The Connecticut legislature recently amended its laws related to foreclosure mediation and the Banking Law of Connecticut (“Act”).  All the legislation discussed in this memorandum is effective October 1, 2018.

Connecticut Senate Bill 391

The Connecticut legislature recently amended the law governing foreclosure mediation to remove the requirement that a borrower represented by counsel attend the first mediation session in person.

Connecticut House Bill 5490

“Commissioner” means the Connecticut Banking Commissioner.

“Licensee” means a person who is licensed or required to be licensed under the Act.

“NMLS” means the Nationwide Multistate Licensing System and Registry.

Mortgage Lenders, Mortgage Correspondent Lenders, Mortgage Brokers and Loan Originators

For the purposes of issuing, renewing, suspending, conditioning, revoking or terminating any license issued on NMLS, or for any general or specific inquiry or investigation of persons engaged in a business or activity subject to licensure by the Commissioner on NMLS to determine compliance with applicable law, the Commissioner may access, receive and use any records, information or evidence, including, but not limited to:

• Criminal, civil and administrative history information;
• Personal history and experience information, including, but not limited to, independent credit reports obtained from a consumer reporting agency; and
• Any other records, information or evidence the Commissioner deems relevant to the inquiry or investigation, regardless of the location, possession, control or custody of such records, information or evidence.

In conducting any authorized examination or investigation, the Commissioner may control access to any records of the person under examination or investigation.  The Commissioner may take possession of the records or place a person in exclusive charge of the records in the place where such records are usually kept.  During the period of control, no person may remove or attempt to remove any of the records except pursuant to a court order or with the consent of the Commissioner.  Unless the Commissioner has reasonable grounds to believe the records of the person under examination or investigation have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of applicable law, the owner of the records must have access to the records as necessary to conduct its ordinary business affairs.

Any licensee who is the subject of any inquiry, investigation, examination or proceeding by the Commissioner must make or compile reports or prepare other information as directed by the Commissioner, including accounting compilations, information lists and dates of transactions in a format prescribed by the Commissioner or such other information as the Commissioner deems necessary.

If any license issued under NMLS expires due to the licensee’s failure to renew such license, the Commissioner may institute a revocation or suspension proceeding, or issue an order revoking, or suspending the license, under applicable authorities not later than one year after the date of such expiration.

Withdrawal of an application for a license filed on NMLS becomes effective upon receipt by the Commissioner of a notice of intent to withdraw such application.  The Commissioner may deny a license up to the date one year after the effective date of withdrawal.

A mortgage lender, mortgage correspondent lender or mortgage broker must have:

• At the main office for which the license is sought, a qualified individual who has supervisory authority over the lending or brokerage activities of the licensee and who is responsible for the actions of the licensee; and
• At each branch office, a branch manager who has supervisory authority over the lending, or brokerage activities of the branch office, who is responsible for the actions of the branch office, who has at least three years’ experience in the mortgage business within the five years immediately preceding the date of the application for the license, and who is licensed as a mortgage loan originator.

“At the main office” may be established by demonstrating to the satisfaction of the Commissioner that the qualified individual resides within 100 miles of the main office or is otherwise capable of providing full-time, in-person supervision of the main office.  The Commissioner may waive this requirement where it is demonstrated to the satisfaction of the Commissioner that no activity subject to licensure will be conducted at the main office and the licensee designates a qualified individual responsible for the actions of the licensee.

“At each branch office” may be established by demonstrating to the satisfaction of the Commissioner that the branch manager resides within 100 miles of the branch office or is otherwise capable of providing full-time, in-person supervision of the branch office.  The Commissioner may waive this requirement where a person licensed as a mortgage lender will act only as a mortgage servicer at such branch office, and the individual designated as branch manager meets the requirements for branch manager.

No person granted a waiver of either of the above requirements may conduct any activity at the main office or at any branch office that would have precluded issuance of such waiver without first designating a qualified individual or branch manager, as applicable, who meets all applicable requirements and is approved by the Commissioner.

Each mortgage loan originator licensee must be associated with a specified licensed office from which such licensee will operate and be subject to supervision by a qualified individual or branch manager.  The specified office must be within a 100-mile distance from where such licensee resides, unless such licensee can otherwise demonstrate to the Commissioner’s satisfaction that the licensee will be subject to supervision by a qualified individual or branch manager.

An applicant for license renewal must pay any outstanding examination fees or other moneys due to the Commissioner.

A mortgage lender, mortgage correspondent lender, mortgage broker or lead generator license is not transferable or assignable.  Any change in any control person of the licensee, except a change of director, general partner or executive officer that is not the result of an acquisition or change in control of the licensee, must be the subject of an advance change notice filed on NMLS not later than 30 days prior to the effective date of such changes and no such change may occur without the Commissioner’s approval.

No licensee may use any name other than its legal name or a fictitious name approved by the Commissioner, provided such licensee may not use its legal name if the Commissioner disapproves use of such name.  No licensee may use any name or address other than the name and address specified on the license issued by the Commissioner.

The Commissioner may automatically suspend any license for a violation of the provisions relating to licensing requirements or for failure to designate a qualified individual or branch manager within 30 days of a vacancy in the position.  After a license has been automatically suspended, the Commissioner must give the licensee notice of the automatic suspension, pending proceedings for revocation of or refusal to renew the license, and an opportunity for a hearing, and require the licensee to take or refrain from taking action as the Commissioner deems necessary.

Except as otherwise specified, each mortgage lender, mortgage correspondent lender, mortgage broker or lead generator applicant or licensee, and each individual designated as a control person, qualified individual or branch manager of such applicant or licensee, must file on NMLS, or, if the information cannot be filed on NMLS, notify the Commissioner, in writing, of any change in the information such applicant, licensee, control person, qualified individual or branch manager most recently submitted to NMLS in connection with the application or license not later than 15 days after the date such applicant, licensee, control person, qualified individual or branch manager had reason to know of the change.  A mortgage lender, mortgage correspondent lender, mortgage broker or lead generator licensee must file with NMLS or, if the information cannot be filed on NMLS, notify the Commissioner, in writing, of the occurrence of any of the following developments not later than 15 days after the date such licensee had reason to know of such development:

• Filing for bankruptcy or the consummation of a corporate restructuring of the licensee;
• Filing of a criminal indictment against the licensee in any way related to the lending or brokerage activities of the licensee, or notification of the filing of any criminal felony indictment or felony conviction of any control person, branch manager or qualified individual of the licensee;
• Receiving notification of the institution of license denial, cease and desist, suspension or revocation procedures, or other formal or informal action by any governmental agency against the licensee or any control person, branch manager or qualified individual of the licensee and the reasons therefor;
• Receiving notification of the initiation of any action against the licensee or any control person, branch manager or qualified individual of the licensee by the Connecticut Attorney General or the attorney general of any other state and the reasons for such action;
• Receiving notification of a material adverse action with respect to any existing line of credit or warehouse credit agreement;
• Suspension or termination of the licensee’s status as an approved seller or servicer by the Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) or Government National Mortgage Association (“Ginnie Mae”);
• Exercise of recourse rights by investors or subsequent assignees of residential mortgage loans if such loans for which the recourse rights are being exercised, in the aggregate, exceed the licensee’s net worth exclusive of real property and fixed assets;
• Receiving notification of filing for bankruptcy of the licensee or of any control person, branch manager or qualified individual of the licensee; or
• A decrease in the required net worth.

Each mortgage loan originator applicant or licensee and each loan processor or underwriter applicant or license must file with NMLS or, if the information cannot be filed with NMLS, notify the Commissioner in writing, of any change in the information most recently submitted in connection with the application or license or other specified developments, not later than 15 days after the date such applicant or licensee had reason to know of the change.

The unique identifier of any mortgage lender, mortgage correspondent lender, mortgage broker or lead generator must be clearly shown on all solicitations or advertisements, including business cards or Internet web sites, and any other documents as established by rule, regulation or order of the Commissioner and must be clearly stated in all audio solicitations or advertisements.

The unique identifier of a mortgage loan originator or loan processor or underwriter must be clearly shown on all solicitations and advertisements, including business cards and Internet web sites, and any other documents as established by rule, regulation or order of the Commissioner, and must be clearly stated in all audio solicitations and advertisements when disseminated by:

• A mortgage loan originator or loan processor or underwriter regarding such individual’s own services; or
• The sponsor of such mortgage loan originator or loan processor or underwriter if such solicitation or advertisement identifies the services of a particular mortgage loan originator or loan processor or underwriter.

Any such advertising:

• May not include any statement that such person is endorsed in any way by the state of Connecticut, except that such advertising may include a statement that such person is licensed in Connecticut;
• May not include any statement or claim that is false, deceptive or misleading;
• Must otherwise conform to licensee requirements and any other regulations or applicable law; and
• Must be retained for two years from the date of its use.

The Act also includes provisions related to mortgage lenders, mortgage correspondent lenders, mortgage brokers and loan originators regarding:

• Removal of an employee or independent contractor who violates the Act;
• Surety bond requirements; and
• Nonprofit licensees.

Servicing

The applicant for a mortgage servicer license must identify a qualified individual for its main office and a branch manager for each branch office that have supervisory authority at the respective office location and at least three years of appropriate experience, within the five years prior to the application.

The Commissioner may waive the supervision and experience requirements for a qualified individual where the applicant establishes to the satisfaction of the Commissioner that the applicant:

• Will not conduct any activity requiring a mortgage servicing license at the main office; and
• Has designated a qualified individual who is responsible for the actions of the applicant.

The Commissioner may waive the supervision and experience requirement for a qualified individual or a branch manager where the applicant establishes to the satisfaction of the Commissioner that the applicant:

• Holds only mortgage servicing rights at the main office or branch office and conducts no other activity at such office; and
• Has designated a qualified individual or branch manager at such main office or branch office who is responsible for the actions of the applicant.

No person licensed as a mortgage servicer and granted a waiver by the Commissioner may engage in any activity that would have precluded the issuance of such waiver without first designating a qualified individual or branch manager, as the case may be, who meets all applicable supervision and experience requirements and is approved by the Commissioner.

“At the respective office location” may be established if the qualified individual or branch manager resides not more than 100 miles from the location of the office or otherwise demonstrates to the satisfaction of the Commissioner an ability to provide full-time, in-person supervision of the office.

Any change in any control person of a licensee, except a change of a director, general partner or executive office that is not the result of an acquisition or change of control of the licensee, must be the subject of an advance change notice filed on NMLS at least 30 days prior to the effective date of such change, and no such change will occur without the Commissioner’s approval.

No licensee may use any name other than its legal name or a fictious name approved by the Commissioner, provided such licensee may not use its legal name if the Commissioner disapproves use of such name.  No licensee may use any name or address other than the name and address stated on the license issued by the Commissioner.

The Act also contains provisions related to servicing regarding:

• Requirement to include the unique identifier on solicitations and advertising;
• Procedures for making a change in the information submitted to NMLS; and
• Requirements for surety bonds.