Chapter 2. Licensing: Residential Mortgage Lender of California Financial Code >> Division 20. >> Chapter 2.
(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) 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) 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) 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
(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
(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
(g) The commissioner may, by rule, require licensees to pay
assessments through the Nationwide Mortgage Licensing System and
The commissioner shall issue a residential mortgage lender
license upon the satisfaction of all of the following:
(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) 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
(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
(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) 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) 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) 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) Information as to the character, fitness, financial and
business responsibility, background, experience, and criminal
convictions of any of the following:
(A) Any person that owns or controls, directly or indirectly, 10
percent or more of any class of stock of the applicant.
(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
(C) Any person or entity that significantly influences or controls
the management of the applicant.
(4) A description of any disciplinary action filed under any other
license through which the person conducts its business.
(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
(6) A copy of the fidelity bond currently in effect.
(7) Other information as required by rule of the commissioner.
(a) A residential mortgage lender license shall remain in
effect until suspended, surrendered, or revoked.
(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) 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.
(a) A residential mortgage lender or servicer shall do all
of the following:
(1) Maintain staff adequate to meet the requirements of this
division, as prescribed by rule or order of the commissioner.
(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) File with the commissioner any report required under law or by
rule or order of the commissioner.
(4) Disburse funds in accordance with its agreements and to make a
good faith and reasonable effort to effect closing in a timely
(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) 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) Comply with the provisions of this division, and with any
order or rule of the commissioner.
(8) Submit to periodic examination by the commissioner as required
by this division.
(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) 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) Comply with all applicable state and federal tax return
(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) 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) Refrain from engaging in conduct that would be cause for
denial of a license.
(15) Remain solvent.
(16) Proceed with due care and competence in performing any act
for which it is required to hold a license under this division.
(17) Comply with any other requirement established by rule of the
(b) The commissioner may require an applicant to submit a
statement agreeing to comply with the requirements of this section.
The commissioner may refuse to issue a residential mortgage
lender or servicer license if any of the following apply:
(a) The applicant is not in material compliance with a provision
of this division or an order or rule of the commissioner.
(b) The commissioner cannot make the findings specified in
subdivision (c) of Section 50121.
(c) A material requirement for issuance of a license has not been
(a) Upon reasonable notice and opportunity to be heard, the
commissioner may deny an application for any of the following
(1) A false statement of a material fact has been made in the
(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) 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) The applicant employs a mortgage loan originator who is not
licensed in this state, unless the mortgage loan originator is exempt
(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) 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.
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.
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.
(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) 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) 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) 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.