Did a South Carolina supervised lender license exempt a company from all mortgage broker rules?

Plain-English summary

A senator asked whether a company licensed to make supervised loans could also broker residential mortgages without complying with mortgage broker registration rules. The April 2001 informal opinion described the Department of Consumer Affairs' narrower reading: supervised lenders could make loans within their licenses, but that status did not free them to broker loans in other areas where they lacked authority.

The AG said the department's reading had statutory support because supervised lender status was defined through the loans a lender made. Since the department administered the law, the letter predicted a court would be unlikely to overturn that reading absent compelling reasons. It identified legislative amendment as the route to a different rule.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Supervised lenders

The opinion treated the mortgage broker exemption as limited to the lender's licensed scope under the department's interpretation. It did not grant a particular company authority to broker every residential mortgage.

Mortgage regulators

The AG expected judicial deference to the department's supported construction of the law it administered.

Common questions

Did supervised lender status alone excuse every mortgage broker license?
A: The AG supported the department's narrower reading: the exemption applied only within the scope of the lender's license.

Why did the opinion give weight to the department's position?
A: The department regulated the relevant laws, and the AG said a court would be unlikely to reject its supported construction without compelling reasons.

How could the rule be changed?
A: The letter said legislative amendment appeared to be the way to change the laws' application.

Background and statutory framework

The letter compared the exemption in Section 40-58-20(5) with the mortgage broker licensing requirement in Section 40-58-30 and Title 37's supervised lender definitions. It found support for limiting the exemption to loans the lender was licensed to make.

Citations and references

• The AG said the exemptions “would apply only to the extent of the licenses of those supervised lenders.”

Official title

Requesting clarification of the statutes pertaining to the registration of mortgage loan brokers, S.C. Code Ann 40-58-10, et seq (2001).

Requester

The Honorable Andre Bauer, Member, South Carolina Senate

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/april-4-2001/
• Original PDF: https://www.scag.gov/wp-content/uploads/2013/11/01april-4-bauer.pdf

Original opinion text

The State of South Carolina

OFFICE OF THE ATTORNEY GENERAL
CHARLES M . CONDON
ATIORNEY GENERAL

April4,2001

The Honorable Andre Bauer
Member, South Carolina Senate
P.O. Box 142
Columbia, South Carolina 29202

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Dear Senator Bauer:
You have requested clarification of the statutes pertaining to the registration of mortgage loan brokers. S.C. Code Ann §40-58-10, et seq (2001). Section 40-58-lO(B)(l) states that "[n]o ... corporation, ... or other organization shall broker a residential mortgage loan as defined in this chapter unless the broker of the mortgage loan: ( 1) is an exempt person or organization as defined by section 40-58-20(5); or (2) has complied with the provisions of this chapter." Section 40-58-30 requires mortgage loan brokers to be licensed but states that" ... the provisions of this chapter do not apply to an exempt person or organization as defined in Section 40-58-20(5)." Under §40-5820(5), "'[e]xempt person or organization' means (a) ... a supervised lender under Title 37 .... " According to your constituent, his company is a "supervised licensed lender under Title 3 7." Section 37-3-501 (2) ( 1989) defines "supervised lender" as "a person authorized to make or take assignments of supervised loans." Section 37-3-503 provides for licenses to make "supervised loans." The term supervised loans is defined under §37-3-501(1). According to the documents that came with your request, The Department of Consumer Affairs takes the position that supervised lenders are free to make loans as they are licensed to do, but they are not free to act as loan brokers in areas in which they are not necessarily otherwise licensed or authorized. Memorandum of Administrator, Department of Consumer affairs, July 8, 1996. Because the Department of Consumer Affairs has regulatory authority under the above laws, a Court would not be likely to overrule its interpretation"absent compelling reasons." Dunton v. South Carolina Board of Examiners in Optometry, 291 S.C. 221, 353 S.E. 2d 132 (1987). This interpretation of the Department of Consumer Affairs appears to have support in that the above provisions of Title 37 which define the term "supervised lender" in terms of the loans that it makes and requires such lenders to have licenses. Under that view, the exemptions in §40-58-10, et seq would apply only to the extent of the licenses of those supervised lenders. Because the Department's conclusions appear to have support in the law, a Court would not be likely to overrule its interpretation of the above laws as they apply to supervised licensed lenders. Dunton. Accordingly, if a change is desired in how the above laws are applied, legislative amendment appears to be the means for doing so.

REMB ERT

c. DENNIS BUILDING

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POST OFFICE Box 11549

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COLUMBIA.

s.c. 29211-1549

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TELEPHONE : 803-734-3970

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FACSIMILE: 803-253-6283

The Honorable Andre Bauer
April 4, 200 I
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This letter is an informal opinion. It has been written by the designated Assistant Deputy Attorney General and represents the opinion of the undersigned attorney as to the specific questions asked. It has not, however, been personally reviewed by the Attorney General nor officially published in the manner of a formal opinion. If you have further questions, please let me know.
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Yours very truly,

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J. Emory S
Assistant Deputy Attorney General