Kansas rules board approves temporary mortgage-record and net-worth regulations

The State Rules and Regulations Board voted to approve two temporary regulations on mortgage record retention and lender net-worth requirements at a meeting called by acting Chief Deputy Robert Hutchison.

The board approved proposed K.A.R. 17-24-4, which clarifies record-retention language moved from the Uniform Consumer Credit Code into the Kansas Mortgage Business Act, and K.A.R. 75-635, which sets net-worth thresholds and notification requirements for certain lenders. Both temporary regulations were adopted by voice vote.

Brock Railer, general counsel for the Office of the State Bank Commissioner, told the board the changes respond to a statutory shift enacted by the 2024 legislature that moved mortgage regulation previously in the Uniform Consumer Credit Code into the Kansas Mortgage Business Act effective Jan. 1, 2025. "In 2024 the legislature agreed with our agency's request to move all mortgages from the Uniform Consumer Credit Code into the Kansas Mortgage Business Act," Railer said, explaining the agency wants to make clear that an automated valuation model remains an available valuation option for nonpurchase-money real estate transactions such as refinances and home-equity lines of credit.

Railer said that without the amendment, lenders who now fall under the Kansas Mortgage Business Act could be limited to using county appraiser values or obtaining full appraisals, which could increase consumer costs. "We have allowed automated valuation models under UCCC for quite some time and it's been very effective," he said.

Railer described the second temporary regulation as a response to signs of financial distress among certain market participants in the higher interest-rate environment. "We have noticed that not just supervised lenders but a couple of our other entities were experiencing financial distress," he said, and the rule would put statutory net-worth expectations on paper and require notifications to the Office so staff can act more quickly if a licensee is failing.

Representative John Carmichael said he did not object to the substance of the regulations but questioned whether the circumstances met the higher standard for a temporary rule. "The evidence that a temporary regulation is necessary may be a little bit on the weak side in this instance," he said, adding he was still prepared to vote to make the necessary finding. Senator Warren and other board members signaled no objection to proceeding with the temporary approvals.

The board made the public-welfare finding and approved K.A.R. 17-24-4 on a motion to adopt the finding and approve the temporary regulation, and later approved K.A.R. 75-635 on a separate finding and voice vote. Charles Long, representing the Department of Administration, spoke during the meeting and was recorded as participating in motions and seconds during proceedings.

At the start of the meeting the board also approved the minutes of the Dec. 30, 2024 meeting; Representative Carmichael recorded an abstention from consideration of those minutes. No roll-call tallies were taken for the regulatory votes; actions were recorded by voice vote and the regulations were approved.

Railer told the board the Office has submitted corresponding permanent-rule proposals and expects hearings to be scheduled; Hutchison cautioned staff and members to monitor the timeline so a temporary rule does not lapse before a permanent rule takes effect. "I just want to watch for that timetable as it progresses," Hutchison said.

The board had no additional matters on its agenda and recessed; future meetings will be scheduled at the call of the chair.