Subchapter 03M – Mortgage lending

 

SECTION .0100 – GENERAL

 

04 NCAC 03M .0101         DEFINITIONS

As used in this Subchapter, unless a contrary definition is

provided or required by the context:

(1)           Terms used in this Subchapter which are defined in

the Act have the same meaning as set forth in the Act.

(2)           When any term in this Subchapter is defined by

reference to or incorporation of a regulation or rule of a federal or state

agency, board, commission or other regulatory body other than the Commissioner,

the reference shall be deemed to be to the regulation or rule as it is in

effect and interpreted in its most current version.

(3)           "Act" means Article 19B of Chapter 53 of

the North Carolina General Statutes, commonly known as the "North Carolina

Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act," or

"NC SAFE Act."

(4)           "Advertisement" means material used or

intended to be used to induce the public to apply for a mortgage loan.  The

term includes any printed or published material, or descriptive literature

concerning a mortgage loan to be solicited, processed, negotiated or funded by

a licensee or exempt entity whether disseminated by direct mail, newspaper,

magazine, radio or television broadcast, electronic mail or other electronic

means, billboard or similar display.  The term does not include any

disclosures, program descriptions, or other materials prepared or authorized by

any state or federal government agency, nor does the term include any material

or communication which has been excluded for purposes of any regulation of the

Board of Governors of the Federal Reserve System regulating consumer credit

disclosures.

(5)           "Call Report" means a report of condition

on a company and its operations which includes financial and loan activity

information.

(6)           "Commission" means the North Carolina

Banking Commission.  For purposes of complying with these Rules by credit

unions, Banking Commission means the North Carolina Credit Union Commission.

(7)           "Controlling person" means a person who,

with regard to a licensee:

(a)           has the ability to exercise

"control", as the term is defined in G.S. 53-244.030(7), or

(b)           otherwise has the power to direct the

management and policy of the licensee.

(8)           "Instructor" means an individual who is

employed by a provider and who is responsible for teaching a program.

(9)           "License" means a mortgage lender,

mortgage servicer, mortgage broker, exclusive mortgage broker, or mortgage loan

originator license issued pursuant to the Act and this Subchapter. 

(10)         "Material" when used in connection with

facts or information provided to the Commissioner by a licensee or applicant,

means facts or information that a reasonable person knows, or should know,

would be likely to influence a decision to grant, suspend, condition, limit,

renew, or revoke a license or to take other disciplinary action against a

licensee or exempt person, including:

(a)           notice of a pending administrative action

involving the licensee or applicant for licensure by any state or federal

authority to which the licensee is subject;

(b)           the issuance of an administrative order

against the licensee or applicant for licensure by any state or federal

authority to which the licensee is subject;

(c)           notice of a pending criminal charge against

the licensee or applicant for actions related to financial services or moral

turpitude;

(d)           the entry of a conviction or one of the

following on a criminal charge against the licensee or applicant for licensure

for a felony or other criminal charge for actions related to financial services

or moral turpitude:

(i)            plea of guilty;

(ii)           plea of no contest or nolo contendere;

(iii)          prayer for judgment continued;

(iv)          deferred prosecution agreement;

(v)           an adjudication or verdict of guilty by a

domestic, foreign, military, or other court of competent jurisdiction;

(vi)          the equivalent of any of the foregoing in a

domestic, foreign, military, or other court of competent jurisdiction; or

(vii)         any other classification that is deemed a

conviction pursuant to the  applicable law  in the jurisdiction where the

criminal charge was brought.

(e)           a change in status to the licensee's bond,

including the reduction or cancellation of such bond; and

(11)         "Material" when used in connection with

facts or information provided to the Commissioner, by a licensee or applicant

for licensure, also means facts and information  regarding the licensee's

identity and contact information, including:

(a)           the licensee's primary phone number, mailing

address, and principal office address;

(b)           any assumed name, trade name, or d/b/a

(doing business as) under which the licensee may be operating;

(c)           the address at which files or documents

retained pursuant to the Act or the rules in this Subchapter are stored;

(d)           the identity of the licensee's bonding

company or carrier, and bond number;

(e)           for corporate licensees, the identity of any

affiliated mortgage lender, mortgage broker, mortgage servicer, or provider of

settlement services; and

(f)            for corporate licensees, the identity of

the licensee's owners, officers, directors, qualifying individual, branch

manager(s), or control persons.

(12)         "Material" when used in connection with

facts or information provided to a borrower, means facts or information that a

reasonable person knows, or should know, would reasonably be expected to

influence a borrower's decision with regard to one or more loans, including:

(a)           the total compensation the mortgage broker

expects to receive from all sources in connection with each loan option

presented to the borrower;

(b)           the terms of each loan option presented to

the borrower;

(c)           the anticipated monthly payment (including

property tax and insurance payments) for each loan option presented to the

borrower;

(d)           if the loan contains a variable rate feature

or other terms which may result in a change to the borrower's monthly payments

over the life of the loan, the circumstances upon which the terms or payments

will change and the impact of the changes upon the borrower's required monthly

payments; and

(e)           any affiliate relationships that may exist

between the licensee and any party or parties to the sale or financing of the

subject property, or any provider of settlement services.

(13)         "Material" when used in connection with

the word "change" or "changes," means a change to any

material facts or information.

(14)         "Nationwide Mortgage Licensing System and

Registry" or "NMLS&R" has the same meaning as in the NC SAFE

Act.

(15)         "Prelicensing Education" means a classroom

or classroom equivalent education program required by G.S. 53-244.070.

(16)         "Program" means a prelicensing program.

(17)         "Provider" means any person who provides a

program.

(18)         "Qualified Written Test" means the

mortgage prelicensing qualified written test required by G.S. 53-244.080.

(19)         "Settlement Services" has the same meaning

as defined in federal Real Estate Procedures Act (RESPA) 12 U.S.C. Sec. 2601

et. seq. Regulation X, 24 C.F.R. Part 3500 et. seq.

(20)         "Testing Provider" means an organization

approved by the NMLS&R to administer the qualified written test.

 

History Note:        Authority G.S. 53-244.118;

Temporary Adoption Eff. July 1, 2002;

Eff. April 1, 2003;

Amended Eff. July 1, 2010; July 18, 2008.

04 NCAC 03M .0102         NOTICES

(a)  Except as otherwise required by G.S. 53-244.113(b),

Article 3A, Chapter 150B of the General Statutes, or by the rules of the North

Carolina Office of Administrative Hearings, any document, decision or other

communication required or permitted to be given by the Commissioner to a

licensee, an applicant for a license or an exempt person is considered given

when either:

(1)           deposited in the United States mail with

sufficient first class postage affixed, addressed to the most recent principal

office address provided by the addressee to the Office of the Commissioner of

Banks; or

(2)           transmitted through electronic mail to the

address provided by the addressee to the Office of the Commissioner of Banks.

(b)  Any application for licensure, report, annual

statement, amendment to application, notice or other document which is required

or permitted by law or rule to be filed with the Commissioner shall be in

writing, and submitted in an electronic format through the NMLS&R.

(c)  Where the NMLS&R does not make available submission

of any document required or permitted by law to be filed with the Commissioner,

such a document may be filed by electronic submission through the Office of the

Commissioner of Bank's website (www.nccob.gov), if the Commissioner makes such

electronic submission available.

 

History Note:        Authority G.S. 53-244.118;

Temporary Adoption Eff. July 1, 2002;

Eff. April 1, 2003;

Amended Eff. May 1, 2010.

 

SECTION .0200 - LICENSING

 

04 NCAC 03M .0201         APPLICATION

(a)  All fees required by G.S. 53-244.090 or 53-244.101

shall be submitted with an application for licensure or renewal of license as a

mortgage lender, mortgage broker, mortgage servicer, exclusive mortgage broker

or mortgage loan originator.  The fees are nonrefundable.

(b)  Each type of application required by the rules in this

Subchapter or the Act shall be filed through the NMLS&R and shall be

verified by the oath or affirmation of the applicant or a principal officer

thereof.

(c)  In addition to the documents and information required

by the rules in this Subchapter, the Commissioner or his or her staff may

require additional information according to the Rules in order to enable the

Commissioner to determine that the applicant meets or the licensee continues to

meet the requirements of G.S. 53-244.040, 53-244.050, 53-244.060, 53-244.070,

53-244.080, 53-244.100, 53-244.101, 53-244.102, 53-244.103, 53-244.104, and

53-244.105.

(d)  Applications submitted without the required fees or

which are missing material information shall be held in pending status for a

period of 30 calendar days after written notice to the applicant specifying the

nature of the deficiency.  If any such deficiency remains outstanding for more

than 30 days, the application shall automatically be considered withdrawn

without further action by the Commissioner, and the applicant shall submit a

new application and pay all fees associated therewith.

 

History Note:        Authority G.S. 53-244.040, 53-244.050;

53-244.060; 53-244.070, 53-244.080, 53-244.100; 53-244.101; 53-244.102;

53-244.103; 53-244.104; 53-244.118;

Temporary Adoption Eff. July 1, 2002;

Eff. April 1, 2003;

Amended Eff. May 1, 2010.

 

04 NCAC 03M .0202         NONTRANSFERABILITY

(a)  Any attempt to transfer or assign a license through a

change of control without the prior consent of the Commissioner shall:

(1)           be ineffective;

(2)           be grounds for summary suspension, or

revocation of the license or other remedies available to the Commissioner; and

(3)           render the licensee jointly and severally

liable with the assignee for any actions or omissions of its assignee which

occur while acting under the apparent authority of the license.

(b)  A change in the identity of a licensee's controlling

person or any material change in the licensee's organizational structure shall

be considered a transfer or assignment of the license.  However, the Commissioner

shall permit the change without requiring the licensee to apply for a new

license, provided:

(1)           the licensee gives notice to the

Commissioner at least 60 days in advance of the effective date of the proposed

change; and

(2)           the Commissioner determines that permitting

the licensee to continue to operate under its existing license would not be

inconsistent with the purposes of the Act.

(c)  A notice pursuant to Subparagraph (b)(1) of this Rule

shall include sufficient detail to enable the Commissioner to make the

determination described in that Subparagraph (b)(2) of this Rule.

(d)  The Commissioner shall waive or reduce the advance

notice requirement of Subparagraph (b)(1) of this Rule if the Commissioner

determines that:

(1)           circumstances beyond the licensee's

reasonable control would make compliance therewith unduly burdensome to the

licensee;

(2)           consumers would not be harmed by such a

waiver or reduction of the advance notice requirement;

(3)           the licensee has otherwise satisfied the

requirements of this Rule; and

(4)           waiver of the requirement of Subparagraph

(b)(1) is in the public interest.

 

History Note:        Authority G.S. 53-244.050; 53-244.060;

53-244.100; 53-244.118;

Temporary Adoption Eff. July 1, 2002;

Eff. April 1, 2003;

Amended Eff. May 1, 2010.

 

04 NCAC 03M .0203         NAME CHANGES

A licensee may, with the prior approval of the Commissioner,

change its corporate name or the name under which it operates, provided:

(1)           the licensee and the proposed new name

satisfies all applicable laws pertaining to corporate, fictitious and trade

names (including, but not limited to, G.S. 53-127);

(2)           the licensee has given the Commissioner at

least 30 days prior notice of the proposed new name; and

(3)           the Commissioner determines that the new

name is not likely to result in confusion among the general banking public

regarding the licensee's identity or powers.

 

History Note:        Authority G.S. 53-244.118;

Temporary Adoption Eff. July 1, 2002;

Eff. April 1, 2003.

 

04 NCAC 03M .0204         EXPERIENCE

As used in G.S. 53-244.050(b)(2), a person is considered to

have acquired "experience in residential mortgage lending" during any

documented period in which:

(1)           that person's employment income was principally

derived from employment in the mortgage lending, mortgage servicing, or

mortgage brokerage industry; and

(2)           that person had actual responsibility for job

functions in each area of study included in a prelicensing education program.

 

History Note:        Authority G.S. 244-118;

Eff. April 1, 2003;

Amended Eff. May 1, 2010; April 1, 2008.

 

04 NCAC 03M .0205         financial responsibility

(a)  In order for applicants to be deemed to have the

financial responsibility such as to command the confidence of the community and

to warrant belief that the business will be operated honestly and fairly under

G.S. 53-244.60(4), the applicant shall:

(1)           If a mortgage lender:

(A)          provide an audited statement of financial condition

that demonstrates a net worth of at least $100,000;

(B)          provide evidence of warehouse line of credit of

$1,000,000 or other evidence of funding capacity to conduct mortgage originations;



(C)          demonstrate a history of satisfying debt

obligations, as indicated by a trade or personal credit report(s) that does not

contain evidence of outstanding judgments or tax liens against applicant, its

officers or directors, by creditors; and

(D)          provide an explanation of the corporate or ownership

structure of the applicant, including information regarding any required

distributions to investors or owners.

(2)           If a mortgage broker:

(A)          provide a certified statement of financial condition

that demonstrates a net worth of at least $25,000;

(B)          demonstrate a history of satisfying debt

obligations, as indicated by a trade or personal credit report(s) that does not

contain evidence of outstanding judgments or tax liens against applicant, its

officers or directors, by creditors; and

(C)          provide evidence (in the form of a copy of a bank

statement or other verifiable document) that the broker owns and holds on a

continual basis cash or other liquid assets in a demand deposit account under

the firm's name of at least ten thousand dollars ($10,000.00) in an

FDIC-insured financial institution.

(3)           If a mortgage loan originator:

(A)          have a credit score from any of the three major

credit rating agencies (Experian, TransUnion or Equifax) of 600 or greater;

(B)          demonstrate a history of satisfying debt

obligations, as indicated by an absence of outstanding tax liens, other

government liens or filings, outstanding judgments, except judgments resulting

solely from medical expenses, by creditors; and

(C)          not have any foreclosures or accounts delinquent in

excess of 90-days within the past three years.

(4)           If a mortgage servicer:

(A)          provide an audited statement of financial condition

that demonstrates a net worth of at least $100,000.00;

(B)          demonstrate a history of satisfying debt

obligations, as indicated by a trade or personal credit report(s) that does not

contain evidence of outstanding judgments or tax liens against applicant, its

officers or directors, by creditors; and

(C)          provide an explanation of the corporate or ownership

structure of the applicant, including information regarding any required

distributions to investors or owners.

(b)  The Commissioner shall not waive any requirement listed

in Paragraph (a) of this Rule unless he believes the predominant weight of the

evidence supports a determination that the applicant has the financial

responsibility necessary to command the confidence of the community and to

warrant belief that the business will be operated honestly and fairly.

(c)  Financial Responsibility is an ongoing requirement and

upon issuance of a license, a licensee must continue to meet the requirements

of Paragraph (a) of this Rule.

 

History Note:        Authority G.S. 53-92; 53-104;

53-244.060(4); 53-244.118;

Eff. July 18, 2008;

Amended Eff. July 1, 2010.

 

04 NCAC 03M .0206         SURETY BOND

(a)  All licensees with surety bonds under G.S. 53-244.103

must ensure that full amount of the surety bond is in effect at all times.  In

the event of a claim against the bond, the licensee has 30 days to reinstate

the bond to the level required in G.S. 53-244.103.  Failure to maintain the

surety bond at the level required in G.S. 53-244.103 is grounds for immediate

suspension of licensure.

(b)  All licensees with surety bonds under G.S. 53-244.103

must report any claims made against the surety bond to the Commissioner within

10 business days upon receipt of notice of any claim.

(c)  All surety bonds under G.S. 53-244.103 shall:

(1)           require the bonding company to report all

claims and any claims paid on the bond to the Commissioner within 10 days of

such claim or payment;

(2)           require the bonding company to pay within

30 days any amount which the Commissioner orders the bonding company to pay

upon a determination by the Commissioner that the licensee has failed to

faithfully perform the licensee's obligations; and

(3)           remain in effect for a minimum of five

years after lapse or termination of the bond in order to satisfy possible

claims for failure to faithfully fulfill obligations during the term of the

bond.

 

History Note:        Authority G.S. 53-103;

Eff. April 1, 2008;

Amended Eff. May 1, 2010.

 

SECTION .0300 - EDUCATION AND EXAMINATIONS

 

04 NCAC 03M .0301         APPROVAL OF PROVIDERS AND COURSES OF

STUDY; PROVIDER REQUIREMENTS; QUALIFIED WRITTEN TEST

(a)  A licensee or prospective licensee shall receive credit

for participation in a program if it is presented by a provider approved as

required by G.S. 53-244.070(b).  The Commissioner shall make available to the

public a listing of approved providers' courses of study, and times and

locations at which the qualified written test will be administered.

(b)  Approval for any prelicensing education course shall

expire in accordance with NMLS&R's rules regarding expiration of approval.

(c)  The Commissioner may deny, revoke, suspend, condition,

limit, or terminate approval of any provider or any individual course of study

upon a finding that:

(1)           the provider has refused or failed to

comply with any applicable provision of this Subchapter;

(2)           any provider officer or employee has

obtained or used, or has attempted to obtain or use, in any manner or form, the

qualified written test questions;

(3)           the provider has knowingly employed in

connection with any program any person who has been convicted of any crime described

in G.S. 53-244.060(2) or (3).

(d)           Providers shall:

(1)           Designate one person as a contact person

who shall be available to the Commissioner during ordinary business hours and

shall be knowledgeable and have authority to act with regard to all administrative

matters concerning instructors, scheduling, advertising, recordkeeping, and

supervising all programs offered by the provider.

(2)           Retain, and make available to the

Commissioner upon request, the following material from each program on file at

one location for a minimum of three years:

(A)          class schedules;

(B)          advertisements;

(C)          bulletins, catalogues, and other publications

distributed to students;

(D)          a list of student names, with unique identifier, for

each program; and

(E)           the name of the instructor. 

(3)           Refrain from the use of any words, symbols

or other means which indicate that either the provider or a program has

received the NMLS&R approval unless such approval has been issued and

remains in effect.

 

History Note:        Authority G.S. 53-244.060; 53-244.070;

53-244.080; 53-244.118;

Temporary Adoption Eff. July 1, 2002;

Eff. April 1, 2003;

Amended Eff. July 1, 2010; July 18, 2008.

 

04 NCAC 03M .0302         LOAN OFFICER EXAMINATION

04 NCAC 03M .0303         REQUIREMENTS FOR PROVIDERS

 

History Note:        Authority G.S. 53-243.05; 53-243.07;

53-243.13;

Temporary Adoption Eff. July 1, 2002;

Eff. April 1, 2003;

Repealed Eff. May 1, 2010.

 

SECTION .0400 - REPORTING AND NOTIFICATION REQUIREMENTS

 

04 NCAC 03M .0401         REPORTING REQUIREMENTS

(a)  No later than 90 days after the end of the calendar

year, mortgage lenders, mortgage servicers and mortgage brokers shall file an

annual report in a format required by the NMLS&R unless the Commissioner

determines that the report is not in the public interest.  The annual report

shall be supplemented with additional information about operations,

characteristics of loans made, or other similar composite data if the

Commissioner determines that this additional information is necessary in order

to safeguard the interests of the borrowing public (See N.C. Gen. Stat.

53-244.118). Mortgage brokers shall as a part of the annual report provide

certification from the insured financial institution holding the account

required under  04 NCAC 03M .0205(a)(2)(C) that the account exists and that the

account has contained an average daily balance, for the previous year covered

by the annual report of ten thousand dollars $10,000 or more.  Failure to

timely submit an annual report is grounds for summary suspension pursuant to

G.S. 53-244.114.

(b)  Mortgage lenders, mortgage servicers, and mortgage

brokers shall provide an audited statement of financial condition or a certified

statement of financial condition as required by 04 NCAC 03M.0205(a) within 90

days of the end of the licensee's fiscal year.  If not shown in the audited

statement of financial condition, mortgage lenders shall provide evidence of

available warehouse lines of credit or other funding facilities. 

(c)  Beginning on January 1, 2011, mortgage lenders and

mortgage brokers shall provide information on the characteristics of loan

originations in an electronic format prescribed by the Commissioner on a quarterly

basis within 45 days after the close of the calendar quarter.  Mortgage lenders

shall provide:

(1)           Information sufficient to identify the mortgage

loan and the unique identifier of the mortgage loan originator, mortgage broker

(if applicable), and mortgage lender for the loan;

(2)           Information sufficient to enable a computation of

key items in the federal Truth in Lending disclosures, including the annual

percentage rate, finance charge, and a schedule of payments, and any deviations

between the final disclosures and the most recent disclosures issued prior to

the final disclosures;

(3)           Information included in the "Good Faith

Estimate" (GFE) disclosure required under the federal Real Estate

Settlement Procedures Act including the rate, the date of any interest rate

lock, itemization of settlement charges and all broker compensation;

(4)           Information included in the final HUD-1 Settlement

Statement, if maintained by the mortgage lender in an electronic format;

(5)           Information related to the terms of the loans,

including adjustable rate loan features (including timing of adjustments,

indices used in setting rates, maximum and minimum adjustments, floors and

ceilings of adjustments), the undiscounted interest rate (if maintained by the

mortgage lender in an electronic format), penalties for late payments, and

penalties for prepayment (including computation of the penalty amount, duration

of prepayment penalty, the maximum amount of penalty);

(6)           Information typically used in underwriting,

including the appraised value of the property, sales price of the property (if

a purchase loan), borrowers' income, monthly payment amount, housing

debt-to-income ratio, total debt-to-income ratio, and credit score(s) of

borrowers; and

(7)           Information included in a Loan Application Register

for mortgage lenders required to submit information pursuant to the federal

Home Mortgage Disclosure Act,

Mortgage brokers shall provide information identified above

unless such information is not prepared or known by the mortgage broker and the

mortgage broker does not reasonably have access to the information in an

electronic format.  The Commissioner shall permit mortgage lenders and mortgage

brokers to utilize compatible third-party software to provide information

required under this Paragraph. 

(d)  On a quarterly basis, mortgage lenders and mortgage

brokers shall provide call reports containing financial and loan activity

information in an electronic format through the NMLS&R.

(e)  Mortgage lenders, mortgage servicers, mortgage brokers,

exclusive mortgage brokers, and mortgage loan originators shall report within

30 days the name of any person suspected of making a material misstatement in

connection with the mortgage lending or servicing process to the Commissioner.

Mortgage lenders and mortgage brokers shall report within 30 days any loan

repurchased due to a material misstatement made in connection with the mortgage

lending process.

(f)  Mortgage lenders, mortgage servicers, mortgage brokers,

exclusive mortgage broker, and mortgage loan originators shall report within 30

days the name of any person suspected of making a material misstatement in

connection with an inquiry, investigation, or examination to the Commissioner.

 

History Note:        Authority G.S. 53-244.108; 53-244.118;

Eff. April 1, 2003;

Amended Eff. July 1, 2010; July 3, 2008.

 

04 NCAC 03M .0402         AMENDMENTS TO INFORMATION ON FILE WITH

THE COMMISSIONER

(a)  A licensee shall notify the Commissioner within 30 days

of any material change in any document or information previously submitted to,

or otherwise filed with, the Commissioner.

(b)  Upon a licensee's discovery of an information security

breach as defined in G.S. 75-61(14), the licensee shall within one business day

provide to the Commissioner a copy of any notification which the licensee is

required to give under G.S. 75-65.

(c)  Notification shall be in accordance with Rule .0102 of

this Subchapter.

 

History Note:        Authority G.S. 53-244.105(b); 53-244.118;

Eff. April 1, 2003;

Amended Eff. May 1, 2010; April 1, 2008.

 

04 NCAC 03M .0403         TERMINATION OF OPERATIONS

(a)  A licensee shall notify the Commissioner in writing of

its decision to cease operations as a mortgage lender, mortgage servicer, or

mortgage broker in this State, and the anticipated effective date of the cessation

of operations, at least 15 days before the cessation.

(b)  A mortgage lender, mortgage servicer, or mortgage

broker that has not originated or serviced a mortgage loan within a 12 month

period is considered to have ceased operations.  Cessation of operations is

grounds for summary suspension pursuant to G.S. 53-244.114(b); provided,

however, that suspension for cessation of operations shall not extend or revive

any license that would otherwise terminate on December 31st based on the

licensee's failure to renew its license or the Commissioner's refusal to renew

the licensee's license.

 

History Note:        Authority G.S. 53-244.118;

Eff. April 1, 2003;

Amended Eff. May 1, 2010; April 1, 2008.

 

SECTION .0500 - RECORD AND BOOKKEEPING REQUIREMENTS

 

04 NCAC 03M .0501         RECORDS TO BE MAINTAINED

(a)  A licensee shall maintain or cause to be maintained a

record of all cash, checks or other monetary instruments received in connection

with each mortgage loan application showing the identity of the payor, date

received, amount, and purpose.

(b)  A licensee shall maintain a record showing a sequential

listing of checks written for each bank account relating to the licensee's

business as a mortgage broker or mortgage lender, showing at least the payee,

amount, date, and purpose of payment, including identification of the loan to

which it relates, if any.  The licensee shall reconcile the bank accounts

monthly.  Financial records must be kept in a manner to permit efficient review

by examiners.

(c)  A licensed mortgage lender or mortgage broker shall

maintain a current listing of all mortgage loan applications in an electronic,

searchable and sortable format that permits a timely review of information by

the Commissioner.

(d)  A licensed mortgage lender or mortgage broker shall

create and retain a file for each mortgage loan application that contains as

applicable;

(1)           the applicant's name;

(2)           date the application was taken;

(3)           name of the person taking the application;

(4)           the application itself; and

(5)           if the loan was closed,

(A)          the HUD-1 Settlement Statement;

(B)          the loan note;

(C)          the deed of trust;

(D)          all agreements or contracts with the applicant,

including any commitment and lock-in agreements, other information utilized in

the origination of the mortgage loan; and

(E)           all disclosures required by State or Federal law.

(e)  A licensed mortgage servicer shall create and retain a

file for each mortgage loan which it services, which shall contain, as

applicable:

(1)           the borrower or borrowers names;

(2)           a copy of the original note and Deed of

Trust;

(3)           a copy of any disclosures or notifications

provided to the borrower required by State or Federal law;

(4)           a copy of all written requests for

information received from the borrower and the servicer's response to such

requests as required by State or Federal law;

(5)           a record of all payments received from the

borrower which contains all information required to be provided to a borrower

upon request under G.S. 45-92(2)b;

(6)           a copy of any bankruptcy plan approved in a

proceeding filed by the borrower or a co-owner of the property subject to the

mortgage;

(7)           a communications log, if maintained by the

servicer, which documents all verbal communication with the borrower or the

borrower's representative;

(8)           a record of all efforts by the servicer to

comply with the duties required under G.S. 53-244.110(7) including all

information utilized in the servicer's determination regarding loss mitigation

proposals offered to the borrower;

(9)           a copy of  all notices sent to the borrower

related to any foreclosure proceeding filed against the encumbered property;

and

(10)         records regarding the final disposition of

the loan including a copy of any collateral release document, records of

servicing transfers, charge-off information, or REO disposition.

(f)  A licensee shall maintain a record of samples of each

piece of advertising relating to the licensee's business of mortgage lending or

mortgage brokerage in North Carolina for a period of 12 months.

(g)  A licensee shall maintain copies of all contracts,

agreements and escrow instructions to or with any depository institution, any

mortgage lender, mortgage servicer, or mortgage broker, any warehouse lender or

other funding facility, any servicer of mortgage loans, and any investor, for a

period of not less than three years after expiration of any such contract or

agreement.

 

History Note:        Authority G.S. 53-244.105; 53-244.115;

53-244.118;

Eff. April 1, 2003;

Amended Eff. May 1, 2010; April 1, 2008.

 

04 NCAC 03M .0502         FORM AND LOCATION of records

(a)  Except for samples of advertising materials retained

pursuant to 4 NCAC 03M .0501(f), all records required by this Section shall be

kept for a period of at least three years, and shall be available for inspection

and copying upon request by the Commissioner.

(b)  The records may be maintained in the form of magnetic

tape, magnetic disk or other form of computer, electronic or microfilm media

available for examination on the basis of computer printed reproduction, video

display or other medium that is easily convertible by the Commissioner into

legible, tangible documents.

(c)  All records required by this Rule shall be prepared in

accordance with generally accepted accounting principles, where applicable.

(d)  All records required to be maintained shall be secured

against unauthorized access and damage in a location within the State of North Carolina accessible to the Commissioner.  However, a mortgage banking licensee which

maintains a centralized out-of-state storage facility for the records from

multiple states may request the Commissioner to approve its storage of such

records in such out-of-state location.  The requests will be approved provided

that:

(1)           The Commissioner determines that the proposed

storage will ensure that the records are secured against unauthorized access

and damage; and

(2)           The licensee agrees in writing to make

available at its expense for inspection and copying upon request by the

Commissioner copies of all requested records in a form which satisfies the

requirements of Paragraph (b) of this Rule.

(e)  If the Commissioner subsequently has reason to believe

that records are not or will not be adequately secured against unauthorized

access or damage, the Commissioner shall summarily revoke any approval

previously granted under Paragraph (d) of this Rule.

(f)  A licensee shall notify the Commissioner of any change

in the location of its books and records within 10 days following such change.

 

History Note:        Authority G.S. 53-244.105; 53-244.115;

53-244.118;

Eff. April 1, 2003;

Amended Eff. May 1, 2010.

 

04 NCAC 03M .0602         SELLER DISCOUNTS FOR USE OF AFFILIATED

MORTGAGE LENDER OR BROKER

(a)  A mortgage lender or mortgage broker shall not

originate a mortgage loan if the use of that mortgage lender or mortgage broker

is a condition for the borrower to receive a discount or thing of value from a

seller affiliated with the mortgage lender or mortgage broker, unless:

(1)           the discount conditioned on the use of the

mortgage lender or mortgage broker is disclosed separately from any other

discount provided by the seller in a written document that informs the borrower

that the choice of a lender not affiliated with the seller will not affect any

other concessions or discounts separately offered to the borrower for the

purchase of the home, other than the incentive offered for the use of the

affiliated lender;

(2)           the discount conditioned on the use of the

mortgage lender or mortgage broker may be used to pay only the following:

(A)          bona fide and reasonable closing costs associated

with the loan as permitted under G.S. 24-8(d); and

(B)          bona fide discount points, which are knowingly paid

by the borrower for the purpose of reducing the interest rate below the market

rate for that loan product and which in fact reduces the interest rate below

the market rate for that loan product; and

(3)           the discount does not exceed three percent

of the final sales price.

(b)  For any discount used as described in Part (a)(2)(B) of

this Rule, the following documents must be maintained in the individual loan

file:

(1)           the disclosure required under Subparagraph

(a)(1) of this Rule;

(2)           the rate sheet used by the mortgage lender

or mortgage broker to inform the borrower of the available interest rate of the

loan; and

(3)           the signed lock-in agreement that

demonstrates the below-market rate chosen by the borrower.

(c)  For any discount used as described in Part (a)(2)(B) of

this Rule, the mortgage lender must maintain written policies and procedures

related to the charging of discount points, which include the method of

informing borrowers of the benefits and costs of discount points and a

commercially-reasonable method for determining the amount by which the interest

rate will be reduced for the payment of a discount point.

(d)  The discount provided for in Paragraph (a) of this Rule

shall not be applied in a manner that would exceed amounts which may be

directly imposed under North Carolina or Federal law, regardless of whether a

party affiliated with lender directly or indirectly pays for any portion of

such charges.

 

History Note:        Authority G.S. 53-244.111(1);

53-244.111(8), 53-244.118(a);

Eff. April 1, 2011.

 

Section .0700 - Servicing

 

04 NCAC 03M .0701         transfer of servicing rights

A person shall not transfer servicing rights or obligations

to a person unless that person holds a mortgage servicing license or is a

person otherwise exempt from the Act.

 

History Note:        Authority 53-244.100(a); 53-244.110(1);

53-244.110(3);

Eff. May 1, 2010.

 

04 NCAC 03M .0702         Requirements for Mortgage Servicers to

Communicate Effectively with Borrowers Regarding Loss Mitigation

(a)  A mortgage servicer shall acknowledge, in writing, a

borrower's loss mitigation request no later than 10 business days after the

request.  The acknowledgement must identify any information needed from the

borrower in order for the mortgage servicer to consider the borrower's loss

mitigation request.  For purposes of this Rule and Rule .0703 of this

Subchapter, a loss mitigation request is considered received by a servicer upon

the borrower or the borrower's agent contacting the servicer at the address,

phone or other contact information required to be provided to borrowers in a

notice complying with G.S. 53-244.111(22).

(b)  A mortgage servicer shall respond to a loss mitigation

request from a borrower no later than 30 business days after the receipt of all

information necessary from the borrower to assess whether or not a borrower

qualifies for any loss mitigation programs offered by the mortgage servicer.

(c)  A mortgage servicer shall include in a final response

denying a loss mitigation request the reason for the denial and contact

information for a person at the mortgage servicer with authority to reconsider

the denial.  In addition, the denial shall also include the following

statement, in a boldface type and in a print no smaller than the largest print

used elsewhere in the main body of the denial:  "If you believe the loss

mitigation request has been wrongly denied, you may file a complaint with the

North Carolina Office of the Commissioner of Banks website, www.nccob.gov."

 

History Note:        Authority G.S. 53-244.110(7);

53-244.118(a);

Eff. June 1, 2010.

 

04 NCAC 03M .0703         Cessation of Foreclosure Activity

During Pendency of Loss Mitigation REquest

(a)  A mortgage servicer shall not initiate or further a

foreclosure proceeding or impose a charge incident to a foreclosure proceeding

during the pendency of a loss mitigation request; provided however, that this

requirement does not apply if:

(1)           the borrower has failed to comply with the

terms of a loss mitigation plan within the previous 12 months, if the loss

mitigation plan:

(A)          was implemented pursuant to a federal or state

foreclosure prevention program, including the Home Affordable Modification

Program; or

(B)          reduced the monthly payment of loan by six percent

from the scheduled monthly payment and resulted in a monthly payment of

principal, interest, taxes, and insurance of less than 31 percent of the

borrower's household income;

(2)           the mortgage servicer has provided a final

response regarding a loss mitigation request within the last 12 months and

reasonably believes that the current loss mitigation request was not made in

good faith;

(3)           the borrower has failed to comply with a

Chapter 13 bankruptcy repayment plan or has any bankruptcy proceedings

dismissed for abuse of process within the last 12 months;

(4)           the loss mitigation request is received by

the servicer after the time for appealing an order granting foreclosure of the

secured residential real estate has passed in accordance with Article 2A of

Chapter 45; or

(5)           the servicing contract or the terms of the

mortgage loan, entered into prior to October 1, 2009, prohibits such a delay.

(b)  Nothing in this Rule shall prevent a mortgage servicer,

in order to avoid dismissal or any other adverse order in a foreclosure

proceeding which was initiated prior to the loss mitigation request being

received, from filing or causing to be filed any pleading or notice which is

required under Article 2A of Chapter 45, the Rules of Civil Procedure, or the

Local Rules of Court to continue or delay further proceedings.

 

History Note:        Authority G.S. 53-244.110(7); 53-244.118(a);

Eff. June 1, 2010.