Section 1321.533. Maintenance of net worth and assets; Corporate surety bond

(A)

(1) A registrant engaged in residential mortgage loan activity shall not conduct business in this state, unless the registrant has obtained and maintains in effect at all times a corporate surety bond issued by a bonding company or insurance company authorized to do business in this state.

(a) The bond shall be in favor of the superintendent of financial institutions.

(b) The bond shall be in the penal sum of one-half per cent of the aggregate loan amount of residential mortgage loans originated in the immediately preceding calendar year, but not exceeding one hundred fifty thousand dollars. Under no circumstances, however, shall the bond be less than fifty thousand dollars and an additional penal sum of ten thousand dollars for each location, in excess of one, at which the registrant conducts business.

(c) The term of the bond shall coincide with the term of registration.

(d) A copy of the bond shall be filed with the superintendent.

(e) The bond shall be for the exclusive benefit of any borrower injured by a violation by an employee, licensee, or registrant of any provision of sections 1321.51 to 1321.60 of the Revised Code or the rules adopted thereunder.

(f) The aggregate liability of the corporate surety for any and all breaches of the conditions of the bond shall not exceed the penal sum of the bond.

(2) An individual licensed as a mortgage loan originator and employed or associated with an exempt entity as set forth in division (D) of section 1321.53 of the Revised Code shall not conduct business in this state, unless either the licensee or the exempt entity on the licensee's behalf has obtained and maintains in effect at all times a corporate surety bond issued by a bonding company or insurance company authorized to do business in this state.

(a) The bond shall be in favor of the superintendent.

(b) The bond shall be in the penal sum of one-half per cent of the aggregate loan amount of residential mortgage loans originated in the immediately preceding calendar year, but not exceeding one hundred thousand dollars. Under no circumstances, however, shall the bond be less than fifty thousand dollars.

(c) The term of the bond shall coincide with the term of licensure.

(d) A copy of the bond shall be filed with the superintendent.

(e) The bond shall be for the exclusive benefit of any borrower injured by a violation by the licensee of any provision of sections 1321.51 to 1321.60 of the Revised Code or the rules adopted thereunder.

(f) The aggregate liability of the corporate surety for any and all breaches of the conditions of the bond shall not exceed the penal sum of the bond.

(g) Licensees covered by a corporate surety bond obtained by a registrant or exempt entity they are employed by or associated with shall not be required to obtain an individual bond.

(B)

(1) The registrant or licensee shall give notice to the superintendent by certified mail of any action that is brought by a borrower against the licensee, registrant, or any mortgage loan originator of the registrant alleging injury by a violation of any provision of sections 1321.51 to 1321.60 of the Revised Code, and of any judgment that is entered against the licensee, registrant, or mortgage loan originator of the registrant by a borrower injured by a violation of any provision of sections 1321.51 to 1321.60 of the Revised Code. The notice shall provide details sufficient to identify the action or judgment, and shall be filed with the superintendent within ten days after the commencement of the action or notice to the registrant or licensee of entry of a judgment. An exempt entity securing bonding for the licensees in their employ shall report those actions by a borrower in the same manner as is required of registrants.

(2) A corporate surety, within ten days after it pays any claim or judgment, shall give notice to the superintendent by certified mail of the payment, with details sufficient to identify the person and the claim or judgment paid.

(C) Whenever the penal sum of the corporate surety bond is reduced by one or more recoveries or payments, the registrant or separately bonded licensee shall furnish a new or additional bond under this section, so that the total or aggregate penal sum of the bond or bonds equals the sum required by this section, or shall furnish an endorsement executed by the corporate surety reinstating the bond to the required penal sum of it.

(D) The liability of the corporate surety on the bond to the superintendent and to any borrower injured by a violation of any provision of sections 1321.51 to 1321.60 of the Revised Code shall not be affected in any way by any misrepresentation, breach of warranty, or failure to pay the premium, by any act or omission upon the part of the registrant or licensee, by the insolvency or bankruptcy of the registrant or licensee, or by the insolvency of the registrant's or licensee's estate. The liability for any act or omission that occurs during the term of the corporate surety bond shall be maintained and in effect for at least two years after the date on which the corporate surety bond is terminated or canceled.

(E) The corporate surety bond shall not be canceled by the registrant, the licensee, or the corporate surety except upon notice to the superintendent by certified mail, return receipt requested. The cancellation shall not be effective prior to thirty days after the superintendent receives the notice.

(F) No registrant or licensee shall fail to comply with this section. Any registrant or licensee that fails to comply with this section shall cease all mortgage lender or mortgage loan originator activity in this state until the registrant or licensee has complied with this section.

Amended by 128th General AssemblyFile No.17, SB 124, §1, eff. 12/28/2009.

Added by 128th General AssemblyFile No.9, HB 1, §101.01, eff. 10/16/2009.