Did a South Carolina lender need a mortgage-broker license if it closed loans in its own name or sold all conventional loans to federally regulated lenders?

Plain-English summary

In a March 1999 informal opinion, the South Carolina Attorney General's office addressed two possible exclusions from the mortgage-broker licensing law. It said a business that only closed mortgage loans in its own name, rather than soliciting, processing, placing, or negotiating them for others, was outside the quoted definition of a mortgage loan broker. It also quoted an exemption for persons or organizations that sold or placed all their conventional real-property loans with federally insured or regulated financial institutions.

The answer depended on those stated conditions. The letter did not address a business that arranged loans for others, sold only some qualifying loans to federally regulated institutions, or engaged in other activities beyond the two described patterns. The opinion applied the law as it stood in 1998 and 1999.

Currency note

This opinion was issued in 1999. 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.

Common questions

Q: Did closing loans solely in a company's own name make it a mortgage broker? A: The opinion said no under the quoted definition, which concerned mortgage-loan activities performed for others. Its answer was limited to a business that only closed its own-name loans.

Q: What loan sales did the exemption cover?
A: The statutory language quoted by the office covered persons or organizations selling or placing all their conventional real-property loans with federally insured or regulated financial institutions, including banks, savings and loan associations, and credit unions.

Q: Did the letter decide whether a mixed business needed a license? A: No. It gave its answer for the two described circumstances and did not analyze a business with additional brokerage activity or loan sales outside the quoted exemption.

Background and statutory framework

The requester asked about lenders that closed loans in their own names or sold loans to federally insured or regulated institutions. The office applied the “Licensing Requirements Act of Certain Brokers of Mortgages on Residential Real Property.” It quoted the definition of a mortgage loan broker in Section 40-58-20(3) and the conventional-loan exemption in § 40-58-20 (5)(a). This was an informal opinion by the signing assistant deputy attorney general, not one personally reviewed or officially published by the Attorney General.

Citations and references

• Broker definition: Section 40-58-20(3), quoted as covering solicitation, processing, placement, or negotiation of mortgage loans for others.
• Conventional-loan exemption: § 40-58-20 (5)(a), quoted for sales or placement of all conventional real-property loans with federally insured or regulated financial institutions.

Official title

Asking whether businesses are exempt from licensing as mortgage brokers if they only close loans in their own names or if they sell loans to federally insured or regulated institutions.

Requester

The Honorable James S. Klauber, Member, House of Representatives

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/march-23-1999/
• Original PDF: https://www.scag.gov/wp-content/uploads/2013/11/99march23klauber.pdf

Original opinion text

The State of South Carolina

OFFICE OF THE ATTORNEY GENERAL
CHARLES MOLONY CONDON
ATTORNEY GENERAL

March 23, 1999

I
I

I

The Honorable James S. Klauber
Member. House of Representatives
518-A Blatt Building
Columbia, SC 29211
Dear Representative Klauber:
You have asked whether businesses are exempt from licensing as mortgage brokers if they only close loans in their own names or if they only sell loans to federally insured or regulated institutions. Under these circumstances, licensing is not required under the "Licensing Requirements Act of Certain Brokers of Mortgages on Residential Real Property." S.C. Code Ann. § 40-58-10, et seq. (Supp. 1998). Section 40-58-20(3) defines "mortgage loan broker" as meaning" ... a person or organization in the business of soliciting, processing, placing, or negotiating mortgage loans for other or offering to process, place or negotiate mortgage loans for others .... " The Act also exempts " ... persons or organizations which sell or place all of their conventional loans on real property with federally insured and/or regulated financial institutions including, but not limited to, banks, savings and loan associations, and credit unions." § 40-58-20 (5)(a). Accordingly, a business that only closes loans in its own name rather than engaging in the business defined above for mortgage brokers or a business that sells all of its loans to federally regulated or insured institutions as provided in
§ 40-58-20 (3) and (5)(a) does not have to be licensed under the above Act. 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.

Yours very truly,

J. Emory Smith, Jr.
Assistant Deputy Attorney General

REMBERT

c. DENNIS BUILDING

•

POST OFFICE Box 11549

REQUEST LETTER

•

COWMOIA. S.C. 29211-1549

•

TELEPHONE:

803- 734-3970

•

FACSIMILE: 803-253-6283