Section 230-RICR-40-10-2.5 - Lenders, Loan Brokers, Third Party Loan Servicers and Small Loan Lender RequirementsA. Application. All licensees shall make application for a license and all changes in Nationwide Multistate Licensing System (NMLS). Any changes to the information provided must be reported to the Department, within thirty (30) days through an NMLS filing.B. Capital. As provided in R.I. Gen. Laws § 19-14-5, each licensee which applied for and is granted a license after June 30, 1995 must maintain minimum net worth, as set forth in R.I. Gen. Laws § 19-14-5. 1. Net worth shall be defined as the amount by which total assets exceed total liabilities, calculated in accordance with Generally Accepted Accounting Principles. a. All licensees must prepare and maintain a financial statement, prepared at a minimum on a quarterly basis, which evidences compliance to applicable statutory net worth requirements.b. All licensees must upload their prepared quarterly and annual financial statements under the Financial Statement Summary Section within the Nationwide Multistate Licensing System ("NMLS"). The financial statements must represent only the licensee's financial position. Consolidated financial statements are not acceptable unless a separate stand-alone breakdown of the licensee's financial statements is included in the uploaded statements.C. Bonds. In accordance with R.I. Gen. Laws § 19-14-6, each Lender, Loan Broker, Third Party Loan Servicer and Small Loan Lender must file bonds in the following amounts with its application and keep the bonds current throughout the period of licensure. The bond amounts for the initial license are: 1. Lenders - Fifty thousand dollars ($50,000.00)2. Loan Brokers - Twenty thousand dollars ($20,000.00)3. Small Loan Lenders - Ten thousand dollars ($10,000.00)4. Third Party Loan Servicers - Fifty thousand dollars ($50,000.00)D. Qualified Individual or Branch Manager 1. Any Lender or Loan Broker that lends or brokers any mortgage loan must appoint a person that holds a valid Rhode Island Mortgage Loan Originator ("MLO") license as the Qualified Individual or Branch Manager designated to operate the licensed business. a. Lenders and Loan Brokers whose main office listed in NMLS is that of a headquarters where no licensable activity is conducted and whose address will not be held out to the public in any way, including on loan documents and advertising is not required to designate a Rhode Island licensed MLO as the Qualified Individual but must meet the requirements as stated in §§ 2.5(D)(3)(a) and (b) of this Part.2. Any Small Loan Lender, and any Lender or Loan Broker whose filed business plan represents that it does not and will not engage in any mortgage lending, or brokering may appoint Qualified Individual(s) and/or Branch Manager(s) that do not hold a Rhode Island MLO license, but must meet the requirements as stated in §§ 2.5(D)(3)(a) and (b) of this Part.3. Third Party Loan Servicers may appoint a Qualified Individual and/or Branch Manager that meets the following requirements:a. Those Qualified Individual(s) and/or Branch Manager(s) must have at least five (5) years' experience in the type of business for which a license is being sought including, without limitation, employment, supervision, or independent work experience. Factors to be considered when assessing the quality of an individual's experience shall include the number complexity and types of transactions handled in relation to the type of license sought by the application.b. The Department will consider experience for a lesser period than five (5) years depending on individual circumstances. Factors which the Department shall consider for such a lesser experience period include but are not limited to the individual's educational experience, the complexity of transactions in relation to the type of license sought by the application and the supervision and oversight over the manager or person designated to operate the licensed business by a person having at least five (5) years of qualified experience.4. Managerial Oversight a. The Qualified Individual or Branch Manager is required to oversee the operations of the licensee and require compliance with this Part and the statutes of this State by all Mortgage Loan Originators sponsored by the location.b. The Qualified Individual or Branch Manager should be physically present at the licensed location the majority of operating hours and to personally oversee the operations of the licensee at that location.c. If the proposed Qualified Individual or Branch Manager does not reside within a reasonable commuting distance of the licensee operation and is therefore unable to be physically present at the licensed location for the majority of operating hours, the application should provide a complete explanation of how the managerial oversight criteria will be satisfied at the time of application.E. Net Branching. Net Branching is prohibited in Rhode Island.1. A net branch arrangement is an arrangement in which a Rhode Island licensed person or entity enters into an agreement whereby its designated Branch Manager has the appearance of ownership of the licensee by, among other things, sharing in the profits and/or losses, establishing, leasing or renting the branch premises, entering into other contractual relationships with vendors such as telephones, utilities, and advertising, having control of a corporate checkbook, and/or exercising control of personnel through the power to hire or fire such individuals.2. An entity may be considered to be utilizing a net branch if the net branch agreement requires the Branch Manager to indemnify the licensee for damages from any apparent, express, or implied agency representation by or through the branch's actions or if the agreement requires the Branch Manager to issue a personal check to cover operating expenses whether or not funds are available from an operating account of the licensee.3. A Branch Manager's compensation that is based upon the net profit of the branch is an acceptable branch compensation arrangement if the employer collects the revenue from the branch, pays the branch expenses including the compensation of all employees of the employer main and branch offices, and then pays the Branch Manager the remaining revenues, if any, as a commission. The distinction between an acceptable and unacceptable branch compensation plan is whether the licensee pays the expenses of the branch. If the licensee pays the expenses, the arrangement is acceptable. If, however, the expenses are paid by the Branch Manager from a personal or nonentity account (or by some third party), the arrangement is prohibited.F. Financial Responsibility. A licensee must demonstrate the financial responsibility of its Officers, Directors, Owners and designated Qualified Individuals and/or Branch Managers pursuant to R.I. Gen. Laws § 19-14-7 under the criteria set forth in section § 2.7 of this Part.G. Criminal Background Checks. All Officers, Directors, owners of ten percent (10%) or more, Qualified Individuals and Branch Managers that do not hold a current valid Rhode Island MLO license must provide a criminal background authorization as provided for in NMLS. The background will be evaluated as indicated in § 2.8 of this Part.H. Insurance Claim Agent 1. R.I. Gen. Laws §§ 5-38-26 and 27-5-3.3 require that each Lender and/or Third Party Loan Servicer designate an agent within Rhode Island whom the Lender and/or Third Party Loan Servicer has agreed may endorse insurance checks on the Lender and/or Third Party Loan Servicers behalf. Each Lender and/or Third Party Loan Servicer must provide a copy of such agreement including all contact information for the individual within Rhode Island at the time of application and must keep that information current during licensure.2. A Lender and/or a Third Party Loan Servicer that has not and will not be included as a loss payee on any insurance policy may be exempted from the provisions of R.I. Gen. Laws §§ 5-38-26 and 27-5-3.3. An applicant that wishes to obtain an exemption must clearly state in its business plan that it is not a loss payee on any insurance policy and must upload into NMLS a statement that it will not be designated as a loss payee on any insurance policy. A Lender and/or Third Party Loan Servicers that obtains an exemption should expect that compliance will be evaluated on examination.I. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the voting stock or equity interests of a licensee requires notification to the Department fifteen (15) days after such a change in ownership. Notification shall be made in NMLS. With the notice of a change in ownership, the licensee shall submit information requested relating to the new owner(s) and new Directors, Officers and Managers, including names, addresses and personal background information. If the new owner(s) and new Directors, Officers and Managers have the financial responsibility, experience, character and general fitness as required of an applicant, the Department shall approve such change in control. The Department shall approve or deny such a change in control within thirty (30) days of receipt of all information the Department requires to be filed to make such a determination.J. Advertising. Each licensee shall include in all advertisements disseminated primarily in Rhode Island using words substantially similar to "Rhode Island Licensed Lender," "Rhode Island Licensed Loan Broker," "Rhode Island Licensed Small Loan Lender" and/or "Rhode Island Licensed Third Party Loan Servicer," whichever is applicable.230 R.I. Code R. 230-RICR-40-10-2.5
Adopted effective 1/1/2019
Amended effective 6/27/2022