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

 

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.

Expired Eff. November 1, 2017 pursuant to G.S. 150B-21.3A.

 

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.

 

SECTION .0600 – ORIGINATION PRACTICES

 

04 NCAC 03M .0601        RESERVED FOR FUTURE CODIFICATION

 

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.