Inside this Issue 2 Commissioner Appointed 2 Continuing Education: Providers & Course Content 3 OTHER ITEMS Examination Issues 3 OTHER ITEMS Federal Regulations 5 Administrative Actions & Issues Check for Web Outstanding C&D and Consent Orders 2990 Brandywine Road Suite 200 Atlanta, GA 30341 Phone: (770) 986-1269 Fax: (770) 986-1029 Monthly Summary of Mortgage Activities Georgia Department of Banking & Finance FOR THE PERIOD ENDING October 2005 SUMMARY OF ACTIVITIES MORTGAGE DIVISION WEB SITE: www.state.ga.us/dbf STAFF: www.state.ga.us/dbf/staff.html . . . . . . . . . . . . . . . . . . . News Items DEPUTY COMMISSIONER FOR MORTGAGE BRASWELL APPOINTED DBF COMMISSIONER Governor Sonny Perdue announced the appointment of Deputy Commissioner for Mortgage Robert M. Braswell as Commissioner of the Georgia Department of Banking and Finance (DBF) on Friday, November 4, 2005, replacing retiring Commissioner David G. Sorrell. Deputy Commissioner Braswell, 43, has been the Deputy Commissioner for Mortgage for the Department since August 2003. He has spent his entire professional career with the Department. Braswell previously served as district director and supervisory examiner for the Northwest region and held several financial examiner positions. He received his bachelor's degree in business administration, with a concentration in finance, from Georgia Southern College. George Reynolds will continue to serve as senior deputy commissioner. He has more than 27 years of regulatory experience with the department. The Mortgage Division congratulates Rob on his promotion, and he will be missed as the Division faces the daily issues regarding mortgage industry regulation. However, he will be available to provide insight and guidance regarding Mortgage Industry issues. The Division wishes him success in meeting the challenges of his new position. CONGRATULATIONS, Rob! CONTINUING EDUCATION: PROVIDERS & COURSE CONTENT ISSUES As anticipated, many questions are being asked regarding how the Department will view the qualifications of the various professional organizations and approved education providers offering Continuing Education Credits (CEs). The following will hopefully provide some guidance. There are two issues here: approved providers and course content. Regarding approved course(s) and content, the topics which can be considered for credit are: mortgage brokering process, federal law, federal rules and regulations, Georgia law, Georgia rules and regulations, applications and required documentation, fraud, ethics or other topics pertinent to the operation of a mortgage brokering business in Georgia, and the inclusion annually of at least one hour concentrated on fraud detection and prevention. Regarding approved continuing education providers, the regulation states that seminars, courses or classes sponsored and approved by mortgage-related state and federal regulatory agencies, the National Association of Mortgage Brokers (NAMB), state and federal regulated lenders and their affiliates or professional associations, all of which must be recognized by the department as proper providers of education requirements ("approved providers") will qualify. To be a Georgia approved provider (school), which does not fall within the other state, federal, lender, or professional categories noted above, the school must be initially qualified to provide the 40 hour training course for licensing. See Department Regulation 80-11-4- .02 regarding approved schools. Looking at these groups, the following apply: State Regulatory Agencies & Approved Providers: A listing of state regulatory agencies is noted on the American Association of Residential Mortgage Regulators (AARMR) website at the following address: http://www.aarmr.org/page 04.lasso. Mortgage related courses provided by these regulatory agencies or their state-approved providers of mortgage education (schools) would qualify, with the exception of "state- specific" law and regulation courses taken pertaining to any state law other than the State of Georgia. Other state's mortgage laws and regulations courses will not count for Georgia CE credit. Federal Mortgage Regulatory Agencies/Other Federally Related Groups: Those federally related agencies offering courses, such as 2 . . . . . . . . . . . . . . . . . . . .. HUD, would qualify, or courses sponsored by other federally related entities, such as the GSEs Fannie Mae or Freddie Mac. Related courses offered by other Federal regulatory agencies, such as the FDIC, would have to be reviewed to determine the applicability of the course content to the mortgage industry. For example, an FDIC sponsored course on bank formations, would most likely not be applicable to the mortgage industry. NAMB The National Association of Mortgage Brokers, and its affiliated state organizations, such as GAMB, would be approved providers of mortgage training for CEs. State and Federal Regulated Lenders and Their Affiliates: These include mortgage lenders, banks, thrifts, credit unions, etc., which are state or federally regulated mortgage lenders, (i.e. FDIC insured), and their affiliates. Courses offered by these lenders and their affiliates on mortgage related topics will be considered for CEs. Professional Associations - If the organization is a Department recognized industry-related professional organization, such as National Association of Professional Mortgage Women, Georgia Banker's Association, etc. , then their topics meeting the seminar or course criteria noted above, offered through training sessions or luncheon meetings which meet the hour time requirement (minimum 50 minute training session), will qualify. Generally these groups will be registered as a non-profit organization with their state's Secretary of State's Office (or similar governing oversight body). That will be a beginning point of reference for the Department in determining the organization's status as an approved provider. It is also recognized that many such organizations operate separate foundations which might handle training, and these would be reviewed. If there is a question regarding the status and nature of the organization, then a copy of the by-laws, purpose and policies might be required in order to make a further determination as to qualification for continuing education. Course Content Remember that the course content is significant, such that a course on another state's mortgage statutes will not count as credit for the Georgia Mortgage Broker's license. Federal and Georgia law courses and seminars related to the mortgage industry, as well as the other items noted above, will count for CEs. Speakers/Instructors: For purposes of continuing education, individual instructors and speakers at seminars, conventions or classes sponsored by approved education providers will not be required to seek separate department approval as approved providers of mortgage training classes. Other Items EXAMINATION ISSUES Examiners often see the same examination issues from licensee to licensee. Therefore, it may be helpful to itemize those issues for you here to prevent citation of the same problems in an examination of your licensed business. Ineligible Employees It appears that many licensees take for granted that their current employees won't get a Cease and Desist or Consent Order, and therefore do not routinely check the Department's database for orders which may have been issued subsequent to the individual's employment with the company, as is often the case. Licensees are reminded to check the database on the internet at https://bkgfin.dbf.state.ga. us/WebAdmActions.html on a routine basis to determine that no orders have been issued to current employees. Mortgage Loan Transaction Journal (MLTJ) In general, the MLTJ must contain the following information: (a) 3 . . . . . . . . . . . . . . . . . . . .. Full name of the proposed borrower and all co- borrowers, and their social security number(s); (b) Date customer applied for the mortgage loan; (c) Name of the loan officer responsible for the loan application whose name also appears on the application; and; (d) Disposition of the application and date of disposition and the result of the loan transaction. It appears that licensees often have a problem maintaining these required components of the MLTJ as spelled out in Department Regulation 80- 11-2-.03 Mortgage Loan Transaction Journal, Paragraph (1). And... it is important to note that Subparagraph (c), inclusion of the name of the loan officer is now required as a result of this year's regulation changes. While the foregoing components for the MLTJ are a minimum, more information than this can be contained in the MLTJ and inclusion is encouraged, but is not required. Employee Personnel Files Licensees must keep personnel files on all employees, both current and those who have left the company. At a minimum the file must contain: 1) an employment application, 2) a background check, 3) copies of all W-2 statements issued on the employee's behalf, and 4) a copy of the W-4 statement as completed by the employee. Based on employment, property and ownership issues which continually arise in this industry, licensees are encouraged to draft an exclusivity / employment contract denoting terms of employment, and in particular spell out ownership of the loan files, particularly noting that the files are the property of the licensee, not the property of the loan officer. Also, remember that Regulation 80-11-1-.05(1) regarding background checks was revised. Employers must now submit the background information to the proper law enforcement authorities within 10 business days of initial hire. Georgia Fair Lending Act Licensees are responsible for determining if they are or are not making high cost loans. Brokers cannot rely on the lender to inform them or to calculate the costs of a high cost loan. The calculation should be done for each loan, and a copy of the calculation placed in each file, or the points and fees calculation can be input as a field on the journal. FEDERAL REGULATIONS Often licensees overlook the fact that many federal regulations, other than just those like Regulation Z-TIL, Regulation BECOA and RESPA, pertain to residential real estate loans, or other laws, such as with FACTARecord Disposal, pertain to other aspects of consumer credit and are applicable to licensees. The following is a partial list of the more significant regulations which pertain to residential mortgage loans and those who make them, and require compliance by non-bank mortgage licensees: Equal Credit Opportunity Act - Reg B Real Estate Settlement Procedures Act (RESPA) Reg X Truth-in-Lending Reg Z Fair Credit Reporting Act Right to Financial Privacy Act Fair Housing Act HMDA Gramm-Leach-Bliley Act Of particular concern are the prevalence of two web site issues advertising of rates and information security, as most licensees utilize the web for advertising, and many take online loan applications. Consumer information privacy concerns appear to be overlooked by many licensees. Web sites where applications are taken are often not properly encrypted. Based on recent incidents of theft of consumer information, at a minimum licensees need to determine that proper on-line security measures are taken to safeguard customers' non-public information, such as social security numbers and birth dates. Sites need to be encrypted by use of Secure Sockets Layer (SSL) technology, which secures web sites by encrypting information and providing authentication. An encrypted communications channel between the consumer and the licensees' server will: 4 . . . . . . . . . . . . . . . . . . . .. reduce the risk of eavesdropping; provide parties to a transaction the ability to verify one another's identity; make use of digital certificates to encrypt the data. Encryption is Indicated on a web site by https:// in the web site address line, and the lock icon, shown here, in the lower right of a web site's screen. Without SSL encryption, packets of information travel networks in full view, similar to sending mail through the postal system in a clear envelope. Anyone with access to it can see the data, and if it looks valuable, then they are likely to use it or change it. Without third-party verification, users do not know a Web site is an authentic representative of a business they trust. Every SSL Certificate is created for a particular server in a specific domain for a verified business entity. An SSL Certificate is issued by a trusted authority. When the SSL handshake occurs, the browser requires authentication from the server. If the information does not match or the certificate has expired, the browser displays an error message. Licensees utilizing the web to take applications need to make certain they are taking adequate steps to protect customer information. The next areas of concern, advertising of rates and other loan payment information, are in Regulation Z. Regulation Z, Truth in Lending, requires that certain items be disclosed if an ad uses "triggering terms". Triggering terms include those items set forth in Regulation Z, Part 226.24, In general, the following apply to advertisements, hardcopy or website, as discussed in Part 226.24 (c) of the Regulation: "Part 226.24 (c) of Regulation Z(c) Advertisement of terms that require additional disclosures. (1) If any of the following terms is set forth in an advertisement, the advertisement shall meet the requirements of paragraph (c)(2) of this section: (i) The amount or percentage of any downpayment. (ii) The number of payments or period of repayment. (iii) The amount of any payment. (iv) The amount of any finance charge. (2) An advertisement stating any of the terms in paragraph (c)(1) of this section shall state the following terms, as applicable: (i) The amount or percentage of the downpayment. (ii) The terms of repayment. (iii) The annual percentage rate, using that term, and, if the rate may be increased after consummation, that fact." Many licensees fail to meet these disclosure requirements of Regulation Z on their websites or other advertisements. Often a payment amount for a loan will be listed, but the APR will not be disclosed. "RATE" will be used, but it does not disclose INTEREST RATE or if it is the APR. Failure to disclose the required items in any advertisement results in violations of the Regulation. Even though licensees are not routinely examined by any federal banking regulatory agency, other federal regulatory agencies, such as the Federal Trade Commission, do have jurisdiction over those non-bank entities subject to these regulations. 5 . . . . . . . . . . . . . . . . . . . .. Administrative Actions and Issues CEASE AND DESIST ORDERS Issued American Lending Group, Inc. dba Avant Lending Group, Inc., El Segundo, CA Cease and Desist Order issued September 8, 2005 became final on October 9, 2005. Beedles, Yolanda, Douglasville, GA Cease and Desist Order issued September 22, 2005 became final on October 23, 2005. Bychtovoy, Oleg, Atlanta, GA (license no. 15848) Cease and Desist Order issued September 2, 2005 became final on October 2, 2005. Croft, Johnny Dean, Cartersville, GA (license no. 19978) Cease and Desist Order issued September 2, 2005 became final on October 2, 2005. Dupree, Brian C., Athens, GA Cease and Desist Order issued September 22, 2005 became final on October 23, 2005. Newell, Wesley Harrison, Dawsonville, GA (license no. 19594) Cease and Desist Order issued September 22, 2005 became final on October 22, 2005. Osibodu, Nicole, Marietta, GA Cease and Desist Order issued September 22, 2005 became final on October 13, 2005. RateCapital, Inc., Vienna, VA (license no. 17915) Cease and Desist Order issued September 21, 2005 became final on October 23, 2005. Wilson, Rasheed, Atlanta, GA Cease and Desist Order issued September 22, 2005 became final on October 13, 2005. _____________________________________________________________________________________ CEASE AND DESIST ORDERS Lifted None FINAL CONSENT ORDERS Issued Fidelity Lending, LLC, Atlanta, GA (license no. 16856) - Consent Order issued October 20, 2005, became final on October 20, 2005. Meuschke, Elena, Atlanta, GA - Consent Order issued October 20, 2005, became final on October 20, 2005. 6 . . . . . . . . . . . . . . . . . . . SUPERIOR COURT INJUNCTIONS None FINE PUBLICATION Information regarding fines assessed against a specific licensee and against whom there are no pending administrative actions, is available on an individual licensee basis by submitting a written request to the following e-mail address: dbfmort@dbf.state.ga.us 7 Licensees fined for Advertising Violations 1 Licensee fined for Unapproved Branch 1 Licensee fined for failure to respond to Consumer Complaint FINE REASON 1 Licensee fined for Check returned for Insufficient funds 1 Licensee fined for Prohibited Act ________________________________________________________________________________________________________ LICENSEES/REGISTRANTS REVOKED, EXPIRED, SURRENDERED, WITHDRAWN OR DENIED IN OCTOBER 2005 ID# NAME CODE 5750 GE MTG SVCS LLC LD 12468 FIDELITY MTG INC LD 12869 ATL N MTG BD 15210 LAND HM MTG LLC BD 15848 BYCHKOVOY, OLEG BD 16703 1ST RATE MTG GRP INC LD 16856 FIDELITY LENDING LLC BD 17915 RATECAPITAL INC BD 19232 AMER BEST MTG INC BD 19594 NEWELL, WESLEY H. BD 19978 CROFT, JOHNNY DEAN BD 20412 HOMEFI MTG ADVISORY INC BD TOTAL: 12 REVOKED EXPIRED SURRENDERED 10-02-2005 10-23-2005 10-22-2005 10-02-2005 WITHDRAWN 10-11-2005 10-11-2005 10-17-2005 10-11-2005 10-21-2005 10-26-2005 10-17-2005 DENIED 7 . . . . . . . . . . . . . . . . . . . LICENSEES/REGISTRANTS APPROVED OR REINSTATED IN OCTOBER 2005 ID# COMPANY NAME CITY 20646 Cyber Mortgage, Inc. 20742 Allgood Financial Group, LLC 20781 Union Street Inv Company 20794 Darrell Scott DeNardo 20797 Lowe's Mortgage, LLC 20800 Ultimate Mortgage, LLC Annandale Tucker Chicago Parker Norcross Suwanee 20805 USA Liberty Mortgage, Inc. 18540 Georgia Funding Network, LLC* 20632 Homeloan USA Corporation 20651 Smart Money Mortgage, Inc. 20731 Abby Mortgage & Finl Svcs 20779 Vanguard Mortgage & Title, Inc. 20780 Classic Home Lending, Inc. 20802 U R Services, Inc. 20807 TC Financial Mortgage, LLC 20808 Triumph Mortgage Corporation 20809 Dream Home Funding, Inc. 20810 Cynthia Wilson Anderson 20838 STWilliams, LLC 20839 North Metro Atlanta Mtg, LLC 20844 Quick Loan Funding, Inc. 20847 Union Centre Mortgage, LLC 20732 Integral Equity Mortgage, LLC 20749 Greater Southeast Mtg Corp, 20796 Len Roberts, Ltd. 20836 Absolute Mtg Solutions, LLC 20843 Ebenezer Akinlade 20846 Empowerment Home Lending, 20848 Alpha Mortgage Group, LLC 20863 Home Depot Finl Mtg Svcs, LLC 20571 OCM, Inc. (California) 20590 Bruce Walter Everling 20650 Jarman Clifford Bryant 20735 Advertent Mortgage Company 20806 Goldleaf Funding, LLC 20812 Advanced Capital USA, Inc. 20835 J D Mortgage Co., Inc. 20840 Andre T. Lynar 20853 Amen Mortgage, Inc. 20873 Acceptance Home Mg, Inc. 20888 Global Mortgage VLC, Inc. 20898 Dianne Key Anderson 20903 Partners Mtg Services, LLC 13198 North Georgia Home Mtg, Inc. Holbrook Winder Albuquerque Lake Elsinore Grayson Littleton Houston Alpharetta Morrow Marietta Atlanta Duluth College Park Suwanee Costa Mesa Douglasville Jonesboro Dallas Apopka Wethersfield Loganville Woodstock Norcross Dudley Santa Ana Gwinnett Atlanta Atlanta Stockbridge Riverside Alabaster Marietta Athens Hazlehurst Westlake Village Atlanta Sugar Hill Greensboro MB ORIGINAL ST CODE APPROVAL RENEWAL REINSTATED VA B GA B IL L CO B GA B GA B 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 10-07-2005 NY B GA L NM L CA L GA B CO L TX L GA B GA B GA B GA B GA B GA B GA B CA L GA B GA B GA B FL B CT L GA B GA B GA B GA B CA B GA B GA B GA B GA B CA B AL B GA B GA B GA B CA L GA B GA B GA B 10-07-2005 08-01-2003 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 02-06-1998 10-07-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-14-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-21-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-28-2005 10-07-2005 10-07-2005 8 . . . . . . . . . . . . . . . . . . . LICENSEES/REGISTRANTS APPROVED OR REINSTATED IN OCTOBER 2005 ID# COMPANY NAME 20055 Maverick Residential Mtg, Inc. TOTAL: 45 CITY Frisco MB ORIGINAL ST CODE APPROVAL RENEWAL REINSTATED TX L 02-11-2005 10-07-2005 10-07-2005 MB CODES B = BROKER L = LENDER R = REGISTRANT * Upgrade Broker to Lender + Downgrade Lender to Broker # Upgrade Lender to Registrant Downgrade Registrant to Lender 9 . . . . . . . . . . . . . . . . . . .