STAND. COM. REP. NO. 435

Honolulu, Hawaii

, 2005

RE: S.B. No. 770

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Housing, to which was referred S.B. No. 770 entitled:

"A BILL FOR AN ACT RELATING TO MORTGAGE BROKERS,"

begs leave to report as follows:

The purpose of this measure is to replace the current law regulating mortgage brokers and solicitors with a new regulatory program that transfers oversight of the mortgage brokering industry within the Department of Commerce and Consumer Affairs from the Professional and Vocational Licensing (PVL) Division to the Division of Financial Institutions (DFI).

The Department of Commerce and Consumer Affairs, Hawaii Bankers Association, Mortgage Bankers Association of Hawaii, and Hawaii Association of Mortgage Brokers testified in support of this measure. Hawaii Lending Specialists, Commercial and Business Lending, Donald Lau Mortgage Broker, Inc., Cendant Timeshare Resort Group, and Primerica Financial Services Home Mortgages, Inc. testified in opposition to the measure. The Hawaii Financial Services Corporation presented comments on the measure.

This measure repeals chapter 454, Hawaii Revised Statutes, the law regulating the practice of mortgage brokering and mortgage soliciting, and replaces it with a new law that regulates mortgage brokers only and places the program under the jurisdiction of DFI, rather than PVL. The program's key provisions require licensing of mortgage brokers, establish pre-licensing and periodic examination requirements, mandate continuing education for licensees, increase bonding requirements, require compliance with federal and state lending laws, and establish mandatory disclosure requirements.

Your Committee finds that this measure proposes broad changes in the regulation of mortgage brokering that have raised concerns among those it proposes to regulate. Testimony received from your Committee indicated that some of the measure's provisions are ambiguous, overlap with federal law, and may have unintended consequences resulting in overly broad penalties and restricted practices.

Your Committee further finds that the proposed regulatory scheme warrants a more detailed review and discussions between DFI and members of the industry, and, therefore, the parties should convene during the legislative interim to develop enabling legislation for consideration by the 2006 Legislature.

Additionally, and in consideration of the above, any changes effected this session to the current regulatory program should be narrowly drawn, pending further review of the proposed new law. Accordingly, your Committee has amended this measure by replacing its contents with language that, rather than establishing a new regulatory program, transfers jurisdiction of the current program from PVL to DFI by:

(1) Redefining "mortgage commissioner" or "commissioner" to mean the Commissioner of Financial Institutions, rather than the Director of Commerce and Consumer affairs;

(2) Requiring an applicant for a mortgage broker or solicitor license to register with the Commissioner of Financial Institutions, rather than with the Business Registration Division; and

(3) Authorizing the Commissioner of Financial Institutions, rather than the Director of Commerce and Consumer Affairs, to establish regulatory fees applicable to mortgage brokers and solicitors.

Your Committee has also amended this measure to take effect on July 1, 2006, rather than July 1, 2005.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 770, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 770, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Housing,

____________________________

RON MENOR, Chair