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Pensionvania changes mortgage licensing law

The Governor of Pennsylvania, Tom Corbett, on 2 July 2013 undersigned Act HB 1124, which implements the Mortgage Licensing Act ("MLA"), 7 Pa. C.S. 6101 et sqq. Significant changes to the AMLA as a consequence of the adoption of HB 1124 contain new exemptions from licensing and new legal stipulations as well as clarification of current regulations of the AMLA.

Firstly, HB 1124 modifies current exemptions to the MLA and sets new exemptions for approval. The minimal except extended. Currently, the only de minimis exemption from licensing in the MLA is for a person who is offering or negotiating the conditions of a mortgage for a member of that person's immediate relatives.

In other words, even proposing or bargaining the conditions of a mortgage would require one licence per year. The HB 1124 revokes that waiver and substitutes for it a more general waiver for individuals who'carry on the mortgage credit activity less than four periods per year, unless the Ministry has decided otherwise to carry on the mortgage credit activity.

" Mortgage lending " is defined by the AMLA as "the transaction of advertisement leading to advertisement that requests, negotiates or arranges or offers, in the normal course of doing business, to grant or to grant mortgage credit. The de minimis exemption from license insurance extends the existing exemption of up to two credits per year under the former Mortgage Bankers and Brokers and Consumer Equity Protection Act, 63 P.S. ยง 456.

It provides a secure harbour for those who are not active in the mortgage lending industry but may have the opportunity to carry out an operation which would have previously been subject to a licence. A new non-profit exemption. Both of the recent exemptions from non-profit licensing have been removed and substituted by a new exemption for "bona-fide charitable organizations" and their people.

Currently, the exemptions are for ( a) non-profit organisations that do not consider themselves publicly involved in the mortgage lending industry, and (b) non-profit organisations that grant mortgage credit held in the company's portfolios and used to support and develop the culture and lifestyle of good faith organisations.

HB 1124 repeals the indemnity (12) and reviews the indemnity (11) to make the indemnity applicable to'a good faith charitable organisation and the organisation's staff who act in the context of their work unless they are considered to be involved in mortgage credit'. "HB 1124 defined a "bona fide non-profit organisation" which includes companies that encourage affordability, home ownership or other similar services.

It will benefit companies such as the Pennsylvania Housing Finance Agency (PHFA) which have not previously been exempted. Non-profit organisations acting in good faith must continue to comply with the MLA's accounting and borrowing standards and be audited and fined by the Ministry. Department will post on its website a listing of companies that have qualified as good faith non-profit organisations.

Novel exemption, if no Pennsylvania Noexus. MLA will be modified to provide an exemption from licensing for lenders whose physical location is in Pennsylvania but who do not enter into a transaction with Pennsylvania users, Pennsylvania apartments or Pennsylvania homes. It is a natural departure from license insurance as these deals have no reasonable link to Pennsylvania that would need to be regulated.

A new exemption for credit changes. Individuals who are involved in changes to mortgage credits for mortgage credits already granted, owned or served by that individual or the individual's employers who are not otherwise involved in mortgage credit operations are now exempted from the authorisation under HB 1124. At present, the MLA does not limit the number of undertakings for which a mortgage lender may work.

AMLA has been modified to allow mortgage lenders to act only on mortgage lending in the name of a sole employers (whether brokers, lenders, credit correspondents or exempt entities). The HB 1124 makes it clear that the training obligation is an annually required standard that applies to all store supervisors, lenders and qualified persons.

Qualified person" is a person employed by a mortgage agent, creditor or credit correspondence agent and a manager associated with the head office. Mortgagors and mortgage intermediaries are obliged to appoint a "qualified person" for the main place of establishment of the licence holder and to appoint different persons as manager of establishment for each site in accordance with the training conditions.

Thirdly, HB has added 1124 new constraints and sanctions on mortgage lenders. Probably the most significant change to the AMLA is the limitation on the extent to which a mortgage lender may survive on his allocated position. GwG demands that a lender works from a licenced site.

The MLA never, however, limited the range a lender may cover from his allocated bureau. HB 1124 requests that mortgage lenders be allocated to operate from a licenced site which is either the principal's domicile or a licensee's licenced site not more than 100 leagues from the principal's domicile.

There is no other approval act specified by the department that specifies the extent to which an associate may reside from his designated location. Like, what if a lender resides 101 leagues from his designated bureau? How about lenders who adopted locations more than 100 leagues away from their offices before amending this Act?

In so far as the object of that rule is to make sure that lenders actually work from the allocated entity, do licencees then have the possibility to prove that the lender actually works from the allocated entity? Lastly, the MLA was modified so that mortgage lenders are liable to the same fine and sanctions for infringements of the MLA as other licence holders.

Whilst some of the changes are seen favourably by the mortgage sector, the limitation on the extent to which authors can reside from their allocated office could have a significant influence on the way licence holders run their businesses.

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