Monthly Summary of Mortgage Activities Georgia Department of Banking and Finance 2990 Brandywine Road, Suite 200, Atlanta, GA 30341-5565 FOR THE PERIOD ENDING MAY 2004 SUMMARY OF ACTIVITIES - MORTGAGE DIVISION WEBSITE: www.state.ga.us/dbf --------------------------------------------------------------------------------------------------------------------------------------- FY2004 LEGISLATIVE CHANGES AFFECTING THE MORTGAGE INDUSTRY Several bills affecting the mortgage industry were passed by the Legislature during this year's session. In addition to a recap of the major changes to the Georgia Residential Mortgage Act (GRMA) from Senate Bill 405 that were contained in the April 2004 Monthly Summary of Mortgage Activities, other bills affecting the mortgage industry are also noted below. The bills have been signed by the Governor and most changes go into effect July 1, 2004. SENATE BILL 405 - DBF HOUSEKEEPING BILL Signed by the Governor 05/19/2004 (See copy at: http://www.ganet.org/dbf/pdfdoc/Mort_HKBill_SB405_2004_APS.pdf) Financial Requirements Brokers/Processors Code Section 7-1-1003.2 (a), relating to financial requirements for licensing and registration: This section was amended to eliminate the previous provision allowing brokers/processors to provide a certified audited financial statement reflecting a net worth of $100,000 or greater to meet the financial requirements for licensing. After July 1, 2004, a broker/processor applicant/licensee must have either a $50,000 surety bond, or must meet the HUD requirements for approved correspondent lender status. Generally this requires that the broker/processor meet audited net worth requirements established by HUD. These applicants and licensees must provide evidence of their HUD approval status and provide a copy of their certified financial audit to the Department. The Department will also verify approval status with HUD. Therefore , beginning July 1, 2004, brokers and processors may no longer provide the Department with a certified audit demonstrating net worth of $100,000 or more to qualify for licensing or license renewal if the broker is not also HUD approved. The only method by which net worth will allow a broker or processor to qualify for a license is if the broker/processor is HUD approved and meets or exceeds HUD's net worth requirements. Otherwise, a surety bond in the amount of $50,000 must be provided. Note that this change does not affect the RENEWALS that are in process for the FY2005 annual licenses. New applications taken after July 1, 2004 and renewals beginning with the FY2006 renewal period (7/1//2005 to 6/30/2006) will be covered by the new requirements. Registration Requirements Code Section 7-1-1003.3, relating to applications for registration: Changes to this section allow the Department to specify by regulation the exact requirements for information to be provided on an annual basis in an application for registration. Because applicants who qualify for registration have already provided significant information to other regulators, this code section was changed to eliminate the duplication of supplied information to which the Department already has access. Investigation of Applicants....Other Requirements Code Section 7-1-1004, relating to the investigation of applicants for mortgage lender or mortgage broker licenses: The change to this section now requires that applicants and licensees examine the department's public records to verify that employees and potential employees are not subject to cease and desist orders issued by the department. This added requirement is to ensure that, before hiring a new employee, applicants and licensees review the department's public records to make certain they do not hire individuals who are barred from working in the industry. Such public records are available on the Department's website at www.ganet.org/dbf/mortgage.html, under the option Cease and Desist Orders. In addition to a listing of outstanding Cease & Desist Orders, outstanding revocations, withdrawals and other administrative actions are available on links from this page. Annual Financial Statements Code Section 7-1-1010, relating to annual financial statements of mortgage brokers and lenders: Brokers - A change to Section 7-1-1010 (a) further clarifies the changes made to Section 7-1-1003.2 (a) as noted above. It specifies that the audit required for HUD approved brokers must be submitted to the Department by those licensees using HUD approval to meet the financial requirements for licensing, for both license applications and renewals. In addition, a change to Section 7-1-1010 (b) regarding audits for lenders removes the requirement to supply an audited financial statement by those LENDER applicants who will be using a bond to meet the financial requirements for licensing, unless specifically required by the Department. SENATE BILL 449 - Signed by the Governor 05/18/2004 Annual Financial Statements Code Section 7-1-1000, relating to licensing of mortgage lenders and brokers and their annual financial statements: Section 7-1-1000 (2) regarding the definition of "Audited Financial Statement" was changed to eliminate the use of independent Georgia registered public accountants (RPAs). Going forward, any financial statement used to meet the financial standards for licensing or registration may only be prepared in accordance with generally accepted auditing standards by an independent certified public accountant. HOUSE BILL 1245 - Signed by the Governor 05/13/2004 Portions of this bill provided for changes to reflect capitalization, typographical, grammatical and other errors. Investigation of Applicant Code Section 7-1-1004, relating to the investigation of applicants for mortgage lender or mortgage broker licenses: Paragraph (d) of this section was changed by striking the word Governor and inserting the word governor. Paragraph (h) of this section was changed by striking the word at and inserting the word as in that paragraph as follows: "....who establishes policy of the applicant has been in one or more of these roles at as a mortgage lender, broker, or registrant....." Cease and Desist Orders Code Section 7-1-1018, relating to Cease and Desist Orders and enforcement procedures was changed as follows: In Paragraph (a), the following sentence was amended to insert the word noted: "....If the notice of reinstatement of the bond is not received within the 30 days, the license shall expire at the end of the 30 day period and the person shall be required to make a new application for license and pay the applicable fees...." OTHER NEWS ITEMS Income Verification Advisory Please be advised that if you solely rely on a paycheck stub to verify gainful employment or income level, you may need to develop alternative verification procedures. The Department has received reports that a web site, http://www.paycheckstub.com is selling paycheck stubs to the public. A customer to the web site can select from a variety of employers and salaries to help them qualify for credit that otherwise, might not be attainable. There may be other similar "credit problem solver" web sites currently operating on the Internet. A sample of the web site is shown at left. Please make certain that proper employment and income verifications are made on prospective borrowers. WEB SITES "Advertisement" as defined in Department Regulation 80-11-1-.02 (f) means material used or intended to be used to induce the public to apply for a mortgage loan. Web Sites are considered advertisements, and must contain the name(s), license number, and an office address which conforms with the name, license number, and office address on record with the Department. Web sites must also contain the words Georgia Residential Mortgage Licensee" or list Georgia as a state in the which the licensee is licensed to do business if the licensee is licensed in more than one state. The web site may not use a name for the licensee which has not been approved as a "d/b/a" name for that licensee. $6.50 PER LOAN FEES On-Line Option "Per loan" fees for the first half of 2004 will be due soon, and beginning with this reporting period those owing the fees will have the option of on-line ACH payment. As noted in last month's summary, the Department has developed an on-line ACH payment system and beginning with the fees for January 1, 2004 to June 30, 2004 period, (which are due by September 1, 2004), it is requested that those owing the fee pay by this new method. Although credit card payments are not yet available, we hope to offer that option in the near future. After the beginning of the billing period, which is July 1, 2004, licensees can submit fees on-line at the website https://bkgfin.dbf.state.ga.us/ach650fees.html and follow the on-screen instructions. This website requires the use of either web browser Netscape Ver. 7.0 or greater or Internet Explorer Ver. 6.0 or greater. More information regarding the use of the website and access will be provided with the billing statements. Please take advantage of this on-line system. Hopefully you will find the site easy to use. Any comments and suggestions about the new process can be e-mailed to the Department at dbfmort@dbf.state.ga.us LICENSE RENEWALS - FY 2005 Renewal applications, whether completed on-line or in hard-copy format, were due by April 1, 2004. Failure to have properly filed the renewal application resulted in a $300 late fine. As in prior years, and for all licensees, whether renewing on-line or by mail, all outstanding issues such as any fines, fees, stale audits, complaint resolution, etc. must be resolved before your renewal license will be granted. REMEMBER that licensees who do not complete the renewal process by June 30, 2004, will have their licenses expire, will have to cease operations, and will have to complete the license application/reinstatement process in full before being allowed to again operate a residential mortgage business. Licenses will be mailed beginning approximately June 15, 2004. If you have not received your license by the first full week in July, please then contact the Department. Going forward, the Department encourages licensees who qualify for the on-line renewal process used this year to take advantage of this process. It significantly reduced processing time, eliminated mailing concerns, ensured quality data entry, and has allowed the Department to offer more on-line services in the future (see $6.50 filing fee article below). We would like to again thank all of you who renewed on-line for your participation. REAL ESTATE BROKERS AND UNLAWFUL RESIDENTIAL MORTGAGE ACTIVITIES Although a real estate broker may refer consumers to a mortgage broker or mortgage lender, Georgia law prohibits a real estate broker from accepting any fee or compensation in any form whatsoever for directly or indirectly negotiating, placing, or finding a mortgage for a Georgia consumer. O.C.G.A. 7-1-1001 (4). In order for a real estate broker to receive compensation legally for such services, that real estate broker must first obtain a mortgage broker or mortgage lender license or demonstrate that he, she, or it is exempt form GRMA's licensing requirements. Compensating a real estate broker for such services will subject a Georgia licensed mortgage broker or mortgage lender to revocation procedures as such conduct constitutesengaging in residential mortgage activities with an unlicensed person. O.C.G.A. 7-1-1002. AUDITED FINANCIAL STATEMENTS Lenders and some brokers have licenses that are dependent upon the filing of current audited financial statements with this office. Those whose audits are more than 15 months old may be subjected to fines and/or revocation of their license. It is the RESPONSIBILITY of the licensee, as professionals licensed to operate in the mortgage industry, to insure that these audits are current AT ALL TIMES. Care must be taken to employ a CPA who has time to service your account in a manner so as to protect your license. Requests for an extension will not be granted. License renewals will not be granted for those licensees whose audits are not current. Please keep in mind that the net worth requirements in Georgia are predicated on tangible assets. Assets including but not limited to items such as "goodwill" and accounts "due from" shareholders, affiliated companies, directors or officers will not count as tangible assets. E- MAIL WORMS With the recent e-mail virus attacks, both the state's and the Department's Technology Departments have introduced stronger e-mail content filtering and blocking for incoming infected messages. As a result, many messages containing attachments have the attachments filtered, or often the entire message itself is deleted. If you are e-mailing the Department and you have not received a response in a day or two, please resend the message, being mindful of the SUBJECT line or other content that may be filtered by anti-virus programs. VERIFYING LICENSED ENTITIES Rule 80-11-4-.05 of the Mortgage Division Rules states, in part, that it is the licensee's responsibility to "know" that it is conducting business with a licensed entity. You run the risk of conducting business with an unlicensed entity if you do not verify the license. The fine for "dealing with unlicensed persons" under Rule 80-11-3-.01 (4) is $1,000 per transaction and your license shall be subject to suspension or revocation. Anyone who purchases, sells, places for processing or transfers a mortgage loan or loan application to or from a person who is required to be licensed but is not properly licensed will be fined. You can check the license status of any licensee by going to the Department's web site at http://www.ganet.org/dbf/mortgage.html . From there you can check by entering the licensee's name, license number, or city, or leave the selection box blank and you will get a complete listing of licensees. There is also an option to download the entire list into an Excel spreadsheet. CEASE AND DESIST ORDERS - Issued America's Best Home Loans, Inc., Woodstock, GA - Cease and Desist Order issued April 7, 2004, and became final on May 7, 2004. Bowe, Robert, Fayetteville, GA - Cease and Desist Order issued April 1, 2004 and became final on May 1, 2004. Brookstone Mortgage Corporation, Burford, GA (license no. 7149) - Cease and Desist Order issued April 15, 2004 and became final on May 13, 2004. Hickman, Horace J., Avondale Estates, GA - Cease and Desist Order issued April 2, 2004, and became final on May 2, 2004. Hill, Darryl dba Home and Family Solutions, Macon, GA - Cease and Desist Order issued April 21, 2004 and became final on May 21, 2004. McCalep & Associates, LLC, Decatur, GA (license no. 18918) - Cease and Desist Order issued April 15, 2004 and became final on May 13, 2004. Mortgage Associates, Macon, GA (license no. 13238) - Cease and Desist Order issued April 13, 2004 and became final on May 9, 2004. National Lends Network Corp., Rockville Centre, NY - Cease and Desist Order issued April 19, 2004 and became final on May 19, 2004. Nexus Financial Group, Inc., West Palm Beach, FL (license 12595) - Cease and Desist Order issued April 28, 2004 and became final on May 18, 2004. Pentagon Mutual, Inc., Clarkston, GA (license no. 16332) - Cease and Desist Order issued May 3, 2004 and became final on May 28, 2004. People's Mortgage & Finance Company, Inc., Lawrenceville, GA (license no. 18980) - Cease and Desist Order issued May 3, 2004 and became final on May 30, 2004. Regulski, Jr. Thomas W., Suwanee, GA - Cease and Desist Order issued April 30, 2004 and became final on May 30, 2004. Scott, Bridget, East Point, GA - Cease and Desist Order issued April 30, 2004 and became final May 21, 2004. Scott, William, East Point, GA - Cease and Desist Order issued April 30, 2004 and became final May 21, 2004. Webster, Leslie, Woodstock, GA - Cease and Desist Order issued April 7, 2004 and became final May 7, 2004. Webster, Randy, Woodstock, GA - Cease and Desist Order issued April 7, 2004 and became final May 7, 2004 FINAL CONSENT ORDERS - Issued None LICENSEES/REGISTRANTS REVOKED, EXPIRED, SUSPENDED, WITHDRAWN OR DENIED IN MAY 2004 ID# 6253 7149 11459 12575 13238 14479 15745 16332 16349 17105 17781 18239 18260 18695 18918 NAME WASHINGTON MUTUAL FIN BROOKSTONE MTG CORP WOODLAND CAP CORP GRAND FIN INC MTG ASSOC SGB CORP ALL STAR MTG INC PENTAGON MUTUAL INC HMSOURCE CAP MTG CO LP MORTGAGEBOT LLC FOUNDERS MTG USA LLC METRO MTG FUNDING SVCS GREAT LAKES CAP BACH CONSULTING INC MCCALEP & ASSOC LLC CODE RD BD LD LD BD LD BD BD LD LD LD BD LD BD BD REVOKED EXPIRED SUSPENDED 05/13/2004 05/28/2004 05/13/2004 WITHDRAWN 05/03/2004 05/07/2004 05/07/2004 05/07/2004 05/21/2004 05/20/2004 05/03/2004 05/25/2004 05/03/2004 05/05/2004 05/03/2004 05/18/2004 DENIED TOTAL: 15 LICENSEES/REGISTRANTS APPROVED OR REINSTATED IN MAY 2004 ID# COMPANY NAME 12317 17414 19215 19235 19281 19322 19351 19353 19356 19363 16182 6816 19206 19270 19305 19331 19354 19366 19395 19423 19438 12980 15285 Maxim Capital, Inc. * National Fidelity Mtg * Silver Leaf Mortgage Company About Mortgage, Inc. American Town Mortgage, Inc. Bayview Loan Servicing, LLC Swan Financial Corporation Pegasus Capital Funding, Inc. Angela Kay Holloway TowneCapital, LLC Popular Financial Svcs, LLC # First Mutual Mtg * Epic Lending Group, Inc. David Anthony Jones Origen Servicing, Inc. Elite Home Mortgage, Inc. Prime Lending, LLC Wallace Albert Carter, Jr. Quality First Mortgage, Inc. Carlos I. Perez Blanco Ocwen Loan Servicing, LLC Universal Financial Services, Source One Mortgage Services CITY DORAVILLE BALTIMORE STONE MOUNTAIN ALPHARETTA KENNESAW CORAL GABLES LOUISVILLE LITHONIA STONE MOUNTAIN SAINT AUGUSTINE MARLTON COLUMBUS EAST POINT LAWRENCEVILLE SOUTHFIELD LITHONIA FORT MYERS AUSTELL CUMMING ROSWELL WEST PALM ATLANTA KENNESAW ST MB CODE GA L MD L GA B GA B GA B FL L KY L GA B GA B FL B NJ R GA L GA B GA B MI L GA B FL B GA B GA B GA B FL R GA B GA B ORIGINAL APPROVAL 03/21/1997 07/19/2002 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 12/22/2004 02/25/1994 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 11/14/1997 01/21/2000 RENEWAL 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/07/2004 05/14/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/21/2004 05/14/2004 05/21/2004 REINSTATED 05/14/2004 05/21/2004 TOTAL: 23 B = BROKER L = LENDER R = REGISTRANT * Upgrade Broker to Lender + Downgrade Lender to Broker # Upgrade Lender to Registrant Downgrade Registrant to FINES ASSESSED IN MAY 2004 ID# ISSUE DATE FINE PAID DATE COMPANY NAME CITY ST 6516 6516 6648 6648 05/18/2004 05/18/2004 05/18/2004 05/18/2004 $300. $25. $300. $25. Bobby L. Taylor Bobby L. Taylor Smith Enterprises, Inc. Smith Enterprises, Inc. Suwanee GA Suwanee GA Hogansville GA Hogansville GA 11640 05/03/2004 $500. Mortgage Investors Group Knoxville TN 12109 05/03/2004 $25. Georgia State Mortgage, Inc. Conyers GA 12489 05/26/2004 $1000. 06/08/2004 Bombardier Capital Inc. Jacksonville FL 12945 05/12/2004 $5000. Wayne Frier Home Center of Waycross, Inc. Waycross GA 12945 05/12/2004 $2000. Wayne Frier Home Center of Waycross, Inc. Waycross GA 12945 05/12/2004 $1000. Wayne Frier Home Center of Waycross, Inc. Waycross GA 13669 05/18/2004 $300. First Choice Mortgage Financial Corporation Marietta GA FINES ASSESSED IN MAY 2004 ID# ISSUE DATE FINE PAID DATE COMPANY NAME CITY ST 13669 05/18/2004 $25. First Choice Mortgage Financial Corporation Marietta GA 13716 05/18/2004 $300. Donnell Woodly Smyrna GA 13716 05/18/2004 $25. Donnell Woodly Smyrna GA 14446 05/26/2004 $1000. Financial Services of the South, Inc. Blakely GA 14457 05/18/2004 $300. Republic Mortgage, Inc. Newnan GA 14457 05/18/2004 $25. Republic Mortgage, Inc. Newnan GA 15290 15290 15779 15779 05/18/2004 05/18/2004 05/18/2004 05/18/2004 $300. $25. $300. $25. 05/21/2004 05/21/2004 ABC Mortgage Services, Inc. ABC Mortgage Services, Inc. Ralph Eugene Lewis, Sr. Ralph Eugene Lewis, Sr. Augusta GA Augusta GA Lithonia GA Lithonia GA 16218 16986 16986 16986 05/04/2004 05/13/2004 05/13/2004 05/13/2004 $1000. $3000. $500. $500. First Security Home Mortgage Corporation Atlanta GA Prime Home Mortgage, Inc St. Augustine FL Prime Home Mortgage, Inc St. Augustine FL Prime Home Mortgage, Inc St. Augustine FL 17038 17038 17781 05/18/2004 05/18/2004 05/10/2004 $300. $25. $1000. 05/26/2004 05/26/2004 Henry Brian Akers Henry Brian Akers Founders Mortgage USA, LLC Stockbridge GA Stockbridge GA Sewell NJ FINE REASON 1 Licensee fined for Prohibited Acts 8 Licensees fined for Renewal filed late 1 Licensee fined for Unapproved Branch 1 Licensee fined for Audit filed late 1 Licensee fined for Acq. of 25% ownership without approval 3 Licensees fined for background checks 1 Licensee fined for Employment of a Felon violation 1 Licensee fined for Unapproved Branch Managers 1 Licensee fined for GAFLA violation 9 Licensees fined for Checks returned for Insufficient Funds 1 Licensee fined for failure to respond to complaint