Assigned to FIN AS PASSED BY COW
ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
AMENDED
FACT SHEET FOR S.B. 1204
mortgage brokers; bankers; qualifications
Purpose
Allows an employee of an affiliated entity or parent company to be designated as the
responsible individual for a mortgage broker, commercial mortgage broker or commercial
mortgage banker licensee and removes the state-residency requirement for the responsible
individual for a commercial mortgage banker licensee. Requires the Director of the Department of
Insurance and Financial Institutions (DIFI) to administer certificates of exemption to applicants
and outlines exemption application procedures.
Background
A person who brokers only commercial mortgage loans must obtain either a mortgage
broker license or a commercial mortgage broker license. A person who brokers residential
mortgage loans must obtain a mortgage broker license. Current statute prohibits the Deputy
Director of DIFI from granting a mortgage broker or commercial mortgage broker license to a
person, other than a natural person, who is not registered to do business in Arizona.
A mortgage broker or commercial mortgage broker licensee who is a natural person and
not a resident of Arizona must designate one employee, who is not an independent contractor, as
the individual responsible for the licensee. A responsible individual must be a resident of Arizona,
in active management of the licensee's activities and meet statutory mortgage broker or commercial
mortgage broker licensee qualifications (A.R.S. § 6-903).
A commercial mortgage banker licensee must designate one officer, director, member, partner,
employee or trustee, who is not an independent contractor, as the individual responsible for the
licensee. A responsible individual for a commercial mortgage banker licensee must be a resident of
Arizona, in active management of the licensee's activities and have at least three years' experience in
commercial mortgage banking or equivalent lending experience in a related business (A.R.S. § 6-976).
An affiliate is an entity which directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with the entity specified (A.R.S. § 6-901).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Allows a mortgage broker, commercial mortgage broker or commercial mortgage banker
licensee who is a natural person and nonresident of Arizona to designate an employee of an
affiliated entity or the parent company of the licensee as the responsible individual. FACT SHEET – Amended
S.B. 1204
Page 2
2. Removes the Arizona residency requirement for the responsible individual of a commercial
mortgage banker licensee.
3. Allows a parent company to apply for and be granted a certificate of exemption on behalf of
an entity that allows the responsible individual for a mortgage broker or commercial mortgage
broker licensee to reside out of state, if the responsible individual:
a) is a natural person;
b) meets the statutory requirements for responsible individuals; and
c) receives notification by the parent company that the parent company has been granted a
certificate of exemption by the Director of DIFI (Director).
4. Requires a parent company to apply on behalf of an entity and submit an attestation that the
parent company:
a) maintains a physical presence in Arizona;
b) does not have any disciplinary actions by DIFI; and
c) has a class of securities registered with the U.S. Securities and Exchange Commission.
5. Requires a responsible individual applicant to pay all exemption certificate fees.
6. Allows the Director to revoke a certificate of exemption if the Director finds:
a) the interests of the consumer are not met; or
b) the requirements of a responsible individual relating to certificates of exemption are not
met.
7. Requires the Director, if the Director denies an application for or revokes a certificate of
exemption, to issue an order outlining the findings of fact, conclusions of law and reasons for
denial or revocation and grants the applicant a right to an administrative hearing.
8. Authorizes a certificate of exemption to be continuous throughout the license period.
9. Allows the Director to prescribe rules for the exemption of responsible individuals and requires
the Director to prescribe an attestation form.
10. Makes technical and conforming changes.
11. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Reinstates the state-residency requirement for a responsible individual for a mortgage broker
and commercial mortgage broker licensee, unless a certificate of exemption is authorized by
the Director.
2. Outlines requirements for parent company applicants for a certificate of exemption from the
in-state responsible individual residency requirement on mortgage broker and commercial
mortgage broker licensees. FACT SHEET – Amended
S.B. 1204
Page 3
3. Requires the Director to authorize, deny or revoke an out-of-state exemption certificate
application and to prescribe forms and any rules necessary to administer out-of-state
exemptions.
4. Makes conforming changes.
Amendments Adopted by Committee of the Whole
1. Removes the requirement that a parent company must employ at least 5,000 employees
nationwide to apply for a certificate of exemption.
2. Makes conforming changes.
Senate Action
FIN 2/16/22 DPA 9-0-1
Prepared by Senate Research
February 24, 2022
MG/KJA/slp