C 6105XGA 33536

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04 LC 19 6105

H. B. 1385

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House Bill 1385

By: Representatives Fludd of the 48th, Post 4, Sailor of the 61st, Post 1, Ehrhart of the 28th,

Sinkfield of the 50th, and Stoner of the 34th, Post 1

A BILL TO BE ENTITLED

AN ACT

To amend Article 13 of Chapter 1 of Title 7 of the Official Code of Georgia Annotated,

relating to licensing of mortgage lenders and mortgage brokers, so as to provide for2

authorization of mortgage loan officers; to provide for a definition; to provide for an3

exemption; to provide for department regulations relating to education and experience4

requirements for loan officers; to provide for other matters relative to the foregoing; to5

provide an effective date; to repeal conflicting laws; and for other purposes.6

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:7

SECTION 1.8

Article 13 of Chapter 1 of Title 7 of the Official Code of Georgia Annotated, relating to9

licensing of mortgage lenders and mortgage brokers, is amended by striking Code Section10

7-1-1000, relating to definitions, and inserting in lieu thereof a new Code Section 7-1-100011

to read as follows:12

"7-1-1000.13

As used in this article, the term:14

(1) 'Affiliate' or 'person affiliated with' means, when used with reference to a specified15

person, a person who directly, indirectly, or through one or more intermediaries controls,16

is controlled by, or is under common control with the person specified. Any beneficial17

owner of 20 percent or more of the combined voting power of all classes of voting18

securities of a person or any executive officer, director, trustee, joint venturer, or general19

partner of a person is an affiliate of such person unless the shareholder, executive officer,20

director, trustee, joint venturer, or general partner shall prove that he or she in fact does21

not control, is not controlled by, or is not under common control with such person.22

(2) 'Audited financial statement' means the product of the examination of financial23

statements in accordance with generally accepted auditing standards by an independent24

certified public accountant or by an independent Georgia registered public accountant25

considered acceptable by the department, which product consists of an opinion on the26

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financial statements indicating their conformity with generally accepted accounting

principles.2

(3) 'Commitment' or 'commitment agreement' means a statement by a lender required to3

be licensed or registered under this article that sets forth the terms and conditions upon4

which the lender is willing to make a particular mortgage loan to a particular borrower.5

(4) 'Control,' including 'controlling,' 'controlled by,' and 'under common control with,'6

means the direct or indirect possession of the power to direct or cause the direction of the7

management and policies of a person, whether through the ownership of voting securities,8

by contract, or otherwise.9

(5) 'Executive officer' means the chief executive officer, the president, the principal10

financial officer, the principal operating officer, each vice president with responsibility11

involving policy-making functions for a significant aspect of a person´s business, the12

secretary, the treasurer, or any other person performing similar managerial or supervisory13

functions with respect to any organization whether incorporated or unincorporated.14

(6) 'Extortionate means' means the use or the threat of violence or other criminal means15

to cause harm to the person, reputation of the person, or property of the person.16

(6.1) 'Georgia Residential Mortgage Act' means this article.17

(7) 'License' means a license issued by the department under this article to act as a18

mortgage lender or mortgage broker.19

(7.1) 'Loan officer' means a person who acts as an employee and not as an independent20

contractor to assist a licensee in performing one or more of the following activities to or21

for a consumer: accepting or offering to accept a mortgage loan application, soliciting22

a mortgage loan, negotiating the terms or conditions of a mortgage loan, issuing mortgage23

loan commitments or interest rate guarantee agreements, or advising on any aspect of a24

mortgage loan transaction, whether such acts are done through contact by telephone, by25

electronic means, by mail, or in person with consumers.26

(8) 'Lock-in agreement' means a written agreement whereby a lender or a broker required27

to be licensed or registered under this article guarantees for a specified number of days28

or until a specified date the availability of a specified rate of interest for a mortgage loan,29

a specified formula by which the rate of interest will be determined, or a specific number30

of discount points if the mortgage loan is approved and closed within the stated period31

of time.32

(9) 'Makes a mortgage loan' means to advance funds, offer to advance funds, or make a33

commitment to advance funds to an applicant for a mortgage loan.34

(10) 'Misrepresent' means to make a false statement of a substantive fact or to engage in,35

with the intent to deceive or mislead, any conduct which leads to a false belief which is36

material to the transaction.37

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(11) 'Mortgage broker' means any person who directly or indirectly solicits, processes,

places, or negotiates mortgage loans for others, or offers to solicit, process, place, or2

negotiate mortgage loans for others or who closes mortgage loans which may be in the3

mortgage broker´s own name with funds provided by others and which loans are assigned4

within 24 hours of the funding of the loans to the mortgage lenders providing the funding5

of such loans.6

(12) 'Mortgage lender' means any person who directly or indirectly makes, originates,7

or purchases mortgage loans or who services mortgage loans.8

(13) 'Mortgage loan' means a loan or agreement to extend credit made to a natural9

person, which loan is secured by a deed to secure debt, security deed, mortgage, security10

instrument, deed of trust, or other document representing a security interest or lien upon11

any interest in one-to-four family residential property located in Georgia, regardless of12

where made, including the renewal or refinancing of any such loan.13

(14) 'Person' means any individual, sole proprietorship, corporation, limited liability14

company, partnership, trust, or any other group of individuals, however organized.15

(15) 'Registrant' means any person required to register pursuant to Code Sections16

7-1-1001 and 7-1-1003.2.17

(16) 'Residential property' means improved real property used or occupied, or intended18

to be used or occupied, as the principal residence of a natural person. Such term does not19

include rental property or second homes.20

(17) 'Service a mortgage loan' means the collection or remittance for another or the right21

to collect or remit for another of payments of principal, interest, trust items such as22

insurance and taxes, and any other payments pursuant to a mortgage loan.23

(18) 'Ultimate equitable owner' means a natural person who, directly or indirectly, owns24

or controls an ownership interest in a corporation or any other form of business25

organization, regardless of whether such natural person owns or controls such ownership26

interest through one or more natural persons or one or more proxies, powers of attorney,27

nominees, corporations, associations, limited liability companies, partnerships, trusts,28

joint-stock companies, other entities or devices, or any combination thereof."29

SECTION 2.30

Said article is further amended by striking paragraph (11) of Code Section 7-1-1001, relating31

to exemption for certain persons and entities, and inserting in lieu thereof the following:32

"(11) A natural person who is not a loan officer and who is employed by a licensed33

mortgage broker, a licensed mortgage lender, or any person exempted from the licensing34

requirements of this article when acting within the scope of employment and under the35

supervision of the licensee or exempted person as an employee and not as an independent36

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contractor. To be exempt, a natural person must be employed by only one such employer

and must be at all times eligible for employment in compliance with the provisions of2

Code Section 7-1-1004;. All employees, including loan officers, must be at all time3

eligible for employment in compliance with the provisions and prohibitions of Code4

Section 7-1-1004;"5

SECTION 3.6

Said article is further amended by inserting new subsections (d), (e), (f), and (g) at the end7

of Code Section 7-1-1002, relating to prohibition of transaction of business without a license,8

to read as follows:9

"(d)(1) On or after July 1, 2005, it is unlawful for any natural person to act as a loan officer10

without first obtaining authorization from the department. The department may provide11

for a phase-in of currently qualified persons. Loan officers may obtain authorization by:12

(A) Providing to their employer a background check dated within 90 days from date13

of initial employment from the Georgia Crime Information Center which shows no14

offenses prohibited in Code Section 7-1-1004; and15

(B) Providing to their employer certification of the education or experience required16

by Georgia law and regulation. Such requirements shall include at least one year of17

experience immediately preceding July 1, 2005, performing one or more duties of a18

loan officer for a licensee or exemptee. In the alternative, satisfactory completion of19

a minimum of eight hours of education in accordance with education requirements for20

licensed mortgage brokers. Providers of education shall be approved by the department21

and may not certify satisfactory completion of loan officer education requirements until22

such loan officer has passed a test reflecting comprehension of the material.23

(2) An employer shall provide a current list to the department of all loan officers who24

have met the requirements of this subsection. Employers shall be required to check the25

department´s website to verify that no disqualifying final orders have been issued against26

any prospective loan officer.27

(3) It is unlawful for any person to employ or compensate a loan officer unless the loan28

officer has met the requirements for being authorized by the department as provided in29

this subsection.30

(2)(e) The license authorization of a loan officer shall not be effective during any period31

when the licensee loan officer is not employed by a mortgage broker or mortgage lender32

licensed under this article. When a loan officer ceases to be employed by a mortgage33

broker or mortgage lender licensed under this article, the loan officer and the mortgage34

broker or mortgage lender licensed under this article by whom that person is employed35

shall promptly notify the department in writing. When a loan officer is to be employed, the36

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employer shall promptly notify the department of the hiring and certify to the employee´s

qualifications as provided in this Code section. A loan officer shall not be employed2

simultaneously by more than one mortgage broker or mortgage lender licensed under this3

article.4

(3)(f) Each mortgage broker or mortgage lender licensed under this article shall maintain5

on file with the department a list of all loan officers who are qualified and employed with6

the mortgage broker or mortgage lender. The department shall maintain on its website the7

ongoing list of all authorized loan officers.8

(g) The department shall be authorized to charge a fee for each loan officer submitted by9

a licensee and to assess fines as authorized by law and regulation to defray the cost of10

administration and enforcement of this program. Such funds shall be deposited with the11

Office of Treasury and Fiscal Services, net of the cost of overhead to administer this12

program. Such overhead shall not exceed the revenue collected under this program."13

SECTION 4.14

Said article is further amended by striking subsections (c), (d), and (i) of Code Section15

7-1-1004, relating to requirements relative to licensees and registrants, and inserting in lieu16

thereof a new subsection (c), (d), and (i) to read as follows:17

"(c) The department may establish by rule or regulation minimum education or experience18

requirements for an applicant for a mortgage broker license or renewal of such a license,19

or for an authorized loan officer.20

(d) The department may not issue or may revoke a license or authorization if it finds that21

the applicant, or any person who is a director, officer, partner, agent, employee, or ultimate22

equitable owner of 10 percent or more of the applicant or any individual who directs the23

affairs or establishes policy for the licensee, has been convicted of a felony involving moral24

turpitude in any jurisdiction or of a crime which, if committed within this state, would25

constitute a felony involving moral turpitude under the laws of this state. For the purposes26

of this article, a person shall be deemed to have been convicted of a crime if such person27

shall have pleaded guilty to a charge thereof before a court or federal magistrate or shall28

have been found guilty thereof by the decision or judgment of a court or federal magistrate29

or by the verdict of a jury, irrespective of the pronouncement of sentence or the suspension30

thereof, and regardless of whether first offender treatment without adjudication of guilt31

pursuant to the charge was entered, unless and until such plea of guilty, or such decision,32

judgment, or verdict, shall have been set aside, reversed, or otherwise abrogated by lawful33

judicial process or until probation, sentence, or both probation and sentence of a first34

offender have been successfully completed and documented or unless the person convicted35

of the crime shall have received a pardon therefor from the President of the United States36

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or the Governor or other pardoning authority in the jurisdiction where the conviction was

had or shall have received an official certification or pardon granted by the State Board of2

Pardons and Paroles which removes the legal disabilities resulting from such conviction3

and restores civil and political rights in this state."4

"(i) The department may not issue a license to and may revoke a license from an applicant5

or licensee if such person employs any other person against whom a final cease and desist6

order has been issued within the preceding three years, if such order was based on a7

violation of Code Section 7-1-1013 or based on the conducting of a mortgage business8

without a required license, or authorization, or whose license has been revoked within three9

years of the date such person was hired."10

SECTION 5.11

Said article is further amended by striking subsection (b) of Code Section 7-1-1005, relating12

to renewal of licenses and registrations, and inserting in lieu thereof the following:13

"(b) Any licensee or registrant making proper application, including all supporting14

documents, list of loan officers, moneys owed to the department, and all applicable fees15

required by this article and any regulations promulgated by the department, for a license16

or registration renewal to operate during the following license year and filing the17

application prior to April 1 shall be permitted to continue to operate pending final approval18

or disapproval of the application for the license or registration renewal for the following19

year if final approval or disapproval is not granted prior to July 1."20

SECTION 6.21

Said title is further amended by striking Code Section 7-1-1013, relating to the prohibition22

of certain acts, and inserting in lieu thereof the following:23

"7-1-1013.24

It is prohibited for any person transacting a mortgage business in or from this state,25

including any person required to be licensed, or registered, or authorized under this article26

and any person exempted from the licensing or registration requirements of this article27

under Code Section 7-1-1001, to:28

(1) Misrepresent the material facts or make false statements or promises likely to29

influence, persuade, or induce an applicant for a mortgage loan, a mortgagee, or a30

mortgagor to take a mortgage loan, or pursue a course of misrepresentation to the31

department or anyone through agents or otherwise;32

(2) Misrepresent or conceal or cause another to misrepresent or conceal material factors,33

terms, or conditions of a transaction to which a mortgage lender or broker is a party,34

pertinent to an applicant or application for a mortgage loan or a mortgagor;35

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(3) Fail to disburse funds in accordance with a written commitment or agreement to

make a mortgage loan;2

(4) Improperly refuse to issue a satisfaction of a mortgage loan;3

(5) Fail to account for or deliver to any person any personal property obtained in4

connection with a mortgage loan such as money, funds, deposit, check, draft, mortgage,5

or other document or thing of value which has come into the possession of the mortgage6

lender or broker and which is not the property of the mortgage lender or broker, or which7

the mortgage lender or broker is not in law or at equity entitled to retain;8

(6) Engage in any transaction, practice, or course of business which is not in good faith9

or fair dealing, or which operates a fraud upon any person, in connection with the10

attempted or actual making of, purchase of, or sale of any mortgage loan;11

(7) Engage in any fraudulent home mortgage underwriting practices;12

(8) Induce, require, or otherwise permit the applicant for a mortgage loan or mortgagor13

to sign a security deed, note, loan application, or other pertinent financial disclosure14

documents with any blank spaces to be filled in after it has been signed, except blank15

spaces relating to recording or other incidental information not available at the time of16

signing;17

(9) Make, directly or indirectly, any residential mortgage loan with the intent to foreclose18

on the borrower´s property. For purposes of this paragraph, there is a presumption that19

a person has made a residential mortgage loan with the intent to foreclose on the20

borrower´s property if the following circumstances can be demonstrated:21

(A) Lack of substantial benefit to the borrower;22

(B) Lack of probability of full payment of the loan by the borrower; and23

(10) Provide an extension of credit or collect a mortgage debt by extortionate means; or25

(11) Purposely withhold, delete, destroy, or alter information requested by an examiner26

of the department or make false statements or material misrepresentations to the27

department during the course of an examination or on any application or renewal form28

sent to the department."29

SECTION 7.30

Said article is further amended by striking subsections (a), (b), and (c) of Code Section31

7-1-1018, relating to cease and desist orders, and inserting in lieu thereof the following:32

"7-1-1018.33

(a) Whenever it shall appear to the department that any person required to be licensed or34

registered or required to file a notification statement under this article or employed by a35

licensee or registrant pursuant to Code Section 7-1-1001 or who would be covered by the36

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prohibitions in Code Section 7-1-1013 has violated any law of this state or any order or

regulation of the department, the department may issue an initial written order requiring2

such person to cease and desist immediately from such unauthorized practices. Such cease3

and desist order shall be final 20 days after it is issued unless the person to whom it is4

issued makes a written request within such 20 day period for a hearing. The hearing shall5

be conducted in accordance with Chapter 13 of Title 50, the 'Georgia Administrative6

Procedure Act.' A cease and desist order to an unlicensed or unauthorized person that7

orders them to cease doing a mortgage business without the appropriate license or8

department authorization shall be final 30 days from the date of issuance, and there shall9

be no opportunity for an administrative hearing. If the proper license or evidence of10

exemption or valid employment status during the time of the alleged offense is delivered11

to the department within the 30 day period, the order shall be rescinded by the department.12

If a cease and desist order is issued to a person who has been sent a notice of bond13

cancellation and if the bond is reinstated or replaced and such documentation is delivered14

to the department within the 30 day period following the date of issuance of the order, the15

order shall be rescinded. If the notice of reinstatement of bond is not received within the16

30 days, the license shall expire at the end of the 30 day period and the person shall be17

required to make a new application for license and pay the applicable fees. In the case of18

an unlawful purchase of mortgage loans, such initial cease and desist order to a purchaser19

shall constitute the knowledge required under subsection (b) of Code Section 7-1-1002 for20

any subsequent violations.21

(b) Whenever a person required to be licensed or authorized under this article shall fail to22

comply with the terms of an order of the department which has been properly issued under23

the circumstances, the department, upon notice of three days to such person, may, through24

the Attorney General, petition the principal court for an order directing such person to obey25

the order of the department within the period of time as shall be fixed by the court. Upon26

the filing of such petition, the court shall allow a motion to show cause why it should not27

be granted. Whenever, after a hearing upon the merits or after failure of such person to28

appear when ordered, it shall appear that the order of the department was properly issued,29

the court shall grant the petition of the department.30

terms of any order issued pursuant to this Code section shall be liable for a civil penalty not32

to exceed $1,000.00. Each day during which the violation continues shall constitute a33

separate offense. In determining the amount of penalty, the department shall take into34

account the appropriateness of the penalty relative to the size of the financial resources of35

such person, the good faith efforts of such person to comply with the order, the gravity of36

the violation, the history of previous violations by such person, and such other factors or37

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circumstances as shall have contributed to the violation. The department may at its

discretion compromise, modify, or refund any penalty which is subject to imposition or has2

been imposed pursuant to this Code section. Any person assessed as provided in this3

subsection shall have the right to request a hearing into the matter within ten days after4

notification of the assessment has been served upon the licensee person involved;5

otherwise, such penalty shall be final except as to judicial review as provided in Code6

Section 7-1-90."7

SECTION 8.8

This Act shall become effective on July 1, 2005.9

SECTION 9.10

All laws and parts of laws in conflict with this Act are repealed.11

C 6105XGA 33536

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