May 8, 1978

Mr. Jack C. Burchill 
South Dakota Real Estate Commission 
Post Office Box 638 
Pierre, South Dakota 57501

Official Opinion No. 78-16

Real Estate Commission authorized to regulate only mortgage brokers dealing with real estate mortgages

Dear Mr. Burchill:

You have requested an opinion from this office based upon the following factual situation:

FACTS: 

At the request of the Attorney General's Office and the Department of Commerce and Consumer Affairs the South Dakota Real Estate Commission commenced proceedings to adopt rules to license and regulate mortgage brokers.  The rule as first submitted was, as follows: 
     
Definitions.  A mortgage broker shall be defined in SDCL 36-21(3) and 36-21-1.1(2).  It is intended that the term, mortgage broker, will cover every and all acts that may be performed, directly or indirectly, in arranging or attempting to arrange for a free loan of money for an individual, a group of individuals or a business enterprise. 
    
The Attorney General after reviewing the proposed rule requested that the definition be changed to read, as follows: 
     
Definitions.  The term “mortgage broker” as defined in SDCL 36-21-1(3) and 36-21-1.1(2) shall have the same meaning in this chapter. 
    
The commission adopted the rule in that form.

Based on the above facts, you have asked the following question:

QUESTION: 

Does the definition of a mortgage broker under the Real Estate Commission rule properly cover those dealing with real estate mortgages, chattel mortgages, business opportunities, as well as any other mortgages?

The following statutes are relevant in regard to the question you raised. 
    
SDCL 36-21-1(3)-Definition of Mortgage Broker-“Mortgage broker,” any person, firm, partnership, copartnership, limited partnership, association, or corporation other than a licensed real estate broker, bank or trust company, savings and loan association, insurance company, federal land bank or state or federal agency and their employees, who for compensation or valuable consideration sell or offer for sale, buy or offer to buy, or negotiate the purchase or sale or exchange of mortgages upon real estate for others, as whole or partial vocation.  The term “mortgages” as used in this chapter shall exclude any leasehold interests; mortgage brokers do not include persons loaning their own funds; 
    
SDCL 36-21-1.1(2).  For another and for commission, fee or other valuable consideration or with the intention or expectation of receiving the same directly or indirectly negotiates or offers or attempts to negotiate a loan, secured or to be secured by a mortgage or other encumbrance on real estate; 
    
SDCL 36-21-28.1.  The commission may adopt rules to provide for the issuance of a restricted broker's license to auctioneer, property managers, mortgage brokers, or such other categories as the commission feels are warranted.  The license may perform only those duties as specified in the license, and if the licensee shall exceed the authority granted, his license may be terminated and criminal proceeding brought against him, if applicable.  No restricted license shall be required until rules adopted under this section become effective.

Based upon the above statutory language, and the thrust of Chapter 36- 21, it is my opinion that the scope of regulation of mortgage brokers given to the Real Estate Commission does not extend to all conceivable types of mortgages.  In my opinion, the Real Estate Commission is authorized only to regulate a mortgage broker dealing with real estate mortgages.  Any extension of regulatory efforts in this area beyond this general scope would, in my view, need to be specifically authorized to you by the Legislature.

Respectfully submitted,

William J. Janklow
Attorney General

WJJ:DOC:mam