S.F. _____ H.F. _____ Section 1. Section 535B.1, Code Supplement 2009, is amended 1 to read as follows: 2 535B.1 Definitions. 3 As used in this chapter unless the context otherwise 4 requires: 5 1. “Administrator” means the superintendent of the division 6 of banking of the department of commerce. 7 2. Reserved. “Closing agent” means a person who is not a 8 party to the real estate transaction, who provides real estate 9 closing services. 10 3. “Licensee” means a person licensed under this chapter; 11 however, any individual natural person who is acting solely as 12 an employee or agent of a mortgage banker or , mortgage broker , 13 or closing agent licensed under this Act chapter need not be 14 separately licensed under this chapter . 15 4. a. “Mortgage banker” means a person who does one or more 16 of the following: 17 (1) a. Makes at least four mortgage loans on residential 18 real property located in this state in a calendar year. 19 (2) b. Originates at least four mortgage loans on 20 residential real property located in this state in a calendar 21 year and sells four or more such loans in the secondary market. 22 (3) c. Services at least four mortgage loans on residential 23 real property located in this state. However, a natural 24 person, who services less than fifteen mortgage loans 25 on residential real estate within the state and who does 26 not sell or transfer mortgage loans, is exempt from this 27 subparagraph paragraph if that person is otherwise exempt from 28 the provisions of this chapter. 29 b. “Mortgage banker” does not include a person who is a 30 licensed mortgage loan originator under chapter 535D . 31 5. “Mortgage broker” means a person who arranges or 32 negotiates, or attempts to arrange or negotiate, at least four 33 mortgage loans or commitments for four or more such loans on 34 residential real property located in this state in a calendar 35 -1- LSB 5401DP (5) 83 rn/nh 1/ 13

S.F. _____ H.F. _____ year. “Mortgage broker” does not include a person who is a 1 licensed mortgage loan originator under chapter 535D . 2 6. “Mortgage loan” means a loan of money secured by a lien 3 on residential real property and includes a refinancing of a 4 contract of sale, an assumption of a prior mortgage loan, and a 5 refinancing of a prior mortgage loan. 6 7. “Party to the real estate transaction” means, with respect 7 to a particular real estate transaction, a lender, seller, 8 purchaser, or borrower. 9 7. 8. “Person” means an individual a natural person , 10 an association, joint venture or joint stock company, 11 partnership, limited partnership, business corporation, 12 nonprofit corporation, or any other group of individuals 13 however organized. 14 8. 9. “Natural person” means an individual who is not 15 an association, joint venture, or joint stock company, 16 partnership, limited partnership, business corporation, 17 nonprofit corporation, other business entity, or any other 18 group of individuals or business entities, however organized. 19 9. 10. “Registrant” means a person registered under section 20 535B.3. 21 11. “Real estate closing services” means the administrative 22 and clerical services required to carry out the conveyance or 23 transfer of real estate or an interest in real estate located 24 in this state to a purchaser or lender. “Real estate closing 25 services” include but are not limited to preparing settlement 26 statements, determining that all closing documents conform 27 to the parties’ contract requirements, ascertaining that the 28 lender’s instructions have been satisfied, conducting a closing 29 conference, receiving and disbursing funds, and completing 30 form documents and instruments selected by and in accordance 31 with instructions of the parties to the transaction. “Real 32 estate closing services” do not include performing solely notary 33 functions. 34 12. “Residential real estate” means the same as defined in 35 -2- LSB 5401DP (5) 83 rn/nh 2/ 13

S.F. _____ H.F. _____ section 535D.3. 1 10. 13. “Residential real property” means real property, 2 which is an owner-occupied single-family or two-family 3 dwelling, located in this state, occupied or used or intended 4 to be occupied or used for residential purposes, including an 5 interest in any real property covered under chapter 499B. 6 14. “Trust account” means a checking account with a 7 federally insured bank, savings and loan association, credit 8 union, or savings bank, which is used exclusively for the 9 deposit of funds transferred electronically or otherwise, cash, 10 money orders, or negotiable instruments that are received by a 11 closing agent to effect a real estate closing. 12 Sec. 2. Section 535B.2, Code 2009, is amended to read as 13 follows: 14 535B.2 Exemptions. 15 This chapter, except for sections 535B.3, 535B.11, 535B.12, 16 and 535B.13, does not apply to any of the following: 17 1. A bank, bank holding company, savings bank, savings 18 and loan association, or credit union organized under the 19 laws of this state, another state, or the United States, or a 20 subsidiary owned or controlled by such a bank, bank holding 21 company, savings bank, savings and loan association, or credit 22 union. 23 2. A loan company licensed under chapter 536 or 536A , except 24 when acting as a closing agent . 25 3. An insurance company or a subsidiary or affiliate of 26 an insurance company organized under the laws of this state, 27 another state, or the United States, and subject to regulation 28 by the commissioner of insurance. 29 4. Mortgage lenders or mortgage bankers maintaining an 30 office in this state whose principal business in this state is 31 conducted with or through mortgage lenders or mortgage bankers 32 otherwise exempt under this section and which maintain a place 33 of business in this state. 34 5. An individual who is employed by a person otherwise 35 -3- LSB 5401DP (5) 83 rn/nh 3/ 13

S.F. _____ H.F. _____ exempt under this section, or who, by contract, operates 1 exclusively on behalf of a person otherwise exempt under this 2 section to the extent that the individual is acting within the 3 scope of the individual’s employment or exclusive contract with 4 the exempt person and is acting within the scope of the exempt 5 person’s charter, license, authority, approval, or certificate. 6 6. A real estate broker licensed under chapter 543B while 7 engaged in practice as a real estate broker. 8 7. A nonprofit organization qualifying for tax-exempt 9 status under the Internal Revenue Code as defined in section 10 422.3 which offers housing services to low and moderate income 11 families. 12 8. A licensed attorney admitted to practice in this state 13 acting solely as an incident to the practice of law. 14 9. An officer or employee of the federal government, any 15 state government, or a political subdivision of the state 16 acting in an official capacity. 17 10. A qualified intermediary or an exchange accommodation 18 titleholder facilitating an exchange under section 1031 of the 19 Internal Revenue Code whose role in the transaction is limited 20 to acting in such a capacity. 21 Sec. 3. Section 535B.4, Code Supplement 2009, is amended to 22 read as follows: 23 535B.4 General licensing requirements. 24 1. A person shall not act as a mortgage banker , or mortgage 25 broker , or closing agent in this state or use the title 26 “mortgage banker” or “mortgage broker” without first obtaining a 27 license from the administrator. 28 2. a. License applicants shall submit to the administrator 29 an application on forms provided by the administrator. The 30 forms shall include, at a minimum, all addresses at which 31 business is to be conducted, the names and titles of each 32 director and principal officers of the business, and a 33 description of the activities of the applicant in such detail 34 as the administrator may require. 35 -4- LSB 5401DP (5) 83 rn/nh 4/ 13

S.F. _____ H.F. _____ b. The administrator may require applicants and licensees to 1 be licensed through the nationwide mortgage licensing system 2 and registry as defined in section 535D.3, and may participate 3 in the nationwide mortgage licensing system and registry if 4 this requirement is implemented. In the event the requirement 5 is implemented, the administrator may establish by rule or 6 order new requirements as necessary and appropriate, including 7 but not limited to requirements that applicants, and officers, 8 directors, and others in a position of authority in relation to 9 the applicant, submit to fingerprinting and criminal history 10 checks, and pay associated fees relating thereto. 11 3. The applicant shall also submit a recently prepared 12 certified financial statement. 13 4. The applicant for an initial license shall submit a fee 14 in the amount of five hundred dollars. 15 5. Licenses granted under this chapter are not assignable. 16 6. Licenses granted under this chapter expire on the next 17 December 31 after their issuance. 18 7. Applications for renewals of licenses under this chapter 19 must be filed with the administrator before December 1 of the 20 year of expiration on forms prescribed by the administrator. 21 A renewal application must be accompanied by a fee of two 22 hundred dollars for a license to transact business solely as 23 a mortgage broker, and four hundred dollars for a license 24 to transact business as a mortgage banker , and four hundred 25 dollars for a licensee to transact business as a closing agent . 26 The administrator may assess a late fee of ten dollars per day 27 for applications or registrations accepted for processing after 28 December 1. 29 8. A mortgage banker or mortgage broker licensee shall not 30 conduct business under any other name than that given in the 31 license. A fictitious name may be used, but a mortgage banker 32 or mortgage broker licensee shall conduct business only under 33 one name at a time. However, the administrator may issue more 34 than one license to the same person to conduct business under 35 -5- LSB 5401DP (5) 83 rn/nh 5/ 13

S.F. _____ H.F. _____ different names at the same time upon compliance for each such 1 additional mortgage banker or mortgage broker license with 2 all of the provisions of this chapter governing an original 3 issuance of a license. 4 9. In addition to the application and renewal fees provided 5 for in subsections 4 and 7, the administrator may assess 6 application and renewal fees for each branch location of the 7 licensee, sponsor fees, and change of sponsor fees. 8 Sec. 4. Section 535B.5, subsection 1, Code 2009, is amended 9 to read as follows: 10 1. Upon the filing of an application for a license, if 11 the administrator finds that the financial responsibility, 12 character, and general fitness of the applicant and of the 13 members thereof if the applicant is a partnership, association, 14 or other organization and of the officers, directors, and 15 principal employees if the applicant is a corporation, are 16 such as to warrant belief that the business will be operated 17 honestly, soundly, and efficiently in the public interest 18 consistent with the purposes of this chapter, the administrator 19 shall issue the applicant a license to engage in mortgage 20 lending, brokering, and servicing as a mortgage broker, 21 mortgage banker, or closing agent . The administrator shall 22 approve or deny an application for a license within ninety days 23 after the filing of the application for a license. 24 Sec. 5. Section 535B.8, Code Supplement 2009, is amended to 25 read as follows: 26 535B.8 Operating without a license. 27 A person who, without first obtaining a license under 28 this chapter, engages in the business or occupation of, or 29 advertises or holds the person out as, or claims to be, or 30 temporarily acts as, a mortgage banker , or mortgage broker , or 31 closing agent in this state is guilty of a class “D” felony and 32 may be prosecuted by the attorney general or a county attorney. 33 Sec. 6. Section 535B.9, Code Supplement 2009, is amended to 34 read as follows: 35 -6- LSB 5401DP (5) 83 rn/nh 6/ 13

S.F. _____ H.F. _____ 535B.9 Bonds required of license applicants. 1 1. An applicant for a license shall file with the 2 administrator a bond furnished by a surety company authorized 3 to do business in this state, together with evidence of whether 4 the applicant is seeking to transact business as a mortgage 5 broker , or as a mortgage banker , or closing agent . Until 6 such time as the superintendent pursuant to administrative 7 rule determines a bond amount that reflects the dollar value 8 of loans originated, the bond shall be in the amount of one 9 hundred thousand dollars for applicants seeking to transact 10 business as a mortgage broker or mortgage banker . For 11 applicants seeking to transact business as a closing agent, 12 the bond shall be in the amount of two hundred fifty thousand 13 dollars, unless the administrator by rule establishes a higher 14 bond amount. The bond shall be continuous in nature until 15 canceled by the surety with not less than thirty days’ notice 16 in writing to the mortgage broker , or mortgage banker , or 17 closing agent and to the administrator indicating the surety’s 18 intention to cancel the bond on a specific date. The bond 19 shall be for the use of the state and any persons who may 20 have causes of action against the applicant. The bond shall 21 be conditioned upon the applicant’s faithfully conforming to 22 and abiding by this chapter and any rules adopted under this 23 chapter and shall require that the surety pay to the state 24 and to any persons all moneys that become due or owing to the 25 state and to the persons from the applicant by virtue of this 26 chapter. 27 2. In lieu of filing a bond, the applicant may pledge an 28 alternative form of collateral acceptable to the administrator, 29 if the alternative collateral provides protection to the state 30 and any aggrieved person that is equivalent to that provided 31 by a bond. 32 3. An applicant seeking to transact business as a closing 33 agent shall maintain a policy of errors and omissions insurance 34 executed by an insurer authorized to do business in this state 35 -7- LSB 5401DP (5) 83 rn/nh 7/ 13

S.F. _____ H.F. _____ in an amount not less than two hundred fifty thousand dollars 1 per claim, and five hundred thousand dollars in the aggregate. 2 4. A licensee may not act as a closing agent unless the bond 3 and insurance requirements in this section are in place at the 4 time of a real estate closing. 5 Sec. 7. Section 535B.13, Code 2009, is amended by striking 6 the section and inserting in lieu thereof the following: 7 535B.13 Civil enforcement authority. 8 1. If the administrator believes that a person has 9 engaged in, or is about to engage in, an act or practice that 10 constitutes or will constitute a violation of this chapter, 11 the administrator may apply to the district court for an 12 order enjoining such act or practice. Upon showing by the 13 administrator that such person has engaged, or is about to 14 engage, in any such act or practice, the district court shall 15 grant an injunction. 16 2. The administrator may investigate or initiate a 17 complaint against a person who is not licensed under this 18 chapter to determine whether the person is violating this 19 chapter. 20 3. In addition to or as an alternative to applying to the 21 district court for an injunction, the administrator may issue 22 an order to a person who is not licensed under this chapter to 23 require compliance with this chapter, including to cease and 24 desist from conducting business or from any harmful activities 25 or violations of law or regulation; may impose a civil penalty 26 against such person for any violation of this chapter in an 27 amount up to five thousand dollars for each violation; may 28 order the person to pay restitution; and may order the person 29 to pay the costs for the investigation and prosecution of the 30 enforcement action including attorney fees. 31 4. Before issuing an order under subsection 3, the 32 administrator shall provide the person written notice and 33 the opportunity to request a hearing. The hearing must be 34 requested within thirty days after receipt of the notice 35 -8- LSB 5401DP (5) 83 rn/nh 8/ 13

S.F. _____ H.F. _____ and shall be conducted in the same manner as provided for 1 in disciplinary proceedings involving a licensee under this 2 chapter. 3 5. A person aggrieved by the imposition of a civil penalty 4 under subsection 3 may seek judicial review pursuant to section 5 17A.19. 6 6. An action to enforce an order under this section may be 7 joined with an action for an injunction. 8 7. This chapter does not limit the power of the attorney 9 general to determine that any other practice is unlawful under 10 the Iowa consumer fraud Act contained in section 714.16, and to 11 file an action under that section. 12 Sec. 8. Section 535B.14, Code Supplement 2009, is amended 13 by striking the section and inserting in lieu thereof the 14 following: 15 535B.14 Administrative authority. 16 The administrator shall have broad administrative authority 17 to administer, interpret, and enforce this chapter and 18 to promulgate rules implementing this chapter, including 19 rules providing the grounds for denial of a license based 20 on information received as a result of a background check, 21 character and fitness grounds, and any other grounds for which 22 a licensee may be disciplined. 23 Sec. 9. NEW SECTION . 535B.19 Trust account requirements for 24 closing agents. 25 A licensee acting as a closing agent shall comply with all of 26 the following: 27 1. All moneys received for disbursement during a real 28 estate closing shall be deposited in a trust account and, when 29 deposited, the moneys shall be designated as trust funds or 30 trust accounts or under some other appropriate name indicating 31 that the moneys are not the moneys of the licensee. 32 2. All trust account moneys shall be deposited in a 33 financial institution that is insured by the federal deposit 34 insurance corporation or national credit union share insurance 35 -9- LSB 5401DP (5) 83 rn/nh 9/ 13

S.F. _____ H.F. _____ fund unless the transaction does not involve residential real 1 estate and another financial institution has been designated in 2 writing in the escrow instructions. 3 3. Unless there is a written agreement between all 4 parties to the transaction to the contrary, or the provisions 5 of subsection 4 apply, all interest earned on the trust 6 account shall be transferred on a calendar quarter basis 7 to the treasurer of state for transfer to the Iowa finance 8 authority for deposit in the housing trust fund established 9 in section 16.181. The amount to be remitted to the state 10 shall be the amount of interest earned less any service charges 11 directly attributable to the requirement of maintaining an 12 interest-bearing account and of remitting the interest to 13 the state. The licensee shall have the depository remit 14 the interest directly. The licensee shall not benefit 15 from interest received on funds of others in the licensee’s 16 possession. 17 4. A licensee shall enter into a written agreement to pay 18 interest to a party to a transaction, or to a third party if 19 requested by the parties to a transaction, if the client’s 20 trust funds can earn net interest. In determining whether a 21 client can earn net interest on funds placed in trust, the 22 licensee shall take into consideration all relevant factors 23 including the following: 24 a. The amount of interest that the funds would earn 25 during the period in which they are reasonably expected to be 26 deposited. 27 b. The cost of establishing and administering an individual 28 interest-bearing trust account in which the interest would be 29 transmitted to the client, including any needed tax forms. 30 c. The capability of the financial institution to calculate 31 and pay interest to individual clients through subaccounting 32 or otherwise. 33 5. The licensee shall notify the administrator of the name 34 of each financial institution in which a trust account is 35 -10- LSB 5401DP (5) 83 rn/nh 10/ 13

S.F. _____ H.F. _____ maintained and the name of the account on forms acceptable to 1 the administrator. A licensee may maintain more than one trust 2 account provided it advises the administrator of the multiple 3 accounts. 4 6. A licensee shall only deposit trust funds in a trust 5 account and shall not commingle the licensee’s personal funds 6 or other funds in the trust account with the exception that a 7 licensee may deposit and keep a sum not to exceed one thousand 8 dollars in the trust account from the licensee’s personal 9 funds, which sum shall be specifically identified and deposited 10 to cover bank service charges relating to the trust account or 11 to advance funds to pay incidental fees as permitted in section 12 535B.20, subsection 2. 13 7. Moneys deposited in a trust account are not subject to 14 execution or attachment or to any claim against the licensee. 15 8. A licensee shall not knowingly keep or cause to be 16 kept any money in any bank, credit union, or other financial 17 institution under any name designating the moneys as belonging 18 to a client of the licensee, unless the money was actually 19 entrusted to the licensee for deposit in trust. 20 Sec. 10. NEW SECTION . 535B.20 Disbursing from a trust 21 account. 22 A licensee acting as a closing agent shall not make, in a real 23 estate closing, a disbursement from a trust account on behalf 24 of another person, unless the following conditions are met: 25 1. The cash, funds, money orders, checks, or negotiable 26 instruments necessary for the disbursement have been 27 transferred electronically to or deposited into the trust 28 account of the closing agent and are available for withdrawal 29 and disbursement, or have been physically received by the agent 30 prior to disbursement and are intended for deposit no later 31 than the next banking day after the date of disbursement. 32 2. Nothing in this section prohibits a closing agent 33 licensee from advancing funds not exceeding one thousand 34 dollars from a trust account or otherwise on behalf of a party 35 -11- LSB 5401DP (5) 83 rn/nh 11/ 13

S.F. _____ H.F. _____ to a real estate closing for the purpose of paying incidental 1 fees, such as conveyance and recording fees, in order to effect 2 and close the sale, purchase, exchange, transfer, encumbrance, 3 or lease of residential real property that is the subject of 4 the real estate closing. 5 Sec. 11. REPEAL. Section 535B.17, Code Supplement 2009, is 6 repealed. 7 Sec. 12. EFFECTIVE DATE. This Act takes effect July 1, 8 2011. 9 EXPLANATION 10 This bill adds provisions relating to the licensure and 11 regulation of real estate closing agents to Code chapter 535B, 12 which currently provides for the licensure and regulation of 13 mortgage bankers and mortgage brokers. 14 The bill makes several changes to definitions applicable to 15 the Code chapter. The bill clarifies that a natural person 16 acting solely as an employee or agent of a mortgage banker, 17 mortgage broker, or closing agent need not be separately 18 licensed under Code chapter 535, and deletes provisions that 19 a person who is a licensed mortgage loan originator pursuant 20 to Code chapter 535D is not included within the definition 21 of a mortgage banker or mortgage broker. The bill defines 22 a “closing agent” as a person not a party to a real estate 23 transaction who provides real estate closing services, and 24 provides associated definitions of “party to the real estate 25 transaction”, “real estate closing services”, “residential real 26 estate”, and “trust account”. 27 The bill qualifies a current exemption from most provisions 28 of Code chapter 535B applicable to loan companies to apply the 29 exemption to such companies except when acting as a closing 30 agent. The bill adds exemptions for licensed attorneys; 31 federal, state, and local officers or employees acting in their 32 official capacities; and qualified intermediaries or exchange 33 accommodation titleholders facilitating an exchange pursuant to 34 Internal Revenue Code section 1031. 35 -12- LSB 5401DP (5) 83 rn/nh 12/ 13

S.F. _____ H.F. _____ The bill adds references to closing agents to provisions 1 and requirements relating to general licensing, penalties for 2 unauthorized practice, and bonding. The bill establishes a 3 bond requirement of $250,000 for applicants seeking to transact 4 business as a closing agent, and requires such applicants 5 to maintain errors and omissions insurance coverage. The 6 bill clarifies that provisions regarding conducting business 7 under any other name than that specified in a license apply to 8 mortgage banker and mortgage broker licensees. 9 The bill adds new provisions concerning the civil 10 enforcement authority of the superintendent of the division 11 of banking acting as the administrator of the chapter’s 12 provisions. The authority encompasses injunctive relief, 13 investigative authority, cease and desist orders, civil 14 penalties, and notice and hearing provisions. The bill also 15 adds new provisions granting broad administrative authority to 16 the administrator. 17 The bill imposes trust account requirements applicable 18 to closing agents and conditions governing the making of 19 disbursements from such trust accounts in a real estate 20 closing. 21 The bill takes effect July 1, 2011. 22 -13- LSB 5401DP (5) 83 rn/nh 13/ 13