§ 590. Licensing. 1. Definitions. (a) "Mortgage loan" shall mean a
loan to a natural person made primarily for personal, family or
household use, secured by either a mortgage or deed of trust on
residential real property, any certificate of stock or other evidence of
ownership in, and proprietary lease from, a corporation or partnership
formed for the purpose of cooperative ownership of residential real
property or, if determined by the superintendent by regulation, shall
include such a loan secured by a security interest on a manufactured
home;

(b) "Residential real property" shall mean real property located in
this state improved by a one-to-four family dwelling used or occupied,
or intended to be used or occupied, wholly or partly, as the home or
residence of one or more persons, but shall not refer to unimproved real
property upon which such dwellings are to be constructed;

(c) "Making a mortgage loan" shall mean for compensation or gain,
either directly or indirectly, advancing funds, offering to advance
funds, or making a commitment to advance funds to an applicant for a
mortgage loan or a mortgagor as a mortgage loan;

(d) "Soliciting, processing, placing or negotiating a mortgage loan"
shall mean for 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 on
behalf of a third party or negotiating or offering to negotiate the
terms or conditions of a mortgage loan with a lender on behalf of a
third party;

(e) "Exempt organization" shall mean any insurance company, banking
organization, foreign banking corporation licensed by the superintendent
or the comptroller of the currency to transact business in this state,
national bank, federal savings bank, federal savings and loan
association, federal credit union, or any bank, trust company, savings
bank, savings and loan association, or credit union organized under the
laws of any other state, or any instrumentality created by the United
States or any state with the power to make mortgage loans. Subject to
such regulations as may be promulgated by the superintendent, "exempt
organization" may also include any subsidiary of such entities;

(f) "Licensee" or "mortgage banker" shall mean a person or entity who
or which is licensed pursuant to section five hundred ninety-one of this
chapter to engage in the business of making mortgage loans in this
state;

(g) "Registrant" or "mortgage broker" shall mean a person or entity
registered pursuant to section five hundred ninety-one-a of this chapter
to engage in the business of soliciting, processing, placing or
negotiating mortgage loans for others, or offering to solicit, process,
place or negotiate mortgage loans for others;

(h) "Mortgage loan servicer" or "servicer" shall mean a person or
entity registered pursuant to subdivision two of this section to engage
in the business of servicing mortgage loans for property located in this
state;

(i) "Servicing mortgage loans" shall mean receiving any scheduled
periodic payments from a borrower pursuant to the terms of any mortgage
loan, including amounts for escrow accounts under section six-k of this
chapter, title three-A of article nine of the real property tax law or
section ten of 12 U.S.C. 2609, and making the payments to the owner of
the loan or other third parties of principal and interest and such other
payments with respect to the amounts received from the borrower as may
be required pursuant to the terms of the mortgage service loan documents
or servicing contract. In the case of a home equity conversion mortgage
or reverse mortgage as referenced in section six-h of this chapter,
sections two hundred eighty and two hundred eighty-a of the real
property law or 24 CFR 3500.2, servicing includes making payments to the
borrower.

2. Necessity for license. (a) No individual, person, partnership,
association, corporation or other entity shall engage in the business of
making mortgage loans without first obtaining a license from the
superintendent in accordance with the licensing procedure provided in
this article and such regulations as may be promulgated by the
superintendent. The licensing provisions of this subdivision shall not
apply to: (i) any exempt organization; (ii) any entity or entities which
shall be exempted in accordance with regulations promulgated by the
superintendent hereunder; or (iii) any individual, person, partnership,
association, corporation or other entity which makes not more than three
such loans in a calendar year, nor more than five in a two year period,
provided that no such mortgage loans have been made which were
solicited, processed, placed or negotiated by a mortgage broker,
mortgage banker or exempt organization.

(b) No person, partnership, association, corporation or other entity
shall engage in the business of soliciting, processing, placing or
negotiating a mortgage loan or offering to solicit, process, place or
negotiate a mortgage loan in this state without first being registered
with the superintendent as a mortgage broker in accordance with the
registration procedure provided in this article and by such regulations
as may be promulgated by the superintendent. The registration provisions
of this subdivision shall not apply to any exempt organization, mortgage
banker or mortgage loan servicer. No real estate broker or salesman, as
defined in section four hundred forty of the real property law, shall be
deemed to be engaged in the business of a mortgage broker if he does not
accept a fee, directly or indirectly, for services rendered in
connection with the solicitation, processing, placement or negotiation
of a mortgage loan. No attorney-at-law who solicits, processes, places
or negotiates a mortgage loan incidental to his legal practice shall be
deemed to be engaged in the business of a mortgage broker. The
registration provisions of this subdivision shall not apply to any
person or entity which shall be exempted in accordance with regulations
promulgated by the superintendent hereunder.

(b-1) No person, partnership, association, corporation or other entity
shall engage in the business of servicing mortgage loans with respect to
any property located in this state without first being registered with
the superintendent as a mortgage loan servicer in accordance with the
registration procedure provided by such regulations as may be prescribed
by the superintendent. The superintendent may refuse to register a
mortgage loan servicer on the same grounds that the superintendent may
refuse to issue a registration certificate to a mortgage broker pursuant
to subdivision two of section five hundred ninety-two-a of this article.
The registration provisions of this subdivision shall not apply to any
exempt organization, mortgage banker, or mortgage broker or any person
or entity which shall be exempted in accordance with regulations
prescribed by the superintendent hereunder; provided that such exempt
organization, mortgage banker, mortgage broker, or exempted person
notifies the superintendent that it is acting as a mortgage loan
servicer in this state and complies with any regulation applicable to
mortgage loan servicers, promulgated by the superintendent. The
superintendent may require all registrations and notifications to be
made through the Nationwide Mortgage Licensing System and Registry. An
application to become a registered mortgage loan servicer or any
application with respect to a mortgage loan servicer shall be
accompanied by a fee as prescribed pursuant to section eighteen-a of
this chapter. Any fee established pursuant to this subdivision may be
collected by and include a processing fee charged by the Nationwide
Mortgage Licensing System and Registry. Any such processing fees shall
not be remitted to the superintendent and shall not be deemed revenue
pursuant to this chapter or the state finance law.

(c) A licensee registrant or mortgage loan servicer may apply for
authority to open and maintain one or more branch offices.

(d) No person or entity engaged in the building and sale of
residential real property, or a financing subsidiary thereof, shall be
deemed to be making a mortgage loan, as defined in paragraph (c) of
subdivision one of this section, or soliciting, processing, placing or
negotiating a mortgage loan, as defined in paragraph (d) of subdivision
one of this section, if and only if such person, entity or financing
subsidiary shall make, solicit, process, place or negotiate a mortgage
loan with respect to residential real property it has built through a
licensee or exempt organization which is acting as its agent in
compliance with this article and regulations promulgated hereunder.

3. Rules and regulations. In addition to such powers as may otherwise
be prescribed by this chapter, the superintendent is hereby authorized
and empowered to promulgate such rules and regulations as may in the
judgement of the superintendent be consistent with the purposes of this
article, or appropriate for the effective administration of this
article, including, but not limited to:

(a) Such rules and regulations in connection with the activities of
mortgage brokers, mortgage bankers, mortgage loan servicers and exempt
organizations as may be necessary and appropriate for the protection of
consumers in this state;

(b) Such rules and regulations as may be necessary and appropriate to
define improper or fraudulent business practices in connection with the
activities of mortgage brokers, mortgage bankers, mortgage loan
servicers and exempt organizations in making mortgage loans;

(c) Such rules and regulations under this article regarding the
origination, sale or servicing of manufactured home loans as may be
necessary and appropriate for the protection of consumers;

(d) Such rules and regulations as may define the terms used in this
article and as may be necessary and appropriate to interpret and
implement the provisions of this article; and

(e) Such rules and regulations as may be necessary for the enforcement
of this article.

The superintendent is hereby authorized and empowered to make such
specific rulings, demands and findings as the superintendent may deem
necessary for the proper conduct of the mortgage lending industry.

4. Exemptions from provisions of article. No person shall be subject
to the licensure or registration provisions of this article if he or she
is employed by an exempt organization, a licensee or registrant, or a
mortgage loan servicer to assist in the performance of the business
activities described in this article for the exempt organization,
licensee or registrant, or a mortgage loan servicer or is engaged in
regulated activities as an associate or affiliate of a registrant, a
licensee, a mortgage loan servicer or exempt organization which has
filed an undertaking of accountability with the superintendent.

No employee of an exempt organization shall be subject to the
licensure or registration provisions of this article due to such
employee's assisting in the performance of the business activities of a
mortgage banker that is controlled by the exempt organization or
affiliated with the exempt organization through common ownership or
control.

5. Activities of mortgage brokers, mortgage bankers, mortgage loan
servicers and exempt organizations. (a) Mortgage brokers may not make
mortgage loans in this state;

(b) Mortgage brokers shall solicit, process, place and negotiate
mortgage loans with a mortgage banker licensed pursuant to the
provisions of this article or exempt organization as defined herein or
pursuant to regulations as promulgated by the banking board or
prescribed by the superintendent and in conformity with the provisions
of this chapter, such rules and regulations as may be promulgated by the
superintendent thereunder and all applicable federal laws and the rules
and regulations promulgated thereunder;

(c) Mortgage bankers and exempt organizations shall make mortgage
loans in conformity with the provisions of this chapter, such rules and
regulations as may be promulgated by the superintendent thereunder and
all applicable federal laws and the rules and regulations promulgated
thereunder;

(d) Mortgage loan servicers shall engage in the business of servicing
mortgage loans in conformity with the provisions of this chapter, such
rules and regulations as may be promulgated by the superintendent
thereunder and all applicable federal laws and the rules and regulations
promulgated thereunder.

(e) No mortgage banker, mortgage broker or exempt organization shall
conduct business with any person, partnership, association, corporation
or other entity which it knows or should have known is acting as a
mortgage banker or a mortgage broker without being licensed or
registered as required by this article. A person, partnership,
association, corporation or other entity who provides non-residential
subordinate loans shall be exempt from this paragraph. A mortgage
banker, mortgage broker or exempt organization shall promptly notify the
department of any such unlicensed or unregistered operations.

(f) Nothing in this section shall be construed to limit any otherwise
applicable state or federal law or regulations.

5-a. Mortgage brokers and federal housing administration-insured
mortgage loans. (a) Notwithstanding the provisions of this section, a
mortgage broker may enter into agreements with federally-approved
sponsors and make mortgage loans, which are insured by the federal
housing administration, for sale or transfer to such sponsors, provided
that such mortgage broker:

(i) meets all federal requirements as a loan correspondent and
receives and maintains federal approval;

(ii) prior to making any such federal housing administration-insured
mortgage loans, receives the superintendent's approval;

(iii) maintains the superintendent's approval;

(iv) enters into agreements only with federally-approved sponsors who
are licensed mortgage bankers or exempt organizations;

(v) promptly notifies the superintendent when it enters into an
agreement with a federally-approved sponsor and when any such agreement
terminates. The federally-approved sponsor shall also promptly notify
the superintendent when any such agreement with a mortgage broker
terminates;

(vi) maintains a written agreement with its federally-approved
sponsors to fund all federal housing administration-insured mortgage
loans that the mortgage broker makes;

(vii) issues a lock-in agreement or commitment only after receiving
approval for such agreement or commitment from its federally-approved
sponsors; and

(viii) maintains at all times the federal net worth requirement.

(b) A federally-approved sponsor is responsible to the superintendent
for the actions of any mortgage broker which is its loan correspondent
in regard to the making of a mortgage loan insured by the federal
housing administration.

(c) If a mortgage broker's federal approval is surrendered, suspended
or revoked, the authorization granted pursuant to this subdivision shall
immediately cease and the mortgage broker shall immediately notify the
superintendent of the surrender, suspension or revocation.

(d) The approval of the superintendent pursuant to paragraph (a) of
this subdivision may be immediately suspended or revoked in the sole
discretion of the superintendent if it is found that the making of
federal housing administration-insured mortgage loans under this section
by a mortgage broker is inconsistent with the provisions of section five
hundred eighty-nine of this chapter.

(e) Notwithstanding the provisions of this section and sections five
hundred ninety-three-a and five hundred ninety-five-a of this chapter,
the superintendent may establish regulations to implement this
subdivision, and may impose requirements and conditions on mortgage
brokers which supplement or exceed federal requirements.

6. The superintendent is hereby authorized and empowered, consistent
with the declaration of policy set forth in this article, to exempt by
rule or regulation from any or all of the provisions of this article any
or all licensees or exempt organizations as defined in paragraph (e) of
subdivision one of this section with respect to credit line mortgages,
installment loans and home improvement loans.