The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Banking and Insurance
BILL: CS/SB 514
INTRODUCER: Senate Committee on Banking and Insurance and Senator Boyd
SUBJECT: Mortgage Brokering
DATE: January 18, 2024
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Moody Knudson BI Fav/CS
2. FP
3. RC
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 514 expands the list of loan originators, mortgage brokers, and mortgage lenders who are
exempted from regulation under ch. 494, F.S., to include a bona fide nonprofit organization and
its employees in certain circumstances.
The bill provides that for an organization to be a “bona fide nonprofit organization,” the Office
of Financial Regulation (“OFR”) must apply criteria and processes established by rule to
determine whether the organization satisfies a list of factors that must be met, including that the
organization that is exempt from federal income tax under s. 501(c)(3), I.R.C., promotes
affordable housing or provides homeownership education or similar services, conducts its
activities in a manner that serves public or charitable purposes, and that meets other specified
criteria.
The OFR must determine whether the loan terms are consistent with loan origination in a public
or charitable context, rather than a commercial context. The OFR must periodically examine the
books and activities of the organization and revoke its status as a bona fide nonprofit
organization if the specified criteria do not continue to be met.
The bill provides the Financial Services Commission (“Commission”) with rulemaking authority
to prescribe criteria and processes for the OFR to determine whether an organization satisfies the
requirements of a bona fide nonprofit organization.
REVISED: BILL: CS/SB 514 Page 2
The bill is effective July 1, 2024.
II. Present Situation:
The 2008 financial crisis began when losses on mortgage-related financial assets caused large
financial firms to experience financial distress, ultimately resulting in significant decreases in the
value of the United States housing market and the United State economy entering into a severe
recession that would ultimately be labeled the “Great Recession.”
1
In response, the United States
Congress enacted the Secure and Fair Enforcement for Mortgage Licensing Act of 2008
(S.A.F.E. Act) (12 U.S.C. s. 5101-5116), to reduce fraud and regulatory burden, enhance
consumer protection, and increase uniformity.
2
The S.A.F.E. Act
Enacted on July 30, 2008, the S.A.F.E. Act establishes minimum standards for the licensing and
registration of state-licensed mortgage loan originators, and mandates a nationwide licensing and
registration system for residential mortgage loan originators. In 2009, Florida adopted this
requirement for loan originators in s. 494.00312, F.S.
3
Florida also adopted parallel requirements
for persons (employers, businesses, and individuals) who are applicants for licenses as mortgage
brokers and mortgage lenders, exceeding the federal requirement. States are allowed to provide
for exemptions from the S.A.F.E. Act to bona fide nonprofit organization or its employees if,
under criteria and pursuant to processes established by the state, the state supervisory authority
determines that the organization:
4
Has the status of a tax-exempt organization under s. 501(c)(3) of the Internal Revenue
Code of 1986;
Promotes affordable housing or provides homeownership education, or similar
services;
Conducts its activities in a manner that serves public or charitable purposes, rather
than commercial purposes;
Receives funding and revenue and charges fees in a manner that does not incentivize
it or its employees to act other than in the best interests of its clients;
Compensates its employees in a manner that does not incentivize employees to act
other than in the best interests of its clients;
Provides or identifies for the borrower residential mortgage loans with terms
favorable to the borrower
5
and comparable to mortgage loans and housing assistance
provided under government housing assistance programs; and
Meets other standards that the state determines are appropriate.
1
John Weinberg, The Great Recession and Its Aftermath, Federal Reserve History (Nov. 22, 2013).
https://www.federalreservehistory.org/essays/great-recession-and-its-aftermath (last visitsed January 10, 2024).
2
12 U.S.C. s. 5101.
3
See Ch. 2009-241, L.O.F.
4
18 C.F.R. s. 1008.103(e)(7)(ii).
5
A state must determine that the terms are consistent with loan origination in a public or charitable context, rather than a
commercial context, for residential mortgage loans to have terms that are favorable to the borrower. 12 C.F.R.
1008.103(e)(7)(iv). BILL: CS/SB 514 Page 3
Under the S.A.F.E. Act, the state must periodically review the books and activities of the bona
fide nonprofit organization it determines is a bona fide nonprofit organization and revoke its
status if the organization does not continue to meet the above criteria.
6
State Regulation of Non-Depository Mortgage Business
The OFR regulates state-chartered banks, credit unions, other financial institutions, as well as
finance companies, and the securities industry.
7
The OFR’s Division of Consumer Finance
licenses and regulates various aspects of the non-depository financial services industries,
including individuals and businesses engaged in the mortgage business.
Under ch. 494, F.S., the OFR licenses and regulates the following individuals and businesses:
A loan originator, who, directly or indirectly, solicits or offers to solicit a mortgage loan,
accepts or offers to accept an application for a mortgage loan, negotiates or offers to
negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower
or lender, or negotiates or offers to negotiate the sale of an existing mortgage loan to a
noninstitutional investor for compensation or gain. The term includes an individual who is
required to be licensed as a loan originator under the S.A.F.E. Act. The term does not include
an employee of a mortgage broker or mortgage lender whose duties are limited to physically
handling a completed application form or transmitting a completed application form to a
lender on behalf of a prospective borrower.
8
A mortgage broker, who conducts loan originator activities through one or more licensed
loan originators employed by the mortgage broker or as independent contractors to the
mortgage broker.
9
A mortgage lender, who makes a mortgage loan or services a mortgage loan for others, or,
for compensation or gain, directly or indirectly, sells or offers to sell a mortgage loan to a
noninstitutional investor.
10
A mortgage lender may act as a mortgage broker.
11
Exemptions
The following persons are exempt from loan originator, mortgage broker and mortgage lender
regulations under ch. 494, F.S.:
12
Any person operating exclusively as a registered loan originator
13
in accordance with the
S.A.F.E. Act.
6
12 C.F.R. s. 1008.103(e)(7)(iii).
7
Section 20.121(3)(a)2. and (d), F.S. The OFR is housed within the Financial Services Commission (commission). The
commission, comprised of the Governor and Cabinet, appoints the OFR Commissioner. The commission is a separate budget
entity under the Department of Financial Services (DFS), and is not subject to the control or supervision by the DFS.
8
Section 494.001(18), F.S.
9
Section 494.001(23), F.S.
10
Section 494.001(24), F.S.
11
Section 494.0073, F.S.
12
Section 494.00115(1), F.S.
13
Section 494.001(31), F.S., defines a “registered loan originator” as “a loan originator who is employed by a depository
institution, by a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency,
or by an institution regulated by the Farm Credit Administration, and who is registered with and maintains a unique identifier
through the [Nationwide Mortgage Licensing System and Registry].” A registered loan originator must comply with federal
registration requirements rather than the loan originator licensing requirements under ch. 494, F.S. BILL: CS/SB 514 Page 4
A depository institution; certain regulated subsidiaries owned and controlled by a depository
institution; or institutions regulated by the Farm Credit Administration.
The Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation;
any agency of the Federal Government; any state, county, or municipal government; or any
quasi-governmental agency that acts in such capacity under the specific authority of the laws
of any state or the United States.
An attorney licensed in this state who negotiates the terms of a mortgage loan on behalf of a
client as an ancillary matter to the attorney’s representation of the client.
A person involved solely in the extension of credit relating to the purchase of a timeshare
plan.
A person who performs only real estate brokerage activities and is licensed or registered in
this state under part I of ch. 475, F.S., unless the person is compensated by a lender, a
mortgage broker, or other loan originator or by an agent of such lender, mortgage broker, or
other loan originator.
The following persons are exempt from the mortgage lender licensing requirements of ch. 494,
F.S.:
14
A person acting in a fiduciary capacity conferred by the authority of a court.
A person who, as a seller of his or her own real property, receives one or more mortgages in
a purchase money transaction.
A person who acts solely under contract and as an agent for federal, state, or municipal
agencies for the purpose of servicing mortgage loans.
A person who makes only nonresidential mortgage loans and sells loans only to institutional
investors.
An individual making or acquiring a mortgage loan using his or her own funds for his or her
own investment, and who does not hold himself or herself out to the public as being in the
mortgage lending business.
An individual selling a mortgage that was made or purchased with that individual’s funds for
his or her own investment, and who does not hold himself or herself out to the public as
being in the mortgage lending business.
A securities dealer, investment advisor, or associated person registered under ch. 517, F.S., is
exempt from regulation as a loan originator or mortgage broker under ch. 494, F.S., if specified
criteria are met.
15
There is no exemption under current Florida law for bona fide nonprofit organizations and its
employees. However, there are a few jurisdictions that have adopted exemptions for nonprofit
organizations.
16
14
Section 494.00115(3), F.S.
15
Section 494.00115(2), F.S.
16
Examples of other jurisdictions that have an exemption relating to nonprofit organizations include Ohio, Georgia, and
Indiana. See Ohio Rev. Code s. 1322.01(AA)(2)(g); O.C.G.A. s. 7-1-1001(a)(18); and IN Code s. 24-4.4-1-202. Colorado
exempts mortgage loan originators of self-help housing organizations, or employees or volunteers of self-help housing
organizations, from licensing and other regulatory requirements. C.R.S. s. 12-10-709. BILL: CS/SB 514 Page 5
Powers and Duties of the Commission and OFR
The OFR is responsible for the administration and enforcement of ch. 494., F.S., relating to loan
originators and mortgage brokers.
17
The Commission has discretion to adopt rules to administer
the chapter, including, but not limited to, rules relating to compliance with specified
requirements of the S.A.F.E. Mortgage Licensing Act of 2008.
18
Current law does not
specifically authorize the Commission to adopt rules to prescribe the criteria and processes that
must be used by the OFR to determine whether an organization is and remains a bona fide
nonprofit organization.
Licensing
Under ch. 494, F.S., these licensees are subject to:
Requirements for the maintenance of books and records relating to the licensee’s compliance
with the chapter, with regard to expenses paid by the licensee on behalf of the borrower, and
relating to its advertisements.
19
Investigations and examinations by the OFR.
20
The OFR’s enforcement authority, such as injunctions, cease and desist orders, suspension or
revocation of licensure, and administrative fines.
21
In order to obtain a license as a mortgage loan originator, an individual must:
22
Be at least 18 years of age and have a high school diploma or its equivalent;
Complete a 20-hour prelicensing class;
23
Pass a written test;
24
Submit an application form;
Submit nonrefundable application fees totaling $215;
Submit fingerprints, the cost of which is borne by the applicant; and
Authorize access to his or her credit report, the cost of which is borne by the applicant.
In order to obtain a license as a mortgage broker, a person must:
25
Submit an application form, which must designate a qualified principal loan originator;
Submit nonrefundable application fees totaling $525;
Submit fingerprints for each of the applicant’s control persons,
26
the cost of which is borne
by the person subject to the background check; and
17
Section 494.0011(1), F.S.
18
Section 494.0011(2), F.S.
19
Sections 494.0016 and 494.00165(2), F.S.
20
Section 494.0012, F.S.
21
Sections 494.0013, 494.0014, and 494.00255, F.S.
22
Section 494.00312, F.S.
23
The cost of prelicensing courses may vary by course provider, but one such course provider charges $349 for the required
20-hour course. See MortgageEducation.com, Mortgage Loan Originator Courses, https://www.mortgage-
education.com/StatePage.aspx?StateCode=FL (last visited December 20, 2023).
24
The cost of written test is $110. See Nationwide Multistate Licensing System & Registry, Uniform State Test (UST)
Implementation Information, Public - SAFE MLO Testing FAQ (csbs.org) (last visited December 20, 2023).
25
Section 494.00321, F.S.
26
“Control persons” is defined in s. 494.001(7), F.S., to mean, in part, “an individual, partnership, corporation, trust, or other
organization that possesses the power, directly or indirectly, to direct the management or policies of a company, whether
through ownership of securities, by contract, or otherwise.” BILL: CS/SB 514 Page 6
Authorize access to the credit reports on each of the applicant’s control persons, the cost of
which is borne by the applicant.
In order to obtain licensure as a mortgage lender, a person must:
27
Submit an application form, which must designate a qualified principal loan originator;
Submit nonrefundable application fees totaling $600;
Submit fingerprints for each of the applicant’s control persons, the cost of which is borne by
the person subject to the background check;
Submit a copy of the applicant’s financial audit report for the most recent fiscal year, which
must document that the applicant has a net worth of at least $63,000 if the applicant is not
seeking a servicing endorsement, or at least $250,000 if the applicant is seeking a servicing
endorsement; and
Authorize access to the credit reports of each of the applicant’s control persons, the cost of
which is borne by the applicant.
A mortgage loan originator, broker, and lender license is subject to annual renewal by December
31, and must meet specified criteria to be eligible for renewal.
28
Examinations and Investigations
The OFR has the authority to conduct an investigation of any person who the OFR has reason to
believe has violated or is about to violate ch. 494, F.S.
29
The OFR also has authority to conduct
intermittent examinations of any licensee or other person under the provisions of ch. 494, F.S.
Violations
The OFR has statutory authority to impose disciplinary actions against any person who engages
in specified conduct,
30
such as:
Failure to disburse funds in compliance with agreements;
31
Fraud, misrepresentation, deceit, negligence, or incompetence in any mortgage
financing transaction;
32
and
Consistently and materially underestimating maximum closing costs.
33
The disciplinary actions the OFR may take include, for instance, suspension, revocation, or
denial of a license, or the imposition of a fine of up to $25,000 for each count or separate
offense.
34
27
Section 494.00611, F.S.
28
Sections 494.00312(7), 494.00321(7), and 494.00611(10), F.S.
29
Section 494.0012, F.S.
30
Section 494.00255(2), F.S.
31
Section 494.00255(1)(c), F.S.
32
Section 494.00255(1)(d), F.S.
33
Section 494.00255(1)(e), F.S.
34
Section 494.00255(2), F.S. BILL: CS/SB 514 Page 7
Any person who knowingly acts as a loan originator, mortgage broker, or mortgage lender
without a current and active license issued pursuant to ch. 494, F.S., commits a felony of the
third degree, punishable as provided in ss. 775.082, 775.083, or 775.084, F.S.
35
Any person who violates any provisions of ch. 494, F.S., in which the total value of money and
property unlawfully obtained exceeds $50,000 and there are five or more victims, commits a
felony of the first degree, punishable as provided in ss. 775.082, 775.083, or 775.084, F.S.
36
Habitat for Humanity, a Florida Nonprofit Organization
Habitat for Humanity of Florida (“Habitat”) was incorporated in 2009 as a nonprofit organization
and provides affordable housing for communities in Florida.
37
Individuals who purchase homes
built through Habitat must comply with a rigorous qualification process, complete financial and
homeowner education courses, contribute physically to the construction of the home, undergo
background screening, and meet minimum financial requirements (e.g. monthly mortgage
payments may not be greater than thirty percent of the borrower’s monthly income).
38
Habitat
staff are not compensated to incentivize them to refer any borrowers to lenders or loan products
that are not affordable or in the borrower’s best interests.
39
A summary comparing current
Florida law requirements and the Habitat qualified loan originator requirements are below:
40
State of Florida
Mortgage Loan Originator
Habitat Qualified Loan Originator
Complete 20 hours of approved education
courses, of which a minimum of 2 hours must
cover the provisions of Florida law and
rules.
41
Complete 17 courses provided in partnership
by Habitat, the American Bankers
Association, and an additional Florida-
specific course which covers Florida law and
rules.
Pass national and state testing requirements.
42
Testing not required.
Pass state and federal background checks.
43
Pass state and federal background checks.
Authorize and pass a credit check.
44
Authorize and pass a credit check.
On August 12, 2010, the OFR issued a nonbinding informal legal opinion to Habitat which
concludes that the organization’s affiliates and their staff are outside the scope of the S.A.F.E.
35
Section 494.0018(1), F.S.
36
Section 494.0018(2), F.S.
37
Habitat, Habitat for Humanity of Florida Milestones, available at: Florida History — Habitat for Humanity Florida
(habitatflorida.org) (last visited Jan. 2, 2024); Habitat, How Habitat Works, available at: How Habitat Works — Habitat for
Humanity Florida (habitatflorida.org) (last visited Jan. 2, 2024).
38
Habitat for Humanity of Florida White Paper, Habitat for Humanity & the SAFE Act Exemption (on file with the Senate
Committee on Banking and Insurance).
39
Id.
40
Id.
41
Section 494.00312(2)(b), F.S.
42
Section 494.00312(2)(c), F.S.
43
Section 494.00312(2)(f), F.S.
44
Section 494.00312(2)(g). BILL: CS/SB 514 Page 8
Act definition of loan originator that has been codified in Florida law.
45
The OFR determined
that Habitat’s employees are not acting for “compensation or gain” based largely on Habitat’s
requirement of “no profit mortgages” and on several factors relating to its pricing and fees
policies.
46
III. Effect of Proposed Changes:
Section 2 of the bill adds s. 494.00115(g) to exempt a bona fide nonprofit organization and its
employees from the regulations under ch. 494, F.S. This exemption is substantially similar to the
exemption permitted under the S.A.F.E. Act except that the exemption in the bill also covers the
bona fide organization (not only the employee of such organization).
The bill establishes an exemption from regulation under ch. 494, F.S., for:
A bona fide nonprofit organization; and
An employee of the bona fide nonprofit organization who acts as a loan originator only with
respect to his or her work duties to the bona fide nonprofit organization and who acts as a
loan originator only with respect to residential mortgage loans with terms that are favorable
to the borrower.
For an organization to be a “bona fide nonprofit organization,” the OFR must determine,
pursuant to criteria and processes established by rule, whether the organization satisfies all of the
following factors:
Has the status of a tax-exempt organization under s. 501(c)(3), I.R.C.
Promotes affordable housing or provides homeownership education or similar services.
Conducts its activities in a manner that serves public or charitable purposes rather than
commercial purposes.
Receives funding and revenue and charges fees in a manner that does not incentivize it or
its employees to act other than in the best interests of its clients.
Compensates its employees in a manner that does not incentivize employees to act other
than in the best interests of its clients.
Provides or identifies for the borrower residential mortgage loans with terms favorable to
the borrower and comparable to mortgage loans and housing assistance provided under
government housing assistance programs. For residential mortgage loans to be deemed to
have terms that are favorable to the borrower, the OFR must determine that the terms are
consistent with loan origination in a public or charitable context, rather than a
commercial context.
This exemption provides the OFR with authority to periodically examine the books and activities
of an organization it determines is a bona fide nonprofit organization and allows the OFR to
revoke its status as a bona fide organization if it does not continue to meet the specified criteria
set out in the paragraph above.
45
Letter from the OFR to Lori Harris, Executive Director, Habitat for Humanity of Florida, Habitat for Humanity of Florida
– Request for Legal Opinion OFR Case No. 0868-FR-3/10 (on file with the Senate Committee on Banking and Insurance).
46
Id. BILL: CS/SB 514 Page 9
Section 1 of the bill expands the Commission’s rulemaking authority under s. 494.0011(2)(b),
F.S., relating to compliance with the S.A.F.E. Act, to prescribe criteria and processes for
determining whether an organization is and remains a bona fide nonprofit organization for the
purpose of determining whether the organization and its employees acting as loan originators
may be exempt from regulation under ch. 494, F.S.
Section 3 of the bill provides for an effective date of July 1, 2024.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
Employees of entities that meet the criteria for the exemption under SB 542 should
benefit financially by not having to pay costs associated with licensure requirements
under ch. 494.0115, F.S. The total number of nonprofit organizations that are eligible for
the exemption is unclear.
C. Government Sector Impact:
The OFR reports that it has not identified any fiscal impact that would result from the
proposed legislation.
47
47
The OFR, 2024 Agency Legislative Bill Analysis Florida Office of Financial Regulation, Dec. 22, 2023, (on file with the
Senate Committee on Banking and Insurance). BILL: CS/SB 514 Page 10
VI. Technical Deficiencies:
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes: 494.0011 and
49400115.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Banking and Insurance Committee on January 16, 2024:
Conforms the provisions of the bill to the S.A.F.E. Act exemption for bona fide
nonprofit organizations’ employees from loan originator and mortgage broker
regulation;
Clarifies the conditions under which an employee may be exempt from the S.A.F.E.
Act regulations adopted in Florida law;
Provides that the OFR must determine whether an organization is a bona fide
nonprofit organization based on specified factors;
Requires the OFR to determine that the terms of the loan are consistent with loan
origination in public or charitable context, rather than a commercial context;
Requires the OFR to periodically examine the books and activities of the organization
and revoke its status if the organization does not continue to meet the requirements;
and
Provides the Commission with rulemaking authority to prescribe criteria and
processes required for the OFR to make the determinations regarding bona fide
nonprofit organizations.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.