S.C. Code § 40-58-20

Current through 2024 Act No. 225.

Section 40-58-20 - Definitions

As used in this chapter:

(1) "Act as a mortgage broker" means to act, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, by:

(i) soliciting, processing, placing, or negotiating a mortgage loan for a borrower from a mortgage lender or depository institution or offering to process, place, or negotiate a mortgage loan for a borrower from a mortgage lender or depository institution,

(ii) engaging in tablefunding of a mortgage loan, or

(iii) acting as a loan correspondent whether those acts are done by telephone, by electronic means, by mail, or in person with the borrowers or potential borrowers. "Act as a mortgage broker" also includes bringing a borrower and lender together to obtain a mortgage loan or rendering a settlement service as described in 12 U.S.C. 2602(3) and 24 C.F.R. Part 3500.2(b).

(2) "Act as a mortgage lender" means to engage in the business of making or servicing mortgage loan for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, including soliciting, processing, placing, or negotiating a mortgage loan.

(3) "Administrator" means the Administrator of the Department of Consumer Affairs (department) or the administrator's designees.

(4) "Advertising" means a commercial message in a medium that promotes, either directly or indirectly, a mortgage loan transaction.

(5) "Affiliate" means a company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et seq.). For purposes of this item, the term "control" means ownership of all of the voting stock or comparable voting interest of the controlled person.

(6) "Borrower" means a natural person in whose dwelling a security interest is or is intended to be retained or acquired if that person's ownership interest in the dwelling is or is to be subject to the security interest.

(7) "Branch manager" means the natural person who is in charge of and who is responsible for the business operations of a branch office of a licensee.

(8) "Branch office" means an office of the licensee that is separate and distinct from the licensee's principal office.

(9) "Clerical or support duties" mean administrative functions after the receipt of an application by a licensed mortgage originator or broker, such as gathering information, requesting information, word processing, sending correspondence, or assembling files, and may include:

(a) The receipt, collection, and distribution common for the processing or underwriting of a residential mortgage loan; or

(b) Any communication with a borrower to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include taking a residential mortgage loan application, offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.

(10) "Control", except as provided in item (5), means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. A person is presumed to have "control" of a company if that person:

(i) is a director, general partner or executive officer,

(ii) directly or indirectly has the right to vote ten percent or more of a class of a voting security or has the power to sell or direct the sale of ten percent or more of a class of voting securities,

(iii) in the case of an LLC, is the managing member, or

(iv) in the case of a partnership, has the right to receive upon dissolution, or has contributed, ten percent or more of the capital.

(11) "Depository institution" has the same meaning as in Section 3 of the Federal Deposit Insurance Act (12 U.S.C. Section 1811 et. seq.), and includes a credit union.

(12) "Dwelling" means the same as the term in Section 226.2(a)19 of Title 12 of the Code of Federal Regulations and the Federal Reserve Board's Official Staff Commentary to that section.

(13) "Employee" means a natural person who has an employment relationship, acknowledged by both the natural person and the mortgage broker, and is treated like an employee for purposes of compliance with the federal income tax laws.

(14) "Escrow account" means an account that a mortgage lender establishes or controls on behalf of a borrower to pay taxes, insurance premiums including flood insurance, or other charges with respect to a mortgage loan, including charges that the borrower and mortgage lender have voluntarily agreed that the mortgage lender collects and pays. The definition encompasses an account established for this purpose. For purposes of this item, the term "escrow account" excludes an account that is under the borrower's total control.

(15) "Escrow funds" means money entrusted to a mortgage lender by a borrower for the purpose of payment of taxes and insurance or other payments to be made in connection with the servicing of a mortgage loan.

(16) "Exempt person" means:

(a) an employee of a licensee whose responsibilities are limited to clerical or support duties for the employer and who does not solicit borrowers, accept applications, or negotiate the terms of loans on behalf of the employer;

(b) a depository institution or a subsidiary that is wholly owned and controlled by the depository institution and regulated by a federal banking agency or an institution regulated by the Farm Credit Administration. This chapter does not apply to the exempt persons described in this subitem;

(c) an officer, registered loan originator, or employee of an exempt person described in subitem (b) of this section when acting in the scope of employment for the exempt person;

(d) a person who offers or negotiates terms of a mortgage loan with or on behalf of an immediate family member of the individual;

(e) an individual who offers or negotiates terms of a mortgage loan secured by a dwelling that served as the person's residence;

(f) an employee whose employment as a processor or underwriter is undertaken pursuant to the direction and supervision of a licensee or exempt person except when the processor or underwriter is working as an independent contractor;

(g) an attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a mortgage lender, a mortgage broker, or other mortgage loan originator or by an agent of the mortgage lender, mortgage broker, or other mortgage loan originator;

(h) an attorney who works for a mortgage lender, pursuant to a contract, for loss mitigation efforts or third party independent contractor who is HUD-certified, Neighborworks-certified, or similarly certified, who works for a mortgage lender, pursuant to a contract, for loss mitigation efforts;

(i) a retailer of manufactured or modular homes or an employee of the retailer if the retailer or employee:

(i) does not receive compensation or other gain for engaging in activities described in item (1), (2), or (24) in excess of any compensation or gain received in a comparable cash transaction;

(ii) discloses in writing to the consumer any corporate affiliation with any creditor and, if a corporate affiliation exists, the identity of at least one unaffiliated creditor; and

(iii) does not directly negotiate with the consumer or lender on loan terms including, but not limited to, rates, fees, and other costs; or

(j) any other person deemed exempt pursuant to the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), Section 1508, Title V of the Housing and Economic Recovery Act of 2008, Public Law 110-289, and any regulations promulgated thereunder.

(17) "Federal banking agencies" means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.

(18) "Financial services or financial services related business" means pertaining to securities, commodities, banking, insurance, consumer lending, or real estate including, but not limited to, acting as or being associated with a bank or savings association, credit union, mortgage lender, mortgage servicer, mortgage broker, real estate broker, real estate salesperson or agent, closing agent, title company, or escrow agent.

(19) "Immediate family member" means a spouse, child, sibling, parent, grandparent, or grandchild including stepparents, stepchildren, stepsiblings, and adoptive relationships.

(20) "Individual servicing a mortgage loan" means an employee of a mortgage lender licensed in this State, that:

(a) collects or receives payments including payments of principal, interest, escrow amounts, and other amounts due on existing obligations due and owing to the licensed mortgage lender for a mortgage loan including, but not limited to, when:

(i) the borrower is in default; or

(ii) the borrower is in reasonably foreseeable likelihood of default;

(b) works with the borrower and the licensed mortgage lender, collects data, and makes decisions necessary to modify, either temporarily or permanently, certain terms of those obligations; or

(c) otherwise finalizes collection through the foreclosure process.

(21) "Licensee" means a person who is licensed pursuant to this chapter.

(22) "Loan commitment" or "commitment" means a statement, written or electronic, by the mortgage lender setting forth the terms and conditions upon which the mortgage lender is willing to make a particular mortgage loan to a particular borrower.

(23) "Loan correspondent" means a person engaged in the business of making mortgage loans as a third party originator and who does not engage in all three of the following activities with respect to each mortgage loan:

(a) underwrite the mortgage loan written by their employees;

(b) approve the mortgage loan; and

(c) fund the mortgage loan utilizing an unrestricted warehouse or credit line.

A loan correspondent is not a mortgage lender.

(24) "Loan originator" means a natural person who, in exchange for compensation or gain or in the expectation of compensation or gain as an employee of a licensed mortgage lender, solicits, negotiates, accepts, or offers to accept applications for mortgage loans, including electronic applications, or includes direct contact with, or informing mortgage loan applicants of, the rates, terms, disclosures, and other aspects of the mortgage loan. The definition of "loan originator" does not include an exempt person described in item (16) or a person solely involved in extensions of credit relating to timeshare plans, as that term is defined in Section 101(53D) of Title 11, United States Code. The definition of loan originator does not apply to an individual servicing a mortgage loan as that term is defined in this chapter until July 31, 2011, unless the United States Department of Housing and Urban Development or a court of competent jurisdiction determines before that time that those individuals servicing mortgage loans are "loan originators" as that term is defined in the SAFE Act pursuant to Section 1508 of Title V of the Housing and Economic Recovery Act of 2008, Public Law 110-289. Solely acquiring and reviewing a credit report does not constitute acting as a loan originator.

(25) "Make a mortgage loan" means to close a mortgage loan, advance funds, offer to advance funds, or make a commitment to advance funds to a borrower under a mortgage loan.

(26) "Managing principal" means a natural person who meets the requirements of Section 37-22-140(C) and who agrees to be primarily responsible for the operations of a licensed mortgage lender.

(27) "Mortgage broker" means a person who acts as a mortgage broker, as that term is defined in item (1).

(28) "Mortgage lender" means a person who acts as a mortgage lender as that term is defined in item (2) or engages in the business of servicing mortgage loans for others or collecting or otherwise receiving mortgage loan payments directly from borrowers for distribution to another person. This definition does not include engaging in a tablefunded transaction.

(29) "Mortgage loan" means a loan made to a natural person primarily for personal, family, or household use, primarily secured by a mortgage, deed of trust, or other security interest on residential real property or security interest arising under an installment sales contract or equivalent security interest against the borrower's dwelling and:

(i) located in South Carolina,

(ii) negotiated, offered, or otherwise transacted within this State, in whole or in part, or

(iii) made or extended within this State.

(30) "Nationwide Mortgage Licensing System and Registry" means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators of licensees licensed pursuant to this chapter.

(31) "Nontraditional mortgage product" means a mortgage product other than a thirty-year fixed rate mortgage loan.

(32) "Person" means a natural person, partnership, limited liability company, limited partnership, corporation, association, or other group engaged in joint business activities, however organized.

(33) "Processor or underwriter" means an employee of a mortgage broker, mortgage lender, or exempt person who performs clerical or support duties at the direction of and subject to the supervision and instruction of a licensee or exempt person and may include direct contact with applicants but does not include soliciting, negotiating, accepting, or offering to accept applications that include personal identifying information as defined in Section 16-13-510(D) for mortgage loans including electronic applications or informing applicants of the rates, terms, disclosures, and other aspects of the mortgage loan.

(a) For purposes of this item only, clerical or support duties may include after the receipt of an application:

(i) the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a mortgage loan, and

(ii) communication with a consumer to obtain the information necessary for the processing or underwriting of a mortgage loan, to the extent that the communication does not include offering or negotiating loan rates or terms or counseling consumers about mortgage loans.

(b) A person engaging solely in loan processor or underwriter activities may not represent to the public, through advertising or other means of communicating or providing information including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items that the person may or will perform any of the activities of a loan originator.

(c) A processor or underwriter who is an independent contractor may not engage in the activities of a processor or underwriter unless the independent contractor processor or underwriter obtains and maintains a license as provided by rule or regulation pursuant to Section 37-22-270.

(34) "Registered loan originator" means a natural person who meets the definition of loan originator and is an employee of a depository institution or a subsidiary that is wholly owned and controlled by the depository institution and regulated by a federal banking agency or an institution regulated by the Farm Credit Administration and is registered with and maintains a unique identifier through the Nationwide Mortgage Licensing System and Registry.

(35) "Residential real property" means real property located in the State of South Carolina upon which there is located or is to be located one or more single-family dwellings or dwelling units that are to be occupied as the owner's dwelling, and includes real estate and residential manufactured home (land/home) transactions.

(36) "RESPA" means the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. Section 2601, et seq., and regulations adopted pursuant to it including, but not limited to, the TILA-RESPA Integrated Disclosure Rule.

(37) "Soliciting, processing, placing, or negotiating a mortgage loan" means, for compensation or gain or in the expectation of compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, assisting or offering to assist in the processing of an application for a mortgage loan, soliciting or offering to solicit a mortgage loan, or negotiating or offering to negotiate the terms or conditions of a mortgage loan.

(38) "Tablefunding" means a settlement at which a loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds.

(39) "TILA" means the Truth in Lending Act, 15 U.S.C. Section 1601, et seq., and regulations adopted pursuant to it including, but not limited to, the TILA-RESPA Integrated Disclosure Rule.

(40) "Unique identifier" means a number or other identifier assigned by protocols established by the Nationwide Mortgage Licensing System and Registry.

(41) "Qualified loan originator" means a natural person who acts as a loan originator exclusively for a mortgage broker licensee and who is not an employee of the mortgage broker. Unless otherwise indicated, a qualified loan originator is subject to the requirements of a loan originator under this chapter.

S.C. Code § 40-58-20

Amended by 2022 S.C. Acts, Act No. 173 (SB 637),s 2, eff. 5/16/2022.

Amended by 2017 S.C. Acts, Act No. 93 (SB 366), s 10, eff. 9/16/2017.

Amended by 2010 S.C. Acts, Act No. 287 (HB 3790), s 1, eff. 6/29/2010.

Amended by 2009 S.C. Acts, Act No. 67 (SB 673), s 5, eff. 1/1/2010.

2009 Act No. 67 Section 7 provides as follows:

"Except as otherwise provided herein, this act is effective January 1, 2010, except that the definition of 'mortgage loan originator' does not include an individual servicing a mortgage loan as that term is defined in Section 37-22-110(22) and Section 40-58-20(20) until July 31, 2011."

Prior Laws:1988 Act No. 544; 1993 Act No. 172, Section 1; 1996 Act No. 430, Section 2; 1998 Act No. 336, Sections 3A, 3B, 12; 2005 Act No. 7, Section 1.

2010 Act No. 287, Section 3, provides as follows:

"Any provision of this act deemed by HUD to conflict with its interpretation of the SAFE Act, provided for in Section 1508 of Title V of The Housing and Economic Recovery Act of 2008, Public Law 110-289, must be interpreted, applied, or amended in such a way so as to comply with HUD's interpretation of the SAFE Act. If any provision of this act cannot be interpreted, applied, or amended in such a way so as to comply with the SAFE Act, that provision must be severed from the act and shall not affect the remainder of the act's compliance with the SAFE Act. The regulating authority shall adopt emergency regulations or take other actions necessary to ensure compliance with the SAFE Act and the regulating authority's continued jurisdiction over and supervision of the mortgage business in this State."