Arizona Department of Financial Institutions

July 5, 2018 2ND QUARTER NEWS

In This Issue

Administration Division

1

NMLS 2

Legislative Alert 2

Licensing and Con-sumer Affairs Division

3

Financial Services Division

4

Financial Services Division

5

Mortgage Division 6

Credit Union Division 7

Bank and Trust

Company Division

8

DFI Management and Vision

9

A Message from Superintendent Robert D. Charlton

Governor Doug Ducey’s vision is for Arizona to be the number one state to live, work, play, recreate, retire, visit, do business, and get an education. To achieve this vision, Arizona is deploying a professional, results-driven management system to transform the way our State government thinks and does business as one enterprise. State agencies are doing more good for Arizona by tracking and improving their performance each and every day.

THE DEPARTMENT HAS MOVED!!

Arizona Department of Financial Institutions has moved to:

100 N. 15th Avenue, Suite 261 Phoenix, AZ 85007

If you need to come to our office, please know that the visitors lot has a 2 hour limit for parking. For your convenience there is also a parking lot on the east side of 15th Avenue without a time limit. Please stop by the security office located on the first floor to your left as you walk into the building to receive a visitors badge. Please be prepared to show your ID.

The Administration Division welcomes Lola Duncan as the new Manager/CFO

During the past Legislative session, DFI has been given six additional examiner positions effective July 1, 2018. The Mortgage Division will get four examiner positions and the other two will go to the Financial Services Division.

Department of Financial Institutions Page 2

NMLS REMINDER

LEGISLATIVE ALERT

August 3, 2018 is the general date for all legisla on passed and signed by Governor Ducey during the 2018: 53rd Legislature ‐ 2nd Regular Session.   

For a complete list of enacted legisla ng affec ng Title 6, please visit the Department’s website.  

h p://azdfi.gov/LawsRulesPolicy/Laws.html 

If you have any legisla ve ques ons, please contact Stephen Briggs at sbriggs@azdfi.gov. 

THE FOLLOWING LICENSE TYPES ARE NOW AVAILABLE TO BE MANAGED THROUGH NMLS:

Advance Fee Loan Brokers  

Collection Agencies  

Consumer Lenders  

Commercial Mortgage Bankers  

Commercial Mortgage Brokers  

Debt Management Companies  

Escrow Agents  

Loan Originators  

Money Transmitters  

Mortgage Bankers  

Mortgage Brokers  

Premium Finance Companies  

Sales Finance Companies

The Consumer Affairs Division is responsible for reviewing and handling any complaints filed against entities licensed with the Department. The Division also responds to inquiries from consumers and licensees that may not be an actual “complaint”. A list of license types and the various lists of active licensees may be obtained at http:// azdfi.gov/Consumers/Licensees/default.asp. The Department reviews complaints to ensure compliance with all applicable laws and rules. All complaints are forwarded to the Licensee with a requirement to respond to the complaint within 10 days. Licensees must respond to the complaint within ten days. Failure to respond may subject the Licensee to administrative action up to and including a cease and desist order with a civil money penalty of up to $5,000.00 per day per violation. Complaints are processed electronically

via e-mail. Licensees should ensure that the Department has the correct email address in order to process a complaint. In addition, the Consumer Affairs Division processes complaints filed against entities transacting business in Arizona that should be but are not licensed by the Department. Each company doing business in Arizona must obtain the appropriate license before conducting business in Arizona. Anyone who would like to file a complaint may obtain a complaint form at http://azdfi.gov/Consumers/Complaints/Consu merComplaint.html. Please provide a valid e-mail address to expedite the processing of your complaint.

Department of Financial Institutions Page 3

CONSUMER AFFAIRS

For More Information: 

Complaints may be emailed to consumeraffairs@azdfi.gov.

  

LICENSING Licenses Issued during Fiscal Year 2018

License Type Number of Licenses Issued Average Lead Time-Calendar Days

Advance Fee Loan Broker 1 7

Collection Agencies 94 4

Commercial Mortgage Banker 4 8

Commercial Mortgage Broker 11 6

Consumer Lender 33 4

Escrow Agent 21 3

Loan Originator 4,499 9

Money Transmitter 19 3

Mortgage Banker 90 4

Mortgage Broker 64 4

Premium Finance Companies 2 3

Sales Finance 64 2

Total Licenses Issued 4,902 5

Department of Financial Institutions Page 4

A reminder for Consumer Lenders: Annual reports are due to the Department on or before October 1st each year per A.R.S. §6-608. On good cause shown by a licensee, the Superintendent may extend the time for filing the report for a period of not more than sixty days; if a licensee fails to file the report timely, a penalty may be assessed of $5 per day late. When submitting the annual report, please be sure to include a completed standard rate of charge report per A.R.S. §6-609. Both report forms can be found on our website under the Industry link.

Did you know? On a quarterly basis, the Department posts a report of the standard rate of charge for all consumer lender licensees. The report can be found on our website under the Public Records link. To ensure accuracy, please be sure to submit an updated standard rate of charge report within thirty days after effectuating a rate change to any of the applicable loan types listed on the report.

Are you in compliance? Most common violations found during a consumer lender examination:

A.R.S. §6-633(A) - Failure to agree, in writing, to calculate interest based on an annual basis of twelve months of thirty days each or on a daily basis if a day is counted either as 1/360th, 1/365th, or 1/366th of a year for an interest bearing loan.

A.R.S. §6-631(B)(3) - Failure to include the required Spanish disclosure statement on the loan documents. A.R.S. §6-635(A)(1) - Failure to limit the delinquency fee to five per cent of the amount of any installment. A.R.S. §6-637(A)(1-3) - Failure to schedule consumer loan terms as required: “A. The scheduled term of a consumer loan shall not be longer than the following: 1. Twenty-four months and fifteen days from the date of making a consumer loan of one thousand dollars or less. 2. Thirty-six months and fifteen days from the date of making a consumer loan of more than one thousand dollars

but not more than two thousand five hundred dollars. 3. Forty-eight months and fifteen days from the date of making a consumer loan of more than two thousand five

hundred dollars but not more than four thousand dollars.”

All Financial Services Licensees: Please remember when your renewals and applicable report(s) are due!!

FINANCIAL SERVICES DIVISION

Renewal Report Due Semi-Annual Report

Debt Management Companies June 30 Annually—August 15 N/A

Escrow Agents September 30 Annually— April 30

August 15 &

February14

Money Transmitters October 31 Quarterly—See A.R.S. 6-1211 N/A

Premium Finance Companies December 31 Annually—February 1 N/A

Sales Finance Companies June 30 N/A N/A

Collection Agencies December 31 N/A Fictitious Name Report: July 1 and December 31

Consumer Lenders June 30 Annually—October 1 N/A

Special Notice to Consumer Lenders!

Department of Financial Institutions Page 5

The Latest in Appraisal News As many of you may know, there is a new residential appraisal product in the market that is gaining popularity among lenders. It is referred to as a Hybrid Appraisal. While desktop appraisals have been around for over a decade, hybrid appraisals, where a third-party inspector does an external or interior inspection on which the appraiser relies, are relatively new to the valuation scene. There are a number of companies offering hybrid valuation products, each of which has its own form, statement of assumptions and limiting conditions, certifications, and unique brand of additional information that is provided to the appraiser and/or included in the report. Some hybrid appraisals have an exterior only inspection, while others include an interior inspection. Some hybrids also include market data, charts, graphs, and/or market analysis within the appraisal form. Many of the more prominent hybrid companies tout their unique algorithms and data-crunching capabilities as a benefit of their hybrid products. These assignments come with their own set of assumptions and limiting conditions built into the forms. Appraisers should read the statements carefully. Appraisers often have a comfort level with Fannie Mae forms, such as the Uniform Residential Appraisal Report (Form 1004), knowing the form and the Certifications well. Appraisers should be careful not to carry this same level of comfort over to the hybrid assignments and should take care to understand what is being asked of them, what statements they are signing their name to, and be ready to add additional statements to the final Attestations and Certifications as needed. The proponents of hybrid appraisals aptly point out that these assignments are not significantly different from a desktop appraisal, or even a Exterior-Only Inspection Appraisal Report (Form 2055), with the noted difference being that the property is being inspected by a third-party who is providing data to the appraiser. Organization of Real Estate Professional (OREP) suggests the following risk management recommendations as a starting point:  •Maintain control of the report.  •Verify the information using the normal tools (public records, MLS).  •Disclose what sources were used to verify data and to what degree they are verified.  • Keep USPAP open next to you as you evaluate a "hybrid" assignment.  • Withdraw from the assignment if you believe credible assignment results cannot be developed. 

Effective May 1st, AZDFI adopted the new AQB

requirements for appraisal licensure. The most significant change is the alternatives to the

college degree requirement. Additional

information can be found on the ASC

website: https://appraisalfoundat

ion.sharefile.com

FINANCIAL SERVICES DIVISION (CONT.)

ARIZONA FUN FACTS 

Arizona has more boats per capita than any other

state in the nation.

By The Numbers:

Appraisal Licensees July July

2000 2018

Licensed 363 153

Certified Residential 668 1,118

Certified General 637 772

Total 1,668 2,043

The above numbers do not include temporary practice permits.

This story is excerpted from OREP's May 2018 presentation on Hybrid Appraisals and Risk Management; presenters were OREP Senior Broker David Brauner and Working RE Editor Isaac Peck. Reprinted with permission from Working RE magazine and OREP, a leading provider of E&O and GL insurance for real estate agents and appraisers nationwide. Visit OREP.org today for comprehensive coverage at competitive rates.

Department of Financial Institutions Page 6

MORTGAGE DIVISION

The Mortgage Lending Division at DFI oversees various license types and has increased considerably since last quarter. Below is a current listing and number of our license types:

Mortgage Broker Licenses 439

Mortgage Banker Licenses 506

Commercial Mortgage Broker Licenses 72

Commercial Mortgage Banker Licenses 22

Loan Originator Licenses 17,140

Total Licenses 18,179

Arizona Becomes 25th State Accredited Under CSBS Mortgage Supervision Program!

We are extremely pleased to announce that the Mortgage Lending Division at DFI has been recommended for accreditation by the Conference of State Bank Supervisors (CSBS). This honor was accomplished with our first attempt at applying for the accreditation, and it confirms that DFI maintains the highest standards and practices in mortgage supervision set by the CSBS.

The accreditation process began with the completion of an extensive self-evaluation questionnaire on all department operations: administration and finance, personnel, training, examination, supervision, community outreach, and legislative powers. Next, an external team of experts comprised of veteran state and federal regulators performed an on-site review and presented its findings to an audit team and to the Performance Standards Committee – the members of which vote on the reports of the review team and the audit team. The accreditation programs are designed to strengthen and promote excellence in state mortgage supervision while minimizing regulatory burden.

DFI provides a critical service and supervisory role in support of a healthy financial services industry in Arizona. One example is serving the mortgage industry as the primary regulator as well as leading joint examinations with both state and federal regulators. State and Federal agencies accept state agency reports of examination from accredited state agencies. DFI must meet rigorous best practices and successfully complete an outside peer review every five years to achieve accreditation from the CSBS. This assures Arizonans that their real estate mortgage needs are being supervised by the highest standards and guidelines. The Mortgage Lending Division at DFI oversees various license types and has increased considerably since last quarter. Below is a current listing and number of our license types:

Department of Financial Institutions Page 7

"Credit union" means a cooperative nonprofit association which is

incorporated under this chapter for the purposes of

encouraging thrift among its members and creating a source

of credit and other financial services at fair and reasonable

cost.

A Message from the Credit Union Division:

The fiscal year that ends June 30th for some may be a good time to reflect on past events. With that in mind, here are some interesting facts about the credit union industry:

The first not-for-profit cooperative institution officially offered loans in Germany in 1849 to assist farmers facing crop failures and famine.

The credit union concept ignited interest which led to institutions opening in other countries, such as Belgium, Italy, England, Austria, Switzerland, Hungary, the Netherlands, the Balkans and British India.

North America opened its first credit union in 1901 in Quebec, Canada.

The first credit union in the United States appeared in 1909 in New Hampshire.

By 1925, laws had been passed in 26 states to charter credit unions.

Since the early part of the nineteenth century, state-chartered credit unions have been serving their members in the Great State of Arizona.

Credit Union Examinations

CREDIT UNION DIVISION

The world’s largest solar telescope is located at Kitts Peak National

Observatory in the city of Sells.

ARIZONA FUN FACTS 

Recently, the Arizona Senate amended Bill 1150 to reduce the non-refundable application fees for financial institutions. The following were impacted: The organization and establishment of financial institutions to which an application or investigation fee is not specified by law, from $2,500 to $1,000; Banking permit, from $5,000 to $1,000; A federal savings and loan charter or national bank to a state charted institution, from $5,000 to $1,000; Trust Company license, from $5,000 to $1,000.

Chapter 3 of Bill 2013 was amended and defines liquid capital for Trust companies to include legal tender for trust company certification; Defines legal tender as a medium of exchange, including specie, that is authorized by the U.S. Constitution or Congress for the payments of debts, public charges, taxes and dues; Defines specie as coins having precious metal content. Both of these amendments will go into effect August 3, 2018.

Department of Financial Institutions Page 8

Division Update

BANK AND TRUST COMPANY DIVISION

It takes 50 years for a saguaro cactus to grow one arm. In April or May the

saguaro blooms. The blossoms become edible fruit.

ARIZONA FUN FACTS 

Department of Financial Institutions Page 9

Our Mission  

To license, examine, and supervise Financial Ins tu ons, in compliance with State law, to ensure 

safety for the Arizona consumer and soundness for the Arizona business.  

Our Vision  

Advance a na onally recognized, strong and vibrant financial marketplace benefi ng Arizona 

ci zens and businesses. 

Our Goals  

To conduct a professional, efficient and effec ve examina on program, mee ng statutory re‐

quirements and ensuring licensees operate in a safe and sound manner and comply with all ap‐

plicable laws.  

To create new strategies to keep pace with the changing financial services industry.  

Our Strategies  

A thorough inves ga on of the applicants for all permits and licenses issued by the Department 

at the speed of business.  

An ongoing program of examina on of licensees to determine the safety and soundness of their 

opera ons and to iden fy those licensees with serious financial or opera onal problems.  

Ensuring that management of the licensees ini ate  mely and effec ve correc ve ac on by 

complying with Arizona Statutes and Rules.  

DFI MANAGEMENT

WE NEED YOUR HELP 

There’s no regulation too small or rule too out-of-date

to suggest eliminating to expand opportunities for people across the state.

Visit http://azgovernor.gov/redtape and make a difference

today. You send it and we’ll see it, because big things can happen when government

gets out of the way of innovation, creativity, and

entrepreneurship.

Robert D. Charlton Superintendent Arizona Department of Financial Institutions 602-771-2770 RCharlton@azdfi.gov Stephen Briggs Legislative Liaison/Ombudsman 602-771-2770 SBriggs@azdfi.gov Marie Corral Division Manager Credit Union Division 602-771-2826 MCorral@azdfi.gov

Greg Dunn Division Manager Bank and Trust Division 602-771-2816 GDunn@azdfi.gov Lola Duncan Administration Manager/IT Administration and IT Division 602-771-2781 LDuncan@azdfi.gov

Gabriela Macias Division Manager Mortgage Lending Division 602-771-2800 GMacias@azdfi.gov

Mark Murphy Division Manager Licensing and Consumer Affairs Division 602-771-2810 MMurphy@azdfi.gov Tammy Seto Division Manager Financial Services Division 602-771-2777 TSeto@azdfi.gov