House Study Bill 72 SENATE/HOUSE FILE BY (PROPOSED ATTORNEY GENERAL BILL) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act specifying a duty of agency applicable to licensed 2 mortgage brokers and making penalties applicable. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1295DP 83 5 rn/nh/5 PAG LIN 1 1 Section 1. NEW SECTION. 535B.18 DUTY OF AGENCY. 1 2 1. A licensee or individual registrant acting in the 1 3 capacity of a mortgage broker pursuant to section 535B.1, 1 4 subsection 5, shall be considered to have created an agency 1 5 relationship with the borrower in all cases and shall perform 1 6 all of the following duties: 1 7 a. Act in good faith and with fair dealing toward 1 8 borrowers and place the borrower's interest ahead of the 1 9 interest of any other party, including the interest of the 1 10 licensee or individual registrant. 1 11 b. Not accept, give, or charge any undisclosed 1 12 compensation or realize any undisclosed remuneration, either 1 13 through direct or indirect means, that inures to the benefit 1 14 of the licensee or individual registrant in connection with 1 15 the licensee's or individual registrant's relationship with 1 16 the borrower. 1 17 c. Carry out all lawful instructions provided or issued by 1 18 the borrower. 1 19 d. Affirmatively disclose to a borrower all material facts 1 20 of which the licensee or individual registrant has knowledge 1 21 which might reasonably affect the borrower's rights, 1 22 interests, or ability to receive the borrower's intended 1 23 benefit from the mortgage loan. 1 24 e. Use reasonable care in the performance of duties. 1 25 f. Account to the borrower for all the borrower's money 1 26 and property received as agent. 1 27 2. a. This section shall not be construed to prohibit a 1 28 licensee or individual registrant from contracting for or 1 29 collecting a fee after services have been rendered which was 1 30 disclosed and agreed to by the borrower in advance of the 1 31 provision of such services. 1 32 b. This section shall not be construed as requiring a 1 33 licensee or individual registrant to obtain a loan for the 1 34 borrower containing terms or conditions not available in the 1 35 usual course of business to the licensee or individual 2 1 registrant, or to obtain a loan for the borrower from a 2 2 mortgage lender with whom the licensee or individual 2 3 registrant does not have a business relationship. 2 4 3. The duties and standards of care established in this 2 5 section shall not be waived or modified by contract or 2 6 otherwise. 2 7 EXPLANATION 2 8 This bill confers upon licensed mortgage brokers and 2 9 individual registrants a duty of agency. 2 10 The bill provides that a licensee or individual registrant 2 11 acting in the capacity of a mortgage broker pursuant to Code 2 12 section 535B.1, subsection 5, shall be considered to have 2 13 created an agency relationship with a borrower in all cases. 2 14 The bill specifies duties a licensee or individual registrant 2 15 shall perform pursuant to the agency relationship, including 2 16 acting in a borrower's best interest, in good faith, and with 2 17 fair dealing, and not accepting, giving, or charging any 2 18 undisclosed compensation or realizing any undisclosed 2 19 remuneration that inures to the licensee's or individual 2 20 registrant's benefit in connection with their relationship 2 21 with the borrower. Additional duties include carrying out all 2 22 lawful instructions provided or issued by a borrower, 2 23 affirmatively disclosing all material facts of which the 2 24 licensee or individual registrant has knowledge which might 2 25 reasonably affect a borrower's rights, interests, or ability 2 26 to receive the intended benefit from the mortgage loan, using 2 27 reasonable care in the performance of duties, and accounting 2 28 for all the borrower's money and property received as agent. 2 29 The bill states that the duty of agency shall not be 2 30 construed to prohibit a licensee or individual registrant from 2 31 contracting for or collecting a fee after services have been 2 32 rendered which was disclosed and agreed to by the borrower in 2 33 advance of the provision of the services, and shall also not 2 34 be construed to require a licensee or individual registrant to 2 35 obtain a loan for the borrower containing terms or conditions 3 1 not available to the licensee or individual registrant in the 3 2 usual course of business, or to obtain a loan for the borrower 3 3 from a mortgage lender with whom the licensee or individual 3 4 registrant does not have a business relationship. The bill 3 5 provides that the duty of agency and standards of care cannot 3 6 be waived or modified by contract or otherwise. 3 7 A violation of the bill's provisions subjects a licensee to 3 8 the disciplinary provisions of Code chapter 535B, including 3 9 license suspension and revocation, and imposition of civil 3 10 penalties in an amount not to exceed $5,000 per violation. 3 11 LSB 1295DP 83 3 12 rn/nh/5.1