7-1-1023. Board of directors; alternatives; responsibilities; audits; risk assessment.

Mortgage brokers and mortgage lenders shall establish and maintain a board of directors.#

Except for covered servicers that are approved to service loans by government sponsored entities and that have not been granted approval by such federal agencies for the creation of an alternative body to that of a board of directors, mortgage lenders and mortgage brokers may establish a similar body to that of the board of directors for the purpose of exercising oversight and fulfilling the board of directors’ responsibilities set forth in subsection (c) of this Code section.#

The board of directors shall be responsible for:#

1. (1)

   Establishing a written corporate governance framework appropriate for the size, complexity, and risk profile of the mortgage lender or mortgage broker, including internal controls designed to monitor corporate governance and assess compliance with the corporate governance framework, and making such framework available to the department upon request;#

2. (2)

   Monitoring and ensuring licensee’s compliance with the corporate governance framework and with the provisions of this article; and#

3. (3)

   Accurate and timely regulatory reporting, including the requirements for filing the Mortgage Call Report.#

The board of directors shall establish internal audit requirements that are appropriate for the size, complexity, and risk profile of the mortgage lender or mortgage broker, with appropriate independence to provide a reliable evaluation of the licensee’s internal control structure, risk management, and corporate governance. Such internal audit requirements and the results of internal audits shall be made available to the department upon request.#

Mortgage lenders and mortgage brokers shall establish a risk management program appropriate for the size, complexity, and risk profile of the licensee that identifies, measures, monitors, and controls risk sufficient for the level of sophistication of the licensee. Such risk management program shall have appropriate processes and models in place to measure, monitor, and mitigate financial risks and changes to the risk profile of the licensee; be under the oversight of the board of directors; and be available to the department upon request.#

Mortgage lenders and mortgage brokers shall conduct a risk management assessment on an annual basis concluding with a formal report to the board of directors, which shall be made available to the department upon request. Evidence of risk management activities throughout the year must be maintained and made part of the report, including findings of issues and the response to address such findings.#

The department shall have the following authority to address risk in mortgage lenders and mortgage brokers as necessary:#

1. (1)

   Where risk is determined by a formal review of a specific mortgage lender or mortgage broker to be extremely high, the department may order or direct the mortgage lender or mortgage broker to satisfy additional conditions necessary to ensure that the mortgage lender or mortgage broker will continue to operate in a safe and sound manner and remain in compliance with state and federal law, including applicable state and federal regulations;#

2. (2)

   Where risk is determined by a formal review of a particular or multiple mortgage lenders or mortgage brokers to be extremely low, the department may provide notice that all or part of this Code section and related rules are not applicable to those mortgage lenders or mortgage brokers; and#

3. (3)

   Where economic, environmental, or societal events are determined to be of such severity to warrant a temporary suspension of all or certain sections of this Code section and related rules, the department may provide public notice of such temporary suspension.#

Mortgage brokers and mortgage lenders may utilize a third party to assist with satisfying some or all of the requirements of this Code section.#