C 6105XGA 33536

User Manual: 6105XGA

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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
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
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
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
(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
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
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
(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
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
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
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
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
(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
(C) A significant proportion of similarly foreclosed loans by such person;24
(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
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
(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
(c) Any person required to be licensed or authorized under this article who violates the31
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
This Act shall become effective on July 1, 2005.9
All laws and parts of laws in conflict with this Act are repealed.11

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