Section I

What functions does your Department perform with respect to the mortgage industry?

To ensure that the citizens of Georgia have access to well-managed and properly operated mortgage service providers, the Mortgage Division of the Georgia Department of Banking and Finance is responsible for supervising those who are licensed (or who should be licensed) to do business in the residential mortgage industry. Residential Mortgage Lenders and Brokers must apply to the Department and meet certain licensing standards before they may legally offer their services to the public. Monetary fines and civil sanctions can be levied if a person or company is discovered to be operating in Georgia without being properly licensed. After obtaining a license, periodic examinations of the licensee's operations are performed to monitor operating standards to assure compliance with the provisions of the Georgia Residential Mortgage Act (GRMA).

Will the Department be participating in the Nationwide Mortgage Licensing System?

The Department will be participating in the Nationwide Mortgage Licensing System(NMLS) as contemplated  by the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE”) (H.R. 3221).  Title V requires that each state enact minimum standards regarding the supervision of mortgage entities.

The NMLS is a multi-state licensing system that allows your business to apply for and manage its licenses with the Department and other participating states through a secure website. The NMLS was developed by and for state regulators to streamline the licensing process for regulators and the industry allowing all mortgage businesses to be licensed in Georgia and other participating states with a minimum amount of paperwork. Statute changes in the past legislative session provided authority for the  Department to participate in the system.

The Department will be providing additional information regarding  implementation of SAFE in Georgia, and you are encouraged to refer to future Department publications and our website for updates.

What laws and regulations do I need to be familiar with in order to meet the licensing requirements and properly operate in Georgia as a mortgage licensee or registrant?

The following sections of the Official Code of Georgia Annotated (O.C.G.A.) and the Regulations of Department of Banking and Finance are used in the operation and regulation of residential mortgage businesses in Georgia. You should be familiar with these in the operation of your mortgage business. Please note that the Georgia Residential Mortgage Act (GRMA) is often referred to in licensing applications and other information as ARTICLE 13.

• The Georgia Residential Mortgage Act  - Title 7, Chapter 1, ARTICLE 13 of the Financial Institutions Code of Georgia.
• The Georgia Fair Lending Act   - Title 7, Chapter 6A of the Financial Institutions Code of Georgia.
• Georgia Residential Mortgage Fraud Act - Follow this link to the Georgia General Assembly’s website and search on OCGA,Title 16-Crimes and Offenses, Article 5: Chapters 16-8-100 to 16-8-106  - Residential Mortgage Fraud.

How do I obtain a license to operate in the residential mortgage industry?

I have filed an application for a mortgage license. Can you tell me the status of my application?

Depending on application volume and the time of year the application is received, most applications for a mortgage license are given an initial review within 15 days of receipt of the COMPLETE application. Incomplete applications will be returned to the applicant without further review. After performing an initial review and initiating the criminal background check, we will notify the applicant in writing of any additional information which may be needed. This document is titled "Schedule A". Note that fingerprint cards must be submitted in duplicate (both originals) on all individuals required to submit background check authorizations, and the processing of these cards through the state and federal criminal information systems can add time to the application process.

Due to the volume of applications for new licenses received by the Department, requests for application status updates must be in writing. E-mail your request for application status to:

newapps@dbf.state.ga.us

These requests receive priority attention and will facilitate responding to requests for information regarding status.

In addition, you may also check the status on-line at: PendingApplications.html

Remember that all new license applications must be paid for by a money order or certified funds. Applications containing personal checks will be returned. Daily calls to inquire about the status of a particular application only serve to delay the process for all applicants.

I want to be licensed as a mortgage broker or a lender. How do I fill out the application?

The large variety of business plans, tax situations, operating structures, etc., makes it impossible for us to give advice as to how a licensee should structure their operations. Some applicants need a corporate structure, some do not. The applicant should make sufficient plans prior to filing for a license. The best way to do this is to formalize a business plan for the intended mortgage operations.

I have bad credit. Will my mortgage license be approved?

Bad credit will make your application VERY difficult to approve. The GRMA requires that licensees demonstrate reasonable financial responsibility and operate in a manner which will protect the financial and property rights of our citizens. At the very least, you must settle all collection accounts, charged-off accounts, judgments and outstanding tax liens. Those who are delinquent on their student loans must be "in good standing", and those who are delinquent on child support payments must remedy this problem before they can be licensed.

I have a criminal background. Will my license be approved?

As stated previously, the GRMA requires that licensees demonstrate reasonable financial responsibility and operate in a manner which will protect the financial and property rights of the citizens of Georgia. Therefore, criminal activity increases the difficulty of making a favorable finding on an application. While minor traffic offenses will not affect your chances for a license, convicted felons who have not been PARDONED (not just paroled) or who have not sought and obtained/documented the remedies provided for in O.C.G.A. Section 7-1-1004(d) cannot be licensed. The Department verifies the criminal background of each applicant for a mortgage license. It is very important to provide honest answers in the application. Omissions regarding arrests are deemed to be a serious falsification of the application and can lead to denial regardless of the nature or outcome of the arrest.

I have an individual license with a "d/b/a" name established. I wish to change my business structure and become incorporated. How does this effect my license? What do I need to do to switch the license into the corporate name?

You will need to first obtain the approval of the Secretary of State's office for the new corporation, and then you need to amend your original application package by filing a new application form from the perspective of the corporation and by providing any related and updated information such as information on additional stockholders, etc. You need a rider to amend the surety bond coverage to cover the new corporation. An application form is available from the Department's web site which will provide you with the necessary information. Click here for the Change in Business Structure application from the "Other Applications ..." forms listing.

I know what a "Licensee" is, but what is a "Registrant"?

A "Registrant" is a company that performs activities covered under the GRMA, but due to its charter and ownership structure, has been specifically exempted from licensing. Certain types of companies are exempt from the licensing provisions of GRMA. These exemptions extend to organizations such as banks which are properly chartered in Georgia, and to properly licensed finance companies who restrict their lending activities to those covered by the Georgia Industrial Loan Act (GILA). Federally insured depository institutions chartered in states other than Georgia should notify the Department of their activities pursuant to the provisions of OCGA Section 7-1-1003.4 (this notification form is available on the mortgage forms and applications page). This allows the Department to have a record of their operations in Georgia and to assist the public in making contact with these companies, should a need arise. Mortgage subsidiaries of bank holding companies only qualify for registrant status since they are separately chartered companies which are not supervised by the primary regulators of banks in the holding company system. Application for registrant status is similar to and uses the same forms as the application for a license.

Do I need to have an annual CPA-prepared opinion audit of my company performed?

Legislative changes made in the 2005 session of the General Assembly revised the financial requirements for licensing and registration, eliminating the minimum net worth provision as a means of financial qualification for a mortgage license. Therefore, audits are no longer required, and can no longer be used, as a means of financial qualification for a license.

Licensees, registrants, and applicants for a broker/processor license must have and maintain either a surety bond or a letter of credit from a federally insured financial institution in a form and terms acceptable and payable to the Department in the amount of $50,000.

Licensees, registrants, and applicants for a lender license must have and maintain either a surety bond or a letter of credit from a federally insured financial institution in a form and terms acceptable and payable to in the amount of $150,000.

The code provision which allowed for HUD approved broker, processor, or lender licensees/registrants to meet financial requirements for licensing by providing an audited financial statement with a required net worth minimum was also eliminated in the 2005 legislative session.

ALL licensees and registrants must now meet the surety bond/letter of credit provisions noted above in order to obtain or maintain a license.

What is a surety bond and why do I need to have one or a letter of credit?

A surety bond is a three-party instrument between a surety (insurance company), the licensee, and the Department. The agreement binds the licensee to comply with the terms and conditions of the laws and regulations concerning the issuance of their license. If the licensee is unable to successfully meet those requirements, the surety assumes certain monetary obligations required for performance under that surety bond for the licensee, and ensures that the obligations are met. Such obligations may be those owed to qualifying consumers, other creditors, or the Department.

A letter of credit may be substituted for the surety bond and in effect allows the individual to self insure to meet the financial requirements for licensing. Often the licensee must provide a financial institution the full amount of the required bond, $50,000 or $150,000, as cash collateral for the letter of credit. Licensees often obtain a letter of credit in lieu of a bond either because they need to meet the financial requirements quickly or they do not qualify for an affordable surety bond.

It is important to note that the issuer of the letter of credit may require the cash collateralizing the letter to remain on deposit for a specified period of time after the letter of credit expires, to cover claims that might have arisen while the letter of credit was in force.

My mortgage company wants to establish a branch office. How do I accomplish this?

Click here to download a branch application and instructions.

Does Georgia allow net branches of mortgage licensees?

NO. The Department considers the following factors in determining whether an office location qualifies as a branch or is a separate business/legal entity that must be licensed separately:

• Who will be the owner or lessee of the property location proposed as a branch?
• Are branch employees supervised employees of the applicant/licensee or unsupervised independent contractors paid on a 1099 basis? The financial and employee records for the branch need to be kept at the main office. Payroll should originate at the main office.
• Are income and expense items accounted for on the books of the licensee? No separate books and records may be maintained for each location [although subsidiary records may be maintained for convenience purposes (see Rule 80-11-2-.01)].
• If the licensee is a lender, they must provide funding for the loans generated by that branch. It is not appropriate for a lender's branch to broker loans to other lenders.
• The licensee must have consistent policies and procedures and quality control for loan origination and processing that are enforced at all the branches.

While these factors may not negate approval of an application for a legitimate branch, they are used to evaluate whether or not a branch application or an application for a license is appropriate and needed.

NOTE: Unlike some states, Georgia does not issue a separate license for each established branch. Branch offices and those individuals who are proposed to serve as branch managers must be approved, as well as any changes in managers for existing approved branch locations. A listing of approved branch locations is contained on our database for each licensee. Operating an unapproved office can jeopardize a license and subject the licensee to monetary fines.

Please provide an explanation of how a "net-branch" might operate and the penalties for operating a "net branch".

When an existing licensee offers to allow another company or individual to use the licensee's name, license number, policies and procedures for a monthly operating charge or fee, without having that company or individual supervised by or submit expenses, loan applications, documentation or other operating results to the licensee, that usually is evidence of a "net-branch" operation. The factors noted in the question above are used to assist in determining the amount of autonomy at a branch to determine if a "net-branch" exists. The Department has also discovered some legitimate lender licensee's selling "franchises" in Georgia to use their company name. In several instances, unapproved franchise offices were then opened at unapproved locations using copies of the license from legitimate locations. Independent franchise operations will not be permitted.

A branch must be an extension of the licensee. The employees who work at or from the branch location must be employees of the licensee who are supervised and accountable to the licensee and the expenses of the branch must be expenses of the licensee. Branch managers can be compensated for the loans they generate as well as for the profitability of the branch. All compensation must be paid on a W-2 basis. All income and expenses related to the branch operation must be reported on all financial and accounting records of the licensee as well as in all state and federal tax returns of the licensee.

Section 7-1-1006 (g) and the Department's rule 80-11-1-.04 require that when a licensee applies for a branch, they must submit the name of the person that they have hired (and are responsible for the supervision of) to run that office. The activities of that office and the actions of its manager and employees are the responsibility of the licensee [Section 7-1-1002 (c)].

The fine for permitting an unlicensed location to operate is $500 [see Rule 80-11-3-.01(6)]; the fine for permitting a branch to be managed by an unapproved individual/manager is $500 [see Rule 80-11-3-.01(17)]. When the Department discovers a lender and a broker operating from an unapproved location or net branch (whether a "franchise" arrangement or not), the licensee is fined $500 for each unapproved location and $500 for each unapproved branch manager. Revocation procedures against that licensee may be initiated as provided for in Section 7-1-1002 (c) and 7-1-1017 and the licensee may be fined $1,000 for each loan generated from an unapproved location. In addition, the "branch manager" of a net branch may receive a "Cease and Desist Order" for operating an unlicensed location (Section 7-1-1002), and if this results in a final a Cease and Desist Order, he or she will be barred from working in the industry for three years [Section 7-1-1004 (i)].

In addition, background checks must be performed on all branch managers [Rule 80-11-1-.04(3)]. Often it is discovered that these unapproved branch offices are managed by individuals who have criminal or credit background problems and are unable to obtain a license in their own name. And often, after an unapproved branch and its manager cause the licensee to have its license revoked, this unapproved branch manager will open an unapproved branch for another licensee. The cycle continues until the licensees take responsibility for the individuals they hire and perform proper background checks on these individuals [Section 7-1- 1004 (f)], and obtain approval [required by Section 7-1-1006 (f)] for the branch location that they intend to operate.

I am a licensed lender and have a branch location in Georgia. Can my loan officers broker loans to other lenders from that branch without being considered a "net branch".

If the licensee is a lender, they must generally provide funding for the loans generated by that branch. It is not appropriate for a lender's branch to broker loans to other lenders.

If a lender licensee desires to allow its Georgia branches to broker residential mortgage loans on Georgia property to outside lenders, that lender licensee must have in place a comprehensive and ongoing strategic business plan that addresses brokerage activities by its Georgia branches, recognizes and acknowledges the risks involved, and provides for management of those risks and adequate supervision and control of its branches’ brokerage activities. The strategic business plan is subject to review by the Department and failure to develop and maintain the plan or failure to adequately control and supervise its Georgia branches’ residential mortgage brokerage activities can result in the loss of a lender’s license.

In all cases, the lender licensee must have consistent policies and procedures and quality control for loan origination and processing that are enforced at all the branches.

I am considering obtaining a mortgage through one of your licensees. Have any complaints been filed against them?

Confidentiality laws will not allow us to discuss specific complaints against a licensee with the public. Watch our Monthly Summary or check our web site for the names of individuals and companies who have been subjected to final Cease and Desist Orders or other administrative actions. A list of Revoked and Suspended licenses is also included in the Monthly Summary. Rest assured that we are taking all possible legal steps to ensure that companies operating illegally are properly sanctioned. These sanctions can include substantial monetary fines or Revocation or Suspension of a license. We use information from consumers or the industry as a basis for these actions.

Annual information on the number of written complaints received on licensees by this Department, together with the number of Georgia loans made, is available on our website through 2007.

In addition, you may want to contact the Better Business Bureau to find out if complaints have been filed against the entity.

Finally, consider referrals from friends and relatives when looking for a mortgage lender or broker. Educate yourself about the process using state and federal agency web sites and brochures before you apply for a loan. Shop different providers and do not be hesitant about asking questions. If you do not get a satisfactory answer, try a different lender or broker.

Click here to access the Department's consumer resources page for helpful guides to the mortgage process.

Click here to access the Department's Monthly Mortgage Summary.

Click here for a list of companies and individuals that are subject to a final Cease and Desist Order or a Consent Order.

I have a complaint against a company offering mortgage services in Georgia. How do I file a complaint?

Click here for further information regarding Complaints and Inquiries.

Click here for further information regarding filing a complaint with the Department of Housing and Urban Development (HUD) for violations of federal law.

I financed my house through a certain mortgage lender but have now paid off the loan. Department records show that this company is no longer licensed and I am unable to reach them. How can I get the security deed canceled?

Georgia Code Section 44-14-3 was amended to provide that in the event the holder of a security deed fails to transmit a properly canceled security deed to the Clerk of Superior Court where the lien is recorded within 60 days after payment in full is received, the clerk is authorized to cancel the security deed upon receipt of the following:

• An affidavit from an attorney who caused the loan to be paid in full or by an officer of a regulated or chartered financial institution whose deposits are federally insured, if the loan was paid in full by that financial institution. The affidavit shall include a recital of the actions taken to comply with that subsection.

• The affidavit shall also include the following attachments: a) A written verification from the holder of the security deed as to the amount necessary to pay the loan in full; b) Copies of the front and back of the canceled check to the holder of the security deed paying off such loan; c) Confirmation of a wire transfer to the holder of the security deed; or d) A bank receipt showing payment to the holder of the security deed.

Any person who files an affidavit in accordance with this subsection which is fraudulent will be guilty of a felony.

Additional remedies are available under an amendment to Code Section 44-14-3 that passed in May 2008.  Go to the Georgia General Assembly's website to view House Bill 1093 at http://www.legis.ga.gov/legis/2007_08/fulltext/hb1093.htm

Currently, the Department has not issued any regulations regarding escrow accounts. Laws regarding escrow accounts are contained in the Residential Settlement and Procedures Act (RESPA), which is Federal legislation.

Click here if you have questions regarding your escrow account.

No license or exemption from licensing is required to make loans on rental property and second homes. Such loans are excluded from the definition of “residential property” by Section 7-1-1000(16) of the Official Code of Georgia Annotated.

I am a licensed broker or lender located in another state. Is it possible to obtain an exemption to originate or fund one loan?

NO - There is no provision in GRMA for an exemption from licensing for oringinating or making a residential mortgage loan unless the person is otherwise exempt from the licensing provisions. Changes were made in the law in 2007 eliminating the exemption that had been allowed for lenders to make up to 5 loans in any calendar year by submitting an exemption request.  Those exemptions are no longer available.