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Amendments to Part 410 of the Superintendent’s Regulations  Concerning New Surety Bond Requirement or Deposit of Assets and Consultants who are Felons


December 29, 2003

To the Institution Addressed:

Re:  Amendments to Part 410 of the Superintendent’s Regulations  Concerning New Surety Bond Requirement or Deposit of Assets and Consultants who are Felons.


As a result of legislation passed this year, a new bond requirement will be effective January 1, 2004 for mortgage brokers.  Mortgage brokers will now be required to have a surety bond or pledged assets of between $10,000 and $100,000.  The Department has developed the following standard upon which the amount of the required bond will be based.  The amount of the bond for mortgage brokers will be determined by the number of New York Applications set forth on the Volume of Operations Report.  Registrants will have until July 1,2004 to supply evidence of the surety bond or the pledge of assets.

The amount of the bond required shall be as follows:

Number of New York Applications

Required Amount of Surety Bond

600+   $100,000
300 - 599  $  75,000
100-  299  $  50,000
25 –  99  $  25,000
0  -  24  $  10,000

The new legislation also adds “consultant” to the categories listed in sections 592.2, 592-a.2 and 595.  These sections provide the bases upon which a Superintendent may refuse to issue a license or registration or may suspend or revoke a license.  Accordingly, the superintendent may refuse to issue a license or registration or may suspend or revoke a license or registration if a consultant is a felon.

The term consultant shall mean an individual or entity involved in advising or directing management, performing management functions, or providing services to management of a licensed mortgage banker or registered mortgage broker on matters relating to the operation of the company, or an individual or entity that receives compensation, either directly or indirectly, from the licensed or registered entity, for advising potential applicants or borrowers with regard to the making of a mortgage loan.  An individual or entity may be deemed a consultant regardless of whether that person or entity is receiving compensation.  Consultant shall not include:

  1. an individual who is a W-2 employee of a licensee or registrant; or

  2. an individual with a professional license issued by this state or another state including, but not limited to, attorneys, accountants, real estate agents and appraisers, provided that the services provided by such individual to the licensee or registrant are the services for which such individual has a professional license; or

  3. an individual who is employed by an entity that is regulated by any local, state or federal regulatory agency; or

  4. any 1099 independent contractor or other outside contractor that does not provide mortgage related services.

The term employee shall mean any individual performing a service for either a mortgage broker, or mortgage banker for whom such entity would be liable for withholding taxes pursuant to Title 26 of the United States Code.

The term independent contractor shall mean any individual engaged in regulated activities as an independent contractor pursuant to Title 26 of the United States Code on behalf of either a mortgage broker, or mortgage banker.

Applicants for a license to engage in the business of mortgage banking and applicants for registration as a mortgage broker shall provide a list of their consultants at the time of application.  A list of consultants must be filed with the Superintendent by the licensee or registrant in such form as may be prescribed within ten days of commencement of retainment. In addition, notification of the termination of any consultant shall be made to the Superintendent within 10 days of such termination. 

An undertaking of accountability for each independent contractor must be filed with the Superintendent by the licensee or registrant in such form as may be prescribed within ten days of commencement of retainment.  In addition, notification of the termination of any independent contractor shall be made to the Superintendent within 10 days of such termination.

A copy of the revised regulation including all changes is on the Banking Department website.

Very truly yours,

Kenneth Bielemeier
Deputy Superintendent of Banks

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