Brief⁽¹⁾

S.B. 241, as amended, expands the powers of the Bank Commissioner to regulate mortgage business in Kansas and imposes new requirements on those mortgage businesses doing business in this state.

The bill:

• adds several new definitions for terms used in the bill and redefines "mortgage loan" to include second as well as first mortgages;



• adds to the list of entities in the mortgage business that are exempt from registration building and loan associations and industrial loan companies;



• makes it unlawful for any person to engage in or to advertise, publish, or otherwise hold out to the public that the person is engaged in mortgage business without having obtained authorization from the Commissioner;



• requires the person seeking registration to provide additional information to assist the Commissioner in identifying the applicant, the applicant's character and qualification;



• allows the Commissioner to deny, suspend, revoke, or refuse to issue or renew a registration if the applicant or registrant has engaged in or is engaging in deceptive business practices, has been the subject of disciplinary action in another jurisdiction, or a judgment has been entered against the applicant or registrant in a civil action based upon the conduct of the person;



• makes certificates of registration effective on the date of issue and renewable in each odd numbered year (renewals received after the expiration date of the registration will be treated as a new application);



• requires the registrant to identify in all advertisements or solicitations, including Internet solicitations, made direct to Kansans that the registrant is registered under this law;



• requires the mortgage business registered in Kansas to use only the name stated on the registration certificate that must be prominently displayed;



• requires those doing mortgage business through a bona fide office in Kansas: to file with the Commissioner a $25,000 surety bond or irrevocable letter of credit, to submit evidence that the registrant or applicant maintains at all times not less than $10,000 in liquid assets, and to submit evidence to the Commissioner that the applicant or registrant maintains at all times a minimum net worth of $100,000;



• requires those doing mortgage business in Kansas but not through a bona fide office, to file with the Commissioner a surety bond or irrevocable letter of credit in the amount of $100,000, and submit evidence that the applicant or registrant maintains a net worth of $50,000;



• requires the registrant to deposit in an escrow account within three days of receipt, all fees and moneys received from a borrower prior to the time the loan is consummated and to maintain a separate record of all money received for any service performed;



• directs registrants to report various kinds of information to the Commissioner, to keep records for a specified period of time, and to make all books and records open for inspection by the Commissioner; and

• authorizes the Commissioner to issue cease and desist orders to any registrant that has engaged, is engaging, or is about to engage in any act or practice constituting a violation of this law or rules and regulations adopted pursuant to this law, or to bring an action in any court of competent jurisdiction to enjoin those acts or practices and to enforce compliance with this law and rules and regulations.

House Committee amendments were technical and name all the statutes requesting mortgage business as the Kansas Mortgage Business Act.

Background

S.B. 241, as amended, was requested by the Acting Bank Commissioner whose Deputy explained that the original mortgage business law enacted in 1996, was a basic statute requiring registration. Since 1996, approximately 500 individuals and companies have registered and that number grows monthly. Approximately 67 percent of the registrants are out-of-state mortgage businesses. The changes to the law proposed in S.B. 241, the Deputy indicated, will assist consumers and the Commissioner in resolving problems related to home mortgages and will permit the Commissioner to work with regulators in other states.

The bill was supported by representatives of the Kansas Association of Mortgage Bankers, the Heartland Community Bankers Association, and the Kansas Association of REALTORS®.

The Office of the State Bank Commissioner states that passage of the bill would result in additional work for the agency, but the agency can absorb the increase with existing staff. Some penalties up to $5,000 could be levied but this authority would be utilized only in limited situations.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html.