In this Chapter, unless otherwise specified:
1. "Active management" means directing a
licensee's activities by a responsible individual, who:
a. Is knowledgeable about the licensee's
Arizona activities;
b. Supervises
compliance with:
i. The laws enforced by the
Department of Insurance and Financial Institutions -Financial Institutions
Division as they relate to the licensee, and
ii. Other applicable laws and rules;
and
c. Has sufficient
authority to ensure compliance.
2. "Affiliate" means the same as defined
under A.R.S. §
6-901,
6-941,
6-971, and
6-991.
3. "Attorney General" means the Attorney
General or an assistant Attorney General of the state of Arizona.
4. "Back-office location" means a location
that:
a. Is dedicated to administrative and
operational functions of the licensee that are incidental to the activity
requiring licensure;
b. Does not
involve interaction with the public whether in-person, telephonically, or
electronically;
c. Is subject to the
licensee's comprehensive written information security plan; and
d. Is able to produce records associated with
the location as part of a Department investigation or examination.
5. "Branch office" means, unless
otherwise provided by law, a business location which is not the licensee's
principal place of business, is maintained by the licensee, and where the
licensee conducts regulated activities. A branch office does not include a
"back-office location" or "remote work location" as defined in this
Section.
6.
"Compensation" means, in applying that term's
definition in A.R.S. §§ 6-901, 6-941, and 6-971, anything received in
advance, after repayment, or at any time during a loan's life. This subsection
expressly excludes the following items from those definitions of
compensation:
a. Charges or fees customarily
received after a loan's closing including prepayment penalties, termination
fees, reinvestment fees, late fees, default interest, transfer fees, impound
account interest and fees, extension fees, and modification fees. However,
extension fees and modification fees are compensation if the lender advances
additional funds or increases the credit limit on an open-end mortgage as part
of the extension or modification;
b. Out-of-pocket expenses paid to
independent third parties including appraisal fees, credit report fees, legal
fees, document preparation fees, title insurance premiums, recording, filing,
and statutory fees, collection fees, servicing fees, escrow fees, and trustee's
fees;
c. Insurance
commissions;
d. Contingent or additional
interest, including interest based on net operating income; or
e. Equity
participation.
"Business of a savings and loan association or savings bank"
means receiving money on deposit subject to payment by check or any other form
of order or request or on presentation of a certificate of deposit or other
evidence of debt.
7.
"Compensation" means, in applying that term's definition in A.R.S. §§
6-901,
6-941, and
6-971, anything received in
advance, after repayment, or at any time during a loan's life. This subsection
expressly excludes the following items from those definitions of compensation:
a. Charges or fees customarily received after
a loan's closing including prepayment penalties, termination fees, reinvestment
fees, late fees, default interest, transfer fees, impound account interest and
fees, extension fees, and modification fees. However, extension fees and
modification fees are compensation if the lender advances additional funds or
increases the credit limit on an open-end mortgage as part of the extension or
modification;
b. Out-of-pocket
expenses paid to independent third parties including appraisal fees, credit
report fees, legal fees, document preparation fees, title insurance premiums,
recording, filing, and statutory fees, collection fees, servicing fees, escrow
fees, and trustee's fees;
c.
Insurance commissions;
d.
Contingent or additional interest, including interest based on net operating
income; or
e. Equity
participation.
8.
"Commercial finance transaction," as that term is used in this Section's
definitions of the terms "Engaged in the business of making mortgage loans" and
"Engaged in the business of making mortgage loans or mortgage banking loans,"
means a loan made primarily for other than personal, family, or household
purposes.
9. "Control of a
licensee," as used in A.R.S. §§
6-903,
6-944, or
6-978, does not include acquiring
additional fractional equity interests in a licensee by any person who already
has the power to vote 51% or more of the licensee's outstanding voting equity
interests.
10. "Correspondent
contract," as that term is used in A.R.S. §§
6-941,
6-943,
6-971, or
6-973, means an agreement between a
lender and a funding source under which the funding source may fund, or is
required to fund, loans originated by the lender.
11.
"Directly or
indirectly makes, negotiates, or offers to make or negotiate" and "Directly or
indirectly making, negotiating, or offering to make or negotiate," as those
phrases are used in A.R.S. §§ 6-901, 6-941, or 6-971, mean:
a. Providing consulting or
advisory services in connection with a mortgage loan transaction, mortgage
banking loan transaction, or commercial mortgage loan
transaction;
i. To an investor, concerning the
location or identity of potential borrowers, regardless of whether the person
providing consulting or advisory services directly contacts any potential
borrowers; or
ii. To a borrower, concerning the
location or identity of potential investors or lenders; or
b. Providing assistance in
preparing an application for a mortgage loan transaction, mortgage banking loan
transaction, or commercial mortgage banking loan transaction, regardless of
whether the person providing assistance directly contacts any potential
investor or lender; and
c. Processing a loan;
but
d. "Directly or indirectly makes,
negotiates, or offers to make or negotiate" and "Directly or indirectly making,
negotiating, or offering to make or negotiate" do not include:
i. Providing clerical, mechanical,
or word processing services to prepare papers or documents associated with a
mortgage loan transaction, mortgage banking loan transaction, or commercial
mortgage banking loan transaction;
ii. Purchasing, selling,
negotiating to purchase or sell, or offering to purchase or sell a mortgage
loan, mortgage banking loan, or commercial mortgage banking loan already
funded;
iii. Making, negotiating, or
offering to make additional advances on an existing open-ended mortgage loan,
mortgage banking loan, or commercial mortgage loan including revolving credit
lines;
iv. Modifying, renewing, or
replacing a mortgage loan, a mortgage banking loan, or a commercial mortgage
loan already funded, if the parties to and security for the loan are the same
as the original loan immediately before the modification, renewal, or
replacement, and if no additional funds are advanced and no increase is made in
the credit limit on an open-ended loan. Replacing a loan means making a new
loan simultaneously with terminating an existing loan.
"Cushion," as that term is used in
R20-4-1811 or
R20-4-1908, means funds that a
servicer or lender may require a borrower to pay into an escrow or impound
account before the borrower's periodic payments are available in the account to
cover unanticipated disbursements.
12. "Department" means the same as defined
under A.R.S. § 6101(5).
13.
"Employee" means a natural person who has an
employment relationship with a licensee that is acknowledged by both the person
and the licensee, and:
a. The person is entitled to
payment, or is paid, by the licensee;
b. The licensee withholds and
remits, or is liable for withholding and remitting, payroll deductions for all
applicable federal and state payroll taxes;
c. The licensee has the right to
hire and fire the employee and the employee's assistants;
d. The licensee directs the
methods and procedures for performing the employee's job;
e. The licensee supervises the
employee's business conduct and the employee's compliance with applicable laws
and rules; and
f. The rights and duties under
subsections (13)(a) through (e) belong to the licensee regardless of whether
another person also shares those rights and duties.
"Directly or indirectly makes, negotiates, or offers to make
or negotiate" and "Directly or indirectly making, negotiating, or offering to
make or negotiate," as those phrases are used in A.R.S. §§
6-901,
6-941, or
6-971:
a. Includes any of the following:
i. Providing consulting or advisory services
in connection with a mortgage loan transaction, mortgage banking loan
transaction, or commercial mortgage loan transaction to an investor, concerning
the location or identity of potential borrowers if the consulting or advisory
services include direct interaction, including by telephone or electronic
means, with a potential borrower that results in a request or obtaining a
consumer's date of birth, social security number, credit report, employment
information, work history, or account information held in any depository,
trust, or investment account:
ii.
Providing consulting or advisory services in connection with a mortgage loan
transaction, mortgage banking loan transaction, or commercial mortgage loan
transaction to a consumer, concerning the location or identity of potential
lenders if the consulting or advisory services include a representation with
regard to pre-qualification, approval, rate, terms, or conditions of a
loan;
iii. Preparing or providing
assistance in preparing an application for a mortgage loan transaction,
mortgage banking loan transaction, or commercial mortgage banking loan
transaction;
iv. Loan processing;
or
v. Loan
underwriting.
b. Does not
include:
i. Providing technological,
mechanical, or word processing services to prepare papers or documents
associated with a mortgage loan transaction, mortgage banking loan transaction,
or commercial mortgage banking loan transaction;
ii. Purchasing, selling, negotiating to
purchase or sell, or offering to purchase or sell a mortgage loan, mortgage
banking loan, or commercial mortgage banking loan already funded;
iii. Making, negotiating, or offering to make
additional advances on an existing open-ended mortgage loan, mortgage banking
loan, or commercial mortgage loan including revolving credit lines;
or
iv. Modifying, renewing, or
replacing a mortgage loan, a mortgage banking loan, or a commercial mortgage
loan already funded, if the parties to and security for the loan are the same
as the original loan immediately before the modification, renewal, or
replacement, and if no additional funds are advanced and no increase is made in
the credit limit on an open-ended loan. Replacing a loan means making a new
loan simultaneously with terminating an existing loan.
14. "Director" means the same as
defined under A.R.S. §
20-102.
15. "Electronic record" means the same as
defined under A.R.S. §
44-7002(7).
16. "Employee" means a natural person who has
an employment relationship with a licensee that is acknowledged by both the
person and the licensee, and:
a. The person is
entitled to payment, or is paid, by the licensee;
b. The licensee withholds and remits, or is
liable for withholding and remitting, payroll deductions for all applicable
federal and state payroll taxes, if applicable;
c. The licensee has the right to hire and
fire the employee and the employee's assistants;
d. The licensee directs the methods and
procedures for performing the employee's job;
e. The licensee supervises the employee's
business conduct and the employee's compliance with applicable laws and rules;
and
f. The rights and duties under
subsections (16)(a) through (e) belong to the licensee regardless of whether
another person also shares those rights and duties.
17. "Engaged in the business of making
mortgage loans," as that phrase is used in A.R.S. §
6-902, and "engaged in the business
of making mortgage loans or mortgage banking loans," as that phrase is used in
A.R.S. §
6-942, mean the direct or indirect
making of a total of more than five mortgage banking loans or mortgage loans,
or both in a calendar year. Each loan counts only once as of its closing date.
A person is not "engaged in the business of making mortgage loans or mortgage
banking loans" if the person makes loans solely in commercial finance
transactions in which no more than 35% of the aggregate value of all security
taken by the investor on the closing date is a lien, or liens, on real
property.
18. "Exclusive contract,"
as that term is used in A.R.S. §§
6-912 and
6-991.02, means a written agreement
in which a loan originator agrees to perform services as a loan originator
subject to supervision and control by a person holding a certificate of
exemption issued under A.R.S. §
6-912 on an exclusive basis. The
agreement provides that the loan originator is expressly prohibited from
performing loan origination or modification services for any other person
during the time the agreement is in effect.
19. "Generally accepted accounting
principles" means United States Generally Accepted Accounting Principles issued
by the Financial Accounting Standards Board or the International Financial
Reporting Standards issued by the International Accounting Standards
Board.
20. "Loan," as that term is
used in A.R.S. §§
6-126(D)(5) and (7), means all loans negotiated or closed
that are secured by Arizona real property.
21. "Loan Processing" means requesting,
collecting, receiving, or reviewing a loan application's supporting documents
for use in underwriting, and communicating with the consumer to obtain
information necessary for making a credit decision.
22.
"Reasonable
investigation of the background," as that term is used in A.R.S. §§
6-903, 6-943, or 6-976 means a licensee, at a minimum:
a. Collects and reviews all the
documents authorized by the Immigration Reform and Control Act of 1986, 8 U.S.C. 1324a ;
b. Obtains a completed Employment
Eligibility Verification (Form I-9);
c. Obtains a completed and signed
employment application;
d. Obtains a signed statement
attesting to all of an applicant's felony convictions, including detailed
information regarding each conviction;
e. Consults with the applicant's
most recent or next most recent employer, if any;
f. Inquiries regarding the
applicant's qualifications and competence for the position;
g. If for a loan officer, loan
originator, loan processor, branch manager, supervisor, or similar position,
obtains a current credit report from a credit reporting agency;
and
h. Investigates further if any
information received in the above inquiries raises questions as to the
applicant's honesty, truthfulness, integrity, or competence. An inquiry is
sufficient after two attempts to contact a person, including at least one
written inquiry.
"Loan underwriting" means analyzing information in
connection with the making of a credit decision.
23. "Person" means a natural person,
including a sole proprietor, or any legal or commercial entity including a
corporation, business trust, estate, trust, partnership, limited partnership,
joint venture, association, limited liability company, limited liability
partnership, or limited liability limited partnership.
24.
"Registered to
do business in this state" means:
a. If an Arizona corporation, it
is incorporated under A.R.S. Title 10, Chapter 2, Article 1;
b. If a foreign corporation, it
either transfers its domicile under A.R.S. Title 10, Chapter 2, Article 2, or
obtains authority to transact business in Arizona under A.R.S. Title 10,
Chapter 15, Article 1;
c. If a business trust, it obtains
authority to transact business in Arizona under A.R.S. Title 10, Chapter 18,
Article 4;
d. If an estate, it acts through a
personal representative duly appointed by this state's Superior Court, under
the provisions of A.R.S. Title 14, Chapter 3 or 4;
e. If a trust, it delivers to the
Superintendent an executed copy of the trust instrument creating the trust
together with:
i. All the current amendments,
or
ii. A true copy of the trust
instrument certified accurate and complete by a trustee of the trust before a
notary public;
f. If a general partnership,
limited partnership, limited liability company, limited liability partnership,
or limited liability limited partnership, it is organized under A.R.S. Title
29;
g. If a foreign general
partnership, limited partnership, limited liability company, limited liability
partnership, or limited liability limited partnership, it is registered with
the Arizona Secretary of State's office under A.R.S. Title 29;
h. If a joint venture,
association, or any entity not specified in this subsection, it is organized
and conducts its business in compliance with Arizona law; or
i. The entity is exempt from
registration.
"Property insurance," as that term is used in A.R.S.
§§
6-909 and
6-947, does not include flood
insurance as that term is used in the Flood Disaster Protection Act of 1973, as
modified by the National Flood Insurance Reform Act of 1994.
42 U.S.C.
4001, et seq.
25. "Reasonable investigation of the
background," as that term is used in A.R.S. §§
6-903,
6-943, or
6-976 means a licensee, at a
minimum:
a. Collects and reviews all the
documents authorized by the Immigration Reform and Control Act of 1986,
8 U.S.C.
1324a;
b. Obtains a completed Employment Eligibility
Verification (Form I-9), if applicable;
c. Obtains a completed and signed employment
application, if applicable;
d.
Obtains a signed statement attesting to all of an applicant's felony
convictions, including detailed information regarding each
conviction;
e. Consults with the
applicant's most recent or next most recent employer, if any;
f. Makes inquiries regarding the applicant's
qualifications and competence for the position;
g. If for a loan originator, loan processor,
branch manager, supervisor, or similar position, obtains a current credit
report from a credit reporting agency; and
h. Investigates further if any information
received in the above inquiries raises questions as to the applicant's honesty,
truthfulness, integrity, or competence. An inquiry is sufficient after two
attempts to contact a person, including at least one written inquiry.
26. "Record" means the same as
defined under A.R.S. § 447002(13).
27.
"Responsible
individual" or "responsible person", as those terms are used in A.R.S.
§§ 6-903, 6-943, 6-973, and 6-976, means a resident of this state
who:
a. Lives in Arizona during the
entire period of designation as the responsible individual on a
license;
b. Is in active management of a
licensee's affairs;
c. Meets the qualifications listed
in A.R.S. §§ 6-903, 6-943, or 6-973 ; and
d. Is an officer, director,
member, partner, employee, or trustee of a licensed entity.
"Registered Exempt Person" means a person who is exempt from
licensure pursuant to A.R.S. §
6-912 and A.R.S. Title 6, Chapter
9, Articles 1, 2 and 3 as a federally chartered savings bank that is registered
with the nationwide mortgage licensing system and registry and holds a
certificate of exemption.
28. "Registered to do business in this state"
means:
a. If an Arizona corporation, it is
incorporated under A.R.S. Title 10, Chapter 2, Article 1;
b. If a foreign corporation, it obtains
authority to transact business in Arizona under A.R.S. Title 10, Chapter 15,
Article 1;
c. If a business trust,
it obtains authority to transact business in Arizona under A.R.S. Title 10,
Chapter 18, Article 4;
d. If an
estate, it acts through a personal representative duly appointed by this
state's Superior Court, under the provisions of A.R.S. Title 14, Chapter 3 or
4;
e. If a trust, it delivers to
the Director an executed copy of the trust instrument creating the trust
together with:
i. All the current amendments,
or
ii. A true copy of the trust
instrument certified accurate and complete by a trustee of the trust before a
notary public;
f. If a
general partnership, limited partnership, limited liability company, limited
liability partnership, or limited liability limited partnership, it is
organized under A.R.S. Title 29;
g.
If a foreign general partnership, limited partnership, limited liability
company, limited liability partnership, or limited liability limited
partnership, it is registered with the Arizona Secretary of State's office
under A.R.S. Title 29;
h. If a
joint venture, association, or any entity not specified in this subsection, it
is organized and conducts its business in compliance with Arizona law;
or
i. The entity is exempt from
registration.
29. "Remote
work location" means a location at which the employees (including licensed loan
originators) of a licensee may conduct licensed activities other than the
principal place of business or branch office. Licensed activities from a remote
work location are permitted when under the supervision of the licensee and when
all of the following apply:
a. The licensee
has written policies and procedures for supervision of employees working from
their residence or a location other than a licensed location,
b. Access to company platforms and customer
information shall be in accordance with the licensee's comprehensive written
information security plan; and
c.
Physical records shall not be maintained at a remote work
location.
30. "Resident
of this state" means a natural person domiciled in Arizona.
31. "Responsible individual" or "responsible
person", as those terms are used in A.R.S. §§
6-903,
6-943,
6-973, and
6-976, means a resident of this
state who:
a. Is in active management of a
licensee's affairs; and
b. Meets
the qualifications listed in A.R.S. §§
6-903,
6-943, or
6-973.
