Arizona Administrative Code › Title 20 - COMMERCE, FINANCIAL INSTITUTIONS, AND INSURANCE › Chapter 04 - DEPARTMENT OF INSURANCE AND FINANCIAL INSTITUTIONS - FINANCIAL INSTITUTIONS › Article 1 - GENERAL › Section R20-4-102 - Definitions

Current through Register Vol. 30, No. 28, July 12, 2024
In this Chapter, unless otherwise specified:
1. "Active management" means directing a licensee's
				  activities by a responsible individual, who:
a. Is knowledgeable about the licensee's Arizona
				  activities;
b. Supervises compliance with:
i. The laws enforced by the Department of Financial
				  Institutions as they relate to the licensee, and
ii. Other applicable laws and rules; and
c. Has sufficient authority to ensure compliance.
2. "Affiliate" has the meaning stated at A.R.S. §
									6-901.
3. "Attorney General" means the Attorney General or an
				  assistant Attorney General of the state of Arizona.
4. "Branch office" means any location within or outside
				  Arizona, including a personal residence, but not including a licensee's
				  principal place of business in Arizona, where the licensee holds out to the
				  public that the licensee acts as a licensee.
5. "Business of a savings and loan association or savings
				  bank" means receiving money on deposit subject to payment by check or any other
				  form of order or request or on presentation of a certificate of deposit or
				  other evidence of debt.
6. "Compensation" means, in applying that term's definition
				  in A.R.S. §§
									6-901,
				  6-941, and
				  6-971, anything
				  received in advance, after repayment, or at any time during a loan's life. This
				  subsection expressly excludes the following items from those definitions of
				  compensation:
a. Charges or fees customarily received after a loan's
				  closing including prepayment penalties, termination fees, reinvestment fees,
				  late fees, default interest, transfer fees, impound account interest and fees,
				  extension fees, and modification fees. However, extension fees and modification
				  fees are compensation if the lender advances additional funds or increases the
				  credit limit on an open-end mortgage as part of the extension or
				  modification;
b. Out-of-pocket expenses paid to independent third parties
				  including appraisal fees, credit report fees, legal fees, document preparation
				  fees, title insurance premiums, recording, filing, and statutory fees,
				  collection fees, servicing fees, escrow fees, and trustee's fees;
c. Insurance commissions;
d. Contingent or additional interest, including interest
				  based on net operating income; or
e. Equity participation.
7. "Commercial finance transaction," as that term is used in
				  this Section's definitions of the terms "Engaged in the business of making
				  mortgage loans" and "Engaged in the business of making mortgage loans or
				  mortgage banking loans," means a loan made primarily for other than personal,
				  family, or household purposes.
8. "Control of a licensee," as used in A.R.S. §§
									6-903,
				  6-944,
				  or
				  6-978,
				  does not include acquiring additional fractional equity interests in a licensee
				  by any person who already has the power to vote 51% or more of the licensee's
				  outstanding voting equity interests.
9. "Correspondent contract," as that term is used in A.R.S.
				  §§
									6-941,
				  6-943,
				  6-971, or
				  6-973,
				  means an agreement between a lender and a funding source under which the
				  funding source may fund, or is required to fund, loans originated by the
				  lender.
10. "Cushion," as that term is used in
				  R20-4-1811 or
				  R20-4-1908,
				  means funds that a servicer or lender may require a borrower to pay into an
				  escrow or impound account before the borrower's periodic payments are available
				  in the account to cover unanticipated disbursements.
11. "Directly or indirectly makes, negotiates, or offers to
				  make or negotiate" and "Directly or indirectly making, negotiating, or offering
				  to make or negotiate," as those phrases are used in A.R.S. §§
									6-901,
				  6-941, or
				  6-971, mean:
a. Providing consulting or advisory services in connection
				  with a mortgage loan transaction, mortgage banking loan transaction, or
				  commercial mortgage loan transaction;
i. To an investor, concerning the location or identity of
				  potential borrowers, regardless of whether the person providing consulting or
				  advisory services directly contacts any potential borrowers; or
ii. To a borrower, concerning the location or identity of
				  potential investors or lenders; or
b. Providing assistance in preparing an application for a
				  mortgage loan transaction, mortgage banking loan transaction, or commercial
				  mortgage banking loan transaction, regardless of whether the person providing
				  assistance directly contacts any potential investor or lender; and
c. Processing a loan; but
d. "Directly or indirectly makes, negotiates, or offers to
				  make or negotiate" and "Directly or indirectly making, negotiating, or offering
				  to make or negotiate" do not include:
i. Providing clerical, mechanical, or word processing
				  services to prepare papers or documents associated with a mortgage loan
				  transaction, mortgage banking loan transaction, or commercial mortgage banking
				  loan transaction;
ii. Purchasing, selling, negotiating to purchase or sell, or
				  offering to purchase or sell a mortgage loan, mortgage banking loan, or
				  commercial mortgage banking loan already funded;
iii. Making, negotiating, or offering to make additional
				  advances on an existing open-ended mortgage loan, mortgage banking loan, or
				  commercial mortgage loan including revolving credit lines;
iv. Modifying, renewing, or replacing a mortgage loan, a
				  mortgage banking loan, or a commercial mortgage loan already funded, if the
				  parties to and security for the loan are the same as the original loan
				  immediately before the modification, renewal, or replacement, and if no
				  additional funds are advanced and no increase is made in the credit limit on an
				  open-ended loan. Replacing a loan means making a new loan simultaneously with
				  terminating an existing loan.
12. "Electronic record" has the meaning stated at A.R.S.
				  §
									44-7002(7).
13. "Employee" means a natural person who has an employment
				  relationship with a licensee that is acknowledged by both the person and the
				  licensee, and:
a. The person is entitled to payment, or is paid, by the
				  licensee;
b. The licensee withholds and remits, or is liable for
				  withholding and remitting, payroll deductions for all applicable federal and
				  state payroll taxes;
c. The licensee has the right to hire and fire the employee
				  and the employee's assistants;
d. The licensee directs the methods and procedures for
				  performing the employee's job;
e. The licensee supervises the employee's business conduct
				  and the employee's compliance with applicable laws and rules; and
f. The rights and duties under subsections (13)(a) through
				  (e) belong to the licensee regardless of whether another person also shares
				  those rights and duties.
14. "Engaged in the business of making mortgage loans," as
				  that phrase is used in A.R.S. §
									6-902, and "engaged in
				  the business of making mortgage loans or mortgage banking loans," as that
				  phrase is used in A.R.S. §
									6-942, mean the direct
				  or indirect making of a total of more than five mortgage banking loans or
				  mortgage loans, or both in a calendar year. Each loan counts only once as of
				  its closing date. A person is not "engaged in the business of making mortgage
				  loans or mortgage banking loans" if the person makes loans solely in commercial
				  finance transactions in which no more than 35% of the aggregate value of all
				  security taken by the investor on the closing date is a lien, or liens, on real
				  property.
15. "Exclusive contract," as that term is used in A.R.S.
				  §§
									6-912
				  and
				  6-991.02, means a
				  written agreement in which a loan originator agrees to perform services as a
				  loan originator subject to supervision and control by a person holding a
				  certificate of exemption issued under A.R.S. §
									6-912 on
				  an exclusive basis. The agreement provides that the loan originator is
				  expressly prohibited from performing loan origination or modification services
				  for any other person during the time the agreement is in effect.
16. "Generally accepted accounting principles" has the
				  meaning used by the Financial Accounting Standards Board or the American
				  Institute of Certified Public Accountants.
17. "Holds out to the public," as used in this Section's
				  definition of "branch office," means advertising or otherwise informing the
				  public that mortgage banking loans, commercial mortgage loans, or mortgage
				  loans are made or negotiated at a location. "Holds out to the public" includes
				  listing a location on business cards, stationery, brochures, rate lists, or
				  other promotional items. "Holds out to the public" does not include a clearly
				  identified home or mobile telephone number on a business card or
				  stationery.
18. "Loan," as that term is used in A.R.S. §§
									6-126(C)(6)
				  and (8), means all loans negotiated or
				  closed, without regard to the location of the real property collateral or type
				  of loan.
19. "Loan Processing" means obtaining a loan application's
				  supporting documents for use in underwriting.
20. "Person" means a natural person or any legal or
				  commercial entity including a corporation, business trust, estate, trust,
				  partnership, limited partnership, joint venture, association, limited liability
				  company, limited liability partnership, or limited liability limited
				  partnership.
21. "Property insurance," as that term is used in A.R.S.
				  §§
									6-909 and
				  6-947, does not
				  include flood insurance as that term is used in the Flood Disaster Protection
				  Act of 1973, as modified by the National Flood Insurance Reform Act of 1994.
				  42 U.S.C.
				  4001, et seq.
22. "Reasonable investigation of the background," as that
				  term is used in A.R.S. §§
									6-903,
				  6-943,
				  or
				  6-976
				  means a licensee, at a minimum:
a. Collects and reviews all the documents authorized by the
				  Immigration Reform and Control Act of 1986,
				  8 U.S.C.
				  1324 a;
b. Obtains a completed Employment Eligibility Verification
				  (Form I-9);
c. Obtains a completed and signed employment
				  application;
d. Obtains a signed statement attesting to all of an
				  applicant's felony convictions, including detailed information regarding each
				  conviction;
e. Consults with the applicant's most recent or next most
				  recent employer, if any;
f. Inquiries regarding the applicant's qualifications and
				  competence for the position;
g. If for a loan officer, loan originator, loan processor,
				  branch manager, supervisor, or similar position, obtains a current credit
				  report from a credit reporting agency; and
h. Investigates further if any information received in the
				  above inquiries raises questions as to the applicant's honesty, truthfulness,
				  integrity, or competence. An inquiry is sufficient after two attempts to
				  contact a person, including at least one written inquiry.
23. "Record" has the meaning stated at A.R.S. §
									44-7002(13).
24. "Registered to do business in this state" means:
a. If an Arizona corporation, it is incorporated under A.R.S.
				  Title 10, Chapter 2, Article 1;
b. If a foreign corporation, it either transfers its domicile
				  under A.R.S. Title 10, Chapter 2, Article 2, or obtains authority to transact
				  business in Arizona under A.R.S. Title 10, Chapter 15, Article 1;
c. If a business trust, it obtains authority to transact
				  business in Arizona under A.R.S. Title 10, Chapter 18, Article 4;
d. If an estate, it acts through a personal representative
				  duly appointed by this state's Superior Court, under the provisions of A.R.S.
				  Title 14, Chapter 3 or 4;
e. If a trust, it delivers to the Superintendent an executed
				  copy of the trust instrument creating the trust together with:
All the current amendments, or
A true copy of the trust instrument certified accurate and
				  complete by a trustee of the trust before a notary public;
f. If a general partnership, limited partnership, limited
				  liability company, limited liability partnership, or limited liability limited
				  partnership, it is organized under A.R.S. Title 29;
g. If a foreign general partnership, limited partnership,
				  limited liability company, limited liability partnership, or limited liability
				  limited partnership, it is registered with the Arizona Secretary of State's
				  office under A.R.S. Title 29;
h. If a joint venture, association, or any entity not
				  specified in this subsection, it is organized and conducts its business in
				  compliance with Arizona law; or
i. The entity is exempt from registration.
25. "Registered Exempt Person" means a person who is exempt
				  from licensure pursuant to A.R.S. §
									6-912
				  and A.R.S. Title 6, Chapter 9, Articles 1, 2 and 3 as a federally chartered
				  savings bank that is registered with the nationwide mortgage licensing system
				  and registry and holds a certificate of exemption.
26. "Resident of this state" means a natural person domiciled
				  in Arizona.
27. "Responsible individual" or "responsible person", as
				  those terms are used in A.R.S. §§
									6-903,
				  6-943,
				  6-973,
				  and
				  6-976,
				  means a resident of this state who:
a. Lives in Arizona during the entire period of designation
				  as the responsible individual on a license;
b. Is in active management of a licensee's affairs;
c. Meets the qualifications listed in A.R.S. §§
									6-903,
				  6-943,
				  or
				  6-973;
				  and
d. Is an officer, director, member, partner, employee, or
				  trustee of a licensed entity.