First Regular Session of the 123rd General Assembly (2023)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
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a new provision to the Indiana Code or the Indiana Constitution.
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between statutes enacted by the 2022 Regular Session of the General Assembly.
SENATE ENROLLED ACT No. 452
AN ACT to amend the Indiana Code concerning financial
institutions.
Be it enacted by the General Assembly of the State of Indiana:
SECTION 1. IC 24-4.4-1-102, AS AMENDED BY P.L.29-2022,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 102. (1) This article shall be liberally construed
and applied to promote its underlying purposes and policies.
(2) The underlying purposes and policies of this article are:
(a) to permit and encourage the development of fair and
economically sound first lien mortgage lending practices; and
(b) to conform the regulation of first lien mortgage lending
practices to applicable state and federal laws, rules, regulations,
policies, and guidance.
(3) A reference to a requirement imposed by this article includes
reference to a related rule of the department adopted under this article.
(4) A reference to a federal law in this article is a reference to the
law as in effect December 31, 2021. 2022.
SECTION 2. IC 24-4.4-1-202, AS AMENDED BY P.L.103-2014,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 202. (a) As used in this section, "balloon
payment", with respect to a mortgage transaction, means any payment:
(1) that the creditor requires the debtor to make at any time during
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the term of the mortgage;
(2) that represents the entire amount of the outstanding balance
with respect to the mortgage; and
(3) the entire amount of which is due as of a specified date or at
the end of a specified period;
if the aggregate amount of the minimum periodic payments required
under the mortgage would not fully amortize the outstanding balance
by the specified date or at the end of the specified period. The term
does not include a payment required by a creditor under a due-on-sale
clause (as defined in 12 U.S.C. 1701j-3(a)) or a payment required by
a creditor under a provision in the mortgage that permits the creditor
to accelerate the debt upon the debtor's default or failure to abide by the
material terms of the mortgage.
(b) This article does not apply to the following:
(1) Extensions of credit to government or governmental agencies
or instrumentalities.
(2) A first lien mortgage transaction in which the debt is incurred
primarily for a purpose other than a personal, family, or
household purpose.
(3) An extension of credit primarily for a business, a commercial,
or an agricultural purpose.
(4) Except for IC 24-4.4-2-401(2), IC 24-4.4-2-402.3,
IC 24-4.4-2-405(4), and IC 24-4.4-2-405(5), a first lien mortgage
transaction made:
(a) in compliance with the requirements of; and
(b) by a community development corporation (as defined in
IC 4-4-28-2) acting as a subrecipient of funds from;
the Indiana housing and community development authority
established by IC 5-20-1-3.
(5) Except for IC 24-4.4-2-401(2), IC 24-4.4-2-402.3,
IC 24-4.4-2-405(4), and IC 24-4.4-2-405(5), a first lien mortgage
transaction made by an entity that exclusively uses funds provided
by the United States Department of Housing and Urban
Development under Title 1 of the federal Housing and
Community Development Act of 1974, Public Law 93-383, as
amended (42 U.S.C. 5301 et seq.).
(6) An extension of credit originated by the following:
(a) A depository institution. However, a federal savings bank
may voluntarily register with the department for the purpose
of sponsoring, under an exclusive written agreement,
individuals who are licensed as mortgage loan originators
under this article and 750 IAC 9-3, who perform mortgage
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loan origination activities as independent agents under the
federal savings bank's direct supervision and control, who hold
a current, valid insurance producer license under IC 27-1-15.6,
and who sell, solicit, or negotiate insurance under an exclusive
written agreement for a licensed insurance company that is a
subsidiary of a company that also owns or controls the federal
savings bank, if the federal savings bank does the following:
(i) Assumes responsibility for and reasonably supervises the
activities of all licensed mortgage loan originators sponsored
by the federal savings bank under this clause.
(ii) Registers with and maintains a valid unique identifier
issued by the NMLSR as required by IC 24-4.4-2-401(2),
maintains a surety bond in accordance with
IC 24-4.4-2-402.3, submits to the NMLSR reports of
condition in accordance with IC 24-4.4-2-405(4) (subject to
IC 24-4.4-2-402.4), and files financial statements with the
department in accordance with IC 24-4.4-2-405(5).
(iii) Cooperates with the department, and provides access to
records and documents, as required by the department in
carrying out examinations of the activities of the licensed
mortgage loan originators sponsored by the federal savings
bank under this clause, as described in IC 24-4.4-2-405(1).
(iv) Agrees to comply with all law, rules, directives, and
orders in connection with the activities of the licensed
mortgage loan originators sponsored by the federal savings
bank, as the director determines necessary to ensure
compliance with the federal Secure and Fair Enforcement
for Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.)
and with Indiana law.
(b) Subsidiaries that are not licensed under this article and that
are:
(i) owned and controlled by a depository institution; and
(ii) regulated by a federal banking agency.
(c) An institution regulated by the Farm Credit Administration.
(7) Except for IC 24-4.4-2-401(2), IC 24-4.4-2-402.3,
IC 24-4.4-2-405(4), and IC 24-4.4-2-405(5), a credit union service
organization that is majority owned, directly or indirectly, by one
(1) or more credit unions.
(8) A person that does not engage as a creditor in first lien
mortgage transactions in Indiana. However, a person may
voluntarily register with the department for the purpose of
sponsoring employees who are licensed as mortgage loan
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originators under this article and 750 IAC 9-3, and who are
engaged solely as third party loan processors or underwriters,
if the person does the following:
(a) Assumes responsibility for and reasonably supervises
the activities of all licensed mortgage loan originators
sponsored by the person.
(b) Registers with and maintains a valid unique identifier
issued by the NMLSR as required by IC 24-4.4-2-401(2),
maintains a surety bond in accordance with
IC 24-4.4-2-402.3, submits to the NMLSR reports of
condition in accordance with IC 24-4.4-2-405(4) (subject to
IC 24-4.4-2-402.4), and files financial statements with the
department in accordance with IC 24-4.4-2-405(5).
(c) Cooperates with the department, and provides access to
records and documents, as required by the department in
carrying out examinations of the activities of the licensed
mortgage loan originators sponsored by the person, as
described in IC 24-4.4-2-405(1).
(d) Agrees to comply with all law, rules, directives, and
orders in connection with the activities of the licensed
mortgage loan originators sponsored by the person, as the
director determines necessary to ensure compliance with
the federal Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 (12 U.S.C. 5101 et seq.) and with
Indiana law.
(8) (9) A first lien mortgage transaction originated by a registered
mortgage loan originator, when acting for an entity described in
subsection (6). However, a privately insured state chartered credit
union shall comply with the system of mortgage loan originator
registration developed by the Federal Financial Institutions
Examinations Council under Section 1507 of the federal Secure
and Fair Enforcement for Mortgage Licensing Act of 2008
(SAFE).
(9) (10) An individual who offers or negotiates terms of a
mortgage transaction with or on behalf of an immediate family
member of the individual.
(10) (11) An individual who offers or negotiates terms of a
mortgage transaction secured by a dwelling that served as the
individual's residence.
(11) (12) Unless the attorney is compensated by:
(a) a lender;
(b) a mortgage broker;
SEA 452 — CC 1 5
(c) another mortgage loan originator; or
(d) any agent of the lender, mortgage broker, or other
mortgage loan originator described in clauses (a) through (c);
a licensed attorney who negotiates the terms of a mortgage
transaction on behalf of a client as an ancillary matter to the
attorney's representation of the client.
(12) (13) The United States, any state or local government, or any
agency or instrumentality of any governmental entity, including
United States government sponsored enterprises.
(13) (14) A person in whose name a tablefunded transaction is
closed, as described in section 301(34)(a) of this chapter.
However, the exemption provided by this subsection does not
apply if:
(a) the transaction:
(i) is secured by a dwelling that is a mobile home, a
manufactured home, or a trailer; and
(ii) is not also secured by an interest in land; and
(b) the person in whose name the transaction is closed, as
described in section 301(34)(a) of this chapter, sells the
dwelling to the debtor through a retail installment contract or
other similar transaction.
(14) (15) A bona fide nonprofit organization not operating in a
commercial context, as determined by the director, if the
following criteria are satisfied:
(a) Subject to clause (b), the organization originates only one
(1) or both of the following types of mortgage transactions:
(i) Zero (0) interest first lien mortgage transactions.
(ii) Zero (0) interest subordinate lien mortgage transactions.
(b) The organization does not require, under the terms of the
mortgage or otherwise, balloon payments with respect to the
mortgage transactions described in clause (a).
(c) The organization is exempt from federal income taxation
under Section 501(c)(3) of the Internal Revenue Code.
(d) The organization's primary purpose is to serve the public
by helping low income individuals and families build, repair,
and purchase housing.
(e) The organization uses only:
(i) unpaid volunteers; or
(ii) employees whose compensation is not based on the
number or size of any mortgage transactions that the
employees originate;
to originate the mortgage transactions described in clause (a).
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(f) The organization does not charge loan origination fees in
connection with the mortgage transactions described in clause
(a).
(15) (16) A bona fide nonprofit organization (as defined in section
301(37) of this chapter) if the following criteria are satisfied:
(a) For each calendar year that the organization seeks the
exemption provided by this subdivision, the organization
certifies, not later than December 31 of the preceding calendar
year and on a form prescribed by the director and accompanied
by such documentation as required by the director, that the
organization is a bona fide nonprofit organization (as defined
in section 301(37) of this chapter).
(b) The director determines that the organization originates
only mortgage transactions that are favorable to the debtor. For
purposes of this clause, a mortgage transaction is favorable to
the debtor if the director determines that the terms of the
mortgage transaction are consistent with terms of mortgage
transactions made in a public or charitable context, rather than
in a commercial context.
SECTION 3. IC 24-4.4-1-301, AS AMENDED BY P.L.69-2018,
SECTION 3, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 301. In addition to definitions appearing in
subsequent chapters of this article, the following definitions apply
throughout this article:
(1) "Affiliate", with respect to any person subject to this article,
means a person that, directly or indirectly, through one (1) or
more intermediaries:
(a) controls;
(b) is controlled by; or
(c) is under common control with;
the person subject to this article.
(2) "Agreement" means the bargain of the parties in fact as found
in the parties' language or by implication from other
circumstances, including course of dealing or usage of trade or
course of performance.
(3) "Agricultural products" includes agricultural products,
horticultural products, viticultural products, dairy products,
livestock, wildlife, poultry, bees, forest products, fish and
shellfish, any products raised or produced on farms, and any
products processed or manufactured from products raised or
produced on farms.
(4) "Agricultural purpose" means a purpose related to the
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production, harvest, exhibition, marketing, transportation,
processing, or manufacture of agricultural products by a natural
person who cultivates, plants, propagates, or nurtures the
agricultural products.
(5) "Consumer credit sale" is a sale of goods, services, or an
interest in land in which:
(a) credit is granted by a person who engages as a seller in
credit transactions of the same kind;
(b) the buyer is a person other than an organization;
(c) the goods, services, or interest in land are purchased
primarily for a personal, family, or household purpose;
(d) either the debt is payable in installments or a credit service
charge is made; and
(e) with respect to a sale of goods or services, either:
(i) the amount of credit extended, the written credit limit, or
the initial advance does not exceed the exempt threshold
amount, as adjusted in accordance with the annual
adjustment of the exempt threshold amount, specified in
Regulation Z (12 CFR 226.3 or 12 CFR 1026.3(b), as
applicable); or
(ii) the debt is secured by personal property used or expected
to be used as the principal dwelling of the buyer.
(6) "Credit" means the right granted by a creditor to a debtor to
defer payment of debt or to incur debt and defer its payment.
(7) "Creditor" means a person:
(a) that regularly engages in the extension of first lien
mortgage transactions that are subject to a credit service
charge or loan finance charge, as applicable, or are payable by
written agreement in more than four (4) installments (not
including a down payment); and
(b) to which the obligation is initially payable, either on the
face of the note or contract, or by agreement if there is not a
note or contract.
The term does not include a person described in subsection
(34)(a) in a tablefunded transaction. A creditor may be an
individual, a limited liability company, a sole proprietorship, a
partnership, a trust, a joint venture, a corporation, an
unincorporated organization, or other form of entity, however
organized.
(8) "Department" refers to the members of the department of
financial institutions.
(9) "Depository institution" has the meaning set forth in the
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Federal Deposit Insurance Act (12 U.S.C. 1813(c)) and includes
any credit union.
(10) "Director" refers to the director of the department of financial
institutions or the director's designee.
(11) "Dwelling" means a residential structure that contains one
(1) to four (4) units, regardless of whether the structure is
attached to real property. The term includes an individual:
(a) condominium unit;
(b) cooperative unit;
(c) mobile home; or
(d) trailer;
that is used as a residence.
(12) "Employee" means an individual who is paid wages or other
compensation by an employer required under federal income tax
law to file Form W-2 on behalf of the individual.
(13) "Federal banking agencies" means the Board of Governors
of the Federal Reserve System, the Office of the Comptroller of
the Currency, the Office of Thrift Supervision, the National Credit
Union Administration, and the Federal Deposit Insurance
Corporation.
(14) "First lien mortgage transaction" means:
(a) a consumer loan; or
(b) a consumer credit sale;
that is or will be used by the debtor primarily for personal, family,
or household purposes and that is secured by a mortgage or a land
contract (or another consensual security interest equivalent to a
mortgage or a land contract) that constitutes a first lien on a
dwelling or on residential real estate upon which a dwelling is
constructed or intended to be constructed.
(15) "Immediate family member" means a spouse, child, sibling,
parent, grandparent, or grandchild. The term includes stepparents,
stepchildren, stepsiblings, and adoptive relationships.
(16) "Individual" means a natural person.
(17) "Licensee" means a person licensed to engage in mortgage
transactions as a creditor.
(18) "Loan" includes:
(a) the creation of debt by:
(i) the creditor's payment of or agreement to pay money to
the debtor or to a third party for the account of the debtor; or
(ii) the extension of credit by a person who engages as a
seller in credit transactions primarily secured by an interest
in land;
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(b) the creation of debt by a credit to an account with the
creditor upon which the debtor is entitled to draw
immediately; and
(c) the forbearance of debt arising from a loan.
(19) "Loan brokerage business" means any activity in which a
person, in return for any consideration from any source, procures,
attempts to procure, or assists in procuring, a mortgage
transaction from a third party or any other person, whether or not
the person seeking the mortgage transaction actually obtains the
mortgage transaction.
(20) "Loan processor or underwriter" means an individual who
performs clerical or support duties as an employee at the direction
of, and subject to the supervision and instruction of, a person
licensed to engage in mortgage transactions or a person exempt
from licensing. For purposes of this subsection, the term "clerical
or support duties" may include, after the receipt of an application,
the following:
(a) The receipt, collection, distribution, and analysis of
information common for the processing or underwriting of a
mortgage transaction.
(b) The communication with a consumer to obtain the
information necessary for the processing or underwriting of a
loan, to the extent that the communication does not include:
(i) offering or negotiating loan rates or terms; or
(ii) counseling consumers about mortgage transaction rates
or terms.
The term does not include an individual who is an employee
of a person that is not engaged in mortgage transactions as a
creditor if that person is permitted to voluntarily register with
the department to sponsor the individual under section
202(b)(8) of this chapter to engage solely in the activities
described in this subdivision.
(21) "Mortgage loan originator" means an individual who, for
compensation or gain, or in the expectation of compensation or
gain, regularly engages in taking a mortgage transaction
application or in offering or negotiating the terms of a mortgage
transaction that either is made under this article or under
IC 24-4.5 or is made by an employee of a person licensed to
engage in mortgage transactions or by an employee of a person
that is exempt from licensing, while the employee is engaging in
the loan brokerage business. The term does not include the
following:
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(a) An individual engaged solely as a loan processor or
underwriter as long as the individual works exclusively as an
employee of a person licensed to engage in mortgage
transactions or as an employee of a person exempt from
licensing. However, the term includes an individual who is
licensed as a mortgage loan originator under this article
and 750 IAC 9-3 and who is an employee of a person that
is not engaged in mortgage transactions as a creditor if
that person voluntarily registers with the department to
sponsor the individual under section 202(b)(8) of this
chapter to engage solely as a third party processor or
underwriter.
(b) Unless the person or entity is compensated by:
(i) a creditor;
(ii) a loan broker;
(iii) another mortgage loan originator; or
(iv) any agent of a creditor, a loan broker, or another
mortgage loan originator described in items (i) through (iii);
a person or entity that performs only real estate brokerage
activities and is licensed or registered in accordance with
applicable state law.
(c) A person solely involved in extensions of credit relating to
timeshare plans (as defined in 11 U.S.C. 101(53D)).
(22) "Mortgage servicer" means the last person to whom a
mortgagor or the mortgagor's successor in interest has been
instructed by a mortgagee to send payments on a loan secured by
a mortgage.
(23) "Mortgage transaction" means:
(a) a consumer loan; or
(b) a consumer credit sale;
that is or will be used by the debtor primarily for personal, family,
or household purposes and that is secured by a mortgage or a land
contract (or another consensual security interest equivalent to a
mortgage or a land contract) on a dwelling or on residential real
estate upon which a dwelling is constructed or intended to be
constructed.
(24) "Nationwide Multistate Licensing System and Registry" (or
"Nationwide Mortgage Licensing System and Registry" or
"NMLSR") means a multistate licensing system owned and
operated by the State Regulatory Registry, LLC, or by any
successor or affiliated entity, for the licensing and registration of
creditors, mortgage loan originators, and other persons in the
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mortgage or financial services industries. The term includes any
other name or acronym that may be assigned to the system by the
State Regulatory Registry, LLC, or by any successor or affiliated
entity.
(25) "Nontraditional mortgage product" means any mortgage
product other than a thirty (30) year fixed rate mortgage.
(26) "Organization" means a corporation, a government or
government subdivision, an agency, a trust, an estate, a
partnership, a limited liability company, a cooperative, an
association, a joint venture, an unincorporated organization, or
any other entity, however organized.
(27) "Payable in installments", with respect to a debt or an
obligation, means that payment is required or permitted by written
agreement to be made in more than four (4) installments not
including a down payment.
(28) "Person" includes an individual or an organization.
(29) "Principal" of a mortgage transaction means the total of:
(a) the net amount paid to, receivable by, or paid or payable
for the account of the debtor; and
(b) to the extent that payment is deferred, amounts actually
paid or to be paid by the creditor for registration, certificate of
title, or license fees if not included in clause (a).
(30) "Real estate brokerage activity" means any activity that
involves offering or providing real estate brokerage services to the
public, including the following:
(a) Acting as a real estate agent or real estate broker for a
buyer, seller, lessor, or lessee of real property.
(b) Bringing together parties interested in the sale, purchase,
lease, rental, or exchange of real property.
(c) Negotiating, on behalf of any party, any part of a contract
relating to the sale, purchase, lease, rental, or exchange of real
property (other than in connection with providing financing
with respect to the sale, purchase, lease, rental, or exchange of
real property).
(d) Engaging in any activity for which a person engaged in the
activity is required to be registered or licensed as a real estate
agent or real estate broker under any applicable law.
(e) Offering to engage in any activity, or act in any capacity,
described in this subsection.
(31) "Registered mortgage loan originator" means any individual
who:
(a) meets the definition of mortgage loan originator and is an
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employee of:
(i) a depository institution;
(ii) a subsidiary that is owned and controlled by a depository
institution and regulated by a federal banking agency; or
(iii) an institution regulated by the Farm Credit
Administration; and
(b) is registered with, and maintains a unique identifier
through, the NMLSR.
(32) "Residential real estate" means any real property that is
located in Indiana and on which there is located or intended to be
constructed a dwelling.
(33) "Revolving first lien mortgage transaction" means a first lien
mortgage transaction in which:
(a) the creditor permits the debtor to obtain advances from
time to time;
(b) the unpaid balances of principal, finance charges, and other
appropriate charges are debited to an account; and
(c) the debtor has the privilege of paying the balances in
installments.
(34) "Tablefunded" means a transaction in which:
(a) a person closes a first lien mortgage transaction in the
person's own name as a mortgagee with funds provided by one
(1) or more other persons; and
(b) the transaction is assigned, not later than one (1) business
day after the funding of the transaction, to the mortgage
creditor providing the funding.
(35) "Unique identifier" means a number or other identifier
assigned by protocols established by the NMLSR.
(36) "Land contract" means a contract for the sale of real estate in
which the seller of the real estate retains legal title to the real
estate until the total contract price is paid by the buyer.
(37) "Bona fide nonprofit organization" means an organization
that does the following, as determined by the director, under
criteria established by the director:
(a) Maintains tax exempt status under Section 501(c)(3) of the
Internal Revenue Code.
(b) Promotes affordable housing or provides home ownership
education or similar services.
(c) Conducts the organization's activities in a manner that
serves public or charitable purposes.
(d) Receives funding and revenue and charges fees in a
manner that does not encourage the organization or the
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organization's employees to act other than in the best interests
of the organization's clients.
(e) Compensates the organization's employees in a manner that
does not encourage employees to act other than in the best
interests of the organization's clients.
(f) Provides to, or identifies for, debtors mortgage transactions
with terms that are favorable to the debtor (as described in
section 202(b)(15) 202(b)(16) of this chapter) and comparable
to mortgage transactions and housing assistance provided
under government housing assistance programs.
(g) Maintains certification by the United States Department of
Housing and Urban Development or employs counselors who
are certified by the Indiana housing and community
development authority.
(38) "Regularly engaged", with respect to a person who extends
or originates first lien mortgage transactions, refers to a person
who:
(a) extended or originated more than five (5) first lien
mortgage transactions in the preceding calendar year; or
(b) extends or originates, or will extend or originate, more than
five (5) first lien mortgage transactions in the current calendar
year if the person did not extend or originate more than five
(5) first lien mortgage transactions in the preceding calendar
year.
SECTION 4. IC 24-4.4-2-401, AS AMENDED BY P.L.69-2018,
SECTION 4, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 401. (1) Unless a person subject to this article has
first obtained a mortgage license from the department and annually
maintains the license, the person shall not engage in Indiana as a
creditor in first lien mortgage transactions. A separate mortgage license
is required for each legal entity that engages in Indiana as a creditor in
first lien mortgage transactions. However, a separate mortgage license
is not required for each branch of a legal entity licensed by the
department.
(2) Each:
(a) creditor licensed by the department to engage in mortgage
transactions; and
(b) entity person exempt from licensing that:
(i) employs a licensed mortgage loan originator; or
(ii) sponsors under an exclusive written agreement, as
permitted by IC 24-4.4-1-202(b)(6)(a), a licensed mortgage
loan originator as an independent agent; permitted by
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IC 24-4.4-1-202(b)(8) or by 750 IAC 9;
shall register with and maintain a valid unique identifier issued by the
NMLSR. Each licensed mortgage loan originator must be employed by,
or sponsored under an exclusive written agreement (as permitted by
IC 24-4.4-1-202(b)(6)(a)) and as an independent agent, permitted by
IC 24-4.4-1-202(b)(8) or by 750 IAC 9, and associated with, a
licensed creditor (or an entity a person exempt from licensing) that is
registered with the NMLSR. in order to originate loans.
(3) An individual engaging solely in loan processor or underwriter
activities shall not represent to the public, through advertising or other
means of communicating or providing information, including the use
of business cards, stationery, brochures, signs, rate lists, or other
promotional items, that the individual can or will perform any of the
activities of a mortgage loan originator. An individual who:
(a) is licensed as a mortgage loan originator under this article
and 750 IAC 9-3; and
(b) is sponsored by a person, as permitted by
IC 24-4.4-1-202(b)(8), to engage solely as a third party loan
processor or underwriter;
is subject to the prohibition set forth in this subsection with respect
to the individual's engagement under the sponsorship.
(4) Applicants for a mortgage license must apply for the license in
the form prescribed by the director. Each form:
(a) must contain content as set forth by rule, instruction, or
procedure of the director; and
(b) may be changed or updated as necessary by the director to
carry out the purposes of this article.
(5) To fulfill the purposes of this article, the director may establish
relationships or contracts with the NMLSR or other entities designated
by the NMLSR to:
(a) collect and maintain records; and
(b) process transaction fees or other fees related to licensees or
other persons subject to this article.
(6) For the purpose of participating in the NMLSR, the director or
the department may:
(a) waive or modify, in whole or in part, by rule or order, any of
the requirements of this article; and
(b) establish new requirements as reasonably necessary to
participate in the NMLSR.
SECTION 5. IC 24-4.4-2-402.3, AS AMENDED BY P.L.129-2020,
SECTION 3, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 402.3. (1) Each:
SEA 452 — CC 1 15
(a) creditor; and
(b) person that is exempt (either under this article or under
IC 24-4.5) from licensing to engage in mortgage loans and that:
(i) employs a licensed mortgage loan originator; or
(ii) sponsors under an exclusive written agreement, as
permitted by IC 24-4.4-1-202(b)(6)(a), a licensed mortgage
loan originator as an independent agent; permitted by
IC 24-4.4-1-202(b)(8) or by 750 IAC 9;
must be covered by a surety bond in accordance with this section.
(2) A surety bond must:
(a) provide coverage for:
(i) a creditor; or
(ii) a person that is exempt from licensing and that employs a
licensed mortgage loan originator, or that sponsors under an
exclusive written agreement (as permitted by
IC 24-4.4-1-202(b)(6)(a)) a licensed mortgage loan originator
as an independent agent; permitted by IC 24-4.4-1-202(b)(8)
or by 750 IAC 9;
in an amount as prescribed in subsection (4);
(b) be in a form prescribed by the director;
(c) be in effect:
(i) during the term of the creditor's license; or
(ii) at any time during which the person exempt from licensing
employs a licensed mortgage loan originator or sponsors under
an exclusive written agreement (as permitted by
IC 24-4.4-1-202(b)(6)(a)) a licensed mortgage loan originator
as an independent agent; permitted by IC 24-4.4-1-202(b)(8)
or by 750 IAC 9;
as applicable;
(d) subject to subsection (3), remain in effect during the two (2)
years after:
(i) the license of the creditor is surrendered or terminated; or
(ii) the person exempt from licensing ceases to employ a
licensed mortgage loan originator, or ceases to sponsor under
an exclusive written agreement (as permitted by
IC 24-4.4-1-202(b)(6)(a)) a licensed mortgage loan originator
as an independent agent, permitted by IC 24-4.4-1-202(b)(8)
or by 750 IAC 9, or to offer financial services to individuals
in Indiana, whichever is later;
as applicable;
(e) be payable to the department for the benefit of:
(i) the state; and
SEA 452 — CC 1 16
(ii) individuals who reside in Indiana when they agree to
receive financial services from the creditor or the person
exempt from licensing, as applicable;
(f) be issued by a bonding, surety, or insurance company
authorized to do business in Indiana and rated at least "A-" by at
least one (1) nationally recognized investment rating service; and
(g) have payment conditioned upon:
(i) the creditor's or any of the creditor's licensed mortgage loan
originators'; or
(ii) the exempt person's or any of the exempt person's licensed
mortgage loan originators';
noncompliance with or violation of this chapter, 750 IAC 9, or
other federal or state laws or regulations applicable to mortgage
lending.
(3) The director may adopt rules or guidance documents with
respect to the requirements for a surety bond as necessary to
accomplish the purposes of this article. Upon written request from:
(a) a creditor described in subsection (1)(a); or
(b) an exempt person described in subsection (1)(b);
the director may, at the discretion of the director, waive or shorten the
two (2) year period set forth in subsection (2)(d) during which a surety
bond required by this section must remain in effect after the occurrence
of an event described in subsection (2)(d)(i) or (2)(d)(ii), as applicable.
(4) The penal sum of the surety bond shall be maintained in an
amount that reflects the dollar amount of mortgage transactions
originated as determined by the director. If the principal amount of a
surety bond required under this section is reduced by payment of a
claim or judgment, the creditor or exempt person for whom the bond
is issued shall immediately notify the director of the reduction and, not
later than thirty (30) days after notice by the director, file a new or an
additional surety bond in an amount set by the director. The amount of
the new or additional bond set by the director must be at least the
amount of the bond before payment of the claim or judgment.
(5) If for any reason a surety terminates a bond issued under this
section, the creditor or the exempt person shall immediately notify the
department and file a new surety bond in an amount determined by the
director.
(6) Cancellation of a surety bond issued under this section does not
affect any liability incurred or accrued during the period when the
surety bond was in effect.
(7) The director may obtain satisfaction from a surety bond issued
under this section if the director incurs expenses, issues a final order,
SEA 452 — CC 1 17
or recovers a final judgment under this chapter.
(8) Notices required under this section must be made in writing and
submitted through the NMLSR or any other electronic registration
system that may be approved by the director.
SECTION 6. IC 24-4.4-2-402.4, AS AMENDED BY P.L.176-2019,
SECTION 4, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 402.4. (1) Subject to subsection (6), the director
shall designate the NMLSR to serve as the sole entity responsible for:
(a) processing applications and renewals for mortgage licenses;
(b) issuing unique identifiers for licensees and entities persons
exempt from licensing that employ or sponsor a licensed
mortgage loan originator under this article; and
(c) performing other services that the director determines are
necessary for the orderly administration of the department's
mortgage licensing system.
(2) Subject to the confidentiality provisions contained in IC 5-14-3,
this section, and IC 28-1-2-30, the director may regularly report
significant or recurring violations of this article to the NMLSR.
(3) Subject to the confidentiality provisions contained in IC 5-14-3,
this section, and IC 28-1-2-30, the director may report complaints
received regarding mortgage licensees to the NMLSR.
(4) The director may report publicly adjudicated licensure actions
against a licensee to the NMLSR.
(5) The director shall establish a process in which licensees may
challenge information reported to the NMLSR by the department.
(6) The director's authority to designate the NMLSR under
subsection (1) is subject to the following:
(a) Information stored in the NMLSR is subject to the
confidentiality provisions of IC 5-14-3 and IC 28-1-2-30. A
person may not:
(i) obtain information from the NMLSR, unless the person is
authorized to do so by statute;
(ii) initiate any civil action based on information obtained
from the NMLSR if the information is not otherwise available
to the person under any other state law; or
(iii) initiate any civil action based on information obtained
from the NMLSR if the person could not have initiated the
action based on information otherwise available to the person
under any other state law.
(b) Documents, materials, and other forms of information in the
control or possession of the NMLSR that are confidential under
IC 28-1-2-30 and that are:
SEA 452 — CC 1 18
(i) furnished by the director, the director's designee, or a
licensee; or
(ii) otherwise obtained by the NMLSR;
are confidential and privileged by law and are not subject to
inspection under IC 5-14-3, subject to subpoena, subject to
discovery, or admissible in evidence in any civil action. However,
the director may use the documents, materials, or other
information available to the director in furtherance of any action
brought in connection with the director's duties under this article.
(c) Disclosure of documents, materials, and information:
(i) to the director; or
(ii) by the director;
under this subsection does not result in a waiver of any applicable
privilege or claim of confidentiality with respect to the
documents, materials, or information.
(d) Information provided to the NMLSR is subject to IC 4-1-11.
(e) This subsection does not limit or impair a person's right to:
(i) obtain information;
(ii) use information as evidence in a civil action or proceeding;
or
(iii) use information to initiate a civil action or proceeding;
if the information may be obtained from the director or the
director's designee under any law.
(f) Except as otherwise provided in the federal Housing and
Economic Recovery Act of 2008 (Public Law 110-289, Section
1512), the requirements under any federal law or IC 5-14-3
regarding the privacy or confidentiality of any information or
material provided to the NMLSR, and any privilege arising under
federal or state law, including the rules of any federal or state
court, with respect to the information or material, continue to
apply to the information or material after the information or
material has been disclosed to the NMLSR. The information and
material may be shared with all state and federal regulatory
officials with mortgage industry oversight authority without the
loss of privilege or the loss of confidentiality protections provided
by federal law or IC 5-14-3.
(g) For purposes of this section, the director may enter agreements
or sharing arrangements with other governmental agencies, the
Conference of State Bank Supervisors, the American Association
of Residential Mortgage Regulators, or other associations
representing governmental agencies, as established by rule or
order of the director.
SEA 452 — CC 1 19
(h) Information or material that is subject to a privilege or
confidentiality under subdivision (f) is not subject to:
(i) disclosure under any federal or state law governing the
disclosure to the public of information held by an officer or an
agency of the federal government or the respective state; or
(ii) subpoena, discovery, or admission into evidence in any
private civil action or administrative process, unless with
respect to any privilege held by the NMLSR with respect to
the information or material, the person to whom the
information or material pertains waives, in whole or in part, in
the discretion of the person, that privilege.
(i) Any provision of IC 5-14-3 that concerns the disclosure of:
(i) confidential supervisory information; or
(ii) any information or material described in subdivision (f);
and that is inconsistent with subdivision (f) is superseded by this
section.
(j) This section does not apply with respect to information or
material that concerns the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, a
person described in section 402(2) of this chapter and that is
included in the NMLSR for access by the public.
(k) The director may require a licensee required to submit
information to the NMLSR to pay a processing fee considered
reasonable by the director. In determining whether an NMLSR
processing fee is reasonable, the director shall:
(i) require review of; and
(ii) make available;
the audited financial statements of the NMLSR.
(7) Notwithstanding any other provision of law, any:
(a) application, renewal, or other form or document that:
(i) relates to mortgage licenses issued by the department; and
(ii) is made or produced in an electronic format;
(b) document filed as an electronic record in a multistate
automated repository established and operated for the licensing or
registration of mortgage lenders, brokers, or loan originators; or
(c) electronic record filed through the NMLSR;
is considered a valid original document when reproduced in paper form
by the department.
SECTION 7. IC 24-4.4-2-405, AS AMENDED BY P.L.69-2018,
SECTION 9, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 405. (1) Every licensee shall maintain records in
a manner that will enable the department to determine whether the
SEA 452 — CC 1 20
licensee is complying with this article. The record keeping system of
a licensee is sufficient if the licensee makes the required information
reasonably available. The department shall determine the sufficiency
of the records and whether the licensee has made the required
information reasonably available. The department shall be given free
access to the records wherever the records are located. Records
concerning any first lien mortgage transaction shall be retained for two
(2) years after the making of the final entry relating to the transaction,
but in the case of a revolving first lien mortgage transaction, the two (2)
years required under this subsection is measured from the date of each
entry relating to the transaction. A federal savings bank person that
voluntarily registers with the department under
IC 24-4.4-1-202(b)(6)(a) IC 24-4.4-1-202(b)(8) for the purpose of
sponsoring under an exclusive written agreement, licensed mortgage
loan originators as independent agents shall:
(a) cooperate with the department; and
(b) provide access to records and documents;
as required by the department in carrying out examinations of the
activities of the licensed mortgage loan originators sponsored by the
federal savings bank. person.
(2) The unique identifier of any person originating a mortgage
transaction must be clearly shown on all mortgage transaction
application forms and any other documents as required by the director.
(3) Every licensee shall use automated examination and regulatory
software designated by the director, including third party software. Use
of the software consistent with guidance and policies issued by the
director is not a violation of IC 28-1-2-30.
(4) Each:
(a) creditor licensed to engage in mortgage transactions by the
department; and
(b) entity person that is exempt from licensing and that:
(i) employs one (1) or more licensed mortgage loan
originators; or
(ii) sponsors under an exclusive written agreement, as
permitted by IC 24-4.4-1-202(b)(6)(a), one (1) or more
licensed mortgage originators as independent agents;
permitted by IC 24-4.4-1-202(b)(8) or by 750 IAC 9;
shall submit to the NMLSR reports of condition, which must be in a
form and must contain information as required by the NMLSR.
(5) Each:
(a) creditor licensed by the department to engage in mortgage
transactions; and
SEA 452 — CC 1 21
(b) entity person that is exempt from licensing by the department
to engage in mortgage transactions and that:
(i) employs one (1) or more licensed mortgage loan
originators; or
(ii) sponsors under an exclusive written agreement, as
permitted by IC 24-4.4-1-202(b)(6)(a), one (1) or more
licensed mortgage loan originators as independent agents;
permitted by IC 24-4.4-1-202(b)(8) or by 750 IAC 9;
shall file with the department additional financial statements relating
to all first lien mortgage transactions originated by the licensed creditor
or the exempt entity person as required by the department, but not
more frequently than annually, in the form prescribed by the
department.
(6) A licensed creditor shall file notification with the department if
the licensee:
(a) has a change in name, address, or any of its principals;
(b) opens a new branch, closes an existing branch, or relocates an
existing branch;
(c) files for bankruptcy or reorganization; or
(d) is subject to revocation or suspension proceedings by a state
or governmental authority with regard to the licensed creditor's
activities;
not later than thirty (30) days after the date of the event described in
this subsection.
(7) A licensee shall file notification with the department if the
licensee or any director, executive officer, or manager of the licensee
has been convicted of a felony under the laws of Indiana or any other
jurisdiction. The licensee shall file the notification required by this
subsection not later than thirty (30) days after the date of the event
described in this subsection.
(8) A licensee shall file notification with the department if the
licensee or any director, executive officer, or manager of the licensee
has had the person's authority to do business in the securities,
commodities, banking, financial services, insurance, real estate, or real
estate appraisal industry revoked or suspended by Indiana or by any
other state, federal, or foreign governmental agency or self regulatory
organization. The licensee shall file the notification required by this
subsection not later than thirty (30) days after the date of the event
described in this subsection.
SECTION 8. IC 24-4.5-1-102, AS AMENDED BY P.L.29-2022,
SECTION 2, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 102. (1) This article shall be liberally construed
SEA 452 — CC 1 22
and applied to promote its underlying purposes and policies.
(2) The underlying purposes and policies of this article are:
(a) to simplify, clarify, and modernize the law governing retail
installment sales, consumer credit, small loans, and usury;
(b) to provide rate ceilings to assure an adequate supply of credit
to consumers;
(c) to further consumer understanding of the terms of credit
transactions and to foster competition among suppliers of
consumer credit so that consumers may obtain credit at
reasonable cost;
(d) to protect consumer buyers, lessees, and borrowers against
unfair practices by some suppliers of consumer credit, having due
regard for the interests of legitimate and scrupulous creditors;
(e) to permit and encourage the development of fair and
economically sound consumer credit practices;
(f) to conform the regulation of consumer credit transactions to
the policies of the Consumer Credit Protection Act (15 U.S.C.
1601 et seq.) and to applicable state and federal laws, rules,
regulations, policies, and guidance; and
(g) to make uniform the law, including administrative rules
among the various jurisdictions.
(3) A reference to a requirement imposed by this article includes
reference to a related rule or guidance of the department adopted
pursuant to this article.
(4) A reference to a federal law in this article is a reference to the
law as in effect December 31, 2021. 2022.
(5) This article applies to a transaction if the director determines
that the transaction:
(a) is in substance a disguised consumer credit transaction; or
(b) involves the application of subterfuge for the purpose of
avoiding this article.
A determination by the director under this subsection must be in
writing and shall be delivered to all parties to the transaction.
IC 4-21.5-3 applies to a determination made under this subsection.
(6) The authority of this article remains in effect, whether a licensee,
an individual, or a person subject to this article acts or claims to act
under any licensing or registration law of this state, or claims to act
without such authority.
(7) A violation of a state or federal law, regulation, or rule
applicable to consumer credit transactions is a violation of this article.
(8) The department may enforce penalty provisions set forth in 15
U.S.C. 1640 for violations of disclosure requirements applicable to
SEA 452 — CC 1 23
mortgage transactions.
SECTION 9. IC 24-4.5-1-301.5, AS AMENDED BY P.L.176-2019,
SECTION 12, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 301.5. In addition to definitions appearing in
subsequent chapters in this article, the following definitions apply
throughout this article:
(1) "Affiliate", with respect to any person subject to this article,
means a person that, directly or indirectly, through one (1) or more
intermediaries:
(a) controls;
(b) is controlled by; or
(c) is under common control with;
the person subject to this article.
(2) "Agreement" means the bargain of the parties in fact as found in
their language or by implication from other circumstances, including
course of dealing or usage of trade or course of performance.
(3) "Agricultural purpose" means a purpose related to the
production, harvest, exhibition, marketing, transportation, processing,
or manufacture of agricultural products by a natural person who
cultivates, plants, propagates, or nurtures the agricultural products.
"Agricultural products" includes agricultural, horticultural, viticultural,
and dairy products, livestock, wildlife, poultry, bees, forest products,
fish and shellfish, and any and all products raised or produced on farms
and any processed or manufactured products thereof.
(4) "Average daily balance" means the sum of each of the daily
balances in a billing cycle divided by the number of days in the billing
cycle, and if the billing cycle is a month, the creditor may elect to treat
the number of days in each billing cycle as thirty (30).
(5) "Closing costs" with respect to a subordinate lien mortgage
transaction includes:
(a) fees or premiums for title examination, title insurance, or
similar purposes, including surveys;
(b) fees for preparation of a deed, settlement statement, or other
documents;
(c) escrows for future payments of taxes and insurance;
(d) fees for notarizing deeds and other documents;
(e) appraisal fees; and
(f) fees for credit reports.
(6) "Conspicuous" refers to a term or clause when it is so written
that a reasonable person against whom it is to operate ought to have
noticed it.
(7) "Consumer credit" means credit offered or extended to a
SEA 452 — CC 1 24
consumer primarily for a personal, family, or household purpose.
(8) "Consumer credit sale" is a sale of goods, services, or an interest
in land in which:
(a) credit is granted by a person who regularly engages as a seller
in credit transactions of the same kind;
(b) the buyer is a person other than an organization;
(c) the goods, services, or interest in land are purchased primarily
for a personal, family, or household purpose;
(d) either the debt is payable in installments or a credit service
charge is made; and
(e) with respect to a sale of goods or services, either:
(i) the amount of credit extended, the written credit limit, or
the initial advance does not exceed the exempt threshold
amount, as adjusted in accordance with the annual adjustment
of the exempt threshold amount, specified in Regulation Z (12
CFR 226.3 or 12 CFR 1026.3(b), as applicable); or
(ii) the debt is secured by personal property used or expected
to be used as the principal dwelling of the buyer.
Unless the sale is made subject to this article by agreement
(IC 24-4.5-2-601), "consumer credit sale" does not include a sale
in which the seller allows the buyer to purchase goods or services
pursuant to a lender credit card or similar arrangement or, except
as provided with respect to disclosure (IC 24-4.5-2-301), debtors'
remedies (IC 24-4.5-5-201), providing payoff amounts
(IC 24-4.5-2-209), and powers and functions of the department
(IC 24-4.5-6), a sale of an interest in land which is a first lien
mortgage transaction.
(9) "Consumer loan" means a loan made by a person regularly
engaged in the business of making loans in which:
(a) the debtor is a person other than an organization;
(b) the debt is primarily for a personal, family, or household
purpose;
(c) either the debt is payable in installments or a loan finance
charge is made; and
(d) either:
(i) the amount of credit extended, the written credit limit, or
the initial advance does not exceed the exempt threshold
amount, as adjusted in accordance with the annual adjustment
of the exempt threshold amount, specified in Regulation Z (12
CFR 226.3 or 12 CFR 1026.3(b), as applicable); or
(ii) the debt is secured by an interest in land or by personal
property used or expected to be used as the principal dwelling
SEA 452 — CC 1 25
of the debtor.
Except as described in IC 24-4.5-3-105, the term does not include a
first lien mortgage transaction.
(10) "Credit" means the right granted by a creditor to a debtor to
defer payment of debt or to incur debt and defer its payment.
(11) "Creditor" means a person:
(a) who regularly engages in the extension of consumer credit that
is subject to a credit service charge or loan finance charge, as
applicable, or is payable by written agreement in more than four
(4) installments (not including a down payment); and
(b) to whom the obligation is initially payable, either on the face
of the note or contract, or by agreement when there is not a note
or contract.
(12) "Depository institution" has the meaning set forth in the
Federal Deposit Insurance Act (12 U.S.C. 1813(c)) and includes any
credit union.
(13) "Director" means the director of the department of financial
institutions or the director's designee.
(14) "Dwelling" means a residential structure that contains one (1)
to four (4) units, regardless of whether the structure is attached to real
property. The term includes an individual:
(a) condominium unit;
(b) cooperative unit;
(c) mobile home; or
(d) trailer;
that is used as a residence.
(15) "Earnings" means compensation paid or payable for personal
services, whether denominated as wages, salary, commission, bonus,
or otherwise, and includes periodic payments under a pension or
retirement program.
(16) "Employee" means an individual who is paid wages or other
compensation by an employer required under federal income tax law
to file Form W-2 on behalf of the individual.
(17) "Federal banking agencies" means the Board of Governors of
the Federal Reserve System, the Office of the Comptroller of the
Currency, the National Credit Union Administration, and the Federal
Deposit Insurance Corporation.
(18) "First lien mortgage transaction" means:
(a) a consumer loan; or
(b) a consumer credit sale;
that is or will be used by the debtor primarily for personal, family, or
household purposes and that is secured by a mortgage or a land
SEA 452 — CC 1 26
contract (or another consensual security interest equivalent to a
mortgage or a land contract) that constitutes a first lien on a dwelling
or on residential real estate upon which a dwelling is constructed or
intended to be constructed.
(19) "Immediate family member" means a spouse, child, sibling,
parent, grandparent, or grandchild. The term includes stepparents,
stepchildren, stepsiblings, and adoptive relationships.
(20) "Individual" means a natural person.
(21) "Lender credit card or similar arrangement" means an
arrangement or loan agreement, other than a seller credit card, pursuant
to which a lender gives a debtor the privilege of using a credit card,
letter of credit, or other credit confirmation or identification in
transactions out of which debt arises:
(a) by the lender's honoring a draft or similar order for the
payment of money drawn or accepted by the debtor;
(b) by the lender's payment or agreement to pay the debtor's
obligations; or
(c) by the lender's purchase from the obligee of the debtor's
obligations.
(22) "Licensee" means a person licensed as a creditor under this
article.
(23) "Loan brokerage business" means any activity in which a
person, in return for any consideration from any source, procures,
attempts to procure, or assists in procuring, a mortgage transaction
from a third party or any other person, whether or not the person
seeking the mortgage transaction actually obtains the mortgage
transaction.
(24) "Loan processor or underwriter" means an individual who
performs clerical or support duties as an employee at the direction of,
and subject to the supervision and instruction of, a person licensed to
engage in mortgage transactions or a person exempt from licensing. For
purposes of this subsection, the term "clerical or support duties" may
include, after the receipt of an application, the following:
(a) The receipt, collection, distribution, and analysis of
information common for the processing or underwriting of a
mortgage transaction.
(b) The communication with a consumer to obtain the information
necessary for the processing or underwriting of a loan, to the
extent that the communication does not include:
(i) offering or negotiating loan rates or terms; or
(ii) counseling consumers about mortgage transaction rates or
terms.
SEA 452 — CC 1 27
The term does not include an individual who is an employee of a
person that is not engaged in mortgage transactions as a creditor
if that person is permitted to voluntarily register with the
department to sponsor the individual under IC 24-4.4-1-202(b)(8)
to engage solely in the activities described in this subdivision. An
individual engaging solely in loan processor or underwriter activities
shall not represent to the public through advertising or other means of
communicating or providing information, including the use of business
cards, stationery, brochures, signs, rate lists, or other promotional
items, that the individual can or will perform any of the activities of a
mortgage loan originator. However, an individual who is licensed as
a mortgage loan originator under IC 24-4.4 and 750 IAC 9-3, and
who is sponsored by a person, as permitted by
IC 24-4.4-1-202(b)(8), to engage solely as a third party loan
processor or underwriter, is subject to the prohibition set forth in
this subdivision with respect to the individual's engagement under
the sponsorship.
(25) "Mortgage loan originator" means an individual who, for
compensation or gain, or in the expectation of compensation or gain,
regularly engages in taking a mortgage transaction application or in
offering or negotiating the terms of a mortgage transaction that either
is made under this article or under IC 24-4.4 or is made by an employee
of a person licensed to engage in mortgage transactions or by an
employee of a person that is exempt from licensing, while the employee
is engaging in the loan brokerage business. The term does not include
the following:
(a) An individual engaged solely as a loan processor or
underwriter as long as the individual works exclusively as an
employee of a person licensed to engage in mortgage transactions
or as an employee of a person exempt from licensing. However,
the term includes an individual who is licensed as a mortgage
loan originator under IC 24-4.4 and 750 IAC 9-3 and who is
an employee of a person that is not engaged in mortgage
transactions as a creditor if that person voluntarily registers
with the department to sponsor the individual under
IC 24-4.4-1-202(b)(8), to engage solely as a third party
processor or underwriter.
(b) Unless the person or entity is compensated by:
(i) a creditor;
(ii) a loan broker;
(iii) another mortgage loan originator; or
(iv) any agent of the creditor, loan broker, or other mortgage
SEA 452 — CC 1 28
loan originator described in items (i) through (iii);
a person or entity that only performs real estate brokerage
activities and is licensed or registered in accordance with
applicable state law.
(c) A person solely involved in extensions of credit relating to
timeshare plans (as defined in 11 U.S.C. 101(53D)).
(26) "Mortgage servicer" means the last person to whom a
mortgagor or the mortgagor's successor in interest has been instructed
by a mortgagee to send payments on a loan secured by a mortgage.
(27) "Mortgage transaction" means:
(a) a consumer loan; or
(b) a consumer credit sale;
that is or will be used by the debtor primarily for personal, family, or
household purposes and that is secured by a mortgage or a land
contract (or another consensual security interest equivalent to a
mortgage or a land contract) on a dwelling or on residential real estate
upon which a dwelling is constructed or intended to be constructed.
(28) "Nationwide Multistate Licensing System and Registry" (or
"Nationwide Mortgage Licensing System and Registry" or "NMLSR")
means a multistate licensing system owned and operated by the State
Regulatory Registry, LLC, or by any successor or affiliated entity, for
the licensing and registration of creditors, mortgage loan originators,
and other persons in the mortgage or financial services industries. The
term includes any other name or acronym that may be assigned to the
system by the State Regulatory Registry, LLC, or by any successor or
affiliated entity.
(29) "Nontraditional mortgage product" means any mortgage
product other than a thirty (30) year fixed rate mortgage.
(30) "Official fees" means:
(a) fees and charges prescribed by law which actually are or will
be paid to public officials for determining the existence of or for
perfecting, releasing, or satisfying a security interest related to a
consumer credit sale, consumer lease, or consumer loan; or
(b) premiums payable for insurance in lieu of perfecting a security
interest otherwise required by the creditor in connection with the
sale, lease, or loan, if the premium does not exceed the fees and
charges described in subdivision (a) that would otherwise be
payable.
(31) "Organization" means a corporation, a government or
governmental subdivision, an agency, a trust, an estate, a partnership,
a limited liability company, a cooperative, an association, a joint
venture, an unincorporated organization, or any other entity, however
SEA 452 — CC 1 29
organized.
(32) "Payable in installments" means that payment is required or
permitted by written agreement to be made in more than four (4)
installments not including a down payment.
(33) "Person" includes an individual or an organization.
(34) "Person related to" with respect to an individual means:
(a) the spouse of the individual;
(b) a brother, brother-in-law, sister, or sister-in-law of the
individual;
(c) an ancestor or lineal descendants of the individual or the
individual's spouse; and
(d) any other relative, by blood or marriage, of the individual or
the individual's spouse who shares the same home with the
individual.
(35) "Person related to" with respect to an organization means:
(a) a person directly or indirectly controlling, controlled by, or
under common control with the organization;
(b) a director, an executive officer, or a manager of the
organization or a person performing similar functions with respect
to the organization or to a person related to the organization;
(c) the spouse of a person related to the organization; and
(d) a relative by blood or marriage of a person related to the
organization who shares the same home with the person.
(36) "Presumed" or "presumption" means that the trier of fact must
find the existence of the fact presumed, unless and until evidence is
introduced that would support a finding of its nonexistence.
(37) "Real estate brokerage activity" means any activity that
involves offering or providing real estate brokerage services to the
public, including the following:
(a) Acting as a real estate agent or real estate broker for a buyer,
seller, lessor, or lessee of real property.
(b) Bringing together parties interested in the sale, purchase,
lease, rental, or exchange of real property.
(c) Negotiating, on behalf of any party, any part of a contract
relating to the sale, purchase, lease, rental, or exchange of real
property (other than in connection with providing financing with
respect to the sale, purchase, lease, rental, or exchange of real
property).
(d) Engaging in any activity for which a person is required to be
registered or licensed as a real estate agent or real estate broker
under any applicable law.
(e) Offering to engage in any activity, or act in any capacity,
SEA 452 — CC 1 30
described in this subsection.
(38) "Registered mortgage loan originator" means any individual
who:
(a) meets the definition of mortgage loan originator and is an
employee of:
(i) a depository institution;
(ii) a subsidiary that is owned and controlled by a depository
institution and regulated by a federal banking agency; or
(iii) an institution regulated by the Farm Credit
Administration; and
(b) is registered with, and maintains a unique identifier through,
the NMLSR.
(39) "Regularly engaged", with respect to a person who extends
consumer credit, refers to a person who:
(a) extended consumer credit:
(i) more than twenty-five (25) times; or
(ii) more than five (5) times for a mortgage transaction secured
by a dwelling;
in the preceding calendar year; or
(b) extends or will extend consumer credit:
(i) more than twenty-five (25) times; or
(ii) more than five (5) times for a mortgage transaction secured
by a dwelling;
in the current calendar year, if the person did not meet the
numerical standards described in subdivision (a) in the preceding
calendar year.
(40) "Residential real estate" means any real property that is located
in Indiana and on which there is located or intended to be constructed
a dwelling.
(41) "Seller credit card" means an arrangement that gives to a buyer
or lessee the privilege of using a credit card, letter of credit, or other
credit confirmation or identification for the purpose of purchasing or
leasing goods or services from that person, a person related to that
person, or from that person and any other person. The term includes a
card that is issued by a person, that is in the name of the seller, and that
can be used by the buyer or lessee only for purchases or leases at
locations of the named seller.
(42) "Subordinate lien mortgage transaction" means:
(a) a consumer loan; or
(b) a consumer credit sale;
that is or will be used by the debtor primarily for personal, family, or
household purposes and that is secured by a mortgage or a land
SEA 452 — CC 1 31
contract (or another consensual security interest equivalent to a
mortgage or a land contract) that constitutes a subordinate lien on a
dwelling or on residential real estate upon which a dwelling is
constructed or intended to be constructed.
(43) "Unique identifier" means a number or other identifier assigned
by protocols established by the NMLSR.
(44) "Land contract" means a contract for the sale of real estate in
which the seller of the real estate retains legal title to the real estate
until the total contract price is paid by the buyer.
(45) "Bona fide nonprofit organization" means an organization that
does the following, as determined by the director under criteria
established by the director:
(a) Maintains tax exempt status under Section 501(c)(3) of the
Internal Revenue Code.
(b) Promotes affordable housing or provides home ownership
education or similar services.
(c) Conducts the organization's activities in a manner that serves
public or charitable purposes.
(d) Receives funding and revenue and charges fees in a manner
that does not encourage the organization or the organization's
employees to act other than in the best interests of the
organization's clients.
(e) Compensates the organization's employees in a manner that
does not encourage employees to act other than in the best
interests of the organization's clients.
(f) Provides to, or identifies for, debtors mortgage transactions
with terms that are favorable to the debtor (as described in section
202(b)(15) of this chapter) and comparable to mortgage
transactions and housing assistance provided under government
housing assistance programs.
(g) Maintains certification by the United States Department of
Housing and Urban Development or employs counselors who are
certified by the Indiana housing and community development
authority.
SECTION 10. IC 24-4.5-3-502.1, AS AMENDED BY P.L.69-2018,
SECTION 19, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 502.1. (1) A person that is a:
(a) depository institution;
(b) subsidiary that is owned and controlled by a depository
institution and regulated by a federal banking agency; or
(c) credit union service organization;
may engage in Indiana in the making of subordinate lien mortgage
SEA 452 — CC 1 32
transactions without obtaining a mortgage license issued by the
department.
(2) A collection agency licensed under IC 25-11-1 or an institution
regulated by the Farm Credit Administration may engage in:
(a) taking assignments of subordinate lien mortgage transactions;
and
(b) undertaking the direct collection of payments from or the
enforcement of rights against debtors arising from subordinate
lien mortgage transactions;
in Indiana without obtaining a mortgage license issued by the
department.
(3) A person that is not otherwise exempt under subsection (1) or
(2) shall acquire and retain a mortgage license issued by the
department in order to regularly engage in Indiana in the following
actions with respect to subordinate lien mortgage transactions:
(a) The making of subordinate lien mortgage loans.
(b) Taking assignments of subordinate lien mortgage loans.
(c) Undertaking the direct collection of payments from or the
enforcement of rights against debtors arising from subordinate
lien mortgage loans.
(4) Each:
(a) creditor licensed by the department to engage in subordinate
lien mortgage transactions; and
(b) entity person that is exempt (either under this article or under
IC 24-4.4-1-202(b)(6)(a)) IC 24-4.4-1-202(b)(8)) from licensing
and that:
(i) employs a licensed mortgage loan originator; or
(ii) sponsors under an exclusive written agreement, as
permitted by IC 24-4.4-1-202(b)(6)(a), a licensed mortgage
loan originator as an independent agent; permitted by
IC 24-4.4-1-202(b)(8) or by 750 IAC 9;
shall register with and maintain a valid unique identifier issued by the
NMLSR. Each licensed mortgage loan originator must be employed by,
or sponsored under an exclusive written agreement (as permitted by
IC 24-4.4-1-202(b)(6)(a)) and as an independent agent, permitted by
IC 24-4.4-1-202(b)(8) or by 750 IAC 9, and associated with, a
licensed creditor (or an exempt entity person described under
subdivision (b)) that is registered with the NMLSR. in order to
originate loans.
(5) Applicants for a mortgage license must apply to the department
for the license in a form prescribed by the director. Each form:
(a) must contain content as set forth by rule, instruction, or
SEA 452 — CC 1 33
procedure of the director; and
(b) may be changed or updated as necessary by the director to
carry out the purposes of this article.
(6) To fulfill the purposes of this article, the director may establish
relationships or contracts with the NMLSR or other entities designated
by the NMLSR to:
(a) collect and maintain records; and
(b) process transaction fees or other fees;
related to licensees or other persons subject to this article.
(7) For the purpose of participating in the NMLSR, the director or
the department may:
(a) waive or modify, in whole or in part, by rule, regulation, or
order, any or all of the requirements of this article; and
(b) establish new requirements as reasonably necessary to
participate in the NMLSR.
SECTION 11. IC 24-4.5-3-503.3, AS AMENDED BY
P.L.129-2020, SECTION 7, IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2023]: Sec. 503.3. (1) Each:
(a) creditor licensed by the department to engage in mortgage
transactions; and
(b) person that is exempt (either under this article or under
IC 24-4.4-1-202(b)(6)(a)) or IC 24-4.4-1-202(b)(8)) from
licensing and that:
(i) employs a licensed mortgage loan originator; or
(ii) sponsors under an exclusive written agreement, as
permitted by IC 24-4.4-1-202(b)(6)(a), a licensed mortgage
loan originator as an independent agent; permitted by
IC 24-4.4-1-202(b)(8) or by 750 IAC 9;
must be covered by a surety bond in accordance with this section.
(2) A surety bond must:
(a) provide coverage for:
(i) a creditor described in subsection (1)(a); and
(ii) an exempt person described in subsection (1)(b);
in an amount as prescribed in subsection (4);
(b) be in a form as prescribed by the director;
(c) be in effect:
(i) during the term of the creditor's license; or
(ii) at any time during which the person exempt from licensing
employs a licensed mortgage loan originator, or sponsors
under an exclusive written agreement (as permitted by
IC 24-4.4-1-202(b)(6)(a)) a licensed mortgage loan originator
as an independent agent; permitted by IC 24-4.4-1-202(b)(8)
SEA 452 — CC 1 34
or by 750 IAC 9;
as applicable;
(d) subject to subsection (3), remain in effect during the two (2)
years after:
(i) the license of the creditor is surrendered or terminated; or
(ii) the person exempt from licensing ceases to employ a
licensed mortgage loan originator, or ceases to sponsor under
an exclusive written agreement (as permitted by
IC 24-4.4-1-202(b)(6)(a)) a licensed mortgage loan originator
as an independent agent, permitted by IC 24-4.4-1-202(b)(8)
or by 750 IAC 9, or to offer financial services to individuals
in Indiana, whichever is later;
as applicable;
(e) be payable to the department for the benefit of:
(i) the state; and
(ii) individuals who reside in Indiana when they agree to
receive financial services from the creditor or the person
exempt from licensing, as applicable;
(f) be issued by a bonding, surety, or insurance company
authorized to do business in Indiana and rated at least "A-" by at
least one (1) nationally recognized investment rating service; and
(g) have payment conditioned upon:
(i) the creditor's or any of the creditor's licensed mortgage loan
originators'; or
(ii) the exempt person's or any of the exempt person's licensed
mortgage loan originators';
noncompliance with or violation of this chapter, 750 IAC 9, or
other federal or state laws or regulations applicable to mortgage
lending.
(3) The director may adopt rules or guidance documents with
respect to the requirements for surety bonds as necessary to accomplish
the purposes of this article. Upon written request from:
(a) a creditor described in subsection (1)(a); or
(b) an exempt person described in subsection (1)(b);
the director may, at the discretion of the director, waive or shorten the
two (2) year period set forth in subsection (2)(d) during which a surety
bond required by this section must remain in effect after the occurrence
of an event described in subsection (2)(d)(i) or (2)(d)(ii), as applicable.
(4) The penal sum of the surety bond shall be maintained in an
amount that reflects the dollar amount of mortgage transactions
originated as determined by the director. If the principal amount of a
surety bond required under this section is reduced by payment of a
SEA 452 — CC 1 35
claim or judgment, the creditor or exempt person for whom the bond
is issued shall immediately notify the director of the reduction and, not
later than thirty (30) days after notice by the director, file a new or an
additional surety bond in an amount set by the director. The amount of
the new or additional bond set by the director must be at least the
amount of the bond before payment of the claim or judgment.
(5) If for any reason a surety terminates a bond issued under this
section, the creditor or the exempt person shall immediately notify the
department and file a new surety bond in an amount determined by the
director.
(6) Cancellation of a surety bond issued under this section does not
affect any liability incurred or accrued during the period when the
surety bond was in effect.
(7) The director may obtain satisfaction from a surety bond issued
under this section if the director incurs expenses, issues a final order,
or recovers a final judgment under this chapter.
(8) Notices required under this section must be made in writing and
submitted through the NMLSR or any other electronic registration
system that may be approved by the director.
SECTION 12. IC 24-4.5-3-503.4, AS AMENDED BY
P.L.176-2019, SECTION 21, IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2023]: Sec. 503.4. (1) Subject to
subsection (6), the director shall designate the NMLSR to serve as the
sole entity responsible for:
(a) processing applications and renewals for licenses under
section 502.1 of this chapter;
(b) issuing unique identifiers for licensees under section 502.1 of
this chapter and for entities persons exempt from licensing
(either under this article or under IC 24-4.4-1-202(b)(8)) that
employ licensed mortgage loan originators or that sponsor
licensed loan originators as permitted by
IC 24-4.4-1-202(b)(8) or by 750 IAC 9; and
(c) performing other services that the director determines
necessary for the orderly administration of the department's
licensing system under section 502.1 of this chapter.
(2) Subject to the confidentiality provisions contained in IC 5-14-3,
this section, and IC 28-1-2-30, the director may regularly report
significant or recurring violations of this article related to subordinate
lien mortgage transactions to the NMLSR.
(3) Subject to the confidentiality provisions contained in IC 5-14-3,
this section, and IC 28-1-2-30, the director may report complaints
received regarding licensees and relating to subordinate lien mortgage
SEA 452 — CC 1 36
transactions to the NMLSR.
(4) The director may report publicly adjudicated licensure actions
against licensees under section 502.1 of this chapter to the NMLSR.
(5) The director shall establish a process in which persons licensed
in accordance with section 502.1 of this chapter may challenge
information reported to the NMLSR by the department.
(6) The director's authority to designate the NMLSR under
subsection (1) is subject to the following:
(a) Information stored in the NMLSR is subject to the
confidentiality provisions of IC 28-1-2-30 and IC 5-14-3. A
person may not:
(i) obtain information from the NMLSR unless the person is
authorized to do so by statute;
(ii) initiate any civil action based on information obtained
from the NMLSR if the information is not otherwise available
to the person under any other state law; or
(iii) initiate any civil action based on information obtained
from the NMLSR if the person could not have initiated the
action based on information otherwise available to the person
under any other state law.
(b) Documents, materials, and other forms of information in the
control or possession of the NMLSR that are confidential under
IC 28-1-2-30 and that are:
(i) furnished by the director, the director's designee, or a
licensee; or
(ii) otherwise obtained by the NMLSR;
are confidential and privileged by law and are not subject to
inspection under IC 5-14-3, subject to subpoena, subject to
discovery, or admissible in evidence in any civil action. However,
the director may use the documents, materials, or other
information available to the director in furtherance of any action
brought in connection with the director's duties under this article.
(c) Disclosure of documents, materials, and information:
(i) to the director; or
(ii) by the director;
under this subsection does not result in a waiver of any applicable
privilege or claim of confidentiality with respect to the
documents, materials, or information.
(d) Information provided to the NMLSR is subject to IC 4-1-11.
(e) This subsection does not limit or impair a person's right to:
(i) obtain information;
(ii) use information as evidence in a civil action or proceeding;
SEA 452 — CC 1 37
or
(iii) use information to initiate a civil action or proceeding;
if the information may be obtained from the director or the
director's designee under any law.
(f) Except as otherwise provided in the federal Housing and
Economic Recovery Act of 2008, Public Law 110-289, Section
1512, the requirements under any federal law or IC 5-14-3
regarding the privacy or confidentiality of any information or
material provided to the NMLSR, and any privilege arising under
federal or state law, including the rules of any federal or state
court, with respect to the information or material, continue to
apply to the information or material after the information or
material has been disclosed to the NMLSR. The information and
material may be shared with all state and federal regulatory
officials with mortgage industry oversight authority without the
loss of privilege or the loss of confidentiality protections provided
by federal law or IC 5-14-3.
(g) For purposes of this section, the director may enter agreements
or sharing arrangements with other governmental agencies, the
Conference of State Bank Supervisors, the American Association
of Residential Mortgage Regulators, or other associations
representing governmental agencies as established by rule or
order of the director.
(h) Information or material that is subject to a privilege or
confidentiality under subdivision (f) is not subject to:
(i) disclosure under any federal or state law governing the
disclosure to the public of information held by an officer or an
agency of the federal government or the respective state; or
(ii) subpoena, discovery, or admission into evidence, in any
private civil action or administrative process, unless with
respect to any privilege held by the NMLSR with respect to
the information or material, the person to whom the
information or material pertains waives, in whole or in part, in
the discretion of the person, that privilege.
(i) Any provision of IC 5-14-3 that concerns the disclosure of:
(i) confidential supervisory information; or
(ii) any information or material described in subdivision (f);
and that is inconsistent with subdivision (f) is superseded by this
section.
(j) This section does not apply with respect to information or
material that concerns the employment history of, and publicly
adjudicated disciplinary and enforcement actions against, a
SEA 452 — CC 1 38
person licensed in accordance with section 502.1 of this chapter
and described in section 503(2) of this chapter and that is
included in the NMLSR for access by the public.
(k) The director may require a licensee required to submit
information to the NMLSR to pay a processing fee considered
reasonable by the director. In determining whether an NMLSR
processing fee is reasonable, the director shall:
(i) require review of; and
(ii) make available;
the audited financial statements of the NMLSR.
(7) Notwithstanding any other provision of law, any:
(a) application, renewal, or other form or document that:
(i) relates to mortgage licenses issued by the department; and
(ii) is made or produced in an electronic format;
(b) document filed as an electronic record in a multistate
automated repository established and operated for the licensing or
registration of mortgage lenders, brokers, or loan originators; or
(c) electronic record filed through the NMLSR;
is considered a valid original document when reproduced in paper form
by the department.
SECTION 13. IC 24-4.5-3-505, AS AMENDED BY P.L.69-2018,
SECTION 22, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 505. (1) Every creditor required to be licensed
under this article shall maintain records in conformity with United
States generally accepted accounting principles and practices, or in any
other form that may be preapproved at the discretion of the director, in
a manner that will enable the department to determine whether the
licensee is complying with the provisions of this article. The record
keeping system of a licensee shall be sufficient if the licensee makes
the required information reasonably available. The department shall
determine the sufficiency of the records and whether the licensee has
made the required information reasonably available. The department
shall be given free access to the records wherever located. The records
pertaining to any loan shall be retained for two (2) years after making
the final entry relating to the loan, but in the case of a revolving loan
account the two (2) years is measured from the date of each entry. A
person licensed or required to be licensed under this chapter is subject
to IC 28-1-2-30.5 with respect to any records maintained by the person.
A person that is exempt (either under this article or under
IC 24-4.4-1-202(b)(6)(a)) IC 24-4.4-1-202(b)(8)) from licensing and
that sponsors one (1) or more licensed mortgage loan originators as
independent agents under an exclusive written agreement, as permitted
SEA 452 — CC 1 39
by IC 24-4.4-1-202(b)(6)(a), IC 24-4.4-1-202(b)(8) or by 750 IAC 9,
shall:
(a) cooperate with the department; and
(b) provide access to records and documents;
as required by the department in carrying out examinations of the
activities of the licensed mortgage loan originators sponsored by the
federal savings bank. person.
(2) The unique identifier of any person originating a mortgage
transaction must be clearly shown on all mortgage transaction
application forms and any other documents as required by the director.
(3) Every licensee that engages in mortgage transactions shall use
automated examination and regulatory software designated by the
director, including third party software. Use of the software consistent
with guidance documents and policies issued by the director is not a
violation of IC 28-1-2-30.
(4) Each:
(a) creditor that is licensed by the department to engage in
mortgage transactions; and
(b) entity person that is exempt (either under this article or under
IC 24-4.4-1-202(b)(6)(a)) IC 24-4.4-1-202(b)(8)) from licensing
and that:
(i) employs one (1) or more licensed mortgage loan
originators; or
(ii) sponsors under an exclusive written agreement, as
permitted by IC 24-4.4-1-202(b)(6)(a), one (1) or more
licensed mortgage loan originators as independent agents;
permitted by IC 24-4.4-1-202(b)(8) or by 750 IAC 9;
shall submit to the NMLSR a call report, which must be in the form
and contain information the NMLSR requires.
(5) Every creditor required to be licensed under this article shall file
with the department a composite report as required by the department,
but not more frequently than annually, in the form prescribed by the
department relating to all consumer loans made by the licensee. The
department shall consult with comparable officials in other states for
the purpose of making the kinds of information required in the reports
uniform among the states. Information contained in the reports shall be
confidential and may be published only in composite form. The
department may impose a fee in an amount fixed by the department
under IC 28-11-3-5 for each day that a creditor fails to file the report
required by this subsection.
(6) A creditor required to be licensed under this article shall file
notification with the department if the licensee:
SEA 452 — CC 1 40
(a) has a change in name, address, or principals;
(b) opens a new branch, closes an existing branch, or relocates an
existing branch;
(c) files for bankruptcy or reorganization; or
(d) is subject to revocation or suspension proceedings by a state
or governmental authority with regard to the licensee's activities;
not later than thirty (30) days after the date of the event described in
this subsection.
(7) Every licensee shall file notification with the department if the
licensee or any director, executive officer, or manager of the licensee
has been convicted of a felony under the laws of Indiana or any other
jurisdiction. The licensee shall file the notification required by this
subsection not later than thirty (30) days after the date of the event
described in this subsection.
SECTION 14. IC 28-7-1-19, AS AMENDED BY P.L.35-2010,
SECTION 160, IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2023]: Sec. 19. (a) The capital of a credit union
shall consist of the payments on shares which have been made to it by
members. A credit union may attach a lien on the shares of any member
with outstanding obligations to the credit union. A credit union may,
upon the resignation of a member, cancel the shares of such member,
and apply the withdrawal value of such shares towards the liquidation
of the member's obligations. Fully paid up shares of a credit union may
be transferred to any qualified member upon such terms as the bylaws
provide. If a federal credit union is authorized by the federal regulatory
authority with jurisdiction or by federal law to use one (1) or more
forms of secondary capital, the department may by rule, order, or
declaratory ruling allow a credit union to use one (1) or more forms of
secondary capital. The rule, order, or declaratory ruling must include
disclosure requirements concerning the conditions for return of the
secondary capital and the liquidation priority of the secondary capital.
(b) A credit union shall maintain capital consistent with the
safety and soundness necessary to support the risk in the credit
union's activities, as determined appropriate by the director. The
National Credit Union Administration's:
(1) prompt corrective action; and
(2) risk based net worth;
regulations set forth in 12 CFR 702.101, 12 CFR 702.102, 12 CFR
702.103, 12 CFR 702.104, and 12 CFR 702.105 apply to all credit
unions.
SECTION 15. IC 28-7-1-19.1 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
SEA 452 — CC 1 41
[EFFECTIVE JULY 1, 2023]: Sec. 19.1. (a) Beginning on the
effective date of a credit union's classification as adequately
capitalized or lower, the credit union must increase the dollar
amount of the credit union's net worth on a quarterly basis, either:
(1) in the current quarter; or
(2) on average over the current quarter and the preceding
three (3) quarters;
by an amount equal to at least one-tenth of one percent (0.1%) of
the credit union's total assets (or by a greater amount at the
election of the credit union) until the credit union is classified as
well capitalized.
(b) Upon written application:
(1) made by a credit union described in subsection (a); and
(2) received by the director and the credit union's share
insurer not later than fourteen (14) days before the end of the
applicable quarter;
the director and the credit union's share insurer may permit the
credit union to increase the dollar amount of the credit union's net
worth by an amount that is less than the amount set forth in
subsection (a), to the extent the director and the credit union's
share insurer determine that the lesser amount is necessary to
avoid a significant redemption of the credit union's shares, and
would further the purposes of section 19(b) of this chapter.
(c) A decision under subsection (b) is subject to quarterly review
and revocation unless the credit union is operating under an
approved net worth restoration plan that is in accordance with the
decision under subsection (b).
SECTION 16. IC 28-7-1-19.2 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2023]: Sec. 19.2. (a) A credit union that is
classified as undercapitalized or lower must do the following:
(1) Increase the credit union's net worth in accordance with
section 19.1 of this chapter.
(2) Submit a net worth restoration plan to the director at the
time and in the manner specified by the director. If the credit
union:
(A) has a net worth ratio of less than five percent (5%);
and
(B) either:
(i) fails to submit a net worth restoration plan required
by this subdivision; or
(ii) materially fails to implement a net worth restoration
SEA 452 — CC 1 42
plan submitted under this subdivision and approved by
the director;
the credit union shall be reclassified as significantly
undercapitalized as described in 12 CFR 702.102(a)(4)(ii).
(3) Beginning on the effective date of the credit union's
classification as undercapitalized or lower, not permit the
credit union's assets to increase beyond the credit union's
assets as of the end of the preceding quarter unless one (1) of
the following applies:
(A) The director and the credit union's share insurer have
approved a net worth restoration plan that provides for an
increase in total assets and:
(i) the assets of the credit union are increasing consistent
with the approved plan; and
(ii) the credit union is implementing steps to increase the
credit union's net worth ratio consistent with the
approved plan.
(B) The director and the credit union's share insurer have
not approved a net worth restoration plan, but the credit
union's total assets are increasing because of increases in
the balances (as of the end of the preceding quarter) of one
(1) or more of the following:
(i) The credit union's total accounts receivable and
accrued income on loans and investments.
(ii) Total cash and cash equivalents.
(iii) Total loans outstanding, as long as the amount of the
credit union's total loans outstanding does not exceed the
sum of the credit union's total assets plus the balance, as
of the end of the preceding quarter, of the credit union's
unused commitments to lend and unused lines of credit.
A credit union with one (1) or more increased balances
under this clause may not offer rates on shares that exceed
the prevailing rates on shares in the credit union's relevant
market area, and may not establish or acquire any
additional branch office.
(4) Beginning on the effective date of the credit union's
classification as undercapitalized or lower, not increase the
total dollar amount of member business loans (including loans
outstanding and unused commitments to lend) above the total
dollar amount of member business loans (including loans
outstanding and unused commitments to lend) as of the end of
the preceding quarter, unless the credit union is permitted to
SEA 452 — CC 1 43
do so by the director and the credit union's share insurer.
(b) Subject to the applicable procedures for issuing, reviewing,
and enforcing directives under this chapter, the director may, by
directive, take one (1) or more of the following actions with respect
to an undercapitalized credit union having a net worth ratio of less
than five percent (5%) (or with respect to a director, officer, or
employee of such a credit union) if the director determines that the
action is necessary to carry out the purposes of section 19(b) of this
chapter:
(1) Prohibit the credit union from, directly or indirectly:
(A) acquiring any interest in any business entity or
financial institution;
(B) establishing or acquiring any additional branch office;
or
(C) engaging in any new line of business;
unless the director has approved the credit union's net worth
restoration plan, the credit union is implementing the plan,
and the director determines that the proposed action is
consistent with and will further the objectives of the plan.
(2) Restrict the credit union's transactions with a credit union
service organization, or require the credit union to reduce or
divest the credit union's ownership interest in a credit union
service organization.
(3) Restrict the dividend rates that the credit union pays on
shares to the prevailing rates paid on comparable accounts
and maturities in the relevant market area, as determined by
the director. However, the director may not retroactively
restrict a dividend rate already declared with respect to
shares acquired before a restriction is imposed under this
subdivision.
(4) Prohibit any growth in the credit union's assets, or in a
category of assets, or require the credit union to reduce the
credit union's assets or a category of the credit union's assets.
(5) Require the credit union or the credit union's credit union
service organization to alter, reduce, or terminate any activity
that poses excessive risk to the credit union, as determined by
the director.
(6) Prohibit the credit union from accepting all or certain
nonmember deposits, as specified by the director.
(7) Require the credit union to dismiss from office one (1) or
more directors or senior executive officers. A dismissal under
this subdivision shall not be construed to be a formal
SEA 452 — CC 1 44
administrative action for removal.
(8) Require the credit union to employ qualified senior
executive officers, who, if the director and the credit union's
share insurer so specify, shall be subject to the approval of the
director and the credit union's share insurer.
(9) Restrict or require any other action by the credit union, to
the extent the director and the credit union's share insurer
determine that the restriction or requirement will carry out
the purposes of section 19(b) of this chapter better than any
of the restrictions or requirements set forth in subdivisions (1)
through (8).
(c) An undercapitalized credit union that:
(1) has a net worth ratio of at least five percent (5%); or
(2) is classified as undercapitalized in accordance with 12
CFR 702.102(a)(3)(ii) for having a risk based capital ratio of
less than eight percent (8%), as calculated under 12 CFR
702.104;
is subject to the discretionary supervisory actions set forth in
subsection (b) if the credit union fails to comply with one (1) or
more mandatory supervisory requirements or restrictions set forth
in subsection (a), or if the credit union fails to timely implement a
net worth restoration plan, as described in 12 CFR 702.111 and
approved by the director, including a failure to meet the prescribed
steps to increase the credit union's net worth ratio.
SECTION 17. IC 28-7-1-19.3 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2023]: Sec. 19.3. (a) A credit union that is
classified as significantly undercapitalized or lower must do the
following:
(1) Increase the credit union's net worth in accordance with
section 19.1 of this chapter.
(2) Submit a net worth restoration plan to the director at the
time and in the manner specified by the director.
(3) Beginning on the effective date of the credit union's
classification as significantly undercapitalized or lower, not
permit the credit union's assets to increase beyond the credit
union's assets as of the end of the preceding quarter except as
permitted under section 19.2(a)(3)(A) or 19.2(a)(3)(B) of this
chapter.
(4) Beginning on the effective date of the credit union's
classification as significantly undercapitalized or lower, not
increase the total dollar amount of member business loans
SEA 452 — CC 1 45
(including loans outstanding and unused commitments to
lend) above the total dollar amount of member business loans
(including loans outstanding and unused commitments to
lend) as of the end of the preceding quarter.
(b) Subject to the applicable procedures for issuing, reviewing,
and enforcing directives under this chapter, the director may, by
directive, take one (1) or more of the following actions with respect
to a significantly undercapitalized credit union (or with respect to
a director, officer, or employee of such a credit union) if the
director determines that the action is necessary to carry out the
purposes of section 19(b) of this chapter:
(1) Prohibit the credit union from, directly or indirectly:
(A) acquiring any interest in any business entity or
financial institution;
(B) establishing or acquiring any additional branch office;
or
(C) engaging in any new line of business;
except as permitted by the director and the credit union's
share insurer.
(2) Restrict the credit union's transactions with a credit union
service organization, or require the credit union to reduce or
divest the credit union's ownership interest in a credit union
service organization.
(3) Restrict the dividend rates that the credit union pays on
shares, as determined by the director and the credit union's
share insurer.
(4) Prohibit any growth in the credit union's assets, or in a
category of assets, or require the credit union to reduce the
credit union's assets or a category of the credit union's assets.
(5) Require the credit union or the credit union's credit union
service organization to alter, reduce, or terminate any activity
that poses excessive risk to the credit union, as determined by
the director.
(6) Prohibit the credit union from accepting all or certain
nonmember deposits, as specified by the director.
(7) Order a new election of the credit union's board of
directors.
(8) Require the credit union to dismiss from office one (1) or
more directors or senior executive officers. A dismissal under
this subdivision shall not be construed to be a formal
administrative action for removal.
(9) Require the credit union to employ qualified senior
SEA 452 — CC 1 46
executive officers, who, if the director and the credit union's
share insurer so specify, shall be subject to the approval of the
director and the credit union's share insurer.
(10) Limit the compensation of one (1) or more senior
executive officers of the credit union to that officer's average
rate of compensation (excluding bonuses and profit sharing)
during the four (4) calendar quarters preceding the effective
date of the credit union's classification as significantly
undercapitalized or lower, and prohibit the payment of a
bonus or profit share to the officer. If the director exercises
the discretionary supervisory authority authorized by this
subdivision, the director may permit the credit union to
compensate a senior executive officer without the limitations
described in this subdivision, or with less stringent limitations
than those described in this subdivision, with the prior written
approval of the director and the credit union's share insurer.
(11) Restrict or require any other action by the credit union,
to the extent the director and the credit union's share insurer
determine that the restriction or requirement will carry out
the purposes of section 19(b) of this chapter better than any
of the restrictions or requirements set forth in subdivisions (1)
through (10).
(12) Require the credit union to merge with another financial
institution if one (1) or more grounds exist for placing the
credit union into conservatorship or into liquidation.
(c) Notwithstanding any other mandatory or discretionary
supervisory requirements or restrictions set forth in this section,
if a credit union is classified as significantly undercapitalized or
lower (including by reclassification in accordance with 12 CFR
702.102(b)), the director and the credit union's share insurer may
place the credit union into conservatorship or into liquidation if the
credit union has no reasonable prospect of becoming well
capitalized, as determined by the director.
SECTION 18. IC 28-7-1-19.4 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2023]: Sec. 19.4. (a) A credit union that is
classified as critically undercapitalized must do the following:
(1) Increase the credit union's net worth in accordance with
section 19.1 of this chapter.
(2) Submit a net worth restoration plan to the director at the
time and in the manner specified by the director.
(3) Beginning sixty (60) days after the effective date of the
SEA 452 — CC 1 47
credit union's classification as critically undercapitalized, not
pay the principal of or interest on the credit union's
subordinated debt (as defined in 12 CFR 702.402). Unpaid
interest shall continue to accrue under the terms of the related
subordinated debt note (as defined in 12 CFR 702.402), to the
extent permitted by law.
(4) Not permit the credit union's total assets to increase,
except as permitted by the director and the credit union's
share insurer.
(5) Beginning on the effective date of the credit union's
classification as critically undercapitalized, not increase the
total dollar amount of member business loans (including loans
outstanding and unused commitments to lend) above the total
dollar amount of member business loans (including loans
outstanding and unused commitments to lend) as of the end of
the preceding quarter.
(b) Subject to the applicable procedures for issuing, reviewing,
and enforcing directives under this chapter, the director may, by
directive, take one (1) or more of the following actions with respect
to a critically undercapitalized credit union (or with respect to a
director, officer, or employee of such a credit union) if the director
determines that the action is necessary to carry out the purposes of
section 19(b) of this chapter:
(1) Prohibit the credit union from, directly or indirectly:
(A) acquiring any interest in any business entity or
financial institution;
(B) establishing or acquiring any additional branch office;
or
(C) engaging in any new line of business;
except as permitted by the director and the credit union's
share insurer.
(2) Restrict the credit union's transactions with a credit union
service organization, or require the credit union to reduce or
divest the credit union's ownership interest in a credit union
service organization.
(3) Restrict the dividend rates that the credit union pays on
shares, as determined by the director and the credit union's
share insurer.
(4) Prohibit any growth in the credit union's assets, or in a
category of assets, or require the credit union to reduce the
credit union's assets or a category of the credit union's assets.
(5) Require the credit union or the credit union's credit union
SEA 452 — CC 1 48
service organization to alter, reduce, or terminate any activity
that poses excessive risk to the credit union, as determined by
the director.
(6) Prohibit the credit union from accepting all or certain
nonmember deposits, as specified by the director.
(7) Order a new election of the credit union's board of
directors.
(8) Require the credit union to dismiss from office one (1) or
more directors or senior executive officers. A dismissal under
this subdivision shall not be construed to be a formal
administrative action for removal.
(9) Require the credit union to employ qualified senior
executive officers, who, if the director and the credit union's
share insurer so specify, shall be subject to the approval of the
director.
(10) Limit the compensation of one (1) or more senior
executive officers of the credit union to that officer's average
rate of compensation (excluding bonuses and profit sharing)
during the four (4) calendar quarters preceding the effective
date of the credit union's classification as critically
undercapitalized, and prohibit the payment of a bonus or
profit share to the officer. If the director exercises the
discretionary supervisory authority authorized by this
subdivision, the director may permit the credit union to
compensate a senior executive officer without the limitations
described in this subdivision, or with less stringent limitations
than those described in this subdivision, with the prior written
approval of the director and the credit union's share insurer.
(11) Beginning sixty (60) days after the effective date of the
credit union's classification as critically undercapitalized,
prohibit payments of principal, dividends, or interest on the
credit union's grandfathered secondary capital (as defined in
12 CFR 702.402). Unpaid dividends or interest shall continue
to accrue under the terms of the account, to the extent
permitted by law.
(12) Require the credit union to obtain the prior written
approval of the director and the credit union's share insurer
before the credit union does any of the following:
(A) Enter into any material transaction not within the
scope of an approved net worth restoration plan or an
approved revised business plan, as applicable.
(B) Extend credit for transactions determined to be highly
SEA 452 — CC 1 49
leveraged by the director.
(C) Amend the credit union's charter or bylaws, except to
the extent necessary to comply with any law, regulation, or
order.
(D) Make any material change in accounting methods.
(E) Pay dividends or interest on new share accounts at a
rate exceeding the prevailing rates of interest on insured
deposits in the credit union's relevant market area.
(13) Restrict or require any other action by the credit union,
to the extent the director and the credit union's share insurer
determine that the restriction or requirement will carry out
the purposes of section 19(b) of this chapter better than any
of the restrictions or requirements set forth in subdivisions (1)
through (12).
(14) Require the credit union to merge with another financial
institution if one (1) or more grounds exist for placing the
credit union into conservatorship or into liquidation.
SECTION 19. IC 28-10-1-1, AS AMENDED BY P.L.29-2022,
SECTION 13, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2023]: Sec. 1. A reference to a federal law or federal
regulation in this title is a reference to the law or regulation as in effect
December 31, 2021. 2022.
SECTION 20. [EFFECTIVE JULY 1, 2023] (a) As used in this
SECTION, "department" refers to the department of financial
institutions established by IC 28-11-1-1.
(b) Not later than June 30, 2024, the department shall adopt
emergency rules under IC 4-22-2-37.1 to amend 750 IAC 9 to:
(1) conform 750 IAC 9 with this act; and
(2) establish a rule to authorize a person that is licensed under
IC 24-4.4 or IC 24-4.5, or that is exempt from licensing under
IC 24-4.4 or IC 24-4.5 (other than a person that has
voluntarily registered with the department under
IC 24-4.4-1-202(b)(8), as amended by this act), to sponsor one
(1) or more mortgage loan originators, who are not employees
of the sponsoring person, to perform mortgage loan
originator activities if the person does the following:
(A) Requires, by written agreement, each sponsored
mortgage loan originator to perform mortgage loan
originator activities exclusively for the sponsoring person.
(B) Assumes responsibility for and reasonably supervises
the activities of each licensed mortgage loan originator
sponsored by the person.
SEA 452 — CC 1 50
(C) Maintains a bond, in accordance with 750 IAC 9-3-7,
that provides coverage for all mortgage loan originators
sponsored by the person.
(D) Ensures each sponsored mortgage loan originator
holds a current, valid insurance producer license under
IC 27-1-15.6.
(c) In adopting the emergency rules described in subsection (b),
the department shall act in accordance with the authority granted
to it under IC 24-4.4-1-101 to adopt emergency rules under
IC 4-22-2-37.1 in order to provide for a system of licensing
creditors and mortgage loan originators that meets the
requirements of:
(1) the Secure and Fair Enforcement for Mortgage Licensing
Act of 2008 (H.R. 3221 Title V) and the interpretations of that
Act issued by the Secretary of Housing and Urban
Development and the Consumer Financial Protection Bureau;
and
(2) the subsequent amendment of the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008 by the
Economic Growth, Regulatory Relief, and Consumer
Protection Act (P.L. 115-174, 132 Stat. 1296).
(d) This SECTION expires July 1, 2024.
SEA 452 — CC 1 President of the Senate
President Pro Tempore
Speaker of the House of Representatives
Governor of the State of Indiana
Date: Time:
SEA 452 — CC 1