Chapter 2Licensing: Residential Mortgage Lender

Section § 50120

Explanation

This law is about the rules for residential mortgage lenders in California. First, they must apply for a license if they want to make or manage residential mortgage loans in the state. Secondly, they can only do business under the name on their license or an officially registered assumed name. They also can't make or manage loans using a license or exemption under the Real Estate Law.

The commissioner has the authority to shut down any other business activities at a lender's location if they help the lender avoid the rules or break any other laws. For businesses located outside California, lenders must either provide access to their records in-state within 10 days upon request or cover the cost for state officials to visit and examine their records.

The commissioner may require applications and other filings to be made through the Nationwide Mortgage Licensing System and Registry. Additionally, lenders might be required to pay certain fees through this system as well.

(a)CA Financial Code § 50120(a) A residential mortgage lender shall file an application for licensure under this chapter with the commissioner to make or service residential mortgage loans in this state.
(b)CA Financial Code § 50120(b) A licensee may not engage in the business as a residential mortgage lender under a name other than the name that appears on the license, or a legally assumed name disclosed either in the application or in an amendment to the application, which shall be reflected on the license.
(c)CA Financial Code § 50120(c) A licensee may not make or service residential mortgage loans secured by real property pursuant to the authority of a license, or an exemption from licensure, under the Real Estate Law.
(d)CA Financial Code § 50120(d) The commissioner may, pursuant to Section 50321, order a licensee to cease any other business conducted at any location where the licensee operates under the authority of a residential mortgage lender license, if the commissioner finds that the conduct of that business has facilitated evasions of this division or the rules adopted pursuant to this division, or that the conduct of that business is in violation of any law to which that business is subject.
(e)CA Financial Code § 50120(e) A license issued for a business location outside this state shall constitute an agreement by the licensee to, at the sole discretion of the commissioner, either (1) make the licensee’s books, accounts, papers, records, and files available to the commissioner or the commissioner’s representatives in this state within 10 calendar days of a request from the commissioner or, (2) pay the reasonable expenses for travel, meals, and lodging of the commissioner or the commissioner’s representatives incurred during an investigation or examination made at the licensee’s location outside this state.
(f)CA Financial Code § 50120(f) The commissioner may, by rule, require an applicant for a residential mortgage lender or servicer license or a residential mortgage lender or servicer licensee to make some or all filings with the commissioner through the Nationwide Mortgage Licensing System and Registry.
(g)CA Financial Code § 50120(g) The commissioner may, by rule, require licensees to pay assessments through the Nationwide Mortgage Licensing System and Registry.
residential mortgage lender application for licensure assumed name Real Estate Law commissioner authority cease business order out-of-state businesses records access Nationwide Mortgage Licensing System filings assessments mortgage servicer license business location licensure exemption compliance rules
(Amended by Stats. 2009, Ch. 160, Sec. 50. (SB 36) Effective October 11, 2009.)

Section § 50121

Explanation

To get a residential mortgage lender license, you must complete a few key steps. First, apply with all necessary details about your background and experience as required. Second, pay a nonrefundable fee of $100 for investigation plus $900 for the application, and cover any fingerprinting costs. Lastly, the commissioner will investigate to ensure that all involved in the business have a good financial record, no serious criminal history, the right experience, and overall good character, suggesting they can run the business honestly and fairly.

The commissioner shall issue a residential mortgage lender license upon the satisfaction of all of the following:
(a)CA Financial Code § 50121(a) The filing with the commissioner of a complete and executed application for licensure, which may, at the discretion of the commissioner, include background and experience disclosures required by any of the uniform application forms of the Nationwide Mortgage Licensing System and Registry.
(b)CA Financial Code § 50121(b) The payment of a nonrefundable investigation fee of one hundred dollars ($100), plus the cost of fingerprint processing and clearance, and an application filing fee of nine hundred dollars ($900).
(c)CA Financial Code § 50121(c) An investigation of the statements required by Section 50124 based upon which the commissioner is able to issue findings that the financial responsibility, criminal records (verified by fingerprint, at the discretion of the commissioner), experience, character, and general fitness of the applicant and of the partners or members thereof, if the applicant is a partnership or association, and of the principal officers and directors thereof, if the license applicant is a corporation, support a finding that the business will be operated honestly, fairly, and in accordance with the requirements of this division.
residential mortgage lender license application requirements background disclosure experience disclosure investigation fee application filing fee fingerprint processing financial responsibility criminal records check business operation standards honesty and fairness in business Nationwide Mortgage Licensing System application process principal officers corporate licensing
(Amended by Stats. 2009, Ch. 160, Sec. 51. (SB 36) Effective October 11, 2009.)

Section § 50122

Explanation

This section mandates that anyone applying for a license to operate as a residential mortgage lender or servicer in California must provide sworn testimony on a specific form. If they intend to serve as both a lender and servicer, they can do so with one application. Applicants must include detailed information such as their complete addresses, financial health (backed by an audited statement), and the personal backgrounds of significant stakeholders within the company. They also need to disclose any previous disciplinary actions, court judgments for fraud, and existing fidelity bonds. The goal is to gauge the applicant's reliability and integrity.

(a)CA Financial Code § 50122(a) Except as provided in Section 50120, the information provided on an application for a residential mortgage lender, residential mortgage servicer, or residential mortgage lender and servicer license shall be sworn testimony on a form prescribed by the commissioner. If an applicant proposes to engage in business as a residential mortgage loan servicer as well as a residential mortgage lender, this information shall be set forth in the application. The commissioner may issue a license under this chapter to engage in business as a residential mortgage lender or to engage in business as a residential mortgage lender and residential mortgage loan servicer. A person filing an application under this chapter to engage in business as a residential mortgage lender and a residential mortgage loan servicer is not required to file an application under Chapter 3 (commencing with Section 50130).
(b)CA Financial Code § 50122(b) The application shall contain the name and complete business and residential address or addresses of the applicant. If the applicant is a partnership, association, corporation, or other entity, the application shall contain the names and complete business and residential addresses of each member, director, and principal officer. The application also shall include a description of the activities of the applicant in the detail and for the periods that the commissioner may require, including all of the following:
(1)CA Financial Code § 50122(b)(1) A statement of financial solvency, noting the net worth requirements and supported by an audited financial statement prepared by an independent certified public accountant, and access to the supporting credit information as required by this division.
(2)CA Financial Code § 50122(b)(2) A statement that the applicant or its members, directors, or principals, as appropriate, are at least 18 years of age. The statement may be made by providing each person’s date of birth.
(3)CA Financial Code § 50122(b)(3) Information as to the character, fitness, financial and business responsibility, background, experience, and criminal convictions of any of the following:
(A)CA Financial Code § 50122(b)(3)(A) Any person that owns or controls, directly or indirectly, 10 percent or more of any class of stock of the applicant.
(B)CA Financial Code § 50122(b)(3)(B) Any person that controls, directly or indirectly, the election of 25 percent or more of the members of the board of directors of an applicant.
(C)CA Financial Code § 50122(b)(3)(C) Any person or entity that significantly influences or controls the management of the applicant.
(4)CA Financial Code § 50122(b)(4) A description of any disciplinary action filed under any other license through which the person conducts its business.
(5)CA Financial Code § 50122(b)(5) A description of any adverse judgments entered in court actions filed by borrowers based upon allegations of fraud, misrepresentation, or dishonesty in the conduct of the person’s business.
(6)CA Financial Code § 50122(b)(6) A copy of the fidelity bond currently in effect.
(7)CA Financial Code § 50122(b)(7) Other information as required by rule of the commissioner.
residential mortgage license application sworn testimony audited financial statement financial solvency fidelity bond background check business responsibility disciplinary action adverse judgments fraud allegations residential mortgage servicer net worth requirements applicant fitness stakeholder assessment business integrity
(Amended by Stats. 2009, Ch. 160, Sec. 52. (SB 36) Effective October 11, 2009.)

Section § 50123

Explanation

This law explains that a residential mortgage lender's license stays valid until it is suspended, given up, or revoked. If a lender wants to quit the business, they need to notify the commissioner in writing and provide a plan detailing how they will close their business, including a final audit by an accountant. The license is only officially surrendered once the commissioner approves the plan and confirms no legal violations. Additionally, a mortgage lender or servicer can't give up their license to then continue similar work under a real estate license unless they've held the mortgage license for at least five years.

(a)CA Financial Code § 50123(a) A residential mortgage lender license shall remain in effect until suspended, surrendered, or revoked.
(b)CA Financial Code § 50123(b) A residential mortgage lender licensee that ceases to engage in the business regulated by this division and desires to no longer be licensed shall inform the commissioner in writing and, at that time, surrender the license and all other indicia of licensure to the commissioner. The licensee shall file a plan for the withdrawal from regulated business, and the plan shall include a timetable for the disposition of the business. The plan shall also include a closing audit, review, or other agreed upon procedures performed by an independent certified public accountant prescribed by rule or order of the commissioner. Upon receipt of the written notice and plan, the commissioner shall review the plan and, if satisfactory to the commissioner, shall accept the surrender of the license. A license is not surrendered until its tender is accepted in writing by the commissioner after a review, and a finding has been made on the licensee’s plan required to be filed by this section, and a determination has been made that there is no violation of this law.
(c)CA Financial Code § 50123(c) A residential mortgage lender or servicer licensee may not surrender its license under this division and, under the authority of a real estate license, subsequently engage in residential mortgage lending or servicing activities that are subject to this division, unless the licensee has been licensed under this division for a period of five years or more.
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(Amended by Stats. 2009, Ch. 160, Sec. 53. (SB 36) Effective October 11, 2009.)

Section § 50124

Explanation

In California, a residential mortgage lender or servicer must do several things to comply with state law. They need enough staff, keep business records for 36 months, and file any necessary reports with the commissioner. They must use funds properly and close agreements on time. If they are holding any property that isn't theirs, they need to return it when required. Before making major changes in their operations, like opening new branches, they must inform the commissioner. They also have to follow tax laws and ensure their mortgage loan originators are licensed. They should avoid any criminal or fraudulent activities, maintain solvency, and ensure their work is competent. The commissioner can demand a compliance statement from applicants.

(a)CA Financial Code § 50124(a) A residential mortgage lender or servicer shall do all of the following:
(1)CA Financial Code § 50124(a)(1) Maintain staff adequate to meet the requirements of this division, as prescribed by rule or order of the commissioner.
(2)CA Financial Code § 50124(a)(2) Keep and maintain for 36 months from the date of final entry the business records and other information required by law or rules of the commissioner regarding any mortgage loan made or serviced in the course of the conduct of its business.
(3)CA Financial Code § 50124(a)(3) File with the commissioner any report required under law or by rule or order of the commissioner.
(4)CA Financial Code § 50124(a)(4) Disburse funds in accordance with its agreements and to make a good faith and reasonable effort to effect closing in a timely manner.
(5)CA Financial Code § 50124(a)(5) Account or deliver to a person any personal property such as money, funds, deposit, check, draft, mortgage, other document, or thing of value, that has come into its possession and is not its property, or that it is not in law or equity entitled to retain under the circumstances, at the time that has been agreed upon or is required by law, or, in the absence of a fixed time, upon demand of the person entitled to the accounting or delivery.
(6)CA Financial Code § 50124(a)(6) File with the commissioner an amendment to its application prior to any material change in the information contained in the application for licensure, including, without limitation, the plan of operation. The commissioner shall, within 20 business days of receiving a completed amendment to the application, or within a longer time if agreed to by the licensee, approve or disapprove the effectiveness of the proposed amendment.
(7)CA Financial Code § 50124(a)(7) Comply with the provisions of this division, and with any order or rule of the commissioner.
(8)CA Financial Code § 50124(a)(8) Submit to periodic examination by the commissioner as required by this division.
(9)CA Financial Code § 50124(a)(9) Advise the commissioner by amendment to its application of any material judgment filed against, or bankruptcy petition filed by, the licensee within five days of the filing.
(10)CA Financial Code § 50124(a)(10) Notify the commissioner, in writing, prior to opening a branch office in this state or changing its business location or locations or its branch offices from which activities subject to this division are conducted.
(11)CA Financial Code § 50124(a)(11) Comply with all applicable state and federal tax return filing requirements.
(12)CA Financial Code § 50124(a)(12) Refrain from employing, or paying a commission or other fee to, a mortgage loan originator who is not licensed in this state, unless the individual is exempt from licensure.
(13)CA Financial Code § 50124(a)(13) Refrain from committing a crime against the laws of any state or the United States, involving moral turpitude, misrepresentation, fraudulent or dishonest dealing, or fraud, and disclose to the commissioner any final judgment entered against it in a civil action upon grounds or allegations of fraud, misrepresentation, or deceit.
(14)CA Financial Code § 50124(a)(14) Refrain from engaging in conduct that would be cause for denial of a license.
(15)CA Financial Code § 50124(a)(15) Remain solvent.
(16)CA Financial Code § 50124(a)(16) Proceed with due care and competence in performing any act for which it is required to hold a license under this division.
(17)CA Financial Code § 50124(a)(17) Comply with any other requirement established by rule of the commissioner.
(b)CA Financial Code § 50124(b) The commissioner may require an applicant to submit a statement agreeing to comply with the requirements of this section.
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(Amended by Stats. 2009, Ch. 160, Sec. 54. (SB 36) Effective October 11, 2009.)

Section § 50125

Explanation

This law says that the commissioner can deny a license for a residential mortgage lender or servicer if certain conditions aren't met. First, if the applicant doesn't comply with specific rules or orders, they may be refused. Second, if the commissioner cannot verify certain required findings, issuance may be denied. Lastly, if a major licensing requirement is unmet, the application can also be denied.

The commissioner may refuse to issue a residential mortgage lender or servicer license if any of the following apply:
(a)CA Financial Code § 50125(a) The applicant is not in material compliance with a provision of this division or an order or rule of the commissioner.
(b)CA Financial Code § 50125(b) The commissioner cannot make the findings specified in subdivision (c) of Section 50121.
(c)CA Financial Code § 50125(c) A material requirement for issuance of a license has not been met.
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(Amended by Stats. 2009, Ch. 160, Sec. 55. (SB 36) Effective October 11, 2009.)

Section § 50126

Explanation

This law explains when the commissioner can deny a mortgage-related application. Reasons for denial include false statements, criminal backgrounds, or dishonest acts by key stakeholders in a company. Additionally, the application might be denied if the applicant breaks any rules or employs unlicensed mortgage loan originators. If an applicant does not fix application issues within 90 days after being notified, the application is considered withdrawn.

The commissioner has 60 days to issue a license or provide a statement if issues exist, once the application is complete and fees paid.

(a)CA Financial Code § 50126(a) Upon reasonable notice and opportunity to be heard, the commissioner may deny an application for any of the following reasons:
(1)CA Financial Code § 50126(a)(1) A false statement of a material fact has been made in the application.
(2)CA Financial Code § 50126(a)(2) Any officer, director, general partner, or person owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or equity securities of the applicant has, within the last 10 years, (A) been convicted of, or pleaded nolo contendere to, a crime or (B) committed any act involving dishonesty, fraud, or deceit, if the crime or act is substantially related to the qualifications, functions, or duties of a person engaged in business in accordance with this division.
(3)CA Financial Code § 50126(a)(3) The applicant or any officer, director, general partner, or person owning or controlling, directly or indirectly, 10 percent or more of the outstanding interests or equity securities of the applicant, has violated any provision of this division or the rules thereunder or any similar regulatory scheme of the State of California or a foreign jurisdiction.
(4)CA Financial Code § 50126(a)(4) The applicant employs a mortgage loan originator who is not licensed in this state, unless the mortgage loan originator is exempt from licensure.
(b)CA Financial Code § 50126(b) The application shall be considered withdrawn within the meaning of this section if the applicant fails to respond to a written notification of a deficiency in the application within 90 days of the date of the notification.
(c)CA Financial Code § 50126(c) The commissioner shall, within 60 days from the filing of a full and complete application for a license, including the receipt of background and investigative reports from the Department of Justice or other government agencies, and the payment of the fees required by Section 50121, issue either a residential mortgage lender or servicer license or a statement of issues prepared in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.
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(Amended by Stats. 2009, Ch. 160, Sec. 56. (SB 36) Effective October 11, 2009.)

Section § 50127

Explanation

If someone is denied a license, the process for handling this denial follows specific rules outlined in a part of the Government Code. The commissioner in charge has all the powers given by those rules to manage the situation.

The proceedings for a denial of a license shall be conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and the commissioner has all the powers granted therein.
license denial proceedings commissioner powers Government Code Chapter 5 procedures Title 2 regulations administrative process license application decision challenge regulatory compliance denied license process Section 11500 Division 3 Part 1 appeals process
(Added by Stats. 1994, Ch. 994, Sec. 7. Effective January 1, 1995. Section operative January 1, 1996, pursuant to Section 50601 (later repealed).)

Section § 50128

Explanation

This section defines a 'principal officer' as someone who is directly in charge of managing a company or applicant's mortgage lending or servicing activities in California.

As used in this act, the term “principal officer” means an officer with direct responsibility for the conduct of the residential mortgage lender or servicer licensee’s or license applicant’s lending or servicing activities in this state.
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(Amended by Stats. 2009, Ch. 160, Sec. 57. (SB 36) Effective October 11, 2009.)

Section § 50129

Explanation

This law explains what activities a licensed residential mortgage lender or servicer in California can perform. They can use their own money to buy or sell residential mortgage loans to institutional investors. They can also work for institutional lenders to solicit and process residential mortgage loan applications but cannot charge fees directly from borrowers except those collected on behalf of the lender. They must disclose to borrowers that they are not the lender but are providing services on the lender's behalf. If looking for other lenders for a declined loan, they must have a brokerage agreement with the borrower.

(a)CA Financial Code § 50129(a) A residential mortgage lender or servicer licensed under this chapter may, under the authority of that license and subject to the provisions of this division, do both of the following:
(1)CA Financial Code § 50129(a)(1) Engage as a principal in the business of buying from or selling to institutional investors residential mortgage loans by using or advancing one’s own funds.
(2)CA Financial Code § 50129(a)(2) Engage, pursuant to a written agency contract with an institutional lender specified in paragraph (1), (2), or (4) of subdivision (k) of Section 50003, in the business of soliciting, processing applications, or applying residential loan underwriting criteria, but not engage in the business of brokerage services pursuant to this subdivision, for residential mortgage loans for that lender, using or advancing the funds of that lender, provided that no fees or charges may be demanded or collected by the residential mortgage lender licensee for any performance or service, except fees demanded by, or collected on behalf of, the institutional lender, and that the licensee gives a written disclosure to the borrower, as soon as practicable but prior to loan closing, identifying the licensee and stating that the licensee is not the lender in the transaction but has contracted to provide soliciting, processing, or underwriting services for the lender. Separate schedules of the number and principal amount of the loans processed and underwritten shall be included in the licensee’s annual report required by subdivision (a) of Section 50401.
(b)CA Financial Code § 50129(b) The act of soliciting other institutional lenders with whom a residential mortgage lender licensee has concluded an agency contract pursuant to paragraph (2) of subdivision (a) for placement of a loan upon declination of that loan by another institutional lender contracted under paragraph (2) of subdivision (a), constitutes brokerage services, and may be pursued by the licensee only following execution of a loan brokerage agreement with the borrower as provided in this division.
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(Amended by Stats. 2009, Ch. 160, Sec. 58. (SB 36) Effective October 11, 2009.)