§24.2 - Licensing

• Jurisdiction: Washington

§24.2 LICENSING

This section discusses licensing of mortgage brokers and loan originators in Washington.

(1) Commercial loans

At present, no license is required to make or broker a commercial real estate loan in Washington. However, effective October 1, 2013, a party who purchases a commercial (or residential) loan that is in default at the time of purchase may need to be licensed as a debt collection agency under Chapter 19.16 RCW to enforce the loan documents. See RCW 19.16.100 (as amended by Laws of 2013, Ch. 148 §1).

(2) Residential loans

Two separate state licensing statutes apply to residential mortgage lending in Washington—the Washington Mortgage Broker Practices Act, Chapter 19.146 RCW, and the Washington Consumer Loan Act, Chapter 31.04 RCW. The Washington State Department of Financial Institutions (DFI) is the state agency with regulatory and enforcement authority under both statutes. Regulations under the Mortgage Broker Practices Act appear in Chapter 208-660 WAC, and regulations under the Consumer Loan Act appear in Chapter 208-620 WAC. In addition, DFI occasionally issues interpretive statements and interpretive letters, which may be available on the DFI website. See, e.g., Wash. St. Dep't of Fin. Inst., Interpretive Letters and Statements, http://www.dfi.wa.gov/resources/interpretivelettersall.htm (last visited June 6, 2014). DFI has the authority, which is frequently exercised, to impose individual sanctions for violations of the Mortgage Broker Practices Act and the Consumer Loan Act. Doing business as an entity will not necessarily protect the owners of a business from personal liability in a DFI enforcement action. A violation of the Consumer Loan Act or the Mortgage Broker Practices Act is also a per se violation of the Washington Consumer Loan Act. RCW 19.146.100; RCW 30.04.208.

(a) Mortgage Broker Practices Act

The Washington Mortgage Broker Practices Act, Chapter 19.146 RCW, applies to "mortgage brokers" and "mortgage loan originators." The Mortgage Broker Practices Act imposes a licensing requirement on mortgage brokers and mortgage loan originators who are not eligible for an exemption from the requirements of the Act, and also imposes disclosure requirements and substantive restrictions on their activities. Licensees are subject to fees and annual assessments, bonding requirements, and examination at such intervals as DFI deems necessary. RCW 19.146.228, .235(1); WAC 208-660-175.

The term "mortgage broker" is denned to include any person or entity who

for direct compensation or gain, or with the expectation of direct compensation or gain (a) assists a person in obtaining or applying to obtain a residential mortgage loan or performs residential mortgage loan modification services or (b) holds himself or herself out as being capable to assist a person in obtaining or applying to obtain a residential mortgage loan or provide residential mortgage loan modification services.

RCW 19.146.010(14) (emphasis added).

The term "loan originator" is denned to include "a natural person who for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain (i) takes a residential mortgage loan application for a mortgage broker, or (ii) offers or negotiates terms of a mortgage loan." RCW 19.146.010(11)(a) (emphasis added). Additionally, it includes a person who "performs residential mortgage loan modification services." RCW 19.146.010(11)(b). "Loan originator" also includes "a person who holds themselves (sic) out to the public as able to perform any of these activities." RCW 19.146.010(11)(a). The term "loan originator" does not include "persons performing purely administrative or clerical tasks for a...