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The Oregon Administrative Rules contain OARs filed through November 15, 2014
 
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DEPARTMENT OF CONSUMER AND BUSINESS SERVICES,
DIVISION OF FINANCE AND CORPORATE SECURITIES

 

DIVISION 870

DISHONEST, FRAUDULENT, UNFAIR AND UNETHICAL PRACTICES

General Provisions

441-870-0010

Dishonest, Fraudulent, Unfair and Unethical Practices

As used in ORS 86A.115(2), the terms “dishonest, fraudulent, or illegal practices or conduct” and “unfair or unethical practices or conduct,” separately or in any combination thereof, shall include but not be limited to those acts defined herein as “Manipulative, deceptive, or fraudulent device or contrivance” or “fraudulent, deceptive or manipulative act or practice.”

Stat. Auth.: ORS 86A.136
Stats. Implemented: ORS 86A.115
Hist.: FCS 3-1993, f. & cert. ef. 11-15-93

441-870-0020

General Definition

“Manipulative, Deceptive, or Fraudulent Device or Contri?vance” and “Fraudu?lent, Deceptive, or Manipulative Act or Prac?tice” are defined to include:

(1) Any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person;

(2) The making of any untrue statement of a material fact and any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or

(3) Any representation by a licensee or a person acting on behalf of a licensee, that the licensing of any person with the Director or the failure of the Director to deny or revoke such license, indicates, in any way, that the Director has passed upon or approved the financial standing, business, or conduct of any person, or the merits of any transaction.

Stat. Auth.: ORS 86A.136
Stats. Implemented: ORS 86A.115
Hist.: FCS 3-1993, f. & cert. ef. 11-15-93; FCS 11-1994, f. 11-4-94, cert. ef. 11-15-94

441-870-0030

Borrower Transactions

A dishonest, fraudulent or illegal practice or conduct under ORS 86A.115 includes, but is not limited to, the following conduct by a person in connection with a mortgage loan:

(1) Making any representation or guarantee to a customer that a loan can be secured by a date certain;

(2) Entering into a lock agreement for a specific interest rate or advertising the availability of a lock agreement for a specific interest rate unless:

(a) The agreement or advertisement also specifies the terms of the lock agreement including the length of the lock period and the costs to the borrower associated with the lock agreement; and

(b) The mortgage banker or mortgage broker can demonstrate that they have successfully closed loans under lock agreements, which provided for similar interest rates within similar time frames;

(3) Making a representation to a customer that interest rates, points, or other financing terms are available at the time the representation was made unless the interest rates, points, or terms are actually available within the time frame represented from:

(a) A lender with whom the mortgage banker or mortgage broker maintains a correspondent or loan brokerage agreement;

(b) A person exempt from licensing pursuant to ORS 86A.100(5)(b); or

(c) One or more persons, other than persons exempt under ORS 59.035(4), if the mortgage banker or mortgage broker has a written commitment from such persons to fund the mortgage loan at the interest rate, points or other financing term offered to the borrower.

(4) Failing to disclose in writing to a borrower before negotiating loan terms for a mortgage loan that the person, mortgage banker or mortgage broker, or mortgage loan originator has a verbal or written contract, joint venture agreement or any other type of understanding with a builder or a realtor who is a party to the transaction and that this relationship may result in the borrower getting less favorable loan terms.

(5) Failing to refund within 72 hours of rejecting a loan, the advance fees paid which have not been distributed pursuant to a signed loan agreement or, in the event the loan agreement does not contain provisions for acceptance and distribution of advance fees, pursuant to a fee agreement;

(6) Failing to account, after reasonable notice, to any person whose property secures a loan made by the mortgage banker or mortgage broker for any money which that person has paid to the mortgage banker or mortgage broker for the payment of third party obligations including, but not limited to, appraisal fees, title search fees, taxes, and insurance premiums;

(7) Failing to comply within 30 working days of a written request by a borrower made within 90 days of notice that the loan will not be obtained, for copies of any appraisal, title report, or credit report paid for by the borrower, unless the agreement between the mortgage banker or mortgage broker and the credit service prohibits such distribution;

(8) Providing a savings statement to the borrower, unless:

(a) The amount of savings the borrower will realize can be projected with certainty;

(b) The amount of savings actually realized is within $1,000.00 of the amount projected;

(c) The savings statement includes a disclaimer that the actual amount of savings may vary; and

(d) The savings statement shows changing payments over the life of the loan when the loan being offered is an adjustable rate product.

(9) Requiring or permitting a consumer to sign promissory notes and trust deeds prior to:

(a) The loan receiving final written loan approval;

(b) Full disclosure to the consumer of repayment terms; and

(c) The lender having funds available to fund the loan.

(10) Delaying release of loan funds to the borrower, the borrower's approved representative or escrow for more than one business day following recording of the lien.

Stat. Auth.: ORS 86A.136
Stats. Implemented: ORS 86A.115
Hist.: FCS 3-1993, f. & cert. ef. 11-15-93; FCS 11-1994, f. 11-4-94, cert. ef. 11-15-94; FCS 4-1999, f. & cert. ef. 12-23-99; FCS 10-2001, f. 12-24-01, cert. ef. 1-1-02; FCS 3-2008, f. 5-2-08, cert. ef. 5-7-08; FCS 14-2009, f. 12-30-09, cert. ef. 1-4-10

441-870-0040

Legend Requirements

A dishonest, fraudulent or illegal practice or conduct under ORS 86A.115 includes, but is not limited to, the following conduct a person in connection with a mortgage loan:

(1) Negotiating a residential loan agreement that provides for a penalty to be charged for repaying the loan prior to the date provided for repayment in the loan agreement without providing notice in writing of a size equal to at least ten-point bold or underlined type that substantially conforms to the following:

NOTICE TO THE BORROWER: Do not sign this loan agreement before you read it. This loan agreement provides for the payment of a penalty if you wish to repay the loan prior to the date provided for repayment in the loan agreement.

If a residential loan agreement does not contain a notice as required by this section, a lender shall not collect from the borrower a penalty for payment of the loan prior to the date provided for repayment.

(2) Negotiating a residential mortgage loan agreement that authorizes the lender to refuse to accept repayment of the loan prior to the date provided for repayment in the loan agreement without providing notice in writing of a size equal to at least ten-point bold or underlined type that substantially conforms to the following:

NOTICE TO THE BORROWER: Do not sign this loan agreement before you read it. This loan agreement authorizes the lender to refuse to accept repayment of this loan prior to the date provided for repayment in this loan agreement.

If a residential loan agreement does not contain a notice as required by this section, a lender shall not refuse to accept repayment of the loan by the borrower prior to the date provided for repayment.

Stat. Auth.: ORS 86A.136
Stats. Implemented: ORS 86A.115
Hist.: FCS 3-1993, f. & cert. ef. 11-15-93; FCS 11-1994, f. 11-4-94, cert. ef. 11-15-94; FCS 14-2009, f. 12-30-09, cert. ef. 1-4-10

441-870-0050

Investor Transactions

A dishonest, fraudulent or illegal practice or conduct under ORS 86A.115 includes, but is not limited to, the following conduct by a person in connection with a mortgage loan:

(1) Failing to provide to investors who are persons other than persons enumerated pursuant to ORS 59.035(4) and (5), prior to the time of sale of any interest in real estate paper, a written disclosure document which contains the following information:

(a) The priority of the lien created by the security and the total face amount of any senior liens;

(b) A statement whether any future advances may have a priority senior to that of the lien created by the security;

(c) A copy of the most recent complete property tax statement, covering the real property underlying the security;

(d) The value of the real property underlying the security. This value must be provided by:

(A) The tax assessed value if it is 100 percent of the true cash value and is on the same property underlying the security; or

(B) An appraisal by an independent licensed appraiser.

(e) The debtor's payment record, on the instrument being sold for the two years immediately preceding the sale. When the debtor's payment record is less than two years or not available:

(A) The payment record to date or a statement that payment records are not available; and

(B) A current credit report on the debtor prepared by a credit reporting agency or a current financial statement of the debtor.

(f) The terms of any senior lien or a copy of the instrument creating the lien and any assignments;

(g) If the mortgage seller, seller's agent, or any affiliate is the debtor, a statement disclosing that fact and the amount of cash paid to the debtor in consideration for the issuance of the real estate paper;

(h) A statement of any commissions, collection fees, and other costs chargeable to the purchaser of the real estate paper;

(i) A prominent statement of any balloon payments;

(j) In the case of a sale of junior real estate paper, a statement of the risk of loss on foreclosure of a senior lien; and

(k) A statement of whether or not the purchaser of the real estate paper will be insured against casualty loss.

(2) In the case of transactions involving securities sold under a registration which is currently effective, compliance with the provisions of this rule shall be deemed to be satisfied if the mortgage banker or mortgage broker provides to the investor a copy of the offering memorandum which was submitted to the director as part of the application to register securities pursuant to ORS Chapter 59.

(3) In the case of transactions which are exempt from registration under the provisions of ORS 59.035(7), compliance with the provisions of this rule shall be deemed to be satisfied if the mortgage banker or mortgage broker provides to the investor a copy of the risk disclosure section of an offering memorandum prepared for sales of similar, but non-exempt securities, if the memorandum was submitted to the director as a part of the registration application and that the registration is effective at the time the document is provided to the investor.

Stat. Auth.: ORS 59.035(7) & 86A.136
Stats. Implemented: ORS 86A.115
Hist.: FCS 3-1993, f. & cert. ef. 11-15-93; FCS 11-1994, f. 11-4-94, cert. ef. 11-15-94; FCS 2-2004, f. & cert. ef. 8-5-04; FCS 14-2009, f. 12-30-09, cert. ef. 1-4-10

441-870-0060

Delivery of Additional Documentation

“Manipulative, Deceptive, or Fraudulent Device or Contri?vance” and “Fraudu?lent, Deceptive, or Manipulative Act or Prac?tice” are defined to include:

(1) Failure to deliver to the purchaser or licensed escrow agent or title company the written evidence of the obligation, properly endorsed, together with the instrument creating the lien; and

(2) Failure to record the instrument creating the lien or assign?ment of the lien in a timely manner in the county or counties where the property is located and retain a copy of the recorded instrument in the customer file maintained by the licensee.

(3) The provisions of section (2) of this rule do not apply when the purchaser is an institutional investor as enumerated in ORS 59.035(4) or an accredited investor as enumerated in 59.035(5) provided the accredited investor has submitted an unsolicited written request that the instrument creating the lien or the assignment of the lien not be filed in the county or counties where the property is located.

Stat. Auth.: ORS 86A.136
Stats. Implemented: ORS 86A.115
Hist.: FCS 3-1993, f. & cert. ef. 11-15-93; FCS 11-1994, f. 11-4-94, cert. ef. 11-15-94

441-870-0070

Servicing Transactions

A dishonest, fraudulent or illegal practice or conduct under ORS 59.865 includes, but is not limited to, the following conduct by a person in connection with a mortgage loan:

(1) Failing to disclose that the lender may sell the loan to another party.

(2) Failing to provide to borrowers an annual statement of the account of the borrower showing the unpaid principal balance of the mortgage loan at the end of the immediately preceding 12-month period, the interest paid during such period, the amounts deposited into escrow and the amounts disbursed from escrow during the period.

Stat. Auth.: ORS 86A.136
Stats. Implemented: ORS 86A.115
Hist.: FCS 3-1993, f. & cert. ef. 11-15-93; FCS 14-2009, f. 12-30-09, cert. ef. 1-4-10

441-870-0080

Advertising

(1) Advertising containing any of the following is false, misleading or deceptive:

(a) A statement or representation of a specific installment amount in repayment of a loan without as least as prominently disclosing the following information about the loan:

(A) Principal amount;

(B) Annual percentage rate;

(C) Whether the interest rate is fixed or variable, and if variable, the loan terms;

(D) Number, amount and period of payments scheduled to the date of maturity; and

(E) Balance due at maturity (balloon payment) if not fully amortized;

(b) An interest rate without as least as prominently disclosing the annual percentage rate of the note;

(c) A statement or representation that the person can make or negotiate “low doc/no doc,” “no income/no asset,” “alt doc,” “stated income,” “stated asset,” “no ratio,” or similar loan products without at least as prominently disclosing that these products may have a higher interest rate, more points, or more fees than other products that require income documentation;

(d) An interest rate or annual percentage rate expressed in less than three decimal places, provided that ending zeros following the decimal point may be omitted;

(e) An offer to procure, arrange, or otherwise assist a borrower to obtain a mortgage loan on terms which the person cannot, does not intend, or does not want to provide, or which the person knows or should know cannot be reasonably provided;

(f) A statement or representation that all or most borrowers may or will qualify for a loan or that persons with bad credit histories or no credit histories may or will qualify for this loan unless the person can demonstrate that borrowers with bad credit or no credit have been routinely and successfully qualified for loans by that lender;

(g) Any statement or representation that would be in violation of Regulation X, 12 C.F.R. Part 1024, regarding kickbacks and unearned fees, including soliciting referrals with a promise to pay the advertising costs of any settlement provider;

(h) Any statement or representation that would be in violation of Regulation Z, 12 C.F.R. Part 1026, regarding advertising;

(i) The phrase “wholesale rates” when the advertising is directed to or accessible by the public;

(j) Any statement or representation about a loan that carries the potential for negative amortization without clearly identifying that potential and without at least as prominently disclosing:

(A) The market or fully indexed rate;

(B) The term of the reduced payments;

(C) The term of the entire loan; and

(D) The annual percentage rate;

(k) Official looking emblems or logos, such as eagles, crests, or flags, which resemble a format similar to that used by any governmental agency;

(l) Envelopes which resemble an official government mailing, from entities such as the Internal Revenue Service, U.S. Treasury, a state taxing authority, or other governmental mailer;

(m) Slogans such as "Buy U.S. Savings Bonds" without at least as prominently disclosing that the mailing is an advertisement and not from a government agency;

(n) The name or logo of a financial institution or the holder of an existing loan when the person responsible for the advertisement or named in the advertisement has no association, affiliation or cooperative agreement with the financial institution or holder of the loan, without at least as prominently disclosing that person’s name and the following statements:

(A) “This is an advertisement”;

(B) “This is an offer for a new loan”; and

(C) “This offer is not related to your existing mortgage lender or holder of your loan”.

(o) Terms such as “verified as eligible”, “preapproved”, “prequalified” or similar words or phrases, without at least as prominently disclosing language that describes prerequisites to qualify for the loan, including, but not limited to, income verification, credit check, and property appraisal or evaluation;

(p) Solicitations from a particular mortgage loan originator or a group of mortgage loan originators without the unique identifier of each mortgage loan originator;

(q) Advertisements pertaining to a particular mortgage loan originator or a group of mortgage loan originators without the unique identifier of each mortgage loan originator;

(r) Promotional materials pertaining to a particular mortgage loan originator or a group of mortgage loan originators without the unique identifier of each mortgage loan originator; and

(s) Websites if the website lists the mortgage loan originator’s name in relation to residential mortgage lending without the unique identifier of the particular mortgage loan originator.

(2) All advertisements a mortgage banker or mortgage broker disseminates by any means must contain the mortgage banker or mortgage broker’s unique identifier or Oregon-issued license number, the mortgage banker or mortgage broker’s name, or the mortgage banker or mortgage broker’s assumed business name that conforms to a name on file with the director.

Stat. Auth.: ORS 86A.136 & 86A.163
Stats. Implemented: ORS 86A.115, 86A.154, 86A.163
Hist.: FCS 3-2008, f. 5-2-08, cert. ef. 5-7-08; FCS 14-2009, f. 12-30-09, cert. ef. 1-4-10; FCS 3-2010, f. 3-18-10, cert. ef. 3-22-10; FCS 5-2014, f. 9-18-14, cert. ef. 1-1-15

441-870-0081

Use of Certification or Professional Designations by Mortgage Banker, Mortgage Broker, or Mortgage Loan Originator

(1) The use of a certification or professional designation by any mortgage banker, mortgage broker, or mortgage loan originator in connection with making, negotiating or offering to make or negotiate a mortgage banking loan or a mortgage loan, taking a residential mortgage loan application, offering or negotiating the terms of a residential mortgage loan, selling real estate paper, or accepting funds for investment in real estate paper, that indicates or implies that the person has special certification or training, in such a way as to mislead any person is a dishonest, fraudulent or illegal practice or conduct under ORS 86A.115. Prohibited use of a certification or designation under this rule includes, but is not limited to, the following activities:

(a) Use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use the certification or designation.

(b) Use of a nonexistent or self-conferred certification or professional designation.

(c) Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training or experience that the person using the certification or professional designation does not have.

(d) Use of a certification that falsely states or implies specialized knowledge of the financial needs of a particular segment of the population or class of borrowers that the person using the certification or professional designation does not have.

(e) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

(A) Is primarily engaged in the business of instruction in sales or marketing, or both;

(B) Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(C) Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or

(D) Does not have reasonable continuing education requirements for its designees to maintain the designation or certificate.

(2) The director recognizes a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of section (1) (e) of this rule when the organization is accredited by:

(a) The American National Standards Institute;

(b) The National Commission for Certifying Agencies;

(c) The National Association of Mortgage Brokers;

(d) The Mortgage Bankers Association; or

(e) An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued from the organization does not primarily apply to sales or marketing, or both.

(3) The director will consider whether a combination of words or an acronym would constitute a certification or professional designation that falsely indicates or implies that a person has special certification or training in advising or servicing a particular segment of the population or class of borrower.

(4) This rule does not apply to use of any of the following designations, titles, degrees, or certifications used by a person unless the facts and circumstances associated with the use of the designation indicate that the designation suggests or implies a greater degree of certification or training than the person possesses or that the designation otherwise misleads borrowers:

(a) A job title within an organization that is licensed, registered, or authorized by a state or federal financial services regulatory agency, when that job title:

(A) Indicates seniority or standing within the organization; or

(B) Specifies an individual’s area of specialization within the organization.

(b) A degree, certificate, or designation evidencing completion of an academic program at an institution of higher education that has been accredited by an organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes.”

(5) Violation of section (1) of this rule is an act, practice, or course of business which operates or would operates as a fraud or deceit upon a person, for the purposes of ORS 86A.154.

(6) The prohibitions in this rule and the remedy available to the director do not limit the director’s authority to enforce existing provisions of law and apply existing remedies.

Stat. Auth.: ORS 86A.136, 86A.163, 86A.242
Stats. Implemented: ORS 86A.115, 86A.154, 86A.163
Hist.: FCS 3-2010, f. 3-18-10, cert. ef. 3-22-10

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