Assigned to FIN AS PASSED BY HOUSE
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. Includes an employee of an affiliated entity or the parent company of the licensee in the
individuals who may be designated as the responsible individual for a mortgage broker or
commercial mortgage broker licensee that is not a natural person in order to entitle the officers,
directors, members, partners, trustees and employees of the licensee to engage in the mortgage
business. FACT SHEET – Amended
S.B. 1204
Page 2
2. Includes an employee of an affiliated entity or the parent company of the licensee in the
individuals who may be designated as the responsible individual for a commercial mortgage
banker licensee in order to entitle the officers, directors, members, partners, trustees and
employees of the licensee to engage in the mortgage business.
3. Removes the Arizona residency requirement for the responsible individual of a commercial
mortgage banker licensee.
4. 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).
5. Requires a parent company that applies on behalf of an entity to 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.
6. Requires a responsible individual applicant to pay all exemption certificate fees.
7. 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 exemption certificates are not met.
8. 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.
9. Authorizes a certificate of exemption to be continuous throughout the license period.
10. Allows the Director to prescribe rules for the exemption of responsible individuals and requires
the Director to prescribe an attestation form.
11. Defines generally accepted accounting principles as the U.S. Generally Accepted Accounting
Principles issued by the Financial Accounting Standards Board or the International Financial
Reporting Standards issued by the International Accounting Standards Board for the purposes
of statutes governing mortgage broker and banker licensees.
12. Makes technical and conforming changes.
13. Becomes effective on the general effective date.
FACT SHEET – Amended
S.B. 1204
Page 3
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 for mortgage broker and commercial
mortgage broker licensees.
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.
Amendments Adopted by the House of Representatives
1. Removes the authorization for a mortgage broker, commercial mortgage broker or commercial
mortgage banker licensee that 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.
2. Allows specified employees to be designated as the responsible individual for:
a) a mortgage broker or commercial mortgage broker licensee that is not a natural person; and
b) a commercial mortgage banker licensee.
3. Defines generally accepted accounting principles for the purposes of statutes governing
mortgage broker and banker licensees.
4. Makes conforming changes.
Senate Action House Action
FIN 2/16/22 DPA 9-0-1 COM 3/22/22 DPA 9-0-0-1
3
rd
Read 2/28/22 26-0-4 3
rd
Read 4/7/22 52-0-8
Prepared by Senate Research
April 7, 2022
MG/KJA/slp