdiction to enjoin the acts or practices and to enforce
compli-
ance with this act or any rule and regulation or order hereunder.
Upon a
proper showing, a permanent or temporary injunction, restraining
order,
restitution, writ of mandamus or other equitable relief shall be
granted
and a receiver or conservator may be appointed for the defendant or
the
defendant's assets. The commissioner shall not be required to post
a
bond.
New Sec. 19. The provisions of
K.S.A. 1998 Supp. 9-2201 through
9-2210, and amendments thereto, and sections 10 through 19, shall
be
known and may be cited as the Kansas mortgage business act.
Sec. 20. K.S.A. 1998 Supp. 9-2201,
9-2202, 9-2203, 9-2204, 9-2205,
9-2206, 9-2207, 9-2208, and 9-2209 are hereby repealed.
Sec. 21. This act shall take effect
and be in force from and after its
publication in the Kansas register.
Approved April 1, 1999.
Published in the Kansas Register April 8, 1999.
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