2010 California Code
Financial Code
Chapter 1. General

50000.  This division will be known and may be cited as the
California Residential Mortgage Lending Act.



50001.  Unless the context otherwise requires, the definitions in
this chapter apply throughout this division.



50002.  (a) No person shall engage in the business of making
residential mortgage loans or servicing residential mortgage loans,
in this state, without first obtaining a license from the
commissioner in accordance with the requirements of Chapter 2
(commencing with Section 50120) or Chapter 3 (commencing with Section
50130), and any rules promulgated by the commissioner under this
law, unless a person or transaction is excepted from a definition or
exempt from licensure by a provision of this law or a rule of the
commissioner.
   (b) An employee of a licensee or of a person exempt from licensure
is not required to be licensed when acting within the scope of his
or her employment and shall be exempt from any other law from which
his or her employer is exempt, except that an individual who meets
the definition of a mortgage loan originator in Section 50003.5 shall
be subject to this division.
   (c) The following persons are exempt from subdivision (a):
   (1) Any bank, trust company, insurance company, or industrial loan
company doing business under the authority of, or in accordance
with, a license, certificate, or charter issued by the United States
or any state, district, territory, or commonwealth of the United
States that is authorized to transact business in this state.
   (2) A federally chartered savings and loan association, federal
savings bank, or federal credit union that is authorized to transact
business in this state.
   (3) A savings and loan association, savings bank, or credit union
organized under the laws of this or any other state that is
authorized to transact business in this state.
   (4) A person engaged solely in business, commercial, or
agricultural mortgage lending.
   (5) A wholly owned service corporation of a savings and loan
association or savings bank organized under the laws of this state or
the wholly owned service corporation of a federally chartered
savings and loan association or savings bank that is authorized to
transact business in this state.
   (6) An agency or other instrumentality of the federal government,
or state or municipal government.
   (7) An employee or employer pension plan making residential
mortgage loans only to its participants, or a person making those
loans only to its employees or the employees of a holding company, or
an owner who controls that person, affiliate, or subsidiary of that
person.
   (8) A person acting in a fiduciary capacity conferred by the
authority of a court.
   (9) A real estate broker licensed under California law, when
making, arranging, selling, or servicing a residential loan.
   (10) A California finance lender or broker licensed under Division
9 (commencing with Section 22000), when acting under the authority
of that license.
   (11) A trustee under a deed of trust pursuant to the Civil Code,
when collecting delinquent loan payments, interest, or other loan
amounts, or performing other acts in a judicial or nonjudicial
foreclosure proceeding.
   (12) A mortgage loan originator who has obtained a license under
Chapter 3.5 (commencing with Section 50140), provided that the
mortgage loan originator is employed by a residential mortgage lender
or servicer.
   (13) A registered mortgage loan originator described in
subdivision (e).
   (d) An individual, unless specifically exempted under subdivision
(e), shall not engage in the business of a mortgage loan originator
with respect to any dwelling located in this state without first
obtaining and maintaining annually a license in accordance with the
requirements of Chapter 3.5 (commencing with Section 50140) and any
rules promulgated by the commissioner under that chapter. Each
licensed mortgage loan originator shall register with and maintain a
valid unique identifier issued by the Nationwide Mortgage Licensing
System and Registry.
   (e) A registered mortgage loan originator is exempt from licensure
under subdivisions (a) and (d), when he or she is employed by a
depository institution, a subsidiary of a depository institution that
is owned and controlled by a depository institution and regulated by
a federal banking agency, or an institution regulated by the Farm
Credit Administration.
   (f) A loan processor or underwriter who is an independent
contractor employed by a residential mortgage lender or servicer may
not perform the activities of a loan processor or underwriter under
this division unless the independent contractor loan processor or
underwriter obtains and maintains a license under Section 50120.



50002.5.  (a) Every licensee engaging in the business of making,
servicing, or making and servicing residential mortgage loans shall
require that every mortgage loan originator employed or compensated
by that licensee obtains and maintains a mortgage loan originator
license from the commissioner under this division or Division 9
(commencing with Section 22000), or has first obtained a license
endorsement from the commissioner of Real Estate pursuant to Article
2.1 (commencing with Section 10166.01) of Chapter 3 of Part 1 of
Division 4 of the Business and Professions Code.
   (b) A residential mortgage lender or servicer shall not employ a
mortgage loan originator whose license or license endorsement has
lapsed.
   (c) A residential mortgage lender or servicer may not make or
broker a residential mortgage loan unless that loan is negotiated by
or applied for through a licensed mortgage loan originator.
   (d) Every licensee engaged in the business of making, servicing,
or making and servicing residential mortgage loans and every mortgage
loan originator licensed under this division shall register with and
maintain a valid unique identifier issued by the Nationwide Mortgage
Licensing System and Registry.
   (e) No mortgage loan originator licensed under this division and
employed by a licensed residential mortgage lender or residential
mortgage servicer shall engage in any activity that is not an
authorized activity for a licensed residential mortgage lender or
residential mortgage servicer pursuant to this division.



50003.  (a) "Annual audit" means a certified audit of the licensee's
books, records, and systems of internal control performed by an
independent certified public accountant in accordance with generally
accepted accounting principles and generally accepted auditing
standards.
   (b) "Borrower" means the loan applicant.
   (c) "Buy" includes exchange, offer to buy, or solicitation to buy.
   (d) "Commissioner" means the Commissioner of Corporations.
   (e) "Control" means the possession, directly or indirectly, of the
power to direct, or cause the direction of, the management and
policies of a licensee under this division, whether through voting or
through the ownership of voting power of an entity that possesses
voting power of the licensee, or otherwise. Control is presumed to
exist if a person, directly or indirectly, owns, controls, or holds
10 percent or more of the voting power of a licensee or of an entity
that owns, controls, or holds, with power to vote, 10 percent or more
of the voting power of a licensee. No person shall be deemed to
control a licensee solely by reason of his or her status as an
officer or director of the licensee.
   (f) "Depository institution" has the same meaning as in Section 3
of the Federal Deposit Insurance Act, and includes any credit union.
   (g) "Engage in the business" means the dissemination to the
public, or any part of the public, by means of written, printed, or
electronic communication or any communication by means of recorded
telephone messages or spoken on radio, television, or similar
communications media, of any information relating to the making of
residential mortgage loans, the servicing of residential mortgage
loans, or both. "Engage in the business" also means, without
limitation, making residential mortgage loans or servicing
residential mortgage loans, or both.
   (h) "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.
   (i) "In this state" includes any activity of a person relating to
making or servicing a residential mortgage loan that originates from
this state and is directed to persons outside this state, or that
originates from outside this state and is directed to persons inside
this state, or that originates inside this state and is directed to
persons inside this state, or that leads to the formation of a
contract and the offer or acceptance thereof is directed to a person
in this state (whether from inside or outside this state and whether
the offer was made inside or outside the state).
   (j) "Institutional investor" means the following:
   (1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
   (2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial bank or industrial loan
company, personal property broker, consumer finance lender,
commercial finance lender, or insurance company, or subsidiary or
affiliate of one of the preceding entities, doing business under the
authority of or in accordance with a license, certificate, or charter
issued by the United States or any state, district, territory, or
commonwealth of the United States.
   (3) Trustees of pension, profit-sharing, or welfare funds, if the
pension, profit-sharing, or welfare fund has a net worth of not less
than fifteen million dollars ($15,000,000), except pension,
profit-sharing, or welfare funds of a licensee or its affiliate,
self-employed individual retirement plans, or individual retirement
accounts.
   (4) A corporation or other entity with outstanding securities
registered under Section 12 of the federal Securities Exchange Act of
1934 or a wholly owned subsidiary of that corporation or entity,
provided that the purchaser represents either of the following:
   (A) That it is purchasing for its own account for investment and
not with a view to, or for sale in connection with, any distribution
of a promissory note.
   (B) That it is purchasing for resale pursuant to an exemption
under Rule 144A (17 C.F.R. 230.144A) of the Securities and Exchange
Commission.
   (5) An investment company registered under the Investment Company
Act of 1940; or a wholly owned and controlled subsidiary of that
company, provided that the purchaser makes either of the
representations provided in paragraph (4).
   (6) A residential mortgage lender or servicer licensed to make
residential mortgage loans under this law or an affiliate or
subsidiary of that person.
   (7) Any person who is licensed as a securities broker or
securities dealer under any law of this state, or of the United
States, or any employee, officer or agent of that person, if that
person is acting within the scope of authority granted by that
license or an affiliate or subsidiary controlled by that broker or
dealer, in connection with a transaction involving the offer, sale,
purchase, or exchange of one or more promissory notes secured
directly or indirectly by liens on real property or a security
representing an ownership interest in a pool of promissory notes
secured directly or indirectly by liens on real property, and the
offer and sale of those securities is qualified under the California
Corporate Securities Law of 1968 or registered under federal
securities laws, or exempt from qualification or registration.
   (8) A licensed real estate broker selling the loan to an
institutional investor specified in paragraphs (1) to (7), inclusive,
or paragraph (9) or (10).
   (9) A business development company as defined in Section 2(a)(48)
of the Investment Company Act of 1940 or a Small Business Investment
Company licensed by the United States Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of
1958.
   (10) A syndication or other combination of any of the foregoing
entities that is organized to purchase a promissory note.
   (11) A trust or other business entity established by an
institutional investor for the purpose of issuing or facilitating the
issuance of securities representing undivided interests in, or
rights to receive payments from or to receive payments primarily
from, a pool of financial assets held by the trust or business
entity, provided that all of the following apply:
   (A) The business entity is not a sole proprietorship.
   (B) The pool of assets consists of one or more of the following:
   (i) Interest-bearing obligations.
   (ii) Other contractual obligations representing the right to
receive payments from the assets.
   (iii) Surety bonds, insurance policies, letters of credit, or
other instruments providing credit enhancement for the assets.
   (C) The securities will be either one of the following:
   (i) Rated as "investment grade" by Standard and Poor's Corporation
or Moody's Investors Service, Inc. "Investment grade" means that the
securities will be rated by Standard and Poor's Corporation as AAA,
AA, A, or BBB or by Moody's Investors Service, Inc. as Aaa, Aa, A, or
Baa, including any of those ratings with "+" or "--" designation or
other variations that occur within those ratings.
   (ii) Sold to an institutional investor.
   (D) The offer and sale of the securities is qualified under the
California Corporate Securities Law of 1968 or registered under
federal securities laws, or exempt from qualification or
registration.
   (k) "Institutional lender" means the following:
   (1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
   (2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial loan company, or insurance
company, or service or investment company that is wholly owned and
controlled by one of the preceding entities, doing business under the
authority of and in accordance with a license, certificate, or
charter issued by the United States or any state, district,
territory, or commonwealth of the United States.
   (3) Any corporation with outstanding securities registered under
Section 12 of the Securities Exchange Act of 1934 or any wholly owned
subsidiary of that corporation.
   (4) A residential mortgage lender or servicer licensed to make
residential mortgage loans under this law.
   (l) "Law" means the California Residential Mortgage Lending Act.
   (m) "Lender" means a person that (1) is an approved lender for the
Federal Housing Administration, Veterans Administration, Farmers
Home Administration, Government National Mortgage Association,
Federal National Mortgage Association, or Federal Home Loan Mortgage
Corporation, (2) directly makes residential mortgage loans, and (3)
makes the credit decision in the loan transactions.
   (n) "Licensee" means, depending on the context, a person licensed
under Chapter 2 (commencing with Section 50120), Chapter 3
(commencing with Section 50130), or Chapter 3.5 (commencing with
Section 50140).
   (o) "Makes or making residential mortgage loans" or "mortgage
lending" means processing, underwriting, or as a lender using or
advancing one's own funds, or making a commitment to advance one's
own funds, to a loan applicant for a residential mortgage loan.
   (p) "Mortgage loan," "residential mortgage loan," or "home
mortgage loan" means a federally related mortgage loan as defined in
Section 3500.2 of Title 24 of the Code of Federal Regulations, or a
loan made to finance construction of a one-to-four family dwelling.
   (q) "Mortgage servicer" or "residential mortgage loan servicer"
means a person that (1) is an approved servicer for the Federal
Housing Administration, Veterans Administration, Farmers Home
Administration, Government National Mortgage Association, Federal
National Mortgage Association, or Federal Home Loan Mortgage
Corporation, and (2) directly services or offers to service mortgage
loans.
   (r) "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 for the licensing and registration of licensed
mortgage loan originators.
   (s) "Net worth" has the meaning set forth in Section 50201.
   (t) "Own funds" means (1) cash, corporate capital, or warehouse
credit lines at commercial banks, savings banks, savings and loan
associations, industrial loan companies, or other sources that are
liability items on a lender's financial statements, whether secured
or unsecured, or (2) a lender's affiliate's cash, corporate capital,
or warehouse credit lines at commercial banks or other sources that
are liability items on the affiliate's financial statements, whether
secured or unsecured. "Own funds" does not include funds provided by
a third party to fund a loan on condition that the third party will
subsequently purchase or accept an assignment of that loan.
   (u) "Person" means a natural person, a sole proprietorship, a
corporation, a partnership, a limited liability company, an
association, a trust, a joint venture, an unincorporated
organization, a joint stock company, a government or a political
subdivision of a government, and any other entity.
   (v) "Residential real property" or "residential real estate" means
real property located in this state that is improved by a
one-to-four family dwelling.
   (w) "SAFE Act" means the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (Public Law 110-289).
   (x) "Service" or "servicing" means receiving more than three
installment payments of principal, interest, or other amounts placed
in escrow, pursuant to the terms of a mortgage loan and performing
services by a licensee relating to that receipt or the enforcement of
its receipt, on behalf of the holder of the note evidencing that
loan.
   (y) "Sell" includes exchange, offer to sell, or solicitation to
sell.
   (z) "Unique identifier" means a number or other identifier
assigned by protocols established by the Nationwide Mortgage
Licensing System and Registry.
   (aa) For purposes of Sections 50142, 50143, and 50145,
"nontraditional mortgage product" means any mortgage product other
than a 30-year fixed rate mortgage.



50003.5.  (a) "Mortgage loan originator" means an individual who,
for compensation or gain, or in the expectation of compensation or
gain, takes a residential mortgage loan application or offers or
negotiates terms of a residential mortgage loan.
   (b) Mortgage loan originator does not include any of the
following:
   (1) An individual who performs purely administrative or clerical
tasks on behalf of a person meeting the definition of a mortgage loan
originator, except as provided in subdivision (c) of Section
50003.6. The term "administrative or clerical tasks" means the
receipt, collection, and distribution of information common for the
processing or underwriting of a loan in the mortgage industry and
communication with a consumer to obtain information necessary for the
processing or underwriting of a residential mortgage loan, to the
extent that the communication does not include offering or
negotiating loan rates or terms, or counseling consumers about
residential mortgage loan rates or terms.
   (2) An individual who solely renegotiates terms for existing
mortgage loans held or serviced by his or her employer and who does
not otherwise act as a mortgage loan originator, unless the United
States Department of Housing and Urban Development or a court of
competent jurisdiction determines that the SAFE Act requires that
employee to be licensed as a mortgage loan originator under state
laws implementing the SAFE Act.
   (3) An individual that is solely involved in extensions of credit
relating to timeshare plans, as that term is defined in Section 101
(53D) of Title 11 of the United States Code.
   (4) An individual licensed as a mortgage loan originator pursuant
to Article 2.1 (commencing with Section 10166.01) of Chapter 3 of
Part 1 of Division 4 of the Business and Professions Code and the
SAFE Act.
   (c) "Registered mortgage loan originator" means any individual who
is all of the following:
   (1) Meets the definition of mortgage loan originator.
   (2) Is an employee of a depository institution, a subsidiary that
is owned and controlled by a depository institution and regulated by
a federal banking agency, or an institution regulated by the Farm
Credit Administration.
   (3) Is registered with, and maintains a unique identifier through,
the Nationwide Mortgage Licensing System and Registry.
   (d) "Loan processor or underwriter" means an individual who
performs clerical or support duties as an employee at the direction
of, and subject to the supervision and instruction of, a mortgage
loan originator licensed by the state or a registered mortgage loan
originator.


50003.6.  (a) A loan processor or underwriter who does 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 individual can or will perform any of the activities of a
loan originator shall not be required to be licensed as a mortgage
loan originator.
   (b) An individual engaging solely in loan processor or underwriter
activities shall 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 individual can or will perform any
of the activities of a mortgage loan originator.
   (c) An independent contractor may not engage in the activities of
a loan processor or underwriter for a residential mortgage loan
unless the independent contractor loan processor or underwriter
obtains and maintains a residential mortgage lender or residential
mortgage servicer license and a mortgage loan originator license
under this division.



50004.  "Fraud," "deceit," and "defraud" are not limited to common
law fraud or deceit.



50005.  This division creates and authorizes a class of exempt
persons pursuant to Section 1 of Article XV of the California
Constitution.


50006.  No person subject to this law shall use in its name "bank,"
"trust," "trustee," "loan association," or related terms. This
section does not apply to any person licensed under the Banking Law
or the Savings Association Law.