On May 19, 2017, the South Carolina Governor signed into law Senate Bill 366 (“SB 366”), which makes amendments to the South Carolina Mortgage Lending Act (“SCMLA”), the South Carolina Licensing of Mortgage Brokers Act (“SCLMBA”), and the South Carolina High-Cost and Consumer Home Loans Act (“SCHCHLA”). The amendments involve, among other things: (1) the inclusion of a definition for a “loan correspondent”; (2) changes to license application and renewal requirements; (3) introduction of new requirements for loan estimate disclosures; (4) modifications to the criminal background check process for individuals who have applied for or hold a mortgage lender or loan originator license; and (5) removal of physical presence requirements for record maintenance. The amendments will become effective on September 16, 2017.
According to the existing provisions of both acts, the term “loan correspondent” is generally included in the definition of the term “mortgage broker” for purposes of the applicable South Carolina licensing provisions. As amended by SB 366, both the SCMLA and the SCLMBA define a “loan correspondent” as a person who engages in the business of making mortgage loans as a third party originator and who, with respect to each mortgage loan, does not engage in all three of the following activities: (1) underwriting, (2) approving the mortgage loan, and (3) funding the mortgage loan while utilizing an unrestricted warehouse or credit line. The definition further specifies that a loan correspondent is not included in the definition of a mortgage lender under these two acts.
The amendments in SB 366 also modify the license application prerequisites and scope under the SCMLA and the SCLMBA. The requirement to obtain prelicensing education of at least twenty hours has been changed to demand that at least three of these hours be on South Carolina laws and regulations. The language that allowed an individual to satisfy these prelicensing education hours through equivalent coursework has been removed. Moreover, a person desiring to obtain a license no longer needs to consent to a state fingerprint-based criminal history check, but must still provide consent for the national version of this check. A commissioner or department may also issue a license for a personal residence of a loan originator as a branch office if it is located more than seventy-five miles from a commercial branch office location. Finally, transitional licenses will be granted, as authorized by and pursuant to the SAFE Act.
Within the renewal process requirements under the SCMLA and the SCLMBA, the amendments remove the reference to a state fingerprint-based criminal history record check and only require that a person attempting to renew a license provide consent to a national fingerprint-based criminal history record check. Further, the amendments require that at least one of the eight hours of annual continuing professional education needed for license renewal be education on South Carolina laws and regulations.
Additionally, the bill amends certain provisions of the SCHCHLA. The amendment replaces the existing language referring to a “good faith loan estimate” with a reference to a “loan estimate.” As amended, the provisions require the broker or mortgage broker to provide the borrower with a disclosure in writing of the amount being earned on the loan at the time the borrower receives the “loan estimate” (as is required under RESPA, TILA, and regulations adopted pursuant to both acts including, but not limited to, the TILA-RESPA Integrated Disclosure Rule (“TRID”)) and before the scheduled closing of a consumer home loan. This amendment appears to be intended to bring the SCHCHLA into conformity with federal law and the changes under TRID relating to the use of loan estimates.
SB 366 also made changes to the criminal background check process under the SCMLA and SCLMBA. The amendments remove reference to the South Carolina Law Enforcement Division as it relates to the requirement of an individual who is applying or holds a mortgage lender or loan originator license to undergo a criminal background check. The amendments only maintain that an applicant must undergo a national criminal record check with fingerprints conducted by the FBI. In addition, the amendments provide that the Nationwide Mortgage Licensing System and Registry is authorized to collect fingerprints on the commissioner’s or administrator’s behalf for certification purposes and for notification of the commissioner and administrator regarding subsequent criminal charges which may be reported to the FBI.
Finally, it is no longer required under the SCLMBA for a mortgage broker to maintain a “sufficient physical presence” and for his or her records to be maintained at the licensed location in South Carolina.
The Senate Bill may be found here.