Reference Title: mortgage lending; loan originators; education

AN ACT
AMENDING SECTIONS 6-901, 6-902, 6-903, 6-904, 6-906 AND 6-907, ARIZONA REVISED STATUTES; AMENDING TITLE 6, CHAPTER 9, ARTICLE 1, ARIZONA REVISED STATUTES, BY ADDING SECTION 6-911; AMENDING TITLE 6, CHAPTER 9, ARIZONA REVISED STATUTES, BY ADDING ARTICLE 1.1; AMENDING SECTIONS 6-941, 6- 942, 6-943 AND 6-946, ARIZONA REVISED STATUTES; AMENDING TITLE 6, CHAPTER 9, ARTICLE 2, ARIZONA REVISED STATUTES, BY ADDING SECTION 6-949; AMENDING TITLE 6, CHAPTER 9, ARIZONA REVISED STATUTES, BY ADDING ARTICLE 4; RELATING TO MORTGAGE LENDING.

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 6-901, Arizona Revised Statutes, is amended to read:

6-901 . Definitions

In this article, unless the context otherwise requires:

1. "Affiliate" means an entity which directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the entity specified.

2. "Compensation" means anything of value or any benefit including points, commissions, bonuses, referral fees, loan origination fees and other similar fees but excluding periodic interest resulting from the application of the note rate of interest to the outstanding principal balance remaining unpaid from time to time.

3. "Investor" means a person who lends or invests money in mortgage loans.

4. "License" means a license issued under this article.

5. "Licensee" means a person licensed under this article.

6. "LOAN ORIGINATOR" HAS THE SAME MEANING PRESCRIBED IN SECTION 6-921.

6. 7. "Mortgage broker" means a person who is not exempt under section 6-902 and who for compensation or in the expectation of compensation either directly or indirectly makes, negotiates or offers to make or negotiate a mortgage loan.

7. 8. "Mortgage loan" means a loan secured by a mortgage or deed of trust or any lien interest on real estate located in this state AND created with the consent of the owner of the real estate.

8. 9. "Mortgage loan closing" means the day by which all documents relating to the mortgage loan have been executed and recorded and all monies have been accounted for under the terms of the escrow instructions.

10. "MORTGAGE LOAN FILE" MEANS ALL DOCUMENTS, APPLICATIONS, VERIFICATIONS, APPRAISALS AND WORK PAPERS RELATING TO A MORTGAGE LOAN.

Sec. 2. Section 6-902, Arizona Revised Statutes, is amended to read:

6-902 . Exemptions

A. This article does not apply to:

1. A person who does business under any other law of this state, or law of any other state while regulated by a state agency of such other state or the United States, relating to banks, savings banks, trust companies, savings and loan associations, profit sharing and pension trusts, credit unions, insurance companies or consumer lenders, or receivership, including directly or indirectly making, negotiating or offering to make or negotiate a mortgage loan if the mortgage transactions are regulated by the other law or are under the jurisdiction of a court. Subsidiaries and service corporations of these institutions shall not be exempt and shall be subject to the provisions of this article unless preempted by federal law.

2. A person who makes a mortgage loan:

(a) With his own monies.

(b) For his own investment.

(c) Without intent to resell.

(d) And is not engaged in the business of making mortgage loans.

3. A person who funds a mortgage loan which has been originated and processed by a licensee, by a mortgage banker licensed in this state or by a person WHO IS exempt under paragraph 1 of this subsection and who meets all of the following:

(a) Does not maintain a place of business in this state in connection with funding mortgage loans.

(b) Does not directly or indirectly solicit borrowers in this state for the purpose of making mortgage loans.

(c) Does not participate in the negotiation of mortgage loans.

4. A person who, as seller of real property, receives one or more mortgages or deeds of trust as security for a purchase money obligation.

5. A person who is licensed to practice law in this state, but is not actively and principally engaged in the business of negotiating mortgage loans, if this person renders services in the course of his practice as an attorney at law.

6. A person who receives a mortgage or deed of trust on real property as security for an obligation payable on an installment or deferred payment basis and arising out of materials furnished or services rendered in the improvement of that real property or any lien created without the consent of the owner of the real property.

7. A person who is licensed pursuant to article 1.1, 2 or 3 of this chapter.

8. An agency of any state or of the United States.

9. A nonprofit federally tax exempt corporation THAT IS certified by the United States small business administration and , THAT IS organized to promote economic development within this state AND whose primary activity consists of providing financing for business expansion.

10. An institutional investor as defined in section 6-971 unless the institutional investor makes a mortgage loan other than a commercial mortgage loan as defined in section 6-971.

B. For the purposes of:

1. Subsection A, paragraph 3 of this section, "originate" includes loans closed in a name other than that of the licensee, a mortgage banker licensed in this state or exempt person only if the person in whose name the loan is closed meets the other requirements of subsection A, paragraph 3 of this section.

2. Subsection A, paragraph 3, subdivision (c) of this section, "negotiation of mortgage loans" does not include setting the terms under which a person may buy a mortgage loan originated by a licensee or a person exempt under subsection A, paragraph 1 of this section.

Sec. 3. Section 6-903, Arizona Revised Statutes, is amended to read:

6-903 . Licensing of mortgage brokers required; qualifications; application; education requirements; bond; fees; renewal; employees

A. A person shall not act as a mortgage broker if he is not licensed under this article.

B. The superintendent shall not grant a mortgage broker's license to a person, other than a natural person, who is not registered to do business in this state on the date of granting the license. An applicant for an original mortgage broker's license shall:

1. Have not less than three years' experience as a mortgage broker, or equivalent lending experience in a related business during the five years immediately preceding the time of application.

2. Have satisfactorily completed a course of study approved by the superintendent during the three years TWELVE MONTHS immediately preceding the time of application.

3. Have passed a mortgage broker's test, pursuant to section 6-908, not more than one year before the granting of the license.

4. HAVE COMPLETED AT LEAST AN ADDITIONAL EIGHT CREDIT HOURS OF EDUCATION ON THE LAWS AND RULES APPLICABLE TO MORTGAGE BROKERAGE WITHIN THREE MONTHS BEFORE OR AFTER OBTAINING A LICENSE.

C. PURSUANT TO ARTICLE 4 OF THIS CHAPTER, A LICENSEE SHALL COMPLETE AT LEAST SIXTEEN CREDIT HOURS OF CONTINUING EDUCATION RELATING TO THE LAWS AND RULES OF REAL ESTATE FINANCE OR MORTGAGE LENDING WITHIN TWENTY-FOUR MONTHS AFTER EACH LICENSE RENEWAL DATE.

C. D. A person shall make an application for a license or for a renewal of a license in writing on the forms, in the manner and accompanied by the information prescribed by the superintendent. The superintendent may require additional information on the experience, background, honesty, truthfulness, integrity and competency of the applicant and any responsible individual designated by the applicant. If the applicant is a person other than a natural person, the superintendent may require information as to the honesty, truthfulness, integrity and competency of any officer, director, shareholder or other interested party of the association, corporation or group.

D. E. The nonrefundable application fee and annual renewal fee are as prescribed in section 6-126. The nonrefundable application fee shall accompany each application for an original license only. The superintendent shall transmit the fees to the state treasurer who shall deposit the monies in the state general fund.

E. F. If a licensee is a person other than a natural person, the license issued to it entitles all officers, directors, members, partners, trustees and employees of the licensed corporation, partnership, association or trust to engage in the mortgage business if one officer, director, member, partner, employee or trustee of the person is designated in the license as the individual responsible for the person under this article. If a licensee is a natural person, the license entitles all employees of the licensee to engage in the mortgage business. If the natural person is not a resident of this state, an employee of the licensee shall be designated in the license as the individual responsible for the licensee under the provisions of this article. For purposes of this subsection an employee does not include an independent contractor. A responsible individual shall be a resident of this state, shall be in active management of the activities of the licensee governed by this article and shall meet the qualifications set forth in subsection B of this section for a licensee.

F. G. A licensee shall notify the superintendent that its responsible individual will cease to be in active management of the activities of the licensee within ten days of learning that fact. The licensee has ninety days after the notification is received by the superintendent within which to replace the responsible individual with a qualified replacement and to so notify the superintendent. If the license is not placed under active management of a qualified responsible individual and if notice is not given to the superintendent within the ninety day period, the license of the licensee expires.

G. H. Every person licensed as a mortgage broker shall deposit with the superintendent, before doing business as a mortgage broker, a bond executed by the licensee as principal and a surety company authorized to do business in this state as surety. The bond shall be conditioned on the faithful compliance of the licensee, including his directors, officers, members, partners, trustees and employees, with this article. The bond is payable to any person injured by the wrongful act, default, fraud or misrepresentation of the licensee or his employees and to this state for the benefit of the person injured. Only one bond is required for any person, firm, association or corporation irrespective of the number of officers, directors, members, partners or trustees who are employed by or are members of such firm, association or corporation. No suit may be commenced on the bond after the expiration of one year following the commission of the act on which the suit is based, except that claims for fraud or mistake are limited to the limitation period provided in section 12-543, paragraph 3. If an injured person commences an action for a judgment to collect from the bond, the injured person shall notify the superintendent of the action in writing at the time of the commencement of the action and shall provide copies of all documents relating to the action to the superintendent on request.

H. I. The bond required by this section shall be ten thousand dollars for licensees whose investors are limited solely to institutional investors, and fifteen thousand dollars for licensees whose investors include any noninstitutional investors.

I. For THE purposes of subsection H of this section SUBSECTION :

1. "Institutional investor" means a state or national bank, a state or federal savings and loan association, a state or federal savings bank, a state or federal credit union, a federal government agency or instrumentality, a quasi-federal government agency, a financial enterprise, a licensed real estate broker or salesman, a profit sharing or pension trust, or an insurance company.

2. "Investor" means any person who directly or indirectly provides funds to a mortgage broker which funds are, or are intended to be, used in the making of a loan, and any person who purchases a loan, or any interest therein IN A LOAN , from a mortgage broker or in a transaction that has been directly or indirectly arranged or negotiated by a mortgage broker.

J. Notwithstanding section 35-155, in lieu of the bond described in this section, an applicant for a license or a licensee may deposit with the superintendent a deposit in the form of cash or alternatives to cash in the same amount as the bond required under subsection G H of this section. The superintendent may accept any of the following as an alternative to cash:

1. Certificates of deposits or investment certificates which are payable or assigned to the state treasurer, issued by banks or savings banks doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.

2. Certificates of deposit, investment certificates or share accounts which are payable or assigned to the state treasurer, issued by a savings and loan association doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.

3. Certificates of deposit, investment certificates or share accounts which are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution.

K. The superintendent shall deposit the cash or alternatives to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post bond pursuant to this section. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars for each cash or alternatives to cash deposit and shall be paid by the applicant or licensee. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.

L. In addition to such other terms and conditions as the superintendent prescribes by rule or order, the principal amount of the deposit shall be released only on written authorization of the superintendent or on the order of a court of competent jurisdiction. The principal amount of the deposit shall not be released before the expiration of three years from the first to occur of any of the following:

1. The date of substitution of a bond for a cash alternative.

2. The surrender of the license.

3. The revocation of the license.

4. The expiration of the license.

M. A licensee or an employee of the licensee shall not advertise for or solicit mortgage business in any manner without using the name and license number as issued on the mortgage broker's principal place of business license, except that a licensee may employ or refer to the commonly used name and any trademarks or service marks of any affiliate. If a license is issued in the name of a natural person, nothing in the advertising or solicitation may imply the license is in the name of another person or entity. For the purpose of this subsection, "advertise" does not include business cards, radio and television advertising directed at national or regional markets and promotional items except if those items contain rates or terms on which a mortgage loan may be obtained.

N. A licensee shall not employ any A person unless UNTIL the licensee:

1. Conducts a reasonable investigation of the background, honesty, truthfulness, integrity and competency of the employee before hiring PERSON .

2. Keeps A LICENSEE SHALL KEEP a record of the investigation for not less than two years after termination.

2. FOR A PERSON WHO IS BEING EMPLOYED IN THE CAPACITY OF LOAN ORIGINATOR, VERIFIES THAT WITHIN THE LAST TWENTY-FOUR MONTHS THE PERSON HAS COMPLETED AT LEAST A SIXTEEN HOUR COURSE OF STUDY RELATING TO MORTGAGE BROKER OR MORTGAGE BANKER LAWS AND RULES.

O. A license is not transferable or assignable and control of a licensee may not be acquired through a stock purchase or other device without the prior written consent of the superintendent. Written consent shall not be given if the superintendent finds that any of the grounds for denial, revocation or suspension of a license as set forth in section 6-905 are applicable to the acquiring person. For the purpose of this subsection "control" means the power to vote more than twenty per cent of outstanding voting shares of a licensed corporation, partnership, association or trust.

P. The licensee is liable for any damage caused by any EMPLOYEE of his employees THE LICENSEE while acting as an employee of the licensee.

Q. A licensee shall comply with the requirements of section 6-114 relating to balloon payments.

R. The examination and course of study requirements of this section shall be waived by the superintendent for any person applying for a license who, within the six months immediately prior to the submission of the application, has been a licensee or a responsible person pursuant to this chapter.

Sec. 4. Section 6-904, Arizona Revised Statutes, is amended to read:

6-904 . Issuance of license; renewal; inactive status; branch office license; application; fee

A. The superintendent, on determining that the applicant is qualified and has paid the fees, shall issue a mortgage broker's license to the applicant which is evidenced by a continuous certificate. The superintendent shall grant or deny a license within one hundred twenty days after receipt of the completed application and fees. An applicant who has been denied a license may not reapply for such a license before one year from the date of the previous application.

B. A licensee shall pay the renewal fee on or before September 30. Licenses not renewed by September 30 are suspended, and the licensee shall not act as a mortgage broker until the license is renewed or a new license is issued pursuant to this article. A person may renew a suspended license by paying the renewal fee plus twenty-five dollars for each day after September 30 that a license renewal fee is not received by the superintendent and making application for renewal as prescribed by the superintendent. Licenses which are not renewed by October 31 expire. A license shall not be granted to the holder of an expired license except as provided in this article for the issuance of an original license.

C. On or before September 30, a licensee may request inactive status for the following license year, and the license shall be placed on inactive status after payment to the superintendent of the inactive status renewal fee prescribed in section 6-126, subsection C and the surrender of the license to the superintendent. During inactive status, an inactive licensee is not required to maintain a bond and shall not act as a mortgage broker. A licensee may not be on inactive status for more than two consecutive years, nor for more than four years in any ten year period. The license is deemed expired on violation of any of the limitations of this subsection.

D. An inactive licensee may return to active status notwithstanding the requirements of section 6-903, subsection B by making a written request to the superintendent for reactivation and paying the prorated portion of the annual assessment that would have been charged to the licensee. The licensee shall also provide the superintendent with proof that WITHIN THE LAST TWENTY-FOUR MONTHS the licensee HAS COMPLETED AT LEAST SIXTEEN CREDIT HOURS OF EDUCATION RELATING TO THE LAWS AND RULES OF MORTGAGE BROKERAGE AND THE LICENSEE meets all of the other requirements for acting as a mortgage broker, including required bond coverage or the deposit of a cash alternative.

E. A licensee shall prominently display the mortgage broker license in the office of the mortgage broker.

F. Every licensed mortgage broker shall designate and maintain a principal place of business in this state for the transaction of business. The license shall specify the address of his principal place of business. If a licensee wishes to maintain one or more locations in addition to a principal place of business, he shall first obtain a branch office license from the superintendent and designate a person for each branch office to oversee the operations of that office. The licensee shall submit a fee as set forth in section 6-126 for each branch office license. If the superintendent determines that the applicant is qualified, the superintendent shall issue a branch office license indicating the address of the branch office. The licensee shall conspicuously display the branch office license in the branch office. If the address of the principal place of business or of any branch office is changed, the licensee shall immediately notify the superintendent of the change and the superintendent shall endorse the change of address on the license for a fee as prescribed in section 6-126.

Sec. 5. Section 6-906, Arizona Revised Statutes, is amended to read:

6-906 . Required accounting practices and records; escrow of monies; disclosure

A. Every mortgage broker shall keep and maintain at all times correct and complete records as prescribed by the superintendent which will enable him to determine whether the licensee is conducting his business in accordance with this article. If the mortgage broker operates two or more licensed places of business in this state, after notifying the superintendent, he may maintain such records at his principal place of business in this state, except that a mortgage broker, with the approval of the superintendent, may maintain the records outside of this state. For records kept outside this state, a mortgage broker shall make the records available to the superintendent in this state not more than three business days after demand and SHALL provide for the acceptance of collect calls or provide a toll free telephone number to borrowers to obtain information from the records if the licensed place of business in this state cannot readily provide the information requested by the borrowers. Every mortgage broker shall maintain original documents or clearly legible copies of all mortgage loan transactions for not fewer than AT LEAST five years from the date of the mortgage loan closing. THE COPIES OF THE ORIGINAL DOCUMENTS MAY BE ELECTRONIC, DIGITAL OR PHOTOGRAPHIC REPRODUCTIONS.

B. Every mortgage broker shall observe generally accepted accounting principles and practices.

C. A mortgage broker shall immediately deposit all monies received by the mortgage broker in an escrow account with an escrow agent licensed pursuant to chapter 7 of this title. Withdrawals shall only be disbursed according to the terms of the escrow instructions. The escrow agent shall not be the mortgage broker. A mortgage broker, however, may accept an appraisal fee, which the mortgage broker shall only use to obtain an appraisal, a credit investigation fee and a fee in connection with an application for a mortgage loan. The mortgage broker shall not commingle the appraisal fee or credit investigation fee with other monies of the mortgage broker. A mortgage broker shall not accept any monies or documents in connection with an application for a mortgage loan in an amount of two hundred thousand dollars or less, except as provided in this section and pursuant to a written agreement. The parties shall sign the written agreement , and the agreement shall contain terms pertaining to the disposition of the monies and documents, whether the loan is finally consummated or not, the term for which the agreement is to remain in force before return of the monies and documents for nonperformance can be required and an itemized list of all estimated costs to the borrower of obtaining the mortgage loan including all costs charged by third parties. The licensee shall preserve all agreements between the parties involved in the transaction and all contracts, agreements and escrow instructions to or with the depository. All documents provided by the borrower or at the expense of the borrower to the mortgage broker, including any appraisals, are the property of the borrower and shall, at the borrower's request, be returned to the borrower or transferred to any person designated by the borrower without further expense to the borrower if the loan is not consummated, provided that any such document is not prohibited by law from being transferred or returned.

D. Before a mortgage loan closing on residential real property designed principally for the occupancy of from one to four families, a licensee shall fully comply, to the extent applicable, with the real estate lending disclosure requirements of title I of the consumer credit protection act (15 United States Code sections 1601 through 1666j), the real estate settlement procedures act (12 United States Code sections 2601 through 2617) and the regulations promulgated under those acts.

Sec. 6. Section 6-907, Arizona Revised Statutes, is amended to read:

6-907 . Required disclosure to investors

A. Before payment of any money by an investor in connection with a mortgage loan, a licensee shall provide to an investor that is not a financial institution, state or national bank, state or federal savings and loan association, state or federal savings bank, state or federal credit union, financial enterprise, licensed real estate broker or salesman, profit sharing or pension trust or insurance company:

1. An opinion from an independent source stating the value of the property subject to the mortgage loan being made or sold. The opinion shall state the value of the property as it exists on the date of the opinion.

2. A copy of the preliminary title report that states the condition of title and discloses any encumbrances, assessments and liens of record on the property securing the mortgage loan being made or sold.

3. A disclosure statement which includes the following information:

(a) The name and address of the fee owner of the property securing the mortgage loan being made or sold.

(b) Information relative to the ability of the borrower to meet the obligations of the mortgage loan.

(c) A legal description OR TAX ASSESSOR'S PARCEL NUMBER or address of the property , IF ASSIGNED, securing the mortgage loan being made or sold.

(d) The existence of A TYPE OF STRUCTURE, any improvements on the property or any utilities on or adjacent to the property which will THAT MAY serve the property.

(e) The terms and conditions of the mortgage loan being made or sold, including the principal balance owed and the status of principal and interest payments thereon , IF APPLICABLE, A STATEMENT THAT PROVIDES THE STATUS OF THE LIEN BEING PAID OFF BY THE PROPOSED LOAN .

(f) The terms and conditions of all liens on the property securing the mortgage loan being made or sold.

(g) A statement as to whether the mortgage broker is acting as principal or agent in the transaction. FOR THE PURPOSES OF THIS SUBDIVISION, "PRINCIPAL" MEANS THE LICENSEE OR AN OFFICER, DIRECTOR, EMPLOYEE OR RELATIVE OF THE LICENSEE WHO ACTS IN THE CAPACITY OF A BUYER, SELLER OR BORROWER.

(h) Any additional information prescribed by the superintendent.

B. After using his best efforts to verify all of the information required by this section , the licensee shall sign the statement attesting to the validity of the information to the best of his knowledge and belief. The licensee shall maintain a record of acknowledgment from the lender of the receipt of this information for not less than two THREE years from the date of the mortgage loan closing.

Sec. 7. Title 6, chapter 9, article 1, Arizona Revised Statutes, is amended by adding section 6-911, to read:

6-911 . Mortgage loan file

A MORTGAGE LOAN FILE IS THE PROPERTY OF THE LICENSEE AND IS NOT THE PROPERTY OF A LOAN OFFICER, LOAN ORIGINATOR OR LOAN PROCESSOR.

Sec. 8. Title 6, chapter 9, Arizona Revised Statutes, is amended by adding article 1.1, to read:

article 1.1. Loan originators

6-921 . Definition of loan originator

IN THIS ARTICLE, UNLESS THE CONTEXT OTHERWISE REQUIRES, "LOAN ORIGINATOR" MEANS ANY PERSON, WHETHER COMPENSATED OR NOT, WHOSE PRIMARY RESPONSIBILITIES ARE ARRANGING OR SOLICITING WITH THE INTENT OF ORIGINATING, NEGOTIATING OR TAKING A MORTGAGE LOAN APPLICATION DIRECTLY FROM A CONSUMER FOR ONE OR MORE RESIDENTIAL MORTGAGE LOANS OR DEEDS OF TRUST.

6-922 . Exemptions

THIS ARTICLE DOES NOT APPLY TO:

1. A PERSON WHO IS LICENSED PURSUANT TO ARTICLE 1, 2 OR 3 OF THIS CHAPTER.

2. ANY PERSON WHOSE PRIMARY RESPONSIBILITY TO A MORTGAGE BROKER IS TO PERFORM THE ADMINISTRATIVE TASKS OF LOAN PROCESSING, LOAN UNDERWRITING OR LOAN CLOSING OR ANY ASSISTANT TO THAT PERSON.

3. ANY PERSON WHOSE PRIMARY RESPONSIBILITY IS TO SOLICIT ANY MORTGAGE BROKER, MORTGAGE BANKER OR LOAN ORIGINATOR OR TO MARKET MORTGAGE LOAN PRODUCTS TO PERSONS OTHER THAN POTENTIAL CONSUMERS WHO ARE THE INTENDED END USERS OF MORTGAGE LOAN PRODUCTS.

6-923 . Loan originator requirements; education

A. A PERSON SHALL NOT ACT AS A LOAN ORIGINATOR UNLESS THE PERSON DOES ALL OF THE FOLLOWING:

1. SATISFACTORILY COMPLETES A COURSE OF STUDY PRESCRIBED IN SUBSECTION C OF THIS SECTION AND APPROVED BY THE SUPERINTENDENT.

2. OBTAINS A PASSING GRADE ON A LOAN ORIGINATOR'S EXAMINATION PRESCRIBED BY THE SUPERINTENDENT AND ADMINISTERED BY THE PROVIDER.

B. EACH LOAN ORIGINATOR SHALL COMPLETE AT LEAST FORTY-FIVE CREDIT HOURS OF EDUCATION AND TESTING IN THE FOLLOWING SUBJECTS:

1. EIGHT HOURS RELATING TO MORTGAGE BROKER AND MORTGAGE BANKER LAWS, INCLUDING AT LEAST ALL OF THE FOLLOWING LAWS:

( a ) THE TRUTH IN LENDING ACT (TITLE I OF THE CONSUMER CREDIT PROTECTION ACT, 15 UNITED STATES CODE SECTIONS 1601 THROUGH 1666 j ) AND REGULATION Z PROMULGATED UNDER THE ACT (12 CODE OF FEDERAL REGULATIONS PART 226).

( b ) REGULATION X, GOOD FAITH ESTIMATE OF COSTS (24 CODE OF FEDERAL REGULATIONS SECTION 3500.7).

( c ) THE FAIR CREDIT REPORTING ACT (15 UNITED STATES CODE SECTIONS 1681 THROUGH 1681 u ).

( d ) THE EQUAL CREDIT OPPORTUNITY ACT (15 UNITED STATES CODE SECTIONS 1691 THROUGH 1691 f ).

( e ) REGULATION X, MORTGAGE SERVICING TRANSFERS (24 CODE OF FEDERAL REGULATIONS SECTION 3500.21).

2. TWO HOURS RELATING TO REAL ESTATE AND MORTGAGE MATHEMATICS.

3. THREE HOURS RELATING TO THE ELEMENTS AND FUNCTIONS OF ESCROW AND TITLE INSURANCE.

4. THREE HOURS RELATING TO GENERAL RESIDENTIAL LENDING.

5. THREE HOURS RELATING TO ETHICS.

6. EIGHT HOURS RELATING TO LOAN PROCESSING AND LOAN UNDERWRITING.

7. THREE HOURS RELATING TO APPRAISALS AND LAND SURVEYS.

8. THREE HOURS RELATING TO THE SECONDARY MORTGAGE MARKET.

9. THREE HOURS RELATING TO LOAN CLOSINGS AND LOAN DOCUMENTS.

10. THREE HOURS RELATING TO FORECLOSURE LAW.

11. THREE HOURS RELATING TO THE MORTGAGE BROKER STATUTES AND RULES OF THIS STATE.

12. THREE HOURS OF REVIEW AND TESTING.

6-924 . Rules

THE SUPERINTENDENT MAY ADOPT RULES PURSUANT TO TITLE 41, CHAPTER 6 TO CARRY OUT THIS ARTICLE.

Sec. 9. Section 6-941, Arizona Revised Statutes, is amended to read:

6-941 . Definitions

In this article, unless the context otherwise requires:

1. "Affiliate" means an entity which directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the entity specified.

2. "Compensation" means anything of value or any benefit including points, commissions, bonuses, referral fees, loan origination fees and other similar fees but excluding periodic interest resulting from the application of the note rate of interest to the outstanding principal balance remaining unpaid from time to time.

3. "License" means a license issued under this article.

4. "Licensee" means a person licensed under this article.

5. "Mortgage banker" means a person who is not exempt under section 6-942 and who for compensation or in the expectation of compensation either directly or indirectly makes, negotiates or offers to make or negotiate a mortgage banking loan or a mortgage loan.

6. "Mortgage banking loan" means a loan which is funded exclusively from the mortgage banker's own resources, which is directly or indirectly secured by a mortgage or deed of trust or any lien interest on real estate located in this state and which is created with the consent of the owner of the real property. For the purposes of this paragraph, "own resources" means any of the following:

(a) Cash, corporate capital, warehouse credit lines at commercial banks, savings banks or savings and loan associations or other sources that are liability items on the mortgage banker's financial statements for which its assets are pledged.

(b) Correspondent contracts between the mortgage banker and a bank, savings bank, trust company, savings and loan association, credit union, profit sharing or pension trust, consumer lender or insurance company.

(c) The mortgage banker's affiliates' cash, corporate capital, warehouse credit lines at commercial banks or other sources that are liability items on the affiliates' financial statements for which the affiliates' assets are pledged.

7. "Mortgage banking loan closing" means the day by which all documents relating to the mortgage banking loan or mortgage loan have been executed and recorded and all monies have been accounted for.

8. "Mortgage loan" means any loan, other than a mortgage banking loan, secured by a mortgage or deed of trust or any lien interest on real estate located in this state and created with the consent of the owner of the real estate.

9. "MORTGAGE LOAN FILE" MEANS ALL DOCUMENTS, APPLICATIONS, VERIFICATIONS, APPRAISALS AND WORK PAPERS RELATING TO A MORTGAGE LOAN.

Sec. 10. Section 6-942, Arizona Revised Statutes, is amended to read:

6-942 . Exemptions

A. This article does not apply to:

1. A person who does business under any other law of this state, or any other state while regulated by a state agency of such other state, or of the United States, relating to banks, savings banks, trust companies, savings and loan associations, profit sharing and pension trusts, credit unions, insurance companies or consumer lenders, or receiverships, including directly or indirectly making, negotiating or offering to make or negotiate a mortgage banking loan or a mortgage loan if the mortgage transactions are regulated by the other law or are under the jurisdiction of a court.

2. A person who makes a mortgage banking loan or a mortgage loan:

(a) With his own monies.

(b) For his own investment.

(c) Without intent to resell.

(d) And is not engaged in the business of making mortgage loans or mortgage banking loans.

3. A person who funds a mortgage loan or mortgage banking loan which has been originated and processed by a licensee, by a mortgage broker licensed in this state or by a person WHO IS exempt under paragraph 1 of this subsection and who meets all of the following:

(a) Does not maintain a place of business in this state in connection with funding mortgage loans or mortgage banking loans.

(b) Does not directly or indirectly solicit borrowers in this state for the purpose of making mortgage loans.

(c) Does not participate in the negotiation of mortgage loans.

4. A person who, as seller of real property, receives one or more mortgages or deeds of trust as security for a purchase money obligation.

5. A person who is licensed to practice law in this state, but is not actively and principally engaged in the business of negotiating mortgage banking loans or mortgage loans, if this person renders services in the course of his practice as an attorney at law.

6. A person who receives a mortgage or deed of trust on real property as security for an obligation payable on an installment or deferred payment basis and arising out of materials furnished or services rendered in the improvement of that real property or any lien created without the consent of the owner of such real property.

7. A person who is licensed pursuant to article 1 , 1.1 or 3 of this chapter.

8. An agency of any state or of the United States.

9. A nonprofit federally tax exempt corporation THAT IS certified by the United States small business administration and , THAT IS organized to promote economic development within this state AND whose primary activity consists of providing financing for business expansion.

10. An institutional investor as defined in section 6-971 unless the institutional investor makes either:

(a) A mortgage loan other than a commercial mortgage loan as defined in section 6-971.

(b) A mortgage banking loan other than a commercial mortgage loan as defined in section 6-971.

B. Subsidiaries and service corporations of institutions exempt under subsection A, paragraph 1 of this section shall not be exempt and shall be subject to the provisions of this article unless preempted by federal law.

C. For the purposes of:

1. Subsection A, paragraph 3 of this section, "originate" includes loans closed in a name other than that of the licensee, a mortgage broker licensed in this state or AN exempt person only if the person in whose name the loan is closed meets the other requirements of subsection A, paragraph 3 of this section.

2. Subsection A, paragraph 3, subdivision (c) of this section, negotiation of mortgage loans does not include setting the terms under which a person may buy a mortgage loan originated by a licensee or a person exempt under subsection A, paragraph 1 of this section.

Sec. 11. Section 6-943, Arizona Revised Statutes, is amended to read:

6-943 . Licensing of mortgage bankers required; qualifications; application; bond; fees; renewal

A. A person shall not act as a mortgage banker if he is not licensed under this article.

B. The superintendent shall not grant a mortgage banker's license to a person, other than a natural person, who is not registered to do business in this state on the date of application for a license. The superintendent shall not issue a mortgage banker's license or a renewal of such a license to an applicant unless he meets all of the requirements prescribed in subsection C of this section. The superintendent shall determine whether the applicant meets the requirements based on the application, and evidence presented at a hearing, if any, or any other evidence that the superintendent may have regarding qualifications of the applicant.

C. In order to qualify for a mortgage banker license or a renewal of such a license , an applicant shall:

1. Have not fewer than three years' experience in the business of making mortgage banking loans or equivalent lending experience in a related business. If the applicant is a person other than a natural person, the responsible individual shall meet this requirement.

2. Have engaged or intend to engage in the business of making mortgage loans or mortgage banking loans.

3. Either:

(a) Be authorized to do business with any of the following:

(i) The federal housing administration.

(ii) The veterans administration.

(iii) The federal national mortgage association.

(iv) The federal home loan mortgage corporation.

(b) Notwithstanding paragraph 5 OF THIS SUBSECTION , at all times have and maintain a net worth of not less than two hundred fifty thousand dollars.

4. Provide the superintendent with a current audited financial statement or that of its parent company prepared by an independent certified public accountant in accordance with generally accepted accounting principles including:

(a) The certified public accountant's opinion as to the fairness of the presentation in conformity with generally accepted accounting principles.

(b) A balance sheet prepared within the previous six months and certified by the licensee. The superintendent may require a more recent balance sheet.

(c) A statement of operations and retained earnings and a statement of changes in financial position provided the applicant has commenced operations.

(d) Notes to the financial statement if applicable.

5. At all times have and maintain a net worth of not less than one hundred thousand dollars.

6. WITHIN THREE MONTHS BEFORE OR AFTER OBTAINING A LICENSE, HAVE COMPLETED AT LEAST AN ADDITIONAL EIGHT CREDIT HOURS OF EDUCATION ON THE LAWS AND RULES APPLICABLE TO MORTGAGE BANKING.

D. PURSUANT TO ARTICLE 4 OF THIS CHAPTER, WITHIN TWENTY-FOUR MONTHS AFTER EACH LICENSE RENEWAL DATE A LICENSEE SHALL COMPLETE AT LEAST SIXTEEN CREDIT HOURS OF CONTINUING EDUCATION RELATING TO THE LAWS AND RULES OF REAL ESTATE FINANCE OR MORTGAGE LENDING.

D. E. A person shall make an application for a license or for a renewal of a license in writing on the forms, in the manner and accompanied by the information prescribed by the superintendent including the requirements prescribed in subsection C of this section. The superintendent may require additional information on the experience, background, honesty, truthfulness, integrity and competency of the applicant and any responsible individual designated by the applicant. If the applicant is a person other than a natural person, the superintendent may require such information as to the honesty, truthfulness, integrity and competency of any officer, director, shareholder, member, partner, trustee, employee or other interested party of the association, corporation or group.

E. F. The nonrefundable application fee and annual renewal fee shall be as prescribed in section 6-126. The nonrefundable application fee shall accompany each application for an original license only.

F. G. If a licensee is a person other than a natural person, the license issued to it entitles all officers, directors, members, partners, trustees and employees of the licensed corporation, partnership, association or trust to engage in the mortgage banking business if one officer, director, member, partner, employee or trustee of the person is designated in the license as the individual responsible for the person under this article. If a licensee is a natural person, the license entitles all employees of the licensee to engage in the mortgage banking business. If the natural person is not a resident of this state, an employee of the licensee shall be designated in the license as the individual responsible for such licensee under the provisions of this article. For the purposes of this article an employee does not include an independent contractor. For the purposes of this article, a responsible individual shall be a resident of this state, shall be in active management of the activities of the licensee governed by this article and shall have not less than three years' experience in the business of making mortgage banking loans or equivalent experience in a related business.

G. H. A licensee shall notify the superintendent that its responsible individual will cease to be in active management of the licensee within ten days of learning that fact. Not less than ninety days after the superintendent receives the notice, the licensee shall place itself under the active management of a qualified responsible person and notify the superintendent. If the licensee is not placed under active management of a qualified responsible individual and if notice is not received by the superintendent within the ninety day period, the license of the licensee expires.

H. I. Every person licensed as a mortgage banker shall deposit with the superintendent, before doing business as a mortgage banker, a bond executed by the licensee as principal and a surety company authorized to do business in this state as surety. The bond shall be conditioned on the faithful compliance of the licensee, including his directors, officers, members, partners, trustees and employees, with this article. Only one bond is required for a person, firm, association or corporation irrespective of the number of officers, directors, members, partners or trustees who are employed by or are members of the firm, association or corporation. The bond is payable to any person injured by the wrongful act, default, fraud or misrepresentation of the licensee and to this state for the benefit of any such person injured. Such coverage shall be maintained in the minimum amount prescribed in this subsection, computed on a base consisting of the total assets of the licensee plus the unpaid balance of loans which it has contracted to service for others as of the end of the licensee's fiscal year.

Base	Minimum Bond
Not over $1,000,000	$25,000 for the first $500,000 plus
	$5,000 for each $100,000 or fraction
	thereof over $500,000
$1,000,001 to $10,000,000	$50,000 plus $5,000 for each $1,800,000
	or fraction thereof over $1,000,000
$10,000,001 to $100,000,000	$75,000 plus $5,000 for each $18,000,000
	or fraction thereof over $10,000,000
$100,000,001 and over	$100,000

No suit may be commenced on the bond after the expiration of one year following the commission of the act on which the suit is based, except that claims for fraud or mistake are limited to the limitation period provided in section 12-543, paragraph 3. If any injured person commences an action for a judgment to collect on the bond, the injured person shall notify the superintendent of the action in writing at the time of the commencement of the action and shall provide copies of all documents relating to the action to the superintendent on request.

I. J. Notwithstanding subsection H I of this section, the bond required shall be twenty-five thousand dollars for licensees whose investors are limited solely to institutional investors.

J. For purposes of subsection I of this section SUBSECTION :

1. "Institutional investor" means a state or national bank, a state or federal savings and loan association, a state or federal savings bank, a state or federal credit union, a federal government agency or instrumentality, a quasi-federal government agency, a financial enterprise, a licensed real estate broker or salesman, a profit sharing or pension trust, or an insurance company.

2. "Investor" means any person who directly or indirectly provides funds to a mortgage banker which funds THAT are, or are intended to be, used in the making of a loan, and any person who purchases a loan, or any interest therein IN A LOAN , from a mortgage banker or in a transaction that has been directly or indirectly arranged or negotiated by a mortgage banker.

K. Notwithstanding section 35-155, in lieu of the bond described in this section, an applicant for a license or a licensee may deposit with the superintendent a deposit in the form of cash or alternatives to cash in the amount prescribed in subsection H or I OR J of this section, as applicable. The superintendent may accept any of the following as an alternative to cash:

1. Certificates of deposit or investment certificates which are payable or assigned to the state treasurer, issued by banks or savings banks doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.

2. Certificates of deposit, investment certificates or share accounts which are payable or assigned to the state treasurer, issued by a savings and loan association doing business in this state and fully insured by the federal deposit insurance corporation or any successor institution.

3. Certificates of deposit, investment certificates or share accounts which are payable or assigned to the state treasurer, issued by a credit union doing business in this state and fully insured by the national credit union administration or any successor institution.

L. The superintendent shall deposit the cash or alternatives to cash received under this section with the state treasurer. The state treasurer shall hold the cash or alternatives to cash in the name of this state to guarantee the faithful performance of all legal obligations of the person required to post bond pursuant to this section. The person is entitled to receive any accrued interest earned from the alternatives to cash. The state treasurer may impose a fee to reimburse the state treasurer for administrative expenses. The fee shall not exceed ten dollars for each cash or alternatives to cash deposit and shall be paid by the applicant or licensee. The state treasurer may prescribe rules relating to the terms and conditions of each type of security provided by this section.

M. In addition to such other terms and conditions as the superintendent prescribes by rule or order, the principal amount of the deposit shall be released only on written authorization of the superintendent or on the order of a court of competent jurisdiction. The principal amount of the deposit shall not be released before the expiration of three years from the first to occur of any of the following:

1. The date of substitution of a bond for a cash alternative.

2. The surrender of the license.

3. The revocation of the license.

4. The expiration of the license.

N. A licensee or an employee of the licensee shall not advertise for or solicit mortgage banking business in any manner without using the name and license number as issued on the mortgage banker's principal place of business license, except that a licensee may also employ or refer to the commonly used name and any trademarks or service marks of any affiliate. If a license is issued in the name of a natural person, nothing in the advertising or solicitation may imply that the license is in the name of another person or entity. For the purpose of this subsection "advertise" does not include business cards, radio and television advertising directed at national or regional markets and promotional items except if those items contain rates or terms on which a mortgage loan or mortgage banking loan may be obtained.

O. A licensee shall not employ any A person unless UNTIL the licensee:

1. Conducts a reasonable investigation of the background, honesty, truthfulness, integrity and competency of the employee before hiring PERSON .

2. Keeps A LICENSEE SHALL KEEP a record of the investigation for not less than two years after termination.

2. FOR A PERSON WHO IS BEING EMPLOYED IN THE CAPACITY OF LOAN ORIGINATOR, VERIFIES THAT WITHIN THE LAST TWENTY-FOUR MONTHS THE PERSON HAS COMPLETED AT LEAST A SIXTEEN HOUR COURSE OF STUDY RELATING TO MORTGAGE BROKER OR MORTGAGE BANKING LAWS AND RULES.

P. The licensee is liable for any damage caused by any EMPLOYEE of his employees THE LICENSEE while engaged in the business of making mortgage loans or mortgage banking loans.

Q. A licensee shall comply with the requirements of section 6-114 relating to balloon payments.

R. Notwithstanding subsection C, paragraph 4 of this section, licensees and applicants whose own resources are derived exclusively from correspondent contracts between mortgage bankers and banks, savings banks, trust companies, savings and loan associations, credit unions, profit sharing or pension trusts, consumer lenders or insurance companies shall provide the superintendent with a current financial statement or that of its parent company prepared in accordance with generally accepted accounting principles including:

1. A balance sheet prepared within the previous six months and certified by the licensee. The superintendent may require a more recent balance sheet.

2. A statement of operations and retained earnings and a statement of changes in financial position provided the applicant has commenced operations.

3. Notes to the financial statement if applicable.

S. In addition to the grounds specified in section 6-945, subsection A, failure of a licensee to operate the business of making mortgage loans or mortgage banking loans for a continuous period of twelve months or more shall constitute grounds for revocation of such license. The superintendent, upon good cause shown, may extend the time for operating such business for a single fixed period which shall not exceed twelve months.

Sec. 12. Section 6-946, Arizona Revised Statutes, is amended to read:

6-946 . Required accounting practices and records; refundable deposits; periodic impoundment payments; disclosure

A. Every mortgage banker shall keep and maintain at all times correct and complete records clearly reflecting the financial condition of the business as prescribed by the superintendent AND that will enable him to determine whether the licensee is conducting his business in accordance with this article. If the mortgage banker operates two or more licensed places of business in this state, after notifying the superintendent, he may maintain the records at his principal place of business in this state, except that a mortgage banker, with the approval of the superintendent, may maintain the records outside of this state. A mortgage banker shall, for records kept outside of this state, make the records available to the superintendent in this state not more than three business days after demand and SHALL provide for the acceptance of collect calls or provide a toll free telephone number to borrowers to obtain information from the records if the licensed places of business in this state cannot readily provide the information requested by the borrowers. Every mortgage banker shall maintain original documents, or clearly legible copies, of all mortgage banking loan transactions and mortgage loan transactions, unless the mortgage banking loan or mortgage loan is paid in full or the mortgage banking loan or mortgage loan and its servicing are sold, for not fewer than AT LEAST two years after the date of the mortgage banking loan closing or the date of the last disbursement of monies by the licensee, whichever occurs last. With the approval of the superintendent, a licensee that uses a computer or mechanical record keeping system is not required to keep a written copy of the records if the licensee is able to generate all information required by this section in a timely manner for examination or for other purposes.

B. Every mortgage banker shall observe generally accepted accounting principles and practices.

C. If a mortgage banker requires an advance or fee to be paid in connection with an application for a mortgage banking loan or mortgage loan, there shall be a written agreement. The parties shall sign the written agreement, and the agreement shall contain terms pertaining to the payment of the fee or disposition of the advance or fee, whether the loan is finally consummated or not, and the term for which the agreement is to remain in force before return of the advance or fee for nonperformance can be required. Advances or fees shall be immediately deposited in a trust account in a bank, savings bank or savings and loan association that is fully insured by the federal deposit insurance corporation or any successor agency and shall not be commingled with other monies. The trust account shall designate the licensee as trustee and shall provide for withdrawal of the monies without previous notice. Withdrawals shall only be disbursed according to the terms of the agreement. A licensee who receives advances or fees shall preserve and on request make available to the superintendent all deposits, withdrawal receipts and statements of account rendered by the bank or savings and loan association. The licensee shall further preserve all agreements between the parties involved in the transaction and all contracts, agreements and instructions to or with the depository and shall keep an accurate accounting of each separate bank account in which the trust funds have been deposited. If the loan is declined by or on behalf of the lender or cancelled by the applicant, all documents provided by or at the expense of the applicant, including any appraisal, are the property of the applicant. At the applicant's discretion, said THESE documents shall be returned or transferred to any financial institution or enterprise so designated without additional consideration except for fees for which the applicant has previously contracted, provided that any such document is not prohibited by law from being transferred or returned.

D. If periodic payments are to be collected from the mortgagor to provide for payments by the mortgagee of taxes, assessments, insurance premiums, ground rents or other current charges against the real estate security, the estimated payment amount stated to the mortgagor by the mortgage banker shall be such that the total of these payments collected for each category during the tax or other period will approximate the actual tax or other payment when due. All such periodic payments of taxes, assessments, insurance premiums, ground rents and other current charges shall be accounted for annually to the borrower and, to the extent monies have been collected for payment, shall be paid promptly by the mortgage banker.

E. Before a mortgage banking loan closing on residential real property designed principally for the occupancy of from one to four families, a licensee shall fully comply, to the extent they apply, with the real estate lending disclosure requirements of title I of the consumer credit protection act (15 United States Code sections 1601 through 1666j), the real estate settlement procedures act (12 United States Code sections 2601 through 2617) and the regulations promulgated under those acts.

Sec. 13. Title 6, chapter 9, article 2, Arizona Revised Statutes, is amended by adding section 6-949, to read:

6-949 . Mortgage loan file

A MORTGAGE LOAN FILE IS THE PROPERTY OF THE LICENSEE AND IS NOT THE PROPERTY OF A LOAN OFFICER, LOAN ORIGINATOR OR LOAN PROCESSOR.

Sec. 14. Title 6, chapter 9, Arizona Revised Statutes, is amended by adding article 4, to read:

article 4. continuing education

6-991 . Definitions

IN THIS ARTICLE, UNLESS THE CONTEXT OTHERWISE REQUIRES:

1. "APPLICANT" MEANS A PROVIDER ORGANIZATION THAT SUBMITS AN APPLICATION TO THE CONTRACTOR TO PROVIDE CONTINUING EDUCATION COURSES.

2. "APPROVED CONTINUING EDUCATION COURSE" MEANS ANY COURSE THAT HAS BEEN APPROVED BY AT LEAST FIVE OTHER STATES OR THAT IS APPROVED BY A CONTRACTOR OR AUTOMATICALLY APPROVED PURSUANT TO SECTION 6-993.

3. "APPROVED PROVIDER" MEANS AN ORGANIZATION OR INDIVIDUAL THAT OFFERS AN APPROVED CONTINUING EDUCATION COURSE AND THAT IS AUTHORIZED BY THE CONTRACTOR TO OFFER THE COURSE TO A LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER FOR CREDIT TOWARD THE LOAN ORIGINATOR'S, MORTGAGE BROKER'S OR MORTGAGE BANKER'S CONTINUING EDUCATION REQUIREMENTS.

4. "CONTINUING EDUCATION REVIEW COMMITTEE" MEANS THE COMMITTEE APPOINTED BY THE SUPERINTENDENT PURSUANT TO SECTION 6-994 TO ESTABLISH MINIMUM STANDARDS THAT APPLY TO APPROVED PROVIDERS AND APPROVED CONTINUING EDUCATION COURSES AND MINIMUM PERFORMANCE STANDARDS THAT APPLY TO CONTRACTORS.

5. "CONTRACTOR" MEANS THE PERSON WHO HAS A CONTRACT WITH THE SUPERINTENDENT TO APPROVE CONTINUING EDUCATION PROVIDERS AND COURSES AND TO ADMINISTER THE CONTINUING EDUCATION PROGRAM AND WHO IS PAID THROUGH FEES COLLECTED FROM APPROVED PROVIDERS WHEN THE APPROVED PROVIDERS APPLY FOR CONTINUING EDUCATION COURSE APPROVAL.

6. "CREDIT HOUR" MEANS THE VALUE ASSIGNED TO AN HOUR OF INSTRUCTION IN AN APPROVED CONTINUING EDUCATION COURSE.

7. "LOAN ORIGINATOR" HAS THE SAME MEANING PRESCRIBED IN SECTION 6-921.

8. "MORTGAGE BANKER" HAS THE SAME MEANING PRESCRIBED IN SECTION 6-941.

9. "MORTGAGE BROKER" HAS THE SAME MEANING PRESCRIBED IN SECTION 6-901.

10. "PROVIDER ORGANIZATION" MEANS A PERSON WHO PROVIDES CONTINUING EDUCATION COURSES BUT WHO HAS NOT YET BEEN ACCEPTED AS AN APPROVED PROVIDER PURSUANT TO SECTION 6-993.

6-992 . Continuing education requirements; record keeping

A. EACH LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER SHALL BIENNIALLY COMPLETE AT LEAST SIXTEEN CREDIT HOURS OF APPROVED CONTINUING EDUCATION COURSES OFFERED BY AN APPROVED PROVIDER.

B. AFTER THE LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER COMPLETES AN APPROVED CONTINUING EDUCATION COURSE, THE APPROVED PROVIDER SHALL FURNISH THE LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER WITH A CERTIFICATE OF COMPLIANCE IN A FORM APPROVED BY THE SUPERINTENDENT THAT CERTIFIES THAT THE LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER HAS TAKEN AND SUCCESSFULLY COMPLETED THE COURSE. THE LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER AND A PERSON WHO IS AUTHORIZED TO SIGN ON BEHALF OF THE APPROVED PROVIDER SHALL SIGN THE CERTIFICATE.

C. PURSUANT TO SUBSECTION B OF THIS SECTION, THE FORM APPROVED BY THE SUPERINTENDENT SHALL REQUIRE AT LEAST THE FOLLOWING INFORMATION:

1. THE LOAN ORIGINATOR'S, MORTGAGE BROKER'S OR MORTGAGE BANKER'S NAME, ADDRESS AND SOCIAL SECURITY NUMBER.

2. THE NAME OF THE APPROVED PROVIDER.

3. THE SUBJECTS AND TITLES OF THE APPROVED CONTINUING EDUCATION COURSES THAT THE LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER COMPLETED.

4. THE DATES THAT THE LOAN ORIGINATOR, MORTGAGE BROKER OR MORTGAGE BANKER COMPLETED THE APPROVED CONTINUING EDUCATION COURSES.

D. A MORTGAGE BROKER OR MORTGAGE BANKER SHALL MAINTAIN ITS OWN CONTINUING EDUCATION RECORDS DESCRIBED IN SUBSECTION C OF THIS SECTION AND SHALL KEEP THE RECORDS UNTIL THE SECOND DATE AFTER THE PERIOD FOR WHICH THE CONTINUING EDUCATION CREDITS WERE EARNED. EACH LOAN ORIGINATOR SHALL PLACE IN THE CUSTODY OF THE LOAN ORIGINATOR'S EMPLOYING MORTGAGE BROKER OR MORTGAGE BANKER THE LOAN ORIGINATOR'S CONTINUING EDUCATION RECORDS DESCRIBED IN SUBSECTION C OF THIS SECTION. THE EMPLOYING MORTGAGE BROKER OR MORTGAGE BANKER SHALL SIGN AND ACKNOWLEDGE THE RECORDS ON THE DATE OF EMPLOYMENT AND ON THE DATE OF TERMINATION AND SHALL MAINTAIN THE ORIGINAL RECORDS OR CERTIFIED COPIES OF THE ORIGINAL RECORDS UNTIL THE LOAN ORIGINATOR LEAVES EMPLOYMENT WITH THAT MORTGAGE BROKER OR MORTGAGE BANKER. WHEN THE LOAN ORIGINATOR LEAVES, THE MORTGAGE BROKER OR MORTGAGE BANKER SHALL TRANSFER THE LOAN ORIGINATOR'S RECORDS TO THE LOAN ORIGINATOR'S NEW EMPLOYING MORTGAGE BROKER OR MORTGAGE BANKER.

E. IN ORDER TO VERIFY THE ATTENDANCE AND SUCCESSFUL COURSE COMPLETION OF ALL LOAN ORIGINATORS, MORTGAGE BROKERS OR MORTGAGE BANKERS ENROLLED IN AN APPROVED COURSE, APPROVED PROVIDERS SHALL MAINTAIN RECORDS FOR AT LEAST FIVE YEARS IN A MANNER ACCEPTABLE TO THE SUPERINTENDENT. THE RECORDS ARE SUBJECT TO AUDIT BY THE SUPERINTENDENT. EACH APPROVED PROVIDER SHALL MAINTAIN RECORDS THAT INCLUDE AT LEAST THE FOLLOWING INFORMATION FOR EACH APPROVED CONTINUING EDUCATION COURSE PROVIDED BY THE APPROVED PROVIDER:

1. THE TITLE AND SUBJECT.

2. A LIST OF ATTENDEES.

3. THE NAME OF THE INSTRUCTOR.

4. A COPY OF THE CONTINUING EDUCATION COURSE OUTLINE.

5. OTHER INFORMATION DEEMED NECESSARY BY THE SUPERINTENDENT.

F. BASED ON AN AUDIT PRESCRIBED IN SUBSECTION E OF THIS SECTION, IF THE SUPERINTENDENT DISCOVERS THAT AN APPROVED PROVIDER HAS FAILED TO MAINTAIN RECORDS IN THE MANNER PRESCRIBED IN SUBSECTION E OF THIS SECTION, THE SUPERINTENDENT SHALL IMMEDIATELY NOTIFY THE CONTRACTOR DESCRIBED IN SECTION 6-993 OF THE APPROVED PROVIDER'S NONCOMPLIANCE AND THE CONTRACTOR SHALL REMOVE THE APPROVED PROVIDER FROM THE CONTRACTOR'S LIST OF APPROVED PROVIDERS. THE CONTRACTOR SHALL NOT ACCEPT THAT PROVIDER ORGANIZATION AS AN APPROVED PROVIDER FOR AT LEAST ONE YEAR. THE APPROVED PROVIDER'S NONCOMPLIANCE DOES NOT AFFECT A MORTGAGE BROKER'S OR MORTGAGE BANKER'S ABILITY TO OBTAIN A RENEWAL OF A LICENSE IF THE MORTGAGE BROKER OR MORTGAGE BANKER COMPLIES WITH THIS SECTION.

6-993 . Contractor requirements; automatic approval

A. PURSUANT TO TITLE 41, CHAPTER 23, THE SUPERINTENDENT SHALL ENTER INTO A CONTRACT WITH A PERSON FOR THE APPROVAL OF APPROVED PROVIDERS AND COURSES AND ADMINISTRATION OF THE CONTINUING EDUCATION PROGRAM. THE SUPERINTENDENT SHALL INCLUDE IN ANY REQUEST FOR PROPOSALS THE MINIMUM PERFORMANCE STANDARDS ESTABLISHED BY THE CONTINUING EDUCATION REVIEW COMMITTEE.

B. THE CONTRACTOR SHALL:

1. AFTER A COMPLETE REVIEW AND INVESTIGATION BASED ON THE MINIMUM STANDARDS ESTABLISHED BY THE CONTINUING EDUCATION REVIEW COMMITTEE:

( a ) ACCEPT OR REJECT PROVIDER ORGANIZATIONS AS APPROVED PROVIDERS.

( b ) EXCEPT AS PROVIDED IN SUBSECTION C OF THIS SECTION, REVIEW COURSE CONTENT FOR APPROVAL OR DISAPPROVAL AS AN APPROVED CONTINUING EDUCATION COURSE.

2. CHARGE AN APPLICANT AN APPLICATION FEE FOR ACCEPTANCE AS AN APPROVED PROVIDER AND A FEE FOR APPROVAL OF A CONTINUING EDUCATION COURSE.

3. BIENNIALLY REVIEW THE REQUIRED NUMBER OF CREDIT HOURS PRESCRIBED IN SECTION 6-992 AND IF NECESSARY RECOMMEND ANY MODIFICATIONS TO THE SUPERINTENDENT. AT ANY TIME THE SUPERINTENDENT MAY CONDUCT AN INDEPENDENT REVIEW OF THE CONTINUING EDUCATION REQUIREMENTS PRESCRIBED IN SECTION 6-992, AND THE REVIEW MAY INCLUDE CONSULTING WITH THE CONTRACTOR, THE CONTINUING EDUCATION REVIEW COMMITTEE AND ANY OTHER PERSON DEEMED APPROPRIATE BY THE SUPERINTENDENT.

C. A CONTINUING EDUCATION COURSE IS AUTOMATICALLY APPROVED IF WITHIN THIRTY DAYS AFTER THE CONTRACTOR RECEIVES AN APPLICATION THE CONTRACTOR DOES NOT DISAPPROVE THE COURSE DESCRIBED IN THE APPLICATION OR DOES NOT REQUEST SUPPLEMENTAL INFORMATION FROM THE APPLICANT.

D. THE CONTRACTOR'S DECISION PURSUANT TO SUBSECTION B, PARAGRAPH 1, SUBDIVISION ( b ) OF THIS SECTION IS AN APPEALABLE AGENCY ACTION AS DEFINED IN SECTION 41-1092, AND THE APPROVED PROVIDER IS ENTITLED TO AN ADMINISTRATIVE HEARING.

E. EXCEPT AS PROVIDED IN SECTION 6-992, THE ACCEPTANCE OF AN APPROVED PROVIDER IS VALID FOR FIVE YEARS. AT THE END OF THE FIVE YEARS, THE APPROVED PROVIDER MAY SUBMIT AN APPLICATION FOR RENEWAL TO THE CONTRACTOR AND THE CONTRACTOR SHALL CHARGE THE APPROVED PROVIDER THE FEE PRESCRIBED IN SUBSECTION B OF THIS SECTION. THE APPROVAL OF A CONTINUING EDUCATION COURSE IS VALID FOR TWO YEARS OR UNTIL THE COURSE CONTENT OR OUTLINE CHANGES. AT THE END OF THE TWO YEARS OR WHEN THE COURSE CONTENT OR OUTLINE CHANGES, THE APPROVED PROVIDER MAY SUBMIT AN APPLICATION FOR RENEWAL TO THE CONTRACTOR AND THE CONTRACTOR SHALL CHARGE THE APPROVED PROVIDER THE FEE PRESCRIBED IN SUBSECTION B OF THIS SECTION.

6-994 . Continuing education review committee

A. THE CONTINUING EDUCATION REVIEW COMMITTEE IS ESTABLISHED IN THE DEPARTMENT CONSISTING OF AT LEAST FIVE MEMBERS AND NOT MORE THAN SEVEN MEMBERS WHO ARE APPOINTED BY THE SUPERINTENDENT. THE SUPERINTENDENT SHALL APPOINT TO THE COMMITTEE REPRESENTATIVES OF THE MORTGAGE BROKERAGE INDUSTRY, MORTGAGE BANKING INDUSTRY CONSUMERS AND ANY OTHER PERSON DEEMED NECESSARY BY THE SUPERINTENDENT. THE SUPERINTENDENT OR THE SUPERINTENDENT'S DESIGNEE SERVES AS THE CHAIRMAN OF THE COMMITTEE. THE MEMBERS SERVE AT THE PLEASURE OF THE SUPERINTENDENT.

B. MEMBERS OF THE COMMITTEE SHALL HAVE KNOWLEDGE OF THE MORTGAGE BROKERAGE INDUSTRY AND MORTGAGE BANKING INDUSTRY AND SHALL BE RESIDENTS OF THIS STATE.

C. THE COMMITTEE SHALL CONDUCT MEETINGS AT LEAST QUARTERLY DURING ITS FIRST YEAR OF OPERATION AND AT LEAST SEMIANNUALLY THEREAFTER. THE COMMITTEE SHALL HOLD ITS MEETINGS IN PHOENIX, EXCEPT THAT THE COMMITTEE SHALL HOLD AT LEAST ONE MEETING EACH YEAR OUTSIDE OF MARICOPA COUNTY. THE COMMITTEE SHALL CONDUCT MEETINGS AS NECESSARY ON THE CALL OF THE SUPERINTENDENT OR THE CHAIRMAN OR ON THE REQUEST OF ANY TWO MEMBERS OF THE COMMITTEE.

D. THE COMMITTEE SHALL:

1. ESTABLISH MINIMUM STANDARDS THAT APPLY TO APPROVED CONTINUING EDUCATION COURSES AND APPROVED PROVIDERS AND THAT THE CONTRACTOR SHALL USE TO EVALUATE CONTINUING EDUCATION COURSE AND PROVIDER ORGANIZATIONS PURSUANT TO SECTION 6-993.

2. ESTABLISH MINIMUM PERFORMANCE STANDARDS THAT APPLY TO THE CONTRACTOR AND THAT THE SUPERINTENDENT SHALL INCLUDE IN ANY REQUEST FOR PROPOSALS FOR THE ADMINISTRATION OF THE CONTINUING EDUCATION PROGRAM PRESCRIBED BY THIS ARTICLE.

3. ENGAGE IN ANY NECESSARY TASK THAT IS PRESCRIBED BY THE SUPERINTENDENT AND THAT IS RELATED TO THE CONTINUING EDUCATION PROGRAM PRESCRIBED BY THIS ARTICLE.

E. A COMMITTEE MEMBER IS NOT CIVILLY LIABLE FOR ACTS, OMISSIONS OR DECISIONS MADE IN GOOD FAITH IN CONJUNCTION WITH THE MEMBER'S SERVICE ON THE COMMITTEE.

F. COMMITTEE MEMBERS ARE NOT ELIGIBLE TO RECEIVE COMPENSATION BUT ARE ELIGIBLE FOR REIMBURSEMENT OF EXPENSES PURSUANT TO TITLE 38, CHAPTER 4, ARTICLE 2.

G. THE COMMITTEE ESTABLISHED BY THE SUPERINTENDENT PURSUANT TO SECTION 6-908 MAY ALSO SERVE AS THE COMMITTEE ESTABLISHED BY THIS SECTION.

6-995 . Expiration

THE PROGRAM ESTABLISHED BY THIS ARTICLE ENDS ON JULY 1, 2009 PURSUANT TO SECTION 41-3102.

Sec. 15. Loan originators; grandfathered rights; definition

A. Notwithstanding section 6-923, subsection A, paragraph 1, Arizona Revised Statutes, as added by this act, a person may act as a loan originator if the person has at least three consecutive years of experience and if the person does both of the following:

1. Presents documentation satisfactory to the superintendent that on the date of the application the person has been actively and continuously employed by a federally or state chartered bank, savings and loan association, credit union, finance company, mortgage broker or mortgage banker for at least the last three consecutive years.

2. Complies with the remaining requirements prescribed in section 6-923, Arizona Revised Statutes, as added by this act.

B. Notwithstanding section 6-923, subsection A, paragraph 1, Arizona Revised Statutes, as added by this act, a person with less than three consecutive years of experience may act as a loan originator if the person does both of the following:

1. Certifies on a form prescribed by the superintendent that the person will attend at least forty-five credit hours of education and testing prescribed in section 6-923, subsection C, Arizona Revised Statutes, as added by this act, within two years after the effective date of this act.

2. Complies with the remaining requirements prescribed in section 6-923, Arizona Revised Statutes, as added by this act.

C. For the purposes of this section, "loan originator" means any person, whether compensated or not, whose primary responsibilities are arranging or soliciting with the intent of originating, negotiating or taking a mortgage loan application directly from a consumer for one or more residential mortgage loans or deeds of trust.

Sec. 16. Delayed repeal

Section 15 of this act, relating to grandfathered rights, is repealed from and after December 31, 2002.