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Adopted Regulations
Adoption of Amendments to Part 410 of the Superintendent's Regulations (Mortgage Bankers: Licensing Requirements; Mortgage Brokers: Registration Requirements; Branch Applications: Notifications: Books and Records; Annual Reports; Surety Bonds; and Consultants of Licensed Mortgage Bankers and Registered Mortgage Brokers.)


Amendments
To Part 410
of the Superintendent’s Regulations

The title is amended to read as follows:

MORTGAGE BANKERS: LICENSING REQUIREMENTS; MORTGAGE BROKERS: REGISTRATION REQUIREMENTS; BRANCH APPLICATIONS: NOTIFICATIONS: BOOKS AND RECORDS; ANNUAL REPORTS; SURETY BONDS; AND CONSULTANTS OF LICENSED MORTGAGE BANKERS AND REGISTERED MORTGAGE BROKERS.

(Statutory authority: Banking Law, Article 12-D)

Paragraph 3 of subdivision (b) of Section 1 of Part 410 is amended to read as follows:

§ 410.1  Mortgage banking license; minimum standards.

  1. Financial responsibility.  Applicants for a license to engage in the business of making mortgage loans shall demonstrate and maintain:

  1. adjusted net worth of not less than $250,000;

  2. an existing line of credit in an amount of not less than $1,000,000.00 provided by an unaffiliated banking institution, insurance company, or similar credit facility approved by the [s]Superintendent; and

  3. a corporate surety bond issued by a bonding company or an insurance company authorized to do business in New York or pledged deposit (valued at the lower of principal amount or market) in the amount [of $50,000.00] set forth in Section 410.9 of this Part.

Subdivision (e) of Section 1 of Part 410 is repealed.

Subdivision (a) of Section 8 of Part 410 is amended to read as follows:

§ 410.8  Books and records; annual reports.

  1. Each mortgage banker and mortgage broker shall keep its books and records in a manner [which] that will allow the [s]Superintendent to determine whether the mortgage banker or mortgage broker is complying with article 12-D of the Banking Law.  Every mortgage banker and mortgage broker shall preserve its books and records for inspection for a minimum of three years.  [Specifically] Every mortgage banker and mortgage broker shall establish and maintain the following:

Subdivision (4) of Section 8 of Part 410 is amended to read as follows:

  1. A centralized application log for the principal office and all branch   offices, updated daily, [maintained in chronological order,] based on the date of receipt of the application, containing the following information:

  1. date application received;

  2. name and address of applicant;

  3. file number assigned;

  4. address of property;

  5.  source of application – if the source is a referral, the entry must include the name, address and a description of the entity making the referral.  This information may be contained in the application log or set forth by file number or applicant name in one or more accounting records of sufficient detail;

  6. all other fees collected and/or distributed prior to closing – include the amount of the fee, date paid, purpose (e.g. appraisal, credit report, etc.) and the name, address, and description of the entity to whom each fee is paid and/or from whom a fee is received.  This information may be contained in the application log or set forth by file number or applicant name in one or more accounting records of sufficient detail; and

  7. final disposition of the application and the date thereof.  Every mortgage broker shall also establish and maintain items 2,3 and 4 above (paragraphs [2]-[4] of this subdivision).  In addition, the application log shall also contain the entity with [whom] which the loan was placed and the amount of the fees received for mortgage brokerage service directly from the applicant and all other sources (e.g. lenders, other brokers, etc.).  Said fees shall be listed separately for each source.  This information may be contained in the application log or set forth by file number or applicant name in one or more accounting records of sufficient detail.

  1. Branches must report their activity to the principal office on a daily basis not later than noon of the fifth business day after the activity takes place.

New subdivisions (f) through (q) of Section 8 of Part 410 are added to read as follows:

  1. Loan files.  Each mortgage banker shall maintain all documents relating to the credit, underwriting and pricing decisions of each loan file irrespective of whether the application has been denied, approved or withdrawnEach mortgage broker shall maintain a copy of the HUD-1 in each loan file.

  2. Documentation relating to pricing and credit.  Each mortgage banker shall establish and maintain the following:

  1. if overages are charged, the lending policies and procedures pertaining to the imposition of overages.  For purposes of this Part, an overage is a specific amount charged to a borrower in excess of the applicable amount indicated on the regular rate sheet utilized by the lender, whether in the interest rate or in the points, which serves to increase compensation to lenders and loan officers.  Such rate sheet shall be maintained and available for review by the Banking Department.  If such rate sheet is not maintained in the loan file, then each loan file shall contain information sufficient to identify which rate sheet was utilized to price that loan;

  2. the lending policies and procedures pertaining to the charging of discount and/or origination points, if any, irrespective of whether such points reduce the interest rate; and

  3. the lending policies and procedures pertaining to the payment, if any, of premium pricing to mortgage brokers.

  1. Other required documentation relating to pricing and credit.  Each mortgage banker shall establish and maintain the following documents for all loans, provided that such documents need not be maintained for federally related mortgage loan programs including, but not limited to, any loan purchased by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, securitized by the Government National Mortgage Association or insured by the Federal Housing Administration, the Veterans’ Administration or the Farmers’ Home Administration or such loans that are prime no documentation/low documentation or alternative documentation loans:

  1. the lending policies and procedures pertaining to loan pricing and the conditions under which exceptions to such loan pricing policies and procedures can be made and by whom;

  2. documents reflecting pricing matrices; and

  3. documents reflecting the establishment of credit grades.

  1. Mortgage loan pipeline.  With respect to mortgage loans for which a commitment has been issued but the loan has not yet closed and funded, each mortgage banker shall maintain a report or reports, updated on a monthly basis, that provides the following information, both by state and in the aggregate:

  1. Total number and dollar amount of such loans;

  2. Type of loan, (i.e., purchase money, refinance, etc.);

  3. Total number and dollar amount of all such loans having a locked-in interest rate and total number and dollar amount of such loans whose interest rate is not locked-in; and

  4. The date the commitment was issued and any fees collected from the borrower up to the date of commitment by any party to the mortgage transaction.

Such report(s) shall be retained for one year.

  1. Mortgage loans subject to a lock-in agreement.  For mortgage loans in which the loan applicant has entered into a lock-in agreement with respect to the interest rate, mortgage bankers shall maintain a report, updated monthly, regarding such loans that includes the date the interest rate was locked-in and the date and dollar amount of any fees collected by any party for the purpose of guaranteeing the lock-in rate.  Such report shall be retained for one year.

  2. Lines of credit.  For each line of credit, a mortgage banker shall maintain a report, or equivalent documentation, updated weekly, listing each advancement of funds from the line of credit that reflects the date of the advancement, the name of the borrower, the date that the mortgage loan closed and the date the funds were forwarded to satisfy its obligation for the advancement from the line of credit;

  3. Closing agents.  Each mortgage banker shall maintain a list, by state, of the closing agents that it uses that contains, at a minimum, the name, address and telephone number of the closing agent.

  4. Quarterly reports.  Within 45 days of the end of each fiscal quarter, each mortgage banker shall file:

  1. an unaudited financial statement with the Department that, at a minimum, includes a balance sheet, income statement, cash flow statement, statement of adjusted net worth and dollar amount of mortgage loans for which a commitment has been issued but the loan has not yet closed.  In instances where a mortgage banker has more than one affiliated company, said mortgage banker shall submit such financial statements on both a consolidated and consolidating basis;

  2. with respect to mortgage loans for which a commitment has been issued but said loan has not yet closed and funded, a quarterly report with the Department that provides the number and dollar amount of such loans, the average number of days from commitment to closing and the number of loans in the quarter that did not close within said average number of days.

  1. Compliance officer.  Each mortgage banker shall employ an in-house Compliance Officer who shall be responsible for ensuring that the mortgage banker operates its mortgage banking business in accordance with all applicable federal and state laws and regulations.  While the Compliance Officer may have other job responsibilities, the mortgage banker is responsible for ensuring that the Compliance Officer devotes sufficient time to the compliance function responsibilities.  Alternatively, the mortgage banker may retain an unaffiliated third party to provide such compliance services.

  2. FNMA or FHLMC certified lenders.  Within ten (10) days of receipt, each mortgage banker certified by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation shall provide the Department with:

  1. copies of any and all financial reporting on the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation forms;

  2. a copy of any audit letter issued on behalf of the mortgage banker in conjunction with the Uniform Single Audit Program for Mortgage Bankers and evidence of current certification by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, if applicable; and

  3. copies of any and all notices received from the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation relating to the withdrawal of said certification.

  1. Third party audit reports.  Within 10 days of receipt, each mortgage banker shall provide the Department with a certified copy of any report of an audit of the mortgage banker and/or its affiliates by any lender extending a line of credit to the mortgage banker, investor, party to a loan purchase agreement, any Federal agency or Government Service Organization.

  2. Maintenance of certain mortgage loan data.  In order to allow the Superintendent of Banks to ensure that all mortgage bankers are conducting their residential mortgage lending business in accordance with the provisions of Section 296-a of the Executive Law, each mortgage banker exempt from the mortgage data reporting requirements of Section 203.3(2) of Regulation C, 12 CFR 203, issued by the Board of Governors of the Federal Reserve pursuant to the Federal Home Mortgage Disclosure Act, 12 USC 2801, et seq., as amended, shall maintain the same data as required by Regulation C for review by the Superintendent of Banks.  The regulation is incorporated by reference and is authored by the Board of Governors of the Federal Reserve System and published by the United States Government Printing Office, Washington, DC  20402.  A copy is available for public inspection and copying at the New York City office of the New York State Banking Department located at the address stated in Supervisory Policy G 1 of Title 3 of the NYCRR. Said data shall be compiled on an annual basis by March 1st of the following year in the manner required by Regulation C but need not be submitted to the Department but must be available for examination for a minimum of three years.  Mortgage bankers wishing to retain the above data in a form other than that required by Regulation C may apply in writing for a waiver from the Superintendent of Banks.

Subdivisions (a) and (b) of Section 410.9 are amended to read as follows:

§ 410.9  [Provision for] Corporate surety bonds for mortgage bankers. 

  1. Every mortgage banker licensed pursuant to Banking Law Section 591[,] shall file with the [s]Superintendent a corporate surety bond in [the] a principal amount of [50,000] not less than $50,000 or more than $500,000 based on its volume of business.  The amount of the bond required shall be as follows:

Aggregate $ Amount of NY Loans Closed Required Amount of Surety Bond
$300,000,000+ $500,000 
$200,000,000 - $299,999,999 $350,000
$100,000,000 - $199,999,999 $250,000
$30,000,000 -   $99,999,999 $150,000
$10,000,000 -   $29,999,999 $100,000
$0 -     $9,999,999 $50,000  

The amount of the surety bond shall be determined from information submitted in the annual Volume of Operations Report (“VOOR”).  The 2004 bond will be based upon the 2002 VOOR figures reported to the Department.  Thereafter, adjustments to the amount of the bond shall be made within 30 days after filing the applicable VOOR.  Moreover, a licensed mortgage banker may submit a sworn statement indicating the aggregate dollar amount of NY loans closed during the first half of the calendar year if such amount, on an annualized basis, would change the required amount of the surety bond.  Such corporate surety bond shall be issued by a bonding company or insurance company authorized to do business in this State.  If the Superintendent determines, in his or her sole discretion, that a licensee has engaged in a pattern of conduct resulting in bona fide consumer complaints of misconduct, the Superintendent may require such licensee to post a surety bond, or keep on deposit, twice the amount of such bond or deposit as is required consistent with this subdivision.

  1. Such bond shall be in favor of the [s]Superintendent for the protection of the [s]Superintendent and residential mortgage consumers located in New York State [.  The principal amount of such bond shall be $50,000] and it shall contain substantially the following language:  

In the event of the insolvency, liquidation or bankruptcy of such licensee, or the expiration, surrender or revocation of such mortgage banker’s license, or where the Superintendent takes possession of such licensee, the proceeds of this bond shall constitute a trust fund to be used exclusively by the [s]Superintendent to reimburse consumer fees or other charges determined by the [s]Superintendent to be improperly charged or collected and to pay past due [b]Banking [d]Department examination costs and assessments charged to the licensee, unpaid penalties, or other obligations of the licensee. [solely in the event of the insolvency, liquidation or bankruptcy of such mortgage banker or the surrender, expiration or revocation of such mortgage banker’s license.]  In the event of the insolvency, liquidation or bankruptcy of the mortgage banker, or the expiration, surrender or revocation of such mortgage banker’s license, or where the Superintendent takes possession of such licensee, the proceeds of the bond shall be paid to the [s]Superintendent forthwith for disposition in accordance with the applicable provisions of the Banking Law.”

Section 10 of Part 410 is amended to read as follows:

§ 410.10  Deposit of assets.

Pursuant to Banking Law, section 591(4), a mortgage banker may, in lieu of filing a corporate surety bond pursuant to section 410.9 of this Part, elect to deposit assets with a value of $50,000 to $500,000, in accordance with the requirements of section 410.9, valued at the lower of principal amount or market value in a New York State chartered commercial bank, trust company, savings bank, savings and loan association or a national bank, federal savings bank or federal savings and loan association in the State of New York.  Pursuant to Banking Law section 591-a, a mortgage broker may, in lieu of filing a corporate surety bond pursuant to section 410.15 of this Part, elect to deposit assets with a value of $10,000 to $100,000, in accordance with the requirements of section 410.15, valued at the lower of principal amount or market value in a New York State chartered commercial bank, trust company, savings bank, savings and loan association or a national bank, federal savings bank or federal savings and loan association in the State of New York.  No such deposit shall be made until the deposit agreement referred to in section 410.11 of this Part has been approved by the [s]Superintendent.

Section 11 of Part 410 is amended to read as follows:

§ 410.11  Deposit agreement; certificate of licensee or registrant.

Any mortgage banker or mortgage broker, which elects to deposit assets pursuant to section 410.10 of this Part, shall execute with the depository a deposit agreement on a form obtained from the Mortgage Banking Division of the Banking Department or such other form as is satisfactory to the [s]Superintendent.  An executed copy of such deposit agreement shall be filed with the [s]Superintendent.  As part of this deposit agreement, the mortgage banker or mortgage broker shall agree that prior to the release or substitution of any assets subject to the deposit agreement, the mortgage banker or mortgage broker shall file a certificate with the depository which shall specify the following:

  1. the complete title of each security being withdrawn;

  2. the complete title of each security being deposited in place thereof;

  3.  the interest rate, series, serial number (if any), face value maturity date, call date, principal amount and market value of each replacement security;

  4.  the aggregate principal amount of all such replacement securities;

  5. the amount, if any, of the funds being withdrawn or deposited; and

  6. certify that any securities being deposited in exchange for securities being withdrawn comply as to type with the provisions of subdivision 4 of section 591 of the Banking Law, and that, after giving effect to the exchange, the aggregate amount of all securities and funds remaining on deposit by the licensed mortgage banker or registered mortgage broker, based in the case of such securities is upon the principal amount or market value, whichever is lower, is at least equal to [$50,000] the amount required in Section 410.9 of this Part for mortgage bankers, or Section 410.15 of this Part for mortgage brokers.

In addition, as part of this deposit agreement, the licensee or registrant shall agree that the [s]Superintendent may revoke the authority of the depository to pay dividends or interest on the securities, funds or other assets deposited pursuant to this deposit agreement.  

Section 13 of Part 410 is amended to read as follows:

§ 410.13  Retention of receipts or statements.

Each mortgage banker and mortgage broker shall retain until completion of its next examination the originals of any and all receipts and/or statements obtained from a depository pursuant to the deposit agreement referred to in section 410.11 of this Part as well as copies of any and all withdrawal requests and the certificate given to a depository pursuant to the deposit agreement referred to section 410.11 of this Part.

Section 14 of Part 410 is amended to read as follows:

§ 410.14  Miscellaneous provisions.

  1. Reliance on written communication of department.  For the purposes of the deposit agreement, the mortgage banker, mortgage broker and the depository shall accept and may rely upon, as an order of the [s]Superintendent, any written communication with the seal of the department affixed thereto, and signed:

  1. by the [s]Superintendent;

  2.  by a [d]Deputy [s]Superintendent of banks;

  3.  by any two employees jointly of the department whom the [s]Superintendent may specifically designate in writing, to the depository [or], the mortgage banker or mortgage broker (whichever is the addressee of such communication).

  1. Release from compliance with terms or conditions of deposit agreement.  The [s]Superintendent may by order relieve the mortgage banker, the mortgage broker or the depository from compliance with any term or condition of the deposit agreement, including any term or condition prescribed by this Part, if the [s]Superintendent shall find such action necessary or proper to give effect to the purposes of sections 591(4) and 591-a(3) of the Banking Law or of this Part.

Section 15 of Part 410 is amended by deleting the existing paragraph and adding new subdivisions a and b to read as follows:

§ 410.15  Corporate surety bonds for mortgage brokers.[Imposition of corporate surety bond or deposit of assets on mortgage brokers]

[In the event the superintendent shall impose a corporate surety bond or deposit of asset requirement on a registered mortgage broker, pursuant to section 591-a of the Banking Law, such corporate surety bond or deposit of asset shall be made in accordance with section 410.9, 410.10, 410.11, 410.12, 410.13, and 410.14 of this Part except that the principal amount required shall not exceed $25,000, valued at the lower of principal amount or market.] 

  1. Every mortgage broker registered pursuant to Banking Law Section 591-a shall file with the Superintendent a corporate surety bond in a principal amount of not less than $10,000 or more than $100,000 based on its number of applications.  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 amount of the surety bond shall be determined from information submitted in the annual Volume of Operations Report (“VOOR”).  The 2004 bond will be based upon the 2002 VOOR figures reported to the Department.  Thereafter, adjustments to the amount of the bond shall be made within 30 days after filing the applicable VOOR.  Moreover, a registered mortgage broker may submit a sworn statement indicating the number of applications taken during the first half of the calendar year if such number, on an annualized basis, would change the required amount of the surety bond.  Such corporate surety bond shall be issued by a bonding company or insurance company authorized to do business in this State.  If the Superintendent determines, in his or her sole discretion, that a registrant has engaged in a pattern of conduct resulting in bona fide consumer complaints of misconduct, the Superintendent may require such registrant to post a surety bond, or keep on deposit, twice the amount of such bond or deposit as is required consistent with this subdivision.

The term “application” shall have the same meaning as that term has in section 202.2(f) of Regulation B of the Federal Reserve System (12 CFR 202).  The regulation, including the interpretations thereof contained in Supplement 1 to Part 202—Official Staff Interpretations, is incorporated by reference and is authored by the Board of Governors of the Federal Reserve System and published by the United States Government Printing Office, Washington, DC  20402.  A copy is available for public inspection and copying at the New York City office of the New York State Banking Department located at the address stated in Supervisory Policy G 1 of Title 3 of the NYCRR. 

  1. Such bond shall be in favor of the Superintendent for the protection of the Superintendent and residential mortgage consumers located in New York State and it shall contain substantially the following language:  

“In the event of the insolvency, liquidation or bankruptcy of such registrant, or the expiration, surrender or revocation of such mortgage broker’s registration, or where the Superintendent takes possession of such registrant, the proceeds of this bond shall constitute a trust fund to be used exclusively by the Superintendent to reimburse consumer fees or other charges determined by the Superintendent to be improperly charged or collected and to pay past due Banking Department examination costs and assessments charged to the registrant, unpaid penalties, or other obligations of the registrant.  In the event of the insolvency, liquidation or bankruptcy of the mortgage broker, or the expiration, surrender or revocation of such mortgage broker’s registration, or where the Superintendent takes possession of such registrant, the proceeds of the bond shall be paid to the Superintendent forthwith for disposition in accordance with the applicable provisions of the Banking Law.”

  1. Mortgage brokers that have been placed on inactive status pursuant to section 410.17 need not obtain a surety bond or deposit of assets.  Should the mortgage broker seek to reactivate its registration, satisfactory proof of the surety bond or deposit of assets will be required before reactivation is granted.

(Section 16 of Part 410 is amended to read as follows)

§ 410.16    Release of corporate surety bond or deposit of assets.

If a claim is not made against the surety bond or deposit of assets held pursuant to Sections 591(4) and 591-a(3) of the Banking Law within six months of the insolvency, liquidation, bankruptcy of the mortgage banker or broker, or the expiration, surrender or revocation of the mortgage banker’s license or mortgage broker’s registration, or where the Superintendent takes possession of the mortgage banker or broker, the [s]Superintendent shall  release any such corporate surety bond or deposit of assets.  Provided that the proceeds of the bond or deposit of assets shall have been first applied to:

  1. all consumer fees determined by the [s]Superintendent to be improperly charged or collected by said mortgage banker or mortgage broker; and

  2. all [b]Banking [d] Department examination costs and assessments outstanding against said mortgage banker or mortgage broker.  Nothing contained herein shall prevent the Superintendent from continuing to retain possession of the bond or its proceeds or the deposit of assets in the event of ongoing litigation involving the mortgage banker or mortgage broker.

(New sections 410.18, 410.19 and 410.20, are added to read as follows:)

§ 410.18  Consultants, Employees and Independent Contractors of Licensed Mortgage Bankers and Registered Mortgage Brokers.

  1. 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.

  1. 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.

  2. 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.

  3. 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 its 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.

  4. 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.

§ 410.19 Filings.

All filings under this Part may be submitted electronically in a format acceptable to the Superintendent.

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