5 Del. Admin. Code — Banking

100 State Bank Commissioner

101 Retention of Financial Institution Records

5 Del. Admin. Code § 101 Retention of Financial Institution Records

100 State Bank Commissioner

101 Retention of Financial Institution Records

5 Del.C. �141

Formerly Regulation No.: 5.141.0001.NC

Effective Date: September 22, 1995

Section 141 of Title 5 of the Delaware Code, as amended, provides that the State Bank Commissioner may from time to time issue regulations classifying and setting minimum retention periods for the records of financial institutions which are subject to the supervision of the Commissioner's Office and of federally chartered financial institutions in Delaware.

This regulation rescinds the previous record retention Regulation No. 5.141.0001.NC and establishes a new regulation in its place.

1.0 Scope

1.1 The following are subject to this regulation:

1.1.1 State chartered financial institutions;

1.1.2 Federally chartered financial institutions, insofar as the regulation does not contravene paramount federal law;

1.1.3 State licensed financial businesses including, but not limited to, Licensed Lenders, Licensed Mortgage Loan Brokers, Licensed Motor Vehicle Sales Finance Companies, and Licensed Cashers of Checks, Drafts, or Money Orders.

1.2 The Office of the State Bank Commissioner requires that financial institutions subject to this Regulation maintain certain books and records for examination, compliance, regulatory and other purposes consistent with any applicable federal law or regulation and the requirements set forth below. Such financial institutions are obligated to ensure compliance with this Regulation and may do so by agreement with other entities that may maintain certain of their records, such as a service provider, data processor or storage facility, wherever located within or without the State of Delaware.

1.3 Records that are not covered by either federal law or regulation or this Regulation should be maintained at the financial institution's discretion and with the advice of counsel.

2.0 Form of Records

2.1 All records required to be maintained under this Regulation must be retained in a form and manner that is consistent with reasonable business practices for financial institutions, and any applicable federal law or regulation. Without limiting the foregoing, all such records (even those which must be maintained permanently as indicated in Schedule A of this Regulation), may be maintained in either original form, as a copy thereof, or as part of any electronic, computer, mechanized or other data storage or retrieval or transmission system or device that can accurately reproduce, regenerate or transmit the original record, a copy of the record or all pertinent information from the original or any copy. Examples of appropriate forms of records include: copies produced from the same impression or process as the original by carbon or other chemical or substance or process (e.g. carbon copies); film, prints, reproduction and facsimiles of an original or copy produced by photographic, microphotographic, photostatic, xerographic, or other process (e.g. photocopies, microfilm, microfiche); and data or other information comprising a record reproduced, regenerated or transmitted from any electronic, computer, mechanized or other data storage or retrieval or transmission system or device (e.g. magnetic tape, optical disk); and such other forms of records as may be approved by the Office of the State Bank Commissioner. The records requirements contained herein are designed to facilitate records retention for examination purposes only; reproductions of records as an alternative to retaining original documents, as permitted herein, may not satisfy other legal requirements.

3.0 Availability and Location of Records

3.1 All records required to be maintained under this Regulation or applicable federal law must be readily available within a reasonable time period upon request by the Office of the State Bank Commissioner for supervisory examination or other authorized purposes. Such records may be maintained at any location wherever located within or without the State of Delaware that is suitable to the financial institution.

4.0 Status of Records

4.1 All records maintained by a financial institution subject to this Regulation, whether in original form or as a copy thereof or as part of a data storage or retrieval or transmission system, which are duly certified, authenticated, or identified by a responsible officer, employee or agent of the financial institution under whose supervision the records are kept, shall in all cases and in all courts and places be admitted and received in evidence with like force and effect as the original record, whether or not the original record is in existence, to the fullest extent permitted by law.

5.0 Retention Periods

5.1 All records required to be maintained pursuant to this Regulation must be maintained consistent with the retention periods set forth in this Regulation and/or any applicable federal law or regulation. More specifically, the retention periods set forth in Schedule A of this Regulation must be adhered to if there is no applicable federal retention period. If there is an applicable federal retention period, the federal retention period should be adhered to even if such federal period is longer or shorter than the retention period set forth in this Regulation. After the applicable retention period expires, the records may be destroyed. In the attached schedule of retention periods, all retention periods begin with the final transaction date appearing on the record unless otherwise noted.

Schedule A

RECORDS RETENTION SCHEDULE

Banks and Trust Companies

(Periods of retention are in years, unless otherwise indicated)

0001.01 PERMANENT RECORDS

1.0101 Annual reports

1.0102 Bank call reports

1.0103 Bank examination reports

1.0104 Bank charter, Certificate of Incorporation, by laws, amendments, minutes of meetings of Directors, executive and other committees

1.0105 Capital stock - Certificates, Ledger, Transfer Ledger

1.0106 Certificate of Authority - approved branch locations

1.0107 General Ledger

1.0108 Internal security investigation reports

0001.02 OTHER RECORDS

1.0201 Advices from correspondents (due from banks) 1 1.0202 Advices of correction (proof, clearing and transit) 2 1.0203 Advices of debits or credits 1 1.0204 Bank investments - broker confirmations, invoices statements, securities buy and sell orders 6 1.0205 Bank investments - safekeeping receipts 6 1.0206 Bank statements (due from banks) 5 1.0207 Bond ledger 6 1.0208 Budget records (corporate) 1 1.0209 Canceled checks 6 1.0210 Cash item records 1 1.0211 Deposit activity register (after maturity, if applicable) 1 1.0212 Certified checks, activity register, money orders, official checks 6 1.0213 Clearinghouse settlement sheets 1 1.0214 Closed account report 1 1.0215 Collection activity register 3 1.0216 Correspondence (customer dispute) 3 1.0217 Currency shipment books 3 1.0218 Currency transaction reports 5 1.0219 Customer's deposit ledgers 5 1.0220 Daily statement of condition 1 1.0221 Debit and credit tickets 1 1.0222 Departmental or teller's proof sheets 2 1.0223 Deposit tickets 2 1.0224 Drafts, draft activity register 6 1.0225 Dividend check, paid (capital) 6 1.0226 Dividend check activity register (capital) 6 1.0227 Escheat records, after escheatment 1 1.0228 FDIC assessment base records 5 1.0229 General ledger tickets 6 1.0230 Insurance records (after expiration of policy) 3 1.0231 International - cable and mail transfers 6 1.0232 International - letter of credit records 6 1.0233 Large transaction report, over $10,000 (deposits) 5 1.0234 Liability ledger 6 1.0235 Loan and note activity register 6 1.0236 Loan application (all evaluation material) 3 1.0237 Loan payment record 6 1.0238 Name and address change report 2 1.0239 Night depository agreements 1 1.0240 Outgoing cash letter 1 1.0241 Overdraft/NSF report (deposit) 1 1.0242 Personnel records (after termination of employment and pension rights) 6 1.0243 Personnel records - declined applications 2 1.0244 Proof tapes, sheets 1 1.0245 Proxies 3 1.0246 Records of outside business interests of bank's executive officers, directors and principal shareholders and their transactions with bank 3 1.0247 Reconcilements (due to banks) (due from banks) 3 1.0248 Registered mail return receipt cards 6 1.0249 Remittances, serviced mortgages 1 1.0250 Reports of accounts opened or closed (due to banks) 1 1.0251 Repossession and foreclosure log 6 1.0252 Reserve computations daily 2 1.0253 Resolutions, authorizations (corporate - deposit/loan) 6 1.0254 Return item letters 1 1.0255 Safe deposit contracts (after termination of contract) 6 1.0256 Safe deposit records and receipts 6 1.0257 Security - camera surveillance log 1 1.0258 Security devices checklist, inspection records 2 1.0259 Service charge report 6 1.0261 Statements 2 1.0262 Stop payment orders 2 1.0263 Taxpayer information (deposits) 5 1.0264 Tax records (corporate) 10 1.0265 Tellers activity register 2 1.0266 Transaction journal 6 1.0267 Transit letters (due from banks) 1 1.0268 Trial balance 1 1.0269 Travelers checks register 2 1.0270 Utility payment records (customer) 6 1.0271 Vault records, access and maintenance 2

1.0201 Advices from correspondents (due from banks)

1

1.0202 Advices of correction (proof, clearing and transit)

2

1.0203 Advices of debits or credits

1

1.0204 Bank investments - broker confirmations, invoices statements,

securities buy and sell orders

6

1.0205 Bank investments - safekeeping receipts

6

1.0206 Bank statements (due from banks)

5

1.0207 Bond ledger

6

1.0208 Budget records (corporate)

1

1.0209 Canceled checks

6

1.0210 Cash item records

1

1.0211 Deposit activity register (after maturity, if applicable)

1

1.0212 Certified checks, activity register, money orders, official checks

6

1.0213 Clearinghouse settlement sheets

1

1.0214 Closed account report

1

1.0215 Collection activity register

3

1.0216 Correspondence (customer dispute)

3

1.0217 Currency shipment books

3

1.0218 Currency transaction reports

5

1.0219 Customer's deposit ledgers

5

1.0220 Daily statement of condition

1

1.0221 Debit and credit tickets

1

1.0222 Departmental or teller's proof sheets

2

1.0223 Deposit tickets

2

1.0224 Drafts, draft activity register

6

1.0225 Dividend check, paid (capital)

6

1.0226 Dividend check activity register (capital)

6

1.0227 Escheat records, after escheatment

1

1.0228 FDIC assessment base records

5

1.0229 General ledger tickets

6

1.0230 Insurance records (after expiration of policy)

3

1.0231 International - cable and mail transfers

6

1.0232 International - letter of credit records

6

1.0233 Large transaction report, over $10,000 (deposits)

5

1.0234 Liability ledger

6

1.0235 Loan and note activity register

6

1.0236 Loan application (all evaluation material)

3

1.0237 Loan payment record

6

1.0238 Name and address change report

2

1.0239 Night depository agreements

1

1.0240 Outgoing cash letter

1

1.0241 Overdraft/NSF report (deposit)

1

1.0242 Personnel records (after termination of employment and pension rights)

6

1.0243 Personnel records - declined applications

2

1.0244 Proof tapes, sheets

1

1.0245 Proxies

3

1.0246 Records of outside business interests of bank's executive officers, directors and principal shareholders and their transactions with bank

3

1.0247 Reconcilements (due to banks) (due from banks)

3

1.0248 Registered mail return receipt cards

6

1.0249 Remittances, serviced mortgages

1

1.0250 Reports of accounts opened or closed (due to banks)

1

1.0251 Repossession and foreclosure log

6

1.0252 Reserve computations daily

2

1.0253 Resolutions, authorizations (corporate - deposit/loan)

6

1.0254 Return item letters

1

1.0255 Safe deposit contracts (after termination of contract)

6

1.0256 Safe deposit records and receipts

6

1.0257 Security - camera surveillance log

1

1.0258 Security devices checklist, inspection records

2

1.0259 Service charge report

6

1.0261 Statements

2

1.0262 Stop payment orders

2

1.0263 Taxpayer information (deposits)

5

1.0264 Tax records (corporate)

10

1.0265 Tellers activity register

2

1.0266 Transaction journal

6

1.0267 Transit letters (due from banks)

1

1.0268 Trial balance

1

1.0269 Travelers checks register

2

1.0270 Utility payment records (customer)

6

1.0271 Vault records, access and maintenance

2

0001.03 TRUST RECORDS

1.0301 Bonds of indemnity 21* 1.0302 Canceled stock certificates Permanent 1.0303 Legal papers 21* 1.0304 Mail receipts 7* 1.0305 Paid dividend checks 7 1.0306 Registration records 7* 1.0307 Stock certificates 7* 1.0308 Stockholder records 7* 1.0309 Tax returns 7* 1.0310 Transfer records 7* 1.0311 Transmittal letters 7*

1.0301 Bonds of indemnity

21*

1.0302 Canceled stock certificates

Permanent

1.0303 Legal papers

21*

1.0304 Mail receipts

7*

1.0305 Paid dividend checks

7

1.0306 Registration records

7*

1.0307 Stock certificates

7*

1.0308 Stockholder records

7*

1.0309 Tax returns

7*

1.0310 Transfer records

7*

1.0311 Transmittal letters

7*

• After trust is terminated or account closed

Schedule B

RECORDS RETENTION SCHEDULE

Licensees

(Periods of retention are in years, unless otherwise indicated)

Licensed Lenders (Chapter 22, Title 5, Delaware Code)

1. Loan Register 2* 2. Individual Accounts with Borrowers 2* 3. File of All Original Paper (including applications) 2* 4. File of All Original Paper/Denials 25 mos. 5. Daily Transaction Journal 2 6. Index of Borrowers, Endorsers, Comakers, etc. 2 7. Record of Loans in Litigation and Repossessions 5** 8. Credit Insurance Claims Register 2

2. Loan Register

2*

2. Individual Accounts with Borrowers

2*

3. File of All Original Paper (including applications)

2*

4. File of All Original Paper/Denials

25 mos.

5. Daily Transaction Journal

2

6. Index of Borrowers, Endorsers, Comakers, etc.

2

7. Record of Loans in Litigation and Repossessions

5**

8. Credit Insurance Claims Register

2

Mortgage Loan Brokers (Chapter 21, Title 5, Delaware Code)

1. Applicant Register 2 2. Individual Records of Applicants/Closed Loans 2 3. Individual Records of Applicants/Denials 25 mos. 4. Record of Litigation 5** 5. Advertising 2

2. Applicant Register

2

2. Individual Records of Applicants/Closed Loans

2

3. Individual Records of Applicants/Denials

25 mos.

4. Record of Litigation

5**

5. Advertising

2

Motor Vehicle Sales Finance (Chapter 29, Title 5, Delaware Code)

1. Retail Installment Contract Applicant Register 2 2. Individual Accounts with Borrowers 2 3. Files of All Original Paper 2* 4. Files of All Paper/Denials 25 mos. 5. Daily Transaction Record 2 6. Index of Borrowers, Endorsers, Comakers, etc. 2 7. Record of Loans in Litigation and Repossessions 5** 8. Credit Insurance Claims Register 2

2. Retail Installment Contract Applicant Register

2

2. Individual Accounts with Borrowers

2

3. Files of All Original Paper

2*

4. Files of All Paper/Denials

25 mos.

5. Daily Transaction Record

2

6. Index of Borrowers, Endorsers, Comakers, etc.

2

7. Record of Loans in Litigation and Repossessions

5**

8. Credit Insurance Claims Register

2

Cashers of Checks, Drafts, or Money Orders (Chapter 27, Title 5, Delaware Code)

1. Transactions Journal 2 2. Record of Deposits 2 3. Summary of Business 2

2. Transactions Journal

2

2. Record of Deposits

2

3. Summary of Business

2

Transportation of Money and Valuables (Chapter 32, Title 5, Delaware Code)

1. Contracts for Transportation/Handling/Storage Services (after expiration) 2

2. Contracts for Transportation/Handling/Storage Services

(after expiration)

2

Preneed Funeral Contracts (Chapter 3, Title 5, Delaware Code)

1. Preneed Trust Agreements (file of all original paper) 2* 2. Record of All Payments Received 2* 3. Record of All Contracting Parties 2* 4. Record of Depository Institution Used 2*

2. Preneed Trust Agreements (file of all original paper)

2*

2. Record of All Payments Received

2*

3. Record of All Contracting Parties

2*

4. Record of Depository Institution Used

2*

• After Account is Closed

** After Litigation or Repossession is Completed

102 Procedures Governing the Creation and Existence of an Interim Bank

5 Del. Admin. Code § 102 Procedures Governing the Creation and Existence of an Interim Bank

Effective Date: February 11, 2019

This regulation establishes procedures governing the creation and existence of an Interim Bank, which shall have no authority to conduct a banking business until merged with an Insured Bank.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-1.0 Definitions

“Articles of Association” means the articles of association described in Section 723 of Title 5 of the Delaware Code.

“Articles of Organization” means the articles of organization described in Section 728 of Title 5 of the Delaware Code.

“Bank” means a Delaware State Bank, Out-of-State State Bank, Delaware National Bank or Out-of-State National Bank.

“Bank Holding Company” has the meaning specified in the Bank Holding Company Act of 1956, as amended (12 U.S.C. § 1841 et seq.).

“Certificate Authorizing the Transaction of Business” means the certificate described in Section 733 of Title 5 of the Delaware Code.

“Delaware Bank” means a Delaware National Bank or a Delaware State Bank.

“Delaware National Bank” means a national banking association created under the National Bank Act (12 U.S.C. § 21 et seq.) that is located in this State.

“Delaware State Bank” means a bank (as defined in § 101 of Title 5 of the Delaware Code) chartered under the laws of this State.

“Insured Bank” means a bank that is an insured depository institution, as defined in the Federal Deposit Insurance Act at 12 U.S.C. § 1813(c).

“Interim Bank” means a bank established for the purposes set forth in this regulation.

“Interim Bank Agreement” means an agreement that expressly provides, among other things, for the creation of an Interim Bank and its merger with an Insured Delaware Bank.

“Located in this State” means, with respect to a state-chartered bank, a bank created under the laws of this State and, with respect to a national banking association, a bank whose organization certificate identifies an address in this State as the place at which its discount and deposit operations are to be carried out.

“Notice of Intent” means a notice of the intention of the incorporators to form an Interim Bank, as provided in Section 5 of this regulation.

“Out-of-State Bank” means an Out-of-State State Bank or an Out-of-State National Bank.

“Out-of-State Bank Holding Company” has the meaning specified in the Bank Holding Company Act of 1956, as amended (12 U.S.C. § 1841 et seq.).

“Out-of-State National Bank” means a national bank association created under the National Bank Act (12 U.S.C. § 21 et seq.) that is not located in this State.

“Out-of-State State Bank” means a State bank, as defined in the Federal Deposit Insurance Act, as amended, at 12 U.S.C. § 1813(a), that is not chartered under the laws of this State.

“Public Notice” means a public notice, as provided in Section 5 of this regulation.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-2.0 Scope

2.1 An Interim Bank may only be formed to facilitate:

2.1.1 The establishment of a Bank Holding Company by an Insured Delaware Bank’s stockholders. The proposed Bank Holding Company, once incorporated, applies in the manner set forth at Section 5 of this regulation for an Interim Bank charter for a subsidiary to be newly formed. An agreement is executed between the proposed Bank Holding Company and the Insured Delaware Bank that provides, among other things, that the Insured Delaware Bank will be merged or consolidated with the Interim Bank and become a subsidiary of the Bank Holding Company upon the receipt of all necessary federal and state approvals for the proposed Bank Holding Company so to act; or

2.1.2 The acquisition of an Insured Delaware Bank by another Insured Delaware Bank or Bank Holding Company (e.g., pursuant to Subchapter VI of Chapter 7 or Subchapters IV or V of Chapter 8 of Title 5 of the Delaware Code). In such instances, the Interim Bank is used to assure that the to-be-acquired Insured Delaware Bank will become wholly-owned through a merger or consolidation pursuant to an agreement between the Insured Delaware Banks or between an Insured Delaware Bank and a Bank Holding Company that provides, among other things, for an Insured Delaware Bank to merge or consolidate with the Interim Bank.

2.1.3 The merger of one or more Out-of-State Banks with or into one or more Delaware Banks to result in a Delaware State Bank, in accordance with Section 795D or Section 795G of Title 5 of the Delaware Code.

2.1.4 The merger or reorganization of one or more Insured Banks to result in a Delaware State Bank.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-3.0 Interim Bank Agreement Required

An Interim Bank may not be chartered unless there is an Interim Bank Agreement.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-4.0 Who May Incorporate

An Interim Bank may be incorporated, in accordance with Section 722 of Title 5 of the Delaware Code, by three or more individual persons, at least two of whom must be citizens and residents of Delaware.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-5.0 Application Procedures

5.1 An application to form an Interim Bank shall be submitted as follows, except as otherwise provided in connection with a contemporaneous application in accordance with another regulation (e.g., Regulation 804 (formerly 5.844.0009), “Application by an Out-of-State Bank Holding Company to Acquire a Delaware Bank or Bank Holding Company”):

5.1.1 The Notice of Intent shall be filed in duplicate in the Office of the Commissioner and shall state:

5.1.1.1 The purpose for forming an Interim Bank;

5.1.1.2 The proposed name of the Interim Bank;

5.1.1.3 The name and address of the incorporators; and

5.1.1.4 The amount of the capital stock of the Interim Bank.

5.1.2 The Notice of Intent shall attach as exhibits:

5.1.2.1 The Interim Bank Agreement;

5.1.2.2 A copy of the proposed Articles of Association of the Interim Bank;

5.1.2.3 A copy either of the certificate of public convenience and advantage or the legislative and/or corporate instruments of banking authority for the Insured Bank which is to be merged with the Interim Bank pursuant to the Interim Bank Agreement.

5.1.3 Upon notification by the Commissioner that the Notice of Intent to form an Interim Bank is complete, the applicant shall cause to be published in a newspaper of general circulation throughout the State of Delaware, once a week for two (2) consecutive weeks, a Public Notice of its intention to form an Interim Bank. The Public Notice shall include the proposed name of the Interim Bank, the names of the incorporators, the amount of the capital stock of the Interim Bank, and a brief summary of the purpose of the Interim Bank, shall identify this regulation under which the Interim Bank is to be formed, and shall inform interested persons of their right to comment on the application before the Commissioner decides whether to approve the Interim Bank.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-6.0 Decision of Commissioner; Incorporation

6.1 Within two weeks of the last publication of the Public Notice, the Commissioner shall issue a decision as to whether to charter the Interim Bank. This two week period may be extended by two additional weeks if the Commissioner requires more time or information.

6.2 Upon the Commissioner’s approval, the Incorporator shall take the necessary steps to form the Articles of Organization and the Commissioner shall endorse the Articles. The Incorporator shall then incorporate the Interim Bank and file the necessary documents with the Secretary of State.

6.3 A Certificate Authorizing the Transaction of Business shall not be issued until the Interim Bank has been merged with the Insured Bank.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-7.0 Powers of Interim Bank Before Merger

7.1 An Interim Bank may not engage in any banking activity or operate as a bank until it has merged with an Insured Bank. An Interim Bank may take only those corporate and fiduciary steps and actions reasonably incidental and necessary to facilitate and complete the merger. Such limitation shall not preclude the Commissioner from granting a certificate of public convenience and advantage, and to otherwise facilitate and authorize the formation and incorporation of the Interim Bank, provided that no Certificate Authorizing the Transaction of Business pursuant to §733 of Title 5 of the Delaware Code shall be issued prior to the consummation of the merger of the Interim Bank with an Insured Bank.

7.2 The receipt by the Commissioner of an Interim Bank Agreement and a copy of either the certificate of public convenience and advantage or the legislative and/or corporate instruments pursuant to which the Insured Bank with which the Interim Bank will merge derives its banking powers shall constitute sufficient authority for the Commissioner to issue a certificate of public convenience and advantage to the Interim Bank.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-8.0 Proof of Merger: Revocation of Certificate

8.1 From the date an Interim Bank is authorized pursuant to this regulation, the parties to the Interim Bank Agreement shall have six (6) months in which to effect the merger with the Insured Bank. Proof of the merger must be timely supplied to the Commissioner.

8.2 Upon proof of the consummation of the merger of the Interim Bank with the Insured Bank, a Certificate Authorizing the Transaction of Business, as required by § 733 of Title 5 of the Delaware Code shall be issued immediately by the Commissioner to the surviving entity if the Interim Bank is the survivor.

8.3 Extensions may be granted by the Commissioner if the parties to the Interim Bank Agreement can show good cause as to why an extension is needed to complete the merger.

8.4 The Commissioner may revoke the certificate of public convenience and advantage of the Interim Bank (and may take such other steps he deems appropriate at any time) if proof of the merger between the Interim Bank and the Insured Bank has not been provided to the Commissioner at the end of the authorized time, if the Interim Bank actually conducts any banking business prior to its proposed merger, or if any related merger or acquisition application is denied or withdrawn.

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

5 Del. Admin. Code § 102-9.0 Fees

9.1 A non-refundable investigation fee of $1,150 to offset the administrative expense of the Commissioner’s office shall be included with the Notice of Intent; provided, however, that such fee shall be considered as part of and not in addition to any fee being paid at the same time to the Commissioner’s office in connection with a contemporaneous application for a merger or acquisition. In addition, depending on the structure of the transaction, other fees may be required in accordance with applicable statutes or regulations (e.g., Section 735 of Title 5 of the Delaware Code).

History

• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 22 DE Reg. 688 (02/01/19)
• 2 DE Reg. 1021 (12/01/98)
• 22 DE Reg. 688 (02/01/19)

700 Corporation Law for State Banks and Trust Companies

701 Procedures for Applications to Form a Bank, Bank and Trust Company or Limited Purpose Trust Company Pursuant to Chapter 7 of Title 5 of the Delaware Code

5 Del. Admin. Code § 701 Procedures for Applications to Form a Bank, Bank and Trust Company or Limited Purpose Trust Company Pursuant to Chapter 7 of Title 5 of the Delaware Code

701 Procedures for Applications to Form a Bank, Bank and Trust Company or Limited Purpose Trust Company Pursuant to Chapter 7 of Title 5 of the Delaware Code

Formerly Regulation No.: 5.701/774.0001

Effective Date: December 11, 1998

1.0 Scope

1.1 This Regulation establishes procedures for filing an application to organize a bank or bank and trust company (hereinafter collectively referred to as a "Bank") or limited purpose trust company pursuant to Chapter 7 of Title 5 of the Delaware Code and the manner in which determinations will be made by the State Bank Commissioner (the "Commissioner") respecting such applications.

2.0 Notice of Intent

2.1 Notice of the intention ("Notice of Intent") of the incorporators (the "Incorporators") to form a Bank or limited purpose trust company shall be filed with the Commissioner. All filings must be in duplicate.

2.2 A $1,150 non-refundable investigation fee shall be submitted with the Notice of Intent, payable to "Office of the State Bank Commissioner."

2.3 The Notice of Intent shall specify: (i) the names of all Incorporators; (ii) the name of the proposed Bank or limited purpose trust company (note: the word "trust" may be used only if a limited purpose trust company or a bank with trust powers is being formed); (iii) the city or town in which the Bank or limited purpose trust company will be located; and (iv) the amount of capital stock of the proposed Bank or limited purpose trust company.

2.4 The Notice of Intent shall have attached as exhibits: (i) a copy of the application for a Certificate of Public Convenience and Advantage (the "Application") in the form the Incorporators intend to file pursuant to Section 4 of this Regulation; (ii) a copy of the proposed form of written agreement in which the subscribers thereto associate themselves with the intent of forming a Bank or limited purpose trust company (the "Articles of Association"); (iii) a proposed form of public notice as provided for in Section 3 of this Regulation (the "Public Notice"); and, (iv) where the Incorporators are acting on behalf of a corporate entity in the application process, a copy of the corporate resolution, sworn to and subscribed by a president or vice-president and certified by the secretary or an assistant secretary, authorizing the Incorporators to execute and file the Notice of Intent and Application on behalf of the corporation.

3.0 Public Notice

3.1 If the Notice of Intent and the attached exhibits filed with the Commissioner are in the form required by this Regulation, conform to applicable provisions of law and are approved by the Commissioner, the Commissioner shall schedule a formal, public evidentiary hearing to receive testimony and documentary evidence relevant to determining whether the public convenience and advantage would be promoted by the establishment of the Bank or limited purpose trust company and whether the Articles of Association are in compliance with applicable provisions of law (such hearing to be held within 60 days following the second publication of Public Notice in accordance with Section 3.2 of this Regulation, but not prior to the expiration of twenty days following the date of the second publication).

3.2 The Incorporators shall cause a Public Notice in such form as the Commissioner shall have approved to be published at least once a week, for two successive weeks, in at least two Delaware newspapers of general circulation designated by the Commissioner, at least one of which newspapers shall be published in the county where it is proposed to establish the Bank.

3.3 The Public Notice shall (i) specify the names of all Incorporators; (ii) set forth the name of the proposed Bank or limited purpose trust company; (iii) identify the city or town where the Bank or limited purpose trust company is to be located; (iv) specify the amount of the Bank's capital stock; (v) describe the subject matter of the proceedings; (vi) give the date, time and place fixed for a hearing on the Application; (vii) cite the law (5 Del.C. §726 for a Bank, and 5 Del.C. §777 for a limited purpose trust company) and regulations (State Bank Commissioner Regulations 701 (formerly 5.701/774.0001) and 703 (formerly 5.725/726.0003.P/A ) for a Bank, and 701 (formerly 5.701/774.0001) and 702 (formerly 5.777.0002) for a limited purpose trust company) giving the Commissioner authority to act; (vii) inform interested parties of their right to present evidence, to be represented by counsel and to appear personally or by other representatives; and (ix) state the Commissioner's obligation to reach his decision based upon the evidence received.

4.0 Application For A Determination of Public Convenience and Advantage

4.1 Within sixty days following the second publication of Public Notice, and prior to or on the date of the public hearing, but not prior to the expiration of twenty days following the date of the second publication, the Incorporators shall file the definitive fully executed Application in the form prescribed by the Commissioner. See Commissioner's Regulation No. 703 (formerly 5.725/726.0003.P/A) for a Bank, and 702 (formerly 5.777.0002) for a limited purpose trust company.

4.2 The Application shall include the information specifically requested in the form of application supplied by the Commissioner and any supplemental information requested by the Commissioner.

5.0 Public Hearing

5.1 The public hearing provided for in this Regulation may be conducted by the Commissioner or his designee. At such hearing, the Commissioner or his designee shall accept all relevant, non-cumulative evidence offered by or on behalf of the Incorporators or by any interested person. Interested parties may appear at the public hearing, in person or by counsel or by other representative. Anyone wishing to present testimony is requested to register with the Commissioner in advance of the hearing.

5.2 A record from which a verbatim transcript can be prepared shall be made. The Incorporators shall be responsible for arranging for a certified court reporter to be present at the public hearing and shall bear the expense of an original written transcript for the Commissioner's use (which shall be supplied to the Commissioner as promptly as practical following the public hearing). Additional transcripts provided to any interested person shall be at the expense of the person requesting the transcript.

5.3 The Commissioner or his designee may request the Incorporators or any other party or parties who appear at the public hearing to submit proposed findings of fact and conclusions of law.

6.0 Record

6.1 With respect to each Application, all notices, correspondence between the Commissioner and the Incorporators or other interested parties, all exhibits, documents and testimony admitted into evidence and all recommended orders, summaries of evidence and findings, and all interlocutory and final orders shall be included in the Commissioner's record of the matter and shall be retained for a period of at least five (5) years following final action on the Application.

6.2 A copy of the proposed order shall be mailed or hand delivered to the Incorporators (or their agent) and to each person who presented data, views or argument at the public hearing, each of whom shall thereafter have twenty (20) days to submit in writing to the Commissioner exceptions, comments and arguments respecting the proposed order.

6.3 If the decision on the Application is not adverse to the Incorporators, the Commissioner may waive the entry of a proposed order and may instead proceed directly to the entry of a final order under Section 7.0 of this Regulation.

7.0 Decision and Final Order

7.1 Every decision on an Application shall be incorporated in a final order which shall include: (i) a brief summary of the evidence; (ii) findings of fact based upon the evidence; (iii) conclusions of law; (iv) any other conclusions or findings required by law; and (v) a concise statement of the determination or action on the case.

7.2 Every final order shall be authenticated by the signature of the Commissioner and shall be mailed or delivered to (i) the Incorporators (or their agent); (ii) each person that presented data, views or argument at the hearing; and (iii) any other person requesting a copy of the final order.

8.0 Organization Meeting of Incorporators

8.1 The first meeting of the Incorporators shall be called by a notice signed by the Incorporator designated in the Articles of Association for that purpose or by a majority of Incorporators (see 5 Del.C. §727). The statutory purpose of the first meeting is to organize by: (i) choosing by ballot a temporary secretary; (ii) adopting bylaws; and (iii) electing in such manner as the bylaws may determine directors, a president, a secretary, and such other officers as the bylaws may prescribe. All of the officers elected shall be sworn to the faithful performance of their duties. Action permitted to be taken at the organization meeting may be taken without a meeting if each Incorporator signs a written consent in lieu of meeting which states the action so taken.

8.2 The President and a majority of directors elected at the organization meeting of the Incorporators shall make, sign and make oath to a certificate (hereinafter the "Articles of Organization") setting forth: (i) a true copy of the Articles of Association; (ii) the names of the subscribers thereto; (iii) the name, residence, and mailing address of each officer; and (iv) the date of the first meeting of the Incorporators (see 5 Del.C. §728).

8.3 The Articles of Organization and attachments shall be submitted to the Commissioner. The Commissioner may require such amendments or additional information as he may consider proper or necessary. The Commissioner shall endorse approval upon the Articles of Organization at such time as he has determined that the applicable provisions of law have been complied with (see 5 Del.C. §729).

9.0 Incorporation and Commencement of Business

9.1 The Articles of Organization shall be filed with the Secretary of State within 30 days after the date of the Commissioner's endorsement (see 5 Del.C. § 730).

9.2 Upon issuance of a Certificate of Incorporation by the Secretary of State and compliance with all provisions of law, a certified copy of the Certificate of Incorporation together with the endorsed Articles of Organization shall be recorded in the Office of the Recorder of Deeds for the county in which the place of business of the Bank or limited purpose trust company is to be located (see 5 Del.C. § 731).

9.3 A certified copy of the Bank's or limited purpose trust company's Certificate of Incorporation together with its bylaws and its Articles of Organization shall be filed with the Commissioner together with the $5,750 fee for the certificate to transact business. No transaction of business can begin until authorized by the Commissioner by the issuance of a certificate to transact business (see 5 Del.C. §§ 733, 735, 902, 903).

9.4 An application for a certificate to transact business shall include a certification as to the issuance of the whole capital stock of the Bank or limited purpose trust company (unless the Articles of Organization otherwise specifically provide) and receipt of payment therefor in cash; a list of stockholders (including the number of shares held by each and the residence and post office address of each stockholder), which list shall be certified by the president and the cashier or treasurer of the Bank; evidence of the deposit of the proceeds of the sale of capital stock in an account for the benefit of the Bank or limited purpose trust company; and, for a Bank, evidence satisfactory to the Commissioner demonstrating that FDIC deposit insurance for the Bank has been approved by the FDIC.

9.5 The Commissioner shall review the application and, in the case of a Bank, the status of the applicant's FDIC insurance. If the above referenced $5,750 fee has been paid and it appears that all requirements of this Regulation and applicable law have been complied with, the Commissioner shall issue a certificate authorizing the Bank or limited purpose.

2 DE Reg. 1020 (12/01/98)

702 Application for a Certificate of Public Convenience and Advantage for a Limited Purpose Trust Company Pursuant to Subchapter V of Chapter 7 of Title 5 of the Delaware Code

5 Del. Admin. Code § 702 Application for a Certificate of Public Convenience and Advantage for a Limited Purpose Trust Company Pursuant to Subchapter V of Chapter 7 of Title 5 of the Delaware Code

702 Application for a Certificate of Public Convenience and Advantage for a Limited Purpose Trust Company Pursuant to Subchapter V of Chapter 7 of Title 5 of the Delaware Code

Formerly Regulation No.: 5.777.0002

Effective Date: January 12, 1998

1.0 Any application made to the State Bank Commissioner for a Certificate of Public Convenience and Advantage for a Limited Purpose Trust Company, pursuant to Subchapter V of Chapter 7 of Title 5 of the Delaware Code, shall be in the form appended hereto and shall be accompanied by any documents called for by such form, a copy of the Articles of Association of the Proposed Limited Purpose Trust Company, and a non-refundable investigation fee of One Thousand One Hundred Fifty Dollars ($1,150.00). Procedures for an application to form a limited purpose trust company are specified in regulation 701 (formerly 5.701/774.0001).

1 DE Reg. 877 (01/01/98)

Application for a Certificate of Public Convenience and Advantage for a Limited Purpose Trust Company Pursuant to Subchapter V of Chapter 7 of Title 5 of the Delaware Code

703 Application for a Certificate of Public Convenience and Advantage Pursuant to 5 Del.C. §§725-726

5 Del. Admin. Code § 703 Application for a Certificate of Public Convenience and Advantage Pursuant to 5 Del.C. §§725-726

703 Application for a Certificate of Public Convenience and Advantage Pursuant to 5 Del.C. §§725-726

Formerly Regulation No.: 5.725/726.0003.P/A

Previous No.: 4-B-81*

Effective Date: March 6, 1981

1.0 Any application made to the State Bank Commissioner pursuant to §725 of Title 5, Delaware Code, shall be in the form appended hereto, shall be accompanied by any documents called for by such form as well as by a copy of the Articles of Association of the Proposed Subsidiary Bank and shall be accompanied by a non-refundable investigation fee of One Thousand One Hundred Fifty Dollars. (5 Del.C. §735).

2.0 Assigned new regulation number and reissued to reflect 15% fee increase mandated by Volume 67, Chapter 260, Laws of Delaware on October 1, 1990.

Application for Certificate of Public Convenience And Advantage Pursuant to Section 725 Of Title 5 of The Delaware Code

704 Procedures Governing the Establishment or Acquisition of a Subsidiary Engaged in the Securities Business

5 Del. Admin. Code § 704 Procedures Governing the Establishment or Acquisition of a Subsidiary Engaged in the Securities Business

704 Procedures Governing the Establishment or Acquisition of a Subsidiary Engaged in the Securities Business

Formerly Regulation No.: 5.761.0004.P/A

Effective Date: July 31, 1989

1.0 Required Notice.

Every bank or bank and trust company which intends to acquire or establish a subsidiary that (1) engages in the sale, distribution or underwriting of stocks, bonds, debentures, notes or other securities; (2) acts as an investment advisor to any investment company; (3) conducts any activity for which the subsidiary is required to register with the Securities and Exchange Commission as a broker/dealer; or (4) engages in any other securities activity shall notify the Commissioner of such intent. Notice shall be in writing and must be received in the office of the Commissioner at least 60 days prior to consummation of the acquisition or commencement of the operation of the subsidiary, whichever is earlier. The bank or bank and trust company shall also notify the Commissioner in writing within 10 days after the consummation of the acquisition or commencement of the operation of the subsidiary, whichever is earlier. The 60-day notice requirement may be waived or shortened in the discretion of the Commissioner.

2.0 Contents of Notice.

The notice required by the first sentence of section 1.0 shall include the following information:

2.1 The corporate name of the subsidiary and, if different, the name in which it will conduct business.

2.2 The address location of the office of the subsidiary.

2.3 The amount of capital which the subsidiary will have upon acquisition or commencement of operations.

2.4 The name, address, age and current business occupation of the proposed directors and officers of the subsidiary.

2.5 A description of the proposed activities of the subsidiary including the specific type of securities which will be underwritten by the subsidiary.

2.6 The amount of outstanding capital stock of the subsidiary to be owned by the bank or bank and trust company.

2.6.1 The notice required by section 1.0 shall also contain the written undertaking of the bank or bank and trust company to operate the subsidiary in accordance with all existing applicable laws and regulations, including the regulations, if applicable, of the Federal Deposit Insurance Corporation and the Securities and Exchange Commission, and such supplemental regulations as may be issued from time to time by the Commissioner.

3.0 Additional Notices.

Every bank or bank and trust company which owns a subsidiary engaged in the securities business shall provide additional notice to the Commissioner in the event the subsidiary commences any securities activity not disclosed in the notice provided pursuant to section 2.1 of this regulation. Any such notice must be received in the office of the Commissioner within 30 days after the subsidiary commences the new activity.

4.0 Capital.

The direct investment of a bank or bank and trust company in a subsidiary engaged in any of the activities described in paragraph (1) hereof will not be counted toward the capital of the bank or bank and trust company, provided, however, this paragraph shall not apply to the direct investment of a bank or bank and trust company in a subsidiary engaged only in those securities activities which would be permissible for an FDIC insured non-member bank under Sections 16 and 21 of the Glass-Steagall Act (12 U.S.C. 24 (Seventh) and 378).

705 Procedures Governing Applications to Open Branch Offices Outside the State of Delaware

5 Del. Admin. Code § 705 Procedures Governing Applications to Open Branch Offices Outside the State of Delaware

705 Procedures Governing Applications to Open Branch Offices Outside the State of Delaware

Formerly Regulation No.: 5.771.0005

Effective Date: January 12, 1998

This regulation establishes procedures for the consideration and determination of applications under §771(a) of Title 5 of the Delaware Code for permission to open branch offices outside of the State of Delaware.

1.0 Branch Offices In the United States Outside the State of Delaware

1.1 Application

1.1.1 An application to open a branch office in the United States outside the State of Delaware pursuant to Section 771(a) of Title 5 of the Delaware Code shall be in writing and shall include the following:

1.1.1.1 Name of applying bank or trust company.

1.1.1.2 Location of proposed branch, including address.

1.1.1.3 The name, address and phone number of the person(s) to whom inquiries may be directed.

1.1.1.4 Explanation of the necessity for the opening of the branch.

1.2 Fee

1.2.1 The application shall be accompanied by a non-refundable investigation fee of two hundred and fifty dollars ($250.00). Checks shall be made payable to the Office of the State Bank Commissioner.

1.3 Notice

1.3.1 Upon notification by the Commissioner that the application to open a branch office in the United States outside the State of Delaware conforms to the requirements for applications pursuant to Section 771(a) of Title 5 of the Delaware Code and this regulation, the applicant shall cause a single notice of such application to be published in a newspaper of general circulation in the locality of the proposed branch. The notice shall provide a brief synopsis of the application, and state that interested persons may present their views in writing to the Office of the State Bank Commissioner, and shall be in a form to be approved by the Commissioner before publication.

1.4 Additional Information, Investigation and Hearing

1.4.1 In addition to the documents filed in accordance with this regulation, the Commissioner at his discretion may require additional information, conduct an investigation, or hold a public hearing in accordance with the Administrative Procedures Act, Chapter 101 of Title 29 of the Delaware Code.

1.5 Decision

1.5.1 No earlier than 20 days after publication of the Notice described in section I.C. of this regulation, the Commissioner shall issue a written Order approving or disapproving the application.

1.6 Certificate of Authority

1.6.1 A Certificate of Authority shall be issued by the Commissioner for each approved branch office in the United States outside the State of Delaware.

1.7 Time to Open Approved Branch Office In the United States Outside the State of Delaware

1.7.1 Branch offices in the United States outside the State of Delaware approved in accordance with Section 771(a) of Title 5 of the Delaware Code and this regulation shall open within one year of the date when the Commissioner issues the Certificate of Authority. The Commissioner may upon review of the application for such branch extend the initial opening date to a date greater than one year. Any Certificate of Authority issued by the Commissioner shall be void and of no effect at the expiration of the time prescribed for the opening of the branch unless the branch is actually opened for business.

2.0 Branch Offices in Foreign Countries

2.1 This section applies to applications under §771(a) of Title 5 of the Delaware Code for permission to open branch offices in foreign countries where the applicant has no existing foreign branch office.

2.1.1 Application

2.1.1.1 An application to open a branch office in a foreign country pursuant to § 771(a) of Title 5 of the Delaware Code shall be in writing, signed by the President of the applicant, and include the following information.

2.1.1.1.1 Name of the applying bank or trust company.

2.1.1.1.2 Location (city and country) of the proposed branch, including the address, if available.

2.1.1.1.3

2.1.1.1.3.1 Existing representation in the foreign country, if any;

2.1.1.1.3.2 Reasons for the proposed branch, including the ways in which it is believed the branch would further the development of the applying bank or trust company’s international or foreign business.

2.1.1.1.4 The type of business to be conducted and types of services to be offered, including:

2.1.1.1.4.1 Volume of business now conducted through subsidiaries or parents for customers in the proposed market;

2.1.1.1.4.2 Whether any existing or planned future business will be transferred to the proposed branch, indicating the volume and type of such business;

2.1.1.1.4.3 Whether the branch will engage in trust activities, and whether that business will be conducted on behalf of customers in the United States.

2.1.1.1.5

2.1.1.1.5.1 Where appropriate, if there has been more than a 25% change in the Bank's (and its affiliates') consolidated exposure in the country of the proposed branch from that reported in the most recently filed Federal Reserve Board Country Exposure Report (F.R. 2036), show the consolidated direct and indirect exposure to borrowers from this country. The exposure in question is both: (a) cross-border exposure (which may be calculated for this purpose by adding the figures under columns 4, 10 and 12 of the form and subtracting the sum of columns 9 and 11); and (b) local currency exposure (column 18 of the form);

2.1.1.1.5.2 If projections indicate that at the end of the third year of operations of the proposed branch, the direct and indirect exposure, as calculated above, will increase by more than 25% from present levels and this amount is greater than 10% of consolidated capital, show the projected consolidated country exposure.

2.1.1.1.6 Estimated start-up costs and projected balance sheets and income statements for at least three years, or until the break-even point is reached if longer.

2.1.1.1.7 Management of the proposed branch.

2.1.1.1.8 Description of the competitive situation in the foreign country, including representation of other U.S. financial institutions, any existing representation of applicant, its subsidiaries, or parent bank holding company.

2.1.1.1.9 Status of foreign government approvals, if any.

2.1.1.1.10 A summary of the bank or trust company’s experience in international banking or trust activities, including the volume and character of present international business, a description of the foreign or international department, the number of its staff, and background of its officers.

2.1.1.1.11 Details of any locally imposed capital requirements and any other special requirements relating to the utilization of capital funds.

2.1.2 Fee

2.1.2.1 The application shall be accompanied by a non-refundable investigation fee of two hundred and fifty dollars ($250.00). Checks shall be made payable to the Office of the State Bank Commissioner.

2.1.3 Notice

2.1.3.1 Upon receipt of any application pursuant to Section II of this regulation, the State Bank Commissioner will afford notice of the filing of such application to such persons as he deems appropriate.

2.1.4 Additional Information

2.1.4.1 In addition to the foregoing, the State Bank Commissioner may, in a particular case, request any additional information he deems appropriate.

2.1.5 Decision

2.1.5.1 The Commissioner shall issue a written Order approving or disapproving the application.

2.1.6 Certificate of Authority

2.1.6.1 If, on the basis of the information submitted, the State Bank Commissioner concludes that the application for the proposed branch office in a foreign country should be approved, he shall issue a Certificate of Authority permitting such office to be opened; such Certificate may contain such conditions as the State Bank Commissioner deems appropriate.

2.1.7 Time to Open Approved Branch Office In a Foreign Country

2.1.7.1 Branch offices in foreign countries approved in accordance with Section 771(a) of Title 5 of the Delaware Code and this regulation shall open within one year of the date when the Commissioner issues the Certificate of Authority. The Commissioner may upon review of the application for such branch extend the initial opening date to a date greater than one year. Any Certificate of Authority issued by the Commissioner shall be void and of no effect at the expiration of the time prescribed for the opening of the branch unless the branch is actually opened for business.

1 DE Reg. 867 (01/01/98)

706 Notice Requirements for Certain Delaware Banks and Trust Companies Engaging In the Business of Insurance

5 Del. Admin. Code § 706 Notice Requirements for Certain Delaware Banks and Trust Companies Engaging In the Business of Insurance

706 Notice Requirements for Certain Delaware Banks and Trust Companies Engaging In the Business of Insurance

5 Del.C. §121(b)

Formerly Regulation No.: 5.761.0007.NC

Effective Date: November 1, 1990

The Bank and Trust Company Insurance Act of 1989 (67 Del. Laws C. 223) (the “Act”) imposes certain capitalization and other requirements upon Delaware banks and trust companies engaging in the business of insurance thereunder. This regulation, promulgated pursuant to the authority of this office under 5 Del.C. §121(b), sets forth the information that must be provided to this office by a bank or trust company first acting as an insurer or transacting the business of insurance in accordance with the provisions of Title 18 pursuant to the authority conferred by the Act, in order to insure compliance with its provisions and other provisions of the Delaware Banking Code. The requirements set forth in this regulation are to be applied in conjunction with and not exclusive of all applicable regulations of the Delaware Insurance Commissioner.

1.0 Notice Requirements

1.1 Notice Required

1.1.1 Any bank or trust company intending to transact the business of insurance in Delaware under the authority of 5 Del.C. §761(a)(14), whether itself (through a division) or through a subsidiary, must notify this office in writing of its intention to do so.

1.2 Time of Notice

1.2.1 The notice required by section 1.1 of these regulations must be filed with this office by the bank or trust company prior to its transaction of any insurance activities pursuant to the authority conferred by 5 Del.C. §761(a)(14), whether through a division or subsidiary.

1.3 Form of Notice

1.3.1 The notice required by section 1.1 of these regulations shall be an identical copy of that notice required to be filed with the Delaware State Insurance Commissioner by the proposed insurance division of the bank itself or the subsidiary of the bank or trust company pursuant to regulations promulgated by the Insurance Commissioner under the Act. In addition, such notice shall be supplemented with the following additional information:

1.3.1.1 Complete information regarding the capitalization of each of the bank or trust company and its insurance division or subsidiary (to the extent not contained in the financial statements included in the notice filed with the State Insurance Commissioner), including the following:

1.3.1.1.1 the amount and sources of paid-in capital and surplus for each of the bank or trust company and its insurance division or subsidiary;

1.3.1.1.2 the allocations of capital, surplus and undivided profits made by such bank and trust company to its insurance division or subsidiary in each of the three (3) years preceding the filing of the notice required under these regulations;

1.3.1.1.3 the relationship, expressed as a percentage, between the capital, surplus and undivided profits of the bank or trust company and those of its insurance subsidiary or division; and

1.3.1.1.4 the allocations of capital, surplus and undivided profits expected to be made by such bank or trust company to its insurance division or subsidiary in the one (1) year period following the filing of the notice required under these regulations.

1.3.1.2 The location of any office in Delaware to be open to the public and at which such bank and trust company proposes to engage in the business of insurance, whether itself (through a division) or through a subsidiary, and, if applicable, a copy of the lease agreement, mortgage, or deed by which such division or subsidiary occupies each such office.

1.3.1.3 In addition, if such bank or trust company proposes to act as insurer then there shall be filed with this office a copy of a written communication from the bank or trust company to the Federal Deposit Insurance Corporation (“FDIC”), informing the FDIC of the nature and scope of the proposed activity.

1.4 Supplementary Notices

1.4.1 A supplementary notice in the form set forth in section 1.3 of these regulations, subject to such timeframes as may be applicable, shall be filed with this office each time, subsequent to the filing of the notice requirement by section 1.1 of these regulations, that: (1) the insurance subsidiary or division of the filing bank or trust company proposes to engage in any insurance activity authorized by 5 Del.C. §761(a)(14) not previously disclosed to this office; or (2) the filing bank or trust company proposes to allocate any additional amount of its capital, surplus and undivided profits to its insurance subsidiary or division. Any such supplementary notice shall be filed prior to the commencement of any activity described herein. If, at the time such supplementary notice is to be filed with this office, a similar supplementary notice has not been filed with the State Insurance Commissioner in the form described in the regulations promulgated by the Insurance Commissioner under the Act, the supplementary notice to be filed with this office shall contain, in addition to the specific information set forth in section 1.3 above, all information required to be contained in any original application to the Insurance Commissioner by the insurance subsidiary or division of a bank or trust company to transact the business of insurance under the authority of 5 Del.C. §761(a)(14).

2.0 Response to Notice

2.1 Within thirty (30) days following the filing of the notice required by section 1.3 or 1.4 of these regulations, the State Bank Commissioner shall determine whether the proposed activities therein should be approved or disapproved in whole or in part. If approved in whole or in part, the Commissioner shall forthwith issue a certificate of authority to engage in those activities which have been approved to the bank or trust company filing such notice. If disapproved in whole or in part, the Commissioner shall, pursuant to §10131(c) of Title 29 of the Delaware Code, give written notice to the bank or trust company of such disapproval and the reasons therefor. Such notice shall also:

2.1.1 inform the bank or trust company that it has a right to demand a hearing on its previously filed notice, at which hearing (a) the bank or trust company would have the right to present relevant evidence, (b) to be represented by counsel, and (c) to appear personally or by other representative; and that the Commissioner is obligated to reach his decision based upon substantial evidence of record; and

2.1.2 inform the bank or trust company of the period, not less than ten (10) days from the date of such notice, during which it may request a hearing on its previously filed notice.

2.2 Should the bank or trust company request a hearing under this paragraph, the Commissioner shall fix a date for such hearing and shall provide at least twenty (20) days’ advance notice of such hearing date to the bank or trust company.

3.0 Capital

3.1 The direct investment of a bank or trust company in a subsidiary or division engaged in any of the activities authorized by 5 Del.C. §761(a)(14) will not be counted toward the capital or surplus of the bank or trust company for the purposes of the Delaware Banking Code.

707 Limitation on the Accretion of Debt for Purposes of Increasing Capital or Surplus by a Division or Subsidiary of a Bank or Trust Company Engaged in Insurance Activities

5 Del. Admin. Code § 707 Limitation on the Accretion of Debt for Purposes of Increasing Capital or Surplus by a Division or Subsidiary of a Bank or Trust Company Engaged in Insurance Activities

707 Limitation on the Accretion of Debt for Purposes of Increasing Capital or Surplus by a Division or Subsidiary of a Bank or Trust Company Engaged in Insurance Activities

Formerly Regulation No.: 5.761.0008

Effective Date: February 15, 1993

1.0 The purpose of this regulation is to set limits on the amount of debt a bank or trust company engaging in insurance activities may incur for the purpose of increasing its capital or surplus.

2.0 No division or subsidiary of any bank or trust company engaged in activities authorized by §761(a)(14) of Title 5 shall incur debt for the purpose of increasing its capital or surplus, including, but not limited to, debt incurred through the sale or issuance of capital notes, debentures or other forms of securitized debt, in an amount in excess of one percent of the total capital, surplus and undivided profits of the bank or trust company in any one year without the prior approval of the State Bank Commissioner and shall, in no event, incur such debt in an amount which, in the aggregate, exceeds ten percent of the total capital, surplus and undivided profits of the bank or trust company.

708 Establishment of a Branch Office by a Bank or Trust Company

5 Del. Admin. Code § 708 Establishment of a Branch Office by a Bank or Trust Company

708 Establishment of a Branch Office by a Bank or Trust Company

5 Del.C. §770(a)

Formerly Regulation No.: 5.770.0009

Effective Date: January 12, 1998

1.0 Scope

1.1 This regulation establishes procedures for the filing of an application to establish a branch office of a bank or trust company pursuant to Section 770(a) of Title 5 of the Delaware Code and states the manner in which the State Bank Commissioner (the “Commissioner”) will review and act upon such applications. An application to establish a mobile branch office pursuant to Section 770(c) of Title 5 is covered separately under Regulation No. 714.

2.0 Application

2.1 An application pursuant to Section 770(a) of Title 5 of the Delaware Code shall be in writing; shall be submitted on such forms the Commissioner may designate from time-to-time for that purpose, and shall include the following:

2.1.1 Name of applying bank or trust company.

2.1.2 Location of proposed branch, including address.

2.1.3 Explanation of the necessity for the opening of the branch office.

2.1.4 Name, address and phone number of the person(s) to whom inquiries may be directed.

2.2 The Commissioner may designate portions of the application as non-public and confidential.

2.3 The Commissioner will not deem any application to be filed until the Commissioner has determined that all of the information and documents required by the application have been provided, that the application has been properly executed, and that all fees have been paid.

3.0 Fee

3.1 The application shall be accompanied by a non-refundable investigation fee of two hundred and fifty dollars ($250.00). Checks shall be made payable to the Office of the State Bank Commissioner.

4.0 Notice

4.1 Upon notification by the Commissioner that the application conforms to the requirements for applications pursuant to Section 770(a) of Title 5 of the Delaware Code and this regulation, the applicant shall cause a single notice of such application to be published in at least two Delaware newspapers of general circulation. The notice shall provide a brief synopsis of the application and state that interested persons may present their views in writing to the Office of the State Bank Commissioner, and shall be in a form to be approved by the Commissioner before publication.

5.0 Additional Information, Investigation and Hearing

5.1 In addition to the documents filed in accordance with this regulation, the Commissioner has discretion to require additional information, conduct an investigation, or hold a public hearing in accordance with the Administrative Procedures Act, Chapter 101 of Title 29 of the Delaware Code.

6.0 Decision

6.1 No earlier than 20 days after publication of the Notice described in section 4 of this regulation, the Commissioner shall issue a written Order approving or disapproving the application. In determining whether to approve the application, the Commissioner shall consider the convenience of the public of this State, and whether there is good and sufficient reason that the bank or trust company should have the branch office.

7.0 Certificate of Authority

7.1 A Certificate of Authority shall be issued by the Commissioner for each approved branch office.

8.0 Time to Open Approved Branch Office

8.1 Branch offices approved in accordance with Section 770(a) of Title 5 of the Delaware Code and this regulation shall open within one year of the date when the Commissioner issues the Certificate of Authority. The Commissioner may upon review of the application for such branch office extend the initial opening date to a date greater than one year upon a determination that the proposed completion date will exceed one year. In no instance shall the initial opening date exceed the planned completion date by ninety (90) days. Any Certificate of Authority issued by the Commissioner shall be void and of no effect at the expiration of the initial opening date prescribed on approval of the branch office unless that office is actually opened for business. Unavoidable delay in opening the branch office due to construction problems or other matters beyond the control of the bank or trust company may be taken into consideration and the Commissioner may extend the Certificate of Authority for periods of six months in the event of such circumstances.

1 DE Reg. 866 (01/01/98)

8 DE Reg. 472 (09/01/04)

709 Revocation of Charter for Failure to Commence Business Within a Reasonable Time

5 Del. Admin. Code § 709 Revocation of Charter for Failure to Commence Business Within a Reasonable Time

709 Revocation of Charter for Failure to Commence Business Within a Reasonable Time

Formerly Regulation No.: 5.734.0011.P

Effective Date: April 1, 1991

1.0 Scope

1.1 This regulation applies to every Bank and Trust Company, or Limited Purpose Trust Company (hereinafter referred to as a "Bank") chartered under Chapter 7 of Title 5.

1.2 The purpose of this regulation is to prescribe the criteria to be applied by the State Bank Commissioner (the "Commissioner") in determining what constitutes a reasonable period of time within which a corporation created pursuant to Chapter 7 of Title 5 shall be actively engaged in the business for which it was created.

2.0 Reasonable Period of Time

2.1 Within a reasonable period of time, every corporation chartered under Chapter 7 of Title 5 shall be actively engaged in the business for which it was created. A reasonable period of time has elapsed at the expiration of one year as measured from the date of incorporation.

2.2 If the Commissioner initially determines that the planned completion date for the banking facility proposed in the application for a Bank will exceed one year, the Commissioner may approve an actual opening date that extends beyond one year.

2.3 The Commissioner may grant extensions for periods of six months in the even of unavoidable delay in opening due to construction problems or other events beyond the control of the Bank.

710 Procedures Governing the Dissolution of a State Chartered Bank or Trust Company

5 Del. Admin. Code § 710 Procedures Governing the Dissolution of a State Chartered Bank or Trust Company

710 Procedures Governing the Dissolution of a State Chartered Bank or Trust Company

5 Del.C. §§750-751

Formerly Regulation No.: 5.751.0013

Effective Date: August 13, 1998

The procedure governing the dissolution of a state chartered bank or trust company are set forth in Chapter 1 of Title 8 (§§103 and 275) of the Delaware Code. In addition, no bank or trust company shall file a Certificate of Dissolution of the Bank with the Secretary of State until approval, both in form and substance, is granted by the State Bank Commissioner. The Commissioner may require such information as to the assets and liabilities and condition of the bank(s) concerned as necessary.

1.0 Letter of Intent

1.1 A letter stating the intent to dissolve a bank or trust company and the target date for dissolution shall be filed with the Commissioner thirty (30) days prior to the anticipated dissolution. Included in the letter shall be a detailed description of the method used to dissolve the bank, including, but not limited to, the following:

1.1.1 Proposed or contracted terms of all asset sales including: loans, securities, fixed assets and other assets;

1.1.2 Proposed or contracted terms for the assumption of deposit liabilities;

1.1.3 Proposed or contracted terms for disposition of other liabilities including contingent liabilities;

1.1.4 Proposed disposition of capital accounts including, if any, settlements with dissenting shareholders.

1.2 In addition, the Applicant shall provide in timely manner verified copies of the following:

1.2.1 Consent of shareholders of the dissolution;

1.2.2 Letter of intent regarding the purchase and assumption of assets and liabilities as submitted to the Federal Deposit Insurance Corporation or other federal regulatory authorities;

1.2.3 Letters of approval from appropriate federal regulatory authorities.

2.0 Findings and Decision of the Commissioner

2.1 A review and analysis of the proposed dissolution shall be performed by the State Bank Commissioner. Upon making a determination, the Commissioner shall issue his approval of dissolution pursuant to 5 Del.C. §751, if appropriate.

3.0 Certificate of Dissolution

3.1 Applicant shall file in timely manner a certified copy of the Certificate of Dissolution, signed by the Secretary of State, with the Office of the State Bank Commissioner.

2 DE Reg. 296 (08/01/98)

711 Application for Approval of the Conversion or Simultaneous Conversion and Acquisition of a Building and Loan Association to a Bank

5 Del. Admin. Code § 711 Application for Approval of the Conversion or Simultaneous Conversion and Acquisition of a Building and Loan Association to a Bank

711 Application for Approval of the Conversion or Simultaneous Conversion and Acquisition of a Building and Loan Association to a Bank

5 Del.C. §794

Formerly Regulation No.: 5.794.0015

Effective Date: December 31, 1993

1.0 Scope

1.1 This regulation applies to every building and loan association regulated pursuant to Chapter 17, Title 5, Delaware Code. The purpose of this regulation is to provide the procedures and application for the conversion or the simultaneous conversion and acquisition (the "Simultaneous Transaction") of a building and loan association to a bank (the "Bank") which shall be deemed as having been formed under and which shall be governed by the provisions of Chapter 7 of Title 5 as provided for in Section 794 of Title 5, Delaware Code. If an application is made for conversion of a building and loan association pursuant to Section 794 of Title 5, Delaware Code, in connection with an application for acquisition pursuant to Subchapter IV of Chapter 8 of Title 5, Delaware Code, the application may cross-reference documents so that duplication is not necessary.

2.0 Notice of Intent

2.1 Notice of the intention of the directors of the building and loan association (the "Applicant") to convert a building and loan association to a bank or to engage in a Simultaneous Transaction ("Notice of Intent") shall be filed with the Commissioner.

2.2 A $1,000 non-refundable investigation fee shall be submitted with the Notice of Intent, payable to the "Office of the State Bank Commissioner."

2.3 The Notice of Intent shall specify: (1) the names of all directors of the Bank at conversion or at the completion of the Simultaneous Transaction; (2) the name of the Bank; (3) the city or town of the building and loan association and the location of the Bank; (4) the capital stock and paid-in-surplus of the Bank at conversion or at the completion of the Simultaneous Transaction; (5) the identity of the Delaware bank holding company or out-of-state bank holding company in a Simultaneous Transaction.

2.4 The Notice of Intent of the directors shall have attached as exhibits: (1) a copy of an application in such form as the Commissioner may from time to time prescribe, submitted and sworn to by the directors of the Applicant (Form A); (2) a copy of the proposed Articles of Association; (3) a proposed form of public notice as provided for under Section 4.0 of this Regulation (the "Public Notice"); (4) a copy of a corporate resolution, sworn to and certified by the Corporate Secretary, authorizing the directors to execute and file the Notice of Intent and Application on behalf of the Applicant; and (5) a copy of the Application for Determination of Public Convenience and Advantage (Form B), executed by the proposed directors of the Bank.

3.0 Application for Determination of Public Convenience and Advantage (Form B)

3.1 The Applicant shall file with the Notice of Intent an Application for Determination of Public Convenience and Advantage set forth in subsection Form B of this Regulation.

3.2 The Commissioner will not deem any application as filed until the Commissioner has determined that all of the information requested in the application has been provided; that the application has been properly executed; that all required exhibits are attached; and that the $1,000 investigation fee has been paid.

3.3 Supplemental information may be requested by the Commissioner.

4.0 Public Notice

4.1 At least once during each of the first two weeks following the filing of an application pursuant to Section 794 and this regulation, the Commissioner will cause to be published in a newspaper having state-wide circulation, at the expense of the Applicant, a notice of the filing of such application, which notice shall invite public inspection and comment thereon prior to the expiration of a 45-day period.

4.2 If the Notice of Intent and the attached exhibits filed with the Commissioner are in the form required by this Regulation and are approved by the Commissioner, the Commissioner will schedule a formal, evidentiary hearing not to be held prior to the end of the 45 day comment period. Notice of the hearing will be given at least 20 days before the day the hearing is to be held.

5.0 Public Hearing

5.1 The public hearing provided for in this Regulation may be conducted by the Commissioner or by a Deputy Commissioner or Deputy Attorney General designated for that purpose. At such hearing, the Commissioner or his designate shall accept all relevant, non-cumulative evidence offered by or on behalf of the Applicant or by any interested person. Interested parties may appear at the public hearing, in person or by counsel or by other representative.

5.2 A record from which a verbatim transcript can be prepared shall be made. The Applicant shall be responsible for arranging for a certified court reporter to be present at the public hearing and shall bear the expense of an original written transcript for the Commissioner's use (which shall be supplied to the Commissioner as promptly as practical following the public hearing). Additional transcripts provided to any interested person shall be at the expense of the person requesting the transcript.

6.0 Commissioner's Determination

6.1 If the Commissioner has cause to believe that because of the conversion or Simultaneous Transaction, accessible banking services will be significantly diminished or that the Applicant would not satisfy one or more of the criteria for the issuance of a Certificate of Public Convenience and Advantage in accordance with Section 726 of Title 5, Delaware Code, the Commissioner will, not later than 45 days after the close of the comment period, advise the Applicant of such objection, together with the grounds therefore. At the request of the Applicant, the Commissioner will proceed to give notice and conduct a hearing in accordance with the Administrative Procedures Act, Chapter 101, Title 29, Delaware Code.

6.2 If the Commissioner or Deputy Commissioner presides at a public hearing conducted pursuant to this Regulation and if the decision on the Application is not adverse to the Applicant, the Commissioner may waive the entry of a proposed order and may instead proceed directly to the entry of a final order.

7.0 Decision and Final Order

7.1 Every decision on an Application shall be incorporated in a final order which shall include: (1) a brief summary of the evidence; (2) findings of fact based upon the evidence; (3) conclusions of law; (4) any other conclusions or findings required by law; and (5) a concise statement of the determination or action on the case.

7.2 Every final order shall be authenticated by the signature of the Commissioner and shall be mailed or delivered to: (1) the Incorporators (or their agent); (2) each person that presented data, views or arguments at the hearing; and (3) any other person requesting a copy of the final order.

8.0 Amendment of Name on Certificate of Incorporation and Commencement of Business

8.1 At any time after the Commissioner's decision approving the application for conversion or approving the Simultaneous Transaction, the Applicant shall submit for the Commissioner's endorsement the proposed Articles of Association attached as an exhibit to the Notice of Intent. The Articles of Association shall be filed with the Secretary of State within 30 days after the Commissioner's endorsement.

8.2 The existing Certificate of Incorporation issued to the Applicant by the Secretary of State shall be amended to reflect the name of the Bank.

8.3 Upon issuance of the amended Certificate of Incorporation by the Secretary of State and compliance with all provisions of law, a certified copy of the amended Certificate of Incorporation shall be recorded in the Office of the Recorder or Deeds for the county in which the Applicant was located and in which the place of business of the Bank is to be located, if not the same.

8.4 A certified copy of the Bank's amended Certificate of Incorporation shall be filed with the Commissioner together with a $5,000 fee for each certificate to transact business requested. No transaction of business as a Chapter 7 institution can begin until authorized by the Commissioner by the issuance of a Certificate to Transact Business.

8.5 An application for a Certificate to Transact Business shall include a certification as to the issuance of the whole capital stock of the Bank; a list of stockholders (including the number of shares held by each and the residence and post office address of each stockholder), which list shall be certified by the president and the cashier or treasurer of the Bank; evidence of the deposit of the proceeds of any sale of capital stock in an account for the benefit of the Bank; and evidence satisfactory to the Commissioner demonstrating that FDIC deposit insurance for the Bank has been approved by the FDIC; and in a Simultaneous Transaction evidence that the out-of-state bank holding company has established a separate escrow account for an amount representing the capital stock and paid-in surplus to be contributed to the Bank upon the issuance of the Certificate to Transact Business.

8.6 The Commissioner shall review the application and the status of the Applicant's FDIC insurance. If the above referenced $5,000 fee has been paid and it appears that all requirements of this Regulation and applicable law have been complied with and the Applicant's building and loan license has been surrendered, the Commissioner shall issue a certificate authorizing the Bank to begin the transaction of business.

Form A Application For Approval Of The Conversion Or The Simultaneous Conversion And Acquisition Of A Building And Loan Association To A Bank

Form B Application for Certificate of Public Convenience and Advantage for the Conversion or Simultaneous Conversion and Acquisition of a Building and Loan Association

712 Merger with Out-of-State Banks

5 Del. Admin. Code § 712 Merger with Out-of-State Banks

712 Merger with Out-of-State Banks1

(§§795D, 795F, 795G, 795H)

Formerly Regulation No.: 5.795etal.0016

Effective Date: January 12, 1998

This regulation establishes procedures governing: (i) the merger of one or more out-of-state banks with or into one or more Delaware banks to result in a Delaware state bank, pursuant to §795D of Title 5, Delaware Code; (ii) the merger of one or more Delaware state banks with or into one or more out-of-state banks to result in an out-of-state state bank, pursuant to §795F of Title 5, Delaware Code; (iii) the merger with an out-of-state bank of a Delaware state bank that is in default or in danger of default, pursuant to §795G of Title 5, Delaware Code; and (iv) the approval by the Commissioner, pursuant to § 795H of Title 5, Delaware Code, of a merger in accordance with §§795C, 795D, 795E, 795F or 795G of Title 5, Delaware Code, even though the resulting bank (including all insured depository institutions, as defined in the Federal Deposit Insurance Act at 12 U.S.C. §1813(c), which would be affiliates of the resulting bank), upon consummation of the transaction, would control 30 percent or more of the total amount of deposits of insured depository institutions in this State. This regulation is to be used in conjunction with statutory provisions included by reference in §§795D, 795F, 795G and 795H of Title 5, Delaware Code, and the merger procedure prescribed in Subchapter IX of Chapter 1 of Title 8, Delaware Code, for the merger or consolidation of domestic and foreign corporations.

1.0 Merger Application By A Delaware State Bank

1.1 A merger application by a Delaware state bank in accordance with §795D, § 795F and § 795G of Title 5, Delaware Code, in which the resulting bank will be a state bank, shall be filed with the Commissioner. Such application shall include: a merger agreement in the same form as that prescribed in §784 of Title 5, Delaware Code; certified copies of the authorizing resolutions of each board of directors showing approval by a majority of the entire board and evidence of proper action by the board of directors of any merging national bank, as provided in §784(b) of Title 5, Delaware Code; a copy of the complete application as submitted to the Federal Deposit

1.2 Insurance Corporation (the “FDIC”), the Board of Governors of the Federal Reserve System (the “FRB”) or the Office of the Comptroller of the Currency (the “OCC”), as applicable; the $1,150 investigation fee as provided in §792 of Title 5, Delaware Code; a cover letter indicating that the application is made pursuant to §795D, §795F or §795 G of Title 5, Delaware Code, as applicable, and providing information about the disposition of existing locations of the merging Delaware state bank, if any; and, when applicable, the information required by regulation 805 (formerly 5.803.0011).

2.0 Application For Waiver Of The 30% Concentration Limit

2.1 A Delaware bank that is a party to a merger in accordance with §§795D or 795F (with a resulting state bank) or §795G (with a resulting state or national bank) of Title 5, Delaware Code, in which the resulting bank, upon consummation of the transaction, would control 30% or more of the total amount of deposits of insured depository institutions in this State, may apply for a waiver of the 30% concentration limit in accordance with §795H of Title 5, Delaware Code, as part of the merger application to the Commissioner.

2.2 A Delaware bank that is a party to a merger in accordance with §§795C or 795E of Title 5, Delaware Code, in which the resulting bank would be a national bank and, upon consummation of the transaction, would control 30% or more of the total amount of deposits of insured depository institutions in this State, may apply for a waiver of the 30% concentration limit in accordance with §795H of Title 5, Delaware Code, by submitting to the Commissioner a copy of the complete application as submitted to the FDIC, the FRB or the OCC, as applicable, and a cover letter indicating that the application is made pursuant to §795H of Title 5, Delaware Code, and providing information about the disposition of existing locations of the merging Delaware bank.

3.0 Additional Information, Investigation, Notice, Comment and Hearing

3.1 In addition to the documents filed in accordance with this regulation, the Commissioner at his discretion may require additional information as deemed necessary, conduct an investigation, order public notice of the merger, period for public comment, and/or a public hearing. The application shall not be considered complete until such additional matters, if any, are completed.

4.0 Findings and Decision

4.1 Within 30 days of receipt of the completed application, the Commissioner shall issue Findings and Decision approving or disapproving the application. Any merging bank whose application is disapproved shall receive an opportunity to amend its application to satisfy the objections of the Commissioner.

5.0 Filing Of Merger Agreement With The Secretary Of State

5.1 Upon receipt of approval of the merger by the FDIC, the FRB or the OCC, as applicable, and verification that the provisions of §252 of Title 8, Delaware Code, have been complied with, the Commissioner shall affix his signature of approval to the merger agreement for filing with the Secretary of State.

1 DE Reg. 869 (01/01/98)

12.1 Terms used in this regulation are as defined in §795 of Title 5, Delaware Code, unless otherwise noted.

713 Incidental Powers

5 Del. Admin. Code § 713 Incidental Powers

713 Incidental Powers

5 Del.C. §761(a)(17)

Formerly Regulation No.: 5.761.0017

Effective Date: June 11, 2001

1.0 Purpose and Scope

1.1 This regulation specifies certain activities that are within the scope of the powers incident to a banking corporation under 5 Del.C. §761(a)(17) and also establishes the procedure for a bank to exercise its powers under that section by engaging in those and other activities, either directly or through a subsidiary.

1.2 This regulation is not intended to limit, restrict or define any other powers granted to a bank or any of its subsidiaries by any other Delaware statute, legislative charter, or regulation.

2.0 Definitions

“Bank” means any bank as defined by 5 Del.C. §101 that is established pursuant to 5 Del.C. Chapter 7, or pursuant to any other law of this State if the bank is entitled to amend its charter or certificate of incorporation in accordance with 5 Del.C. §749.

“Commissioner” means the State Bank Commissioner.

3.0 Specified Activities

3.1 Any bank that desires to exercise its incidental powers under 5 Del.C. §761(a)(17) by engaging in any of the following specified activities, either directly or through a subsidiary, shall notify the Commissioner in writing before commencing that activity:

3.1.1 Any activity that is permissible for a national bank as principal.

3.1.2 Any activity that is permissible for a bank holding company pursuant to Section 4(c)(8) of the Bank Holding Company Act of 1956, as amended (12 USC §1843(c)(8)).

3.1.3 Any activity that is permissible in accordance with Part 362.3 of the Rules and Regulations of the Federal Deposit Insurance Corporation (the “FDIC”) (12 CFR §362.3), which implements provisions of Section 24 of the Federal Deposit Insurance Act (12 USC §1831a), other than activities that are otherwise specifically limited or prohibited under Delaware law.

3.1.4 The provision of travel agency services. Banks chartered by the Delaware General Assembly before 1933 traditionally provided travel agency services to their customers, in reliance on the broad grants of agency power typically conferred by their charters. Delaware bank customers historically relied upon Delaware banks as providers of travel agency services, and continue to look to Delaware banks for such services. Accordingly, the Commissioner has concluded that travel agency services constituted part of the generally accepted business of banking when Delaware’s Corporation Law for State Banks and Trust Companies was enacted in 1933, and that the provision of travel agency services continues to be authorized by the powers incident to a banking corporation pursuant to 5 Del.C. §761(a)(17).

3.1.5 The provision of general management consulting services. Many banks chartered by the Delaware General Assembly before 1933 were given broad powers to act in a fiduciary capacity, and the fulfillment of fiduciary duties in the context of banking affairs ordinarily involves the provision by banks of disinterested advice on many business and financial matters. Accordingly, the Commissioner has concluded that general management consulting services constituted part of the generally accepted business of banking when Delaware’s Corporation Law for State Banks and Trust Companies was enacted in 1933, and that the provision of general management consulting services continues to be authorized by the powers incident to a banking corporation pursuant to 5 Del.C. §761(a)(17).

3.2 Any bank that desires to exercise its incidental powers under 5 Del.C. §761(a)(17) by engaging in any of the following specified activities through a subsidiary shall notify the Commissioner in writing before commencing that activity:

3.2.1 Any activity that is permissible for a financial subsidiary of a national bank pursuant to Section 5136A of the Revised Statutes of the United States, as amended (12 USC §24a), other than activities that are otherwise specifically limited or prohibited under Delaware law;

3.2.2 Any activity that is permissible in accordance with Part 362.3 or Part 362.4 of the Rules and Regulations of the FDIC (12 CFR §362.3 or §362.4), which implement provisions of Section 24 of the Federal Deposit Insurance Act (12 USC §1831a), other than activities that are otherwise specifically limited or prohibited under Delaware law.

3.3 If the Commissioner does not object in writing to the proposed activity within 30 days of receiving the notice, the bank may then exercise its incidental powers by engaging in the specified activity described in the notice. The Commissioner may also permit the bank to engage in the specified activity before the end of the 30-day notice period.

3.4 The Commissioner may require the bank to conduct the specified activity only through a subsidiary, and may also impose any conditions related to the conduct of that activity that are necessary or appropriate for the bank’s safety and soundness, as the Commissioner may determine.

3.5 If the Commissioner objects in writing to the proposed activity within 30 days of receiving the bank’s notice, the bank may not engage in that activity either directly or through a subsidiary, until the Commissioner issues a written order approving such activity.

3.6 The bank or its subsidiary may submit an application to the Commissioner seeking approval of the proposed activity. The Commissioner has discretion to require any additional information deemed necessary and the application shall not be considered complete until such additional information is provided. Within 30 days of receiving the completed application, the Commissioner shall issue an order approving or disapproving the application.

4.0 Other Activities

4.1 A bank may apply to the Commissioner for permission to exercise its incidental powers under 5 Del.C. §761(a)(17) by engaging, either directly or through a subsidiary, in any activity that is not specified in Section 3.0 of this regulation.

4.1.1 The bank’s application must describe the proposed activity in detail and demonstrate that the activity is within the powers, rights, privileges and franchises incident to a banking corporation, and is also necessary and proper to the transaction of the business of the corporation within the meaning of 5 Del.C. §761(a)(17).

4.1.2 Upon receipt of the application, the Commissioner may require additional information appropriate to evaluate the request, and the application shall not be considered complete until such additional information is received.

4.1.3 Within 30 days of receiving the completed application, the Commissioner shall issue a written order approving or disapproving the bank’s application. In issuing that order, the Commissioner shall consider all information that the bank has provided as well as the bank’s general financial condition and performance.

4.1.4 The Commissioner may require that the activity be conducted only through a subsidiary, and may also impose any conditions related to the conduct of the activity that are necessary or appropriate to the bank’s safety and soundness, as the Commissioner may determine.

4 DE Reg. 1995 (06/01/01)

714 Establishment of a Mobile Branch Office by a Bank or Trust Company

5 Del. Admin. Code § 714 Establishment of a Mobile Branch Office by a Bank or Trust Company

714 Establishment of a Mobile Branch Office by a Bank or Trust Company

5 Del.C. §770(c)

1.0 Scope

1.1 This regulation establishes procedures for the filing of an application to establish a mobile branch office of a bank or trust company pursuant to Section 770(c) of Title 5 of the Delaware Code and states the manner in which the State Bank Commissioner (the “Commissioner”) will review and act upon such applications. An application to establish a branch office pursuant to Section 770(a) of Title 5 that is not a mobile branch is covered separately under Regulation No. 708.

2.0 Application

2.1 An application pursuant to Section 770(c) of Title 5 of the Delaware Code shall be in writing; shall be submitted on such form as the Commissioner may designate from time-to-time for that purpose, and shall include the following:

2.1.1 Name of applying bank or trust company.

2.1.2 The area in which the mobile branch office will operate.

2.1.3 The manner of operation of the mobile branch office.

2.1.4 An explanation of the necessity for the opening of the mobile branch office.

2.1.5 Name, address and phone number of the person(s) to whom inquiries may be directed.

2.2 The Commissioner may designate portions of the applications as non-public and confidential.

2.3 The Commissioner will not deem any application to be filed until the Commissioner has determined that all of the information and documents required by the application have been provided, that the application has been properly executed, and that all fees have been paid.

3.0 Fee

3.1 The application shall be accompanied by a non-refundable investigation fee of two hundred and fifty dollars ($250.00). Checks shall be made payable to the Office of the State Bank Commissioner.

4.0 Notice

4.1 Upon notification by the Commissioner that the application conforms to the requirements for applications pursuant to Section 770(c) of Title 5 of the Delaware Code and this regulation, the applicant shall cause a single notice of such application to be published in at least two Delaware newspapers of general circulation. The notice shall provide a brief synopsis of the application and state that interested persons may present their views in writing to the Office of the State Bank Commissioner, and shall be in a form to be approved by the Commissioner before publication.

5.0 Additional Information, Investigation and Hearing

5.1 In addition to the documents filed in accordance with this regulation, the Commissioner has discretion to require additional information, conduct an investigation, or hold a public hearing in accordance with the Administrative Procedures Act, Chapter 101 of Title 29 of the Delaware Code.

6.0 Decision

6.1 No earlier than 20 days after publication of the notice described in Section 4 of this regulation, the Commissioner shall issue a written order approving or disapproving the application. In determining whether to approve the application, the Commissioner shall consider the convenience of the public of this State, and whether there is good and sufficient reason that the bank or trust company should have the mobile branch office.

7.0 Certificate of Authority

7.1 A Certificate of Authority shall be issued by the Commissioner for each approved mobile branch office.

8.0 Time to Open Approved Mobile Branch Office

8.1 Mobile branch offices approved in accordance with Section 770(c) of Title 5 of the Delaware Code and this regulation shall open within one year of the date when the Commissioner issued the Certificate of Authority. The Commissioner may upon review of the application for such mobile branch office extend the initial opening date to a date greater than one year upon a determination that the proposed completion date will exceed one year. In no such instance shall the initial opening date exceed the planned completion date by more than ninety (90) days. Any Certificate of Authority issued by the Commissioner shall be void and of no effect at the expiration of the initial opening date prescribed on approval of the mobile branch office unless the mobile branch is actually opened for business. Unavoidable delay in opening the mobile branch office due to construction problems or other matters beyond the control of the bank or trust company may be taken into consideration and the Commissioner may extend the Certificate of Authority for periods of six months in the event of such circumstances.

9.0 Changes in Manner or Area of Operation

9.1 A bank or trust company that is operating an approved mobile branch office shall notify the Commissioner, in writing, in advance of any change in the manner or area of operation of the mobile branch office. Any such change shall be deemed approved unless the Commissioner notifies the bank or trust company otherwise with 20 days of the Commissioner’s receipt of that notice. The Commissioner may decline to approve any of the changes, or may direct the bank or trust company to submit a new application in accordance with this regulation.

10.0 Operations Log

After the mobile branch begins operations, the bank or trust company operating that branch must maintain a log of operations, indicating the date, specific location, and a description of each stop (e.g., office, store, residence).

8 DE Reg. 473 (09/01/04)

800 Acquisition of Interests in Banking Institutions Bank Holding Companies

801 Application to Become a Delaware Bank Holding Company

5 Del. Admin. Code § 801 Application to Become a Delaware Bank Holding Company

5 Del.C. §852

Effective Date: October 11, 2020

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-1.0 Scope of Regulation

This regulation establishes procedures governing the creation of a Delaware bank holding company. A bank holding company with bank subsidiaries in Delaware whose operations are principally conducted within this state is required to become a Delaware bank holding company. A bank holding company is deemed to be principally conducting operations in Delaware when the total deposits of all bank subsidiaries in this State are greater than in any other state (See 5 Del.C. §851(3)). Except as provided in §852(a), no bank holding company other than a Delaware bank holding company may own a Delaware bank.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-2.0 Application

2.1 Notice of Intent to become a Delaware Bank Holding Company constitutes an application. Said Notice of Intent shall be filed in duplicate with the Office of the State Bank Commissioner. The Notice of Intent shall include:

2.1.1 Name of Applicant and address of principal office.

2.1.2 The State in which the Applicant is (or will be) incorporated. If the Applicant is incorporated outside of the State of Delaware, identify the name and address of a resident of Delaware designated as the Applicant's agent for the service of any paper or notice of legal process.

2.1.3 If applicable, the corporate title and the address of the bank to be acquired; the number of voting shares to be acquired; and the percentage of said shares this number represents.

2.1.4 The name, address and telephone number of the person(s) to whom inquiries may be directed.

2.1.5 The Notice of Intent shall include the following exhibits:

2.1.5.1 A copy of the Resolution by the Board of Directors of the Applicant authorizing the establishment of a Delaware bank holding company.

2.1.5.2 A description of the Applicant and the transaction.

2.1.5.3 A description of the financial and managerial resources of the proposed Delaware bank holding company.

2.1.5.4 The future prospects of the bank holding company and the bank whose assets or shares it will acquire, if applicable, to include a statement in narrative form of a three (3) year business plan of the Applicant for the proposed bank holding company and, if applicable, the bank to be acquired.

2.1.5.5 The financial history of the Applicant:

2.1.5.5.1 Provide a narrative description of the financial history of the Applicant and its bank and deposit taking non‑bank subsidiaries over the past three (3) years. Include as exhibits all annual statements of income and condition filed with the bank regulatory authority or authorities in each state where the bank holding company maintains a bank subsidiary or, in the case of a national bank, with the Comptroller of the Currency; provided that such filings shall not be required with respect to any bank subsidiary under the jurisdiction of the Delaware State Bank Commissioner.

2.1.5.5.2 Provide for the past three calendar years, copies of all Form 10‑Ks.

2.1.5.5.3 Describe regulatory action taken or anticipated or any agreements in lieu thereof entered into with a regulatory agency, either federal or state, with regard to any bank subsidiary within the holding company.

2.1.5.6 The effects of the proposed acquisition on competition in Delaware.

2.1.5.7 Describe how this transaction will better meet the needs and convenience of the public in the State of Delaware.

2.1.5.8 A copy of the application filed with the Board of Governors of the Federal Reserve System to become a Bank Holding Company.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-3.0 Publication

3.1 A proposed form of public notice shall be filed at the time the Notice of Intent (Application) is submitted for the Commissioner's approval. Said public notice shall include: the name and address of the Applicant, the subject matter of the application, the name and address of the bank to be acquired, and a statement indicating: a) for a period of 20 days commencing with the second date of publication, interested parties may submit written comments to the State Bank Commissioner at 1110 Forrest Avenue, Dover, Delaware 19904; and b) the application is on file in the Office of the State Bank Commissioner and the non‑confidential portions thereof will be available for examination by interested parties during regular office hours.

3.2 Upon written notice from the Commissioner that the proposed public notice is satisfactory, the Applicant shall cause said public notice to be published once a week for two consecutive weeks in a newspaper of general circulation in the community in which the head office of the bank of which shares are to be acquired is located. An affidavit of publication shall be submitted to the Commissioner for the record.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-4.0 Additional Information

Upon review and consideration of the application, the Commissioner may require any additional information deemed necessary.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-5.0 Confidential Information

An Applicant may request that specific information included in the Notice of Intent be treated as confidential. Any information or exhibits of which the applicant claims the designation of confidential shall be segregated at the end of the application as a separate exhibit designated as "confidential". The Commissioner, in his sole discretion, shall determine whether any or all of the information for which the "confidential" designation is requested by the Applicant meets the criteria for confidentiality set forth in 29 Del.C. §10112(b)(4). All portions of the Notice of Intent which the Commissioner does not designate as "confidential" shall be made available for public inspection and copying in the manner provided by law with the exception of the copy of the Application filed with the Federal Reserve.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-6.0 Fees

The Notice of Intent (Application) shall be accompanied by a filing fee in the amount of five thousand seven hundred and fifty dollars ($5,750.00) for the use of the State and a non‑refundable processing fee in the amount of one thousand one hundred and fifty dollars ($1,150.00). Checks shall be made payable to the Office of the State Bank Commissioner.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-7.0 Hearing

If, after the twenty (20) day comment period, the Commissioner determines a public hearing should be conducted, such determination shall be made within ten (10) days after the conclusion of the 20-day comment period. Notice fixing the time, place and date for the holding of a hearing on the application shall be published at least twenty (20) days prior to the day it is to be held. The hearing shall be conducted in accordance with Chapter 101 of Title 29 of the Delaware Code.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

5 Del. Admin. Code § 801-8.0 Findings and Decision of the Commissioner

The Findings and Decision approving or disapproving the Application will be issued in accordance with Chapter 101 of Title 29, Delaware Code.

History

• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 24 DE Reg. 382 (10/01/20)
• 2 DE Reg. 297 (08/13/98)
• 24 DE Reg. 382 (10/01/20)

802 Application by an Out-of-state Savings Institution, Out-of-State Savings and Loan Holding Company or Out-of-State Bank Holding Company to Acquire a Delaware Savings Bank or Delaware Savings and Loan Holding Company

5 Del. Admin. Code § 802 Application by an Out-of-state Savings Institution, Out-of-State Savings and Loan Holding Company or Out-of-State Bank Holding Company to Acquire a Delaware Savings Bank or Delaware Savings and Loan Holding Company

802 Application by an Out-of-state Savings Institution, Out-of-State Savings and Loan Holding Company or Out-of-State Bank Holding Company to Acquire a Delaware Savings Bank or Delaware Savings and Loan Holding Company

5 Del.C. §833

Formerly Regulation No.: 5.833.0004

Effective Date: December 11, 1998

1.0 Instructions

1.1 This Application is to be filed by an “out-of-state savings institution”, “out-of-state savings and loan holding company” or an "out-of-state bank holding company" (as defined in Section 831 of Title 5 of the Delaware Code), or subsidiary thereof, for the purpose of acquiring a Delaware savings bank or Delaware savings and loan holding company pursuant to the Savings Bank Acquisition Act (5 Del.C. §831 et seq.).

1.2 This Application is to be completed, executed and acknowledged by a lawfully empowered officer of the out-of-state savings institution, savings and loan holding company or bank holding company. The completed Application and required exhibits should be filed with the Office of the State Bank Commissioner, Dover, Delaware, in duplicate, accompanied by a non-refundable filing fee made payable to the State of Delaware in the amount of five thousand seven hundred and fifty dollars ($5,750.00), together with a non-refundable processing fee in the amount of one thousand one hundred and fifty dollars ($1,150.00) made payable to the Office of the State Bank Commissioner. THE COMMISSIONER WILL NOT DEEM ANY APPLICATION AS FILED UNTIL THE COMMISSIONER HAS DETERMINED THAT ALL OF THE INFORMATION REQUESTED IN THE APPLICATION HAS BEEN PROVIDED; THAT THE CERTIFICATE HAS BEEN PROPERLY SIGNED AND ACKNOWLEDGED; THAT ALL REQUIRED EXHIBITS ARE ATTACHED; AND THAT ALL FEES HAVE BEEN PAID.

2.0 Application Process

Upon notification by the Commissioner that this Application is deemed as filed, the applicant shall cause to be published in a newspaper of general circulation throughout the State of Delaware, once a week for two (2) consecutive weeks, a notice of its intention to acquire a Delaware savings bank or Delaware savings and loan holding company, and, if applicable, to form an interim savings bank in connection therewith. Such notice shall include the date, time and location of the public hearing on the application as established by the Commissioner. Such notice shall expressly invite members of the public to examine the Application on file with the Office of the State Bank Commissioner and to submit comments regarding the Application to the Office of the State Bank Commissioner. A public hearing will be conducted by the Commissioner or the Commissioner’s designee in accordance with Chapter 101 of Title 29, Delaware Code, to review the Application and to take such testimony and to gather such evidence as the Commissioner or the Commissioner’s designee deems necessary to determine whether the proposed acquisition (and, where applicable, the formation of the proposed interim savings bank) will serve the public convenience and advantage pursuant to the criteria set forth in 5 Del.C. §833(b). When applicable, the Commissioner or his designee will also consider whether a proposed acquisition should be approved even though the acquiring out-of-state savings institution, out-of-state savings and loan holding company or out-of-state bank holding company, or any subsidiary thereof, would control, together with any affiliated insured depository institution, 30 percent or more of the total amount of deposits of insured depository institutions in this State, as provided in 5 Del.C. §832(b). A record from which a verbatim transcript can be prepared shall be made of all hearings. The expense of any transcription of the proceedings requested by the Commissioner or the Commissioner’s designee shall be borne by the applicant; in all other instances, the expense of such transcription shall be borne by the person requesting it. The Commissioner or the Commissioner’s designee will issue preliminary findings of fact and law and make the same available for comment to the applicant and all parties shall have thereafter twenty (20) days to submit in writing to the Commissioner or the Commissioner’s designee exceptions, comments and arguments respecting the preliminary findings. If the Commissioner or the Commissioner’s designee presides at a hearing conducted pursuant to this regulation and if the decision on the applicant is not adverse to the applicant, the Commissioner or the Commissioner’s designee has the right to waive the preliminary findings of fact and law and proceed directly to the entry of a final order.

3.0 Confidential Information

An applicant may request that specific information included in this Application be treated as confidential. Any information or exhibits for which the applicant claims the designation of confidential shall be segregated at the end of the Application as a separate exhibit which the applicant shall designate as "confidential". The Commissioner, in his sole discretion, will determine whether any or all of the information for which the "confidential" designation is requested by the applicant meets the criteria for confidentiality set forth in 29 Del.C. §10112(b)(4). All portions of this Application which the Commissioner does not designate as "confidential" will be made available for public inspection and copying.

2 DE Reg. 1025 (12/01/98)

802 Application by an Out-of-state Savings Institution, Out-of-State Savings and Loan Holding Company or Out-of-State Bank Holding Company to Acquire a Delaware SavingsBank or Delaware Savings and Loan Holding Company 5 Del.C. §833

803 Application by an Out-of-State Bank Holding Company to Acquire a Delaware Bank or Bank Holding Company

5 Del. Admin. Code § 803 Application by an Out-of-State Bank Holding Company to Acquire a Delaware Bank or Bank Holding Company

803 Application by an Out-of-State Bank Holding Company to Acquire a Delaware Bank or Bank Holding Company

5 Del.C. §844

Formerly Regulation No.: 5.844.0009

Effective Date: December 11, 1998

1.0 Instructions

1.1 This Application is to be filed by an "out-of-state bank holding company" (as defined in Section 801 of Title 5 of the Delaware Code) for the purpose of acquiring a Delaware bank or bank holding company pursuant to the Delaware Interstate Banking Act (5 Del.C. §84l et seq.).

1.2 This Application is to be completed, executed and acknowledged by a lawfully empowered officer of the out-of-state bank holding company. The completed Application and required exhibits should be filed with the Office of the State Bank Commissioner, Dover, Delaware in duplicate, accompanied by a non-refundable filing fee made payable to the State of Delaware in the amount of five thousand seven hundred and fifty dollars ($5,750.00), together with a non-refundable processing fee made payable to the Office of the State Bank Commissioner in the amount of one thousand one hundred and fifty dollars ($1,150.00). THE COMMISSIONER WILL NOT DEEM ANY APPLICATION AS FILED UNTIL THE COMMISSIONER HAS DETERMINED THAT ALL OF THE INFORMATION REQUESTED IN THE APPLICATION HAS BEEN PROVIDED; THAT THE CERTIFICATE HAS BEEN PROPERLY SIGNED AND ACKNOWLEDGED; THAT ALL REQUIRED EXHIBITS ARE ATTACHED; AND THAT ALL FEES HAVE BEEN PAID.

2.0 Application Process

2.1 Upon notification by the Commissioner that this Application is deemed as filed, the applicant shall cause to be published in a newspaper of general circulation throughout the State of Delaware, once a week for two (2) consecutive weeks, a notice of its intention to acquire a Delaware bank holding company or bank, and, if applicable, to form an interim bank in connection therewith. Such notice shall include the date, time and location of the public hearing on the application as established by the Commissioner. Such notice shall expressly invite members of the public to examine the Application on file with the Office of the State Bank Commissioner and to submit comments regarding the Application to the Office of the State Bank Commissioner. A public hearing will be conducted by the Commissioner or his designee in accordance with Chapter 101 of Title 29, Delaware Code to review the Application and to take such testimony and to gather such evidence as the Commissioner or his designee deems necessary to determine whether the proposed acquisition (and, where applicable, the formation of the proposed interim bank) will serve the public convenience and advantage pursuant to the criteria set forth in 5 Del.C. §844(b). When applicable, the Commissioner or his designee will also consider whether a proposed acquisition should be approved even though the acquiring out-of-state bank holding company, or any subsidiary thereof, would control, together with any affiliated insured depository institution, 30 percent or more of the total amount of deposits of insured depository institutions in this State, as provided in 5 Del.C. § 843(b). A record from which a verbatim transcript can be prepared shall be made of all hearings. The expense of any transcription of the proceedings requested by the Commissioner or his designee shall be borne by the applicant; in all other instances, the expense of such transcription shall be borne by the person requesting it. The Commissioner or his designee will issue preliminary findings of fact and law and make the same available for comment to the applicant and all parties having presented data, views or argument at the hearing. Said parties shall have thereafter twenty (20) days to submit in writing to the Commissioner exceptions, comments and arguments respecting the preliminary findings. If the Commissioner or his designee presides at a hearing conducted pursuant to this regulation and if the decision on the Application is not adverse to the applicant, the Commissioner or his designee has the right to waive the preliminary findings of fact and law and may instead proceed directly to the entry of a final order.

3.0 Confidential Information

3.1 An applicant may request that specific information included in this Application be treated as confidential. Any information or exhibits for which the applicant claims the designation of confidential shall be segregated at the end of the Application as a separate exhibit which the applicant shall designate as "confidential". The Commissioner, in his sole discretion, shall determine whether any or all of the information for which the "confidential" designation is requested by the applicant meets the criteria for confidentiality set forth in 29 Del.C. §10112(b)(4). All portions of this Application which the Commissioner shall not designate as "confidential" shall be made available for public inspection and copying in the manner provided by law.

Application for Authority of an Out-of-state Bank Holding Company to Acquire a Delaware Bank or Bank Holding Company

804 Application for Waiver of Section 803 Conditions

5 Del. Admin. Code § 804 Application for Waiver of Section 803 Conditions

804 Application for Waiver of Section 803 Conditions

5 Del.C. §803(c)

Formerly Regulation No.: 5.803.0011

Effective Date: October 23, 1995

A bank seeking a waiver pursuant to Section 803(c) of Title 5, Delaware Code, of any or all of the conditions specified in subsections (a)(1), (a)(2), (a)(3) and (a)(4) of Section 803 of Title 5, Delaware Code, shall apply for such waiver in accordance with this regulation.1 Until such waiver is approved by the State Bank Commissioner (the "Commissioner"), the conditions specified in subsections (a)(1), (a)(2), (a)(3) and (a)(4) of Section 803 of Title 5, Delaware Code, will be strictly enforced.

1.0 Application

1.1 The applicant shall clearly identify the conditions specified in subsections (a)(1), (a)(2), (a)(3) and (a)(4) of Section 803 of Title 5, Delaware Code, for which the bank seeks a waiver. The applicant shall provide the following information, as applicable:

1.2 Waiver of condition under 5 Del.C. § 803(a)(1) relating to a single office in this State open to the public for the conduct of banking business.

1.3 The applicant shall specify whether the bank seeks a waiver of the condition under Section 803(a)(1) of Title 5, Delaware Code, that it have no more than a single office located in this State open to the public for the conduct of banking business. The applicant shall identify the number and proposed locations, if any, of additional offices located in this State that the bank proposes to open to the public for the conduct of banking business within the next two years, and shall submit a business plan relating to such additional offices. (A separate application to open a branch office must be filed in accordance with Section 770 of Title 5, Delaware Code.)

1.4 Waiver of condition under 5 Del.C. §803(a)(2) relating to minimum capital stock and paid-in surplus.

1.5 The applicant shall specify whether the bank seeks a waiver of the condition under Section 803(a)(2) of Title 5, Delaware Code, relating to minimum capital stock and paid-in surplus. The applicant shall specify the bank's planned amounts of capital stock and paid-in surplus for the next two years. The applicant shall submit a business plan explaining, in detail, the reasons for the planned change, if any, from the bank's current amounts of capital stock and paid-in surplus and the expected effect of such change on the bank's operations and safe and sound condition.

1.6 Waiver of condition under 5 Del.C. §803(a)(3) relating to employment of persons within this State.

1.7 The applicant shall specify whether the bank seeks a waiver of the condition under Section 803(a)(3) of Title 5, Delaware Code, relating to employment of persons within this State. The applicant shall specify the bank's planned employment of persons within this State for the next two years. The applicant shall submit a business plan explaining, in detail, the reasons for the planned change, if any, from the bank's current employment of persons in this State and the expected effect of such change on the bank's operations and safe and sound condition.

1.8 Waiver of condition under 5 Del.C. §803(a)(4) relating to manner and location of operation in this State.

1.9 The applicant shall specify whether the bank seeks a waiver of the condition under Section 803(a)(4) of Title 5, Delaware Code, relating to operating in a manner and at a location that is not likely to attract customers from the general public in this State to the substantial detriment of existing banking institutions located in this State. The applicant shall specify the bank's planned manner and location of operation in this State during the next two years. The applicant shall submit a business plan explaining, in detail, the reasons for the planned change, if any, from the bank's current manner and location of operation in this State and the expected effect of such change on the bank's operations and safe and sound condition.

2.0 Fee

2.1 The application shall be accompanied by a fee of $6,000, payable to the Office of the State Bank Commissioner.

3.0 Notice

3.1 Upon receipt of an application conforming to the requirements for applications pursuant to Section 803(c) of Title 5, Delaware Code, and this regulation, the Commissioner shall cause a single notice of such application to be published in at least two Delaware newspapers of general circulation. The notice shall provide a brief synopsis of the application, and state that interested persons may present their views in writing to the Office of the State Bank Commissioner.

4.0 Additional Information, Investigation and Hearing

4.1 In addition to the documents filed in accordance with this regulation, the Commissioner at his discretion may require additional information, conduct an investigation, or hold a public hearing in accordance with the Administrative Procedures Act, Chapter 101 of Title 29, Delaware Code.

5.0 Findings and Decision

5.1 No earlier than 20 days after publication of the Notice described in section III of this regulation, the Commissioner shall issue Findings and Decision approving or disapproving the application. In determining whether to approve the application, the Commissioner shall consider the convenience and needs of the public of this State.

1 Notwithstanding the foregoing, a bank seeking a waiver pursuant to Section 803(c) of Title 5, Delaware Code, of any or all of the conditions specified in subsections (a)(1), (a)(2), (a)(3) and (a)(4) of Section 803 of Title 5, Delaware Code, may apply for such waiver as part of an application to merge with an out-of-state bank as provided in regulation 712 (formerly 5.795etal.0016) by including in that application all of the information required by this regulation 805 (formerly 5.803.0011). In such case, banks required to pay the $5,750 fee and $1,150 investigation fee provided in Section 792 of Title 5, Delaware Code, will not be required to pay in addition the $6,000 fee otherwise required by Section 803(c) of Title 5, Delaware Code.

900 Regulations Governing Business of Banks and Trust Companies

901 Reporting of Reserves Against Deposits

5 Del. Admin. Code § 901 Reporting of Reserves Against Deposits

5 Del.C. §907

Formerly Regulation No.: 5.907.0001

Effective Date: June 22, 1995

1.0 Institutions subject to §907 which are not members of the Federal Reserve System shall maintain reserves against deposits as required by Regulation D of the Federal Reserve Board and in so doing shall meet the requirement of 5 Del.C. §907.

2.0 Reserves being held against deposits under this section need not be reported to the Commissioner except upon request of the Commissioner.

902 Loans to Affiliated Bidcos

5 Del. Admin. Code § 902 Loans to Affiliated Bidcos

5 Del.C. §909, §910

Formerly Regulation No.: 5.909/910.0002

Effective Date: February 15, 1993

1.0 A bank which lends to an affiliated Bidco or to a Bidco in which a bank has an interest shall:

1.1 Make loans to such Bidco on substantially the same basis as any other loan subject to the loan limitations imposed by 5 Del.C. §909.

1.2 A bank shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing on the condition or requirement:

1.2.1 that the Bidco obtain some additional credit, property, or service from such bank other than a loan, discount, deposit, or trust service;

1.2.2 that the Bidco provide some additional credit, property, or service from a bank holding company of such bank, or from any other subsidiary of such bank holding company;

1.2.3 that the Bidco not obtain some other credit, property, or service from a competitor of such bank, a bank holding company of such bank or any subsidiary of such bank holding company, other than a condition or requirement that such bank reasonably impose in a credit transaction to assure the soundness of the credit.

1.3 Bank investments in a Bidco are subject to investment limitations set forth in 5 Del.C. §910.

903 Mandatory Disclosure of Certain Information by Delaware Banks or Trust Companies Engaging in the Business of Insurance

5 Del. Admin. Code § 903 Mandatory Disclosure of Certain Information by Delaware Banks or Trust Companies Engaging in the Business of Insurance

5 Del.C. §929, §930, §930A

Formerly Regulation No.: 5.929/930/930A.0003

Effective Date: February 15, 1993

The Bank and Trust Company Insurance Act of 1989, (67 Del.Laws C. 223) requires banks and trust companies engaging in the business of insurance to disclose certain information to their customers. Such banks and trust companies acting as insurers and transacting the business of insurance pursuant to 5 Del.C. §761(a)(14) are generally bound by Title 18 of the Delaware Code. (See also Regulation 66 promulgated by the Department of Insurance, which governs the mandatory disclosure of certain information by such banks or trust companies.)

5 Del. Admin. Code § 903-1.0 Generally

1.1 All information required to be disclosed by this regulation shall be set out conspicuously and under appropriate captions of such prominence that it shall not be minimized, rendered obscure or presented in an ambiguous fashion or intermingled with the context of other information so as to be confusing or misleading.

5 Del. Admin. Code § 903-2.0 Specific Disclosures Required

2.1 Prohibitions on "Tying"

2.1.1 Any bank or trust company directly or indirectly engaging in the sale of insurance whether pursuant to the authority conferred by 5 Del.C. §761(a)(14) or otherwise, shall make written disclosure simultaneously with every application for any loan, credit, product or service to be purchased or obtained from such bank or trust company or any of its affiliates in conjunction with which the institution offers to sell, directly or through an affiliate, an insurance product, that the approval of such loan, credit, product or service may not be conditioned upon:

2.1.1.1 The agreement of applicant to obtain additional credits, products or services from such bank or trust company or from any company or person affiliated with such bank or trust company;

2.1.1.2 Applicant's agreement to provide additional credits, products or services to such bank or trust company or to any company or person affiliated with such bank or trust company; or

2.1.1.3 Applicant's agreement not to obtain other credits, products or services from any person or company that competes with such bank or trust company or with any company or person affiliated with such bank or trust company.

Such disclosure shall be in addition to any disclosures required by the applicable laws of other appropriate jurisdictions.

2.1.2 Any bank or trust company first authorized to transact the business of insurance in Delaware pursuant to 5 Del.C. §761(a)(14) and directly or indirectly engaging in the sale of insurance pursuant to such grant of authority shall make written disclosure, immediately following the disclosure required by section 2.1.1 of this regulation, in every application for any loan, credit, product or service (other than insurance) to be purchased or obtained from such bank or trust company or its insurance division or subsidiary that unless and until bank or trust company approves an application, neither it nor any person or company affiliated with it can accept an application from the applicant on application for any insurance policy which directly relates to the products or services for which the applicant has applied.

2.2 Cancellation Rights

2.2.1 Any bank or trust company first authorized to transact the business of insurance in Delaware pursuant to 5 Del.C. §761(a)(14), and directly or indirectly engaging in the sale of insurance pursuant to such grant of authority, must deliver copies of the following written notice form or its substantial equivalent to any "individual borrower" (as defined in 5 Del.C. §930(f)) who has purchased insurance from such bank or trust company or any subsidiary thereof under circumstances where the procurement of such insurance (whether from the bank or trust company or from any other source) is lawfully made an express condition of any extension of credit by such bank or trust company. Such notice form shall be delivered to the individual borrower not later than the date of delivery of the policy.

Notice of Insurance Cancellation Rights

1. You have purchased insurance from us for a total premium of $ per (mo/yr) in connection with an extension of credit.

2. You may cancel the insurance you have purchased from us at any time until midnight of the 30th day following our delivery of this notice and the accompanying cancellation form to you (the "Cancellation Period"). If you exercise your right to cancel the insurance within the Cancellation Period, you are entitled to a refund of some or all of the premium you have paid for such insurance, as follows:

a. If, within the first ten (10) days of the Cancellation Period, you exercise your right to cancel the insurance, we will unconditionally refund all of the premium you have paid.

b. If, at any time after the 10th day of the Cancellation Period and before the end of the Cancellation Period, you exercise your right to cancel the insurance you have purchased from us, we will, at your option:

(i) refund the unearned portion of the premium you have paid (as computed in accordance with applicable law); or

(ii) issue you a credit for the unearned portion of the premium you have paid, and, where we have financed the premium over time, with interest, issue you a credit for the unearned portion of the finance charge attributable to the insurance (as computed in accordance with your contract documents).

All refunds under this Paragraph 2.b. will be calculated as of the date of your cancellation of the insurance you have purchased from us. As set forth in Paragraph 3 of this notice, the date of your cancellation of this insurance depends upon the method you use to send the accompanying cancellation form to us.

3. You must exercise your right to cancel the insurance you have purchased from us by delivering the accompanying cancellation form to us (or our assignee) within the Cancellation Period. If you send the accompanying form to us by first class mail, postage prepaid, at the address shown on such form, the form will be considered to have been delivered to us (and your insurance will be considered to have been cancelled) when you mailed it. The postmark on the envelope in which the cancellation form is mailed to us will be conclusive evidence of the date on which you mailed it. IF THE CANCELLATION FORM IS SENT TO US BY ANY OTHER MEANS, IT WILL BE CONSIDERED TO HAVE BEEN DELIVERED WHEN ACTUALLY RECEIVED BY US, AND YOUR INSURANCE WILL BE CONSIDERED TO HAVE BEEN CANCELLED AT THAT TIME.

4. You have the right to choose the person or company through which you wish to obtain the insurance you have purchased from us. In other words, you do not have to purchase this insurance from us. During the Cancellation Period, you may obtain price quotations on the insurance you have purchased from us from other sources.

5. If the insurance you have purchased from us is against loss of, damage to, or liability arising out of ownership or use of property which you have pledged or otherwise used to secure an extension of credit from us or any of our affiliates, and that extension of credit was conditioned on your purchase of such insurance, you may not cancel such insurance as provided in this notice unless at the same time you deliver the accompanying cancellation form to us, you deliver evidence to us that you have obtained other adequate insurance against such risks. For reasonable cause, we may refuse to accept the insurance obtained by you.

6. You will not be subject to any fee cancellation charge, or penalty payment if you exercise your right to cancel the insurance you have purchased from us, as specified herein.

7. You may have rights in addition to those described above under the terms of your insurance policy or applicable State law.

The foregoing notice form must be delivered to an "individual borrower" only upon his initial purchase of insurance, and not upon his subsequent renewal of that insurance. In the absence of proof to the contrary, receipt of this notice by the "individual borrower" shall be deemed to have occurred ten (10) days after the date of mailing as established by an adequate record maintained by the insurance division or subsidiary.

Contemporaneously with the delivery of the notice form described in Paragraph 2.2.1 of this regulation, a bank or trust company described in such Paragraph shall deliver the following written cancellation form or its substantial equivalent to any "individual borrower" (as defined in 5 Del.C. §930(f)) who has purchased insurance from such bank or trust company or any subsidiary thereof under circumstances where the procurement of such insurance (whether from the bank or trust company or from any other source) is lawfully made an express condition of any extension of credit by such bank or trust company:

Cancellation Notice

The undersigned, pursuant to the provisions of 5 Del.C. §930, hereby cancels the purchase of insurance obtained from [insert name of insurance division or subsidiary], and requests a refund or credit of the premium paid for such insurance, as follows (check only one of the following 3 alternatives):

Unconditional Refund of Premium. YOU ARE ONLY ENTITLED TO SUCH A PREMIUM REFUND IF THIS CANCELLATION FORM IS DELIVERED TO (insert name of insurance subdivision or subsidiary) WITHIN THE FIRST TEN (10) DAYS OF THE CANCELLATION PERIOD (see Paragraph 2.a of the "Notice of Insurance Cancellation Rights" provided to you with this Cancellation Form).

Refund of Unearned Portion of Premium (see Paragraph 2.b.(i) of the "Notice of Insurance Cancellation Rights" provided to you with this Cancellation Form).

Credit of Unearned Portions of Premium and Applicable Finance Charges (see Paragraph 2.b.(ii) of the "Notice of Insurance Cancellation Rights" provided to you with this Cancellation Form).

If the insurance I am cancelling is against loss of, damage to, or liability arising out of the ownership of use or, property which I pledged or otherwise used to secure an extension of credit from [insert name of insurance division or subsidiary], I have enclosed with this Cancellation Form a certificate of insurance showing that I have obtained other adequate insurance against such risks, and I understand that [insert name of insurance division or subsidiary] has no obligation to honor this Cancellation Form if I have not enclosed such a certificate of insurance.

Purchaser Signature

Date of Signature

IMPORTANT NOTICE: THIS CANCELLATION FORM IS EFFECTIVE WHEN DELIVERED TO [insert name of insurance division or subsidiary] AT THE FOLLOWING ADDRESS;

[insert address]

IF THIS CANCELLATION FORM IS SENT BY FIRST‑CLASS MAIL, POSTAGE PREPAID, IT WILL BE DEEMED TO HAVE BEEN DELIVERED WHEN MAILED. THE POSTMARK ON THE ENVELOPE IN WHICH THIS FORM IS MAILED WILL BE CONCLUSIVE EVIDENCE OF THE DATE ON WHICH YOU MAILED IT. IF THE CANCELLATION FORM IS SENT BY ANY OTHER MEANS, IT WILL BE DEEMED TO HAVE BEEN DELIVERED WHEN RECEIVED BY [insert name of insurance division or subsidiary].

The foregoing cancellation form must be delivered to an "individual borrower" only upon his initial purchase of insurance, and not upon his subsequent renewal of that insurance. Such cancellation form may be appended to, incorporated in, or otherwise made a part of the notice form described in Paragraph 3.2.2.2 of this regulation.

2.3 Separation of Bank and Trust Company and its Insurance Operations

2.3.1 Any bank or trust company issuing policies of insurance, either directly or through an affiliate, shall make the following disclosure to all applicants for an insurance policy at the time of applicable or as soon thereafter as possible:

Payment of Any Insurance Policy is Controlled by Delaware Law

Delaware banks and trust companies are NOT liable for any insurance policies issued by their subsidiaries or divisions; such policies are not insured by the Federal Deposit Insurance Corporation.

If the subsidiary or division of a bank or trust company that has issued an insurance policy becomes insolvent or is otherwise unable to fulfill its obligations under that policy, the policyholder has no claim against the assets of the bank or trust company itself, but only against the assets of the issuing subsidiary or division.

904 Exceptions to Tying Restrictions

5 Del. Admin. Code § 904 Exceptions to Tying Restrictions

[5 Del.C. §929]

Effective Date: December 11, 2005

History

• 9 DE Reg. 1004 (12/01/05)

5 Del. Admin. Code § 904-1.0 Purpose.

This Regulation authorizes certain conduct as exceptions to the anti-tying restrictions of Section 929 of the State Banking Code (5 Del.C. §929), pursuant to Section 929(f). These exceptions are in addition to those elsewhere in Section 929.

History

• 9 DE Reg. 1004 (12/01/05)

5 Del. Admin. Code § 904-2.0 Exceptions to statute.

Subject to the limitations of paragraph 3.0 of this Regulation, a bank may:

2.1 Safe harbor for combined-balance discounts. Vary the consideration for any product or package of products based on a customer's maintaining a combined minimum balance in certain products specified by the bank (eligible products), if:

2.1.1 The bank offers deposits, and all such deposits are eligible products; and

2.1.2 Balances in deposits count at least as much as nondeposit products toward the minimum balance.

2.2 Safe harbor for foreign transactions. Engage in any transaction with a customer if that customer is:

2.2.1 A corporation, business, or other person (other than an individual) that:

2.2.1.1 Is incorporated, chartered, or otherwise organized outside the United States; and

2.2.1.2 Has its principal place of business outside the United States; or

2.2.2 An individual who is a citizen of a foreign country and is not resident in the United States.

History

• 9 DE Reg. 1004 (12/01/05)

5 Del. Admin. Code § 904-3.0 Limitations on exceptions.

Any exception authorized pursuant to this Regulation shall terminate upon a finding by the Commissioner that the arrangement is resulting in anti-competitive practices. The eligibility of a bank to operate under any exception authorized pursuant to this Regulation shall terminate upon a finding by the Commissioner that its exercise of this authority is resulting in anti-competitive practices.

History

• 9 DE Reg. 1004 (12/01/05)

905 Loan Limitations: Credit Exposure to Derivative Transactions

5 Del. Admin. Code § 905-1.0 Purpose

This regulation sets forth the rules for calculating the credit exposure arising from a derivative transaction entered into by a bank for purposes of determining the bank’s loan limitations pursuant to Section 909 of Title 5 of the Delaware Code.

History

• 17 DE Reg. 656 (12/01/13)
• 17 DE Reg. 656 (12/01/13)
• 16 DE Reg. 815 (02/01/13)
• 17 DE Reg. 656 (12/01/13)

5 Del. Admin. Code § 905-2.0 Definitions

The following words and terms, when used in this regulation, shall have the following meaning unless the context clearly indicates otherwise:

“Borrower” means a person who is named as a borrower or debtor in a loan or extension of credit, including a person to whom a bank has credit exposure arising from a derivative transaction.

“Contractual commitment to advance funds”:

a. Includes a bank’s obligation to:

1. Make payment (directly or indirectly) to a third person contingent upon default by a customer of the bank in performing an obligation and to make such payment in keeping with the agreed upon terms of the customer’s contract with the third person, or to make payments upon some other stated condition;

2. Guarantee or act as surety for the benefit of a person;

3. Advance funds under a qualifying commitment to lend, as defined for a national bank in 12 C.F.R. 32.2(t); and

4. Advance funds under a standby letter of credit as defined in 12 C.F.R. 32.2(dd), a put, or other similar arrangement.

b. The term does not include commercial letters of credit and similar instruments where the issuing bank expects the beneficiary to draw on the issuer, that do not guarantee payment, and that do not provide for payment in the event of a default by a third party.

“Credit derivative” means a financial contract executed under standard industry credit derivative documentation that allows one party (the protection purchaser) to transfer the credit risk of one or more exposures (reference exposure) to another party (the protection provider).

“Derivative transaction” includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.

“Effective margining arrangement” means a master legal agreement governing derivative transactions between a bank and a counterparty that requires the counterparty to post, on a daily basis, variation margin to fully collateralize that amount of the bank’s net credit exposure to the counterparty that exceeds $25 million created by the derivative transactions covered by the agreement.

“Eligible credit derivative” means a single-name credit derivative or a standard, non-tranched index credit derivative provided that:

a. The derivative contract meets the requirements of an eligible guarantee, as defined in this regulation, and has been confirmed by the protection purchaser and the protection provider;

b. Any assignment of the derivative contract has been confirmed by all relevant parties;

c. If the credit derivative is a credit default swap, the derivative contract includes the following credit events:

1. Failure to pay any amount due under the terms of the reference exposure, subject to any applicable minimal payment threshold that is consistent with standard market practice and with a grace period that is closely in line with the grace period of the reference exposure; and

2. Bankruptcy, insolvency, or inability of the obligor on the reference exposure to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due and similar events;

d. The terms and conditions dictating the manner in which the derivative contract is to be settled are incorporated into the contract;

e. If the derivative contract allows for cash settlement, the contract incorporates a robust valuation process to estimate loss with respect to the derivative reliably and specifies a reasonable period for obtaining post-credit event valuations of the reference exposure;

f. If the derivative contract requires the protection purchaser to transfer an exposure to the protection provider at settlement, the terms of at least one of the exposures that is permitted to be transferred under the contract provides that any required consent to transfer may not be unreasonably withheld; and

g. If the credit derivative is a credit default swap, the derivative contract clearly identifies the parties responsible for determining whether a credit event has occurred, specifies that this determination is not the sole responsibility of the protection provider, and gives the protection purchaser the right to notify the protection provider of the occurrence of a credit event.

“Eligible guarantee” means a guarantee that:

a. Is written and unconditional

b. Covers all or a pro rata portion of all contractual payments of the obligor on the reference exposure;

c. Gives the beneficiary a direct claim against the protection provider;

d. Is not unilaterally cancelable by the protection provider for reasons other than the breach of the contract by the beneficiary;

e. Is legally enforceable against the protection provider in a jurisdiction where the protection provider has sufficient assets against which a judgment may be attached and enforced;

f. Requires the protection provider to make payment to the beneficiary on the occurrence of a default (as defined in the guarantee) of the obligor on the reference exposure in a timely manner without the beneficiary first having to take legal actions to pursue the obligor for payment;

g. Does not increase the beneficiary’s cost of credit protection on the guarantee in response to deterioration in the credit quality of the reference exposure; and

h. Is not provided by an affiliate of the bank, unless the affiliate is an insured depository institution, bank, securities broker or dealer, or insurance company that:

1. Does not control the bank; and

2. Is subject to consolidated supervision and regulation comparable to that imposed on U.S. depository institutions, securities broker-dealers, or insurance companies (as the case may be).

“Eligible protection provider” means:

a. A sovereign entity (a central government, including the U.S. government; an agency; department; ministry; or central bank);

b. The Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Commission, or a multilateral development bank;

c. A Federal Home Loan Bank;

d. The Federal Agricultural Mortgage Corporation;

e. A depository institution, as defined in section 3 of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c);

f. A bank holding company, as defined in section 2 of the Bank Holding Company Act, as amended, 12 U.S.C. 1841;

g. A savings and loan holding company, as defined in section 10 of the Home Owners’ Loan Act, 12 U.S.C. 1467a;

h. A securities broker or dealer registered with the SEC under the Securities Exchange Act of 1934, 15 U.S.C. 78o et seq.;

i. An insurance company that is subject to the supervision of a State insurance regulator;

j. A foreign banking organization;

k. A non-U.S.-based securities firm or a non-U.S.-based insurance company that is subject to consolidated supervision and regulation comparable to that imposed on U.S. depository institutions, securities broker-dealers, or insurance companies; and

l. A qualifying central counterparty.

“Loans and extensions of credit”

a. Loans or extensions of credit, for purposes of Section 909 of Title 5 of the Delaware Code include any credit exposure, as determined pursuant to Section 3.0 of this regulation, arising from a derivative transaction, and also include a contractual commitment to advance funds.

b. The following items do not constitute loans or extensions of credit for purposes of Section 909 of Title 5 of the Delaware Code and this regulation:

1. Additional funds advanced for the benefit of a borrower by a bank for payment of taxes, insurance, utilities, security, and maintenance and operating expenses necessary to preserve the value of real property securing the loan, consistent with safe and sound banking practices, but only if the advance is for the protection of the bank’s interest in the collateral, and provided that such amounts must be treated as an extension of credit if a new loan or extension of credit is made to the borrower;

2. Accrued and discounted interest on an existing loan or extension of credit, including interest that has been capitalized from prior notes and interest that has been advanced under terms and conditions of a loan agreement;

3. Financed sales of a bank’s own assets, including Other Real Estate Owned, if the financing does not put the bank in a worse position than when the bank held title to the assets;

4. A renewal or restructuring of a loan as a new ‘‘loan or extension of credit,’’ following the exercise by a bank of reasonable efforts, consistent with safe and sound banking practices, to bring the loan into conformance with the lending limit, unless new funds are advanced by the bank to the borrower (except as permitted for national banks by 12 C.F.R. § 32.3(b)(5)), or a new borrower replaces the original borrower, or unless the Commissioner or the appropriate Federal banking agency determine that a renewal or restructuring was undertaken as a means to evade the bank’s lending limit;

5. Amounts paid against uncollected funds in the normal process of collection; and

6. A. That portion of a loan or extension of credit sold as a participation by a bank on a nonrecourse basis, provided that the participation results in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. Where a participation agreement provides that repayment must be applied first to the portions sold, a pro rata sharing will be deemed to exist only if the agreement also provides that, in the event of a default or comparable event defined in the agreement, participants must share in all subsequent repayments and collections in proportion to their percentage participation at the time of the occurrence of the event.

B. When an originating bank funds the entire loan, it must receive funding from the participants before the close of business of its next business day. If the participating portions are not received within that period, then the portions funded will be treated as a loan by the originating bank to the borrower. If the portions so attributed to the borrower exceed the originating bank’s lending limit, the loan may be treated as nonconforming subject to Section 5.0 of this regulation, rather than a violation, if:

i. The originating bank had a valid and unconditional participation agreement with a participant or participants that was sufficient to reduce the loan to within the originating bank’s lending limit;

ii. The participant reconfirmed its participation and the originating bank had no knowledge of any information that would permit the participant to withhold its participation; and

iii. The participation was to be funded by close of business of the originating bank’s next business day.

C. That portion of one or more loans or extensions of credit, not to exceed 10 percent of capital and surplus, with respect to which the bank has purchased protection in the form of a single-name credit derivative that meets the requirements of this regulation from an eligible protection provider if the reference obligor is the same legal entity as the borrower in the loan or extension of credit and the maturity of the protection purchased equals or exceeds the maturity of the loan or extension of credit.

“Qualifying master netting agreement” means any written, legally enforceable bilateral agreement, provided that:

a. The agreement creates a single legal obligation for all individual transactions covered by the agreement upon an event of default, including bankruptcy, insolvency, or similar proceeding, of the counterparty;

b. The agreement provides the bank the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set off collateral promptly upon an event of default, including upon an event of bankruptcy, insolvency, or similar proceeding, of the counterparty, provided that, in any such case, any exercise of rights under the agreement will not be stayed or avoided under applicable law in the relevant jurisdictions;

c. The bank has conducted sufficient legal review to conclude with a well-founded basis (and maintains sufficient written documentation of that legal review) that:

1. The agreement meets the requirements of paragraph (b) of this definition; and

2. In the event of a legal challenge (including one resulting from default or from bankruptcy, insolvency, or similar proceeding) the relevant court and administrative authorities would find the agreement to be legal, valid, binding, and enforceable under the law of the relevant jurisdictions;

d. The bank establishes and maintains procedures to monitor possible changes in relevant law and to ensure that the agreement continues to satisfy the requirements of this definition; and

e. The agreement does not contain a walkaway clause (that is, a provision that permits a non-defaulting counterparty to make a lower payment than it would make otherwise under the agreement, or no payment at all, to a defaulter or the estate of a defaulter, even if the defaulter or the estate of the defaulter is a net creditor under the agreement).

History

• 17 DE Reg. 656 (12/01/13)
• 17 DE Reg. 656 (12/01/13)
• 16 DE Reg. 815 (02/01/13)
• 17 DE Reg. 656 (12/01/13)

5 Del. Admin. Code § 905-3.0 Credit Exposure to Derivative Transactions.

3.1 Derivative transactions. For purposes of Section 909 of Title 5 of the Delaware Code, derivative transactions entered into by a bank shall be included for purposes of determining the bank’s loan limitations.

3.2 Non-credit derivatives. A bank shall calculate the credit exposure to a counterparty arising from a derivative transaction by one of the following methods. A bank shall use the same method for calculating counterparty credit exposure arising from all of its derivative transactions.

3.2.1 Model Method.

3.2.1.1 Credit exposure. The credit exposure of a derivative transaction under the Internal Model Method shall equal the sum of the current credit exposure of the derivative transaction and the potential future credit exposure of the derivative transaction.

3.2.1.2 Calculation of current credit exposure. A bank shall determine its current credit exposure by the mark-to-market value of the derivative contract. If the mark-to-market value is positive, then the current credit exposure equals that mark-to-market value. If the mark to market value is zero or negative, than the current credit exposure is zero.

3.2.1.3 Calculation of potential future credit exposure. A bank shall calculate its potential future credit exposure by using either:

3.2.1.3.1 An internal model the use of which has been approved in writing for purposes of 12 CFR part 3, Appendix C, Section 32(d), 12 CFR part 167, Appendix C, Section 32(d), or 12 CFR part 390, subpart Z, Appendix A, Section 32(d), as appropriate, provided that the bank provides prior written notice to the Commissioner and the appropriate Federal banking agency of its use for purposes of this section; or

3.2.1.3.2 Any other appropriate model the use of which has been approved in writing for purposes of this section by the Commissioner and the appropriate Federal banking agency.

Any substantive revisions to a model made after the bank or savings association has provided notice of the use of the model to its regulator or after the regulator has approved the use of the model must be approved by the [state and the] appropriate Federal banking agency before the bank may use the revised model.

3.2.1.4 Net credit exposure. A bank that calculates its credit exposure by using the Model Method pursuant to this paragraph may net credit exposures of derivative transactions arising under the same qualifying master netting agreement.

3.2.2 Conversion Factor Matrix Method. The credit exposure arising from a derivative transaction under the Conversion Factor Matrix Method shall equal and remain fixed at the potential future credit exposure of the derivative transaction which shall equal the product of the notional amount of the derivative transaction and a fixed multiplicative factor as determined at the execution of the transaction by reference to Table 1 below.

3.2.3 Current Exposure Method. The credit exposure arising from a derivative transaction (other than a credit derivative transaction) under the Current Exposure Method shall be calculated pursuant to 12 CFR part 3, Appendix C, Sections 32(c)(5), (6) and (7); 12 CFR part 167, Appendix C, Sections 32(c)(5), (6) and (7); or 12 CFR part 390, subpart Z, Appendix A, Sections 32(c)(5), (6) and (7), as appropriate.

3.3 Credit Derivatives.

3.3.1 Counterparty Exposure.

3.3.1.1 Notwithstanding Subsection 3.2 of this section, a bank that uses the Conversion Factor Matrix Method or Current Exposure Method, or that uses the Model Method without entering an effective margining arrangement, as defined in Section 2.0 of this regulation, shall calculate the counterparty credit exposure arising from credit derivatives entered by the bank by adding the net notional value of all protection purchased from the counterparty on each reference entity.

3.3.1.2 Special rule for certain effective margining arrangements. A bank must add the EMA threshold amount to the counterparty credit exposure arising from credit derivatives calculated under the Model Method. The EMA threshold is the amount under an effective margining arrangement with respect to which the counterparty is not required to post variation margin to fully collateralize the amount of the bank’s net credit exposure to the counterparty.

3.3.2 Reference Entity Exposure. A bank shall calculate the credit exposure to a reference entity arising from credit derivatives entered by the bank by adding the net notional value of all protection sold on the reference entity. However, the bank may reduce its exposure to a reference entity by the amount of any eligible credit derivative purchased on that reference entity from an eligible protection provider.

3.4 Special Rule for Central Counterparties. In addition to amounts calculated under previous sections of this rule, the measure of counterparty exposure to a central counterparty shall also include the sum of the initial margin posted by the bank, plus any contributions made by it to a guaranty fund at the time such contribution is made. However, this does not apply to a bank or saving association that uses an internal model pursuant to this regulation if such model reflects the initial margin and any contributions to a guaranty fund.

3.5 Mandatory use of a certain method. The Commissioner or the appropriate Federal banking agency may, in their discretion, require or permit a bank to use a specific method or methods set forth in this Section 3.0 to calculate the credit exposure arising from all derivative transactions or any specific, or category of, derivative transactions upon finding, in their discretion, that such method is consistent with the safety and soundness of the bank.

History

• 17 DE Reg. 656 (12/01/13)
• 17 DE Reg. 656 (12/01/13)
• 16 DE Reg. 815 (02/01/13)
• 17 DE Reg. 656 (12/01/13)

5 Del. Admin. Code § 905-4.0 Intraday credit exposures

Intraday credit exposures arising from a derivative transaction are not subject to the lending limits of Section 909 of Title 5 of the Delaware Code or this regulation.

History

• 17 DE Reg. 656 (12/01/13)
• 17 DE Reg. 656 (12/01/13)
• 16 DE Reg. 815 (02/01/13)
• 17 DE Reg. 656 (12/01/13)

5 Del. Admin. Code § 905-5.0 Nonconforming Loans and Extensions of Credit

A loan or extension of credit, within the bank’s legal lending limit when made, will not be deemed a violation, but will be treated as nonconforming, if the loan or extension of credit is no longer in conformity with the bank’s lending limit because, in the case of a credit exposure arising from a derivative transaction identified in Section 3.0 of this regulation and measured by the Model Method specified in Section 3.2.1 of this regulation, the credit exposure, subject to the lending limits of Section 909 of Title 5 of the Delaware Code or this regulation, increases after execution of the transaction. A bank must use reasonable efforts to bring a loan or extension of credit that is nonconforming as a result of this section into conformity with the bank’s lending limit unless to do so would be inconsistent with safe and sound banking practices.

History

• 17 DE Reg. 656 (12/01/13)
• 17 DE Reg. 656 (12/01/13)
• 16 DE Reg. 815 (02/01/13)
• 17 DE Reg. 656 (12/01/13)

1100 Taxation

1102 Regulations Governing the Organization, Chartering, Supervision, Operation and Authority of a Delaware Foreign Bank Limited Purpose Branch, a Delaware Foreign Bank Agency and a Delaware Foreign Bank Representative Office

5 Del. Admin. Code § 1102 Regulations Governing the Organization, Chartering, Supervision, Operation and Authority of a Delaware Foreign Bank Limited Purpose Branch, a Delaware Foreign Bank Agency and a Delaware Foreign Bank Representative Office

1100 Taxation

1102 Regulations Governing the Organization, Chartering, Supervision, Operation and Authority of a Delaware Foreign Bank Limited Purpose Branch, a Delaware Foreign Bank Agency and a Delaware Foreign Bank Representative Office

Formerly Regulation No.: 5.1403/1101.0003

Effective Date: August 13, 1998

1.0 Statement of Authority.

1.1 These regulations are promulgated pursuant to the authority vested in the Commissioner under the provisions of Chapter 14, Title 5, Delaware Code, including without limitation §1403 (relating to the foreign bank limited purpose branch or foreign bank agency application process); §1404(a)(2) (relating to the taking and maintenance of deposits by a foreign bank limited purpose branch or foreign bank agency); §1405 (maintenance of assets by a foreign bank limited purpose branch or foreign bank agency within Delaware); §1406(a) (relating to the making of written reports to the Commissioner by a foreign bank limited purpose branch or foreign bank agency); §1407 (relating to the rule-making power of the Commissioner generally); §1420 (relating to the licensing and operation of a foreign bank representative office); §1422(a) (relating to the application fee); and §1424(b) (relating to the fee which must accompany certain reports). The Commissioner is authorized to adopt appropriate regulations regarding the computation of tax liability of a foreign bank limited purpose branch or foreign bank agency or federal branch or agency located in Delaware pursuant to the provisions of §1101(a) of Title 5. Additionally, §121(b) authorizes the Commissioner to prescribe regulations to carry out the purposes of Title 5.

2.0 General Powers.

2.1 Foreign Bank Agency.

2.1.1 A "foreign bank agency", as defined in §101 of Title 5 of the Delaware Code, shall be entitled to engage within the State of Delaware in the general business of banking in the State of Delaware, subject, however, to the limitations set forth in 5 Del.C. §1404(a)(1). The deposit taking authority of such agency, in addition to the authority expressly granted under §1404, shall be co-extensive with the full authority which a federal agency operating in this State would have pursuant to the provisions of the International Banking Act of 1978 as amended.

2.2 Foreign Bank Limited Purpose Branch

2.2.1 A “foreign bank limited purpose branch”, as defined in §101 of Title 5 of the Delaware Code, shall be entitled to engage in all the activities of a foreign bank agency and, in addition, may accept such deposits as would be permissible for a corporation organized under §25A of the Federal Reserve Act (12 U.S.C. §611 et seq.).

2.3 Foreign Bank Representative Office.

2.3.1 A foreign bank representative office may conduct within the State of Delaware representative activities intended to promote banking services offered by and originating from an office or offices of the foreign bank located outside the State of Delaware. A foreign bank representative office is prohibited from either offering or contracting for any product or service within the State of Delaware which would constitute the doing of a general banking business in Delaware.

3.0 General Regulations

3.1 Application Fees.

3.1.1 A foreign bank shall apply for a certificate of authority for a foreign bank limited purpose branch or foreign bank agency on such forms and in such manner as the Commissioner shall from time to time prescribe. The application shall be accompanied by a filing fee in the amount of $2,000.00 for the use of the State made payable to the State of Delaware.

3.1.2 A foreign bank shall apply for a license to establish a representative office on such forms and in such manner as the Commissioner shall from time to time prescribe. The application shall be accompanied by a license fee of $500.00 and a processing fee of $500.00 made payable to the State of Delaware.

3.2 Records.

3.2.1 In addition to such records as the Commissioner may from time to time require with respect to the computation of tax liability of a foreign bank limited purpose branch or foreign bank agency, each foreign bank limited purpose branch, foreign bank agency and foreign bank representative office shall maintain at its place of business in Delaware in the English language and in United States dollar equivalents a correct and complete set of books and records of account of all business transacted by such office.

3.3 Reports.

3.3.1 Whenever the Commissioner shall require, the foreign bank limited purpose branch or foreign bank agency shall make a written report in the English language and in United States dollar equivalents in such form as he shall from time to time prescribe and verified by a duly authorized executive officer of the foreign bank limited purpose branch or foreign bank agency. Such report shall show the actual financial condition of the business of the foreign bank limited purpose branch or foreign bank agency in the State of Delaware at the close of any past day designated by the Commissioner. The verification of such Report shall state that the person making it on behalf of the foreign bank limited purpose branch or foreign bank agency solemnly swears or affirms that the information set forth therein is a true and correct statement of the condition of the Delaware foreign bank limited purpose branch or foreign bank agency to the best of his knowledge, information and belief.

3.3.1.1 Additionally, the Commissioner may from time to time request from a foreign bank limited purpose branch or foreign bank agency a copy of any report of condition or the like filed by the foreign bank of which the foreign bank limited purpose branch or foreign bank agency is a part with any other State, the Federal Deposit Insurance Corporation, or the Federal Reserve Board.

3.3.2 Every licensed foreign bank representative office shall file annually a written report of activities conducted during the previous twelve-month period, in the English language and in United States dollar equivalents in such form as the Commissioner shall prescribe. Said report shall be accompanied by a $500.00 fee.

3.4 Maintenance of Assets in Delaware; Separate Assets.

3.4.1 A foreign bank limited purpose branch or foreign bank agency shall maintain within the State of Delaware currency, real estate (at net book value or appraised value, whichever is less), precious metals (to the extent of 75% of market value), bonds, notes, debentures, drafts, bills of exchange or other evidence of indebtedness, including loan participation agreements or certificates, or other obligations payable in the United States or in United States funds, or, with the prior approval of the Commissioner, in funds freely convertible into United States funds, or also with the prior approval of the Commissioner, such other assets as the Commissioner may permit, in an amount which shall be equal to one hundred percent (100%) of the liabilities of the foreign bank of which the foreign bank limited purpose branch or foreign bank agency is a part which are payable at or through the foreign bank limited purpose branch or foreign bank agency, including acceptances, but excluding (without duplication) (1) accrued expenses, (2) amounts due and other liabilities to other offices, agencies or branches of, and wholly-owned (except for a nominal number of directors' shares) subsidiaries of, such foreign bank, (3) liabilities maintained on the books of an international banking facility located at such foreign bank limited purpose branch or foreign bank agency, and (4) such other liabilities as the Commissioner shall determine. The valuation of securities shall be in the manner provided in §1405. Each foreign bank limited purpose branch or foreign bank agency shall keep the assets of its business in this State separate and apart from the assets of its business outside this State.

3.5 Deposit of Assets.

3.5.1 The Commissioner may by order direct a foreign bank limited purpose branch or foreign bank agency to deposit all or a portion of the assets which the foreign bank limited purpose branch or foreign bank agency is required to maintain in this State with such banks or trust companies or national banks located in this State as the Commissioner may from time to time designate where the Commissioner finds such order necessary or desirable for the maintenance of the sound financial condition of the foreign bank limited purpose branch or foreign bank agency, the protection of depositors, creditors and the public interest, and the maintenance of public confidence in the business of a foreign bank limited purpose branch or foreign bank agency.

3.5.2 Where deposits constituting liabilities for purposes of section 3.4 are fully insured by the Federal Deposit Insurance Corporation, such deposits shall be excluded from the definition of liabilities for the purpose of determining the amount of assets which must be maintained by the foreign bank limited purpose branch or foreign bank agency within the State of Delaware.

4.0 Revocation of Certificate of Authority or License.

4.1 Revocation of Foreign Bank Limited Purpose Branch or Foreign Bank Agency Certificate of Authority.

4.1.1 Determination of Cause.

4.1.1.1 Whenever the Commissioner shall have cause to believe that a foreign bank limited purpose branch or foreign bank agency has engaged in conduct which, pursuant to Section 1410, would constitute cause for the revocation of the certificate of authority of such foreign bank limited purpose branch or foreign bank agency, he shall notify such foreign bank limited purpose branch or foreign bank agency in writing of the alleged violation, and, by means of informal fact-finding, determine whether an order should be issued directing such foreign bank limited purpose branch or foreign bank agency to cease and desist from the conduct giving rise to the violation by a date certain.

4.1.2 Violation of Order.

4.1.2.1 If the Commissioner shall determine that a foreign bank limited purpose branch or foreign bank agency which is the subject of a cease and desist order has not, within the time established, discontinued or rectified the conduct which was the subject of the violation order, he shall give written notice in the manner provided by the provisions of 29 Del.C. §10122 to the foreign bank limited purpose branch or foreign bank agency of the date, time and place of a formal hearing at which the foreign bank limited purpose branch or foreign bank agency shall appear and show cause why its certificate of authority should not be revoked. In addition to witnesses appearing on behalf of the foreign bank limited purpose branch or foreign bank agency, the Commissioner shall, by either informal or formal fact finding, take such testimony and gather such evidence as he deems necessary and appropriate in reaching a decision. Within thirty (30) days following the adjournment of such hearing, the Commissioner shall issue his findings and order revoking the certificate of authority, imposing a lesser sanction, or determining that the order to show cause should be retired without action. The foreign bank limited purpose branch or foreign bank agency shall have such right of appeal from such findings and order as is provided for in Subchapter V of Chapter 101, Title 29, Delaware Code.

4.2 Revocation of Foreign Bank Representative Office License.

4.2.1 Upon a preliminary determination by the Commissioner that a foreign bank representative office may have engaged in conduct which would constitute cause for the revocation of the license of such foreign bank representative office under the provisions of §1425, he shall give notice in writing to such foreign bank representative office setting forth the alleged violation, and directing such foreign bank representative office to appear at a place, on a date and at a time certain to show cause why its license should not be revoked. At such hearing, the foreign bank representative office shall be accorded the right to appear and be heard. The Commissioner shall, by either informal or formal fact finding and within thirty (30) days from the adjournment of such hearing, issue findings and order directing the revocation of the license of the foreign bank representative office, some lesser sanction, or the retirement of the notice to show cause without action. The foreign bank representative office shall have such rights of appeal from such findings and order as are provided in Subchapter V of Chapter 101, Title 29, Delaware Code.

5.0 Allocation of Income and Expenses for Purposes of Determining Delaware Tax Liability of Foreign Bank Limited Purpose Branch or Foreign Bank Agency.

5.1 Method of Allocation.

5.1.1 Although technically a part of the foreign bank, a Delaware foreign bank limited purpose branch or foreign bank agency is to be treated for purposes of assessing and collecting the Delaware Bank Franchise Tax on taxable income (5 Del. C. §1101 et seq.) as if it were a bank having separate corporate existence (§1101(a)). To that end, and in order to derive the amount of "net operating income before taxes" for purposes of §1101(a), a foreign bank limited purpose branch or foreign bank agency shall maintain at all times separate books of account in its Delaware office which fully segregate and portray:

5.1.1.1 With respect to income:

5.1.1.1.1 all receipts directly attributable to an asset carried on the books of the foreign bank limited purpose branch or foreign bank agency; and

5.1.1.1.2 all receipts arising from a transaction entered into or a service provided by the foreign bank limited purpose branch or foreign bank agency within the State of Delaware;

5.1.1.1.3 provided, that the foreign bank limited purpose branch or foreign bank agency may exclude from its accounting of income otherwise properly allocated to Delaware such receipts as are directly or indirectly subject to taxation in any state other than Delaware by reason of either: (1) the existence of a taxable nexus under the laws of any such state between such state and the transaction of service giving rise to such receipts; or (2) the required inclusion under the laws of any such state of such receipts in the numerator of a receipts factor of a formula used to calculate the income of the foreign bank subject to tax in such state.

5.1.1.2 With respect to expenses:

5.1.1.2.1 all costs directly incurred in the start up, maintenance and operation of the Delaware office;

5.1.1.2.2 all other costs attributable to the generation of income allocated to Delaware pursuant to subsection 5.1.1.1 above; and

5.1.1.2.3 to the extent not included in paragraph 5.1.1.2.1 and 5.1.1.2.2 of this subsection 5.1.1.2 above, an aliquot portion of indirect costs incurred by the foreign bank (in both the United States and the home country) with respect to the start up, maintenance and operation of the foreign bank limited purpose branch or foreign bank agency.

Costs under subparagraphs 5.1.1.2.2 and 5.1.1.2.3 of subsection 5.1.1.2 shall be allocated to Delaware in the same ratio as the gross receipts of the foreign bank are allocated to Delaware, or in such other fair, equitable and consistent manner as the Commissioner shall, upon request of a foreign bank limited purpose branch or foreign bank agency, approve.

5.2 Commissioner's Right of Examination

5.2.1 The Commissioner shall have the right from time to time to examine the books and records of a foreign bank limited purpose branch or foreign bank agency for the purpose of determining whether all or any portion of the income of the foreign bank limited purpose branch or foreign bank agency has been properly allocated to Delaware, and to issue such findings and orders as he deems necessary and appropriate regarding the reallocation of income which he shall find to have been improperly allocated to a state or states other than Delaware.

6.0 Change of Location, Name or Business.

6.1 A foreign bank limited purpose branch or foreign bank agency may, pursuant to the provisions of §1408, make written request of the Commissioner to change its place of business (accompanied by a filing fee of $500.00) or to change its corporate name for the duration of its corporate existence (no filing fee required). Upon the receipt of such application, the Commissioner shall grant such application within twenty (20) days thereof unless he shall have determined by informal fact finding or otherwise that there exists cause for denying such application. If the Commissioner should determine that facts or circumstances exist constituting cause for denying such application, he shall provide notice and opportunity to be heard to the applicant foreign bank limited purpose branch or foreign bank agency in the manner provided for under the provisions of 29 Del.C. §10123. Not less than thirty (30) days after the adjournment of such hearing, the Commissioner shall issue his final order and findings with respect to the grant or denial of the requested change of location or change of name. An applicant foreign bank limited purpose branch or foreign bank agency aggrieved by the determination of the Commissioner shall have such right of appeal as is granted pursuant to the provisions of Subchapter V, Chapter 101, Title 29, Delaware Code.

2 DE Reg. 312 (08/01/98)

1103 Instructions for Preparation of Franchise Tax

5 Del. Admin. Code § 1103 Instructions for Preparation of Franchise Tax

5 Del.C. Ch. 11

Effective Date: September 12, 2019

1.0 This regulation applies to banking organizations and trust companies, other than resulting branches in this State of out-of-state banks or federal savings banks not headquartered in this state but maintaining branches in this State. The estimated and final franchise tax reports that accompany this regulation are found in regulations 1104 and 1105, respectively. Regulations 1106, 1107 and 1108 are applicable to federal savings banks not headquartered in this State but maintaining branches in this State. Regulations 1110, 1111 and 1112 are applicable to resulting branches in this State of out-of-state banks.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

5 Del. Admin. Code § 1103-2.0 Definitions

“Bank” means every bank and every corporation conducting a banking business of any kind or plan whose principal place of business is in this State, except a national bank.

“Banking organization” means:

“International Banking Facility” means a set of asset and liability accounts, segregated on the books of a banking organization, that includes only international banking facility deposits, borrowings and extensions of credit.

“International Banking Transaction” shall mean any of the following transactions, whether engaged in by a banking organization, any foreign branch thereof (established pursuant to 5 Del.C. §771 or federal law) or any subsidiary corporation directly or indirectly owned by any banking organization:

“National Bank” means a banking association organized under the authority of the United States and having a principal place of business in this State.

“Net Operating Income Before Taxes” means the total net interest income plus total non-interest income, minus provision for loan and lease losses, provision for allocated transfer risk, and total non-interest expense, and adjustments made for securities gains or losses and other appropriate adjustments.

“Out-of-State Bank” has the same meaning as in §795 of Title 5 of the Delaware Code, which is (i) a State bank, as defined in the Federal Deposit Insurance Act, as amended, at 12 U.S.C. §1813(a), that is not chartered under Delaware law, or (ii) a national bank association created under the National Bank Act (12 U.S.C. §21 et seq.) whose organization certificate identifies an address outside Delaware as the place at which its discount and deposit operations are to be carried out.

“Resulting Branch In This State Of An Out-of-State Bank” has the same meaning as in §1101(a) of Title 5 of the Delaware Code, which is a branch office in this State of an out-of-state bank resulting from a merger as provided in Subchapter VII of Chapter 7 of Title 5 of the Delaware Code, and, in addition, a branch office in this State of an out-of-state bank.

“Securities Business” means to engage in the sale, distribution and underwriting of, and deal in, stocks, bonds, debentures, notes or other securities. For purposes of this regulation and Title 5, Section 1101(a)(1)b, a subsidiary that is a bank or insured institution, as those terms are defined in the federal Bank Holding Company Act, 12 USC 1841, is not considered to be “engaged in the sale, distribution or underwriting of, or dealing in, securities”.

“Trust Company” means a trust company or corporation doing a trust company business which has a principal place of business in this State.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

5 Del. Admin. Code § 1103-3.0 Estimated Franchise Tax

3.1 A banking organization or trust company whose franchise tax liability for the current year is estimated to exceed $10,000 shall file an estimated franchise tax report with the State Bank Commissioner and pay estimated franchise tax.

3.2 Filing. The estimated franchise tax report shall be filed with the State Bank Commissioner on the first day of March of the current year.

3.3 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the estimated franchise tax report required above in subsection 3.2, unless the State Bank Commissioner is satisfied that such failure was not willful.

3.4 Form. The estimated franchise tax report shall be in the form set out in Regulation 1104.

3.5 Calculation of estimated tax. The total estimated annual franchise tax shall be calculated as follows:

3.5.1 The estimated net operating income before taxes, which includes the income of any corporation making an election as provided in Regulation No. 1101;

3.5.2 Adjusted for any estimated income from an insurance division or subsidiary;

3.5.3 Less any deductions set forth in 5 Del.C. §1101;

3.5.4 Multiplied by .56 to arrive at estimated taxable income;

3.5.5 The appropriate rate of taxation set forth in 5 Del.C. §1105 shall be applied;

3.5.6 The subtotal estimated annual franchise tax shall be adjusted for tax credits applicable pursuant to 5 Del.C. §1105, which are calculated in accordance with Regulation No. 1109;

3.5.7 The subtotal estimated annual franchise tax shall be adjusted for Travelink tax credits calculated in accordance with Department of Transportation Travelink tax credit reporting requirements;

3.5.8 The subtotal estimated annual franchise tax shall be adjusted for Historic Preservation Tax Credits calculated in accordance with 30 Del.C. §§1811 et seq. and the regulations thereunder. Claimed credits must be accompanied by a Certificate of Completion issued by the Delaware State Historic Preservation Office certifying that the credits have been properly earned, in accordance with 5 Del.C. §1105(g). If the credits have been transferred, sold or assigned to the taxpayer by another person, a Certificate of Transfer must also be attached, in accordance with 30 Del.C. §1814(c);

3.5.9 The subtotal estimated annual franchise tax shall be adjusted for any other applicable tax credit(s) [attach supporting schedule identifying the tax credit(s)].

3.6 Payment of estimated tax. The estimated tax liability shall be due and payable as follows:

3.6.1 40% due on or before June 1 of the current taxable year;

3.6.2 20% due on or before September 1 of the current taxable year;

3.6.3 20% due on or before December 1 of the current taxable year.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

5 Del. Admin. Code § 1103-4.0 Final Franchise Tax

4.1 Filing. The December 31 call report, verified by oath, setting forth the net operating income of the banking organization and the final franchise tax report, setting forth the "taxable income" of the banking organization or trust company, shall be filed with the Office of the State Bank Commissioner on or before January 30 each year; provided, however, that a banking organization may file the December 31 call report and the final franchise tax report with the Office of the State Bank Commissioner on or before any later date allowed by the Federal Financial Institutions Examination Council guidelines for filing its Report of Condition and Income, except as otherwise required by 5 Del.C. §904.

4.2 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the final franchise tax report required above in subsection 4.1, unless the State Bank Commissioner is satisfied that such failure was not willful.

4.3 Form. The final franchise tax report shall be in the form set out in Regulation No. 1105.

4.4 Calculation of final tax. The total final franchise tax shall be calculated as follows:

4.4.1 The net operating income before taxes, which includes the income of any corporation making an election as provided in Regulation No. 1101;

4.4.2 Adjusted for any income from an insurance division or subsidiary; (include a report of income showing the name and federal employer identification number of the division or subsidiary);

4.4.3 Less any deduction set forth in 5 Del.C. §1101; (include a report of income showing the name and federal employer identification number of each subsidiary taken as a deduction);

4.4.4 Multiplied by .56 to arrive at “taxable income”;

4.4.5 The appropriate rate of taxation set forth in 5 Del.C. §1105 shall be applied to the taxable income to arrive at subtotal annual franchise tax;

4.4.6 The subtotal annual franchise tax shall be adjusted for tax credits applicable pursuant to 5 Del.C. §1105, which are calculated in accordance with Regulation No. 1109;

4.4.7 The subtotal annual franchise tax shall be adjusted for Travelink tax credits calculated in accordance with Department of Transportation Travelink tax credit reporting requirements;

4.4.8 The subtotal annual franchise tax shall be adjusted for Historic Preservation Tax Credits calculated in accordance with 30 Del.C. §§1811 et seq. and the regulations thereunder. Claimed credits must be accompanied by a Certificate of Completion issued by the Delaware State Historic Preservation Office certifying that the credits have been properly earned, in accordance with 5 Del.C. §1105(g). If the credits have been transferred, sold or assigned to the taxpayer by another person, a Certificate of Transfer must also be attached, in accordance with 30 Del.C. §1814(c);

4.4.9 The subtotal annual franchise tax shall be adjusted for any other applicable tax credit(s) [attach supporting schedule identifying the tax credit(s)].

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

5 Del. Admin. Code § 1103-5.0 Payment of Final Franchise Tax

5.1 Taxes owed for the previous calendar year are due and payable on or before March 1 of the following year. Checks or other forms of payment should be made payable to the State of Delaware and directed to the Office of the State Bank Commissioner.

5.2 The amount due and payable on or before March 1 for the previous calendar year shall be the final franchise tax, less any estimated tax payments made for the taxable year, plus any additional tax due to underpayment of estimated franchise tax or installment. If the final franchise tax is not paid by March 1, a penalty for late payment of the final franchise tax shall be assessed.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

5 Del. Admin. Code § 1103-6.0 Additional Tax Due to Underpayment of Estimated Franchise Tax or Installment

6.1 In the case of any underpayment of estimated franchise tax or installment of estimated tax required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax for the taxable year an amount determined at the rate of 0.05 percent per day upon the amount of the underpayment for the period of the underpayment. The amount of the underpayment shall be the excess of:

6.1.1 The amount of the estimated franchise tax or installment payment which would be required to be made if the estimated tax were equal to 80 percent of the tax shown on the final return for the taxable year, or if no return were filed, 80 percent of the tax for such year, over;

6.1.2 The amount, if any, of the estimated tax or installment paid on or before the last date prescribed for payment.

6.2 The period of the underpayment shall run from the date the estimated franchise tax or installment was required to be paid to the earlier of the date when such estimated tax or installment is paid or the date of the final payment of tax for the year.

6.3 Notwithstanding the above, the addition to the tax with respect to any underpayment of estimated franchise tax or any installment shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment thereof equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax were the tax shown on the final return of the banking organization or trust company for the preceding taxable year.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

5 Del. Admin. Code § 1103-7.0 Penalty - Late Payment of Final Franchise Tax

7.1 In the case of a late payment of final franchise tax as required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax a penalty in an amount determined at the rate of 0.05 percent per day until required payment is made.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

5 Del. Admin. Code § 1103-8.0 Election to be listed as a "Subsidiary Corporation"

8.1 Any corporation which has elected to be treated as a "subsidiary corporation" of a banking organization or trust company pursuant to §1101(f) and filed with the State Bank Commissioner the required election form in accordance with Commissioner's Regulation No. 1101 shall provide (a) a tentative report of income for the electing corporation covering estimated bank franchise tax liability for the current income year to be submitted in conjunction with the estimated franchise tax report due March 1 for a banking organization or trust company whose franchise tax liability for the current year is estimated to exceed $10,000, and (b) a report of income for the electing corporation as of December 31 of each year to be submitted in conjunction with the final franchise tax report due January 30 or any later date allowed as provided in subsection 4.1 above.

8.2 As long as the election remains in effect, the ownership and employment tests must be met. Therefore, the election form in Regulation No. 1101 must be completed each year for each Electing Corporation and submitted with the final franchise tax report.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 236 (09/01/19)

1104 Estimated Franchise Tax Report

5 Del. Admin. Code § 1104 Estimated Franchise Tax Report

5 Del.C. Ch. 11

Effective Date: February 11, 2017

1.0 This report shall be completed by any banking organization (other than a resulting branch in this State of an out-of-state bank, as defined in §1101(a) of Title 5 of the Delaware Code) or trust company with an estimated tax liability in excess of $10,000 in a given year. The completed report is to be filed in the Office of the State Bank Commissioner on or before March 1 of the current year. Instructions for the preparation of this report are found in Regulation 1103.

1104A.pdf Estimated Franchise Tax Report

History

• 5 DE Reg. 652 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

1105 Final Franchise Tax Report

5 Del. Admin. Code § 1105 Final Franchise Tax Report

5 Del.C. Ch. 11

Effective Date: February 11, 2017

This report shall be completed by all banking organizations (other than resulting branches in this State of out-of-state banks, as defined in §1101(a) of Title 5 of the Delaware Code) and trust companies and submitted to the Office of the State Bank Commissioner on or before January 30; provided, however, that a banking organization may submit this report to the Office of the State Bank Commissioner on or before any later date allowed by the Federal Financial Institutions Examination Council guidelines for filing its Report of Condition and Income. Income reported is for the previous calendar year. Instructions for the preparation of this report are found in Regulation 1103.

1105A.pdf Final Franchise Tax Report

History

• 5 DE Reg. 654 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

1106 Instructions for Preparation of Franchise Tax for Federal Savings Banks Not Headquartered in this State but Maintaining Branches in this State

5 Del. Admin. Code § 1106 Instructions for Preparation of Franchise Tax for Federal Savings Banks Not Headquartered in this State but Maintaining Branches in this State

5 Del.C. Ch. 11

Effective Date: February 11, 2017

1.0 This regulation applies only to federal savings banks not headquartered in this State but maintaining branches in this State. The estimated and final franchise tax reports that accompany this regulation are found in regulations 1107 and 1108, respectively.

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1106-2.0 Definitions

“Net Operating Income Before Taxes” means the total net income calculated in accordance with Section 8.0 of this Regulation, with adjustments made for securities gains or losses and other appropriate adjustments.

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1106-3.0 Estimated Franchise Tax

3.1 A federal savings bank not headquartered in this State whose franchise tax liability for the current year is anticipated to exceed $10,000 shall file an estimated franchise tax report with the State Bank Commissioner and pay estimated franchise tax.

3.2 Filing. The estimated franchise tax report shall be filed with the State Bank Commissioner on the first day of March of the current year.

3.3 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the estimated franchise tax report required above in subsection 3.2, unless the State Bank Commissioner is satisfied that such failure was not willful.

3.4 Form. The estimated franchise tax report shall be in the form set out in Regulation No. 1107.

3.5 Calculation of estimated tax. The total estimated annual franchise tax shall be calculated as follows:

3.5.1 The estimated net operating income before taxes of the branch or branches located in Delaware;

3.5.2 Less the estimated interest income from obligations of volunteer fire companies;

3.5.3 The appropriate rate of taxation set forth in 5 Del.C. §1105 shall be applied;

3.5.4 The subtotal estimated annual franchise tax shall be adjusted for tax credits applicable pursuant to 5 Del.C. §1105, which are calculated in accordance with Regulation No. 1109;

3.5.5 The subtotal estimated annual franchise tax shall be adjusted for Travelink tax credits calculated in accordance with Department of Transportation Travelink tax credit reporting requirements;

3.5.6 The subtotal estimated annual franchise tax shall be adjusted for Historic Preservation Tax Credits calculated in accordance with 30 Del.C. §§1181 et seq. and the regulations thereunder. Claimed credits must be accompanied by a Certificate of Completion issued by the Delaware State Historic Preservation Office certifying that the credits have been properly earned, in accordance with 5 Del.C. §1105(g). If the credits have been transferred, sold or assigned to the taxpayer by another person, a Certificate of Transfer must also be attached, in accordance with 30 Del.C. §1814(c);

3.5.7 The subtotal estimated annual franchise tax shall be adjusted for any other applicable tax credit(s) [attach supporting schedule identifying the tax credit(s).

3.6 Payment of estimated tax. The estimated tax liability shall be due and payable as follows:

3.6.1 40% due on or before June 1 of the current year;

3.6.2 20% due on or before September 1 of the current year;

3.6.3 20% due on or before December 1 of the current year.

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1106-4.0 Final Franchise Tax

4.1 Filing. The December 31 call report, verified by oath, setting forth the net operating income of the Delaware branch or branches of the federal savings bank not headquartered in this State and the final franchise tax report shall be filed with the Office of the State Bank Commissioner on or before January 30 each year.

4.2 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the final franchise tax report required above in section 4.1, unless the State Bank Commissioner is satisfied that such failure was not willful.

4.3 Form. The final franchise tax report shall be in the form set out in Regulation No. 1108.

4.4 Calculation of final tax. The total final franchise tax shall be calculated as follows:

4.4.1 The net operating income before taxes of the branch or branches located in Delaware;

4.4.2 Less the interest income from obligations of volunteer fire companies;

4.4.3 The appropriate rate of taxation set forth in 5 Del.C. §1105 shall be applied;

4.4.4 The subtotal annual franchise tax shall be adjusted for tax credits applicable pursuant to 5 Del.C. §1105, which are calculated in accordance with Regulation No. 1109;

4.4.5 The subtotal annual franchise tax shall be adjusted for Travelink tax credits calculated in accordance with Department of Transportation Travelink tax credit reporting requirements;

4.4.6 The subtotal annual franchise tax shall be adjusted for Historic Preservation Tax Credits calculated in accordance with 30 Del.C. §§1811 et seq. and the regulations thereunder. Claimed credits must be accompanied by a Certificate of Completion issued by the Delaware State Historic Preservation Office certifying that the credits have been properly earned, in accordance with 5 Del.C. §1105(g). If the credits have been transferred, sold or assigned to the taxpayer by another person, a Certificate of Transfer must also be attached, in accordance with 30 Del.C. §1814(c);

4.4.7 The subtotal annual franchise tax shall be adjusted for any other applicable tax credit(s) [attach supporting schedule identifying the tax credit(s)].

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1106-5.0 Payment of Final Franchise Tax

5.1 Taxes owed for the previous calendar year are due and payable on or before March 1 of the following year. Checks or other forms of payment should be made payable to the State of Delaware and directed to the Office of the State Bank Commissioner.

5.2 The amount due and payable on or before March 1 for the previous calendar year shall be the final franchise tax, less any estimated tax payments made for the taxable year, plus any additional tax due to underpayment of estimated franchise tax or installment. If the final franchise tax is not paid by March 1, a penalty for late payment of the final franchise tax shall be assessed.

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1106-6.0 Additional Tax Due to Underpayment of Estimated Franchise Tax or Installment

6.1 In the case of any underpayment of estimated franchise tax or installment of estimated franchise tax required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax for the taxable year an amount determined at the rate of 0.05 percent per day upon the amount of the underpayment for the period of the underpayment. The amount of the underpayment shall be the excess of:

6.1.1 The amount of the estimated franchise tax or installment payment which would be required to be made if the estimated tax were equal to 80 percent of the tax shown on the final return for the taxable year, or if no return were filed, 80 percent of the tax for such year, over;

6.1.2 The amount, if any, of the estimated tax or installment paid on or before the last date prescribed for payment.

6.2 The period of the underpayment shall run from the date the estimated franchise tax or installment was required to be paid to the earlier of the date when such estimated tax or installment is paid or the date of the final payment of tax for the year.

6.3 Notwithstanding the above, the addition to the tax with respect to any underpayment of estimated franchise tax or any installment shall not be imposed if the total amount of all payments of estimated tax made on or before the last date for the payment thereof equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax were the tax shown on the final return of the federal savings bank not headquartered in this State for the preceding taxable year.

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1106-7.0 Penalty - Late Payment of Estimated Franchise Tax or Installment or Final Franchise Tax

7.1 In the case of a late payment of final franchise tax as required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax a penalty in an amount determined at the rate of 0.05 percent per day until required payment is made.

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1106-8.0 Separate Accounting by Delaware Branches

8.1 Books and Records. Each branch in this State of a federal savings bank not headquartered in this State must keep a separate set of books and records as if it were an entity separate from the rest of the federal savings bank that operates such Delaware branch. These books and records must reflect the following items attributable to the Delaware branch:

8.1.1 Assets and the credit equivalent amounts of offbalance sheet items used in computing the riskbased capital ratio under 12 C.F.R. part 567;

8.1.2 Liabilities;

8.1.3 Income and gain;

8.1.4 Expense and loss.

8.2 Consolidation of Delaware Branches. If a federal savings bank not headquartered in this State operates more than one Delaware branch, it may treat all Delaware branches as a single separate entity for purposes of computing the assets, liabilities, income, gain, expense, and loss referred to above.

8.3 Determining Assets Attributable to a Delaware Branch

8.3.1 General Principle of Asset Attribution. The general principle will be to attribute assets to a Delaware branch if personnel at the Delaware branch actively and materially participate in the solicitation, investigation, negotiation, approval, or administration of an asset.

8.3.2 Loans and Finance Leases. These assets will be attributed to a Delaware branch if personnel at the Delaware branch actively and materially participated in the solicitation, investigation, negotiation, final approval, or administration of a loan or financing lease. Loans include all types of loans, including credit and travel card accounts receivable.

8.3.3 Stocks and Debt Securities. These assets will be attributed to a Delaware branch if personnel at the Delaware branch actively and materially participated in the acquisition of such assets.

8.3.4 Foreign Exchange Contracts and Futures Options, Swaps, and Similar Assets. These assets will be attributed to a Delaware branch if personnel at the Delaware branch actively and materially participated in the solicitation, investigation, negotiation, acquisition, or administration of such assets.

8.3.5 Patents, Copyrights, Trademarks, and Similar Intellectual Property. These assets will be attributed to a Delaware branch if personnel at the Delaware branch actively and materially participated in the licensing of such asset.

8.3.6 Currency. U.S. and foreign currency will be attributed to a Delaware branch if physically stored at the Delaware branch.

8.3.7 Tangible Personal and Real Property. These assets (including bullion and other precious metals) will be attributed to a Delaware branch if they are located at or are part of the physical facility of a Delaware branch.

8.3.8 Other Business Assets. Other business assets will be attributed to a Delaware branch if personnel at the Delaware branch actively and materially participated in the acquisition of such assets.

8.3.9 Credit Equivalent Amounts of Regulatory Off Balance Sheet Items Taken Into Account in Determining RiskBased Capital Ratio. These are the credit equivalent amounts of offbalance sheet items described in 12 C.F.R. part 567 not otherwise addressed above (e.g., guarantees, standby letters of credit, commercial letters of credit, risk participations, sale and repurchase agreements and asset sales with recourse if not already included on the balance sheet, forward agreements to purchase assets, securities lent (if the lending federal savings bank is exposed to risk of loss), bid and performance bonds, commitments, revolving underwriting facilities). These assets will be attributed to a Delaware branch if personnel at the Delaware branch actively and materially participated in the solicitation, investigation, negotiation, acquisition, or administration of such assets.

8.4 Liabilities Attributable to a Delaware Branch.

8.4.1 The liabilities attributable to a Delaware branch shall be the deposits recorded on the books of the Delaware branch plus any other legally enforceable obligations of the Delaware branch recorded on the books of the Delaware branch or the federal savings bank not headquartered in this State.

8.5 Income of a Delaware Branch.

8.5.1 Income from Assets. Income and gain from assets (including fees from offbalance sheet items) attributed to a Delaware branch in accordance with the rules in subsection 8.3 above will be attributed to the Delaware branch.

8.5.2 Income from Fees. Fee income not attributed to a Delaware branch in accordance with subsection 8.5.1 above will be attributed to the Delaware branch depending on the type of fee income.

8.5.2.1 Fee income from letters of credit, travelers checks, and money orders will be attributed to the Delaware branch if the letters of credit, travelers checks, or money orders are issued by the Delaware branch, except to the extent that subsection 8.5.1 above requires otherwise.

8.5.2.2 Fee income from services (e.g., trustee and custodian fees) will be attributed to the Delaware branch if the services generating the fees are performed by personnel at the Delaware branch. If services are performed both within and without Delaware, the fees from such services must be allocated between Delaware and other states based on the relative value of the services or upon the time spent in rendering the services or on some other reasonable basis. The basis for allocation must be disclosed and applied consistently from period to period.

8.6 Determining the Expenses of a Delaware Branch.

8.6.1 Interest. The amount of interest expense of a Delaware branch shall be the actual interest booked by the Delaware branch, which should reflect market rates.

8.6.2 Direct Expenses of a Delaware Branch. Expenses or other deductions that can be specifically identified with the gross income, gains, losses, deductions, assets, liabilities or other activities of the Delaware branch are direct expenses of such Delaware branch. Examples of such expenses are payroll, rent, depreciation and amortization of assets attributed to the Delaware branch, some taxes, insurance, the cost of supplies and fees for services rendered to the Delaware branch.

8.6.3 Indirect Expenses of a Delaware Branch. Expenses or other deductions that cannot be specifically identified with the gross income, gains, losses, deductions, assets, liabilities, or other activities of a Delaware branch must be allocated between the Delaware branch and the rest of the federal savings bank operating the Delaware branch. If the federal savings bank makes such an allocation on any reasonable basis, and applies such basis consistently from period to period, the allocation likely will be respected. If the federal savings bank makes no such allocation, such expenses could be allocated on the basis of the ratio of assets of the Delaware branch to the assets of the entire federal savings bank or based on the ratio of gross income of the Delaware branch to gross income of the entire federal savings bank.

History

• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

1107 Estimated Franchise Tax Report Federal Savings Banks Not Headquartered in Delaware

5 Del. Admin. Code § 1107 Estimated Franchise Tax Report Federal Savings Banks Not Headquartered in Delaware

5 Del.C. Ch. 11

Effective Date: February 11, 2017

This report shall be completed by any federal savings bank not headquartered in this State but maintaining branches in this State with an estimated tax liability in excess of $10,000 in any given year. The completed report is to be filed in the Office of the State Bank Commissioner on or before March 1 of the current year. Instructions for the preparation of this report are found in Regulation 1106.

1107A.pdf Estimated Franchise Tax Report Federal Savings Banks Not Headquartered in Delaware

History

• 5 DE Reg. 659 (09/01/01)
• 20 DE Reg. 654 (02/01/17)

1108 Final Franchise Tax Report Federal Savings Banks Not Headquartered in Delaware

5 Del. Admin. Code § 1108 Final Franchise Tax Report Federal Savings Banks Not Headquartered in Delaware

5 Del.C. Ch. 11

Effective Date: October 11, 2020

This report shall be completed by any federal savings bank not headquartered in this State but maintaining branches in this State and submitted to the Office of the State Bank Commissioner on or before January 30. Income reported is for the previous calendar year. Instructions for the preparation of this report are found in Regulation 1106.

1108A.pdf Final Franchise Tax Report Federal Savings Banks Not Headquartered in Delaware

https://regulations.delaware.gov/AdminCode/title5/1100/1108A.pdf

History

• 5 DE Reg. 660 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 390 (10/01/20)

1109 Instructions for Calculation of Employment Tax Credits (5 Del.C. §1105)

5 Del. Admin. Code § 1109 Instructions for Calculation of Employment Tax Credits (5 Del.C. §1105)

5 Del.C. §1105

Effective Date: February 11, 2017

This regulation provides for the calculation of employment tax credits for the tax years 1997 through 2011 and 2012 through 2031 for entities subject to the bank franchise tax. These employment tax credits are provided in Section 1105(d) for tax years 1997 through 2011 and Section 1105(h) for tax years 2012 through 2031, and subject to requirements in Sections 1105(e), 1105(f), and 1105(i) of Title 5 of the Delaware Code.

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1109-1.0 Definitions

“Base Year” means calendar year 1996 for tax years 1997 through 2011, and calendar year 2011 for tax years 2012 through 2031, provided, however, that for tax years 2012 through 2031, that beginning on January 1, 2022 and each January 1st thereafter, the base year shall increase by one calendar year until the base year shall have reached the period after December 31, 2020 and before January 1, 2022.

“Full-time Employment” means employment of any individual for at least 35 hours per week, not including absences excused by reason of vacations, illness, holidays or similar causes.

“Health Care Benefits” means financial protection against the medical care cost arising from disease and accidental bodily injury (for which the employer pays at least 50%) for workers employed by the employer for a continuous period of 6 months or more.

“New Investment” includes (1) machinery, (2) equipment and (3) the cost of land and improvements to land, provided that the new investment is placed into service within Delaware after December 1996 for tax years 1997 through 2011, or after December 2011 for tax years 2012 through 2031, and was not used by any person at any time within the one year period ending on the date the taxpayer placed such property in service in the conduct of the taxpayer’s business. If the new investment is leased or subleased by the taxpayer, the amount of the new investment shall be deemed to be eight times the net annual rent paid or incurred by the taxpayer. The net annual rent represents the gross rent paid or incurred by the taxpayer during the taxable year, less any gross rental income received by the taxpayer from sublessees of any portion of the facility during the taxable year.

“Qualified Employee” means an employee engaged in regular full-time employment, for whom the taxpayer provides health care benefits, who has been employed in Delaware by the taxpayer for a continuous period of at least 6 months and who was not employed at the same facility in substantially the same capacity by a different employer during all or part of the base year.

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1109-2.0 Employment Tax Credit

2.1 A tax credit for tax years 1997 through 2011 shall be allowed against the tax imposed under subsection 1105(a) and 1101A of Title 5 of the Delaware Code in the amount of $400 for each new qualified employee in excess of 50 qualified employees above the number of employees employed by the taxpayer in full-time employment during the base year.

2.2 For tax years beginning after December 31, 2011, and ending before January 1, 2032, there shall be allowed as a credit against the tax imposed under subsection 1105(a) or 1101A of Title 5 of the Delaware Code an amount equal to $1,250 for each new qualified employee above the number of employees employed by the taxpayer in full-time employment during the base year; provided, however, that the credit provided pursuant to this section shall be available only for taxable years in which the taxpayer has at least 200 new qualified employees above the number of employees employed by the taxpayer in full-time employment during the base year. The base year shall be the period after December 31, 2010, and before January 1, 2012.

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1109-3.0 New Investment Required

3.1 The employment tax credit provided above may not be claimed until the taxpayer has made new investments of at least $15,000 per qualified employee in excess of the numbers of employees employed by the taxpayer in full-time employment during the base year.

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1109-4.0 Annual Limit On Credit

4.1 The amount of the employment tax credit allowable for the current tax year (including any credit carried forward as provided below) shall not exceed 50 percent of the amount of tax imposed on the taxpayer under Section 1105(a) and 1101A of Title 5 of the Delaware Code for the current tax year.

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1109-5.0 Applicable Years

5.1 The employment tax credit specified in Section 2.1 above may be earned and applied only in tax years beginning after December 31, 1996 and ending before January 1, 2012, subject to the credit carryover described below.

5.2 The employment tax credit specified in Section 2.2 above may be earned and applied only in tax years beginning after December 31, 2011 and ending before January 1, 2032, subject to the credit carryover described below.

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1109-6.0 Credit Carryover

6.1 The amount of the employment tax credit for any taxable year that is not allowable for such taxable year solely as a result of the limitation described above in Section 4.0 shall be a credit carryover to each of the succeeding 9 years in the manner described in Section 2011(f) of Title 30 of the Delaware Code.

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

5 Del. Admin. Code § 1109-7.0 Calculation Worksheet

7.1 The employment tax credit provided above shall be calculated on the appropriate Employment Tax Credit Calculation Worksheet accompanying this Regulation, which shall be submitted with the taxpayer’s tax report.

1109A.pdf Employment Tax Credit Calculation Worksheet For Years 1997 – 2011

1109B.pdf Employment Tax Credit Calculation Worksheet For Years 2012 – 2031

History

• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 10 DE Reg. 1046 (12/01/06)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 669 (09/01/01)
• 10 DE Reg. 1046 (12/01/06)
• 16 DE Reg. 656 (12/01/12)
• 20 DE Reg. 654 (02/01/17)

1110 Instructions for Preparation of Franchise Tax for Resulting Branches in this State of Out-of-State Banks

5 Del. Admin. Code § 1110 Instructions for Preparation of Franchise Tax for Resulting Branches in this State of Out-of-State Banks

5 Del.C. Ch. 11

Effective Date: September 12, 2019

1.0 This regulation applies only to resulting branches in this State of out-of-state banks. The estimated and final franchise tax reports that accompany this regulation are found in regulations 1111 and 1112, respectively.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-2.0 Definitions

“Bank” means every bank and every corporation conducting a banking business of any kind or plan whose principal place of business is in this State, except a national bank.

“Banking organization” means:

A bank or bank and trust company organized and existing under the laws of this State;

A national bank, including a federal savings bank, with its principal office in this State;

An Edge Act corporation organized pursuant to §25(a) of the Federal Reserve Act, 12 U.S.C. §611 et seq. (an “Edge Act Corporation”), or a state chartered corporation exercising the powers granted thereunto pursuant to an agreement with the Board of Governors of the Federal Reserve System (an “Agreement Corporation”), and maintaining an office in this State;

A federal branch or agency licensed pursuant to §4 and §5 of the International Banking Act of 1978, 12 U.S.C. §3101 et seq., to maintain an office in this State;

A foreign bank branch, foreign bank limited purpose branch or foreign bank agency organized pursuant to Chapter 14 of Title 5, or a resulting branch in this State of a foreign bank authorized pursuant to Chapter 14 of Title 5; or

A resulting branch in this State of an out-of-state bank, or a branch office in this State of an out-of-state bank.

“International Banking Facility” means a set of asset and liability accounts, segregated on the books of a banking organization, that includes only international banking facility deposits, borrowings and extensions of credit.

“International Banking Transaction” shall mean any of the following transactions, whether engaged in by a banking organization, any foreign branch thereof (established pursuant to 5 Del.C. §771 or federal law) or any subsidiary corporation directly or indirectly owned by any banking organization:

The financing of the exportation from, or the importation into, the United States or between jurisdictions abroad of tangible property or services;

The financing of the production, preparation, storage or transportation of tangible personal property or services which are identifiable as being directly and solely for export from, or import into, the United States or between jurisdictions abroad;

The financing of contracts, projects or activities to be performed substantially abroad, except those transactions secured by a mortgage, deed of trust or other lien upon real property located in this State;

The receipt of deposits or borrowings or the extensions of credit by an international banking facility, except the loan or deposit of funds secured by mortgage, deed of trust or other lien upon real property located in this State;

The underwriting, distributing and dealing in debt and equity securities outside of the United States and the conduct of any activities permissible to an Edge Act Corporation or an Agreement Corporation described above, or any of its subsidiaries, in connection with the transaction of banking or other financial operations; or

The entering into foreign exchange trading or hedging transactions in connection with the activities described in paragraphs (1) through (5) above.

“National Bank” means a banking association organized under the authority of the United States and having a principal place of business in this State.

“Net Operating Income Before Taxes” means the total net income calculated in accordance with Section 9.0 of this Regulation, with adjustments made for securities gains or losses and other appropriate adjustments.

“Out-of-State Bank” has the same meaning as in §795 of Title 5 of the Delaware Code, which is (i) a State bank, as defined in the Federal Deposit Insurance Act, as amended, at 12 U.S.C. §1813(a), that is not chartered under Delaware law, or (ii) a national bank association created under the National Bank Act (12 U.S.C. §21 et seq.) whose organization certificate identifies an address outside Delaware as the place at which its discount and deposit operations are to be carried out.

“Resulting Branch In This State Of An Out-of-State Bank” has the same meaning as in §1101(a) of Title 5 of the Delaware Code, which is a branch office in this State of an out-of-state bank resulting from a merger as provided in Subchapter VII of Chapter 7 of Title 5 of the Delaware Code, and, in addition, a branch office in this State of an out-of-state bank.

“Securities Business” means to engage in the sale, distribution and underwriting of, and deal in, stocks, bonds, debentures, notes or other securities. For purposes of this regulation and Title 5, Section 1101(a)(1)b, a subsidiary that is a bank or insured institution, as those terms are defined in the federal Bank Holding Company Act, 12 USC 1841, is not considered to be “engaged in the sale, distribution or underwriting of, or dealing in, securities”.

“Trust Company” means a trust company or corporation doing a trust company business which has a principal place of business in this State.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-3.0 Estimated Franchise Tax

3.1 A resulting branch or branches in this State of an out-of-state bank whose franchise tax liability for the current year, on a consolidated basis, is estimated to exceed $10,000 shall file an estimated franchise tax report with the State Bank Commissioner and pay estimated tax.

3.2 Filing. The estimated franchise tax report shall be filed with the State Bank Commissioner on the first day of March of the current year.

3.3 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the estimated franchise tax report required above in subsection 3.2, unless the State Bank Commissioner is satisfied that such failure was not willful.

3.4 Form. The estimated franchise tax report shall be in the form set out in Regulation 1111.

3.5 Calculation of estimated tax. The total estimated annual franchise tax shall be calculated as follows:

3.5.1 The estimated net operating income before taxes of the resulting branch or branches in this State of the out-of-state bank, which includes the income of any corporation making an election as provided in Regulation No. 1101;

3.5.2 Adjusted for any estimated income from an insurance division or subsidiary;

3.5.3 Less any deductions set forth in 5 Del.C. §1101;

3.5.4 Multiplied by .56 to arrive at estimated taxable income;

3.5.5 The appropriate rate of taxation set forth in 5 Del.C. §1105 shall be applied;

3.5.6 The subtotal estimated annual franchise tax shall be adjusted for tax credits applicable pursuant 5 Del.C. §1105, which are calculated in accordance with Regulation No. 1109;

3.5.7 The subtotal estimated annual franchise tax shall be adjusted for Travelink tax credits calculated in accordance with Department of Transportation Travelink tax credit reporting requirements;

3.5.8 The subtotal estimated annual franchise tax shall be adjusted for Historic Preservation Tax Credits calculated in accordance with 30 Del.C. §§1811 et seq. and the regulations thereunder. Claimed credits must be accompanied by a Certificate of Completion issued by the Delaware State Historic Preservation Office certifying that the credits have been properly earned, in accordance with 5 Del.C. §1105(g). If the credits have been transferred, sold or assigned to the taxpayer by another person, a Certificate of Transfer must also be attached, in accordance with 30 Del.C. §1814(c);

3.5.9 The subtotal estimated annual franchise tax shall be adjusted for any other applicable tax credit(s) [attach supporting schedule identifying the credit(s)].

3.6 Payment of estimated tax. The estimated tax liability shall be due and payable as follows:

3.6.1 40% due on or before June 1 of the current taxable year;

3.6.2 20% due on or before September 1 of the current taxable year;

3.6.3 20% due on or before December 1 of the current taxable year.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-4.0 Final Franchise Tax

4.1 Filing. The December 31 call report, verified by oath, setting forth the net operating income, on a consolidated basis, of the resulting branch or branches in this State of the out-of-state bank and the final franchise tax report, setting forth the "taxable income", on a consolidated basis, of the resulting branch or branches in this State of the out-of-state bank, shall be filed with the Office of the State Bank Commissioner on or before January 30 each year; provided, however, that a resulting branch of an out-of-state bank may file the December 31 call report and the final franchise tax report with the Office of the State Bank Commissioner on or before any later date allowed by the Federal Financial Institutions Examination Council guidelines for filing its Report of Condition and Income.

4.2 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the final franchise tax report required above in subsection 4.1, unless the State Bank Commissioner is satisfied that such failure was not willful.

4.3 Form. The final franchise tax report shall be in the form set out in Regulation No. 1112.

4.4 Calculation of final tax. The total final franchise tax shall be calculated as follows:

4.4.1 The net operating income before taxes of the resulting branch or branches in this State of the out-of-state bank, which includes the income of any corporation making an election as provided in Regulation No.1101;

4.4.2 Adjusted for any income from an insurance division or subsidiary; (include a report of income showing the name and federal employer identification number of the division or subsidiary);

4.4.3 Less any deduction set forth in 5 Del.C. §1101; (include a report of income showing the name and federal employer identification number of each subsidiary taken as a deduction);

4.4.4 Multiplied by .56 to arrive at "taxable income";

4.4.5 The appropriate rate of taxation set forth in 5 Del.C. §1105 shall be applied to the taxable income to arrive at subtotal annual franchise tax;

4.4.6 The subtotal annual franchise tax shall be adjusted for tax credits pursuant to 5 Del.C. §1105, which are calculated in accordance with Regulation No. 1109;

4.4.7 The subtotal annual franchise tax shall be adjusted for Travelink tax credits calculated in accordance with Department of Transportation Travelink tax credit reporting requirements;

4.4.8 The subtotal annual franchise tax shall be adjusted for Historic Preservation Tax Credits calculated in accordance with 30 Del.C. §§1811 et seq. and the regulations thereunder. Claimed credits must be accompanied by a Certificate of Completion issued by the Delaware State Historic Preservation Office certifying that the credits have been properly earned, in accordance with 5 Del.C. §1105(g). If the credits have been transferred, sold or assigned to the taxpayer by another person, a Certificate of Transfer must also be attached, in accordance with 30 Del.C. §1814(c).

4.4.9 The subtotal annual franchise tax shall be adjusted for any other applicable tax credit(s) [attach supporting schedule identifying the credit(s)].

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-5.0 Payment of Final Franchise Tax

5.1 Taxes owed for the previous calendar year are due and payable on or before March 1 of the following year. Checks or other forms of payment should be made payable or directed to the State of Delaware.

5.2 The amount due and payable on or before March 1 for the previous calendar year shall be the final franchise tax, less any estimated tax payments made for the taxable year, plus any additional tax due to underpayment of estimated franchise tax or installment. If the final franchise tax is not paid by March 1, a penalty for late payment of the final franchise tax shall be assessed.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-6.0 Additional Tax Due to Underpayment of Estimated Franchise Tax or Installment

6.1 In the case of any underpayment of estimated franchise tax or installment of estimated tax required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax for the taxable year an amount determined at the rate of 0.05 percent per day upon the amount of the underpayment for the period of the underpayment. The amount of the underpayment shall be the excess of:

6.1.1 The amount of the estimated franchise tax or installment payment which would be required to be made if the estimated tax were equal to 80 percent of the tax shown on the final return for the taxable year, or if no return were filed, 80 percent of the tax for such year, over;

6.1.2 The amount, if any, of the estimated tax or installment paid on or before the last date prescribed for payment.

6.2 The period of the underpayment shall run from the date the estimated franchise tax or installment was required to be paid to the earlier of the date when such estimated tax or installment is paid or the date of the final payment of tax for the year.

6.3 Notwithstanding the above, the addition to the tax with respect to any underpayment of estimated franchise tax or any installment shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment thereof equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax were the tax shown on the final return of the resulting branch(es) of the out-of-state bank for the preceding taxable year.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-7.0 Penalty - Late Payment of Final Franchise Tax

7.1 In the case of a late payment of final franchise tax as required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax a penalty in an amount determined at the rate of 0.05 percent per day until required payment is made.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-8.0 Election to be listed as a "Subsidiary Corporation"

8.1 Any corporation which has elected to be treated as a "subsidiary corporation" of the resulting branch(es) of the out-of-state bank pursuant to §1101(f) and filed with the State Bank Commissioner the required election form in accordance with Commissioner's Regulation No.1101 shall provide (a) a tentative report of income for the electing corporation covering estimated bank franchise tax liability for the current income year to be submitted in conjunction with the estimated franchise tax report due March 1 for the resulting branch(es) of the out-of-state bank whose franchise tax liability for the current year is estimated to exceed $10,000, and (b) a report of income for the electing corporation as of December 31 of each year to be submitted in conjunction with the Final Franchise Tax Report due January 30 or any later date allowed as provided in subsection 4.1 above.

8.2 As long as the election remains in effect, the ownership and employment tests must be met. Therefore, the election form in Regulation 1101 must be completed each year for each Electing Corporation and submitted with the final franchise tax report.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

5 Del. Admin. Code § 1110-9.0 Separate Accounting by Resulting Branches

9.1 Books and Records. Each resulting branch must keep a separate set of books and records as if it were an entity separate from the rest of the bank that operates such resulting branch. These books and records must reflect the following items attributable to the resulting branch:

9.1.1 Assets and the credit equivalent amounts of offbalance sheet items used in computing the riskbased capital ratio under 12 C.F.R. part 325;

9.1.2 Liabilities;

9.1.3 Income and gain;

9.1.4 Expense and loss.

9.2 Consolidation of Delaware Branches. If a bank operates more than one resulting branch, it may treat all resulting branches as a single separate entity for purposes of computing the assets, liabilities, income, gain, expense, and loss referred to above.

9.3 Determining Assets Attributable to a Resulting Branch

9.3.1 General Principle of Asset Attribution. The general principle will be to attribute assets to a resulting branch if personnel at the resulting branch actively and materially participate in the solicitation, investigation, negotiation, approval, or administration of an asset.

9.3.2 Loans and Finance Leases. These assets will be attributed to a resulting branch if personnel at the resulting branch actively and materially participated in the solicitation, investigation, negotiation, final approval, or administration of a loan or financing lease. Loans include all types of loans, including credit and travel card accounts receivable.

9.3.3 Stocks and Debt Securities. These assets will be attributed to a resulting branch if personnel at the resulting branch actively and materially participated in the acquisition of such assets.

9.3.4 Foreign Exchange Contracts and Futures, Options, Swaps, and Similar Assets. These assets will be attributed to a resulting branch if personnel at the resulting branch actively and materially participated in the solicitation, investigation, negotiation, acquisition, or administration of such assets.

9.3.5 Patents, Copyrights, Trademarks, and Similar Intellectual Property. These assets will be attributed to a resulting branch if personnel at the resulting branch actively and materially participated in the licensing of such asset.

9.3.6 Currency. U.S. and foreign currency will be attributed to a resulting branch if physically stored at the resulting branch.

9.3.7 Tangible Personal and Real Property. These assets (including bullion and other precious metals) will be attributed to a resulting branch if they are located at or are part of the physical facility of a resulting branch.

9.3.8 Other Business Assets. Other business assets will be attributed to a resulting branch if personnel at the resulting branch actively and materially participated in the acquisition of such assets.

9.3.9 Credit Equivalent Amounts of Regulatory Off-Balance Sheet Items Taken Into Account in Determining Risk-Based Capital Ratio. These are the credit equivalent amounts of off-balance sheet items described in Appendix A to 12 C.F.R. part 325 (the "Appendix") not otherwise addressed above (e.g., guarantees, surety contracts, standby letters of credit, commercial letters of credit, risk participations, sale and repurchase agreements and asset sales with recourse if not already included on the balance sheet, forward agreements to purchase assets, securities lent (if the lending bank is exposed to risk of loss), bid and performance bonds, commitments, revolving underwriting facilities, note issuance facilities described in the Appendix). These assets will be attributed to a resulting branch if personnel at the resulting branch actively and materially participated in the solicitation, investigation, negotiation, acquisition, or administration of such assets.

9.4 Liabilities Attributable to a Resulting Branch. The liabilities attributable to a resulting branch shall be the deposits recorded on the books of the resulting branch plus any other legally enforceable obligations of the resulting branch recorded on the books of the resulting branch or its parent.

9.5 Income of a Resulting Branch.

9.5.1 Income from Assets. Income and gain from assets (including fees from off-balance sheet items) attributed to a resulting branch in accordance with the rules in section 9.3 above will be attributed to the resulting branch.

9.5.2 Income from Fees. Fee income not attributed to a resulting branch in accordance with paragraph 9.5.1. above will be attributed to the resulting branch depending on the type of fee income.

9.5.2.1 Fee income from letters of credit, travelers checks, and money orders will be attributed to the resulting branch if the letters of credit, travelers checks, or money orders are issued by the resulting branch, except to the extent that paragraph 9.5.1 above requires.

9.5.2.2 Fee income from services (e.g., trustee and custodian fees) will be attributed to the resulting branch if the services generating the fees are performed by personnel at the resulting branch. If services are performed both within and without Delaware, the fees from such services must be allocated between Delaware and other states based on the relative value of the services or upon the time spent in rendering the services or on some other reasonable basis. The basis for allocation must be disclosed and applied consistently from period to period.

9.6 Determining the Expenses of a Resulting Branch.

9.6.1 Interest. The amount of interest expense of a resulting branch shall be the actual interest booked by the resulting branch, which should reflect market rates.

9.6.2 Direct Expenses of a Resulting Branch. Expenses or other deductions that can be specifically identified with the gross income, gains, losses, deductions, assets, liabilities or other activities of the resulting branch are direct expenses of such resulting branch. Examples of such expenses are payroll, rent, depreciation and amortization of assets attributed to the resulting branch, some taxes, insurance, the cost of supplies and fees for services rendered to the resulting branch.

9.6.3 Indirect Expenses of a Resulting Branch. Expenses or other deductions that cannot be specifically identified with the gross income, gains, losses, deductions, assets, liabilities, or other activities of a resulting branch must be allocated between the resulting branch and the rest of the bank operating the resulting branch. If the bank makes such an allocation on any reasonable basis, and applies such basis consistently from period to period, the allocation likely will be respected. If the bank makes no such allocation, such expenses could be allocated on the basis of the ratio of assets of the resulting branch to the assets of the entire bank or based on the ratio of gross income of the resulting branch to gross income of the entire bank.

History

• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 5 DE Reg. 661 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 23 DE Reg. 241 (09/01/19)

1111 Estimated Franchise Tax Report for Resulting Branches in this State of Out-of-State Banks

5 Del. Admin. Code § 1111 Estimated Franchise Tax Report for Resulting Branches in this State of Out-of-State Banks

5 Del.C. Ch. 11

Effective Date: October 11, 2020

This report shall be completed by the resulting branch(es) in this State of an out of state bank with an estimated tax liability in excess of $10,000 in a given year. The completed report is to be filed in the Office of the State Bank Commissioner on or before March 1 of the current year. Instructions for the preparation of this report are found in Regulation 1110.

1111A.pdf Estimated Franchise Tax Report for Resulting Branches in this State of Out-of-State Banks

https://regulations.delaware.gov/AdminCode/title5/1100/1111A.pdf

History

• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 391 (10/01/20)

1112 Final Franchise Tax Report for Resulting Branches in this State of Out-of-State Banks

5 Del. Admin. Code § 1112 Final Franchise Tax Report for Resulting Branches in this State of Out-of-State Banks

5 Del.C. Ch. 11

Effective Date: October 11, 2020

This report shall be completed by all resulting branch(es) in this state of out-of-state banks and submitted to the Office of the State Bank Commissioner on or before January 30; provided, however, that a resulting branch of an out-of-state bank may submit this report to the Office of the State Bank Commissioner on or before any later date allowed by the Federal Financial Institutions Examination Council guidelines for filings its Report of Condition and Income. Income reported is for the previous calendar year. Instructions for the preparation of this report are found in Regulation 1110.

1112A.pdf Final Franchise Tax Report for Resulting Branches in this State of Out-of-State Banks

https://regulations.delaware.gov/AdminCode/title5/1100/1112A.pdf

History

• 5 DE Reg. 647 (09/01/01)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 392 (10/01/20)

1113 Election by a Subsidiary Corporation of a Banking Organization or Trust Company to be Taxed in Accordance with Chapter 19 of Title 30

5 Del. Admin. Code § 1113 Election by a Subsidiary Corporation of a Banking Organization or Trust Company to be Taxed in Accordance with Chapter 19 of Title 30

Effective Date: October 11, 2020

History

• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)
• 8 DE Reg. 474 (09/01/04)
• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)

5 Del. Admin. Code § 1113-1.0 Qualifications for Election

Pursuant to 5 Del.C. §1101(e) and §1101A(c)(2), a subsidiary corporation of a banking organization or trust company may elect to be taxed in accordance with Chapter 19 of Title 30 if the subsidiary is not itself a banking organization or trust company, if the subsidiary is not described in §1902(b)(8) of Title 30, and if the subsidiary is not engaged in the sale, distribution, underwriting of, or dealing in, securities.

History

• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)
• 8 DE Reg. 474 (09/01/04)
• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)

5 Del. Admin. Code § 1113-2.0 Effect

If a valid election is made, the electing subsidiary shall not be considered a subsidiary corporation of its parent banking organization or trust company for the purposes of Chapter 11 of Title 5, and the income of the electing subsidiary shall be excluded from the taxable income of its parent banking organization or trust company for the tax year involved.

History

• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)
• 8 DE Reg. 474 (09/01/04)
• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)

5 Del. Admin. Code § 1113-3.0 Filing

An electing subsidiary shall make this election by filing the original of Form A under this regulation with the State Bank Commissioner; 1110 Forrest Avenue; Dover, DE, 19901 and a copy with the Delaware Division of Revenue; 820 N. French Street; Wilmington, DE 19801.

History

• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)
• 8 DE Reg. 474 (09/01/04)
• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)

5 Del. Admin. Code § 1113-4.0 Reporting Requirements

Every year, an electing subsidiary shall file with the State Bank Commissioner on or before the date that its Delaware State Income Tax Return is due (1) Form B under this regulation, and (2) a copy of its Delaware State Income Return as filed with the Delaware Division of Revenue.

History

• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)
• 8 DE Reg. 474 (09/01/04)
• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)

5 Del. Admin. Code § 1113-5.0 Termination of Election

An election under this regulation remains in effect until terminated. An electing subsidiary may terminate its election by filing a notice to that effect with the State Bank Commissioner and the Delaware Division of Revenue.

1113A.pdf FORM A Election of a Subsidiary Corporation to be Taxed in Accordance with Chapter 19 of Title 30 and FORM B Annual Report of a Subsidiary Corporation Electing to be Taxed in Accordance with Chapter 19 of Title 30

https://regulations.delaware.gov/AdminCode/title5/1100/1113A.pdf

History

• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)
• 8 DE Reg. 474 (09/01/04)
• 10 DE Reg. 1046 (12/01/06)
• 24 DE Reg. 393 (10/01/20)

1114 Alternative Franchise Tax

5 Del. Admin. Code § 1114 Alternative Franchise Tax

Chapter 11 of Title 5 of the Delaware Code

Effective Date: October 11, 2020

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-1.0 This regulation applies to banking organizations and trust companies, other than federal savings banks not headquartered in this State but maintaining branches in this State, that annually elect to pay an alternative franchise tax pursuant to Section 1101A of Title 5 of the Delaware Code. The election to pay the alternative franchise tax is made by filing an original final alternative franchise tax return on the due date, or an amended return within 180 days of the due date of the original return.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-2.0 Definitions

“Bank” means every bank and every corporation conducting a banking business of any kind or plan whose principal place of business is in this State, except a national bank.

“Banking organization” means:

“International Banking Facility” means a set of asset and liability accounts, segregated on the books and records of a banking organization, that includes only international banking facility deposits, borrowings and extensions of credit.

“International Banking Transaction” shall mean any of the following transactions, whether engaged in by a banking organization, any foreign branch thereof (established pursuant to Section 771 of Title 5 of the Delaware Code or federal law) or any subsidiary corporation directly or indirectly owned by any banking organization:

“National Bank” means a banking association organized under the authority of the United States and having a principal place of business in this State.

“Net Operating Income Before Taxes” means all pre-tax net income from the operations of a banking organization or trust company, including extraordinary items and other adjustments, computed in accordance with principles used by the Federal Financial Institutions Examination Council or other appropriate federal authority.

“Out-of-state bank” has the same meaning as in Section 795 of Title 5 of the Delaware Code, which is (i) a State bank, as defined in the Federal Deposit Insurance Act, as amended, at 12 U.S.C. § 1813(a), that is not chartered under Delaware law, or (ii) a national bank association created under the National Bank Act (12 U.S.C. § 21 et seq.) whose organization certificate identifies an address outside Delaware as the place at which its discount and deposit operations are to be carried out.

“Resulting branch in this State of an out-of-state bank” has the same meaning as in Section 1101(a) of Title 5 of the Delaware Code, which is a branch office in this State of an out-of-state bank resulting from a merger as provided in Subchapter VII of Chapter 7 of Title 5 of the Delaware Code, and, in addition, a branch office in this State of an out-of-state bank.

“Securities Business” means to engage in the sale, distribution and underwriting of, and deal in, stocks, bonds, debentures, notes or other securities.

“Trust Company” means a trust company or corporation doing a trust company business which has a principal place of business in this State.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-3.0 Instructions for Filing the Estimated Alternative Franchise Tax Return

3.1 A banking organization or trust company whose alternative franchise tax liability for the current year is estimated to exceed $10,000 should file an estimated alternative franchise tax return with the State Bank Commissioner, instead of the estimated franchise tax report in Regulation No. 1104 or No. 1111, and pay estimated alternative franchise tax:

3.2 Filing. The estimated alternative franchise tax return shall be filed with the State Bank Commissioner on the first day of March of the current year. Filing an estimated tax return for a particular taxation method is not a mandatory election of that particular method. Additional tax due that results from the underpayment of estimated taxes will be computed on the basis of the final method properly chosen.

3.3 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the estimated alternative franchise tax return required by subsection 3.2, or an estimated franchise tax report pursuant to Regulation No. 1104 or No. 1111, unless the State Bank Commissioner is satisfied that such failure was not willful.

3.4 Form. The estimated alternative franchise tax return is contained in this regulation as Form 1114E.

3.5 Rounding. All amounts shall be rounded to the nearest dollar.

3.6 Calculation of estimated alternative franchise tax. The total estimated alternative franchise tax shall be calculated as follows:

3.6.1 The estimated net operating income before taxes of the banking organization or trust company;

3.6.2 Plus the estimated net operating income before taxes of any corporation(s) making an election as provided in Regulation No. 1101;

3.6.3 Less any deductions set forth in 5 Del.C. §1101A(c)(1);

3.6.4 Less the estimated net operating income before taxes of any subsidiary corporation(s) and Edge Act corporation(s) making an election as provided in Regulation No. 1113;

3.6.5 Apportion the entire net income to the State of Delaware in accordance with 5 Del.C. §1101A(c)(6) (attach Schedule 1 – Apportionment Percentage Calculation Worksheet [apportionment percentage shall be rounded to the nearest tenth of a percent]);

3.6.6 Multiply the elective income tax base by the rate of taxation set forth in 5 Del.C. §1101A(c)(7);

3.6.7 Plus the estimated location benefit tax liability calculated in accordance with 5 Del.C. §1101A(d), (attach Schedule 2 – Location Benefit Tax Calculation Worksheet);

3.6.8 Adjust the subtotal estimated alternative franchise tax for applicable employment tax credits pursuant to 5 Del.C. §1105, calculated in accordance with Regulation No. 1109;

3.6.9 Adjust the subtotal estimated alternative franchise tax for TraveLink tax credits calculated in accordance with Department of Transportation (DelDOT) TraveLink tax credit reporting requirements;

3.6.10 Adjust the subtotal estimated alternative franchise tax for Historic Preservation Tax Credits calculated in accordance with 30 Del.C. Ch. 18 and the regulations thereunder.

3.6.11 Adjust the subtotal estimated alternative franchise tax for any other applicable tax credit(s) [attach supporting schedule identifying the tax credit(s)].

3.7 Payment of estimated alternative franchise tax. The estimated alternative franchise tax liability shall be due and payable as follows:

3.7.1 40% due on or before June 1 of the current taxable year;

3.7.2 20% due on or before September 1 of the current taxable year;

3.7.3 20% due on or before December 1 of the current taxable year.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-4.0 Instructions for Filing the Final Alternative Franchise Tax Return

4.1 Filing. The December 31 call report, verified by oath, setting forth the net operating income of the banking organization or trust company and the final alternative franchise tax return, setting forth the "taxable income" of the banking organization or trust company, shall be filed with the Office of the State Bank Commissioner on or before January 30; provided, however, that a banking organization may file this return on or before any later date allowed by the Federal Financial Institutions Examination Council guidelines for filing its Report of Condition and Income. A banking organization or trust company whose original final franchise tax report was filed pursuant to Regulation No. 1105 or No. 1112 may elect to pay the alternative franchise tax pursuant to Section 1101A of Title 5 of the Delaware Code by filing an amended final alternative franchise tax return, as provided in this regulation, within 180 days of the due date of the original return.

4.2 Penalty for late filing. A late filing penalty shall be assessed against the taxpayer in the amount of $25 for each day after the due date that the taxpayer fails to file the final alternative franchise tax return required by subsection 4.1, or the final franchise tax report in Regulation No. 1105 or No. 1112, unless the State Bank Commissioner is satisfied that such failure was not willful.

4.3 Form. The final alternative franchise tax return is contained in this regulation as Form 1114F.

4.4 Rounding. All amounts shall be rounded to the nearest dollar.

4.5 Calculation of final alternative franchise tax. The total final alternative franchise tax shall be calculated as follows:

4.5.1 The net operating income before taxes of the banking organization or trust company, (attach a statement of net income that is filed with an appropriate financial regulatory agency);

4.5.2 Plus the net operating income before taxes of any corporation(s) making an election as provided in Regulation No. 1101, (attach Regulation 1101 form – Election To Be Treated As A Subsidiary Corporation Under Sections 1101(f) or 1101A(c)(3) of Title 5 of the Delaware Code and a separate report of income for each electing corporation);

4.5.3 Less any deductions set forth in Section 1101A(c)(1) of Title 5 of the Delaware Code;

4.5.4 Less the net operating income before taxes of any subsidiary corporation(s) and Edge Act corporation(s) making an election as provided in Regulation No. 1113;

4.5.5 Apportion the entire net income to the State of Delaware in accordance with Section 1101A(c)(6) of Title 5 of the Delaware Code (attach Schedule 1 – Apportionment Percentage Calculation Worksheet [apportionment percentage shall be rounded to the nearest tenth of a percent]);

4.5.6 Multiply the elective income tax base by the rate of taxation set forth in Section 1101A(c)(7) of Title 5 of the Delaware Code;

4.5.7 Plus the location benefit tax liability calculated in accordance with Section 1101A(d) of Title 5 of the Delaware Code, computed as of December 31 of the year prior to the year for which alternative franchise tax is paid (attach Schedule 2 – Location Benefit Tax Calculation Worksheet);

4.5.8 Adjust the subtotal alternative franchise tax for applicable employment tax credits pursuant to Section 1105 of Title 5 of the Delaware Code calculated in accordance with Regulation No. 1109, (attach Employment Tax Credit Calculation Worksheet);

4.5.9 Adjust the subtotal alternative franchise tax for TraveLink tax credits calculated in accordance with Department of Transportation (DelDOT) TraveLink tax credit reporting requirements, (attach DelDOT approval and calculation worksheet);

4.5.10 Adjust the subtotal alternative franchise tax for Historic Preservation Tax Credits calculated in accordance with Chapter 18 of Title 30 of the Delaware Code and the regulations thereunder, (attach a Certificate of Completion issued by the Delaware State Historic Preservation Office certifying that the credits have been properly earned, in accordance with Section 1105(g) of Title 5 of the Delaware Code, and if the credits have been transferred, sold or assigned to the taxpayer by another person, also attach a Certificate of Transfer in accordance with Section 1814(c) of Title 30 of the Delaware Code);

4.5.11 Adjust the subtotal alternative franchise tax for any other applicable tax credit(s) [attach supporting schedule identifying the tax credit(s)].

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-5.0 Payment of Final Alternative Franchise Tax

5.1 Taxes owed for the previous calendar year are due and payable on or before March 1 of the following year. Checks or other forms of payment should be made payable to the State of Delaware and directed to the Office of the State Bank Commissioner.

5.2 The amount due and payable on or before March 1 for the previous calendar year shall be the final alternative franchise tax, less any estimated tax payments made for the taxable year, plus any additional tax due to underpayment of estimated alternative franchise tax or installment. If the final alternative franchise tax is not paid by March 1, a penalty for late payment of the final alternative franchise tax shall be assessed.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-6.0 Additional Tax Due to Underpayment of Estimated Alternative Franchise Tax or Installment

6.1 In the case of any underpayment of alternative estimated franchise tax or an installment of estimated alternative tax required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax for the taxable year an amount determined at the rate of 0.05 percent per day upon the amount of the underpayment for the period of the underpayment. The amount of the underpayment shall be the excess of:

6.1.1 The amount of the estimated alternative franchise tax or installment payment which would be required to be made if the estimated alternative tax were equal to 80 percent of the tax shown on the final return for the taxable year, or if no return were filed, 80 percent of the tax for such year; over

6.1.2 The amount, if any, of the estimated alternative tax or installment paid on or before the last date prescribed for payment.

6.2 The period of the underpayment shall run from the date the estimated alternative franchise tax or installment was required to be paid to the earlier of the date when such estimated alternative tax or installment is paid or the date of the final payment of tax for the year;

6.3 Notwithstanding the above, the addition to the tax with respect to any underpayment of estimated alternative franchise tax or any installment shall not be imposed if the total amount of all payments of estimated alternative tax made on or before the last date prescribed for the payment thereof equals or exceeds the amount which would have been required to be paid on or before such date if the estimated alternative tax were the tax shown on the final return of the banking organization or trust company for the preceding taxable year.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-7.0 Penalty - Late Payment of Final Alternative Franchise Tax

In the case of a late payment of final alternative franchise tax as required by Chapter 11 of Title 5 of the Delaware Code, there shall be added to the tax a penalty in an amount determined at the rate of 0.05 percent per day until required payment is made.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-8.0 Election to be listed as a "Subsidiary Corporation"

8.1 Regulation No. 1101 shall apply to elections to be treated as a subsidiary corporation pursuant to Section 1101A(c)(3) of Title 5 of the Delaware Code.

8.2 Any corporation which has elected to be treated as a "subsidiary corporation" of a banking organization or trust company pursuant to Section 1101A(c)(3) of Title 5 of the Delaware Code and has filed with the State Bank Commissioner the required election form in accordance with Regulation No. 1101 shall provide a report of income for each electing corporation as of December 31 of each year to be submitted in conjunction with the final alternative franchise tax return due January 30; provided, however, that a banking organization may file this return on or before any later date allowed by the Federal Financial Institutions Examination Council guidelines for filing its Report of Condition and Income.

8.3 As long as the election remains in effect, the ownership and employment tests must be met. Therefore, the election form in Regulation No. 1101 must be completed each year for each Electing Corporation and submitted with the final alternative franchise tax return.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-9.0 Election by a Subsidiary Corporation of a Banking Organization or Trust Company to be Taxed in Accordance with Chapter 19 of Title 30

Regulation No. 1113 shall apply to elections to be taxed in accordance with Chapter 19 of Title 30 pursuant to Section 1101A(c)(2) of Title 5 of the Delaware Code.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-10.0 Election by an Edge Act Corporation to be Taxed in Accordance with Chapter 19 of Title 30

Regulation No. 1113 shall apply to elections to be taxed in accordance with Chapter 19 of Title 30 pursuant to Section 1101A(c)(4) of Title 5 of the Delaware Code.

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

5 Del. Admin. Code § 1114-11.0 Instructions for Filing an Amendment to the Final Alternative Franchise Tax Return

Filing. To amend a previously filed final alternative franchise tax return, or to elect the alternative franchise tax method as provided in Section 1101A(a) of Title 5 of the Delaware Code, place a check mark () in the box provided on Form 1114F and complete the return in accordance with Section 4 of this regulation. Attach a complete copy of the original filing along with a statement of explanation for all changes.

1114A.pdf Form 1114E - Estimated Alternative Franchise Tax Return and Form 1114F Final Alternative Franchise Tax Return

https://regulations.delaware.gov/AdminCode/title5/1100/1114A.pdf

History

• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)
• 24 DE Reg. 394 (10/01/20)
• 10 DE Reg. 1046 (12/01/06)
• 20 DE Reg. 654 (02/01/17)
• 24 DE Reg. 394 (10/01/20)

1400 Foreign Banks

1401 Procedures Governing Filings and Determinations Respecting Applications for a Foreign Bank Limited Purpose Branch Or Foreign Bank Agency

5 Del. Admin. Code § 1401 Procedures Governing Filings and Determinations Respecting Applications for a Foreign Bank Limited Purpose Branch Or Foreign Bank Agency

1401 Procedures Governing Filings and Determinations Respecting Applications for a Foreign Bank Limited Purpose Branch Or Foreign Bank Agency

5 Del.C. §1403

Formerly Regulation No.: 5.1403.0001

Effective Date: August 13, 1998

1.0 Application Process

1.1 Form of Application - An Applicant to establish a limited purpose branch or agency of a foreign bank in Delaware shall complete the "Application for Chartering of a Delaware Foreign Bank Limited Purpose Branch or Foreign Bank Agency" (Regulation No. 1402 Formerly 5.1403.0002). Such Application shall not be regarded as having been received by the Commissioner for the purposes of these regulations unless (1) all information solicited is provided in satisfactory form; (2) all documents which are required are attached to the application; (3) a duly empowered executive officer has signed and certified to the Application; and the Application is accompanied by a certified check made payable to the "State of Delaware" in the amount of $2,000.00.

1.2 Notice of Receipt of Application - Within seven (7) days of the date on which the Commissioner shall deem an Application to have been received, he shall cause to be published, at the expense of the Applicant, once a week for two consecutive weeks in a publication of general circulation within the County where the office of said Agency is to be located a notice acknowledging receipt of the Application, which further recites:

1.2.1 The location of the proposed office of the Foreign Bank Limited Purpose Branch or Agency;

1.2.2 A statement regarding where members of the general public may view, for a period of twenty (20) days, a copy of that portion of the Application which is not deemed to be "confidential".

1.2.3 A statement requesting any objections to the application be filed with the State Bank Commissioner in writing within twenty (20) days of the first publication.

2.0 Hearing

2.1 If after the twenty (20) day comment period, the Commissioner determines a public hearing shall be conducted:

2.1.1 Such determination shall be made within ten (10) days after the conclusion of the 20-day comment period;

2.1.2 The Commissioner shall fix a time, place, and date for the holding of a hearing for the presentation of data, views or arguments pertinent to the application. In no event may the date fixed be less than twenty (20) days after publication of notice of the hearing. The hearing shall be conducted in accordance with Chapter 101 of Title 29 of the Delaware Code.

3.0 Findings and Decision of the Commissioner

3.1 The Commissioner shall issue his Findings and Decision relative to the application within sixty (60) days from the receipt of an Application, or within thirty (30) days of a hearing on such Application, whichever shall later occur.

2 DE Reg. 295 (08/01/98)

1402 Application by a Foreign Bank for a Certificate of Authority to Establish A Foreign Bank Limited Purpose Branch Or Foreign Bank Agency

5 Del. Admin. Code § 1402 Application by a Foreign Bank for a Certificate of Authority to Establish A Foreign Bank Limited Purpose Branch Or Foreign Bank Agency

1402 Application by a Foreign Bank for a Certificate of Authority to Establish A Foreign Bank Limited Purpose Branch Or Foreign Bank Agency

5 Del.C. §1403

Formerly Regulation No.: 5.1403.0002

Effective Date: August 13, 1998

Any application made to the State Bank Commissioner pursuant to §1403 of Title 5, Delaware Code, shall be submitted on the form appended hereto and accompanied by all documents called for by such form as well as by a duly authenticated copy of its charter and bylaws. A non-refundable filing fee of $2,000 - payable to “State of Delaware”, must accompany the filing of the attached application (5 Del. C., §1403(c)).

2 DE Reg. 295 (08/01/98)

Application by a Foreign Bank for a Certificate of Authority to Establish A Foreign Bank Limited Purpose Branch Or Foreign Bank Agency

1403 Regulations Governing the Organization, Chartering, Supervision, Operation and Authority of a Delaware Foreign Bank Limited Purpose Branch, a Delaware Foreign Bank Agency and a Delaware Foreign Bank Representative Office

5 Del. Admin. Code § 1403 Regulations Governing the Organization, Chartering, Supervision, Operation and Authority of a Delaware Foreign Bank Limited Purpose Branch, a Delaware Foreign Bank Agency and a Delaware Foreign Bank Representative Office

1403 Regulations Governing the Organization, Chartering, Supervision, Operation and Authority of a Delaware Foreign Bank Limited Purpose Branch, a Delaware Foreign Bank Agency and a Delaware Foreign Bank Representative Office

Formerly Regulation No.: 5.1403/1101.0003

Effective Date: August 13, 1998

1.0 Statement of Authority.

1.1 These regulations are promulgated pursuant to the authority vested in the Commissioner under the provisions of Chapter 14, Title 5, Delaware Code, including without limitation §1403 (relating to the foreign bank limited purpose branch or foreign bank agency application process); §1404(a)(2) (relating to the taking and maintenance of deposits by a foreign bank limited purpose branch or foreign bank agency); §1405 (maintenance of assets by a foreign bank limited purpose branch or foreign bank agency within Delaware); §1406(a) (relating to the making of written reports to the Commissioner by a foreign bank limited purpose branch or foreign bank agency); §1407 (relating to the rule-making power of the Commissioner generally); §1420 (relating to the licensing and operation of a foreign bank representative office); §1422(a) (relating to the application fee); and §1424(b) (relating to the fee which must accompany certain reports). The Commissioner is authorized to adopt appropriate regulations regarding the computation of tax liability of a foreign bank limited purpose branch or foreign bank agency or federal branch or agency located in Delaware pursuant to the provisions of §1101(a) of Title 5. Additionally, §121(b) authorizes the Commissioner to prescribe regulations to carry out the purposes of Title 5.

2.0 General Powers.

2.1 Foreign Bank Agency.

2.1.1 A "foreign bank agency", as defined in §101 of Title 5 of the Delaware Code, shall be entitled to engage within the State of Delaware in the general business of banking in the State of Delaware, subject, however, to the limitations set forth in 5 Del.C. §1404(a)(1). The deposit taking authority of such agency, in addition to the authority expressly granted under §1404, shall be co-extensive with the full authority which a federal agency operating in this State would have pursuant to the provisions of the International Banking Act of 1978 as amended.

2.2 Foreign Bank Limited Purpose Branch

2.2.2 A “foreign bank limited purpose branch”, as defined in §101 of Title 5 of the Delaware Code, shall be entitled to engage in all the activities of a foreign bank agency and, in addition, may accept such deposits as would be permissible for a corporation organized under §25A of the Federal Reserve Act (12 U.S.C. §611 et seq.).

2.3 Foreign Bank Representative Office.

2.3.1 A foreign bank representative office may conduct within the State of Delaware representative activities intended to promote banking services offered by and originating from an office or offices of the foreign bank located outside the State of Delaware. A foreign bank representative office is prohibited from either offering or contracting for any product or service within the State of Delaware which would constitute the doing of a general banking business in Delaware.

3.0 General Regulations.

3.1 Application Fees.

3.1.1 A foreign bank shall apply for a certificate of authority for a foreign bank limited purpose branch or foreign bank agency on such forms and in such manner as the Commissioner shall from time to time prescribe. The application shall be accompanied by a filing fee in the amount of $2,000.00 for the use of the State made payable to the State of Delaware.

3.1.2 A foreign bank shall apply for a license to establish a representative office on such forms and in such manner as the Commissioner shall from time to time prescribe. The application shall be accompanied by a license fee of $500.00 and a processing fee of $500.00 made payable to the State of Delaware.

3.2 Records.

3.2.1 In addition to such records as the Commissioner may from time to time require with respect to the computation of tax liability of a foreign bank limited purpose branch or foreign bank agency, each foreign bank limited purpose branch, foreign bank agency and foreign bank representative office shall maintain at its place of business in Delaware in the English language and in United States dollar equivalents a correct and complete set of books and records of account of all business transacted by such office.

3.3 Reports.

3.3.1 Whenever the Commissioner shall require, the foreign bank limited purpose branch or foreign bank agency shall make a written report in the English language and in United States dollar equivalents in such form as he shall from time to time prescribe and verified by a duly authorized executive officer of the foreign bank limited purpose branch or foreign bank agency. Such report shall show the actual financial condition of the business of the foreign bank limited purpose branch or foreign bank agency in the State of Delaware at the close of any past day designated by the Commissioner. The verification of such Report shall state that the person making it on behalf of the foreign bank limited purpose branch or foreign bank agency solemnly swears or affirms that the information set forth therein is a true and correct statement of the condition of the Delaware foreign bank limited purpose branch or foreign bank agency to the best of his knowledge, information and belief.

Additionally, the Commissioner may from time to time request from a foreign bank limited purpose branch or foreign bank agency a copy of any report of condition or the like filed by the foreign bank of which the foreign bank limited purpose branch or foreign bank agency is a part with any other State, the Federal Deposit Insurance Corporation, or the Federal Reserve Board.

3.3.2 Every licensed foreign bank representative office shall file annually a written report of activities conducted during the previous twelve-month period, in the English language and in United States dollar equivalents in such form as the Commissioner shall prescribe. Said report shall be accompanied by a $500.00 fee.

3.4 Maintenance of Assets in Delaware; Separate Assets.

3.4.1 A foreign bank limited purpose branch or foreign bank agency shall maintain within the State of Delaware currency, real estate (at net book value or appraised value, whichever is less), precious metals (to the extent of 75% of market value), bonds, notes, debentures, drafts, bills of exchange or other evidence of indebtedness, including loan participation agreements or certificates, or other obligations payable in the United States or in United States funds, or, with the prior approval of the Commissioner, in funds freely convertible into United States funds, or also with the prior approval of the Commissioner, such other assets as the Commissioner may permit, in an amount which shall be equal to one hundred percent (100%) of the liabilities of the foreign bank of which the foreign bank limited purpose branch or foreign bank agency is a part which are payable at or through the foreign bank limited purpose branch or foreign bank agency, including acceptances, but excluding (without duplication) (1) accrued expenses, (2) amounts due and other liabilities to other offices, agencies or branches of, and wholly-owned (except for a nominal number of directors' shares) subsidiaries of, such foreign bank, (3) liabilities maintained on the books of an international banking facility located at such foreign bank limited purpose branch or foreign bank agency, and (4) such other liabilities as the Commissioner shall determine. The valuation of securities shall be in the manner provided in §1405. Each foreign bank limited purpose branch or foreign bank agency shall keep the assets of its business in this State separate and apart from the assets of its business outside this State.

3.5 Deposit of Assets.

3.5.1 The Commissioner may by order direct a foreign bank limited purpose branch or foreign bank agency to deposit all or a portion of the assets which the foreign bank limited purpose branch or foreign bank agency is required to maintain in this State with such banks or trust companies or national banks located in this State as the Commissioner may from time to time designate where the Commissioner finds such order necessary or desirable for the maintenance of the sound financial condition of the foreign bank limited purpose branch or foreign bank agency, the protection of depositors, creditors and the public interest, and the maintenance of public confidence in the business of a foreign bank limited purpose branch or foreign bank agency.

3.5.2 Where deposits constituting liabilities for purposes of 3.5 of Section 3.0 are fully insured by the Federal Deposit Insurance Corporation, such deposits shall be excluded from the definition of liabilities for the purpose of determining the amount of assets which must be maintained by the foreign bank limited purpose branch or foreign bank agency within the State of Delaware.

4.0 Revocation of Certificate of Authority or License.

4.1 Revocation of Foreign Bank Limited Purpose Branch or Foreign Bank Agency Certificate of Authority.

4.1.1 Determination of Cause.

4.1.1.1 Whenever the Commissioner shall have cause to believe that a foreign bank limited purpose branch or foreign bank agency has engaged in conduct which, pursuant to Section 1410, would constitute cause for the revocation of the certificate of authority of such foreign bank limited purpose branch or foreign bank agency, he shall notify such foreign bank limited purpose branch or foreign bank agency in writing of the alleged violation, and, by means of informal fact-finding, determine whether an order should be issued directing such foreign bank limited purpose branch or foreign bank agency to cease and desist from the conduct giving rise to the violation by a date certain.

4.1.2 Violation of Order.

4.1.2.1 If the Commissioner shall determine that a foreign bank limited purpose branch or foreign bank agency which is the subject of a cease and desist order has not, within the time established, discontinued or rectified the conduct which was the subject of the violation order, he shall give written notice in the manner provided by the provisions of 29 Del.C. §10122 to the foreign bank limited purpose branch or foreign bank agency of the date, time and place of a formal hearing at which the foreign bank limited purpose branch or foreign bank agency shall appear and show cause why its certificate of authority should not be revoked. In addition to witnesses appearing on behalf of the foreign bank limited purpose branch or foreign bank agency, the Commissioner shall, by either informal or formal fact finding, take such testimony and gather such evidence as he deems necessary and appropriate in reaching a decision. Within thirty (30) days following the adjournment of such hearing, the Commissioner shall issue his findings and order revoking the certificate of authority, imposing a lesser sanction, or determining that the order to show cause should be retired without action. The foreign bank limited purpose branch or foreign bank agency shall have such right of appeal from such findings and order as is provided for in Subchapter V of Chapter 101, Title 29, Delaware Code.

4.2 Revocation of Foreign Bank Representative Office License.

4.2.1 Upon a preliminary determination by the Commissioner that a foreign bank representative office may have engaged in conduct which would constitute cause for the revocation of the license of such foreign bank representative office under the provisions of §1425, he shall give notice in writing to such foreign bank representative office setting forth the alleged violation, and directing such foreign bank representative office to appear at a place, on a date and at a time certain to show cause why its license should not be revoked. At such hearing, the foreign bank representative office shall be accorded the right to appear and be heard. The Commissioner shall, by either informal or formal fact finding and within thirty (30) days from the adjournment of such hearing, issue findings and order directing the revocation of the license of the foreign bank representative office, some lesser sanction, or the retirement of the notice to show cause without action. The foreign bank representative office shall have such rights of appeal from such findings and order as are provided in Subchapter V of Chapter 101, Title 29, Delaware Code.

5.0 Allocation of Income and Expenses for Purposes of Determining Delaware Tax Liability of Foreign Bank Limited Purpose Branch or Foreign Bank Agency.

5.1 Method of Allocation.

5.1.1 Although technically a part of the foreign bank, a Delaware foreign bank limited purpose branch or foreign bank agency is to be treated for purposes of assessing and collecting the Delaware Bank Franchise Tax on taxable income (5 Del.C. §1101 et seq.) as if it were a bank having separate corporate existence (§1101(a)). To that end, and in order to derive the amount of "net operating income before taxes" for purposes of §1101(a), a foreign bank limited purpose branch or foreign bank agency shall maintain at all times separate books of account in its Delaware office which fully segregate and portray:

5.1.1.1 With respect to income:

5.1.1.1.1 all receipts directly attributable to an asset carried on the books of the foreign bank limited purpose branch or foreign bank agency; and

5.1.1.1.2 all receipts arising from a transaction entered into or a service provided by the foreign bank limited purpose branch or foreign bank agency within the State of Delaware; provided, that the foreign bank limited purpose branch or foreign bank agency may exclude from its accounting of income otherwise properly allocated to Delaware such receipts as are directly or indirectly subject to taxation in any state other than Delaware by reason of either: (1) the existence of a taxable nexus under the laws of any such state between such state and the transaction of service giving rise to such receipts; or (2) the required inclusion under the laws of any such state of such receipts in the numerator of a receipts factor of a formula used to calculate the income of the foreign bank subject to tax in such state.

5.1.1.2 With respect to expenses:

5.1.1.2.1 all costs directly incurred in the start up, maintenance and operation of the Delaware office;

5.1.1.2.2 all other costs attributable to the generation of income allocated to Delaware pursuant to subsection 5.1.1.1 above; and

5.1.1.2.3 to the extent not included in paragraph 5.1.1.2.1 and 5.1.1.2.2 of this subsection 5.1.1.2 above, an aliquot portion of indirect costs incurred by the foreign bank (in both the United States and the home country) with respect to the start up, maintenance and operation of the foreign bank limited purpose branch or foreign bank agency.

Costs under subparagraphs 5.1.1.2.2 and 5.1.1.2.3 of this subsection 5.1.1.2 shall be allocated to Delaware in the same ratio as the gross receipts of the foreign bank are allocated to Delaware, or in such other fair, equitable and consistent manner as the Commissioner shall, upon request of a foreign bank limited purpose branch or foreign bank agency, approve.

5.2 Commissioner's Right of Examination

5.2.1 The Commissioner shall have the right from time to time to examine the books and records of a foreign bank limited purpose branch or foreign bank agency for the purpose of determining whether all or any portion of the income of the foreign bank limited purpose branch or foreign bank agency has been properly allocated to Delaware, and to issue such findings and orders as he deems necessary and appropriate regarding the reallocation of income which he shall find to have been improperly allocated to a state or states other than Delaware.

6.0 Change of Location, Name or Business.

6.1 A foreign bank limited purpose branch or foreign bank agency may, pursuant to the provisions of §1408, make written request of the Commissioner to change its place of business (accompanied by a filing fee of $500.00) or to change its corporate name for the duration of its corporate existence (no filing fee required). Upon the receipt of such application, the Commissioner shall grant such application within twenty (20) days thereof unless he shall have determined by informal fact finding or otherwise that there exists cause for denying such application. If the Commissioner should determine that facts or circumstances exist constituting cause for denying such application, he shall provide notice and opportunity to be heard to the applicant foreign bank limited purpose branch or foreign bank agency in the manner provided for under the provisions of 29 Del.C. §10123. Not less than thirty (30) days after the adjournment of such hearing, the Commissioner shall issue his final order and findings with respect to the grant or denial of the requested change of location or change of name. An applicant foreign bank limited purpose branch or foreign bank agency aggrieved by the determination of the Commissioner shall have such right of appeal as is granted pursuant to the provisions of Subchapter V, Chapter 101, Title 29, Delaware Code.

2 DE Reg. 295 (08/01/98)

1404 Application by a Foreign Bank for a License To Establish a Foreign Bank Representative Office Pursuant to Subchapter II, Chapter 14, Title 5, Delaware Code

5 Del. Admin. Code § 1404 Application by a Foreign Bank for a License To Establish a Foreign Bank Representative Office Pursuant to Subchapter II, Chapter 14, Title 5, Delaware Code

1404 Application by a Foreign Bank for a License To Establish a Foreign Bank Representative Office Pursuant to Subchapter II, Chapter 14, Title 5, Delaware Code

Formerly Regulation No.: 5.1422.0004

Effective Date: August 13, 1998

1.0 Any application made to the State Bank Commissioner pursuant to §1422 of Title 5, Delaware Code, shall be submitted on the form appended hereto and accompanied by all documents called for by such form as well as by a duly authenticated copy of the foreign bank's charter and bylaws. A non-refundable processing fee of $500 payable to "State of Delaware" must accompany the filing of the attached application. Upon approval of the application, an additional $500 fee must be remitted prior to issuance of the license.

2.0 The Commissioner may, without notice or hearing, issue the requested license; provided that, at his discretion, the Commissioner may require public notice and a hearing on the application.

3.0 All portions, except for the financial report requested in item 5, of this application shall be considered public information.

2 DE Reg. 295 (08/01/98)

Application by a Foreign Bank for a License To Establish a Foreign Bank Representative Office Pursuant to Subchapter II, Chapter 14, Title 5, Delaware Code

1500 Credit Card Institutions

1501 Procedures Governing the Filing and Determination of an Application for a Certificate of Public Convenience and Advantage to Form a Credit Card Institution

5 Del. Admin. Code § 1501 Procedures Governing the Filing and Determination of an Application for a Certificate of Public Convenience and Advantage to Form a Credit Card Institution

1501 Procedures Governing the Filing and Determination of an Application for a Certificate of Public Convenience and Advantage to Form a Credit Card Institution

Formerly Regulation No.: 5.1513.0001

Effective Date: December 8, 1995

1.0 Scope of Regulation

1.1 This regulation establishes procedures governing the filing of an application for a Certificate of Public Convenience and Advantage to form a Credit Card Institution (hereinafter referred to as a "Bank") pursuant to Chapter 15 of Title 5 of the Delaware Code, and the manner in which determinations will be made respecting such applications by the State Bank Commissioner (the "Commissioner").

2.0 Application Procedures

2.1 Notice of the intention of the incorporator(s) to form a Bank ("Notice of Intent") shall be filed in duplicate in the Office of the Commissioner. The Notice of Intent shall specify: (i) the proposed name of the Bank; (ii) the name and address of the incorporator(s) of the Bank (the "Incorporator"); (iii) the city or town in which the Bank will be located; and (iv) the amount of the capital stock of the Bank.

2.2 The Notice of Intent shall attach as exhibits: (i) a copy of the application for a Certificate of Public Convenience and Advantage (the "Application") in the form intended to be filed by the Incorporator pursuant to Section 4.0 of this regulation; (ii) a copy of the proposed Articles of Association of the Bank and (iii) a copy of the resolution of the Board of Directors referred to in 2.3 of this section.

2.3 The Notice of Intent shall be sworn to and subscribed by the Incorporator or by the Incorporator's duly authorized representative.

3.0 Hearing; Notice of Hearing

3.1 If a Notice of Intent and the exhibits thereto filed with the Commissioner are in the form required by this regulation and otherwise conform to applicable provisions of law, the Commissioner shall fix a time, place and date (which shall be within 90 days of the receipt of the Notice of Intent, but not before the expiration of 35 days from the date of the second publication referred to in paragraph 3.2 of this section) for the holding of a hearing on the Application. Within five days following the filing of a Notice of Intent, the Commissioner shall notify the Incorporator making such filing of the date, time and place fixed for the hearing, and shall inform the Incorporator of the right to present evidence, to be represented by counsel or other representatives and of the Commissioner's obligation to reach a decision based upon evidence of record. Thereafter, the Commissioner shall direct the Incorporator to publish a notice of the filing of the Notice of Intent and of the holding of a hearing thereon, in such form as the Commissioner shall approve and containing the information required under 3.2 of this section. Such notice shall be published at least once a week for two successive weeks in one or more newspapers of general circulation designated by the Commissioner, at least one of which newspapers shall be published in the county where it is proposed to establish the Bank.

3.2 The published notice required under paragraph 3.1 of this section shall: describe the subject matter of the proceedings; list the name of the Incorporator; set forth the name of the proposed Bank; specify the city or town where the Bank is to be located; specify the amount of its capital stock; give the date, time and place fixed for a hearing on the application; cite the law (5 Del.C. §1514) and regulation (State Bank Commissioner Regulation No. 1501 (formerly 5.1513.0001) giving the Commissioner authority to act; inform interested persons of an opportunity to present evidence, to be represented by counsel, and to appear personally or by other representatives; and state the Commissioner's obligation to reach a decision based upon evidence of record.

4.0 Filing of Application for a Certificate of Public Convenience & Advantage

4.1 Within sixty days following the second publication of the notice described above in Section 3.0 of this regulation, but not before the expiration of twenty days following the date of the second publication, the Incorporator shall file with the Office of the Commissioner the Application for a Certificate of Public Convenience and Advantage in the format specified by the Commissioner. The Application shall be signed by the Incorporator and shall be accompanied by a non-refundable investigation fee in the amount of $1,150.00, payable to the "Office of the State Bank Commissioner." The Application shall include the "Plan of Operation" for the Bank as required under the provisions of 5 Del.C. §1514. Such plan shall include:

4.1.1 A description of the Bank's Delaware office that accepts deposits (the "Main Office") and all other premises proposed to be occupied by the Bank;

4.1.2 A statement of the services that will be available to the public at the Main Office;

4.1.3 A description of the types of businesses located in the vicinity of the Main Office;

4.1.4 A statement whether the Bank's premises will be owned or leased and, if leased, the material terms of the lease(s);

4.1.5 A description of the types of services and products that the Bank plans to offer;

4.1.6 A description of the principal geographic and demographic markets within which the Bank will operate;

4.1.7 The plans to fund the Bank's proposed credit card operations; and

4.1.8 Any other information which the Commissioner deems relevant to the determination of the Bank's Plan of Operation.

4.2 The Plan of Operation submitted to the Commissioner as a part of the Application may not be materially altered without the prior consent of the Commissioner.

5.0 Hearing Procedures

5.1 The hearing contemplated by this regulation may be conducted by the Commissioner or his designee. At such hearing, the Commissioner or his designee shall accept all relevant, non-cumulative evidence offered by or on behalf of the Incorporator or by any interested person who appears in person or by counsel or other representative.

5.2 The burden of proof at any hearing shall be upon the Incorporator.

5.3 A record from which a verbatim transcript can be prepared shall be made of all hearings. The expense of any transcription of the proceedings requested by the Commissioner or his designee shall be borne by the Incorporator; in all other instances, the expense of such transcription shall be borne by the person requesting it.

5.4 The Commissioner or his designee may request the Incorporator or any other party or parties who appear at a hearing to submit proposed findings of fact and conclusions of law.

6.0 Record

6.1 With respect to each Application, all notices, correspondence between the Commissioner and the Incorporator or other interested parties, all exhibits, documents and testimony admitted into evidence and all recommended orders, summaries of evidence and findings and all interlocutory and final orders shall be included in the Commissioner's record of the matter and shall be retained for a period of at least three years following final action on the Application.

7.0 Proposed Orders

7.1 Following completion of a hearing conducted pursuant to this regulation, the Commissioner or his designee shall prepare a proposed order which shall include:

7.1.1 A brief summary of the proceedings and evidence, and recommended findings of fact based upon the evidence;

7.1.2 Recommended conclusions of law; and

7.1.3 Recommended decision.

7.2 A copy of the proposed order shall be mailed or hand delivered to the Incorporator (or to the Incorporator's designated representative) and to each person who presented data, views or argument at the hearing, each of whom shall thereafter have 20 days to submit in writing to the Commissioner exceptions, comments and arguments respecting the proposed order.

7.3 If the Commissioner presides at a hearing conducted pursuant to this regulation and if the decision on the Application is not adverse to the Incorporator, the Commissioner shall have the right to waive the entry of a proposed order and may instead proceed directly to the entry of a final order under Section 8.0 of this regulation.

8.0 Decision and Final Order

8.1 The Commissioner shall make his determination whether approval of an Application would promote the public convenience and advantage based upon the entire record and any applicable statutory criteria, and upon the summaries and recommendations of subordinates based upon the record.

8.2 Every determination on an Application shall be incorporated in a final order which shall include, where appropriate:

8.2.1 A brief summary of the proceedings and evidence;

8.2.2 Findings of fact based upon the evidence;

8.2.3 Conclusions of Law;

8.2.4 Any other conclusions or findings required by law; and

8.2.5 A concise statement of the Commissioner's determination of the Application.

8.3 Every final order shall be signed by the Commissioner and shall be mailed or hand delivered to the Incorporator (or to the Incorporator's designated representative) and to each person that presented data, views, or arguments at the hearing and to any other person requesting a copy of the final order.

1502 Application for a Certificate of Public Convenience and Advantage Pursuant to 5 Del. C. §1513

5 Del. Admin. Code § 1502 Application for a Certificate of Public Convenience and Advantage Pursuant to 5 Del. C. §1513

1502 Application for a Certificate of Public Convenience and Advantage Pursuant to 5 Del. C. §1513

Formerly Regulation No.: 5.1513.0002

Effective Date: December 8, 1995

Any application made to the State Bank Commissioner pursuant to §1513 of Title 5, Delaware Code, shall be submitted on the form appended hereto and accompanied by all documents called for by such form. A non-refundable investigation fee of One Thousand One Hundred and Fifty Dollars, payable to the "Office of the State Bank Commissioner", must accompany the filing of the attached application (see Regulation 1501 (formerly 5.1513.0001)).

Application for a Certificate of Public Convenience and Advantage Pursuant to 5 Del. C. §1513

1503 Minimum Books and Records for Credit Card Institutions

5 Del. Admin. Code § 1503 Minimum Books and Records for Credit Card Institutions

1503 Minimum Books and Records for Credit Card Institutions

5 Del.C. §1542

Formerly Regulation No.: 5.1542.0003

Effective Date: December 8, 1995

This regulation provides for the minimum books and records requirements for Credit Card Institutions.

§1542 of Title 5 of the Delaware Code provides that the State Bank Commissioner may issue regulations prescribing the minimum books and records required to be maintained by and at the institution's Delaware office that accepts deposits.

All records must be easily accessible for supervisory examination purposes. In addition, records, with the exception of those that are considered to be of a permanent nature, may be copied (i.e. microfilmed, photographed) at the institution's discretion and such copy retained for the designated period of time.

1.0 Corporate Records

1.1 Annual Reports

1.2 Charter, certificate of incorporation, bylaws, amendments, minutes of meetings of directors, executive and other committees

1.3 FDIC Assessment base records

1.4 Records of loans to executive officers, directors and principal shareholders

1.5 Records of outside business interests of bank's executive officers, directors and principal shareholders and their transactions with the bank

2.0 Capital

2.1 Capital Stock Certificates, records and stubs

2.2 Capital Stock Ledger

2.3 Capital Stock Transfer Ledger

2.4 Dividend Check Register

2.5 Dividend Checks paid

2.6 Proxies

3.0 Accounting and Auditing

3.1 Accrual and Bond Amortization Records

3.2 Audit Reports - External & Internal

3.3 Bank Reports of Condition and Income

3.4 Bank Franchise Tax Returns

3.5 Bank Examiner Supervision Reports

3.6 Budget Worksheets

3.7 Charged-off asset records

3.8 Daily Reserve Computation

3.9 Difference Record

3.10 Reconcilements of bank asset and liability accounts, i.e., due to and due from, loans, etc.

4.0 General Ledger

4.1 Daily Statement of Condition

4.2 General ledger and any subsidiary ledgers

4.3 Transactions journals, general ledger sheets/cards and general ledger tickets - debits and credits

5.0 Insurance

5.1 Banker's Blanket Bond

5.2 Records of Policies in force

5.3 Insurance schedules, records of premium payments and recoveries

6.0 Investments

6.1 Securities ledger

6.2 Brokers' Confirmations and Invoices

6.3 Brokers' Statements

6.4 Safekeeping Receipts

6.5 Securities Buy and Sell orders

7.0 Loans

7.1 Customer applications

7.2 Customer collateral and register, if any

7.3 Correspondence: customer, dealer and general

7.4 Credit files

7.5 Trial Balance - Account number, name, balance, cycles past due (if applicable), etc.

7.6 Delinquency Report - account number, name, balance cycles past due, etc.

7.7 Cardholder agreements and merchants agreements

7.8 Statements - Cardholders and Merchants

7.9 Transaction Journals

7.10 Overdraft loan agreement, where applicable

7.11 Records of extensions of credit over $5,000

7.12 Collection letters; incoming and outgoing

8.0 Compliance

Evidence of compliance with the following federal regulations:

8.1 Truth-in-Lending Act

8.2 Fair Credit Reporting Act

8.3 Fair Debt Collection Practices Act

8.4 Bank Secrecy Act

9.0 Taxes

9.1 All tax records

10.0 Due from Banks

10.1 Advice from correspondents

10.2 Bank statements

10.3 Drafts and Draft Register

10.4 Reconcilement letters

10.5 Transit letters

11.0 Certificates of Deposits and Other Time Deposits

11.1 Certificate Register

11.2 Signature Cards

11.3 Taxpayer Information

11.4 Trial Balance

11.5 Withdrawal request

12.0 Registered Mail

12.1 Registered mail records - incoming, outgoing, air & sea

12.2 Return receipt cards

1700 Building and Loan Associations

1701 Filings by Federally-Insured Savings/Building and Loan Associations

5 Del. Admin. Code § 1701 Filings by Federally-Insured Savings/Building and Loan Associations

1701 Filings by Federally-Insured Savings/Building and Loan Associations

Formerly Regulation No.: 5.1701etal.0001.P/A

Effective Date: August 15, 1986

1.0 All State-chartered savings/building and loan associations insured by the Savings Association Fund shall submit all filings required by the Office of Thrift Supervision simultaneously with this office. Examples of such filings are the quarterly financial reports and any submissions requested as a result of an examination.

1800 Taxation - Building & Loan Associations

1801 Instructions for Preparation of Franchise Tax

5 Del. Admin. Code § 1801 Instructions for Preparation of Franchise Tax

1801 Instructions for Preparation of Franchise Tax

5 Del.C. Ch. 18

Formerly Regulation No.: 5.1801.0001

Effective Date: January 1, 1993

1.0 Definitions

"Building And Loan Association" means any corporation, person, firm partnership, association, trustee or combination of persons whatsoever within the purview of Chapter 17, Title 5, Delaware Code, and includes savings and loan associations.

"Net Operating Income Before Taxes" means the total operating income minus total operating expense.

2.0 Certification of Tax; tax Due

2.1 Within 75 days after the end of its fiscal year, the building and loan association shall file with the Office of the State Bank Commissioner a statement of net income for the prior taxable period verified by oath. The statement of net income shall be of the form set forth in Regulation No. 1802 (formerly 5.1801.0002).

2.2 At the same time the building and loan association shall file with the Office of the State Bank Commissioner a Final Franchise Tax Report, verified by oath, of the form set forth in Regulation No. 1803 (formerly 5.1801.0003) and shall pay the final franchise tax due. Checks should be made payable to the State of Delaware.

2.3 The total franchise tax due shall be calculated as follows:

2.3.1 Net operating income before taxes reduced by any deduction set forth in §1801 of Title 5, Delaware Code;

2.3.2 Multiplied by the factor .56 to arrive at taxable income;

2.3.3 The appropriate rate of taxation set forth in subsection 1801(c) of Chapter 18, Title 5, Delaware Code, shall be applied to the taxable income to arrive at the total franchise tax due.

3.0 Penalty

3.1 If any building and loan association shall fail to pay any tax due on or before the due date, a penalty of 1½ percent shall be assessed for each month or fraction thereof that the tax remains unpaid.

1803 Final Franchise Tax Report

5 Del. Admin. Code § 1803 Final Franchise Tax Report

1803 Final Franchise Tax Report

5 Del.C. Ch. 18

Formerly Regulation No.: 5.1801.0003

Effective Date: January 1, 1993

Within 75 days after the end of its fiscal year each building and loan association shall submit this form to the Office of the State Bank Commissioner. Income reported is for the previous taxable period.

The Final Franchise Tax Report can be viewed at:

Final Franchise Tax Report

2100 Mortgage Loan Brokers

2101 Mortgage Loan Brokers Operating Regulations

5 Del. Admin. Code § 2101 Mortgage Loan Brokers Operating Regulations

5 Del.C. §§2102(b) and 2112

Effective Date: October 13, 2016

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-1.0 Applicability of Chapter

1.1 5 Del.C. Ch. 21 applies only to extensions of credit secured by one to four family residential owner-occupied property located in this State intended for personal, family, or household purposes.

1.2 5 Del.C. Ch. 21 does not apply to:

1.2.1 mortgage loans secured by any property of 25 acres or more; and

1.2.2 mortgage loans intended for commercial purposes.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-2.0 Compliance with Applicable Laws

2.1 All licensees shall comply with 5 Del.C. Ch. 21, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

2.2 The manager and appropriate staff of each licensed office shall familiarize themselves with all such statutes and regulations.

2.3 Each licensed office shall maintain, either by paper copy or through electronic access, 5 Del.C. Ch. 21 and the following regulations:

2.3.1 Regulation 101, Retention of Financial Institution Records;

2.3.2 Regulation 2101, Operating Regulation;

2.3.3 Regulation 2102, Minimum Records;

2.3.4 Regulation 2103, Schedule of Charges;

2.3.5 Regulation 2104, Minimum Disclosure and Agreement Requirements;

2.3.6 Regulation 2105, Report of Delaware Loan Volume;

2.3.7 Regulation 2106, Report of Delaware Assets;

2.3.8 Regulation 2107/2208, Guidance on Nontraditional Mortgage Product Risks;

2.3.9 Regulation 2108/2209, Statement on Subprime Mortgage Lending; and

2.3.10 Regulation 2401, Mortgage Loan Originator Licensing.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-3.0 Loan Closings in the Name of a Licensee

A mortgage loan shall not close in the name of a licensee unless such a closing is required by either a government agency or a government sponsored entity.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-4.0 Mortgage Loan Originators

4.1 Each licensee shall insure that every person who it employs, or is affiliated with it, as a mortgage loan originator, as defined by 5 Del.C. Ch. 24, to provide mortgage loan originator services has complied with all the requirements of that chapter and the regulations issued thereunder.

4.2 Each licensee shall promptly notify the Commissioner of the cessation of employment or termination of affiliation of any mortgage loan originator who had been providing residential mortgage loan origination services for the licensee.

4.3 The unique identifier, issued by the Nationwide Mortgage Licensing System and Registry, of the applicable mortgage loan originator shall be clearly shown on all residential mortgage loan application forms for all such loans originated by that individual.

4.4 A licensee may use its surety bond under 5 Del.C. Ch. 21 to cover mortgage loan originators who are its employees or exclusive agents if the bond conforms to all requirements of 5 Del.C. §2415 and §12.0 of Regulation 2401.

4.4.1 A licensee’s irrevocable letter of credit may not be used to cover mortgage loan originators.

4.4.2 A licensee shall notify the Commissioner in writing of the names of the mortgage loan originators who are covered by its surety bond and of any change in such coverage for those originators.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-5.0 Advertising

5.1 A licensee shall not advertise in any way that is false, misleading or deceptive.

5.2 Any advertising that in any way falsely indicates that its source or origin is a government agency or the recipient’s existing lender is prohibited.

5.3 A licensee shall not advertise any credit terms that are not actually available.

5.4 When a licensee advertises with respect to its services under 5 Del.C. Ch. 21, the advertisement may state that the licensee is licensed by the Delaware State Bank Commissioner to engage in business in this State and may specify the license number and expiration date of the license.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-6.0 Internet Websites

If the website allows the licensee to conduct any business governed by its license, the website shall properly secure the transmission of all confidential information entered on the website or otherwise exchanged between the licensee and any consumer or borrower.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-7.0 Reports

Each licensee shall submit to the Nationwide Mortgage Licensing System and Registry such reports of condition at such times, in such form and containing such information as that System shall require.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-8.0 Information Security

Each licensee shall implement and maintain a written comprehensive security program that contains appropriate administrative, technical and physical measures to safeguard the confidentiality of all information concerning applicants and borrowers related to the business governed by this regulation, including, but not limited to, all application information, account information, and information from any consumer report.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-9.0 License Applications

9.1 The Nationwide Mortgage Licensing System and Registry, as the multi-state automated licensing system in which the Commissioner is participating pursuant to 5 Del.C. §2117, is authorized to act on behalf of the Commissioner to facilitate the application and licensing processes of 5 Del.C. Ch. 21, and in that capacity, the System may, with respect to that chapter:

9.1.1 process licensing applications;

9.1.2 collect licensing payments;

9.1.3 submit fingerprints and any other information required for a criminal history background check to the Federal Bureau of Investigation or other law-enforcement agency;

9.1.4 receive information and maintain records regarding applicants and licensees; and

9.1.5 share information it maintains regarding applicants and licensees subject to the System with any other state participating in the System, if that state could have obtained that same information directly from the applicant or licensee under its own law for the purpose of licensing, regulating, or supervising that same applicant or licensee under a statute similar to 5 Del.C. Ch. 21.

9.2 Any person seeking an initial or renewal license to engage in a business that requires a license under 5 Del.C. Ch. 21 shall submit the appropriate application and fees to the Commissioner through the Nationwide Mortgage Licensing System and Registry.

9.3 All applications shall contain such information, and be submitted on such forms and in such manner as the Commissioner may designate. The Commissioner may change and update application forms as the Commissioner deems appropriate. The Commissioner may also require additional information in connection with any particular application.

9.4 All applications, whether for a main company location or a branch location, must be submitted with the investigation fee of $250, the annual licensing fee of $500.00, and the Nationwide Mortgage Licensing System processing fee of $100 (main company location) or $20 (branch location) (or such other amount as the System may charge). The Nationwide Mortgage Licensing System processing fee and the investigation fee are non-refundable.

9.5 No application shall be deemed complete until the Commissioner has received all required information, documents and fees.

9.6 If the Commissioner determines that an application is incomplete, the Commissioner shall send written notification to the applicant indicating the items that must be addressed to continue the application review process. If the Commissioner does not receive a complete response fully addressing all such items within 30 days after sending that notice, the Commissioner may consider the application withdrawn.

9.7 Any person seeking an initial license following withdrawal of an application shall submit a new application that includes all information, documents and fees required for an initial license.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-10.0 Examination Fees and Supervisory Assessments

10.1 The Commissioner may examine licensees pursuant to 5 Del.C. §§122 and 2110. The costs of such examinations are assessed in accordance with 5 Del.C. §127(a). A licensee shall remit payment not later than 30 days after the date of the examination invoice.

10.2 The Commissioner shall assess each licensee a supervisory assessment that is due and payable on August 1 each year, in accordance with 5 Del.C. §127(b).

10.3 Failure to remit timely payment of any examination fee or supervisory assessment will result in a penalty of 0.05 percent of the amount unpaid for each day that such fee or assessment remains unpaid after the due date, in accordance with 5 Del.C. §§127(a) and 127(b).

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

5 Del. Admin. Code § 2101-11.0 Examination Responses

A licensee shall send the Commissioner a written response to every violation specified in a report of examination no later than 30 days after the date of the report.

History

• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 20 DE Reg. 304 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 13 DE Reg. 862 (12/01/09)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 304 (10/01/16)

2102 Mortgage Loan Brokers Minimum Requirements for Content of Books and Records

5 Del. Admin. Code § 2102 Mortgage Loan Brokers Minimum Requirements for Content of Books and Records

5 Del.C. §§2111(a) and 2112

Effective Date: December 11, 2014

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2102-1.0 Minimum Required Records

Each licensed office shall maintain the following records on a current basis:

1.1 Register.

1.1.1 For applicants not granted credit, the office shall maintain a register containing:

1.1.1.1 the applicant’s name and address;

1.1.1.2 a file identification number;

1.1.1.3 the application date;

1.1.1.4 the name of the mortgage loan originator for the application together with the unique identifier assigned to the originator by the Nationwide Mortgage Licensing System and Registry;

1.1.1.5 the date of the credit decision or the date the application was withdrawn; and

1.1.1.6 the reason that applicant was not granted credit.

1.1.2 For borrowers, the office shall maintain a register containing:

1.1.2.1 the information specified in §§1.1.1.1 through 1.1.1.4 of this regulation;

1.1.2.2 the date of the loan closing;

1.1.2.3 an identification of the security for the loan;

1.1.2.4 the amount of the loan;

1.1.2.5 the lender’s name and address;

1.1.2.6 the amount of the broker's fee; and

1.1.2.7 the date that fee was paid.

1.2 Applicant Record. For each applicant not granted credit, the office shall maintain a record containing all documents relating to the applicant that shall include:

1.2.1 the applicant’s name and address;

1.2.2 a file identification number;

1.2.3 the application;

1.2.4 all disclosures related to the loan that are required by the Federal Truth-in-Lending Act, as amended, and the regulations thereunder;

1.2.5 the name of the mortgage loan originator together with the unique identifier assigned to the originator by the Nationwide Mortgage Licensing System and Registry;

1.2.6 the Good Faith Estimate for the loan that is required by the Federal Real Estate Settlement Procedures Act, as amended, and the regulations thereunder;

1.2.7 the broker agreement with signature(s) of each applicant;

1.2.8 all invoices or other evidence of expenses incurred in connection with the application, including any property appraisal, title certificate, and credit report;

1.2.9 all receipts provided to the applicant for amounts paid to the licensee;

1.2.10 a record of all fees collected by the licensee;

1.2.11 a record of all refunds with an explanation of them;

1.2.12 the name and address of every lender the licensee contacted concerning the application;

1.2.13 any written counteroffer for credit provided to the applicant;

1.2.14 any document specifying the reasons that credit was not granted; and

1.2.15 all other written communications between the licensee and the applicant.

1.3 Borrower Record. For each borrower, the office shall maintain a record containing all documents relating to the borrower that shall include:

1.3.1 the information and documents specified in §§1.2.1 through 1.2.13 of this regulation;

1.3.2 the lender’s name and address;

1.3.3 the loan commitment;

1.3.4 the Uniform Settlement Statement required by the Federal Real Estate Settlement Procedures Act, as amended, and the regulations thereunder;

1.3.5 for reverse mortgage loans, the certification from an independent housing counselor that is required by 5 Del.C. §2118; and

1.3.6 all other written communications between the licensee and the borrower.

1.4 Daily Transaction Record. The office shall maintain on a daily basis a record of all transactions involving either the receipt or disbursement of any amount whatsoever. Details of disbursements to or for the account of applicants and borrowers shall be itemized.

1.5 Litigation Record. The office shall maintain in an individual file or in a separate litigation section, a record of all judicial and arbitration proceedings in which the licensee and an applicant or borrower are adversary parties. Records of judicial or arbitration proceedings being handled by attorneys or corporate collection centers may be maintained in a central office and must reflect the current status of the matter. In addition to all other information required by this regulation, these records shall include:

1.5.1 all documents filed with, or issued by, the court or arbitrator; and

1.5.2 the date and terms of any judgment, arbitration decision, dismissal or settlement.

1.6 Advertising Record. The office shall maintain a record containing all advertising materials used by the licensee:

1.6.1 for printed advertising, this record shall contain a copy of each advertisement indicating its type (print publication, billboard, direct mail, etc.) a listing of the publications in which printed, billboard locations by zip code, number of mailings by zip code and the dates of publication, display or mailing;

1.6.2 for radio advertising, this record shall contain a transcript of each advertisement, a listing of the stations on which each advertisement was broadcast, and for each station, the date of each broadcast;

1.6.3 for television advertising, this record shall contain a transcript of the advertisement with visual depictions of each scene, a list of the stations on which each advertisement was broadcast, and for each station the date of each broadcast;

1.6.4 for internet advertising, this record shall contain a copy of the advertisement.

1.7 Mortgage Loan Originator Register. The office shall maintain a register of all mortgage loan originators that it has employed, or have been affiliated with it, to provide residential mortgage loan origination services. The register shall contain:

1.7.1 the name of the originator;

1.7.2 the originator’s unique identifier issued the Nationwide Mortgage Licensing System and Registry;

1.7.3 the date that the licensee first retained the originator in that capacity; and

1.7.4 the date that the originator’s employment or affiliation with the licensee in that capacity ended.

1.8 Additional Records. The office shall maintain any other records necessary to verify the licensee’s compliance with 5 Del.C. Ch. 21, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2102-2.0 Location, Format and Retention of Records

2.1 All records shall be made available to the Commissioner’s staff when requested.

2.2 Records may be maintained at the licensed office itself or at any other suitable location if they can be available within a reasonable period of time upon request.

2.3 All records may be maintained by paper copy or in an electronic format.

2.4 All records shall be retained in accordance with the time periods specified in Regulation 101, Retention of Financial Institution Records.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2102-3.0 Variations

The Commissioner may grant written approval for variations from this regulation to accommodate specific record keeping systems. Requests for such approvals must be in writing and provide sufficient information concerning the system to ensure that the requirements of this regulation are satisfied and that the records will be readily available when requested.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2103 Mortgage Loan Broker Regulations Itemized Schedule of Charges

5 Del. Admin. Code § 2103 Mortgage Loan Broker Regulations Itemized Schedule of Charges

5 Del.C. §2115

Effective Date: April 11, 2014

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2103-1.0 Itemization of Charges

1.1 Each licensee shall maintain an itemization of the current charges that the licensee uses in consumer transactions. The itemization shall identify all charges that the licensee may collect from an applicant or borrower for a particular type of transaction, including a credit report fee, any broker origination fees, or other third-party fees. The itemization must be dated as of the most recent change in any charge and may contain value ranges to reflect the different costs of credit that may vary with risk or rate.

1.2 Each licensee shall furnish every applicant with a copy of its itemization of charges when the application is made.

1.2.1 An explanation of the contents of the itemization satisfies this requirement for telephone applications.

1.2.2 Website screens containing the itemization satisfy this requirement for electronic applications. The applicant must affirmatively acknowledge receipt of these screens before completing an application.

1.2.3 A Good Faith Estimate issued in accordance with the Federal Real Estate Settlement Procedures Act, as amended, satisfies this requirement for real estate secured transactions covered by that statute.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2103-2.0 Licensee Compensation

2.1 A licensee may receive any form of compensation that is allowed under 5 Del.C. Ch. 21, and not prohibited by any applicable federal statute or regulation. For the purposes of this section, compensation means the transfer of any "thing of value" as defined in the Federal Real Estate Settlement Procedures Act, as amended and the regulations thereunder, and does not require transfer of money.

2.2 Compensation cannot exceed any maximum allowed by any applicable State or federal statute or regulation.

2.3 Charges for fees paid to a third-party cannot exceed the amount paid to that party for the particular service provided. Average charges for fees paid to third parties are permissible provided they are calculated in accordance with the Federal Real Estate Settlement Procedures Act, as amended, and the regulations thereunder.

2.4 All forms of compensation that a licensee receives from an applicant or borrower must be specified in the licensee’s agreement with that customer for a licensee to receive payment. This specification must include a description of each fee to be received, including but not limited to, credit report fees and loan origination fees.

2.5 The total compensation charged by a licensee shall not exceed the value of the goods and services provided.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2103-3.0 Charges Permissible Prior to Receipt of a Written Commitment

3.1 A licensee may collect the following charges prior to the receipt of a written commitment from a lender:

3.1.1 Credit Report Fee: The fee charged for all credit reports obtained from credit reporting agencies;

3.1.2 Appraisal Fee: The fee charged for a written report as to the value of the security tendered;

3.1.3 Rate Lock Fee: Fees for the commitment of a specific interest rate to be held for a specified period of time may be collected in accordance with a signed agreement if the fees are paid to the lender.

3.1.4 Title Insurance Premiums and Title Services Fees: The premium for lender’s title insurance and related endorsements. At the request of the borrower, such amount may include owner’s title insurance and related endorsements in addition to lender’s coverage. The fees for title services include the cost of the title commitment, certificate, search, examination, binder and direct compensation paid to the agent and the underwriter;

3.1.5 Third-Party Fees: Other bona fide third-party fees paid or incurred on behalf of the customer. These other fees shall not be incurred without the express permission of the customer; and

3.1.6 Returned Check Charges: Charges for returned checks and for the denial of electronic account debits are limited to the amount specified in the licensee’s agreement with its customer. A customer may be assessed only one such charge per item.

3.2 Amounts collected in excess of actual charges shall be refunded to the customer, and actual charges that exceed amounts collected may be charged to the customer.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2103-4.0 Charges Permissible After Receipt of a Written Commitment or Pre-Approval and Prior to Consummation of the Mortgage Loan

4.1 A licensee may collect fees that the lender may require in advance of a loan closing, if paid directly to the lender or third-party provider.

4.2 This section shall not prohibit the collection of charges otherwise permitted under §3.0 of this regulation if such charges are collected after receipt of a written commitment or pre-approval.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2103-5.0 Collection of Charges in the Name of the Licensee

Notwithstanding the limitations under §§3.0 and 4.0 of this regulation, a licensee may collect the charges authorized in those sections in the licensee's own name, if required by the lender.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2103-6.0 Fees From Lenders

A licensee may collect a fee from a lender in accordance with their written mortgage loan broker agreement at closing or following any applicable rescission period.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2104 Mortgage Loan Brokers Minimum Disclosure Requirements

5 Del. Admin. Code § 2104 Mortgage Loan Brokers Minimum Disclosure Requirements

5 Del.C. §2113

Effective Date: December 11, 2014

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)

5 Del. Admin. Code § 2104-1.0 Written Agreement

The licensee shall enter into a separate, signed, written agreement with the applicant, independent of the loan agreement. The licensee shall provide a copy of this agreement to the lender, and the lender shall disburse licensee compensation only in accordance with that agreement. The terms of the agreement shall be disclosed to the applicant before the payment of any nonrefundable fees other than any credit report fee. A copy of the agreement shall be provided to the applicant at the time the agreement is signed.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)

5 Del. Admin. Code § 2104-2.0 Contents of Agreement

The agreement shall contain, at minimum:

2.1 the licensee’s name, address, and telephone number;

2.2 the name of the mortgage loan originator together with the unique identifier assigned by the Nationwide Mortgage Licensing System and Registry;

2.3 the applicant’s name, address, and telephone number;

2.4 the date of the agreement and the period for which it shall remain in effect;

2.5 a statement that the licensee is not the lender;

2.6 a complete description of the services the licensee will perform for the applicant. This description must be sufficient to determine whether the services the licensee will provide are commensurate with the compensation the licensee will receive;

2.7 a statement of the circumstances under which the licensee will be entitled to obtain or retain compensation from the applicant;

2.8 the total amount of the mortgage loan broker’s compensation expressed as a dollar amount or range;

2.9 a specific statement that “In no event shall the cost of these services exceed the amount disclosed in this agreement”;

2.10 a statement as to which fees are refundable and nonrefundable and under what circumstances; and

2.11 a statement that the applicant may be entitled to the refund of certain funds paid to the licensee upon exercise of the right to rescind the transaction under the Federal Truth-In-Lending Act, as amended, and the regulations thereunder.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)

2105 Report of Delaware Loan Volume

5 Del. Admin. Code § 2105 Report of Delaware Loan Volume

5 Del.C. §§2111 and 2112

Effective Date: April 11, 2014

Each licensee shall submit this report to the Office of the State Bank Commissioner twice each year. The first report must be received no later than July 31 and must contain information from January 1 through June 30 of the current year. The second report must be received no later than January 31 and must contain information from January 1 through December 31 of the previous year.

Licensees with more than one licensed office, whose files are maintained at a consolidated, centralized location, may file a consolidated report. Otherwise, a separate report must be submitted for each licensed office.

A completed, signed report may be scanned and submitted by e-mail to bco_reports@state.de.us not later than July 31 and January 31.

Failure to submit this report when due will be a violation of this regulation. In addition, an examination may be scheduled and examination staff allocated without respect to the licensee’s volume of Delaware loans. This may result in additional examination costs.

1. Name of Licensee: ____________________________________________________

2. Is this a consolidated report? Yes _____ No _____

3. License No.: __________ (If consolidated, list all license numbers): ______________

---

4. List the address where the loan files are maintained:

---

---

---

---

5. Examination contact person’s name, title, phone number, fax number and e-mail address:

---

---

6. List the Delaware business conducted (number of loans) in each of the following categories:

A. Loans Placed, per agreement: _________________________

Total Dollar Value: $________________________

B. Loans Rescinded: _________________________

C. Applications Denied: _________________________

7. Reporting Period: __________________ to ___________________

I, the undersigned officer, hereby certify that this report is true and correct to the best of my knowledge and belief.

---

Date Signature Title

---

Printed Name Phone Number

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2106 Report of Delaware Assets

5 Del. Admin. Code § 2106 Report of Delaware Assets

5 Del.C. §§2111 and 2112

Effective Date: April 11, 2014

Each licensee shall submit this report annually to the Office of the State Bank Commissioner. This report must be received no later than April 1 of each year and must contain information for the previous calendar year. The information reported should reflect DELAWARE assets only (including the value of any Delaware loans or contracts, any funds deposited in Delaware, and any fixed assets located in Delaware or any other assets allocated to the Delaware operations).

A completed, signed report may be scanned and submitted by e-mail to bco_reports@state.de.us no later than April 1.

Failure to submit this report when due will be a violation of this regulation. In addition, an examination may be scheduled and examination staff allocated without respect to the licensee’s amount of Delaware assets. This may result in additional examination costs.

1. Name of Licensee: _______________________________________________________

2. Address of Principal License: _______________________________________________

---

---

3. To whom should we mail the supervisory assessment invoice? Please provide name, title, complete mailing address, telephone number (include area code and extension numbers, if applicable) fax number and e-mail address:

---

---

---

---

4. DELAWARE assets as of December 31st of the immediately previous year:

I, the undersigned officer, hereby certify that this report is true and correct to the best of my knowledge and belief.

---

Date Signature Title

---

Printed Name Phone Number

History

• 17 DE Reg. 994 (04/01/14)

2107/2208 Guidance On Nontraditional Mortgage Product Risks

5 Del. Admin. Code § 2107/2208 Guidance On Nontraditional Mortgage Product Risks

2107/2208 Guidance On Nontraditional Mortgage Product Risks

5 Del.C. §2110(a), §2210(a)

Effective Date: July 11, 2007

1.0 Introduction and Background

1.1 On October 4, 2006, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) (collectively, the Agencies) published final guidance in the Federal Register (Volume 71, Number 192, Page 58609-58618) on nontraditional mortgage product risks (“interagency guidance”). The interagency guidance applies to all banks and their subsidiaries, bank holding companies and their nonbank subsidiaries, savings associations and their subsidiaries, savings and loan holding companies and their subsidiaries, and credit unions.

1.1.1 The Delaware State Bank Commissioner (the “Commissioner”) strongly supports the purpose of the guidance adopted by the Agencies and is committed to promote uniform application of its consumer protections for all borrowers.

1.1.2 The following guidance will promote consistent regulation in the mortgage market and clarify how mortgage brokers and mortgage companies (referred to as “providers”) not affiliated with a bank holding company or an insured financial institution can offer nontraditional mortgage products in a way that clearly discloses the risks that borrowers may assume.

1.1.3 In order to maintain regulatory consistency, this guidance substantially mirrors the interagency guidance, except for the deletion of sections not applicable to non-depository institutions.

1.2 The Agencies developed their guidance to address risks associated with the growing use of mortgage products that allow borrowers to defer payment of principal and, sometimes, interest. These products, referred to variously as “nontraditional,” “alternative,” or “exotic” mortgage loans (hereinafter referred to as nontraditional mortgage loans), include “interest-only” mortgages and “payment option” adjustable-rate mortgages. These products allow borrowers to exchange lower payments during an initial period for higher payments during a later amortization period.

1.3 While similar products have been available for many years, the number of institutions and providers offering them has expanded rapidly. At the same time, these products are offered to a wider spectrum of borrowers who may not otherwise qualify for more traditional mortgages. The Commissioner is concerned that some borrowers may not fully understand the risks of these products. While many of these risks exist in other adjustable-rate mortgage products, the concern of the Commissioner is elevated with nontraditional products because of the lack of principal amortization and potential for negative amortization. In addition, providers are increasingly combining these loans with other features that may compound risk. These features include simultaneous second-lien mortgages and the use of reduced documentation in evaluating an applicant’s creditworthiness.

1.4 Residential mortgage lending has traditionally been a conservatively managed business with low delinquencies and losses and reasonably stable underwriting standards. In the past few years consumer demand has been growing, particularly in high priced real estate markets, for closed-end residential mortgage loan products that allow borrowers to defer repayment of principal and, sometimes, interest. These mortgage products, herein referred to as nontraditional mortgage loans, include such products as “interest-only” mortgages where a borrower pays no loan principal for the first few years of the loan and “payment option” adjustable-rate mortgages (ARMs) where a borrower has flexible payment options with the potential for negative amortization.1

1.5 While some providers have offered nontraditional mortgages for many years with appropriate risk management, the market for these products and the number of providers offering them has expanded rapidly. Nontraditional mortgage loan products are now offered by more lenders to a wider spectrum of borrowers who may not otherwise qualify for more traditional mortgage loans and may not fully understand the associated risks.

1.6 Many of these nontraditional mortgage loans are underwritten with less stringent income and asset verification requirements (“reduced documentation”) and are increasingly combined with simultaneous second-lien loans.2 Such risk layering, combined with the broader marketing of nontraditional mortgage loans, exposes providers to increased risk relative to traditional mortgage loans.

1.7 Given the potential for heightened risk levels, management should carefully consider and appropriately mitigate exposures created by these loans. To manage the risks associated with nontraditional mortgage loans, management should:

1.7.1 Ensure that loan terms and underwriting standards are consistent with prudent lending practices, including consideration of a borrower’s repayment capacity; and

1.7.2 Ensure that consumers have sufficient information to clearly understand loan terms and associated risks prior to making a product choice.

1.8 The Commissioner expects providers to effectively assess and manage the risks associated with nontraditional mortgage loan products.

1.9 Providers should use this guidance to ensure that risk management practices adequately address these risks. The Commissioner will carefully scrutinize risk management processes, policies, and procedures in this area. Providers that do not adequately manage these risks will be asked to take remedial action.

1.10 The focus of this guidance is on the higher risk elements of certain nontraditional mortgage products, not the product type itself. Providers with sound underwriting, and adequate risk management will not be subject to criticism merely for offering such products.

2.0 Loan Terms and Underwriting Standards

2.1 When a provider offers nontraditional mortgage loan products, underwriting standards should address the effect of a substantial payment increase on the borrower’s capacity to repay when loan amortization begins.

2.2 Central to prudent lending is the internal discipline to maintain sound loan terms and underwriting standards despite competitive pressures. Providers are strongly cautioned against ceding underwriting standards to third parties that have different business objectives, risk tolerances, and core competencies. Loan terms should be based on a disciplined analysis of potential exposures and compensating factors to ensure risk levels remain manageable.

2.3 Qualifying Borrowers -- Payments on nontraditional loans can increase significantly when the loans begin to amortize. Commonly referred to as payment shock, this increase is of particular concern for payment option ARMs where the borrower makes minimum payments that may result in negative amortization. Some providers manage the potential for excessive negative amortization and payment shock by structuring the initial terms to limit the spread between the introductory interest rate and the fully indexed rate. Nevertheless, a provider’s qualifying standards should recognize the potential impact of payment shock, especially for borrowers with high loan-to-value (LTV) ratios, high debt-to-income (DTI) ratios, and low credit scores. Recognizing that a provider’s underwriting criteria are based on multiple factors, a provider should consider these factors jointly in the qualification process and may develop a range of reasonable tolerances for each factor. However, the criteria should be based upon prudent and appropriate underwriting standards, considering both the borrower’s characteristics and the product’s attributes.

2.3.1 For all nontraditional mortgage loan products, a provider’s analysis of a borrower’s repayment capacity should include an evaluation of their ability to repay the debt by final maturity at the fully indexed rate,3 assuming a fully amortizing repayment schedule.4 In addition, for products that permit negative amortization, the repayment analysis should be based upon the initial loan amount plus any balance increase that may accrue from the negative amortization provision.5

2.3.2 Furthermore, the analysis of repayment capacity should avoid over-reliance on credit scores as a substitute for income verification in the underwriting process. The higher a loan’s credit risk, either from loan features or borrower characteristics, the more important it is to verify the borrower’s income, assets, and outstanding liabilities.

2.4 Collateral-Dependent Loans -- Providers should avoid the use of loan terms and underwriting practices that may heighten the need for a borrower to rely on the sale or refinancing of the property once amortization begins. Loans to individuals who do not demonstrate the capacity to repay, as structured, from sources other than the collateral pledged may be unfair and abusive.6 Providers that originate collateral-dependent mortgage loans may be subject to criticism and corrective action.

2.5 Risk Layering -- Providers that originate or purchase mortgage loans that combine nontraditional features, such as interest only loans with reduced documentation or a simultaneous second-lien loan, face increased risk. When features are layered, a provider should demonstrate that mitigating factors support the underwriting decision and the borrower’s repayment capacity. Mitigating factors could include higher credit scores, lower LTV and DTI ratios, significant liquid assets, mortgage insurance or other credit enhancements. While higher pricing is often used to address elevated risk levels, it does not replace the need for sound underwriting.

2.6 Reduced Documentation -- Providers increasingly rely on reduced documentation, particularly unverified income, to qualify borrowers for nontraditional mortgage loans. Because these practices essentially substitute assumptions and unverified information for analysis of a borrower’s repayment capacity and general creditworthiness, they should be used with caution. As the level of credit risk increases, it is expected that a provider will more diligently verify and document a borrower’s income and debt reduction capacity. Clear policies should govern the use of reduced documentation. For example, stated income should be accepted only if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity. For many borrowers, providers generally should be able to readily document income using recent W-2 statements, pay stubs, or tax returns.

2.7 Simultaneous Second-Lien Loans -- Simultaneous second-lien loans reduce owner equity and increase credit risk. Historically, as combined loan-to-value ratios rise, so do defaults. A delinquent borrower with minimal or no equity in a property may have little incentive to work with a lender to bring the loan current and avoid foreclosure. In addition, second-lien home equity lines of credit (HELOCs) typically increase borrower exposure to increasing interest rates and monthly payment burdens. Loans with minimal or no owner equity generally should not have a payment structure that allows for delayed or negative amortization without other significant risk mitigating factors.

2.8 Introductory Interest Rates -- Many providers offer introductory interest rates set well below the fully indexed rate as a marketing tool for payment option ARM products. When developing nontraditional mortgage product terms, a provider should consider the spread between the introductory rate and the fully indexed rate. Since initial and subsequent monthly payments are based on these low introductory rates, a wide initial spread means that borrowers are more likely to experience negative amortization, severe payment shock, and an earlier-than-scheduled recasting of monthly payments. Providers should minimize the likelihood of disruptive early recastings and extraordinary payment shock when setting introductory rates.

2.9 Lending to Subprime Borrowers -- Providers of mortgage programs that target subprime borrowers through tailored marketing, underwriting standards, and risk selection should ensure that such programs do not feature terms that could become predatory or abusive. They should also recognize that risk-layering features in loans to subprime borrowers may significantly increase risks for both the provider and the borrower.

2.10 Non-Owner-Occupied Investor Loans -- Borrowers financing non-owner-occupied investment properties should qualify for loans based on their ability to service the debt over the life of the loan. Loan terms should reflect an appropriate combined LTV ratio that considers the potential for negative amortization and maintains sufficient borrower equity over the life of the loan. Further, underwriting standards should require evidence that the borrower has sufficient cash reserves to service the loan, considering the possibility of extended periods of property vacancy and the variability of debt service requirements associated with nontraditional mortgage loan products.

3.0 Risk Management Practices

3.1 Providers should ensure that risk management practices keep pace with the growth of nontraditional mortgage products and changes in the market. Providers that originate or invest in nontraditional mortgage loans should adopt more robust risk management practices and manage these exposures in a thoughtful, systematic manner. To meet these expectations, providers should:

3.1.1 Develop written policies that specify acceptable product attributes, production, sales and securitization practices, and risk management expectations; and

3.1.2 Design enhanced performance measures and management reporting that provide early warning for increasing risk.

3.2 Policies -- A provider’s policies for nontraditional mortgage lending activity should set acceptable levels of risk through its operating practices and policy exception tolerances. Policies should reflect appropriate limits on risk layering and should include risk management tools for risk mitigation purposes. Further, a provider should set growth and volume limits by loan type, with special attention for products and product combinations in need of heightened attention due to easing terms or rapid growth.

3.3 Concentrations -- Providers with concentrations in nontraditional mortgage products should have well-developed monitoring systems and risk management practices. Further, providers should consider the effect of employee and third party incentive programs that could produce higher concentrations of nontraditional mortgage loans. Concentrations that are not effectively managed will be subject to elevated supervisory attention and potential examiner criticism to ensure timely remedial action.

3.4 Controls -- A provider’s quality control, compliance, and audit procedures should focus on mortgage lending activities posing high risk. Controls to monitor compliance with underwriting standards and exceptions to those standards are especially important for nontraditional loan products. The quality control function should regularly review a sample of nontraditional mortgage loans from all origination channels and a representative sample of underwriters to confirm that policies are being followed. When control systems or operating practices are found deficient, business-line managers should be held accountable for correcting deficiencies in a timely manner.

3.5 Third-Party Originations -- Providers often use third parties, such as mortgage brokers or correspondents, to originate nontraditional mortgage loans. Providers should have strong systems and controls in place for establishing and maintaining relationships with third parties, including procedures for performing due diligence. Oversight of third parties should involve monitoring the quality of originations so that they reflect the provider’s lending standards and compliance with applicable laws and regulations.

3.5.1 Monitoring procedures should track the quality of loans by both origination source and key borrower characteristics. This will help providers identify problems such as early payment defaults, incomplete documentation, and fraud. If appraisal, loan documentation, credit problems or consumer complaints are discovered, the provider should take immediate action. Remedial action could include more thorough application reviews, more frequent re-underwriting, or even termination of the third-party relationship.

3.6 Secondary Market Activity -- The sophistication of a provider’s secondary market risk management practices should be commensurate with the nature and volume of activity. Providers with significant secondary market activities should have comprehensive, formal strategies for managing risks. Contingency planning should include how the provider will respond to reduced demand in the secondary market.

3.6.1 While third-party loan sales can transfer a portion of the credit risk, a provider remains exposed to reputation risk when credit losses on sold mortgage loans or securitization transactions exceed expectations. As a result, a provider may determine that it is necessary to repurchase defaulted mortgages to protect its reputation and maintain access to the markets.

4.0 Consumer Protection Issues

4.1 While nontraditional mortgage loans provide flexibility for consumers, the Commissioner is concerned that consumers may enter into these transactions without fully understanding the product terms. Nontraditional mortgage products have been advertised and promoted based on their affordability in the near term; that is, their lower initial monthly payments compared with traditional types of mortgages. In addition to apprising consumers of the benefits of nontraditional mortgage products, providers should take appropriate steps to alert consumers to the risks of these products, including the likelihood of increased future payment obligations. This information should be provided in a timely manner—before disclosures may be required under the Truth in Lending Act or other laws—to assist the consumer in the product selection process.

4.2 Concerns and Objectives -- More than traditional ARMs, mortgage products such as payment option ARMs and interest-only mortgages can carry a significant risk of payment shock and negative amortization that may not be fully understood by consumers. For example, consumer payment obligations may increase substantially at the end of an interest-only period or upon the “recast” of a payment option ARM. The magnitude of these payment increases may be affected by factors such as the expiration of promotional interest rates, increases in the interest rate index, and negative amortization. Negative amortization also results in lower levels of home equity as compared to a traditional amortizing mortgage product. When borrowers go to sell or refinance the property, they may find that negative amortization has substantially reduced or eliminated their equity in it even when the property has appreciated. The concern that consumers may not fully understand these products would be exacerbated by marketing and promotional practices that emphasize potential benefits without also providing clear and balanced information about material risks.

4.2.1 In light of these considerations, communications with consumers, including advertisements, oral statements, promotional materials, and monthly statements should provide clear and balanced information about the relative benefits and risks of these products, including the risk of payment shock and the risk of negative amortization. Clear, balanced, and timely communication to consumers of the risks of these products will provide consumers with useful information at crucial decision-making points, such as when they are shopping for loans or deciding which monthly payment amount to make. Such communication should help minimize potential consumer confusion and complaints, foster good customer relations, and reduce legal and other risks to the provider.

4.3 Legal Risks -- Providers that offer nontraditional mortgage products must ensure that they do so in a manner that complies with all applicable laws and regulations. With respect to the disclosures and other information provided to consumers, applicable laws and regulations include the following:

4.3.1 Truth in Lending Act (TILA) and its implementing regulation, Regulation Z.

4.3.2 Section 5 of the Federal Trade Commission Act (FTC Act).

4.4 TILA and Regulation Z contain rules governing disclosures that providers must provide for closed-end mortgages in advertisements, with an application,7 before loan consummation, and when interest rates change. Section 5 of the FTC Act prohibits unfair or deceptive acts or practices.

4.5 Other federal laws, including the fair lending laws and the Real Estate Settlement Procedures Act (RESPA), also apply to these transactions. Moreover, the sale or securitization of a loan may not affect a provider’s potential liability for violations of TILA, RESPA, the FTC Act, or other laws in connection with its origination of the loan. State laws, including laws regarding unfair or deceptive acts or practices, may apply.

5.0 Recommended Practices

Recommended practices for addressing the risks raised by nontraditional mortgage products include the following:8

5.1 Communications with Consumers -- When promoting or describing nontraditional mortgage products, providers should give consumers information that is designed to help them make informed decisions when selecting and using these products. Meeting this objective requires appropriate attention to the timing, content, and clarity of information presented to consumers. Thus, providers should give consumers information at a time that will help consumers select products and choose among payment options. For example, providers should offer clear and balanced product descriptions when a consumer is shopping for a mortgage—such as when the consumer makes an inquiry to the provider about a mortgage product and receives information about nontraditional products, or when marketing relating to nontraditional mortgage products is given by the provider to the consumer—not just upon the submission of an application or at consummation.9 The provision of such information would serve as an important supplement to the disclosures currently required under TILA and Regulation Z or other laws.10

5.1.1 Promotional Materials and Product Descriptions -- Promotional materials and other product descriptions should provide information about the costs, terms, features, and risks of nontraditional mortgages that can assist consumers in their product selection decisions, including information about the matters discussed below.

5.1.1.1 Payment Shock -- Providers should apprise consumers of potential increases in payment obligations for these products, including circumstances in which interest rates or negative amortization reach a contractual limit. For example, product descriptions could state the maximum monthly payment a consumer would be required to pay under a hypothetical loan example once amortizing payments are required and the interest rate and negative amortization caps have been reached.11 Such information also could describe when structural payment changes will occur (e.g., when introductory rates expire, or when amortizing payments are required), and what the new payment amount would be or how it would be calculated. As applicable, these descriptions could indicate that a higher payment may be required at other points in time due to factors such as negative amortization or increases in the interest rate index.

5.1.1.2 Negative Amortization -- When negative amortization is possible under the terms of a nontraditional mortgage product, consumers should be apprised of the potential for increasing principal balances and decreasing home equity, as well as other potential adverse consequences of negative amortization. For example, product descriptions should disclose the effect of negative amortization on loan balances and home equity, and could describe the potential consequences to the consumer of making minimum payments that cause the loan to negatively amortize. (One possible consequence is that it could be more difficult to refinance the loan or to obtain cash upon a sale of the home.)

5.1.1.3 Prepayment Penalties -- If the provider may impose a penalty in the event that the consumer prepays the mortgage, consumers should be alerted to this fact and to the need to ask the lender about the amount of any such penalty.

5.1.1.4 Cost of Reduced Documentation Loans -- If a provider offers both reduced and full documentation loan programs and there is a pricing premium attached to the reduced documentation program, consumers should be alerted to this fact.

5.1.2 Monthly Statements on Payment Option ARMs -- Monthly statements that are provided to consumers on payment option ARMs should provide information that enables consumers to make informed payment choices, including an explanation of each payment option available and the impact of that choice on loan balances. For example, the monthly payment statement should contain an explanation, as applicable, next to the minimum payment amount that making this payment would result in an increase to the consumer’s outstanding loan balance. Payment statements also could provide the consumer’s current loan balance, what portion of the consumer’s previous payment was allocated to principal and to interest, and, if applicable, the amount by which the principal balance increased. Providers should avoid leading payment option ARM borrowers to select a non-amortizing or negatively-amortizing payment (for example, through the format or content of monthly statements).

5.1.3 Practices to Avoid -- Providers also should avoid practices that obscure significant risks to the consumer. For example, if a provider advertises or promotes a nontraditional mortgage by emphasizing the comparatively lower initial payments permitted for these loans, the provider also should give clear and comparably prominent information alerting the consumer to the risks. Such information should explain, as relevant, that these payment amounts will increase, that a balloon payment may be due, and that the loan balance will not decrease and may even increase due to the deferral of interest and/or principal payments. Similarly, providers should avoid promoting payment patterns that are structurally unlikely to occur.12 Such practices could raise legal and other risks for providers.

5.1.3.1 Providers also should avoid such practices as: giving consumers unwarranted assurances or predictions about the future direction of interest rates (and, consequently, the borrower’s future obligations); making one-sided representations about the cash savings or expanded buying power to be realized from nontraditional mortgage products in comparison with amortizing mortgages; suggesting that initial minimum payments in a payment option ARM will cover accrued interest (or principal and interest) charges; and making misleading claims that interest rates or payment obligations for these products are “fixed.”

5.2 Control Systems -- Providers should develop and use strong control systems to monitor whether actual practices are consistent with their policies and procedures relating to nontraditional mortgage products. Providers should design control systems to address compliance and consumer information concerns as well as the risk management considerations discussed in this guidance. Lending personnel should be trained so that they are able to convey information to consumers about the product terms and risks in a timely, accurate, and balanced manner. As products evolve and new products are introduced, lending personnel should receive additional training, as necessary, to continue to be able to convey information to consumers in this manner. Lending personnel should be monitored to determine whether they are following these policies and procedures. Providers should review consumer complaints to identify potential compliance, reputation, and other risks. Attention should be paid to appropriate legal review and to using compensation programs that do not improperly encourage lending personnel to direct consumers to particular products.

5.2.1 With respect to nontraditional mortgage loans that a provider makes, purchases, or services using a third party, such as a mortgage broker, correspondent, or other intermediary, the provider should take appropriate steps to mitigate risks relating to compliance and consumer information concerns discussed in this guidance. These steps would ordinarily include, among other things, (1) conducting due diligence and establishing other criteria for entering into and maintaining relationships with such third parties, (2) establishing criteria for third-party compensation designed to avoid providing incentives for originations inconsistent with this guidance, (3) setting requirements for agreements with such third parties, (4) establishing procedures and systems to monitor compliance with applicable agreements, policies, and laws, and (5) implementing appropriate corrective actions in the event that the third party fails to comply with applicable agreements, policies, or laws.

APPENDIX

Interest-Only Mortgage Loan -- A nontraditional mortgage on which, for a specified number of years (e.g., three or five years), the borrower is required to pay only the interest due on the loan during which time the rate may fluctuate or may be fixed. After the interest-only period, the rate may be fixed or fluctuate based on the prescribed index and payments include both principal and interest.

Payment Option ARM -- A nontraditional mortgage that allows the borrower to choose from a number of different payment options. For example, each month, the borrower may choose a minimum payment option based on a “start” or introductory interest rate, an interest-only payment option based on the fully indexed interest rate, or a fully amortizing principal and interest payment option based on a 15-year or 30-year loan term, plus any required escrow payments. The minimum payment option can be less than the interest accruing on the loan, resulting in negative amortization. The interest-only option avoids negative amortization but does not provide for principal amortization. After a specified number of years, or if the loan reaches a certain negative amortization cap, the required monthly payment amount is recast to require payments that will fully amortize the outstanding balance over the remaining loan term.

Reduced Documentation -- A loan feature that is commonly referred to as “low doc/no doc,” “no income/no asset,” “stated income” or “stated assets.” For mortgage loans with this feature, a provider sets reduced or minimal documentation standards to substantiate the borrower’s income and assets.

Simultaneous Second-Lien Loan -- A lending arrangement where either a closed-end second-lien or a home equity line of credit (HELOC) is originated simultaneously with the first lien mortgage loan, typically in lieu of a higher down payment.

11 DE Reg. 90 (7/1/07)

1 Interest-only and payment option ARMs are variations of conventional ARMs, hybrid ARMs, and fixed rate products. Refer to the Appendix for additional information on interest-only and payment option ARM loans. This guidance does not apply to reverse mortgages; home equity lines of credit (“HELOCs”), other than as discussed in the Simultaneous Second-Lien Loans section; or fully amortizing residential mortgage loan products.

2 Refer to the Appendix for additional information on reduced documentation and simultaneous second-lien loans.

3 The fully indexed rate equals the index rate prevailing at origination plus the margin that will apply after the expiration of an introductory interest rate. The index rate is a published interest rate to which the interest rate on an ARM is tied. Some commonly used indices include the 1-Year Constant Maturity Treasury Rate (CMT), the 6-Month London Interbank Offered Rate (LIBOR), the 11th District Cost of Funds (COFI), and the Moving Treasury Average (MTA), a 12-month moving average of the monthly average yields of U.S. Treasury securities adjusted to a constant maturity of one year. The margin is the number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period. In different interest rate scenarios, the fully indexed rate for an ARM loan based on a lagging index (e.g., MTA rate) may be significantly different from the rate on a comparable 30-year fixed-rate product. In these cases, a credible market rate should be used to qualify the borrower and determine repayment capacity.

4 The fully amortizing payment schedule should be based on the term of the loan. For example, the amortizing payment for a loan with a 5-year interest only period and a 30-year term would be calculated based on a 30-year amortization schedule. For balloon mortgages that contain a borrower option for an extended amortization period, the fully amortizing payment schedule can be based on the full term the borrower may choose.

5 The balance that may accrue from the negative amortization provision does not necessarily equate to the full negative amortization cap for a particular loan. The spread between the introductory or “teaser” rate and the accrual rate will determine whether or not a loan balance has the potential to reach the negative amortization cap before the end of the initial payment option period (usually five years). For example, a loan with a 115 percent negative amortization cap but a small spread between the introductory rate and the accrual rate may only reach a 109 percent maximum loan balance before the end of the initial payment option period, even if only minimum payments are made. The borrower could be qualified based on this lower maximum loan balance.

6 A loan will not be determined to be “collateral-dependent” solely through the use of reduced documentation.

7 These program disclosures apply to ARM products and must be provided at the time an application is provided or before the consumer pays a nonrefundable fee, whichever is earlier.

8 Providers also should review the recommendations relating to mortgage lending practices set forth in other supervisory guidance from their respective primary regulators, as applicable, including guidance on abusive lending practices.

9 Providers also should strive to: (1) focus on information important to consumer decision making; (2) highlight key information so that it will be noticed; (3) employ a user-friendly and readily navigable format for presenting the information; and (4) use plain language, with concrete and realistic examples. Comparative tables and information describing key features of available loan products, including reduced documentation programs, also may be useful for consumers considering the nontraditional mortgage products and other loan features described in this guidance.

10 Providers may not be able to incorporate all of the practices recommended in this guidance when advertising nontraditional mortgages through certain forms of media, such as radio, television, or billboards. Nevertheless, providers should provide clear and balanced information about the risks of these products in all forms of advertising.

11 Consumers also should be apprised of other material changes in payment obligations, such as balloon payments.

12 For example, marketing materials for payment option ARMs may promote low predictable payments until the recast date. Such marketing should be avoided in circumstances in which the minimum payments are so low that negative amortization caps would be reached and higher payment obligations would be triggered before the scheduled recast, even if interest rates remain constant.

2108/2209 Statement on Subprime Mortgage Lending

5 Del. Admin. Code § 2108/2209 Statement on Subprime Mortgage Lending

2108/2209 Statement on Subprime Mortgage Lending

5 Del.C. §2110(a), §2210(a)

Effective Date November 11, 2007

1.0 Introduction and Background

1.1 On June 29, 2007, the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Board), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) (collectively, the Agencies) publicly released the Statement on Subprime Mortgage Lending (Subprime Statement).

1.1.1 The Agencies developed the Subprime Statement to address emerging risks associated with certain subprime mortgage products and lending practices. In particular, the Agencies are concerned about the growing use of adjustable rate mortgage (ARM) products1 that provide low initial payments based on a fixed introductory rate that expires after a short period, and then adjusts to a variable rate plus a margin for the remaining term of the loan. These products could result in payment shock to the borrower. The Agencies are concerned that these products, typically offered to subprime borrowers, present heightened risks to lenders and borrowers. Often, these products have additional characteristics that increase risk. These include qualifying borrowers based on limited or no documentation of income or imposing substantial prepayment penalties or prepayment penalty periods that extend beyond the initial fixed interest rate period. In addition, borrowers may not be adequately informed of product features and risks, including their responsibility to pay taxes and insurance, which might be separate from their mortgage payments.

1.1.2 These products originally were extended to customers primarily as a temporary credit accommodation in anticipation of early sale of the property or in expectation of future earnings growth. However, these loans have more recently been offered to subprime borrowers as “credit repair” or “affordability” products. The Agencies are concerned that many subprime borrowers may not have sufficient financial capacity to service a higher debt load, especially if they were qualified based on a low introductory payment. The Agencies are also concerned that subprime borrowers may not fully understand the risks and consequences of obtaining this type of ARM loan. Borrowers who obtain these loans may face unaffordable monthly payments after the initial rate adjustment, difficulty in paying real estate taxes and insurance that were not escrowed, or expensive refinancing fees, any of which could cause borrowers to default and potentially lose their homes.

1.2 Like the interagency Guidance on Nontraditional Mortgage Product Risks that was published in the Federal Register on October 4, 2006 (Volume 71, Number 192, Page 58609-58618), the interagency Subprime Statement applies to all banks and their subsidiaries, bank holding companies and their nonbank subsidiaries, savings associations and their subsidiaries, savings and loan holding companies and their subsidiaries, and credit unions.

1.3 Recognizing that the interagency Subprime Statement does not apply to subprime loan originations of independent mortgage lenders and mortgage brokers, the Delaware State Bank Commissioner (Commissioner) is adopting this parallel Statement. The Commissioner strongly supports the purpose of the Subprime Statement and is committed to promoting uniform application of the Statement’s origination and underwriting standards for all mortgage brokers and lenders (herein referred to as providers).

1.4 The Subprime Statement identifies many important standards for subprime lending, and the Commissioner supports additional efforts to enhance subprime lending oversight. For instance, the Subprime Statement encourages depository institutions to consider a borrower’s housing-related expenses in the course of determining a borrower’s ability to repay the subprime mortgage loan. However, the Agencies did not explicitly encourage the consideration of total monthly debt obligations. Rather than create confusion or adopt a higher standard, the Commissioner has determined to mirror the interagency statement. The Commissioner will continue to work with the Agencies and other states to improve industry-wide mortgage lending practices.

1.5 The following Statement will assist in promoting consistent regulation in the mortgage market and clarify how providers can offer subprime loans in a safe and sound manner that clearly discloses the risks that borrowers may assume.

1.6 In order to maintain regulatory consistency, this Statement substantially mirrors the interagency Subprime Statement, except for the removal of sections not applicable to non-depository institutions.

2.0 Subprime Mortgage Lending

2.1 The Commissioner is adopting this Statement on Subprime Mortgage Lending (Statement) to address emerging issues and questions relating to subprime mortgage lending practices. The term “subprime” refers to the credit characteristics of individual borrowers. Subprime borrowers typically have weakened credit histories that include payment delinquencies, and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income (DTI) ratios, or other criteria that may encompass borrowers with incomplete credit histories. “Subprime loans” are loans to borrowers displaying one or more of these characteristics at the time of origination or purchase. Such loans have a higher risk of default than loans to prime borrowers. Generally subprime borrowers will display a range of credit risk characteristics that may include one or more of the following:

2.1.1 Two or more 30-day delinquencies in the last 12 months, or one or more 60-day delinquencies in the last 24 months;

2.1.2 Judgment, foreclosure, repossession, or charge-off in the prior 24 months;

2.1.3 Bankruptcy in the last 5 years;

2.1.4 Relatively high default probability as evidenced by, for example, a credit bureau risk score (FICO) of 660 or below (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood; and/or

2.1.5 Debt service-to-income ratio of 50% or greater, or otherwise limited ability to cover family living expenses after deducting total monthly debt-service requirements from monthly income.

2.2 This list is illustrative rather than exhaustive and is not meant to define specific parameters for all subprime borrowers. Additionally, this definition may not match all market or institution specific subprime definitions, but should be viewed as a starting point from which the Commissioner will expand examination efforts.2

2.3 The Commissioner is concerned that borrowers may not fully understand the risks and consequences of obtaining products that can cause payment shock.3 In particular, the Commissioner is concerned with certain adjustable-rate mortgage (ARM) products typically4 offered to subprime borrowers that have one or more of the following characteristics:

2.3.1 Low initial payments based on a fixed introductory rate that expires after a short period and then adjusts to a variable index rate plus a margin for the remaining term of the loan;5

2.3.2 Very high or no limits on how much the payment amount or the interest rate may increase (“payment or rate caps”) on reset dates;

2.3.3 Limited or no documentation of borrowers’ income;

2.3.4 Product features likely to result in frequent refinancing to maintain an affordable monthly payment; and/or

2.3.5 Substantial prepayment penalties and/or prepayment penalties that extend beyond the initial fixed interest rate period.

2.4 Products with one or more of these features present substantial risks to both consumers and providers. These risks are increased if borrowers are not adequately informed of the product features and risks, including their responsibility for paying real estate taxes and insurance, which may be separate from their monthly mortgage payments. The consequences to borrowers could include: being unable to afford the monthly payments after the initial rate adjustment because of payment shock; experiencing difficulty in paying real estate taxes and insurance that were not escrowed; incurring expensive refinancing fees, frequently due to closing costs and prepayment penalties, especially if the prepayment penalty period extends beyond the rate adjustment date; and losing their homes. Consequences to providers may include unwarranted levels of credit, legal, compliance, reputation, and liquidity risks due to the elevated risks inherent in these products.

2.5 The Commissioner notes that many of these concerns are addressed in existing interagency guidance.6 The Commissioner recognizes that these guidance documents may not apply to state-supervised providers. However, the Commissioner believes these guidelines provide sound principles for mortgage lending as a reference for state-supervised providers.

2.6 While Regulation 2107/2208 Guidance on Nontraditional Mortgage Product Risks may not explicitly pertain to products with the characteristics addressed in this Statement, it outlines prudent underwriting and consumer protection principles that providers also should consider with regard to subprime mortgage lending. This Statement reiterates many of the principles addressed in existing guidance relating to prudent risk management practices and consumer protection laws.7

3.0 Risk Management Practices: Predatory Lending Considerations

3.1 Subprime lending is not synonymous with predatory lending, and loans with features described above are not necessarily predatory in nature. However, providers should ensure that they do not engage in the types of predatory lending practices discussed in the Expanded Subprime Guidance. Typically, predatory lending involves at least one of the following elements:

3.1.1 Making loans based predominantly on the foreclosure or liquidation value of a borrower’s collateral rather than on the borrower’s ability to repay the mortgage according to its terms;

3.1.2 Inducing a borrower to repeatedly refinance a loan in order to charge high points and fees each time the loan is refinanced (“loan flipping”); or

3.1.3 Engaging in fraud or deception to conceal the true nature of the mortgage loan obligation, or ancillary products, from an unsuspecting or unsophisticated borrower.

3.2 Loans to borrowers who do not demonstrate the capacity to repay the loan, as structured, from sources other than the collateral pledged may lack sufficient consumer protection safeguards and are generally considered unsafe and unsound. Examiners are instructed to criticize such lending practices in the Report of Examination. Further, examiners are instructed to refer any loans with the aforementioned characteristics to the Commissioner for additional review.

3.3 Providers offering mortgage loans such as these face an elevated risk that their conduct will violate Section 5 of the Federal Trade Commission Act (FTC Act) or other state laws, which prohibit unfair or deceptive acts or practices.

4.0 Risk Management Practices: Underwriting Standards

4.1 The 1993 interagency Real Estate Guidelines provide underwriting standards for all real estate loans and state that prudently underwritten real estate loans should reflect all relevant credit factors, including the capacity of the borrower to adequately service the debt. Providers should refer to Regulation 2107/2208, which details similar criteria for qualifying borrowers for products that may result in payment shock.

4.2 Prudent qualifying standards recognize the potential effect of payment shock in evaluating a borrower’s ability to service debt. A provider’s analysis of a borrower’s repayment capacity should include an evaluation of the borrower’s ability to repay the debt by its final maturity at the fully indexed rate,8 assuming a fully amortizing repayment schedule.9

4.3 One widely accepted approach in the mortgage industry is to quantify a borrower’s repayment capacity by a debt-to-income (DTI) ratio. A provider’s DTI analysis should include, among other things, an assessment of a borrower’s total monthly housing-related payments (e.g., principal, interest, taxes, and insurance, or what is commonly known as PITI) as a percentage of gross monthly income.10

4.4 This assessment is particularly important if the provider relies upon reduced documentation or allows other forms of risk layering. Risk-layering features in a subprime mortgage loan may significantly increase the risks to both the provider and the borrower. Therefore, a provider should have clear policies governing the use of risk-layering features, such as reduced documentation loans or simultaneous second lien mortgages. When risk-layering features are combined with a mortgage loan, a provider should demonstrate the existence of effective mitigating factors that support the underwriting decision and the borrower’s repayment capacity.

4.5 Recognizing that loans to subprime borrowers present elevated credit risk, providers should verify and document the borrower’s income (both source and amount), assets and liabilities. Stated income and reduced documentation loans to subprime borrowers should be accepted only if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity. Reliance on such factors also should be documented. Typically, mitigating factors arise when a borrower with favorable payment performance seeks to refinance an existing mortgage with a new loan of a similar size and with similar terms, and the borrower’s financial condition has not deteriorated. Other mitigating factors might include situations where a borrower has substantial liquid reserves or assets that demonstrate repayment capacity and can be verified and documented by the provider. However, a higher interest rate is not considered an acceptable mitigating factor.

5.0 Workout Arrangements

5.1 The Commissioner encourages providers to work constructively with residential borrowers who are in default or whose default is reasonably foreseeable.

5.2 Prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the provider and the borrower.

5.3 Providers should follow prudent underwriting practices in determining whether to consider a loan modification or a workout arrangement.11 Such arrangements can vary widely based on the borrower’s financial capacity. For example, a provider might consider modifying loan terms, including converting loans with variable rates into fixed-rate products to provide financially stressed borrowers with predictable payment requirements.

5.4 The Commissioner will not criticize providers that pursue reasonable workout arrangements with borrowers. Further, existing supervisory guidance and applicable accounting standards do not require providers to immediately foreclose on the collateral underlying a loan when the borrower exhibits repayment difficulties. For those providers that portfolio loans, they should identify and report credit risk, maintain an adequate allowance for loan losses, and recognize credit losses in a timely manner.

6.0 Consumer Protection Principles

6.1 Fundamental consumer protection principles relevant to the underwriting and marketing of mortgage loans include:

6.1.1 Approving loans based on the borrower’s ability to repay the loan according to its terms; and

6.1.2 Providing information that enables consumers to understand material terms, costs, and risks of loan products at a time that will help the consumer select a product.

6.2 Communications with consumers, including advertisements, oral statements, and promotional materials, should provide clear and balanced information about the relative benefits and risks of the products. This information should be provided in a timely manner to assist consumers in the product selection process, not just upon submission of an application or at consummation of the loan. Providers should not use such communications to steer consumers to these products to the exclusion of other products offered by the provider for which the consumer may qualify.

6.3 Information provided to consumers should clearly explain the risk of payment shock and the ramifications of prepayment penalties, balloon payments, and the lack of escrow for taxes and insurance, as necessary. The applicability of prepayment penalties should not exceed the initial reset period. In general, borrowers should be provided a reasonable period of time (typically at least 60 days prior to the reset date) to refinance without penalty.

6.4 Similarly, if borrowers do not understand that their monthly mortgage payments do not include taxes and insurance, and they have not budgeted for these essential homeownership expenses, they may be faced with the need for significant additional funds on short notice.12 Therefore, mortgage product descriptions and advertisements should provide clear, detailed information about the costs, terms, features, and risks of the loan to the borrower. Consumers should be informed of:

6.4.1 Payment Shock. Potential payment increases, including how the new payment will be calculated when the introductory fixed rate expires.13

6.4.2 Prepayment Penalties. The existence of any prepayment penalty, how it will be calculated, and when it may be imposed.

6.4.3 Balloon Payments. The existence of any balloon payment.

6.4.4 Cost of Reduced Documentation Loans. Whether there is a pricing premium attached to a reduced documentation or stated income loan program.

6.4.5 Responsibility for Taxes and Insurance. The requirement to make payments for real estate taxes and insurance in addition to their loan payments, if not escrowed, and the fact that taxes and insurance costs can be substantial.

7.0 Control Systems

7.1 Providers should develop strong control systems to monitor whether actual practices are consistent with their policies and procedures. Systems should address compliance and consumer information concerns, as well as safety and soundness, and encompass both institution personnel and applicable third parties, such as mortgage brokers or correspondents.

7.2 Important controls include establishing appropriate criteria for hiring and training loan personnel, entering into and maintaining relationships with third parties, and conducting initial and ongoing due diligence on third parties. Providers also should design compensation programs that avoid providing incentives for originations inconsistent with sound underwriting and consumer protection principles, and that do not result in the steering of consumers to these products to the exclusion of other products for which the consumer may qualify.

7.3 Providers should have procedures and systems in place to monitor compliance with applicable laws and regulations, third-party agreements and internal policies. A provider’s controls also should include appropriate corrective actions in the event of failure to comply with applicable laws, regulations, third-party agreements or internal policies. In addition, providers should initiate procedures to review consumer complaints to identify potential compliance problems or other negative trends.

8.0 Supervisory Review

The Commissioner will carefully review risk management and consumer compliance processes, policies, and procedures. The Commissioner will take action against providers that exhibit predatory lending practices, violate consumer protection laws or fair lending laws, engage in unfair or deceptive acts or practices, or otherwise engage in unsafe or unsound lending practices.

1 For example, ARMs known as “2/28” loans feature a fixed rate for two years and then adjust to a variable rate for the remaining 28 years. The spread between the initial fixed interest rate and the fully indexed interest rate in effect at loan origination typically ranges from 300 to 600 basis points.

2 “Subprime” and “subprime loans” are defined by the 2001 Interagency Expanded Guidance for Subprime Lending Programs. To promote consistency and uniformity, the Commissioner supports these definitions for the purposes of this Statement.

3 Payment shock refers to a significant increase in the amount of the monthly payment that generally occurs as the interest rate adjusts to a fully indexed basis. Products with a wide spread between the initial interest rate and the fully indexed rate that do not have payment caps or periodic interest rate caps, or that contain very high caps, can produce significant payment shock.

4 As noted by Agencies in the final statement, the Subprime Statement focuses on subprime borrowers; however, the statement applies to ARM products that have one or more characteristics that can cause payment shock. Providers should look to the principles of this statement when such ARM products are offered to non-subprime borrowers.

5 For example, ARMs known as “2/28” loans feature a fixed rate for two years and then adjust to a variable rate for the remaining 28 years. The spread between the initial fixed interest rate and the fully indexed interest rate in effect at loan origination typically ranges from 300 to 600 basis points.

6 The most prominent are the 1993 Interagency Guidelines for Real Estate Lending (Real Estate Guidelines), the 1999 Interagency Guidance on Subprime Lending, and the 2001 Expanded Guidance for Subprime Lending Programs (Expanded Subprime Guidance).

7 As with the Interagency Guidance on Nontraditional Mortgage Product Risks, 71 FR 58609 (October 4, 2006), the interagency Subprime Statement applies to all banks and their subsidiaries, bank holding companies and their nonbank subsidiaries, savings associations and their subsidiaries, savings and loan holding companies and their subsidiaries, and credit unions. This Statement is applicable to all state-supervised mortgage providers.

8 The fully indexed rate equals the index rate prevailing at origination plus the margin to be added to it after the expiration of an introductory interest rate. For example, assume that a loan with an initial fixed rate of 7% will reset to the six-month London Interbank Offered Rate (LIBOR) plus a margin of 6%. If the six-month LIBOR rate equals 5.5%, providers should qualify the borrower at 11.5% (5.5% + 6%), regardless of any interest rate caps that limit how quickly the fully indexed rate may be reached.

9 The fully amortizing payment schedule should be based on the term of the loan. For example, the amortizing payment for a “2/28” loan would be calculated based on a 30-year amortization schedule. For balloon mortgages that contain a borrower option for an extended amortization period, the fully amortizing payment schedule can be based on the full term the borrower may choose.

10 A prudent practice used by the industry is to include a borrower’s total monthly debt obligations as a percentage of gross monthly income in the DTI analysis.

11 For those providers that portfolio loans, they may need to account for workout arrangements as troubled debt restructurings and should follow generally accepted accounting principles in accounting for these transactions.

12 Providers generally can address these concerns most directly by requiring borrowers to escrow funds for real estate taxes and insurance.

13 To illustrate: a borrower earning $42,000 per year obtains a $200,000 “2/28” mortgage loan. The loan’s two-year introductory fixed interest rate of 7% requires a principal and interest payment of $1,331. Escrowing $200 per month for taxes and insurance results in a total monthly payment of $1,531 ($1,331 + $200), representing a 44% DTI ratio. A fully indexed interest rate of 11.5% (based on a six-month LIBOR index rate of 5.5% plus a 6% margin) would cause the borrower’s principal and interest payment to increase to $1,956. The adjusted total monthly payment of $2,156 ($1,956 + $200 for taxes and insurance) represents a 41% increase in the payment amount and results in a 62% DTI ratio.

2200 Licensed Lenders

2107/2208 Guidance On Nontraditional Mortgage Product Risks

5 Del. Admin. Code § 2107/2208 Guidance On Nontraditional Mortgage Product Risks

2107/2208 Guidance On Nontraditional Mortgage Product Risks

5 Del.C. §2110(a), §2210(a)

Effective Date: July 11, 2007

1.0 Introduction and Background

1.1 On October 4, 2006, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) (collectively, the Agencies) published final guidance in the Federal Register (Volume 71, Number 192, Page 58609-58618) on nontraditional mortgage product risks (“interagency guidance”). The interagency guidance applies to all banks and their subsidiaries, bank holding companies and their nonbank subsidiaries, savings associations and their subsidiaries, savings and loan holding companies and their subsidiaries, and credit unions.

1.1.1 The Delaware State Bank Commissioner (the “Commissioner”) strongly supports the purpose of the guidance adopted by the Agencies and is committed to promote uniform application of its consumer protections for all borrowers.

1.1.2 The following guidance will promote consistent regulation in the mortgage market and clarify how mortgage brokers and mortgage companies (referred to as “providers”) not affiliated with a bank holding company or an insured financial institution can offer nontraditional mortgage products in a way that clearly discloses the risks that borrowers may assume.

1.1.3 In order to maintain regulatory consistency, this guidance substantially mirrors the interagency guidance, except for the deletion of sections not applicable to non-depository institutions.

1.2 The Agencies developed their guidance to address risks associated with the growing use of mortgage products that allow borrowers to defer payment of principal and, sometimes, interest. These products, referred to variously as “nontraditional,” “alternative,” or “exotic” mortgage loans (hereinafter referred to as nontraditional mortgage loans), include “interest-only” mortgages and “payment option” adjustable-rate mortgages. These products allow borrowers to exchange lower payments during an initial period for higher payments during a later amortization period.

1.3 While similar products have been available for many years, the number of institutions and providers offering them has expanded rapidly. At the same time, these products are offered to a wider spectrum of borrowers who may not otherwise qualify for more traditional mortgages. The Commissioner is concerned that some borrowers may not fully understand the risks of these products. While many of these risks exist in other adjustable-rate mortgage products, the concern of the Commissioner is elevated with nontraditional products because of the lack of principal amortization and potential for negative amortization. In addition, providers are increasingly combining these loans with other features that may compound risk. These features include simultaneous second-lien mortgages and the use of reduced documentation in evaluating an applicant’s creditworthiness.

1.4 Residential mortgage lending has traditionally been a conservatively managed business with low delinquencies and losses and reasonably stable underwriting standards. In the past few years consumer demand has been growing, particularly in high priced real estate markets, for closed-end residential mortgage loan products that allow borrowers to defer repayment of principal and, sometimes, interest. These mortgage products, herein referred to as nontraditional mortgage loans, include such products as “interest-only” mortgages where a borrower pays no loan principal for the first few years of the loan and “payment option” adjustable-rate mortgages (ARMs) where a borrower has flexible payment options with the potential for negative amortization.1

1.5 While some providers have offered nontraditional mortgages for many years with appropriate risk management, the market for these products and the number of providers offering them has expanded rapidly. Nontraditional mortgage loan products are now offered by more lenders to a wider spectrum of borrowers who may not otherwise qualify for more traditional mortgage loans and may not fully understand the associated risks.

1.6 Many of these nontraditional mortgage loans are underwritten with less stringent income and asset verification requirements (“reduced documentation”) and are increasingly combined with simultaneous second-lien loans.2 Such risk layering, combined with the broader marketing of nontraditional mortgage loans, exposes providers to increased risk relative to traditional mortgage loans.

1.7 Given the potential for heightened risk levels, management should carefully consider and appropriately mitigate exposures created by these loans. To manage the risks associated with nontraditional mortgage loans, management should:

1.7.1 Ensure that loan terms and underwriting standards are consistent with prudent lending practices, including consideration of a borrower’s repayment capacity; and

1.7.2 Ensure that consumers have sufficient information to clearly understand loan terms and associated risks prior to making a product choice.

1.8 The Commissioner expects providers to effectively assess and manage the risks associated with nontraditional mortgage loan products.

1.9 Providers should use this guidance to ensure that risk management practices adequately address these risks. The Commissioner will carefully scrutinize risk management processes, policies, and procedures in this area. Providers that do not adequately manage these risks will be asked to take remedial action.

1.10 The focus of this guidance is on the higher risk elements of certain nontraditional mortgage products, not the product type itself. Providers with sound underwriting, and adequate risk management will not be subject to criticism merely for offering such products.

2.0 Loan Terms and Underwriting Standards

2.1 When a provider offers nontraditional mortgage loan products, underwriting standards should address the effect of a substantial payment increase on the borrower’s capacity to repay when loan amortization begins.

2.2 Central to prudent lending is the internal discipline to maintain sound loan terms and underwriting standards despite competitive pressures. Providers are strongly cautioned against ceding underwriting standards to third parties that have different business objectives, risk tolerances, and core competencies. Loan terms should be based on a disciplined analysis of potential exposures and compensating factors to ensure risk levels remain manageable.

2.3 Qualifying Borrowers -- Payments on nontraditional loans can increase significantly when the loans begin to amortize. Commonly referred to as payment shock, this increase is of particular concern for payment option ARMs where the borrower makes minimum payments that may result in negative amortization. Some providers manage the potential for excessive negative amortization and payment shock by structuring the initial terms to limit the spread between the introductory interest rate and the fully indexed rate. Nevertheless, a provider’s qualifying standards should recognize the potential impact of payment shock, especially for borrowers with high loan-to-value (LTV) ratios, high debt-to-income (DTI) ratios, and low credit scores. Recognizing that a provider’s underwriting criteria are based on multiple factors, a provider should consider these factors jointly in the qualification process and may develop a range of reasonable tolerances for each factor. However, the criteria should be based upon prudent and appropriate underwriting standards, considering both the borrower’s characteristics and the product’s attributes.

2.3.1 For all nontraditional mortgage loan products, a provider’s analysis of a borrower’s repayment capacity should include an evaluation of their ability to repay the debt by final maturity at the fully indexed rate,3 assuming a fully amortizing repayment schedule.4 In addition, for products that permit negative amortization, the repayment analysis should be based upon the initial loan amount plus any balance increase that may accrue from the negative amortization provision.5

2.3.2 Furthermore, the analysis of repayment capacity should avoid over-reliance on credit scores as a substitute for income verification in the underwriting process. The higher a loan’s credit risk, either from loan features or borrower characteristics, the more important it is to verify the borrower’s income, assets, and outstanding liabilities.

2.4 Collateral-Dependent Loans -- Providers should avoid the use of loan terms and underwriting practices that may heighten the need for a borrower to rely on the sale or refinancing of the property once amortization begins. Loans to individuals who do not demonstrate the capacity to repay, as structured, from sources other than the collateral pledged may be unfair and abusive.6 Providers that originate collateral-dependent mortgage loans may be subject to criticism and corrective action.

2.5 Risk Layering -- Providers that originate or purchase mortgage loans that combine nontraditional features, such as interest only loans with reduced documentation or a simultaneous second-lien loan, face increased risk. When features are layered, a provider should demonstrate that mitigating factors support the underwriting decision and the borrower’s repayment capacity. Mitigating factors could include higher credit scores, lower LTV and DTI ratios, significant liquid assets, mortgage insurance or other credit enhancements. While higher pricing is often used to address elevated risk levels, it does not replace the need for sound underwriting.

2.6 Reduced Documentation -- Providers increasingly rely on reduced documentation, particularly unverified income, to qualify borrowers for nontraditional mortgage loans. Because these practices essentially substitute assumptions and unverified information for analysis of a borrower’s repayment capacity and general creditworthiness, they should be used with caution. As the level of credit risk increases, it is expected that a provider will more diligently verify and document a borrower’s income and debt reduction capacity. Clear policies should govern the use of reduced documentation. For example, stated income should be accepted only if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity. For many borrowers, providers generally should be able to readily document income using recent W-2 statements, pay stubs, or tax returns.

2.7 Simultaneous Second-Lien Loans -- Simultaneous second-lien loans reduce owner equity and increase credit risk. Historically, as combined loan-to-value ratios rise, so do defaults. A delinquent borrower with minimal or no equity in a property may have little incentive to work with a lender to bring the loan current and avoid foreclosure. In addition, second-lien home equity lines of credit (HELOCs) typically increase borrower exposure to increasing interest rates and monthly payment burdens. Loans with minimal or no owner equity generally should not have a payment structure that allows for delayed or negative amortization without other significant risk mitigating factors.

2.8 Introductory Interest Rates -- Many providers offer introductory interest rates set well below the fully indexed rate as a marketing tool for payment option ARM products. When developing nontraditional mortgage product terms, a provider should consider the spread between the introductory rate and the fully indexed rate. Since initial and subsequent monthly payments are based on these low introductory rates, a wide initial spread means that borrowers are more likely to experience negative amortization, severe payment shock, and an earlier-than-scheduled recasting of monthly payments. Providers should minimize the likelihood of disruptive early recastings and extraordinary payment shock when setting introductory rates.

2.9 Lending to Subprime Borrowers -- Providers of mortgage programs that target subprime borrowers through tailored marketing, underwriting standards, and risk selection should ensure that such programs do not feature terms that could become predatory or abusive. They should also recognize that risk-layering features in loans to subprime borrowers may significantly increase risks for both the provider and the borrower.

2.10 Non-Owner-Occupied Investor Loans -- Borrowers financing non-owner-occupied investment properties should qualify for loans based on their ability to service the debt over the life of the loan. Loan terms should reflect an appropriate combined LTV ratio that considers the potential for negative amortization and maintains sufficient borrower equity over the life of the loan. Further, underwriting standards should require evidence that the borrower has sufficient cash reserves to service the loan, considering the possibility of extended periods of property vacancy and the variability of debt service requirements associated with nontraditional mortgage loan products.

3.0 Risk Management Practices

3.1 Providers should ensure that risk management practices keep pace with the growth of nontraditional mortgage products and changes in the market. Providers that originate or invest in nontraditional mortgage loans should adopt more robust risk management practices and manage these exposures in a thoughtful, systematic manner. To meet these expectations, providers should:

3.1.1 Develop written policies that specify acceptable product attributes, production, sales and securitization practices, and risk management expectations; and

3.1.2 Design enhanced performance measures and management reporting that provide early warning for increasing risk.

3.2 Policies -- A provider’s policies for nontraditional mortgage lending activity should set acceptable levels of risk through its operating practices and policy exception tolerances. Policies should reflect appropriate limits on risk layering and should include risk management tools for risk mitigation purposes. Further, a provider should set growth and volume limits by loan type, with special attention for products and product combinations in need of heightened attention due to easing terms or rapid growth.

3.3 Concentrations -- Providers with concentrations in nontraditional mortgage products should have well-developed monitoring systems and risk management practices. Further, providers should consider the effect of employee and third party incentive programs that could produce higher concentrations of nontraditional mortgage loans. Concentrations that are not effectively managed will be subject to elevated supervisory attention and potential examiner criticism to ensure timely remedial action.

3.4 Controls -- A provider’s quality control, compliance, and audit procedures should focus on mortgage lending activities posing high risk. Controls to monitor compliance with underwriting standards and exceptions to those standards are especially important for nontraditional loan products. The quality control function should regularly review a sample of nontraditional mortgage loans from all origination channels and a representative sample of underwriters to confirm that policies are being followed. When control systems or operating practices are found deficient, business-line managers should be held accountable for correcting deficiencies in a timely manner.

3.5 Third-Party Originations -- Providers often use third parties, such as mortgage brokers or correspondents, to originate nontraditional mortgage loans. Providers should have strong systems and controls in place for establishing and maintaining relationships with third parties, including procedures for performing due diligence. Oversight of third parties should involve monitoring the quality of originations so that they reflect the provider’s lending standards and compliance with applicable laws and regulations.

3.5.1 Monitoring procedures should track the quality of loans by both origination source and key borrower characteristics. This will help providers identify problems such as early payment defaults, incomplete documentation, and fraud. If appraisal, loan documentation, credit problems or consumer complaints are discovered, the provider should take immediate action. Remedial action could include more thorough application reviews, more frequent re-underwriting, or even termination of the third-party relationship.

3.6 Secondary Market Activity -- The sophistication of a provider’s secondary market risk management practices should be commensurate with the nature and volume of activity. Providers with significant secondary market activities should have comprehensive, formal strategies for managing risks. Contingency planning should include how the provider will respond to reduced demand in the secondary market.

3.6.1 While third-party loan sales can transfer a portion of the credit risk, a provider remains exposed to reputation risk when credit losses on sold mortgage loans or securitization transactions exceed expectations. As a result, a provider may determine that it is necessary to repurchase defaulted mortgages to protect its reputation and maintain access to the markets.

4.0 Consumer Protection Issues

4.1 While nontraditional mortgage loans provide flexibility for consumers, the Commissioner is concerned that consumers may enter into these transactions without fully understanding the product terms. Nontraditional mortgage products have been advertised and promoted based on their affordability in the near term; that is, their lower initial monthly payments compared with traditional types of mortgages. In addition to apprising consumers of the benefits of nontraditional mortgage products, providers should take appropriate steps to alert consumers to the risks of these products, including the likelihood of increased future payment obligations. This information should be provided in a timely manner—before disclosures may be required under the Truth in Lending Act or other laws—to assist the consumer in the product selection process.

4.2 Concerns and Objectives -- More than traditional ARMs, mortgage products such as payment option ARMs and interest-only mortgages can carry a significant risk of payment shock and negative amortization that may not be fully understood by consumers. For example, consumer payment obligations may increase substantially at the end of an interest-only period or upon the “recast” of a payment option ARM. The magnitude of these payment increases may be affected by factors such as the expiration of promotional interest rates, increases in the interest rate index, and negative amortization. Negative amortization also results in lower levels of home equity as compared to a traditional amortizing mortgage product. When borrowers go to sell or refinance the property, they may find that negative amortization has substantially reduced or eliminated their equity in it even when the property has appreciated. The concern that consumers may not fully understand these products would be exacerbated by marketing and promotional practices that emphasize potential benefits without also providing clear and balanced information about material risks.

4.2.1 In light of these considerations, communications with consumers, including advertisements, oral statements, promotional materials, and monthly statements should provide clear and balanced information about the relative benefits and risks of these products, including the risk of payment shock and the risk of negative amortization. Clear, balanced, and timely communication to consumers of the risks of these products will provide consumers with useful information at crucial decision-making points, such as when they are shopping for loans or deciding which monthly payment amount to make. Such communication should help minimize potential consumer confusion and complaints, foster good customer relations, and reduce legal and other risks to the provider.

4.3 Legal Risks -- Providers that offer nontraditional mortgage products must ensure that they do so in a manner that complies with all applicable laws and regulations. With respect to the disclosures and other information provided to consumers, applicable laws and regulations include the following:

4.3.1 Truth in Lending Act (TILA) and its implementing regulation, Regulation Z.

4.3.2 Section 5 of the Federal Trade Commission Act (FTC Act).

4.4 TILA and Regulation Z contain rules governing disclosures that providers must provide for closed-end mortgages in advertisements, with an application,7 before loan consummation, and when interest rates change. Section 5 of the FTC Act prohibits unfair or deceptive acts or practices.

4.5 Other federal laws, including the fair lending laws and the Real Estate Settlement Procedures Act (RESPA), also apply to these transactions. Moreover, the sale or securitization of a loan may not affect a provider’s potential liability for violations of TILA, RESPA, the FTC Act, or other laws in connection with its origination of the loan. State laws, including laws regarding unfair or deceptive acts or practices, may apply.

5.0 Recommended Practices

Recommended practices for addressing the risks raised by nontraditional mortgage products include the following:8

5.1 Communications with Consumers -- When promoting or describing nontraditional mortgage products, providers should give consumers information that is designed to help them make informed decisions when selecting and using these products. Meeting this objective requires appropriate attention to the timing, content, and clarity of information presented to consumers. Thus, providers should give consumers information at a time that will help consumers select products and choose among payment options. For example, providers should offer clear and balanced product descriptions when a consumer is shopping for a mortgage—such as when the consumer makes an inquiry to the provider about a mortgage product and receives information about nontraditional products, or when marketing relating to nontraditional mortgage products is given by the provider to the consumer—not just upon the submission of an application or at consummation.9 The provision of such information would serve as an important supplement to the disclosures currently required under TILA and Regulation Z or other laws.10

5.1.1 Promotional Materials and Product Descriptions -- Promotional materials and other product descriptions should provide information about the costs, terms, features, and risks of nontraditional mortgages that can assist consumers in their product selection decisions, including information about the matters discussed below.

5.1.1.1 Payment Shock -- Providers should apprise consumers of potential increases in payment obligations for these products, including circumstances in which interest rates or negative amortization reach a contractual limit. For example, product descriptions could state the maximum monthly payment a consumer would be required to pay under a hypothetical loan example once amortizing payments are required and the interest rate and negative amortization caps have been reached.11 Such information also could describe when structural payment changes will occur (e.g., when introductory rates expire, or when amortizing payments are required), and what the new payment amount would be or how it would be calculated. As applicable, these descriptions could indicate that a higher payment may be required at other points in time due to factors such as negative amortization or increases in the interest rate index.

5.1.1.2 Negative Amortization -- When negative amortization is possible under the terms of a nontraditional mortgage product, consumers should be apprised of the potential for increasing principal balances and decreasing home equity, as well as other potential adverse consequences of negative amortization. For example, product descriptions should disclose the effect of negative amortization on loan balances and home equity, and could describe the potential consequences to the consumer of making minimum payments that cause the loan to negatively amortize. (One possible consequence is that it could be more difficult to refinance the loan or to obtain cash upon a sale of the home.)

5.1.1.3 Prepayment Penalties -- If the provider may impose a penalty in the event that the consumer prepays the mortgage, consumers should be alerted to this fact and to the need to ask the lender about the amount of any such penalty.

5.1.1.4 Cost of Reduced Documentation Loans -- If a provider offers both reduced and full documentation loan programs and there is a pricing premium attached to the reduced documentation program, consumers should be alerted to this fact.

5.1.2 Monthly Statements on Payment Option ARMs -- Monthly statements that are provided to consumers on payment option ARMs should provide information that enables consumers to make informed payment choices, including an explanation of each payment option available and the impact of that choice on loan balances. For example, the monthly payment statement should contain an explanation, as applicable, next to the minimum payment amount that making this payment would result in an increase to the consumer’s outstanding loan balance. Payment statements also could provide the consumer’s current loan balance, what portion of the consumer’s previous payment was allocated to principal and to interest, and, if applicable, the amount by which the principal balance increased. Providers should avoid leading payment option ARM borrowers to select a non-amortizing or negatively-amortizing payment (for example, through the format or content of monthly statements).

5.1.3 Practices to Avoid -- Providers also should avoid practices that obscure significant risks to the consumer. For example, if a provider advertises or promotes a nontraditional mortgage by emphasizing the comparatively lower initial payments permitted for these loans, the provider also should give clear and comparably prominent information alerting the consumer to the risks. Such information should explain, as relevant, that these payment amounts will increase, that a balloon payment may be due, and that the loan balance will not decrease and may even increase due to the deferral of interest and/or principal payments. Similarly, providers should avoid promoting payment patterns that are structurally unlikely to occur.12 Such practices could raise legal and other risks for providers.

5.1.3.1 Providers also should avoid such practices as: giving consumers unwarranted assurances or predictions about the future direction of interest rates (and, consequently, the borrower’s future obligations); making one-sided representations about the cash savings or expanded buying power to be realized from nontraditional mortgage products in comparison with amortizing mortgages; suggesting that initial minimum payments in a payment option ARM will cover accrued interest (or principal and interest) charges; and making misleading claims that interest rates or payment obligations for these products are “fixed.”

5.2 Control Systems -- Providers should develop and use strong control systems to monitor whether actual practices are consistent with their policies and procedures relating to nontraditional mortgage products. Providers should design control systems to address compliance and consumer information concerns as well as the risk management considerations discussed in this guidance. Lending personnel should be trained so that they are able to convey information to consumers about the product terms and risks in a timely, accurate, and balanced manner. As products evolve and new products are introduced, lending personnel should receive additional training, as necessary, to continue to be able to convey information to consumers in this manner. Lending personnel should be monitored to determine whether they are following these policies and procedures. Providers should review consumer complaints to identify potential compliance, reputation, and other risks. Attention should be paid to appropriate legal review and to using compensation programs that do not improperly encourage lending personnel to direct consumers to particular products.

5.2.1 With respect to nontraditional mortgage loans that a provider makes, purchases, or services using a third party, such as a mortgage broker, correspondent, or other intermediary, the provider should take appropriate steps to mitigate risks relating to compliance and consumer information concerns discussed in this guidance. These steps would ordinarily include, among other things, (1) conducting due diligence and establishing other criteria for entering into and maintaining relationships with such third parties, (2) establishing criteria for third-party compensation designed to avoid providing incentives for originations inconsistent with this guidance, (3) setting requirements for agreements with such third parties, (4) establishing procedures and systems to monitor compliance with applicable agreements, policies, and laws, and (5) implementing appropriate corrective actions in the event that the third party fails to comply with applicable agreements, policies, or laws.

APPENDIX

Interest-Only Mortgage Loan -- A nontraditional mortgage on which, for a specified number of years (e.g., three or five years), the borrower is required to pay only the interest due on the loan during which time the rate may fluctuate or may be fixed. After the interest-only period, the rate may be fixed or fluctuate based on the prescribed index and payments include both principal and interest.

Payment Option ARM -- A nontraditional mortgage that allows the borrower to choose from a number of different payment options. For example, each month, the borrower may choose a minimum payment option based on a “start” or introductory interest rate, an interest-only payment option based on the fully indexed interest rate, or a fully amortizing principal and interest payment option based on a 15-year or 30-year loan term, plus any required escrow payments. The minimum payment option can be less than the interest accruing on the loan, resulting in negative amortization. The interest-only option avoids negative amortization but does not provide for principal amortization. After a specified number of years, or if the loan reaches a certain negative amortization cap, the required monthly payment amount is recast to require payments that will fully amortize the outstanding balance over the remaining loan term.

Reduced Documentation -- A loan feature that is commonly referred to as “low doc/no doc,” “no income/no asset,” “stated income” or “stated assets.” For mortgage loans with this feature, a provider sets reduced or minimal documentation standards to substantiate the borrower’s income and assets.

Simultaneous Second-Lien Loan -- A lending arrangement where either a closed-end second-lien or a home equity line of credit (HELOC) is originated simultaneously with the first lien mortgage loan, typically in lieu of a higher down payment.

11 DE Reg. 90 (7/1/07)

2108/2209 Statement on Subprime Mortgage Lending

5 Del. Admin. Code § 2108/2209 Statement on Subprime Mortgage Lending

2108/2209 Statement on Subprime Mortgage Lending

5 Del.C. §2110(a), §2210(a)

Effective Date November 11, 2007

1.0 Introduction and Background

1.1 On June 29, 2007, the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Board), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) (collectively, the Agencies) publicly released the Statement on Subprime Mortgage Lending (Subprime Statement).

1.1.1 The Agencies developed the Subprime Statement to address emerging risks associated with certain subprime mortgage products and lending practices. In particular, the Agencies are concerned about the growing use of adjustable rate mortgage (ARM) products1 that provide low initial payments based on a fixed introductory rate that expires after a short period, and then adjusts to a variable rate plus a margin for the remaining term of the loan. These products could result in payment shock to the borrower. The Agencies are concerned that these products, typically offered to subprime borrowers, present heightened risks to lenders and borrowers. Often, these products have additional characteristics that increase risk. These include qualifying borrowers based on limited or no documentation of income or imposing substantial prepayment penalties or prepayment penalty periods that extend beyond the initial fixed interest rate period. In addition, borrowers may not be adequately informed of product features and risks, including their responsibility to pay taxes and insurance, which might be separate from their mortgage payments.

1.1.2 These products originally were extended to customers primarily as a temporary credit accommodation in anticipation of early sale of the property or in expectation of future earnings growth. However, these loans have more recently been offered to subprime borrowers as “credit repair” or “affordability” products. The Agencies are concerned that many subprime borrowers may not have sufficient financial capacity to service a higher debt load, especially if they were qualified based on a low introductory payment. The Agencies are also concerned that subprime borrowers may not fully understand the risks and consequences of obtaining this type of ARM loan. Borrowers who obtain these loans may face unaffordable monthly payments after the initial rate adjustment, difficulty in paying real estate taxes and insurance that were not escrowed, or expensive refinancing fees, any of which could cause borrowers to default and potentially lose their homes.

1.2 Like the interagency Guidance on Nontraditional Mortgage Product Risks that was published in the Federal Register on October 4, 2006 (Volume 71, Number 192, Page 58609-58618), the interagency Subprime Statement applies to all banks and their subsidiaries, bank holding companies and their nonbank subsidiaries, savings associations and their subsidiaries, savings and loan holding companies and their subsidiaries, and credit unions.

1.3 Recognizing that the interagency Subprime Statement does not apply to subprime loan originations of independent mortgage lenders and mortgage brokers, the Delaware State Bank Commissioner (Commissioner) is adopting this parallel Statement. The Commissioner strongly supports the purpose of the Subprime Statement and is committed to promoting uniform application of the Statement’s origination and underwriting standards for all mortgage brokers and lenders (herein referred to as providers).

1.4 The Subprime Statement identifies many important standards for subprime lending, and the Commissioner supports additional efforts to enhance subprime lending oversight. For instance, the Subprime Statement encourages depository institutions to consider a borrower’s housing-related expenses in the course of determining a borrower’s ability to repay the subprime mortgage loan. However, the Agencies did not explicitly encourage the consideration of total monthly debt obligations. Rather than create confusion or adopt a higher standard, the Commissioner has determined to mirror the interagency statement. The Commissioner will continue to work with the Agencies and other states to improve industry-wide mortgage lending practices.

1.5 The following Statement will assist in promoting consistent regulation in the mortgage market and clarify how providers can offer subprime loans in a safe and sound manner that clearly discloses the risks that borrowers may assume.

1.6 In order to maintain regulatory consistency, this Statement substantially mirrors the interagency Subprime Statement, except for the removal of sections not applicable to non-depository institutions.

2.0 Subprime Mortgage Lending

2.1 The Commissioner is adopting this Statement on Subprime Mortgage Lending (Statement) to address emerging issues and questions relating to subprime mortgage lending practices. The term “subprime” refers to the credit characteristics of individual borrowers. Subprime borrowers typically have weakened credit histories that include payment delinquencies, and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income (DTI) ratios, or other criteria that may encompass borrowers with incomplete credit histories. “Subprime loans” are loans to borrowers displaying one or more of these characteristics at the time of origination or purchase. Such loans have a higher risk of default than loans to prime borrowers. Generally subprime borrowers will display a range of credit risk characteristics that may include one or more of the following:

2.1.1 Two or more 30-day delinquencies in the last 12 months, or one or more 60-day delinquencies in the last 24 months;

2.1.2 Judgment, foreclosure, repossession, or charge-off in the prior 24 months;

2.1.3 Bankruptcy in the last 5 years;

2.1.4 Relatively high default probability as evidenced by, for example, a credit bureau risk score (FICO) of 660 or below (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood; and/or

2.1.5 Debt service-to-income ratio of 50% or greater, or otherwise limited ability to cover family living expenses after deducting total monthly debt-service requirements from monthly income.

2.2 This list is illustrative rather than exhaustive and is not meant to define specific parameters for all subprime borrowers. Additionally, this definition may not match all market or institution specific subprime definitions, but should be viewed as a starting point from which the Commissioner will expand examination efforts.2

2.3 The Commissioner is concerned that borrowers may not fully understand the risks and consequences of obtaining products that can cause payment shock.3 In particular, the Commissioner is concerned with certain adjustable-rate mortgage (ARM) products typically4 offered to subprime borrowers that have one or more of the following characteristics:

2.3.1 Low initial payments based on a fixed introductory rate that expires after a short period and then adjusts to a variable index rate plus a margin for the remaining term of the loan;5

2.3.2 Very high or no limits on how much the payment amount or the interest rate may increase (“payment or rate caps”) on reset dates;

2.3.3 Limited or no documentation of borrowers’ income;

2.3.4 Product features likely to result in frequent refinancing to maintain an affordable monthly payment; and/or

2.3.5 Substantial prepayment penalties and/or prepayment penalties that extend beyond the initial fixed interest rate period.

2.4 Products with one or more of these features present substantial risks to both consumers and providers. These risks are increased if borrowers are not adequately informed of the product features and risks, including their responsibility for paying real estate taxes and insurance, which may be separate from their monthly mortgage payments. The consequences to borrowers could include: being unable to afford the monthly payments after the initial rate adjustment because of payment shock; experiencing difficulty in paying real estate taxes and insurance that were not escrowed; incurring expensive refinancing fees, frequently due to closing costs and prepayment penalties, especially if the prepayment penalty period extends beyond the rate adjustment date; and losing their homes. Consequences to providers may include unwarranted levels of credit, legal, compliance, reputation, and liquidity risks due to the elevated risks inherent in these products.

2.5 The Commissioner notes that many of these concerns are addressed in existing interagency guidance.6 The Commissioner recognizes that these guidance documents may not apply to state-supervised providers. However, the Commissioner believes these guidelines provide sound principles for mortgage lending as a reference for state-supervised providers.

2.6 While Regulation 2107/2208 Guidance on Nontraditional Mortgage Product Risks may not explicitly pertain to products with the characteristics addressed in this Statement, it outlines prudent underwriting and consumer protection principles that providers also should consider with regard to subprime mortgage lending. This Statement reiterates many of the principles addressed in existing guidance relating to prudent risk management practices and consumer protection laws.7

3.0 Risk Management Practices: Predatory Lending Considerations

3.1 Subprime lending is not synonymous with predatory lending, and loans with features described above are not necessarily predatory in nature. However, providers should ensure that they do not engage in the types of predatory lending practices discussed in the Expanded Subprime Guidance. Typically, predatory lending involves at least one of the following elements:

3.1.1 Making loans based predominantly on the foreclosure or liquidation value of a borrower’s collateral rather than on the borrower’s ability to repay the mortgage according to its terms;

3.1.2 Inducing a borrower to repeatedly refinance a loan in order to charge high points and fees each time the loan is refinanced (“loan flipping”); or

3.1.3 Engaging in fraud or deception to conceal the true nature of the mortgage loan obligation, or ancillary products, from an unsuspecting or unsophisticated borrower.

3.2 Loans to borrowers who do not demonstrate the capacity to repay the loan, as structured, from sources other than the collateral pledged may lack sufficient consumer protection safeguards and are generally considered unsafe and unsound. Examiners are instructed to criticize such lending practices in the Report of Examination. Further, examiners are instructed to refer any loans with the aforementioned characteristics to the Commissioner for additional review.

3.3 Providers offering mortgage loans such as these face an elevated risk that their conduct will violate Section 5 of the Federal Trade Commission Act (FTC Act) or other state laws, which prohibit unfair or deceptive acts or practices.

4.0 Risk Management Practices: Underwriting Standards

4.1 The 1993 interagency Real Estate Guidelines provide underwriting standards for all real estate loans and state that prudently underwritten real estate loans should reflect all relevant credit factors, including the capacity of the borrower to adequately service the debt. Providers should refer to Regulation 2107/2208, which details similar criteria for qualifying borrowers for products that may result in payment shock.

4.2 Prudent qualifying standards recognize the potential effect of payment shock in evaluating a borrower’s ability to service debt. A provider’s analysis of a borrower’s repayment capacity should include an evaluation of the borrower’s ability to repay the debt by its final maturity at the fully indexed rate,8 assuming a fully amortizing repayment schedule.9

4.3 One widely accepted approach in the mortgage industry is to quantify a borrower’s repayment capacity by a debt-to-income (DTI) ratio. A provider’s DTI analysis should include, among other things, an assessment of a borrower’s total monthly housing-related payments (e.g., principal, interest, taxes, and insurance, or what is commonly known as PITI) as a percentage of gross monthly income.10

4.4 This assessment is particularly important if the provider relies upon reduced documentation or allows other forms of risk layering. Risk-layering features in a subprime mortgage loan may significantly increase the risks to both the provider and the borrower. Therefore, a provider should have clear policies governing the use of risk-layering features, such as reduced documentation loans or simultaneous second lien mortgages. When risk-layering features are combined with a mortgage loan, a provider should demonstrate the existence of effective mitigating factors that support the underwriting decision and the borrower’s repayment capacity.

4.5 Recognizing that loans to subprime borrowers present elevated credit risk, providers should verify and document the borrower’s income (both source and amount), assets and liabilities. Stated income and reduced documentation loans to subprime borrowers should be accepted only if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity. Reliance on such factors also should be documented. Typically, mitigating factors arise when a borrower with favorable payment performance seeks to refinance an existing mortgage with a new loan of a similar size and with similar terms, and the borrower’s financial condition has not deteriorated. Other mitigating factors might include situations where a borrower has substantial liquid reserves or assets that demonstrate repayment capacity and can be verified and documented by the provider. However, a higher interest rate is not considered an acceptable mitigating factor.

5.0 Workout Arrangements

5.1 The Commissioner encourages providers to work constructively with residential borrowers who are in default or whose default is reasonably foreseeable.

5.2 Prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the provider and the borrower.

5.3 Providers should follow prudent underwriting practices in determining whether to consider a loan modification or a workout arrangement.11 Such arrangements can vary widely based on the borrower’s financial capacity. For example, a provider might consider modifying loan terms, including converting loans with variable rates into fixed-rate products to provide financially stressed borrowers with predictable payment requirements.

5.4 The Commissioner will not criticize providers that pursue reasonable workout arrangements with borrowers. Further, existing supervisory guidance and applicable accounting standards do not require providers to immediately foreclose on the collateral underlying a loan when the borrower exhibits repayment difficulties. For those providers that portfolio loans, they should identify and report credit risk, maintain an adequate allowance for loan losses, and recognize credit losses in a timely manner.

6.0 Consumer Protection Principles

6.1 Fundamental consumer protection principles relevant to the underwriting and marketing of mortgage loans include:

6.1.1 Approving loans based on the borrower’s ability to repay the loan according to its terms; and

6.1.2 Providing information that enables consumers to understand material terms, costs, and risks of loan products at a time that will help the consumer select a product.

6.2 Communications with consumers, including advertisements, oral statements, and promotional materials, should provide clear and balanced information about the relative benefits and risks of the products. This information should be provided in a timely manner to assist consumers in the product selection process, not just upon submission of an application or at consummation of the loan. Providers should not use such communications to steer consumers to these products to the exclusion of other products offered by the provider for which the consumer may qualify.

6.3 Information provided to consumers should clearly explain the risk of payment shock and the ramifications of prepayment penalties, balloon payments, and the lack of escrow for taxes and insurance, as necessary. The applicability of prepayment penalties should not exceed the initial reset period. In general, borrowers should be provided a reasonable period of time (typically at least 60 days prior to the reset date) to refinance without penalty.

6.4 Similarly, if borrowers do not understand that their monthly mortgage payments do not include taxes and insurance, and they have not budgeted for these essential homeownership expenses, they may be faced with the need for significant additional funds on short notice.12 Therefore, mortgage product descriptions and advertisements should provide clear, detailed information about the costs, terms, features, and risks of the loan to the borrower. Consumers should be informed of:

6.4.1 Payment Shock. Potential payment increases, including how the new payment will be calculated when the introductory fixed rate expires.13

6.4.2 Prepayment Penalties. The existence of any prepayment penalty, how it will be calculated, and when it may be imposed.

6.4.3 Balloon Payments. The existence of any balloon payment.

6.4.4 Cost of Reduced Documentation Loans. Whether there is a pricing premium attached to a reduced documentation or stated income loan program.

6.4.5 Responsibility for Taxes and Insurance. The requirement to make payments for real estate taxes and insurance in addition to their loan payments, if not escrowed, and the fact that taxes and insurance costs can be substantial.

7.0 Control Systems

7.1 Providers should develop strong control systems to monitor whether actual practices are consistent with their policies and procedures. Systems should address compliance and consumer information concerns, as well as safety and soundness, and encompass both institution personnel and applicable third parties, such as mortgage brokers or correspondents.

7.2 Important controls include establishing appropriate criteria for hiring and training loan personnel, entering into and maintaining relationships with third parties, and conducting initial and ongoing due diligence on third parties. Providers also should design compensation programs that avoid providing incentives for originations inconsistent with sound underwriting and consumer protection principles, and that do not result in the steering of consumers to these products to the exclusion of other products for which the consumer may qualify.

7.3 Providers should have procedures and systems in place to monitor compliance with applicable laws and regulations, third-party agreements and internal policies. A provider’s controls also should include appropriate corrective actions in the event of failure to comply with applicable laws, regulations, third-party agreements or internal policies. In addition, providers should initiate procedures to review consumer complaints to identify potential compliance problems or other negative trends.

8.0 Supervisory Review

The Commissioner will carefully review risk management and consumer compliance processes, policies, and procedures. The Commissioner will take action against providers that exhibit predatory lending practices, violate consumer protection laws or fair lending laws, engage in unfair or deceptive acts or practices, or otherwise engage in unsafe or unsound lending practices.

2201 Licensed Lenders Operating Regulations

5 Del. Admin. Code § 2201 Licensed Lenders Operating Regulations

5 Del.C. §2210(e)

Effective Date: October 13, 2016

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-1.0 Applicability of Chapter

1.1 5 Del.C. Ch. 22 applies only to consumer credit transactions, including but not limited to, extensions of credit secured by one to four family residential, owner-occupied property located in this State intended for personal, family, or household purposes.

1.2 5 Del.C. Ch. 22 does not apply to:

1.2.1 mortgage loans secured by any property of 25 acres or more;

1.2.2 mortgage loans intended for commercial purposes; and

1.2.3 lending that requires a license under 5 Del.C. Ch. 29, Financing the Sale of a Motor Vehicle.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-2.0 Compliance with Applicable Laws

2.1 All licensees shall comply with 5 Del.C. Ch. 22, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

2.2 The manager and appropriate staff of each licensed office shall familiarize themselves with all such statutes and regulations, as applicable.

2.3 Each licensed office shall maintain, either by paper copy or through electronic access, 5 Del.C. Ch. 22 and the following regulations, if applicable:

2.3.1 Regulation 101, Retention of Financial Institution Records;

2.3.2 Regulation 2201, Operating Regulation;

2.3.3 Regulation 2202, Minimum Records;

2.3.4 Regulation 2203, Schedule of Charges;

2.3.5 Regulation 2204, Surety Bond or Irrevocable Letter of Credit;

2.3.6 Regulation 2205, Report of Delaware Loan Volume;

2.3.7 Regulation 2206, Report of Delaware Assets;

2.3.8 Regulation 2207, Exemption of Licensed Lenders;

2.3.9 Regulations 2107/2208, Guidance on Non-traditional Mortgage Products;

2.3.10 Regulation 2108/2209, Statement on Subprime Mortgage Lending;

2.3.11 Regulation 2210, Short-Term Consumer Loans; and

2.3.12 Regulation 2401, Mortgage Loan Originator Licensing.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-3.0 Display of Payday Loan Notice

Each licensed office open to the public that provides short-term consumer loans as defined in 5 Del.C. §2227 shall also prominently post the following statement in plain view in an area easily accessible to its customers at the entrance to the office: “A payday loan is not intended to meet long-term financial needs.”

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-4.0 Satisfaction of Mortgages and Other Security Interests

4.1 Upon full performance of a debt obligation or duty secured by a mortgage or a conveyance in the nature of a mortgage on real estate, a licensee holding such a mortgage or conveyance shall cause a proper record of its satisfaction or performance to be made within 60 days as required by 25 Del.C. Ch. 21.

4.2 A licensee shall take all necessary action to discharge, satisfy or release any other security interest for a loan under 5 Del.C. Ch. 22 within 30 days from the date that the loan is satisfied or fully performed.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-5.0 Insurance

5.1 Credit Life and Health Insurance

5.1.1 A licensee may offer credit life and health insurance to qualified borrowers. Such insurance transactions shall conform to Title 18 of the Delaware Code and all applicable Insurance Commissioner Regulations.

5.1.2 Every licensee offering credit life and health insurance whose charges do not conform to those authorized by Title 18 of the Delaware Code shall maintain in each office a copy of a submission to the Insurance Commissioner requesting the non-conforming charges and the Insurance Commissioner's approval of those charges.

5.1.3 Credit life insurance refunds shall be calculated as of the date of death except as permitted by 18 Del.C. §3705(b)(4).

5.1.4 Credit health insurance payments received by a licensee shall be applied to the account for the period the payment actually covers regardless of the date of receipt. Additional interest charges shall not accrue if payment is received after the payment due date.

5.2 A licensee may offer, but not require, only such other insurance products as the Commissioner may, upon written approval, permit.

5.3 Any licensee may require proof of insurance coverage for any loan secured by a motor vehicle, real estate, or other collateral. The borrower has the right to submit any existing policy(s) naming the licensee as beneficiary, provided such policy is acceptable to the licensee as to coverage, term and carrier. Upon notification to the licensee of cancellation of any policy, the licensee may place coverage to protect the licensee's interest. The borrower shall be informed of such placement and any amount expended shall be due and payable by the borrower before a loan may be satisfied. A licensee may, if requested by the borrower, place such insurance coverage as is necessary to protect the licensee's interest at the inception of the loan.

5.4 Any insurance authorized by this regulation, other than the insurance coverage authorized by §5.3 of this regulation, must be specifically requested by the borrower in writing. This request must be attached to, or part of, the loan application.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-6.0 Purchase or Sale of Loan Contracts

6.1 A licensee shall not sell, assign, or in any way transfer loan contracts to any person who is not licensed under 5 Del.C. Ch. 22 or licensed under a similar statute of another state, without the express written permission of the Commissioner.

6.2 Purchasers, assignees, and transferees shall be limited to collecting balances due under the existing contract terms and shall be bound by applicable Delaware laws regarding legal fees and usury statutes if a loan is subsequently refinanced.

6.3 This section shall not apply to:

6.3.1 the sale, assignment or transfer of loan contracts between licensees under the same management or control;

6.3.2 the sale, assignment or transfer of a loan contract to an out-of-state affiliate of a licensee for collection or for the convenience of a borrower provided however that the out-of-state affiliate must be domiciled in the United States;

6.3.3 the sale, assignment or transfer of a loan contract to any person secondarily liable on the contract; and

6.3.4 the sale, assignment or transfer of a participation interest or an entire loan to a federal, state, or local government agency, or to a federal or state regulated bank, savings bank, mortgage banking company, insurance company or investment banking firm or their subsidiaries.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-7.0 Origination of Mortgage Loans for Resale

Solely for the purposes of the loan limitation provisions contained in the last sentence of 5 Del.C. §2228(a), the term “loans” shall not be deemed to include loans secured by mortgages on real property located in this State (or secured by certificates of stock or other evidence of ownership interest in, or proprietary leases from corporations or partnerships formed for the purpose of cooperative ownership of real estate in this State) if such loans are originated by a licensee for resale and the licensee in fact sells, assigns or otherwise transfers the entire interest in the loan (except servicing, if servicing is retained) within 120 days following the date the loan is made. Upon written request, additional time may be granted at the discretion of the Commissioner.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-8.0 Mortgage Loan Originators

8.1 Each licensee shall insure that every person who it employs, or is affiliated with it, as a mortgage loan originator, as defined by 5 Del.C. Ch. 24, to provide mortgage loan origination services has complied with all requirements of that Chapter and the regulations issued thereunder.

8.2 Each licensee shall promptly notify the Commissioner of the cessation of employment or termination of affiliation of any mortgage loan originator who had been providing residential mortgage loan origination services for the licensee.

8.3 The unique identifier issued by the Nationwide Mortgage Licensing System and Registry of the applicable mortgage loan originator shall be clearly shown on all residential mortgage loan application forms for all such loans originated by that individual.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-9.0 Advertising

9.1 A licensee shall not advertise in any way that is false, misleading or deceptive.

9.2 Any advertising that in any way falsely indicates that its source or origin is a government agency or the recipient’s existing lender is prohibited.

9.3 A licensee shall not advertise any credit terms that are not actually available.

9.4 When a licensee advertises with respect to its services under 5 Del.C. Ch. 22, the advertisement may state that the licensee is licensed by the Delaware State Bank Commissioner to engage in business in this State under and may specify the license number and expiration date of the license.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-10.0 Internet Websites

10.1 If the licensee provides short-term consumer loans as defined in 5 Del.C. §2227, the home page shall prominently display the following statement: “A payday loan is not intended to meet long-term financial needs.”

10.2 If the website allows the licensee to conduct any business governed by its license, the website shall properly secure the transmission of all confidential information entered on the website or otherwise exchanged between the licensee and any consumer or borrower.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-11.0 Reports

Each licensee who employs mortgage loan originators shall submit to the Nationwide Mortgage Licensing System and Registry such reports of condition at such time, in such form and containing such information as that System shall require.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-12.0 Information Security

Each licensee shall implement and maintain a written comprehensive security program that contains appropriate administrative, technical and physical measures to safeguard the confidentiality of all information concerning applicants and borrowers related to the business governed by this regulation including, but not limited to, all application information, account information, and information from any consumer report.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-13.0 Repossession Policy

Each licensee shall comply in all respects with 6 Del.C. Article 9, Secured Transactions, Part 6, Default.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-14.0 License Applications

14.1 The Nationwide Mortgage Licensing System and Registry, as the multistate automated licensing system in which the Commissioner is participating pursuant to 5 Del.C. §2213A, is authorized to act on behalf of the Commissioner to facilitate the application and licensing processes of 5 Del.C. Ch. 22 as to persons that employ, or have affiliated, a mortgage loan originator as defined by 5 Del.C. Ch. 24, and in that capacity, the System may, with respect to those persons:

14.1.1 process licensing applications;

14.1.2 collect licensing payments;

14.1.3 submit fingerprints and any other information required for a criminal history background check to the Federal Bureau of Investigation or other law-enforcement agency;

14.1.4 receive information and maintain records related to applicants and licensees; and

14.1.5 share information it maintains regarding applicants and licensees subject to the System with any other state participating in the System, if that state could have obtained that same information directly from the applicant or licensee under its own law for the purpose of licensing, regulating, or supervising that same applicant or licensee under a statute similar to 5 Del.C. Ch 22.

14.2 Any person seeking an initial or renewal license to engage in a business that requires a license under 5 Del.C. Ch 22 shall submit the appropriate application and fees to the Commissioner through the Nationwide Mortgage Licensing System and Registry when that person employs, or has affiliated, a mortgage loan originator as defined by 5 Del.C. Ch 24. All other persons shall submit applications for licenses under 5 Del.C. Ch 22 directly to the Commissioner.

14.3 All applications shall contain such information, and be submitted on such forms and in such manner as the Commissioner may designate. The Commissioner may change and update application forms as the Commissioner deems appropriate. The Commissioner may also require additional information in connection with any particular application.

14.4 All applications, whether for a main company location or a branch location, must be submitted with the investigation fee of $250, the annual license fee of $250, and, if applicable, the Nationwide Mortgage Licensing System and Registry processing fee of $100 (main company location) or $20 (branch location) (or such other amount as the System may charge). The Nationwide Mortgage Licensing System and Registry processing fee and the investigation fee are non-refundable.

14.5 No application shall be deemed complete until the Commissioner has received all required information, documents and fees.

14.6 If the Commissioner determines that an application is incomplete, the Commissioner shall send written notification to the applicant indicating the items that must be addressed to continue the application review process. If the Commissioner does not receive a complete response fully addressing all such items within 30 days after sending that notice, the Commissioner may consider the application withdrawn.

14.7 Any person seeking an initial license following withdrawal of an application shall submit a new application that includes all information, documents and fees required for an initial license.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-15.0 Examination Fees and Supervisory Assessments

15.1 The Commissioner may examine licensees pursuant to 5 Del.C. §§122 and 2210. The cost of such examinations are assessed in accordance with 5 Del.C. §127(a). A licensee shall remit payment not later than 30 days after the date of the examination invoice.

15.2 The Commissioner shall assess each licensee a supervisory assessment fee which is due and payable on August 1 each year, in accordance with 5 Del.C. §127(b).

15.3 Failure to remit timely payment of any examination fee or supervisory assessment will result in a penalty of 0.05 percent of the amount unpaid for each day that such fee or assessment remains unpaid after the due date, in accordance with 5 Del.C. §§127(a) and 127(b).

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

5 Del. Admin. Code § 2201-16.0 Examination Responses

A licensee shall send the Commissioner a written response to every violation specified in a report of examination no later than 30 days after the date of the report.

History

• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 308 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 18 DE Reg. 472 (12/01/14)
• 2 DE Reg. 781 (11/01/98)
• 17 DE Reg. 994 (04/01/14)
• 20 DE Reg. 308 (10/01/16)

2202 Licensed Lenders Minimum Requirements for Content of Books and Records

5 Del. Admin. Code § 2202 Licensed Lenders Minimum Requirements for Content of Books and Records

5 Del.C. §§2210(e) and 2211(a)

Effective Date: December 11, 2014

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2202-1.0 Minimum Required Records

Each licensed office shall maintain the following records on a current basis:

1.1 Register.

1.1.1 For applicants not granted credit, the office shall maintain a register containing:

1.1.1.1 the applicant’s name and address;

1.1.1.2 a file identification number;

1.1.1.3 the application date;

1.1.1.4 for mortgage loans, the name of the mortgage loan originator for the application together with the unique identifier assigned to the originator by the Nationwide Mortgage License System and Registry;

1.1.1.5 the date of the credit decision or the date the application was withdrawn; and

1.1.1.6 the reason that the applicant was not granted credit.

1.1.2 For borrowers, the office shall maintain a register containing:

1.1.2.1 the information specified in §§1.1.1.1 through 1.1.1.4;

1.1.2.2 the date of the loan closing;

1.1.2.3 an identification of any type of security for the loan; and

1.1.2.4 the amount of the loan.

1.2 Applicant Record. For each applicant not granted credit, the office shall maintain a record containing all documents related to the applicant that shall include:

1.2.1 the applicant’s name and address;

1.2.2 a file identification number;

1.2.3 the application;

1.2.4 all disclosures, when applicable, related to the loans that are required by the Federal Truth-in-Lending Act, as amended, and the regulations thereunder;

1.2.5 all invoices or other evidence of expenses incurred in connection with the application;

1.2.6 all receipts provided to the applicant for amounts paid to the licensee;

1.2.7 a record of all fees collected by the licensee;

1.2.8 evidence of any refunds with an explanation of them; and

1.2.9 for mortgage loans:

1.2.9.1 the name of the mortgage loan originator for the loan together with the unique identifier assigned to the originator by the Nationwide Mortgage Licensing System and Registry; and

1.2.9.2 the Good Faith Estimate for the loan that is required by the Federal Real Estate Settlement Procedures Act, as amended and the regulations thereunder.

1.2.10 for short-term consumer loans as defined in 5 Del.C. §2227, evidence that the licensee has complied with all requirements of 5 Del.C. §§2235A and 2235B for each short-term consumer loan or rollover application received from the applicant, including:

1.2.10.1 a copy of the database submission used to determine the applicant’s eligibility for the loan or rollover; or

1.2.10.2 a copy of the database ineligibility confirmation for the application.

1.2.11 any document specifying the reasons that credit was not granted; and

1.2.12 all other written communications with the applicant.

1.3 Borrower Record. For each borrower, the office shall maintain a record containing all documents related to the borrower that shall include:

1.3.1 the information and documents specified in §§1.2.1 through 1.2.8 of this regulation;

1.3.2 for short-term consumer loans as defined in 5 Del.C. §2227, evidence that the licensee has complied with the requirements of 5 Del.C. §2235A and 2235B for each short-term consumer loan or rollover made to the borrower, including;

1.3.2.1 a copy of the database submission used to determine the borrower’s eligibility for the loan or rollover;

1.3.2.2 a copy of the database eligibility confirmation for the loan or rollover;

1.3.2.3 the database transaction identification number for the loan or rollover; and

1.3.2.4 the date the loan or rollover is paid in full.

1.3.3 for title loans as defined in 5 Del.C. §2250, evidence that the licensee has complied with the requirements of 5 Del.C. Ch. 22 Subch. V including the requirements related to disclosures, rollovers, work-out agreements and rescissions;

1.3.4 for mortgage loans:

1.3.4.1 the name of the mortgage loan originator for the loan together with the unique identifier assigned to the originator by the Nationwide Mortgage Licensing System and Registry;

1.3.4.2 the Good Faith Estimate for the loan that is required by the Federal Real Estate Settlement Procedures Act, as amended, and the regulations thereunder;

1.3.4.3 the Uniform Settlement Statement for the loan that is required by the Federal Real Estate Settlement Procedures Act, as amended, and the regulations thereunder;

1.3.4.4 for reverse mortgage loans, the certification from an independent housing counselor that is required by 5 Del.C. §2244; and

1.3.4.5 for non purchase money mortgage loans, any evidence that a consumer exercised his or her right to rescind under the Federal Truth-in-Lending Act together with documents evidencing the actions taken by the lender following rescission.

1.3.5 the date of the loan closing;

1.3.6 the amount of the loan;

1.3.7 the repayment terms;

1.3.8 the type of any security;

1.3.9 the names of any endorsers, co-makers, guarantors, or sureties;

1.3.10 the actual date of receipt of each payment of principal and charges;

1.3.11 the name of any assignee or purchaser of the note;

1.3.12 a breakdown of how payments have been applied to interest, principal and fees;

1.3.13 the current balance due on the principal;

1.3.14 any workout agreement;

1.3.15 any credit related insurance contracts;

1.3.16 contracts for any non-insurance products sold by the licensee to the borrower or borrowers related to the credit transaction;

1.3.17 evidence that a mortgage or other security interest of record has been properly satisfied or released as prescribed by §4 of Regulation 2201;

1.3.18 evidence that the licensee has complied with the interest rate reduction requirements of the Federal Servicemembers Civil Relief Act, as amended, and the regulations thereunder, if applicable, including evidence that the rate was reduced at the appropriate time and remained reduced for the appropriate period;

1.3.19 evidence that the licensee has complied with the requirements of 10 U.S.C. §987, as amended, and the regulations thereunder, if applicable, relating to the requirements for payday loans, vehicle title loans and tax refund anticipation loans as each of those loans are defined in 32 CFR Part 232 when the loan is extended to a covered borrower as defined in Part 232;

1.3.20 if the licensee provides mortgage loan modification services as defined in 5 Del.C. §2245, evidence that the licensee has complied with the requirements of that section, including the limitations on compensation; and

1.3.21 all other written communications with the borrower.

1.4 Daily Transaction Record. The office shall maintain on a daily basis a record of all transactions involving either the receipt or disbursement of any amount whatsoever. Details of disbursements to or for the account of borrower’s shall be itemized.

1.5 Litigation and Enforcement of Security Record.

1.5.1 Litigation. The office shall maintain in either an individual file or in a separate litigation section, a record of all judicial and arbitration proceedings in which the licensee and an applicant or borrower are adversary parties. Records of judicial or arbitration proceedings being handled by attorneys or corporate collection centers may be maintained in a central office and must reflect the current status of the matter.

1.5.2 Enforcement of Security Interest. The office shall maintain in an individual borrower’s account file a record of all loans in which the licensee has enforced its security interest by taking possession of the security without a judicial proceeding or in which the borrower has voluntarily surrendered the security.

1.5.3 In addition to all other information required under by this regulation, these records, shall include, as applicable:

1.5.3.1 the unpaid balance immediately prior to either the judicial or arbitration proceeding, the licensee’s non-judicial repossession of the security, or the borrower’s voluntary surrender of the security;

1.5.3.2 the type of any security foreclosed, replevined, repossessed, surrendered or of which the licensee otherwise acquires possession;

1.5.3.3 all documents filed with, or issued by, the court or arbitrator;

1.5.3.4 the date and terms of any judgment, arbitration decision, dismissal or settlement;

1.5.3.5 evidence that the terms of any sale of security were fair to the borrower, if the security was sold after a non-judicial repossession;

1.5.3.6 any other documents sent or received by the licensee pursuant to the 6 Del.C. Article 9. Secured Transactions, Part 6. Default;

1.5.3.7 with respect to any judicial or arbitration proceeding, non-judicial repossession or voluntary surrender of a motor vehicle:

1.5.3.7.1 the vehicle identification number (VIN);

1.5.3.7.2 the date the licensee acquired possession of the motor vehicle;

1.5.3.7.3 a description of the motor vehicle;

1.5.3.7.4 the date of the sale of the motor vehicle;

1.5.3.7.5 the terms of the sale of the motor vehicle, including copies of all bids or other offers received together with the purchaser’s name and address, price and cash or financing terms;

1.5.3.7.6 evidence that the borrower was notified of the time and place of the sale; and

1.5.3.7.7 evidence of any amount paid to a third party.

1.5.3.8 with respect to a mortgage foreclosure proceeding under 10 Del.C. Ch. 49:

1.5.3.8.1 the notice of intent to foreclose required by 10 Del.C. §5062B;

1.5.3.8.2 proof of the certified mailing of that notice; and

1.5.3.8.3 all documents sent or received by the licensee pursuant to the mediation proceeding required by 10 Del.C. §5062C.

1.6 Credit Insurance Claims Record. The office shall maintain a credit insurance claims record containing the following information on all claims submitted by borrowers to the insurer:

1.6.1 the claim date;

1.6.2 the claim amount;

1.6.3 the date and amount of the payment by the insurer, or the date of rejection and the reason for the rejection;

1.6.4 the borrower's name and address;

1.6.5 the file identification number for the loan;

1.6.6 the reason for the claim (i.e. death, illness, etc.);

1.6.7 proof of death, if applicable;

1.6.8 a copy of any check issued by the insurance company for benefit payments or any other record of such disbursement by the insurance company; and

1.6.9 a copy of any check issued by the insurance company to return unearned insurance premiums that result from pre-payment of the loan or cancellation of the insurance or any other record of such disbursements by the insurance company.

1.6.10 In the event a loan is sold and no servicing performed; only those items listed in this regulation that are available prior to such sale shall be required.

1.7 Advertising Record. The office shall maintain a record containing all advertising materials used by the licensee:

1.7.1 for printed advertising, this record shall contain each advertisement indicating its type (print publication, billboard, direct mail, etc.) a listing of the publications in which printed, billboard locations by zip code, number of mailings by zip code, and the dates of publication, display or mailing;

1.7.2 for radio advertising, this record shall contain a transcript of each advertisement, a listing of the stations on which each advertisement was broadcast, and for each station, the date of each broadcast;

1.7.3 for television advertising, this record shall contain a transcript of the advertisement with visual depictions of each scene, a list of the stations on which each advertisement was broadcast, and for each station the date of each broadcast;

1.7.4 for internet advertising, this record shall contain a copy of the advertisement.

1.8 Mortgage Loan Originator Register. The office shall maintain a register of all mortgage loan originators that it has employed, or who have been affiliated with it, to provide residential mortgage loan origination services. The register shall contain:

1.8.1 the name of the originator;

1.8.2 the originator’s unique identifier issued by the Nationwide Mortgage Licensing System and Registry;

1.8.3 the date that the licensee first retained the originator in that capacity; and

1.8.4 the date that the originator’s employment or affiliation with the licensee in that capacity ended.

1.9 Additional Records. The office shall maintain any other records necessary to verify the licensee’s compliance with 5 Del.C. Ch. 22, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2202-2.0 Location, Format and Retention of Records

2.1 All records shall be made available to the Commissioner’s staff when requested.

2.2 Records may be maintained at the licensed office itself or at any other suitable location if they can be available within a reasonable period of time upon request.

2.3 All records may be maintained by paper copy or in an electronic format.

2.4 All records shall be retained in accordance with the time periods specified in Regulation 101, Retention of Financial Institution Records.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2202-3.0 Variations

The Commissioner may grant written approval for variations from this regulation to accommodate specific record keeping systems. Requests for such approvals must be in writing and provide sufficient information concerning the system to ensure that the requirements of this regulation are satisfied and that the records will be readily available when requested.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2203 Licensed Lenders Regulations Itemized Schedule of Charges

5 Del. Admin. Code § 2203 Licensed Lenders Regulations Itemized Schedule of Charges

5 Del.C. §§2218(a) and 2231

Effective Date: April 11, 2014

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2203-1.0 Itemization of Charges

1.1 Each licensee shall maintain itemizations of the current charges that the licensee uses in consumer transactions. The itemization shall identify all charges that the licensee may collect from its customers for a particular type of transaction. Separate itemizations must be prepared for revolving transactions, closed-end transactions, short term consumer loans as defined in 5 Del.C. §2227, title loans as defined in 5 Del.C. §2250, and real estate secured transactions. Each itemization must be dated as of the most recent change in any charge and may contain value ranges to reflect the different costs of credit that may vary with risk or rate. Each itemization shall clearly identify the specific type of loan to which it applies.

1.1.1 For closed end transactions, separate itemizations must be prepared for short-term consumer loans as defined in 5 Del.C. §2227 and title loans as defined in 5 Del.C. §2250.

1.1.2 For real estate secured transactions, separate itemizations must be prepared for revolving loans and closed-end loans.

1.2 Each licensee shall furnish every applicant with a copy of the appropriate itemization of charges when the application is made.

1.2.1 An explanation of the contents of the appropriate itemization satisfies this requirement for telephone applications.

1.2.2 Website screens containing the appropriate itemizations satisfy this requirement for electronic applications. The applicant must affirmatively acknowledge receipt of the appropriate screens before completing an application.

1.2.3 A Good Faith Estimate issued in accordance with the Federal Real Estate Settlement Procedures Act, as amended, satisfies this requirement for real estate secured transactions covered by that statute.

1.3 Each licensee that provides short term consumer loans as defined in 5 Del.C. §2227 or title loans as defined in 5 Del.C. §2250 shall prominently post its itemization of charges for those loans:

1.3.1 in plain view in an area easily accessible to its customers at the entrance to every office open to the public; and

1.3.2 on any internet website it maintains related to those loans.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2203-2.0 Licensee Compensation

2.1 A licensee may receive any form of compensation that is allowed under 5 Del.C. Ch. 22 and not prohibited by any applicable federal statute or regulation.

2.2 Compensation cannot exceed any maximum allowed by any applicable State or federal statute or regulation.

2.3 Charges for fees paid to a third-party cannot exceed the amount paid to that party for the particular service provided.

2.4 All forms of compensation that a licensee receives from a customer must be specified in the licensee’s agreement with that customer for a licensee to receive payment.

2.5 A licensee may not receive any compensation for mortgage loan modification services as defined in 5 Del.C. §2245 prior to the execution of a written contract that describes in detail all such services that the licensee will perform and all compensation that the licensee will receive for those services. Any compensation that a licensee receives in advance of the completion of all such services may not exceed $250, and a licensee’s total compensation for such services must be limited to an amount that is customary and reasonable for those services in this State.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2203-3.0 Charges for Revolving Credit

A licensee may collect the following charges for revolving credit as allowed by of 5 Del.C. Ch. 22, Subch. II:

3.1 interest, including interest at variable rates;

3.2 a periodic charge for privileges made available to the borrower;

3.3 transaction charges;

3.4 a minimum charge for each scheduled billing period during which there was an outstanding unpaid balance;

3.5 fees for services rendered in good faith by the licensee or its agents in connection with the loan;

3.6 reimbursement for expenses incurred in good faith by the licensee or its agents in connection with the loan;

3.7 late or delinquency charges;

3.8 attorney fees incurred by the licensee as a result of a default by the borrower;

3.9 court, alternative dispute resolution, or other collection costs (including collection agency fees) incurred by the licensee as a result of a default by the borrower; and

3.10 returned check charges and charges for the denial of electronic account debits limited to the amount specified in the licensee’s agreement with its customers. A customer may be assessed only one such charge per item.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2203-4.0 Charges for Closed End Credit

A licensee may collect the following charges for closed end credit as allowed by 5 Del.C. Ch. 22, Subch. III:

4.1 interest, including interest at variable rates;

4.2 fees for services rendered in good faith by the licensee or its agents in connection with the loan;

4.3 reimbursement for expenses incurred in good faith by the licensee or its agents in connection with the loan;

4.4 late or delinquency charges;

4.5 charges for deferred installment payments;

4.6 attorney fees incurred by the licensee as a result of a default by the borrower;

4.7 court, alternative dispute resolution, or other collection costs (including collection agency fees) incurred by the licensee as a result of a default by the borrower;

4.8 deferral charges; and

4.9 returned check charges and charges for the denial of electronic account debits limited to the amount specified in the licensee’s agreement with its customers. A customer may be assessed only one such charge per item.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2203-5.0 Charges for Real Estate Secured Credit

In addition to the charges allowed under §§3.0 and 4.0 of this regulation, a licensee may collect the following charges for credit secured by residential real estate. For each separately identified charge paid to a third party, the name of the party ultimately receiving the payment must be disclosed together with the total amount paid to that party. Average charges for fees paid to third parties are permissible provided they are calculated in accordance with the Federal Real Estate Settlement Procedures Act, as amended, and the regulations thereunder.

5.1 Rate Lock Fee: The fee for the commitment of a specific interest rate to be held for a specified period of time.

5.2 Origination Charge: All fees, other than points, received as compensation for loan origination services. All loan origination charges, including but not limited to, processing, application, administration, underwriting, document preparation, wire, lender inspection, mortgage broker fees, and fees for loan handling, shall be included in the origination charge.

5.3 Points: The fee charged or credit received for the specific interest rate chosen.

5.4 Appraisal Fee: The fee charged for a written report as to the value of the security tendered.

5.5 Credit Report Fee: The fee charged for all credit reports obtained from credit reporting agencies.

5.6 Tax Service Fee: The fee charged for certification of the current tax status of the security tendered, and for life-of-loan monitoring of tax and improvement lien payments as they become due.

5.7 Flood Certification Fee: The fee paid for determining whether the security tendered is or will be located in a special flood hazard area. The fee may also include the cost of life-of-loan monitoring.

5.8 Funding Fee: The fee charged by a governmental agency to originate and guarantee a mortgage loan.

5.9 Odd Days Interest: The interest that accrues on the principal balance of the loan between the date of settlement or disbursement and the date of the first loan payment.

5.10 Mortgage Insurance Premium: The premium due at settlement for mortgage insurance to protect the lender or investor from losses due to future default of the mortgage loan.

5.11 Homeowner’s Insurance Premium: The premium due at settlement for homeowner’s hazard insurance, exclusive of amounts collected in escrow reserves.

5.12 Credit Related Insurance Premium: The premium due at settlement for credit life, health or disability insurance. All such insurance must be elective, and all such premiums are subject to the limitations contained in Title 18 of the Delaware Code and applicable Insurance Commissioner Regulations.

5.13 Escrow Reserves: The amounts collected for reserves, including but not limited to, homeowner’s insurance, mortgage insurance and property taxes. Escrow item calculations and cushions shall be subject to the limitations specified in the United States Real Estate Settlement Procedures Act, as amended, and the regulations thereunder.

5.14 Title Insurance Premium and Title Services Fees: The premium for lender’s title insurance and related endorsements. At the request of the borrower, such amount may include owner’s title insurance and related endorsements in addition to lender’s coverage. The fees for title services include the cost of the title commitment, certificate, search, examination, binder and direct compensation paid to the agent and the underwriter.

5.15 Attorneys Fee: The legal fees paid to an attorney who is not an employee of the licensee, its parent entity, or other affiliate, for services to secure or close the loan. The services may include the preparation of deeds, mortgages, notes and other services rendered to the borrower as part of the transaction.

5.16 Government Transfer Taxes and Recording Fees: The taxes and fees paid to local and state governments for the transfer of real estate and for the recording of documents associated with the transaction.

5.17 Property Survey Fee: The fee to obtain a drawing that delineates the exact boundaries of the security tendered, including lot lines and placement of improvements on the property.

5.18 Inspection Fees: The fee for a written report as to the physical condition of the security tendered, including but not limited to, pest inspections, lead-based paint inspections, radon inspections, structural inspections and inspections of heating, plumbing or electrical equipment. Inspection fees may include fees for insurance or warranty coverage, provided such insurance or coverage is itemized separately.

5.19 Prepayment Charges: The fee imposed in connection with the payoff and termination of a revolving credit plan or closed end loan.

5.20 Incidental Closing Fees: The fee for any other necessary and appropriate settlement service such as an assumption fee. Such fee must be actually incurred and specifically identified and itemized.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2203-6.0 Disbursements to Mortgage Loan Brokers

A licensee shall disburse funds to a mortgage loan broker only in accordance with the broker’s agreement with its customer.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2203-7.0 Miscellaneous

Notwithstanding the provisions of this regulation, licensees who make mortgage loans pursuant to the rules, regulations, guidelines and/or loan requirements established by State of Delaware or federal governmental or quasi-governmental entities (including, without limitation the Federal Housing Administration, the Department of Veterans Affairs, the Farmers Home Administration, the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation or their successors) may charge any fees permitted under a lending program conducted or supervised by any such entity.

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2204 Required Amount of Licensed Lender’s Surety Bond or Irrevocable Letter of Credit

5 Del. Admin. Code § 2204 Required Amount of Licensed Lender’s Surety Bond or Irrevocable Letter of Credit

5 Del.C. §2208

Effective Date: April 11, 2014

History

• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2204-1.0 Bond or Irrevocable Letter of Credit Required

Each licensee shall file with the State Bank Commissioner (the “Commissioner”) an original corporate surety bond or an irrevocable letter of credit, in a form satisfactory to the Commissioner, in accordance with 5 Del.C. §2208. The minimum amount of the surety bond or irrevocable letter of credit is based on the factors identified in that section.

History

• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2204-2.0 Amount of Bond or Irrevocable Letter of Credit

2.1 Each licensee shall obtain a surety bond or irrevocable letter of credit in an amount that correlates with the licensee’s volume of Delaware lending for the year ending December 31 that precedes the effective year of the license under 5 Del.C. Ch. 22. A licensee who obtains a surety bond that is effective for more than one year or an irrevocable letter of credit shall annually review the amount of the surety bond or irrevocable letter of credit as of December 31 of each year to ensure that the minimum required amount is maintained. The minimum required amount of the surety bond or irrevocable letter of credit shall be maintained according to the following table:

2.2 The Commissioner may require a licensee to obtain a larger surety bond or irrevocable letter of credit based upon the licensee’s individual circumstances.

History

• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2204-3.0 Bond for Mortgage Loan Originators

3.1 A licensee may use its surety bond under 5 Del.C. Ch. 22 to cover mortgage loan originators licensed under 5 5 Del.C. Ch. 22 and who are its employees or exclusive agents if the bond conforms to all requirements of 5 Del.C. §2415 and §12.0 of Regulation 2401.

3.2 A licensee’s irrevocable letter of credit may not be used to cover mortgage loan originators.

3.3 A licensee shall notify the Commissioner in writing of the names of the mortgage loan originators who are covered by its surety bond and of any change in such coverage for those originators.

History

• 17 DE Reg. 994 (04/01/14)

2205 Report of Delaware Loan Volume

5 Del. Admin. Code § 2205 Report of Delaware Loan Volume

5 Del.C. §2210(e)

Effective Date: April 11, 2014

Each licensee shall submit this report to the Office of the State Bank Commissioner twice each year. The first report must be received no later than July 31 and must contain information from January 1 through June 30 of the current year. The second report must be received no later than January 31 and must contain information from January 1 through December 31 of the previous year.

Licensees with more than one licensed office, whose files are maintained at a consolidated, centralized location, may file a consolidated report. Otherwise, a separate report must be submitted for each licensed office.

A completed, signed report may be scanned and submitted by e-mail to bco_reports@state.de.us no later than July 31 and January 31.

Failure to submit this report when due will be a violation of this regulation. In addition, an examination may be scheduled and examination staff allocated without respect to the licensee’s volume of Delaware loans. This may result in additional examination costs.

1. Name of Licensee: _______________________________________________________

2. Is this a consolidated report? Yes _____ No _____

3. License No.: __________ (If consolidated, list all license numbers): ____________

---

4. List the address where the loan files are maintained:

---

---

---

---

5. Examination contact person’s name, title, phone number, fax number and e-mail address:

---

---

6. List the Delaware business conducted (number of loans) in each of the following categories:

A. Loans Executed: _________________________

Total Dollar Value: $_______________________

B. Loans Brokered _________________________

Total Dollar Value $________________________

C. Loans Paid Off at Maturity: _________________________

D. Loans Paid Off Prior to Maturity: _____________________

E. Applications Denied: _________________________

F. Loans in Litigation: _________________________

G. Credit Life Insurance Claims: _________________________

H. Credit A & H Insurance Claims: ________________________

7. Reporting Period: __________________ to __________________

I, the undersigned officer, hereby certify that this report is true and correct to the best of my knowledge and belief.

---

Date Signature Title

---

Printed Name Phone Number

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2206 Report of Delaware Assets

5 Del. Admin. Code § 2206 Report of Delaware Assets

5 Del.C. §2210(e)

Effective Date: April 11, 2014

Each licensee shall submit this report annually to the Office of the State Bank Commissioner. This report must be received no later than April 1 of each year and must contain information for the previous calendar year. The information reported should reflect DELAWARE assets only (including the value of any Delaware loans or contracts, any funds deposited in Delaware, and any fixed assets located in Delaware or any other assets allocated to the Delaware operations).

A completed, signed report may be scanned and submitted by e-mail to bco_reports@state.de.us no later than April 1.

Failure to submit this report when due will be a violation of this regulation. In addition, an examination may be scheduled and examination staff allocated without respect to the licensee’s amount of Delaware assets. This may result in additional examination costs.

1. Name of Licensee: __________________________________________________________

2. Address of Principal License: __________________________________________________

---

---

3. To whom should we mail the supervisory assessment invoice? Please provide name, title, complete mailing address, telephone number (include area code and extension numbers, if applicable) fax number and e-mail address:

---

---

---

---

4. DELAWARE assets as of December 31st of the immediately previous year:

I, the undersigned officer, hereby certify that this report is true and correct to the best of my knowledge and belief.

---

Date Signature Title

---

Printed Name Phone Number

History

• 1 DE Reg. 1414 (3/1/98)
• 17 DE Reg. 994 (04/01/14)

2207 Exemption of Licensed Lenders

5 Del. Admin. Code § 2207 Exemption of Licensed Lenders

5 Del.C. §2202(b)

Effective Date: August 11, 2014

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-1.0 Purpose

This regulation governs the procedures and requirements for exemptions pursuant to 5 Del.C. §2202(b).

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-2.0 Definitions

For the purpose of this regulation, the following definitions apply:

“Commissioner” means the State Bank Commissioner.

“Exempt Person” means a person that has been granted an exemption from the Statute pursuant to 5 Del.C. §2202(b) and this regulation.

“Person” means an individual, corporation, partnership, or any other business entity or group or combination of individuals however organized.

“Statute” means 5 Del.C. Ch. 22.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-3.0 Applicability

3.1 This regulation and the Statute apply only to persons engaged in consumer credit transactions, including but not limited to mortgage lending secured by one to four family residential, owner occupied property located in Delaware and intended for personal, family or household purposes.

3.2 This regulation and the Statute’s licensing requirements do not apply to:

3.2.1 Any person who makes 5 or less loans within any 12 month period;

3.2.2 Any banking organization, as defined by 5 Del.C. §101;

3.2.3 Any federal credit union;

3.2.4 Any insurance company;

3.2.5 Any person if and to the extent that such person is lending money in accordance with, and as authorized by, any other applicable law of the State of Delaware; and

3.2.6 Any person if and to the extent that such person is lending money in accordance with, and as authorized by, any applicable law of the United States of America.

3.3 A person shall not be deemed to be transacting the business of lending money within the meaning of 5 Del.C. §2202 and shall not be subject to this regulation or the licensing requirements of the Statute solely because the person is a participating merchant as the term is used in the Statute.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-4.0 Qualifications

An exempt person shall at all times maintain such financial responsibility, experience, character, and general fitness as to command the confidence of the community and to warrant belief that its business will be operated honestly, fairly, and efficiently within the purposes of the Statute.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-5.0 Grant of Exemptions

5.1 Upon finding the qualifications of Section 4.0 of this regulation have been met, the Commissioner may grant an exemption to:

5.1.1 Any person whose lending operations are regularly examined, either separately or as part of an examination of an affiliated company, by an agency of the State of Delaware or the United States of America, if that agency regulates banks.

5.1.2 Any person exempt from federal taxation under 26 USC §501(c)(3), as amended.

5.1.3 Any other person whom the Commissioner determines to be inappropriate to include within the coverage of the Statute, including any person whose operations and financial condition are regularly examined by any other agency of the State of Delaware, the United States of America, or another state.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-6.0 Nature of Exemption

6.1 An exemption granted pursuant to Section 5.1.1 and 5.1.2 of this regulation shall include at minimum an exemption from the licensing and surety bond requirements of the Statute. The Commissioner may also grant an exemption from any other provision of the Statute that the Commissioner deems appropriate.

6.2 The Commissioner shall determine the nature and extent of any exemption granted pursuant to Section 5.1.3 of this regulation.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-7.0 Application of the Statute to Exempt Persons

Unless the Commissioner specifies otherwise, Subchapter II and Subchapter III of the Statute shall apply to all exempt persons as if they were licensees.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-8.0 Expiration

Except as otherwise provided in this regulation, exemptions shall expire on December 31 of each year.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-9.0 Application and Renewals

9.1 Any person who desires an exemption from the Statute shall apply to the Commissioner on such forms as the Commissioner may designate.

9.2 An exempt person shall apply for a renewal of the exemption at least 30 days before the expiration of the exemption on such forms as the Commissioner may designate.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-10.0 Changed Information

Exempt persons shall notify the Commissioner within 30 days of any changes in the information contained in the application for its exemption or the renewal thereof.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-11.0 Extensions on License Applications

An exempt person who applies for a license under the Statute before the expiration or revocation of its exemption shall have the exemption automatically extended until a final decision is made on the license application.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-12.0 Suspension or Revocation

12.1 The Commissioner may suspend or revoke any exemption upon a finding that:

12.1.1 The exempt person has violated any statute, judicial order, administrative order, rule, regulation or other law of the State of Delaware, any other state or the United States of America;

12.1.2 Any fact or condition exists which if it had existed at the time of the application or renewal for the exemption, would have warranted the Commissioner in refusing to issue the exemption or its renewal;

12.1.3 The exempt person has engaged in unfair or deceptive business activities or practices in connection with extensions of credit to consumers. Unfair or deceptive activities and practices include, but are not limited to, the use of tactics which mislead the consumer, misrepresent the consumer transaction or any part thereof, or otherwise create false expectations on the part of the consumer; or

12.1.4 The exempt person does not meet the qualifications specified in Section 4 of this regulation.

12.2 No exemption shall be suspended or revoked except in accordance with the procedures for suspending or revoking a license that are specified in the Statute and in the Delaware Administrative Procedures Act, 29 Del.C. Ch. 101.

12.3 No suspension or revocation of an exemption shall impair or affect the obligation of any preexisting lawful contract between the exempt person and any other person.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-13.0 Exemption Denials

If the Commissioner denies an exemption or the renewal of an exemption, the Commissioner shall promptly send the applicant or exempt person a written order to that effect which states the grounds for the denial. The applicant or exempt person may request that the Commissioner hold a hearing to reconsider that denial, in accordance with the procedures for requesting a hearing on the denial of a license application that are specified in the Statute and in the Delaware Administrative Procedures Act, 29 Del.C. Ch. 101. The Commissioner may extend the term of any exemption whose renewal has been denied until the final resolution of that hearing.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2207-14.0 Fees

14.1 The investigation fee for an application for an exemption shall be $250.00 and shall be submitted with the application.

14.2 The investigation fee for renewal of an exemption shall be $100.00. A renewal application must be submitted more than 30 days in advance of the exemption’s expiration.

14.3 A renewal application submitted less than 30 days in advance of the exemption's expiration shall be treated as a new application for an exemption and shall be subject to the investigation fee of $250.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 4 DE Reg. 1993 (6/1/01)
• 18 DE Reg. 159 (08/01/14)

2210 Short-Term Consumer Loans

5 Del. Admin. Code § 2210 Short-Term Consumer Loans

2200 Licensed Lenders

2210 Short-Term Consumer Loans

1.0 Application of Statute

1.1 5 Del.C. §§2235A, 2235B and 2235C and this regulation apply to all short-term consumer loans made in the State of Delaware or to any resident of this State by a licensee.

1.2 5 Del.C. §§2235A, 2235B and 2235C and this regulation do not apply to any short-term consumer loan that is not made in the State of Delaware or to a resident of this State.

2.0 Definitions

For the purpose of this regulation, the following definitions apply:

“Commissioner” means the State Bank Commissioner.

“Database” means the database established and maintained by the Commissioner pursuant to 5 Del.C. §2235B to verify requests from a licensee as to whether a potential borrower is eligible for a short-term consumer loan under 5 Del.C. § 2235A and to determine any other information a licensee may need in order to comply with 5 Del.C. Ch. 22 and this regulation.

“Licensee” means any person licensed under 5 Del.C. Ch.22.

“Right of rescission” means with respect to any short-term consumer loan, the right to return any amount borrowed, in full, on or before the close of business of the business day following the day on which such sum has been disbursed or advanced without the incursion of any fee or other charges.

“Rollover” means with respect to any short-term consumer loan, the extension of an outstanding and unpaid indebtedness beyond the stated repayment period solely on the basis of the payment of a fee without approval of a new loan application.

“Short-term consumer loan” means a loan of $1,000 or less made to an individual borrower that charges interest and/or fees for which the stated repayment period is less than 60 days and is not secured by title to a motor vehicle. This term also includes a rollover and a refinancing.

“Workout agreement” means an agreement between an individual borrower and a licensee for the repayment of an outstanding and unpaid indebtedness. The workout agreement must provide for payments in equal installments over a period of at least 90 days and the licensee may not assess any other fee, interest charge, or other charge on the borrower as a result of converting the loan into a workout agreement.

3.0 Short-Term Consumer Loans

3.1 All licensees shall comply with 5 Del.C. Ch. 22, all regulations issued thereunder, and all other applicable State and federal statutes and regulations. In addition, all short-term consumer loans shall be subject to the following:

3.1.1 Notwithstanding any other provision of law, no licensee shall make, and no borrower shall receive, a short-term consumer loan that would cause the borrower to have more than five short-term consumer loans from all licensees in any twelve-month period. Any loan made or collected in violation of this paragraph is void, and the licensee does not have the right to collect, receive, or retain any principal, interest, fees or other charges. A violation of 5 Del.C. §2235A is a violation of Chapter 25 of Title 6 of the Delaware Code.

3.1.2 No licensee shall make more than four rollovers of an existing short-term consumer loan. A licensee may, following not more than the maximum allowable number of rollovers, enter into a workout agreement with the borrower or take such other actions as are lawful to collect any outstanding and unpaid indebtedness.

3.1.3 No licensee shall make a short-term consumer loan unless such loan is subject to a right of rescission on the part of the individual borrower.

3.1.4 No licensee shall pursue or threaten to pursue criminal action against an individual borrower in connection with the nonpayment of any amount due, including the unpaid return of any check or automated clearing house transaction.

3.1.5 No licensee shall make a short-term consumer loan unless the application for the loan shall be written in both English and Spanish.

3.2 Nothing in this regulation prohibits a licensee from refinancing the principal amount of a short-term consumer loan, subject to the limitations and requirements imposed by 5 Del.C. §2235A and this regulation.

3.3 In addition to such other disclosure requirements as are imposed pursuant to other provisions of 5 Del.C. Ch. 22, Subch. III and the regulations in 5 DE Admin. Code Ch. 22, no licensee shall make a short-term consumer loan unless the application for the loan contains a written disclosure, conspicuously displayed, that:

3.3.1 The loan is designed as a short-term cash flow solution and not designed as a solution for longer term financial problems;

3.3.2 Additional fees may accrue if the loan is rolled over; and

3.3.3 Credit counseling services are available to consumers who are experiencing financial problems.

3.4 Every short-term consumer loan provider must post in plain view, in an area easily accessible to their customers at the entrance to the office and on any website, a schedule of fees and rates applicable to their loans, and a prominent statement that: "A payday loan is not intended to meet long-term financial needs."

3.5 A licensee or licensee’s agent shall not engage in any device or subterfuge intended to evade the requirements of 5 Del.C. Ch. 22 and the regulations thereunder through any method including, but not limited to, mail, telephone, internet or any electronic means, including:

3.5.1 Offering, making, or assisting a borrower to obtain a loan in violation of 5 Del.C. §2235A and this regulation, or brokering or acting as an agent for a third party in such a transaction, regardless of whether approval, acceptance or ratification is necessary to create a legal obligation for the third party.

3.5.2 Disguising a short-term consumer loan as a revolving line of credit, or making or assisting a borrower to obtain a revolving line of credit for the purpose of avoiding the requirements of 5 Del.C. §2235A and this regulation.

4.0 Short-Term Consumer Loan Database

4.1 Prior to entering into a short-term consumer loan with a potential borrower, a licensee shall access the database to determine:

4.1.1 Whether a potential borrower has an outstanding short-term consumer loan;

4.1.2 The number of short-term consumer loans the borrower has outstanding;

4.1.3 Whether the borrower is eligible for a short-term consumer loan under 5 Del.C. §2235A and this regulation; and

4.1.4 Any other information necessary for the licensee to comply with 5 Del.C. Ch. 22.

4.2 Immediately upon entering into a short-term consumer loan with a borrower, a licensee shall accurately submit to the database in the appropriate format:

4.2.1 The borrower’s name, address, social security or employment authorization number, and gross monthly income;

4.2.2 The amount of the transaction;

4.2.3 The annual percentage rate of the transaction as computed under the federal Truth in Lending Act;

4.2.4 The date of the transaction; and

4.2.5 The anticipated date that the transaction will be paid off.

4.3 A licensee shall promptly submit to the database:

4.3.1 The date that a short-term consumer loan is paid in full or is otherwise satisfied; or

4.3.2 The date that a short-term consumer loan defaults and the amount of the default.

4.4 A licensee shall promptly correct any incorrect data entered into the database that was previously submitted.

4.5 A licensee must continue to enter and update all required information for any short-term consumer loans subject to 5 Del.C. §2235A that are outstanding or have not yet expired after the date on which the licensee no longer has the license required by 5 Del.C. Ch.22.

4.5.1 Within ten business days after ceasing to make such loans, the licensee must submit a plan for continuing compliance with 5 Del.C. §2235B(d) to the Commissioner for approval.

4.5.2 The Commissioner must promptly approve or disapprove the plan and may require the licensee to submit a new or modified plan that ensures compliance with 5 Del.C. §2235B(d).

4.6 All borrower identifying information shall be deleted from the database on a regular and routine basis twelve months after the borrower’s short-term consumer loan is paid off or otherwise satisfied.

4.7 All data collected pursuant to 5 Del.C. §2235B and this regulation shall be used only as prescribed by 5 Del.C. Ch.22 or for research and reporting as authorized by the Commissioner.

5.0 Fees

5.1 In addition to the annual license fee required by 5 Del.C. §2203(b), each licensee making short-term consumer loans shall pay an annual high-cost loan license fee surcharge of $1,500 for each licensed office.

5.2 Each licensee making short-term consumer loans shall pay a database fee for each transaction that the licensee submits to the database.

5.2.1 The database fee shall be paid directly to the operator of the database, as agent of the Commissioner.

5.2.2 Licensees shall not charge customers for the database fee.

5.3 The Commissioner shall establish the database fee as authorized by 5 Del.C. §2235B(e)(4).

5.3.1 The database fee must reasonably reflect the costs necessary to defray the expenses associated with administering the provisions of 5 Del.C. §2235B.

5.3.2 The Commissioner may revise the amount of the database fee as required from time to time based upon changes to those expenses.

5.3.3 The Commissioner shall promptly notify all licensees in advance of any revisions to the amount of the database fee.

16 DE Reg. 658 (12/01/12)

2300 Sale of Checks and Transmission of Money

2301 Operating Regulation

5 Del. Admin. Code § 2301 Operating Regulation

5 Del.C. Ch. 23

5 Del.C. §2318

Effective Date: April 13, 2020

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-1.0 Compliance with Applicable Laws

1.1 All licensees shall comply with 5 Del.C. Ch. 23, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

1.2 The manager and appropriate staff of each licensee shall familiarize themselves with all such statutes and regulations.

1.3 Each licensee shall maintain either by paper copy or through electronic access, 5 Del.C. Ch. 23 and the following regulations:

1.3.1 Regulation 101, Retention of Financial Institution Records;

1.3.2 Regulation 2301, Operating Regulation;

1.3.3 Regulation 2302, Exemptions; and

1.3.4 Regulation 2303, Report of Delaware Volume.

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-2.0 Minimum Required Records

2.1 Each licensee shall maintain any records necessary to verify the licensee’s compliance with 5 Del.C. Ch. 23, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

2.2 All such records shall be made available to the Commissioner’s staff when requested.

2.3 Records may be maintained at any suitable location but must be available within a reasonable period of time upon request.

2.4 All such records may be maintained by paper copy or in an electronic format.

2.5 All records shall be maintained in accordance with the time periods specified in Regulation 101, Retention of Financial Institution Records.

2.6 The Commissioner may grant written approval for variations from this section to accommodate specific record keeping systems. Requests for such approvals must be in writing and provide sufficient information concerning the system to ensure that the requirements of this section are satisfied and that the records will be readily available when requested.

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-3.0 Expired Identification

Licensees shall not accept from a customer any form of identification that has expired.

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-4.0 Advertising

A licensee shall not advertise in any way that is false, misleading, or deceptive.

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-5.0 Examination Fees and Supervisory Assessments

5.1 The Commissioner may examine licensees and their agents pursuant to 5 Del.C. §122. The costs of such examinations are assessed in accordance with 5 Del.C. §127(a). A licensee shall remit payment not later than 30 days after the date of the examination invoice.

5.2 The Commissioner shall assess each licensee a supervisory assessment that is due and payable on August 1 each year, in accordance with 5 Del.C. §127(b).

5.3 Failure to remit timely payment of any examination fee or supervisory assessment will result in a penalty of 0.05 percent of the amount unpaid for each day that such fee or assessment remains unpaid after the due date, in accordance with 5 Del.C. §§127(a) and 127(b).

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-6.0 Examination Responses

A licensee shall send the Commissioner a written response to every violation specified in a report of examination no later than 30 days after the date of the report.

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-7.0 License Applications/ Nationwide Multistate Licensing System and Registry

7.1 The Nationwide Multistate Licensing System and Registry, as the multi-state automated licensing system in which the Commissioner is participating pursuant to 5 Del.C. §2319, is authorized to act on behalf of the Commissioner to facilitate the application and licensing processes of 5 Del.C. Ch. 23, and in that capacity, the System may, with respect to that chapter:

7.1.1 Process licensing applications;

7.1.2 Collect licensing payments;

7.1.3 Submit fingerprints and any other information required for a criminal history background check to the Federal Bureau of Investigation or other law-enforcement agency;

7.1.4 Receive information and maintain records regarding applicants and licensees; and

7.1.5 Share information it maintains regarding applicants and licensees subject to the System with any other state participating in the System, if that state could have obtained that same information directly from the applicant or licensee under its own law for the purpose of licensing, regulating, or supervising that same applicant or licensee under a statute similar to 5 Del.C. Ch. 23.

7.2 Any person seeking an initial or renewal license to engage in a business that requires a license under 5 Del.C. Ch. 23 shall submit the appropriate application and fees to the Commissioner through the Nationwide Multistate Licensing System and Registry.

7.3 All applications shall contain such information, and be submitted on such forms and in such manner as the Commissioner may designate. The Commissioner may change and update application forms as the Commissioner deems appropriate. The Commissioner may also require additional information in connection with any particular application.

7.4 All applications, whether for a main company location or a branch location, must be submitted with the investigation fee of $172.50, the annual licensing fee of $230.00, plus $4.60 for each additional location, and the Nationwide Multistate Licensing System and Registry processing fee of $100 (main company location) or $20 (branch location) (or such other amount as the System may charge). The Nationwide Multistate Licensing System and Registry processing fee and the investigation fee are non-refundable.

7.5 No application shall be deemed complete until the Commissioner has received all required information, documents and fees.

7.6 If the Commissioner determines that an application is incomplete, the Commissioner shall send written notification to the applicant indicating the items that must be addressed to continue the application review process. If the Commissioner does not receive a complete response fully addressing all such items within 30 days after sending that notice, the Commissioner may consider the application withdrawn.

7.7 Any person seeking an initial license following withdrawal of an application shall submit a new application that includes all information, documents and fees required for an initial license.

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

5 Del. Admin. Code § 2301-8.0 Reports

Each licensee shall submit to the Nationwide Multistate Licensing System and Registry such reports of condition at such times, in such form and containing such information as that System or the Commissioner shall require.

History

• 23 DE Reg. 885 (04/01/20)
• 16 DE Reg. 1286 (06/01/13)
• 23 DE Reg. 885 (04/01/20)

2302 Exemptions

5 Del. Admin. Code § 2302 Exemptions

5 Del.C. §2304(c)

Effective Date: August 11, 2014

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-1.0 Purpose

This regulation governs the procedures and requirements for exemptions pursuant to 5 Del.C. §2304(c).

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-2.0 Definitions

For the purpose of this regulation, the following definitions apply:

"Commissioner" means the State Bank Commissioner.

"Exempt person" means a person exempt from any of the requirements of the Statute pursuant to 5 Del.C. §2304(c) and this regulation.

"Person" means any individual, partnership, association, joint stock association or corporation, but does not include the United States government or the government of the State of Delaware.

"Statute" means 5 Del.C. Ch. 23.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-3.0 General Exemption

3.1 Banks, trust companies, credit unions, building and loan associations and savings and loan associations, organized under the law of any state in the United States of America or the United States of America, which either are authorized to do business in the State of Delaware, or which act through a contractor or agent authorized to do business in this State are exempt from all requirements of the Statute. Nothing contained in this regulation shall be construed to enlarge or limit the rights that any of the persons listed in this Section 3.1 have under any existing law.

3.2 Agents of an exempt person are exempt from the Statute to the same extent as the exemption granted to their principal.

3.3 Persons exempt from the Statute pursuant to this section 3.0 are not subject to any other provisions of this regulation.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-4.0 Grant of Exemptions

4.1 Upon finding the qualifications of Section 5.0 of this regulation have been met, the Commissioner may grant an exemption to:

4.1.1 any person whose operations and financial condition with respect to the transmission of money and/or the sale or issuance of checks are regularly examined, either separately or as part of an examination of an affiliate, by an agency of the State of Delaware, another state, or the United States of America; or

4.1.2 any other person whom the Commissioner determines to be inappropriate to include within the coverage of the Statute.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-5.0 Qualifications for Exemption

5.1 An exempt person shall at all times maintain:

5.1.1 a net worth of at least $100,000 computed in accordance with generally accepted accounting principles; and

5.1.2 such financial responsibility, financial condition, financial and business experience, character, and general fitness as reasonably to warrant the belief that its business will be conducted honestly, fairly, equitably, carefully, and efficiently.

5.2 The Commissioner may investigate and consider the qualifications of the applicant for the exemption, including principals, officers and directors of an applicant, in determining whether the qualifications for an exemption have been met.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-6.0 Nature of Exemption

An exemption shall include at minimum an exemption from the licensing and surety bond requirements of the Statute. The Commissioner may also grant an exemption from any other provision of the Statute that the Commissioner deems appropriate.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-7.0 Expiration

Except as otherwise provided in this regulation, exemptions shall expire on December 31 of each year.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-8.0 Application and Renewals

8.1 Any person who desires an exemption from the Statute shall apply to the Commissioner on such forms as the Commissioner may designate.

8.2 An exempt person shall apply for a renewal of the exemption at least 30 days before the expiration of the exemption on such forms as the Commissioner may designate.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-9.0 Changed Information

Exempt persons shall notify the Commissioner within 30 days of any changes in the information contained in the application for its exemption or the renewal thereof.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-10.0 Extensions on License Applications

An exempt person who applies for a license under the Statute before the expiration or revocation of its exemption shall have the exemption automatically extended until a final decision is made on the license application.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-11.0 Suspension or Revocation

11.1 The Commissioner may suspend or revoke any exemption upon a finding that:

11.1.1 the exempt person has violated any statute, judicial order, administrative order, rule, regulation or other law of the State of Delaware, another state, or the United States of America;

11.1.2 any fact or condition exists, which if it had existed at the time of the application or renewal for the exemption, would have warranted the Commissioner in refusing to issue the exemption or its renewal; or

11.1.3 the exempt person has engaged in business activities or practices in connection with any business for which the exemption was granted, which could be deemed unfair or deceptive by nature of intent, including the use of tactics which mislead the consumer, misrepresent the consumer transaction or any part thereof, or otherwise create false expectations on the part of the consumer.

11.2 No exemption shall be suspended or revoked except in accordance with the procedures for suspending or revoking a license that are specified in the Statute and in the Delaware Administrative Procedures Act, 29 Del.C. Ch. 101.

11.3 No suspension or revocation of an exemption shall impair or affect the obligation of any preexisting lawful contract between the exempt person and any other person.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-12.0 Exemption Denials

12.1 If the Commissioner denies an exemption or the renewal of an exemption, the Commissioner shall promptly send the applicant or exempt person a written notice to that effect which states the grounds for the denial.

12.2 The applicant or exempt person may request that the Commissioner hold a hearing to reconsider that denial, in accordance with the procedures for requesting a hearing on the denial of a license application that are specified in the Statute and in the Delaware Administrative Procedures Act, 29 Del.C. Ch. 101.

12.3 The Commissioner may extend the term of any exemption whose renewal has been denied until the final resolution of that hearing.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 2302-13.0 Fees

13.1 The investigation fee for an initial application for an exemption shall be $250.00 and shall be submitted with the application.

13.2 The investigation fee for renewal of an exemption shall be $100.00. A renewal application must be submitted more than 30 days in advance of the exemption's expiration.

13.3 A renewal application submitted less than 30 days in advance of the exemption's expiration shall be treated as a new application for an exemption and shall be subject to the investigation fee of $250.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

2303 Report of Delaware Volume

5 Del. Admin. Code § 2303 Report of Delaware Volume

2303 Report of Delaware Volume

5 Del.C. Ch. 23

5 Del.C. Ch. 23

Effective Date: June 11, 2013

Each licensee shall submit this report to the Office of the State Bank Commissioner twice each year. The first report must be received no later than July 31 and must contain information from January 1 through June 30 of the current year. The second report must be received no later than January 31 and must contain information from January 1 through December 31 of the previous year.

Licensees with more than one licensed office, whose files are maintained at a consolidated, centralized location, may file a consolidated report. Otherwise, a separate report must be submitted for each licensed office.

A completed, signed report may be scanned and submitted by e-mail to bco_reports@state.de.us.

Failure to submit this report when due will be a violation of this regulation. In addition, an examination may be scheduled and examination staff allocated without respect to the licensee’s volume of Delaware business. This may result in additional examination costs.

1. Name of Licensee: ________________________________________________________

2. License No.: _______________

3. List the address where the books and records are maintained: ______________________

---

4. Examination contact person’s name, title, phone number, fax number and e-mail address:

---

5. List the Delaware business conducted in each of the following categories:

A. Travelers Checks/Cheques

Number sold: ____________________________

Total dollar value: ____________________________

B. Money Orders

Number sold: ____________________________

Total dollar value: ____________________________

C. Transmission of Funds in any form

Number of transmissions: ____________________________

Total dollar value: ____________________________

6. Reporting Period: _____________________ to ____________________________

I, the undersigned officer, hereby certify that this report is true and correct to the best of my knowledge and belief.

---

Date Signature Title

---

Printed Name Phone Number

16 DE Reg. 1286 (06/01/13)

2400 Mortgage Loan Originators

2401 Mortgage Loan Originator Licensing

5 Del. Admin. Code § 2401 Mortgage Loan Originator Licensing

2401 Mortgage Loan Originator Licensing

5 Del.C. §§121(b), 2422

Effective Date: December 11, 2009

1.0 Definitions

For the purposes of this regulation, the following definitions apply unless the context otherwise requires:

“Commissioner” means the State Bank Commissioner.

“Depository institution” has the same meaning as in §3 of the United States Federal Deposit Insurance Act, and includes any credit union.

“Dwelling” has the same meaning as in §103(v) of the United States Truth in Lending Act.

“Federal banking agencies” means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.

“Immediate family member” means a spouse, child, sibling, parent, grandparent or grandchild. This includes step-parents, step-children, step-siblings, and adoptive relationships.

“Individual” means a natural person.

“Loan processor or underwriter” means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of a person licensed, or exempt from licensing under Chapters 21 or 22 of Title 5 of the Delaware Code.

a. For purposes of this definition, ‘clerical or support duties’ may include subsequent to the receipt of an application:

1. the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and

2. communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.

b. An individual engaging solely in loan processor or underwriter activities, shall not represent to the public, through advertising or other means of communicating or providing information including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator.

“Mortgage loan originator” means an individual who for compensation or gain or in the expectation of compensation or gain:

a. takes a residential mortgage loan application; or

b. offers or negotiates terms of a residential mortgage loan;

c. but does not include:

1. an individual engaged solely as a loan processor or underwriter, except as otherwise provided in §3.2.

2. a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with Delaware law, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; and

3. a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in §101(53D) of Title 11, United States Code.

“Nationwide Mortgage Licensing System and Registry” means the mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of licensed mortgage loan originators.

“Nontraditional mortgage product” means any mortgage product other than a 30 year fixed rate mortgage.

“Person” means a natural person, corporation, company, limited liability company, partnership, association, or other entity.

“Real estate brokerage activity” means any activity that involves offering or providing real estate brokerage services to the public, including:

a. acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;

b. bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property;

c. negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property (other than in connection with providing financing with respect to any such transaction);

d. engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and

e. offering to engage in any activity, or act in any capacity, described in a., b., c., or d. of this definition.

“Registered mortgage loan originator” means any individual who:

a. meets the definition of mortgage loan originator and is an employee of:

1. a depository institution;

2. a subsidiary that is:

A. owned and controlled by a depository institution; and

B. regulated by a federal banking agency; or

3. an institution regulated by the Farm Credit Administration; and

b. is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry.

“Residential mortgage loan” means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling.

“Residential real estate” means any real property located in Delaware, upon which is constructed, or intended to be constructed, a dwelling.

“Statute” means the Delaware S.A.F.E. Mortgage Licensing Act of 2009, 5 Del.C. Ch. 24, as amended.

“Unique identifier” means a number or other identifier assigned by protocols established by the Nationwide Mortgage Licensing System and Registry.

2.0 Exemptions

The following are exempt from the statute and this regulation:

2.1 registered mortgage loan originators, when acting for an entity that is:

2.1.1 a depository institution;

2.1.2 a subsidiary that is:

2.1.2.1 owned and controlled by a depository institution; and

2.1.2.2 regulated by a federal banking agency; or

2.1.3 an institution regulated by the Farm Credit Administration;

2.2 any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual;

2.3 any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence; and

2.4 a licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator.

3.0 License and Registration Required

3.1 Unless specifically exempted from the statute and this regulation, an individual shall not engage in the business of a mortgage loan originator with respect to any dwelling located in this State without first obtaining and then annually maintaining a license issued by the Commissioner under the statute and this regulation.

3.2 A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter without first obtaining and then annually maintaining a license issued by the Commissioner under the statute and this regulation.

3.3 Each licensed mortgage loan originator must register with the Nationwide Mortgage Licensing System and Registry and maintain a valid unique identifier.

3.4 Licenses shall not be transferable or assignable.

3.5 Every person licensed under the statute and this regulation shall be a financial institution for purposes of Part I of Title 5 of the Delaware Code.

4.0 Applications

4.1 Any person seeking an initial license to engage in the business of a mortgage loan originator with respect to any dwelling located in this State shall submit an application to the Commissioner through the Nationwide Mortgage Licensing System and Registry. All such applicants shall furnish to that System information concerning the applicant’s identity, including:

4.1.1 fingerprints for submission to the Federal Bureau of Investigation, and any governmental agency or entity authorized to receive such information for a state, national and international criminal history background check; and

4.1.2 personal history and experience in a form prescribed by the Nationwide Mortgage Licensing System and Registry, including the submission of authorization for that System and the Commissioner to obtain:

4.1.2.1 an independent credit report obtained from a consumer reporting agency described in §603(p) of the United States Fair Credit Reporting Act; and

4.1.2.2 information related to any administrative, civil or criminal findings by any governmental jurisdiction.

4.2 Any individual seeking to renew an existing license to engage in the business of a mortgage loan originator with respect to any dwelling located in this State shall submit an application to the Commissioner through the Nationwide Mortgage Licensing System and Registry at least 30 days before the expiration of the existing license. A renewal application that is not received by that time shall be treated as an application for an initial license and shall be subject to the investigation fee, but not the pre-licensing education and testing requirements.

4.3 All applications shall contain such information, and be submitted on such forms and in such manner as the Commissioner may designate. The Commissioner may change and update application forms as the Commissioner deems appropriate. The Commissioner may also require additional information in connection with any particular application.

4.4 All applications must be submitted with the annual license fee and the Nationwide Mortgage Licensing System and Registry processing fee. Initial applications must also be submitted with the investigation fee.

4.5 No application shall be deemed complete until the Commissioner has received all required information, documents and fees.

4.6 If the Commissioner determines that an application is incomplete, the Commissioner shall send written notification to the applicant indicating the items that must be addressed to continue the application review process. If the Commissioner does not receive a complete response fully addressing all such items within 30 days after sending that notice, the Commissioner may consider the application withdrawn.

4.7 Any person seeking an initial license following withdrawal of an application shall submit a new application that includes all information, documents and fees required for an initial license.

5.0 Fees

5.1 An investigation fee of $250.00 must be submitted with the application for an initial license. This fee is non-refundable.

5.2 An annual license fee of $250.00 must be submitted with all applications. This fee shall be refunded if the application is denied, but shall not be reduced or refunded in any amount if the license is issued for less than one year; or is surrendered, suspended, canceled or revoked prior to its expiration.

5.3 A Nationwide Mortgage Licensing System and Registry processing fee of $30.00 (or such other amount as that System may charge) must be submitted with all applications. This fee is non-refundable.

6.0 Issuance of Initial License

6.1 The Commissioner shall issue a mortgage loan originator license only upon finding, at a minimum, that:

6.1.1 The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent formal vacating of a revocation shall not be deemed a revocation.

6.1.2 The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court:

6.1.2.1 during the 7-year period preceding the date of the application for licensing and registration; or

6.1.2.2 at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, breach of trust, or money laundering;

6.1.2.3 provided that any conviction that has been pardoned shall not be a conviction for the purposes of this section.

6.1.3 The applicant has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the applicant will operate as a mortgage loan originator honestly, fairly, and efficiently within the purposes of the statute and this regulation. For purposes of this section, applicants have demonstrated that they are not financially responsible when they have shown a disregard in the management of their own financial condition. A determination that an applicant has not shown financial responsibility may include, but not be limited to:

6.1.3.1 current outstanding judgments, except judgments solely as a result of medical expenses;

6.1.3.2 current outstanding tax liens or other government liens and filings;

6.1.3.3 foreclosures within the past three years;

6.1.3.4 a pattern of seriously delinquent accounts within the past three years; or

6.1.3.5 failure to pay the State or the Commissioner any money when due.

6.1.4 The applicant has completed the pre-licensing education requirements described in §8.0.

6.1.5 The applicant has passed a written test that meets the test requirements described in §9.0; and

6.1.6 The applicant has met the surety bond requirements described in §12.0.

7.0 Denial of Initial License

7.1 If the Commissioner refuses to issue an initial license, the Commissioner shall notify the applicant in writing of that refusal, of the reasons for the refusal, and of the applicant’s right to request a hearing; provided however, the Commissioner shall retain any investigation or other fee charged for the expense of processing an initial application, notwithstanding that the application was rejected.

7.2 The Commissioner shall send a copy of the notice to the applicant at that individual's last known mailing address by certified mail, return receipt requested. If the applicant sends the Commissioner a written request for a hearing within 10 days of the notice’s mailing date, the Commissioner shall then hold that hearing in accordance with Chapter 101 of Title 29 of the Delaware Code.

8.0 Pre- Licensing Education

8.1 To meet the pre-licensing education requirements of §6.1.4, an applicant must complete at least 20 hours of education that include:

8.1.1 federal law and regulations – 3 hours;

8.1.2 ethics, to include instruction on fraud, consumer protection, and fair lending issues – 3 hours; and

8.1.3 lending standards for the nontraditional mortgage product marketplace – 2 hours.

8.2 All pre-licensing education courses must be approved by the Nationwide Mortgage Licensing System and Registry.

8.3 Pre-licensing education may be offered either in a classroom, online or by any other means and at any location approved by the Nationwide Mortgage Licensing System and Registry.

8.4 Any pre-licensing education courses specified in §8.1.1 to §8.1.3 that are approved by the Nationwide Mortgage Licensing System and Registry for any other state shall be accepted as credit towards completion of the pre-licensing education requirements in this State.

8.5 A person previously licensed under the statute and this regulation subsequent to the effective date of the statute and this regulation applying to be licensed again must have completed all of the continuing education requirements for the year in which the previous license was last held.

9.0 Testing

9.1 To meet the written test requirements of §6.1.5, an applicant must pass a written test developed by the Nationwide Mortgage Licensing System and Registry that adequately measures the applicant’s knowledge and comprehension in appropriate subject areas, including:

9.1.1 ethics;

9.1.2 federal law and regulation pertaining to mortgage origination;

9.1.3 state law and regulation pertaining to mortgage origination; and

9.1.4 federal and state law and regulation, pertaining to fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.

9.2 An applicant must achieve a score of at least 75 percent correct answers to the test questions for a passing grade.

9.3 The test must be administered by a test provider approved by the Nationwide Mortgage Licensing System and Registry, and may be taken at any location approved by that System.

9.4 An applicant may take a test 3 consecutive times, with each consecutive test occurring at least 30 days after the preceding test.

9.5 After failing 3 consecutive tests, an applicant must wait at least 6 months before taking the test again.

9.6 A licensed mortgage loan originator who fails to maintain a valid license for a period of 5 years or longer must retake the test, not taking into account any time during which such individual is a registered mortgage loan originator.

10.0 License Renewal

10.1 The Commissioner shall renew a mortgage loan originator’s license only upon finding, at a minimum, that:

10.1.1 the mortgage loan originator continues to meet the minimum standards for initial license issuance under §6.0;

10.1.2 the mortgage loan originator has satisfied the annual continuing education requirements described in §11.0; and

10.1.3 the mortgage loan originator has paid all required fees for renewal of the license.

10.2 The Commissioner may refuse to renew a mortgage loan originator’s license pursuant to §13.0.

11.0 Continuing Education

11.1 To meet the annual continuing education requirements of §10.1.2, a licensed mortgage loan originator must complete during every calendar year after initial licensing at least 8 hours of education that include:

11.1.1 federal law and regulations – 3 hours;

11.1.2 ethics, to include instruction on fraud, consumer protection, and fair lending issues – 2 hours; and

11.1.3 lending standards for the nontraditional mortgage product marketplace – 2 hours.

11.2 All continuing education courses must approved by the Nationwide Mortgage Licensing System and Registry.

11.3 Continuing education may be offered either in a classroom, online or by any other means and at any location approved by the Nationwide Mortgage Licensing System and Registry.

11.4 A licensed mortgage loan originator:

11.4.1 except as provided in §11.8, may only receive credit for a continuing education course in the calendar year in which the course is taken; and

11.4.2 may not take the same course in the same or successive calendar years to meet the annual requirements for continuing education.

11.5 A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originator’s own annual continuing education requirement at the rate of 2 hours credit for every 1 hour taught.

11.6 Any continuing education courses specified in §11.1.1 to §11.1.3 that are approved by the Nationwide Mortgage Licensing System and Registry for any other state shall be accepted as credit towards completion of the continuing education requirements in this State.

11.7 A licensed mortgage loan originator who subsequently becomes unlicensed must complete the continuing education requirements for the last year in which a license was held prior to issuance of a new or renewed license.

11.8 A mortgage loan originator who applies for a license renewal and meets the requirements of §10.1 and §10.3, but fails to complete the required continuing education credits by December 31 shall submit to the Commissioner by that date a specific plan for making up the deficiency of necessary credits by March 1 of the succeeding year.

11.8.1 Unless the Commissioner notifies the mortgage loan originator to the contrary by January 31, the plan shall be deemed accepted by the Commissioner and the mortgage loan originator’s license will be renewed provisionally until March 15.

11.8.2 Not later than March 15, the mortgage loan originator shall submit to the Commissioner a written certification of completion of the plan that includes the title, date, and number of credits earned at each course.

11.8.3 The Commissioner may refuse to renew pursuant to §13.0 the license of a mortgage loan originator with a continuing education deficiency who fails to submit either the plan or certification required by this section.

12.0 Surety Bonds

12.1 All licensed mortgage loan originators and applicants for an initial license under the statute and this regulation shall file with the Commissioner an original corporate surety bond in a form satisfactory to the Commissioner in accordance the requirements of this section.

12.2 The surety bond for an applicant for an initial license shall be a minimum of $25,000. The surety bond for a licensed mortgage loan originator shall be in a minimum amount in accordance with the following table based upon the volume of Delaware mortgage loans which that licensee originated for the year ending December 31 that precedes the effective year of the license. The amount of a surety bond that is effective for more than one year shall be adjusted as of December 31 of each year to ensure that the minimum required amount is maintained.

Annual Volume of Delaware Mortgage Loans

Minimum Required Amount of Surety Bond

not more than $11,000,000

$25,000

$11,000,001 - $23,000,000

$50,000

$23,000,001 - $35,000,000

$75,000

$35,000,001 - $47,000,000

$100,000

$47,000,001 - $59,000,000

$125,000

$59,000,001 - $71,000,000

$150,000

$71,000,001 - $83,000,000

$175,000

$83,000,001 and over

$200,000

12.3 The Commissioner may require a larger surety bond based upon the particular circumstances of the applicant or licensee.

12.4 No bond shall be accepted unless the following requirements are satisfied:

12.4.1 The aggregate value of the bond shall be equal to, or greater than, the amount determined in accordance with §12.2;

12.4.2 The term of the bond shall be commensurate with the license period or continuous;

12.4.3 The expiration date of the bond shall not be earlier than midnight of the date on which the license expires; and

12.4.4 The bond shall run to the State for the benefit of the Office of the State Bank Commissioner and for the benefit of all consumers injured by any wrongful act, omission, default, fraud or misrepresentation by the mortgage loan originator in the course of that individual's activity as such. Compensation under the bond shall be for amounts which represent actual losses and shall not be payable for claims made by business creditors, third-party service providers, agents or persons otherwise in the employ of the mortgage loan originator. Surety claims shall be paid to the Office of the State Bank Commissioner by the insurer not later than 90 days after receipt of a claim. Claims paid after 90 days shall be subject to daily interest at the legal rate. The aggregate liability of the surety on the bond, exclusive of any interest which accrues for payments made after 90 days, shall in no event exceed the amount of such bond.

12.5 If a mortgage loan originator changes surety company or the bond is otherwise amended, the mortgage loan originator shall immediately provide the Commissioner with the amended original copy of the surety bond. No cancellation of an existing bond by a surety shall be effective unless written notice of its intention to cancel is filed with the Commissioner at least 30 days before the date upon which cancellation shall take effect.

12.6 The Commissioner may require potential claimants to provide such documentation and affirmations as the Commissioner may determine to be necessary and appropriate. In the event the Commissioner determines that multiple consumers have been injured by a mortgage loan originator, the Commissioner shall cause a notice to be published for the purpose of identifying all relevant claims.

12.7 When a surety company receives a claim against the bond of a mortgage loan originator, it shall immediately notify the Commissioner and shall not pay any claim unless and until it receives notice to do so from the Commissioner.

12.8 The Commissioner shall have a period of 2 calendar years after the effective date of cancellation or termination of the surety bond by the insurer to submit claims to the insurer.

12.9 A new bond shall be filed when an action is commenced on an existing bond.

12.10 Mortgage loan originators who are employees or exclusive agents of a licensee under Chapters 21 or 22 of Title 5 of the Delaware Code can use the surety bond of their employer or principal in lieu of their surety bond requirement under this section, if the surety bond of the employer or principal is in a minimum amount as provided in §12.2 based on the total annual volume of Delaware mortgage loans originated by all mortgage loan originators covered by that surety bond, that surety bond meets all the requirements of this section, and the employer or principal consents to that use. Licensees under those Chapters shall notify the Commissioner in writing of the names of the mortgage loan originators who are covered by their bond, and of any changes in that coverage.

13.0 Revocation, Suspension, Reprimand and Other Discipline

13.1 The Commissioner may revoke, suspend, condition, or refuse to renew any license, or publicly reprimand a licensee under the statute and this regulation upon finding that the licensee:

13.1.1 has violated or failed to comply with any provision of the statute; this regulation; any rule, regulation, order, or supervisory letter promulgated by the Commissioner under the authority of Title 5 of the Delaware Code; or any other law, rule or regulation of this State or the federal government;

13.1.2 has failed at any time to meet the requirements of §§6.0 or 10.0; or

13.1.3 has withheld information or made a material misstatement in an initial or renewal application for a license.

13.2 Whenever the Commissioner determines to take any action under this section, the Commissioner shall issue a written order that shall include a statement of the facts upon which the action is based and a notice that the licensee may request a hearing in accordance with Chapter 101 of Title 29 of the Delaware Code.

13.3 Except as provided in §13.4, an order under this section shall not become effective less than 10 days after its mailing date.

13.4 The Commissioner may issue an order under this section which shall become effective immediately upon issuance whenever in the opinion of the Commissioner, the public health, safety or welfare clearly requires emergency action and the Commissioner’s order so states.

13.5 Upon its issuance, the Commissioner shall send a copy of the order to the licensee at that individual's last known mailing address by certified mail, return receipt requested.

13.5.1 If the licensee sends the Commissioner a written request for a hearing within 10 days of the order’s mailing date, the Commissioner shall then hold a hearing in accordance with Chapter 101 of Title 29 of the Delaware Code, and except as provided in §13.4, the order then shall not become effective until the conclusion of the hearing.

13.5.2 At the conclusion of the hearing, the Commissioner may affirm the order as originally issued, or modify, amend or rescind the order.

13.6 No action taken under this section shall in any way impair or otherwise affect either the obligations of any pre-existing lawful contract between the licensee and any person, or the licensee’s civil or criminal liability.

13.7 If the expiration or surrender of a license occurs after the Commissioner issues a written order under §13.2, the Commissioner may proceed as if the expiration or surrender had not occurred.

13.8 The conditions that may be imposed pursuant to this section on a license and on the reinstatement of a suspended license may include the payment of restitution to consumers for fees or other charges that the licensee improperly charged or collected.

14.0 Information Challenges

14.1 A mortgage loan originator may challenge information that the Commissioner has entered into the Nationwide Mortgage Licensing System and Registry by submitting to the Commissioner a written statement that identifies the specific information being challenged and provides evidence that this information is incorrect.

14.2 Upon receipt of an information challenge, the Commissioner shall consider the merits of the challenge and issue a written preliminary determination.

14.3 Upon issuance, the Commissioner shall send a copy of the determination to the mortgage loan originator initiating the challenge at that individual’s last known address by certified mail, return receipt requested.

14.4 The Commissioner’s preliminary determination will be the final resolution of the challenge, unless the mortgage loan originator sends the Commissioner a written request for a hearing within 10 days of the mailing date of the preliminary determination. The Commissioner shall then hold that hearing in accordance with Chapter 101 of Title 29 of the Delaware Code; provided, however, that if the subject matter of the information at issue is a decision issued pursuant to such a hearing or by a court of competent jurisdiction, then the Commissioner shall only confirm that the decision was correctly entered into the Nationwide Mortgage Licensing System and Registry and inform the mortgage loan originator of that confirmation without holding a hearing.

15.0 Records and Reports

15.1 Every licensed mortgage loan originator shall promptly notify the Commissioner of the following:

15.1.1 any change of primary residence address;

15.1.2 any pending felony charges or conviction;

15.1.3 any pending criminal charges or conviction involving financial services, a financial services related business, fraud, dishonesty, breach of trust, false statements or omissions, consumer deception, theft, wrongful taking of property, identity theft, bribery, perjury, forgery, extortion, or money laundering;

15.1.4 cessation of employment or termination of affiliation with any person for whom the mortgage loan originator had been providing residential mortgage loan origination services;

15.1.5 the initiation, settlement, or other resolution of any complaint, litigation, administrative action, or other proceeding against the mortgage loan originator by any person, governmental unit or self-regulatory organization involving residential mortgage loans, financial services, a financial services related business, fraud, dishonesty, breach of trust, false statements or omissions, consumer deception, theft, wrongful taking of property, identity theft, bribery, perjury, forgery, extortion, or money laundering;

15.1.6 the filing of any bankruptcy petition in which the mortgage loan originator is the debtor in the proceeding;

15.1.7 the entry of any judgment, tax lien, other government lien or similar filing against the mortgage loan originator; and

15.1.8 the initiation of any foreclosure action against the mortgage loan originator.

15.2 Every licensed mortgage loan originator shall maintain a journal of residential mortgage loan applications, which shall include, at a minimum, the following information:

15.2.1 the full name and address of all proposed borrowers and co-borrowers;

15.2.2 the address of the residential real estate to be used as security for the loan;

15.2.3 the date the mortgage loan originator took the loan application for the mortgage loan;

15.2.4 the name and the unique identifier or other unique identifying number of the mortgage loan originator’s employer or other person for whom the mortgage loan originator was providing residential mortgage loan origination services; and

15.2.5 the disposition of the loan application and date of disposition. The disposition of the application shall be categorized as either loan closed, loan denied, application withdrawn, application in process, or other (with an explanation provided).

15.2.6 The journal shall be kept current, updated no less frequently than every 10 business days.

15.3 All licensed mortgage loan originators who maintain their own surety bond coverage must keep copies of their bonds and also provide copies to their employer or other person for whom the mortgage loan originator was providing residential mortgage loan origination services.

15.4 All records required by this section shall be maintained for a period of five (5) years.

16.0 Surrender of License

A mortgage loan originator may surrender a license issued under the statute and this regulation by submitting a written notice of license surrender to the Commissioner or the Nationwide Mortgage Licensing System and Registry. A license may be surrendered only by the individual to whom the license was issued.

17.0 Expiration of Licenses

17.1 All licenses issued under the statute and this regulation expire on December 31 of each year; provided however, that if a renewal application is received prior to that date, the applicant may continue to act as a mortgage loan originator until the Commissioner has made a determination on that application.

17.2 Whenever a license expires, the Commissioner shall send the licensee a written notice of that expiration stating that the licensee may no longer engage in the business of a mortgage loan originator with respect to any dwelling located in this State.

18.0 Duration of License

18.1 Every license issued under the statute and this regulation shall remain in effect until it expires, or is surrendered, suspended, or revoked.

18.2 When a mortgage loan originator’s Delaware license becomes ineffective, the Commissioner may send a written notice of that fact to the mortgage loan originator’s employer or other person for whom the mortgage loan originator had been providing residential mortgage loan origination services.

18.3 Whenever a mortgage loan originator’s Delaware license ceases to be effective for any reason, neither the obligations of any pre-existing lawful contract between the mortgage loan originator and any person, nor the mortgage loan originator’s civil or criminal liability for acts committed while that license was in effect shall be affected in any way.

19.0 Nationwide Mortgage Licensing System and Registry

The administrator of the Nationwide Mortgage Licensing System and Registry is authorized to act on behalf of the Commissioner to process applications, to collect payments, to receive information and to maintain records related to the administration of the statute and this regulation.

20.0 Examination Fees and Supervisory Assessments

20.1 The Commissioner may conduct investigations and examinations pursuant to §122 and §2417 of Title 5 of the Delaware Code.

20.2 The cost of such investigations and examinations is assessed in accordance with §127(a) and §2417(b)(6) of Title 5 of the Delaware Code. A person subject to investigation or examination shall remit payment not later than 30 days of the examination invoice.

20.3 The Commissioner shall assess each licensee under the statute and this regulation a supervisory assessment that is due and payable on August 1 of each year, in accordance with §127(b) of Title 5 of the Delaware Code.

20.4 Failure to remit timely payment of any examination fee or supervisory assessment will result in a penalty of 0.05 percent of the amount unpaid for each day the such fee or assessment remains unpaid after the due date, in accordance with §127(a) and §127 (b) of Title 5 of the Delaware Code, and may also result in license revocation, suspension or other disciplinary action under §13.0.

21.0 Unique Identifiers

The unique identifier of any individual originating a residential mortgage loan on a dwelling located in this State shall be clearly shown on all residential mortgage loan application forms for all such loans originated by that individual, and on all solicitations, advertisements, business cards, and websites listing the name of that individual.

22.0 Prohibited Acts And Practices

A person subject to the statute and this regulation shall not:

22.1 directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person;

22.2 engage in any unfair or deceptive practice toward any person;

22.3 obtain property by fraud or misrepresentation;

22.4 solicit or enter into a contract with a borrower that provides in substance that the person subject to the statute and this regulation may earn a fee or commission through ‘best efforts’ to obtain a loan even though no loan is actually obtained for the borrower;

22.5 solicit, advertise, or enter into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at the time of soliciting, advertising, or contracting;

22.6 conduct any business covered by the statute and this regulation without holding a valid license as required under the statute and this regulation, or assist or aid and abet any person in the conduct of business under the statute and this regulation without a valid license as required under the statute and this regulation;

22.7 fail to make disclosures as required by the statute and this regulation and any other applicable federal or State law including regulations thereunder;

22.8 fail to comply with the statute and this regulation or rules or regulations promulgated under the statute, or fail to comply with any other federal or State law, including the rules and regulations thereunder, applicable to any business authorized or conducted under this the statute and this regulation;

22.9 make, in any manner, any false or deceptive statement or representation, or engage in ‘bait and switch’ advertising;

22.10 negligently make any false statement or knowingly and willfully make any omission of material fact in connection with any information or reports filed with a governmental agency or the Nationwide Mortgage Licensing System and Registry or in connection with any investigation or examination conducted by the Commissioner or another governmental agency;

22.11 make any payment, threat or promise, directly or indirectly, to any person for the purposes of influencing the independent judgment of the person in connection with a residential mortgage loan, or make any payment threat or promise, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property;

22.12 collect, charge, attempt to collect or charge or use or propose any agreement purporting to collect or charge any fee prohibited by the statute and this regulation;

22.13 cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer; or

22.14 fail to truthfully account for monies belonging to a party to a residential mortgage loan transaction.

23.0 Transition

Pursuant to §2404(e) of the statute and Section 2 of 77 Delaware Laws Chapter 96, the Commissioner may annually renew any license issued pursuant to Chapter 24 of Title 5 of the Delaware Code as it existed immediately prior to the enactment of the statute until such time as the statute is fully implemented; and also issue new licenses pursuant to that prior chapter until the later of either July 31, 2010, or until the Nationwide Mortgage Licensing System and Registry develops the qualified written test required for initial license applicants as specified by §2408(a) of the statute and §9.0 of this regulation, and the System is fully able to process applications pursuant to the statute.

12 DE Reg. 818 (12/01/08)

13 DE Reg. 852 (12/01/09)

2700 Cashing of Checks Drafts or Money Orders

2701 Operating Regulation

5 Del. Admin. Code § 2701 Operating Regulation

5 Del.C. §2741

5 Del.C. §2741

Effective Date: October 13, 2016

History

• 20 DE Reg. 309 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 16 DE Reg. 1286 (06/01/13)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 309 (10/01/16)

5 Del. Admin. Code § 2701-1.0 Compliance with Applicable Laws

1.1 All licensees shall comply with 5 Del.C. Ch. 27, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

1.2 The manager and appropriate staff of each licensed office, including all mobile units, shall familiarize themselves with all such statutes and regulations.

1.3 Each licensed office, including all mobile units, shall maintain, either by paper copy or through electronic access, 5 Del.C. Ch. 27 and the following regulations:

1.3.1 Regulation 101, Retention of Financial Institution Records;

1.3.2 Regulation 2701, Operating Regulation; and

1.3.3 Regulation 2702, Minimum Records.

History

• 20 DE Reg. 309 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 16 DE Reg. 1286 (06/01/13)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 309 (10/01/16)

5 Del. Admin. Code § 2701-2.0 Display of Fee Schedule

Each licensed office, including all mobile units, shall prominently display in clear view of all customers the fee schedule set forth in 5 Del.C. §2742.

History

• 20 DE Reg. 309 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 16 DE Reg. 1286 (06/01/13)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 309 (10/01/16)

5 Del. Admin. Code § 2701-3.0 Expired Identification

Licensees shall not accept from a customer any form of identification that has expired.

History

• 20 DE Reg. 309 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 16 DE Reg. 1286 (06/01/13)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 309 (10/01/16)

5 Del. Admin. Code § 2701-4.0 Advertising

4.1 A licensee shall not advertise in any way that is false, misleading or deceptive.

4.2 When a licensee advertises with respect to its services under 5 Del.C. Ch. 27, the advertisement may state that the licensee is licensed to engage in business in this State under that chapter and may specify the license number and expiration date of its license.

History

• 20 DE Reg. 309 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 16 DE Reg. 1286 (06/01/13)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 309 (10/01/16)

5 Del. Admin. Code § 2701-5.0 Examination Fees and Supervisory Assessments

5.1 The Commissioner may examine licensees pursuant to 5 Del.C. §122. The costs of such examinations are assessed in accordance with 5 Del.C. §127(a). A licensee shall remit payment not later than 30 days after the date of the examination invoice.

5.2 The Commissioner shall assess each licensee a supervisory assessment that is due and payable on August 1 each year, in accordance with 5 Del.C. §127(b).

5.3 Failure to remit timely payment of any examination fee or supervisory assessment will result in a penalty of 0.05 percent of the amount unpaid for each day that such fee or assessment remains unpaid after the due date, in accordance with 5 Del.C. §§127(a) and 127(b).

History

• 20 DE Reg. 309 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 16 DE Reg. 1286 (06/01/13)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 309 (10/01/16)

5 Del. Admin. Code § 2701-6.0 Examination Responses

A licensee shall send the Commissioner a written response to every violation specified in a report of examination no later than 30 days after the date of the report.

History

• 20 DE Reg. 309 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 16 DE Reg. 1286 (06/01/13)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 309 (10/01/16)

2702 Minimum Records

5 Del. Admin. Code § 2702 Minimum Records

2700 Cashing of Checks Drafts or Money Orders

2702 Minimum Records

5 Del.C. §2743

5 Del.C. §§2741 and 2743

Effective Date: June 11, 2013

1.0 Minimum Required Records

Each licensed office, including all mobile units, shall maintain the following records on a current basis:

1.1 Transactions Journal. The office shall maintain a journal recording all transactions involving the cashing of checks, drafts, or money orders. The entries in this journal shall include:

1.1.1 the date of the transaction;

1.1.2 the customer’s name;

1.1.3 the customer’s address;

1.1.4 the type of identification the customer used, the issuer of that identification and its expiration date;

1.1.5 the item number and amount of the check, draft or money order;

1.1.6 the fee received for the transaction; and

1.1.7 an identification of the employee who conducted the transaction.

1.2 Daily Deposit Records. The office shall maintain a daily record containing a copy of each day’s deposit of the checks, drafts, and money orders cashed.

1.3 Business Summary Record. The office shall maintain a record containing the daily and monthly totals of:

1.3.1 the number of checks, drafts, and money orders cashed; and

1.3.2 the aggregate fees received.

2.0 Location, Format and Retention of Records

2.1 All records shall be made available to the Commissioner’s staff when requested.

2.2 Records may be maintained at the licensed office or mobile unit itself or at any other suitable location if they can be available within a reasonable period of time upon request.

2.3 The licensee may maintain a separate record for repeat customers containing the information required by §§1.1.2, 1.1.3, and 1.1.4 of this regulation if the journal entry for each transaction clearly identifies the customer. Customer information maintained as a separate record must be updated annually, or sooner if the form of identification or record has expired since the last transaction.

2.4 Any licensee operating two or more office locations or mobile units may maintain consolidated or combined records, provided the records reflect separate figures for each location or unit.

2.5 All records may be maintained by paper copy or in an electronic format.

2.6 All records shall be retained in accordance with the time periods specified in Regulation 101 Retention of Financial Institution Records.

3.0 Variations

The Commissioner may grant written approval for variations from this regulation to accommodate specific record keeping systems. Requests for such approvals must be in writing and provide sufficient information concerning this system to ensure that the requirements of this regulation are satisfied and that the records will be readily available when requested.

16 DE Reg. 1286 (06/01/13)

2900 Financing the Sale of Motor Vehicles

2901 Motor Vehicle Sales Finance Companies

5 Del. Admin. Code § 2901 Motor Vehicle Sales Finance Companies

5 Del.C. §2906(e)

Effective Date: October 13, 2016

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-1.0 Applicability of Chapter

1.1 Lease Contracts. 5 Del.C. Ch. 29 applies to a lease contract only when:

1.1.1 The lessee contracts to pay a sum substantially equivalent to, or in excess of, the value of the motor vehicle for the use of the motor vehicle over the lease term;

1.1.2 The lessee is obligated to become, or has the option of becoming, the owner of the motor vehicle at some time during, or at the expiration of, the lease contract; and

1.1.3 The value for which the motor vehicle is to be sold at the end of the lease term is not paid in a single installment.

1.2 5 Del.C. Ch. 29 applies to all motor vehicles meeting the definition of that term in 5 Del.C. §2901(1) regardless of whether the intended use is personal or commercial.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-2.0 Compliance with Applicable Laws

2.1 All licensees shall comply with 5 Del.C. Ch. 29, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

2.2 The manager and appropriate staff of each licensed office shall familiarize themselves with all such statutes and regulations.

2.3 Each licensed office shall maintain, either by paper copy or through electronic access, 5 Del.C. Ch. 29 and the following regulations:

2.3.1 Regulation 101, Retention of Financial Institution Records.

2.3.2 Regulation 2901, Operating Regulation;

2.3.3 Regulation 2902, Minimum Records;

2.3.4 Regulation 2903, Report of Delaware Loan Volume; and

2.3.5 Regulation 2904, Report of Delaware Assets.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-3.0 Security Interest Satisfaction

A licensee shall take all necessary action to discharge, satisfy or release a retained title, lien, or other security interest for a retail installment contract within 30 days of the date that the debt is satisfied or fully performed.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-4.0 Insurance

4.1 Credit Life and Health Insurance

4.1.1 A licensee may offer credit life and health insurance to qualified borrowers. Such insurance transactions shall conform to Title 18 of the Delaware Code and all applicable Insurance Commissioner Regulations.

4.1.2 Every licensee offering credit life and health insurance whose charges do not conform to those authorized by Title 18 of the Delaware Code shall maintain in each office a copy of a submission to the Insurance Commissioner requesting the non-conforming charge and the Insurance Commissioner's approval of those charges.

4.1.3 Credit life insurance refunds shall be calculated as of the date of death except as permitted by 18 Del.C. §3705(b)(4).

4.1.4 Credit health insurance payments received by a licensee shall be applied to the account for the period the payment actually covers regardless of the date of receipt. Additional interest charges shall not accrue if payment is received after the payment due date.

4.2 A licensee may offer, but not require, only such other insurance products as the State Bank Commissioner may, upon written approval, permit.

4.3 Any licensee may require proof of insurance coverage for any loan secured by a motor vehicle or other collateral. The borrower has the right to submit any existing policy(s) naming the licensee as beneficiary, provided such policy is acceptable to the licensee as to coverage, term and carrier. Upon notification to the licensee of cancellation of any policy, the licensee may place coverage to protect the licensee's interest. The borrower shall be informed of such placement and any amount expended shall be due and payable by the borrower before a loan may be satisfied. A licensee may, if requested by the borrower, place such insurance coverage as is necessary to protect the licensee's interest at the inception of the loan.

4.4 Any insurance authorized by this regulation, other than the insurance coverage authorized by §4.3 of this regulation, must be specifically requested by the borrower in writing. This request must be attached to, or part of, the loan application.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-5.0 Negative Equity Financing

Inclusion of negative equity financing is permissible only if the amount of an existing lien in a credit sales transaction exceeds the value of a trade-in. In a negative equity trade-in transaction where no cash payment is involved, licensees must disclose a zero down-payment. The negative equity must not be disclosed as a negative number for the consumer’s down-payment. Any negative equity to be financed under the retail installment sales contract must be disclosed under 5 Del.C. §2907(e)(4), and not 5 Del.C. §2907(e)(2).

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-6.0 Advertising

6.1 A licensee shall not advertise in any way that is false, misleading or deceptive.

6.2 Any advertising that in any way falsely indicates that its source or origin is a government agency or the recipient’s existing lender is prohibited.

6.3 A licensee shall not advertise any credit terms that are not available.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-7.0 Internet Websites

If the website allows the licensee to conduct any business governed by its license, the website shall properly secure the transmission of all confidential information entered on the website or otherwise exchanged between the licensee and any consumer or borrower.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-8.0 Information Security

Each licensee shall implement and maintain a written comprehensive security program that contains appropriate administrative, technical and physical measures to safeguard the confidentiality of all information concerning applicants and borrowers customer related to the business governed by this regulation, including, but not limited to, all application information, account information, and information from any consumer report.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-9.0 Repossession Policy

Each licensee shall comply in all respects with 6 Del.C. Article 9, Secured Transactions, Part 6, Default.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-10.0 Examination Fees and Supervisory Assessments

10.1 The Commissioner may examine licensees pursuant to 5 Del.C. §§122 and 2906. The cost of such examinations are assessed in accordance with 5 Del.C. §127(a). A licensee shall remit payment not later than 30 days after the date of the examination invoice.

10.2 The Commissioner shall assess each licensee a supervisory assessment fee, which is due and payable on August 1 of each year, in accordance with 5 Del.C. §127(b).

10.3 Failure to remit timely payment of any examination fee or supervisory assessment will result in a penalty of 0.05 percent of the amount unpaid for each day that such fee or assessment remains unpaid after the due date, in accordance with 5 Del.C. §127(a) and (b).

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

5 Del. Admin. Code § 2901-11.0 Examination Responses

A licensee shall send the Commissioner a written response to every violation specified in a report of examination no later than 30 days after the date of the report.

History

• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)
• 20 DE Reg. 310 (10/01/16)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)
• 18 DE Reg. 472 (12/01/14)
• 20 DE Reg. 310 (10/01/16)

2902 Motor Vehicle Sales Finance Companies

5 Del. Admin. Code § 2902 Motor Vehicle Sales Finance Companies

5 Del.C. §2906(e)

Effective Date: December 11, 2014

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2902-1.0 Minimum Required Records

Each licensed office shall maintain the following records on a current basis:

1.1 Register.

1.1.1 For applicants not granted credit, the office shall maintain a register containing:

1.1.1.1 the applicant’s name and address;

1.1.1.2 a file identification number;

1.1.1.3 the application date;

1.1.1.4 the date of the credit decision, or the date the application was withdrawn; and

1.1.1.5 the reason that the applicant was not granted credit.

1.1.2 For borrowers, the office shall maintain a register containing:

1.1.2.1 the information specified in §§1.1.1.1 through 1.1.1.3 of this regulation;

1.1.2.2 the date the loan was granted;

1.1.2.3 the annual percentage rate for the loan;

1.1.2.4 the amount of the loan; and

1.1.2.5 the lender’s name and address.

1.2 Applicant Record. For each applicant not granted credit, the office shall maintain a record containing all documents relating to the applicant that shall include:

1.2.1 the applicant’s name and address;

1.2.2 a file identification number;

1.2.3 the application;

1.2.4 any document specifying the reasons that credit was not granted; and

1.2.5 all other written communications with the applicant.

1.3 Borrower Record. For each borrower, the office shall maintain a record containing all documents relating to the borrower that shall include:

1.3.1 the information and documents specified in §§1.2.1 through 1.2.3 of this regulation;

1.3.2 the loan contract;

1.3.3 the date the loan was granted;

1.3.4 the face amount of the loan;

1.3.5 the total sale price of the motor vehicle financed;

1.3.6 the annual percentage rate for the loan and the amount of all other charges;

1.3.7 the repayment terms;

1.3.8 the vehicle identification number (VIN);

1.3.9 all disclosures related to the loan that are required by the Federal Truth-in-Lending Act, as amended, and the regulations thereunder;

1.3.10 the names of any endorsers, co-makers, guarantors, or sureties;

1.3.11 the actual date of receipt of each payment of principal and charges;

1.3.12 a breakdown of how payments have been applied to interest, principal and fees;

1.3.13 the name of any assignee or purchaser of the retail installment contract;

1.3.14 the current balance due on the principal;

1.3.15 any workout agreement;

1.3.16 any credit related insurance contracts;

1.3.17 copies of any non-insurance products sold by the licensee to the borrower related to the credit transaction;

1.3.18 evidence that a retained title or lien was released within the time period prescribed in §4 of Regulation 2901;

1.3.19 evidence that the licensee has complied with the interest rate reduction requirements of the Federal Servicemembers Civil Relief Act, as amended, and the regulations thereunder, if applicable, including evidence that the rate was reduced at the appropriate time and remained reduced for the appropriate period; and

1.3.20 all other written communication with the borrower.

1.4 Daily Transaction Record. The office shall maintain on a daily basis a record of all transactions involving either the receipt or disbursement of any amount related to retail installment accounts. Details of disbursements to or for the account of borrowers shall be itemized.

1.5 Litigation and Enforcement of Security Interest Record.

1.5.1 Litigation. The office shall maintain in an individual file or a separate litigation section, a record of all judicial and arbitration proceedings in which the licensee and an applicant or borrower are adversary parties. Records of judicial or arbitration proceedings being handled by attorneys or corporate collection centers may be maintained in a central office and must reflect the current correct status of the matter.

1.5.2 Enforcement of Security Interest. The office shall maintain in an individual borrower’s account file a record of all loans in which the licensee has enforced its security interest by taking possession of the motor vehicle without a judicial proceeding, or in which the borrower has voluntarily surrendered the motor vehicle.

1.5.3 In addition to all other information required by this regulation, these records shall include, as applicable:

1.5.3.1 the unpaid balance immediately prior to either the judicial or arbitration proceeding, the licensee’s non-judicial repossession of the motor vehicle, or the borrower’s voluntary surrender of the motor vehicle;

1.5.3.2 the vehicle identification number (VIN);

1.5.3.3 the date the licensee acquired possession of the motor vehicle;

1.5.3.4 a description of the motor vehicle;

1.5.3.5 copies of all documents filed with, or issued by, the court or arbitrator;

1.5.3.6 the date and terms of any judgment, arbitration decision, dismissal or settlement;

1.5.3.7 the date of the sale of the motor vehicle;

1.5.3.8 the terms of the sale of the motor vehicle, including copies of all bids or other offers received together with the purchaser’s name and address, price and cash or financing terms;

1.5.3.9 evidence that the borrower was notified of the time and place of the sale;

1.5.3.10 evidence of any amount paid to a third party; and

1.5.3.11 any other documents sent or received by the licensee pursuant to 6 Del.C. Article 9. Secured Transactions, Part 6. Default.

1.6 Credit Insurance Claims Record

1.6.1 The office shall maintain a credit insurance claims record containing the following information on all claims submitted by borrowers to the insurer:

1.6.1.1 the claim date;

1.6.1.2 the claim amount;

1.6.1.3 the date and amount of the payment by the insurer, or the date of rejection and the reason for the rejection;

1.6.1.4 the borrower’s name and address;

1.6.1.5 the file identification number;

1.6.1.6 the reason for the claim (i.e. death, illness, etc.);

1.6.1.7 proof of death, if applicable;

1.6.1.8 a copy of any check issued by the insurance company for benefit payments or any other record of such disbursements by the insurance company; and

1.6.1.9 a copy of any check issued by the insurance company to return unearned insurance premiums that result from pre-payment of the loan or cancellation of the insurance, or any other record of such disbursements by the insurance company.

1.7 Advertising Record. The office shall maintain a record containing copies of all advertising materials used by the licensee:

1.7.1 for printed advertising, this record shall contain a copy of each advertisement indicating its type (print publication, billboard, direct mail, etc.) a listing of the publications in which printed, billboard locations by zip code, number of mailings by zip code, and the dates of publication, display or mailing;

1.7.2 for radio advertising, this record shall contain a transcript of each advertisement, a listing of the stations on which each advertisement was broadcast, and for each station, the date of each broadcast;

1.7.3 for television advertising, this record shall contain a transcript of the advertisement with visual depictions of each scene, a list of the stations on which each advertisement was broadcast, and for each station the date of each broadcast;

1.7.4 for internet advertising, this record shall contain a copy of the advertisement.

1.8 Additional Records. The office shall maintain any other records necessary to verify the licensee’s compliance with 5 Del.C. Ch. 29, all regulations issued thereunder, and all other applicable State and federal statutes and regulations.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2902-2.0 Location, Format and Examination of Records

2.1 All records shall be made available to the Commissioner’s staff when requested.

2.2 Records may be maintained at the licensed office itself or at any other suitable location if they can be available within a reasonable period of time upon request.

2.3 All records may be maintained by paper copy or in an electronic format.

2.4 All records shall be retained in accordance with the time periods specified in Regulation 101, Retention of Financial Institution Records.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

5 Del. Admin. Code § 2902-3.0 Variations

The Commissioner may grant written approval for variations from this regulation to accommodate specific record keeping systems. Requests for such approvals must be in writing and provide sufficient information concerning the system to ensure that the requirements of this regulation are satisfied and that the records will be readily available when requested.

History

• 18 DE Reg. 472 (12/01/14)
• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2903 Report of Delaware Loan Volume Motor Vehicle Installment Contracts

5 Del. Admin. Code § 2903 Report of Delaware Loan Volume Motor Vehicle Installment Contracts

5 Del.C. §2906(e)

Effective Date: April 11, 2014

Each licensee shall submit this report to the Office of the State Bank Commissioner twice each year. The first report must be received no later than July 31 and must contain information from January 1 through June 30 of the current year. The second report must be received no later than January 31 and must contain information from January 1 through December 31 of the previous year.

Licensees with more than one licensed office, whose files are maintained at a consolidated, centralized location, may file a consolidated report. Otherwise, a separate report must be submitted for each licensed office.

A completed, signed report may be scanned and submitted by e-mail to bco_reports@state.de.us no later than July 31 and January 31.

Failure to submit this report when due will be a violation of this regulation. In addition, an examination may be scheduled and examination staff allocated without respect to the licensee’s volume of Delaware loans. This may result in additional examination costs.

1. Name of Licensee: ______________________________________________________

2. Is this a consolidated report? Yes _____ No _____

3. License No.:__________ (If consolidated, list all license numbers): _________________

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4. List the address where the retail installment contract files are maintained:

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5. Examination contact person’s name, title, phone number, fax number and e-mail address:

---

---

6. List the Delaware business conducted (number of contracts) in each of the following categories:

A. Contracts Executed: ____________________________

Total Dollar Value: $___________________________

B. Contracts Paid Off at Maturity: ____________________________

C. Contracts Paid Off Prior to Maturity: ____________________________

D. Applications Denied: ____________________________

E. Contracts in Litigation: ____________________________

F. Credit Life Insurance Claims: ____________________________

G. Credit A & H Insurance Claims: ____________________________

7. Reporting Period:____________________ to ____________________________

I, the undersigned officer, hereby certify that this report is true and correct to the best of my knowledge and belief.

---

Date Signature Title

---

Printed Name Phone Number

History

• 3 DE Reg. 653 (11/01/99)
• 17 DE Reg. 994 (04/01/14)

2904 Report of Delaware Assets

5 Del. Admin. Code § 2904 Report of Delaware Assets

5 Del.C. §2906(e)

Effective Date: April 11, 2014

Each licensee shall submit this report annually to the Office of the State Bank Commissioner. This report must be received no later than April 1 of each year and must contain information for the previous calendar year. The information reported should reflect DELAWARE assets only (including the value of any Delaware loans or contracts, any funds deposited in Delaware, and any fixed assets located in Delaware or any other assets allocated to the Delaware operations).

A completed, signed report may be scanned and submitted by e-mail to bco_reports@state.de.us no later than April 1.

Failure to submit this report when due will be a violation of this regulation. In addition, an examination may be scheduled and examination staff allocated without respect to the licensee’s amount of Delaware assets. This may result in additional examination costs.

1. Name of Licensee: ________________________________________________________

2. Address of Principal License: _______________________________________________

---

---

3. To whom should we mail the supervisory assessment invoice? Please provide name, title, complete mailing address, telephone number (include area code and extension numbers, if applicable) fax number and e-mail address:

---

---

---

---

4. DELAWARE assets as of December 31st of the immediately previous year:

I, the undersigned officer, hereby certify that this report is true and correct to the best of my knowledge and belief.

---

Date Signature Title

---

Printed Name Phone Number

History

• 1 DE Reg. 1414 (03/01/98)
• 17 DE Reg. 994 (04/01/14)

3200 Transportation of Money and Valuables

3201 Regulation on the Interpretation of “All Risk” Insurance

5 Del. Admin. Code § 3201 Regulation on the Interpretation of “All Risk” Insurance

3201 Regulation on the Interpretation of “All Risk” Insurance

5 Del.C. §3209

Formerly Regulation No.: 5.3209(c).0001

Effective Date: May 1, 1993

1.0 This is an interpretative regulation on the use and meaning of “All Risk” as it appears in subsection (c) of section 3209 of Title 5 of the Delaware Code.

2.0 An applicant/licensee’s insurance policy shall be deemed to meet the statutory mandate of “All Risk” if the policy insures the licensee against claims arising from any loss through any risk (subject to permissible exclusions under the Act) assumed by the licensee in the transportation of money or valuables. This provision shall not preclude the insurer from establishing certain reasonable conditions precedent to recovery under the policy.

3.0 Reasonable conditions precedent may include conditions which establish prudent standards of performance with which the insured must comply. Conditions which preclude recovery because of the acts of third parties or negligence shall not be deemed to be reasonable.

3300 Business and Industrial Development Corporations

3301 Procedures Governing Applications to Form and Conduct Business as a Business and Industrial Development Corporation (BIDCO)

5 Del. Admin. Code § 3301 Procedures Governing Applications to Form and Conduct Business as a Business and Industrial Development Corporation (BIDCO)

3301 Procedures Governing Applications to Form and Conduct Business as a Business and Industrial Development Corporation (BIDCO)

Formerly Regulation No.: 5.3311.0001

Effective Date: January 11, 1993

This regulation establishes procedures for the form and content of applications under §3311(b) of Title 5 of the Delaware Code for permission to form and conduct Business as a Business and Industrial Development Corporation.

1.0 An application pursuant to §3311(b) of Title 5 of the Delaware Code shall be in writing, signed by the President or authorized representative of Applicant (a Delaware Corporation) and shall include the following:

1.1 A non-refundable investigation fee;

1.2 Name of applicant. Pursuant to §3311(a) of Title 5 of the Delaware Code, only a Delaware corporation can apply;

1.3 Certificate of Incorporation. To include general business clause under section 3.0;

1.4 Board Resolution authorizing applicant to make application on behalf of the corporation.

1.5 A detailed business plan setting forth the services to be provided by the proposed Bidco to business firms located within or outside of the State;

1.6 Directors-Current financial statements, Officers-Current financial statements and three (3) consecutive years prior;

1.7 Resumes for all officers and directors, including information concerning the experience of the management of the proposed Bidco and how such experience relates to the execution of the business plan referred to in item 1.5 of this regulation;

1.8 Completed officers and directors questionnaires, questionnaires furnished by the Office of the State Bank Commissioner;

1.9 A summary of the geographical business markets of the proposed Bidco;

1.10 Location of the proposed main office of the Bidco and any branch offices, or the vicinity thereof, including other offices, whether within or outside of the State (licensee is required to maintain not less than (1) office in this State);

1.11 A detailed summary of how the management of the proposed Bidco intends to implement a reasonable and prudent policy for conserving and investing the capital of such Bidco;

1.12 A summary of the types of business firms to be assisted by the proposed Bidco;

1.13 Three (3) years of detailed financial projections or until such time as profitability is obtained;

1.14 Evidence that the applicant has, or has firm financing commitments from equity investors or debt sources for, cash or similar liquid assets sufficient to demonstrate that prior to the time such applicant is authorized to transact business as a Bidco, such applicant will have liquid assets available to provide financing assistance to business firms in an amount adequate for such applicant to transact business as a Bidco and in accordance with the business plan;

1.15 Evident that the Bidco has, or will have, a net worth of not less than $1,000,000 at the time it is licensed to transact business as a Bidco;

1.16 Any market studies which have been conducted by or on behalf of the applicant or as requested by the Commissioner;

1.17 A compensation schedule for all officers and directors for a minimum period of 3 years;

1.18 Name, resume, reference sources, and compensation schedule for any person(s) employed in an advisory capacity for the Bidco, and a description of their purpose(s) and involvement(s) in the affairs of the Bidco; and

1.19 Such other information the applicant may provide to support the application;

1.20 Such other information the Commissioner may require or deem appropriate to the application.

2.0 If, on the basis of the information submitted, the State Bank Commissioner concludes that the application for the proposed Bidco should be approved, he shall issue a findings and decision indicating his intent to approve the license.

3.0 Upon receipt of the Commissioner’s Findings and Decision, the applicant should proceed to amend their charter to reflect the word ‘Bidco’ in their corporate name and amend the Article III to reflect that they intend to conduct the business of, and incidental to, a Bidco.

4.0 Upon receipt of the amended Certificate of Incorporation, and upon the applicant’s payment of the appropriate licensing fee, the State Bank Commissioner shall issue a license permitting such applicant to form and conduct business as a Bidco at the address contained on the license.

5.0

5.1 If on the basis of the information submitted or obtained through the investigation process, the State Bank Commissioner proposes to disapprove an application properly made under this regulation, he shall, pursuant to §10131(c) of Title 29 of the Delaware Code, give written notice to the applicant of the intended action and the reasons therefor. Such notice shall:

5.1.1 Describe the subject matter of the proceeding and the statutory authority therefor;

5.1.2 Inform the applicant of the proposed action and the reasons therefor;

5.1.3 Inform the applicant that it has a right to demand a hearing on the application at which hearing (a) the applicant would have the right to present relevant evidence, (b) to be represented by counsel, and (c) to appear personally or by other representative; and that the Commissioner is obligated to reach his decision based upon the evidence received; and

5.1.4 Inform the applicant of the period, not less than ten (10) days from the date of such notice, during which it may request a hearing on such application.

5.2 Should the applicant request a hearing under this section, the Commissioner shall fix a date for such hearing and shall provide at least twenty (20) days advance notice of such hearing date to applicant.

3302 Bidco Interpretation of “Prudent Business Manner”

5 Del. Admin. Code § 3302 Bidco Interpretation of “Prudent Business Manner”

3302 Bidco Interpretation of “Prudent Business Manner”

5 Del.C. §3306(b)

Formerly Regulation No.: 5.3324.0002

Effective Date: January 11, 1993

1.0 This is an interpretative regulation on the use, meaning, and intent of “prudent business manner” as it appears in §3324 of Title 5 of the Delaware Code.

2.0 The Bidco will be deemed to be conducting business in a prudent business manner provided the officers and directors are found to discharge the duties of their respective positions in good faith, and with the diligence, care, judgement and skill that ordinarily prudent men would exercise under similar circumstances in like positions, consistent with the purposes of the Delaware Bidco Act.

3303 Bidco Main and Alternate Office Locations

5 Del. Admin. Code § 3303 Bidco Main and Alternate Office Locations

3303 Bidco Main and Alternate Office Locations

5 Del.C. §3306(b)

Formerly Regulation No.: 5.3321.0003

Effective Date: January 11, 1993

1.0 Pursuant to §3321 of Title 5 of the Delaware Code, each Bidco shall maintain a main office in the State. Such office shall be designated as the main office and shall be the location at which examinations by the Office of the State Bank Commissioner occur.

2.0 Alternate locations, in or out of the State, may be obtained by providing notice of your intent to establish another location to the Office of the State Bank Commissioner. This notice shall contain, at a minimum:

2.1 The name of the Bidco;

2.2 The address of the alternate location;

2.3 The functions to be performed at this location;

2.4 The personnel/staffing of this location;

2.5 A statement acknowledging the books and records availability requirements set forth in Regulation No. 3306 (formerly 5.3341(a).0006);

2.6 Any such other information the Commissioner may require, or the applicant may choose to provide.

3.0 If, on the basis of the information submitted, the State Bank Commissioner concludes that the request for an alternate location should be approved, the Commissioner shall issue a license permitting such Bidco to conduct the business of, and incidental to, the Bidco at the address contained on the license, in addition to the address for the main office and any other alternate locations which have been or may be approved.

4.0 No Bidco licensee shall maintain an office at any other location than that designated on the license(s).

3304 Activities Incidental to the Conduct of a Bidco

5 Del. Admin. Code § 3304 Activities Incidental to the Conduct of a Bidco

3304 Activities Incidental to the Conduct of a Bidco

5 Del.C. §3306(b)

Formerly Regulation No.: 5.3322(d).0004

Effective Date: January 11, 1993

1.0 Pursuant to §3322(d) of Title 5 of the Delaware Code, the activities incidental to the conduct of a Bidco shall include, but not be limited to the following:

1.1 Electronic Data Processing Services

1.2 Investment Advisory Services

1.3 Accounting, Bookkeeping, and Internal Auditing Services

1.4 Personnel Services

1.5 Marketing Analysis

1.6 Advetising Services

1.7 Security Services

1.8 Transportation of Valuables Services

1.9 Agent Services for Leasing of real property, business equipment, and business vehicles

1.10 Underwriting and brokerage services for issues of commercial paper, securities and other debt and equity instruments

1.11 Corporate Agent Services

1.12 Employee Benefit Planning Services

1.13 Pension Fund Management Services

2.0 All above activities should only be entered into in full consideration of any license, registration or other requirements thereof.

3305 Bidco Schedule of Investigation and Licensing Fees

5 Del. Admin. Code § 3305 Bidco Schedule of Investigation and Licensing Fees

3305 Bidco Schedule of Investigation and Licensing Fees

5 Del.C. §§3306(b) and 3307

Formerly Regulation No.: 5.3307.0005

Effective Date: January 11, 1993

1.0 Pursuant to §3307, Subchapter I of Chapter 33, Title 5 of the Delaware Code, each application submitted for the formation of a Bidco shall be accompanied by a non-refundable investigation fee in the amount of two thousand dollars ($2,000) payable to and for the use of the Office of the State Bank Commissioner. Each application submitted for the merger or acquisition of a Bidco shall be accompanied by a non-refundable investigation fee in the amount of one thousand dollars ($1,000) payable to and for the use of the Office of the State Bank Commissioner.

2.0 The licensing fee for each location shall be in the amount of ($1,000) payable to the Office of the State Bank Commissioner prior to the issuance of a license under Chapter 33 of Title 5 of the Delaware Code and upon renewal thereof.

3.0 Bidco licensees shall be subject to examination pursuant to §122, 5 Del.C. The cost of such examinations shall be assessed to the licensee in accordance with §127(a), 5 Del.C. In addition to the cost of examination and licensure, the Commissioner shall assess annually each licensee a supervisory assessment fee, as provided in §127(b), 5 Del.C. In addition, the licensee shall pay or reimburse the fees, costs, and expenses of any third parties retained by the Commissioner to accomplish this purpose.

4.0 The Commissioner may require reimbursement of any other direct costs incurred in the application/regulation/supervision of a Bidco.

3306 Bidco Minimum Requirements for Books, Accounts and Other Records

5 Del. Admin. Code § 3306 Bidco Minimum Requirements for Books, Accounts and Other Records

3306 Bidco Minimum Requirements for Books, Accounts and Other Records

5 Del.C. §§3306(b) and 3341(a)

Formerly Regulation No.: 5.3341(a).0006

Effective Date: January 11, 1993

1.0 Pursuant to §3341(a) of Title 5 of the Delaware Code, each licensee shall:

1.1 Submit a complete copy of their corporate by-laws no later than 30 days from the date of issuance of a license authorizing said corporation to conduct the business of, and incidental to, a Bidco. Subsequent amendments to by-laws should be submitted within 30 days of the amendment.

1.2 Post the license(s) prominently in each place of business of the licensee. The posted license shall appropriately reflect the location of the office. In case such location is to be changed, the licensee shall return the license to the State Bank Commissioner to be endorsed for the location change. Such change and endorsement shall be at no charge.

1.3 Each licensed office shall establish and maintain the following books and records on a current basis, either at the main office of the licensee or at alternate licensed offices, providing the information can be made available at the main office location within a 72 hour period. There may be suitable variations to accommodate individual accounting systems, provided the required data is kept on a current basis and is readily available to the examiners, when requested.

1.3.1 A licensee shall maintain a record of all transactions involving receipt or disbursement of money by that office each day. The record shall identify each transaction; show account numbers and names of the business firms assisted; show amounts disbursed; show amounts received and the distribution of such amounts among principal, interest, and other charges.

1.3.2 For each business firm to which financing assistance is provided, a licensee shall maintain a record containing all of the following information:

1.3.2.1 Loan or account number;

1.3.2.3 Loan or investment date;

1.3.2.4 Loan or investment amount;

1.3.2.5 Rate of charge and/or return on equity provisions;

1.3.2.6 Repayment terms;

1.3.2.7 Indication of management assistance provisions;

1.3.2.8 Description of collateral, if secured;

1.3.2.9 Indication of guarantors, if any;

1.3.2.10 Description and amount of fees collected from the business firm;

1.3.2.11 Dates and amounts of all payments received and cash disbursements made.

1.3.2.12 Date to which interest charges are paid, and the unpaid principal balance due;

1.3.2.13 A description of any other services provided to the client by the Bidco which are incidental to the conduct of the Bidco, and the fees derived from said services.

1.3.3 For each business firm which qualifies under subsection 1.3.2, the following additional information shall be maintained:

1.3.3.1 Applications, credit decisions documentation, and all correspondence;

1.3.3.2 Evidence and documentation regarding restructured loans;

1.3.3.3 Financial assistance agreements including any participation agreements and plans to exit from the loan or investment at maturity;

1.3.3.4 Management assistance agreements including identification of type, frequency, and costs involved;

1.3.3.5 Documentation of management assistance provided;

1.3.3.6 Loan performance evaluations including an evaluation of cash flows and income projections.

1.3.4 For each business firm to which financing assistance is denied, a licensee shall maintain a record containing all of the following information:

1.3.4.1 Business firm’s name and address;

1.3.4.2 Applications, credit decision documentation and all correspondence.

1.4 A licensee shall maintain consolidated reports showing its assets, liabilities, income and expenses. The reports shall be consolidated quarterly or at such specific intervals as the Commissioner may otherwise request.

1.5 All written correspondence between the Office of the State Bank Commissioner and the licensee shall be retained by the licensee in a file designated as such and available for review at the main office location.

1.6 All applicable procedural, interpretative, operational or other regulations issued pursuant to this chapter shall be maintained and available for review at the main office location.

3307 Procedure for Approval of Mergers, Acquisitions, and Sale of Assets of a Business Industrial Development Corporation

5 Del. Admin. Code § 3307 Procedure for Approval of Mergers, Acquisitions, and Sale of Assets of a Business Industrial Development Corporation

3307 Procedure for Approval of Mergers, Acquisitions, and Sale of Assets of a Business Industrial Development Corporation

5 Del.C. §3331

Formerly Regulation No.: 5.3331.0007

Effective Date: January 11, 1993

This regulation establishes procedures for the form and content of requests under §3331, Subchapter IV, Title 5 of the Delaware Code, for approval of mergers, acquisitions, and sale of assets of a Business Industrial Development Corporation.

1.0 A request pursuant to §3331, Subchapter IV, Title 5 of the Delaware Code, shall be in writing, signed by the President or authorized representative of applicant, and shall include the following:

1.1 A non-refundable investigation fee;

1.2 Name of applicant. Pursuant to §3331(b), the approval for merger, acquisition, and sale of assets of a Business Industrial Development Corporation with another corporation shall not be granted unless the licensee is the surviving corporation; or, if the licensee is the disappearing corporation, the surviving corporation is also a licensee;

1.3 Name of surviving corporation;

1.4 Name of disappearing corporation;

1.5 Board of resolution authorizing applicant to make application on behalf of the corporation;

1.6 An explanation regarding the purpose(s) or reason(s) for the merger, acquisition, and sale of assets of a Business Industrial Development Corporation;

1.7 The specific terms of the merger, acquisition, and sale of assets of a Business Industrial Development Corporation, including management changes, stock or other asset sales and the respective prices, location/ relocation, continuation of servicing of disappearing corporation (if Bidco), clients, etc.

1.8 If the business plan is to be modified by the merger/acquisition, a detailed amended business plan shall be submitted. This plan shall set forth the services to be provided by the proposed Bidco to business firms located within or outside the State;

1.9 Financial statements for all new officers and directors;

1.10 Resumes for all new officers and directors, including information concerning the experience of the management of the proposed Bidco and how such experience relates to the execution of the business plan referred to in item 1.8 of this regulation;

1.11 Completed officers and directors questionnaires, questionnaires furnished by the Office of the State Bank Commissioner;

1.12 Any amendments to the geographical business markets the Bidco intends to service;

1.13 Amendments to the detailed summary of how the management of the proposed Bidco intends to implement a reasonable and prudent policy for conserving and investing the capital of such Bidco;

1.14 Amendments to types of business firms to be assisted by the Bidco;

1.15 Three (3) years of detailed financial projections or until such time as profitability is obtained;

1.16 Evidence that the Bidco has, or will have, a net worth of not less than $1,000,000 at the time it is licensed to transact business as a Bidco;

1.17 Any market studies which have been conducted by or on behalf of the applicant or as requested by the Commissioner, if not previously submitted;

1.18 If amended, new names, resumes, reference sources, and compensation schedules for any person(s) employed in an advisory capacity for the Bidco, and a description of their purpose(s) and involvement(s) in the affairs of the Bidco;

1.19 Current financial statements for both the surviving and disappearing corporations (within the last quarter);

1.20 Such other information the applicant may provide to support the request; and

1.21 Such other information the Commissioner may require or deem appropriate to the request.

1.22 Where such information required above is unchanged from application for formation on file with the Office of the State Bank Commissioner, such information may be referenced.

2.0 If on the basis of the information submitted, the State Bank Commissioner concludes that the request for a merger, acquisition, and sale of assets should be approved, he shall issue a written approval.

3.0

3.1 If on the basis of the information submitted or obtained through the investigation process, the State Bank Commissioner proposes to disapprove request for merger, acquisition, and sale of assets, he shall, pursuant to §10131(c) of Title 29 of the Delaware Code, give written notice to the applicant of the intended action and the reasons therefor. Such notice shall:

3.1.1 Describe the subject matter of the proceeding and the statutory authority therefor;

3.1.2 Inform the applicant of the proposed action and the reasons therefor;

3.1.3 Inform the applicant that it has a right to demand a hearing on the application at which hearing (a) the applicant would have the right to present relevant evidence, (b) to be represented by counsel, and (c) to appear personally or by other representative; and that the Commissioner is obligated to reach his decision based upon the evidence received; and

3.1.4 Inform the applicant of the period, not less than ten days from the date of such notice, during which it may request a hearing on such application.

3.2 Should the applicant request a hearing under this section, the Commissioner shall fix a date for such hearing and shall provide at least twenty (20) days advance notice of such hearing date to applicant.

3308 Bidco Procedure for Approval of Additional Incidental Activities

5 Del. Admin. Code § 3308 Bidco Procedure for Approval of Additional Incidental Activities

3308 Bidco Procedure for Approval of Additional Incidental Activities

5 Del.C. §3322(d)

Formerly Regulation No.: 5.3322(d).0008

Effective Date: January 11, 1993

This regulation establishes procedures for the form and content of requests of approval of additional incidental activities not set forth in Regulation No. 3304 (formerly 5.3322(d).0004), pursuant to §3322(d) of Title 5 of the Delaware Code.

1.0 The request for approval to conduct additional incidental activities shall be in writing to the State Bank Commissioner and shall contain, at a minimum:

1.1 The name of the Bidco and an authorized signature of a representative designated to make the request on behalf of the Bidco;

1.2 A complete explanation of the activity(s) in which the Bidco desires to engage;

1.3 An explanation as to why such activity(s) is necessary or convenient to carry on the business of, or that is reasonably related to the business of, providing financing assistance and management assistance to business firms of the Bidco;

1.4 An explanation as to what experience or expertise will be brought to bear in this area;

1.5 Such other information the applicant may provide to support the request;

1.6 Such other information the Commissioner may require or deem appropriate to the request.

2.0 If, on the basis of the information submitted, the State Bank Commissioner concludes that the request should be approved, he shall issue a written approval for such activity(s), such approvals may be conditional in nature.

3.0 If on the basis of the information submitted or obtained through the investigation process, the State Bank Commissioner proposes to disapprove an application properly made under this regulation, he shall, pursuant to §10131(c) of Title 29 of the Delaware Code, give written notice to the applicant of the intended action and the reasons therefor. Such notice shall:

3.1 Describe the subject matter of the proceeding and the statutory authority therefor;

3.2 Inform the applicant of the proposed action and the reasons therefor;

3.3 Inform the applicant that it has a right to demand a hearing on the application at which hearing (a) the applicant would have the right to present relevant evidence, (b) to be represented by counsel, and (c) to appear personally or by other representative; and that the Commissioner is obligated to reach his decision based upon the evidence received; and

3.4 Inform the applicant of the period, not less than ten (10) days from the date of such notice, during which it may request a hearing on such application.

3.5 Should the applicant request a hearing under this section, the Commissioner shall fix a date for such hearing and shall provide at least twenty (20) days advance notice of such hearing date to applicant.

3400 Funeral Contracts

3401 Operating Regulation

5 Del. Admin. Code § 3401 Operating Regulation

5 Del.C. §§3404 and 3409

Effective Date: August 11, 2014

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-1.0 Expiration and Renewal

All licenses under 5 Del.C. Ch. 34 shall expire on December 31 of each year. A renewal application must be submitted to the Commissioner before that date for a license to remain in effect.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-2.0 Compliance with Applicable Laws

2.1 All licensees shall comply with 5 Del.C. Ch. 34, all regulations issued thereunder, and all other applicable State and federal statutes and regulations relating to preneed funeral contracts.

2.2 The manager and appropriate staff of each licensee shall familiarize themselves with all such statutes and regulations.

2.3 Each licensee shall maintain, either by paper copy or through electronic access, 5 Del.C. Ch. 34 and the following regulations:

2.3.1 Regulation 101, Retention of Financial Institution Records;

2.3.2 Regulation 3401, Operating Regulation; and

2.3.3 Regulation 3402, Surety Bond or Irrevocable Letter of Credit.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-3.0 Minimum Required Records

3.1 Each licensee shall maintain any records necessary to verify the licensee’s compliance with 5 Del.C. Ch. 34, all regulations issued thereunder, and all other applicable State and federal statutes and regulations relating to preneed funeral contracts.

3.2 All such records shall be made available to the Commissioner’s staff when requested.

3.3 Records may be maintained at any suitable location, but must be available within a reasonable period of time upon request.

3.4 All such records may be maintained by paper copy or in an electronic format.

3.5 All records shall be maintained in accordance with the time periods specified in Regulation 101, Retention of Financial Institution Records.

3.6 The Commissioner may grant written approval for variations from this section to accommodate specific record keeping systems. Requests for such approvals must be in writing and provide sufficient information concerning the system to ensure that the requirements of this section are satisfied and that the records will be readily available when requested.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-4.0 Display of License

Each licensee shall prominently display its license issued under 5 Del.C. Ch. 34 in clear view of all customers.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-5.0 Annual Statement to Preneed Contract Beneficiaries

5.1 At least once, annually, each licensee shall deliver, to each beneficiary of its preneed funeral contracts, or an appropriate representative of the beneficiary, a statement containing the following information:

5.1.1 the name and address of the financial institution where the trust account for the contract is held;

5.1.2 the total amount held in that trust account at the beginning of the statement period;

5.1.3 the number and amounts of payments received during the statement period;

5.1.4 the amount of interest accrued during the statement period; and

5.1.5 the total amount held in the trust account at the end of the statement period.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-6.0 Annual Statement to the Commissioner

6.1 Each licensee shall submit to the Commissioner on July 31st of each year a statement containing the following information for each of its preneed funeral contracts:

6.1.1 the name and address of the contract beneficiary and any appropriate representative of the beneficiary;

6.1.2 the name and address of the financial institution where the trust account for the contract is held;

6.1.3 the name and address of the trustee for the trust account;

6.1.4 the total amount held in the trust account as of June 30th; and

6.1.5 a certification from the financial institution that the information contained in the statement is true and accurate.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-7.0 Disclosure Requirements for Irrevocable Trust Documents

7.1 The trust document establishing an irrevocable trust permitted by Section 3404 of Title 5 of the Delaware Code shall contain:

7.1.1 A provision expressly stating that the trust is irrevocable;

7.1.2 A provision that upon the discontinuation of business or the inability to provide the contracted goods or services by the original trustee, the funds held in the trust shall be transferred to either a specified successor trustee or a successor trustee selected by either the contract beneficiary, or an appropriate representative of the beneficiary;

7.1.3 A provision that if funds held by the trust are inadequate, at the death of the contract beneficiary, to cover the beneficiary’s funeral expenses, the trustee shall contribute all trust funds toward payment of those expenses;

7.1.4 A provision that if the funds held by the trust exceed the beneficiary’s funeral expenses, the excess funds shall be paid to the beneficiary’s estate;

7.1.5 A provision that the trustee may, from time to time, accept monetary contributions to the trust; and

7.1.6 A provision stating “In no event shall the principal amount of the trust exceed $15,000, excluding accrued interest.”

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-8.0 Examination Fees and Supervisory Assessments

8.1 The Commissioner may examine licensees pursuant to Section 122 of Title 5 of the Delaware Code. The costs of such examination are assessed in accordance with Section 127(a) of Title 5. A licensee shall remit payment not later than 30 days after the date of the examination invoice.

8.2 The Commissioner shall assess each licensee a supervisory assessment, which is due and payable on August 1 each year, in accordance with Section 127(b) of Title 5 of the Delaware Code.

8.3 Failure to remit timely payment of any examination fee or supervisory assessment will result in a penalty of 0.05 percent of the amount unpaid for each day that such fee or assessment remains unpaid after the due date, in accordance with Sections 127(a) and 127(b) of Title 5 of the Delaware Code.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3401-9.0 Examination Responses

A licensee shall send the Commissioner a written response to every violation specified in a report of examination no later than 30 days after the date of the report.

History

• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 2 DE Reg. 295 (8/1/98)
• 3 DE Reg. 653 (11/1/99)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)
• 18 DE Reg. 159 (08/01/14)

3402 Surety Bond or Irrevocable Letter of Credit

5 Del. Admin. Code § 3402 Surety Bond or Irrevocable Letter of Credit

5 Del.C. §§3409 and 3411

Effective Date: August 11, 2014

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3402-1.0 Bond or Irrevocable Letter of Credit Required

Each licensee shall file with the State Bank Commissioner (the "Commissioner") an original corporate surety bond or an irrevocable letter of credit in a form satisfactory to the Commissioner in accordance with 5 Del.C. §3411. The minimum amount of the surety bond or irrevocable letter of credit is based on the factors identified in that section.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)

5 Del. Admin. Code § 3402-2.0 Amount of Bond or Irrevocable Letter of Credit

2.1 Each licensee shall obtain a surety bond or irrevocable letter of credit based upon the maximum dollar value of the trust funds it held as a trustee during the twelve month period ending October 31 that precedes the calendar year for which the bond or irrevocable letter of credit is effective. A licensee who obtains a surety bond that is effective for more than one year or an irrevocable letter of credit shall annually review the amount of the surety bond or letter of credit, to ensure that the minimum required amount is maintained. The minimum required amount of the surety bond or irrevocable letter of credit shall be maintained according to the following table:

Maximum Dollar Value of Trust Funds Held by Licensee

Minimum Required Amount of Surety Bond or Irrevocable Letter of Credit

not more than $50,000

$50,000

$50,001 - $75,000

$75,000

$75,001 - $100,000

$100,000

$100,001 - $125,000

$125,000

$125,001 - $150,000

$150,000

$150,001 - $175,000

$175,000

$175,001 and over

$200,000

2.2 Subject to the $200,000 cap, the Commissioner may require a licensee to obtain a larger surety bond or irrevocable letter of credit based upon the licensee’s individual circumstances.

History

• 18 DE Reg. 159 (08/01/14)
• 11 DE Reg. 693 (11/01/07)
• 18 DE Reg. 159 (08/01/14)