Senate Bill 369 - Kansas Mortgage Business Act

Mortgage Transition FAQs

Key Changes

Earlier this year, the Kansas Legislature passed, and the governor signed into law, legislation to update the Kansas Mortgage Business Act (KMBA) (K.S.A. 9-2201 et seq.). The bill, SB 369, takes effect July 1, 2016. Among other provisions, SB 369 places all companies that conduct mortgage business in Kansas under the KMBA for licensing purposes. Companies that currently hold a Supervised Lender license will transition to a Mortgage Company (MC) license later this year. Details will follow in a separate notice to affected companies in the coming weeks. Please note that companies currently holding a MC license with the OSBC will not see any changes to their license or licensing process as a result of this bill. MC license numbers are in the format MC.0009999, for example.

However, SB 369 makes additional changes to mortgage laws in Kansas that will be applicable to all current and future MC licensees. Key changes are highlighted below, along with a link to the text of the bill. Again, these provisions will become effective July 1, 2016.

SB 369 added or modified the following definitions in K.S.A. 9-2201. Changes to existing law are in italics:

Application -This definition was added to set out what constitutes a MC application in Kansas.

"Application" means the submission of a consumer's financial information, including the consumer's name, income and social security number to obtain a credit report, the property address, an estimate of the value of the property and the mortgage loan amount sought, for the purpose of obtaining an extension of credit.

Mortgage business -This definition sets out the types of activity that constitute mortgage business in Kansas. The definition clarifies that an entity that "holds the rights" to engage in any of these activities is conducting mortgage business.

"Mortgage business" means engaging in, or holding out to the public as willing to engage in, for compensation or gain, or in the expectation of compensation or gain, directly or indirectly, the business of making, originating, servicing, soliciting, placing, negotiating, acquiring, selling, arranging for others, or holding the rights to or offering to solicit, place, negotiate, acquire, sell or arrange for others, mortgage loans in the primary market.

Mortgage loan -This definition was modified to clarify that mortgages of any lien position are covered by the KMBA.

''Mortgage loan'' means a loan or agreement to extend credit made to one or more individuals which is secured by a first or subordinate mortgage, deed of trust, contract for deed or other similar instrument or document representing a security interest or lien, except as provided for in K.S.A. 60-1101 through 60-1110, and amendments thereto, upon any lot intended for residential purposes or a one-to-four family dwelling as defined in 15 U.S.C. 1602(w), located in this state, occupied or intended to be occupied for residential purposes by the owner, including the renewal or refinancing of any such loan.

Mortgage servicer -This definition was added to clarify what constitutes a mortgage servicer (as set out in the mortgage business definition).

"Mortgage servicer" means any person engaged in mortgage servicing;

Mortgage servicing -This definition was added to clarify mortgage servicing activity in Kansas.

"Mortgage servicing" means collecting payment; remitting payment for another; or the right to collect or remit payment of any of the following: principal, interest, tax, insurance, or other payment under a mortgage loan.

Primary market -This definition was modified to clarify what constitutes the market where mortgage business is conducted that is subject to the KMBA. It is intended to capture activity that occurs once the original lender sells a loan or servicing rights to another entity whose activity is licensed under the KMBA. It is not written or intended to subject to the KMBA an exempt entity or an investor who may indirectly hold mortgage loans through investments such as mortgage-backed securities which may include the loan, but where such investor does not regularly engage in mortgage business.

''Primary market'' means the market wherein mortgage business is conducted including activities conducted by any person who assumes or accepts any mortgage business responsibilities of the original parties to the transaction.

K.S.A. 9-2202
Not-for-profit -Exempts from the KMBA not-for-profit entities that provide mortgage loans for building or rehabilitating homes for low-income Kansans.

K.S.A. 9-2203
Mortgage licensing -Clarifies that no other license is required to conduct non-depository mortgage business in the state other than a KMBA license; no dual license requirement is contemplated for entities engaged solely in mortgage business.

K.S.A. 9-2205
Electronic certificate -Modified to reflect that the OSBC no longer issues paper licenses, but instead provides these electronically, and that the license or registration becomes effective as of the date specified in writing by the commissioner.

K.S.A. 9-2208(a)
Display of license -Current law requires a license to be displayed at the principal place of business. The bill modifies this provision to provide that "each licensee shall make available the evidence of licensure of each licensed location in a way that reasonably assures recognition by consumers and members of the general public."

K.S.A. 9-2208(c)
NMLS ID in lieu of Kansas license number -Provides that licensees may use either the MC license number assigned by the OSBC or their Nationwide Mortgage Licensing System unique identifier (NMLS ID) for identification purposes on solicitations and advertisements for state compliance purposes.

K.S.A. 9-2208(c)
Record Retention -Adjusts the record retention period for solicitations and advertisements to 36 rather than 24 months to align with record retention requirements for other documentation.

K.S.A. 9-2209(a)
Provides OSBC the authority to accept consumer complaints, provide guidance to persons and groups on their rights and duties under the KMBA, enter into informal agreements, and issue, amend and revoke administrative guidance.
(17) receive and act on complaints, take action designed to obtain voluntary compliance with the provisions of the Kansas mortgage business act or commence proceedings on the commissioner's own initiative;
(18) provide guidance to persons and groups on their rights and duties under the Kansas mortgage business act;
(19) enter into any informal agreement with any mortgage company for a plan of action to address violations of law. The adoption of an informal agreement authorized by this paragraph shall not be subject to the provisions of K.S.A. 77-501 et seq., and amendments thereto, or K.S.A. 77-601 et seq., and amendments thereto. Any informal agreement authorized by this paragraph shall not be considered an order or other agency action, and shall be considered confidential examination material pursuant to K.S.A. 9-2217, and amendments thereto. All such examination material shall also be confidential by law and privileged, shall not be subject to the open records act, K.S.A. 45-215 et seq., and amendments thereto, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private civil action. The provisions of this paragraph shall expire on July 1, 2021, unless the legislature reviews and reenacts this provision pursuant to K.S.A. 45-229, and amendments thereto, prior to July 1, 2021; and
(20) issue, amend and revoke written administrative guidance documents in accordance with the applicable provisions of the Kansas administrative procedure act.

K.S.A. 9-2216(c)
Journal -Provides flexibility regarding the format in which minimum documentation requirements are maintained.

K.S.A. 9-2216a(b)
MCR in lieu of Kansas Annual Report -Permits the OSBC to accept the Mortgage Call Report (MCR) in lieu of a state annual report.

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Mortgage Transition FAQs