Monthly Summary of Mortgage Activities Georgia Department of Banking and Finance 2990 Brandywine Road, Suite 200, Atlanta, GA 30341-5565 FOR THE PERIOD ENDING FEBRUARY 2005 SUMMARY OF ACTIVITIES - MORTGAGE DIVISION WEB SITE: www.state.ga.us/dbf NEWS ITEMS FY2005 HOUSEKEEPING BILL The Department's Housekeeping Bill for this legislative session is Senate Bill 82. Some of the significant items related to the Georgia Residential Mortgage Act, Article 13 of Chapter 1 of Title 7 of the Official Code of Georgia, Code Sections 7-1-1000 to 7-1-1021, are noted below for your reference. A complete marked-up version of the houskeeping bill can be found on the internet at: http://www.legis.state.ga.us/legis/2005_06/sum/sb82.htm Section 7-1-1000 (10) - Definitions Applicable to Mortgage Lenders and Brokers Changed the definition of "misrepresent" to include to intentionally engage in any conduct which leads to a false belief which is material to the transaction. Section 7-1-1003 (b) (1) - Licensing mortgage lenders or mortgage brokers Expanded the types of legal entities seeking a license which would be required to report members, officers and directors for licensing purposes. Section 7-1-1003.2 - Financial Requirements for Licensing Changes include the removal of net worth as a means of financial qualification for a lender's license, and the removal of HUD approval status as a means of alternatively using net worth for qualifying for licensing for either a broker's or lender's license. Neither brokers nor lenders will be able to use HUD approval status and a minimum net worth to qualify for licensing. As a result, all brokers will be required to have and maintain a $50,000 surety bond or letter of credit with a federally insured financial institution, and lenders will be required to have and maintain a $150,000 surety bond or letter of credit with a federally insured financial institution. Section 7-1-1004 - Investigations Regarding for Licensing Changes include addition of the word "applicant" to clarify that some of the provisions of this section apply to applicants for a license as well as existing licensees. In addition, the requirement to conduct a background check on employees by licensees was changed to clarify that the time period that a licensee has to conduct a background check is 90 days from the initial date of hire, not from any subsequent hire dates, should the person have been temporarily dismissed before the end of the initial 90 day period. Section 7-1-1005 - Renewals Eliminated language related to renewals for licenses issued in the year 2000. Section 7-1-1006 - Contents and Posting of Licenses Clarified to specify that the required notification to the Department for a change in address was for the main office or an approved branch, within 15 days of the change, and clarified the need to obtain prior approval for a new branch office. Additionally, a change was added to remove the requirement for notification to the Department of the commencement of business at the approved additional office. Section 7-1-1013 - Prohibited Acts Paragraphs (1), (6), and (11) of Code Section 7-1-1013, relating to prohibited acts of mortgage licensees, are amended specifically as shown below for clarity. These provisions provide tighter definition regarding when or how misrepresentation occurs, at what point it can occur in a mortgage transaction, and clarifies that prohibited acts involving regulatory activity by the Department and the licensee are not limited to examination, application, or renewal activity only, but upon any request in relation to regulatory authority over a licensee. "(1) Misrepresent the material facts, or make false statements or promises, or submit false statements or documents likely to influence, persuade, or induce an applicant for a mortgage loan, a mortgagee, or a mortgagor to take a mortgage loan, or, through agents or otherwise, pursue a course of misrepresentation by use of fraudulent or unauthorized documents or other means to the department or anyone through agents or otherwise; (6) Engage in any transaction, practice, or course of business which is not in good faith or fair dealing, or which operates a fraud upon any person, in connection with the attempted or actual making of, purchase of, transfer of, or sale of any mortgage loan; (11) Purposely withhold, delete, destroy, or alter information requested by an examiner of the department or make false statements or material misrepresentations to the department during the course of an examination or on any application or renewal form sent to the department." Section 7-1-1017- Relating to Suspensions or Revocations of Licenses Expanded the grounds on which the Department can suspend or revoke an original or renewal license or registration to include a violation of a final order previously issued by the Department, and expanded to specify that withdrawal or non-renewal of a license by the licensee will not prevent the Department from pursuing to its conclusion any administrative action initiated against a licensee while the license was current. Section 7-1-1018- Relating to Cease and Desist Orders Clarified that the provisions of this section apply to persons to whom the Department has properly issued an administrative action, not just those required to be licensed under the Article. ONLINE LICENSE RENEWALS - FY 2006 FY2006 license renewals were mailed out February 9, 2005. Please contact the office at renewal@dbf.state.ga.us if you have not received your renewal notification. If you have any problems accessing the on-line renewal systemor have any concerns about a payment method, please contact the Department at 770/986-1269 or at the e-mail address noted above. Please note that all information is required to complete processing of your application. In particular, this year we are asking you to verify and/or update your registered agent information. For those entities registered with the Secretary of State's office, the agent must be the same as that recorded with the Secretary of State. For those licensed as individuals, the registered agent may, but is not required to be, an officer of the applicant. For all licensees, the registered office must be a Georgia location where the registered agent may be served. REMEMBER - Renewals are due by the close of business April 1, 2005. Renewals postmarked, stamped, received electronically or hand delivered after April 1, 2005 are considered late renewals and the licensee will be fined $300. For all licensees, whether submitting renewals on-line or by mail, all outstanding issues which exist or may arise prior to the license issue date, such as any new fines, fees, stale audits, complaint issues, etc. must be resolved before your renewal license will be granted. Licensees who do not complete the renewal process by June 30, 2005, will have their licenses expire, and will have to cease operations. The on-line system will not be available after April 1, 2005. AUDITED FINANCIAL STATEMENTS - Licensees who currently use net worth to qualify for licensing should submit audtied financial statements separately from any paperwork submitted for the annual license renewal, should the renewal not be submitted and paid for on-line. REAL ESTATE BROKERS AND UNLAWFUL RESIDENTIAL MORTGAGE ACTIVITIES A question often comes up regarding the activities of real estate agents/brokers as to whether or not certain mortgage related types of activities by real estate agents are permitted without requiring the agent to have a mortgage license, or even if the type of activity is permitted at all. Under the Georgia Residential Mortgage Act, 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 from 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 constitutes engaging in residential mortgage activities with an unlicensed person. O.C.G.A. 7-1-1002. In addition, it has come to the attention of the Department that some institutions and mortgage licensees may compensate real estate companies for mortgage business referrals, regardless of whether or not an application is made. Such compensation is often paid on a monthly flat fee basis or on a number of referrals made basis, etc. regardless of whether or not a closing occurs. It would appear that such activity is a violation of the Real Estate Settlement Procedures Act (RESPA), Section 8(a) which provides that: "no person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." Real estate agents working with your company should be aware of their need for a mortgage license in order to receive a fee for "brokering" activity, and all settlement service providers to a mortgage transaction need to be aware of these kickback provisions of RESPA. Should you need additional information regarding RESPA, please contact the Atlanta HUD office at 404/331-5001 or visit the RESPA web site at: http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm APPLICATIONS AND BOND FORMS Laws, rules and regulations may be changed from time-to-time. When changes do occur, they often require changes in various applications and forms that must be submitted to the Department. Submission of outdated applications and forms may delay the processing of your request. Please be sure to use applications and forms that are current when submitted. Up-to-date applications and forms may be downloaded from the Department's web site at: http://www.ganet.org/dbf/mortgage_forms.html FINGERPRINT CARD SCANNING In September of last year, the Department purchased a fingerprint card scanner which allows us to scan "on-line" fingerprint cards to the GBI. In January of this year, the GBI obtained the ability to forward these scanned cards to the FBI. As a result, if the Department receives a fingerprint card that can be scanned, criminal history results may be received within days, and not weeks, which helps decrease the time for approving pending applications. If we receive a complete application, requiring no further information, along with good fingerprint cards the approval processing time has decreased from 10-12 weeks to 4-6 weeks, and in some cases, we have been able to approve these applications within two weeks. Often, however, the cards received by the Department are not of sufficient quality to be scanned. Therefore, in order to increase the probability fingerprint cards will be readable and acceptable for the GBI and FBI, examine the cards and make sure the prints are not too light or dark and the prints are not smudged. In addition, make sure each print is inside the appropriate blue box on the form and does not touch or cross over the lines. WRITTEN BRANCH OPERATIONS POLICY GUIDELINES The Written Branch Operations Policy should include items such as how you will supervise branch operations (branches located in Georgia must be supervised by you), how the income and expenses of branches will be reported (financial information), how branch employees will be paid (all must be W-2 employees ), the mortgage loan transaction journal, etc. The policy must include a definitive statement that branches are under your control and that you accept full responsibility for the actions of branch personnel. The policy should not just be a copy of your employee handbook, operating procedures manual, etc., unless such information is included in these publications in a section titled "Written Branch Operations Policy". OTHER REGULATORY ISSUES & INFORMATION JUDGMENT/CLAIM NOTIFICATION As a reminder to licensees, Section 7-1-1007 of the Georgia Residential Mortgage Act, dealing with certain actions brought against licensees, states the following: "(a) A licensee shall give notice to the department by registered or certified mail or statutory overnight delivery of any action which may be brought against it by any creditor or borrower where such action is brought under this article, involves a claim against the bond filed with the department for the purposes of compliance with Code Section 7-1-1003 or 7-1-1004, or involves a claim for damages in excess of $25,000.00 for a broker and $250,000.00 for a lender and of any judgment which may be entered against it by any creditor or any borrower or prospective borrower, with details sufficient to identify the action or judgment, within 30 days after the commencement of any such action or the entry of any such judgment." The Department has recently obtained information regarding judgments and claims from public sources or other regulators, not from the licensee. It is important to remember that such notification is required by law, and any licensee subject to such claim or judgment must report details to the Department according to the guidelines noted above. LENDER ACCOUNTABILITY FOR APPRAISALS HUD Mortgagee Letter 2005-06, dated January 28, 2005, regarding Lender Accountability for Appraisals, was issued to remind mortgagees of their responsibilities to obtain high quality appraisals for properties that will be security for FHA-insured mortgages. These responsibilities are contained in an amendment to 24CFR 203.5 that was published in the Federal Register on July 20, 2004, effective August 19, 2004. This rule also amended 24 CFR 25.9 to make submission of, or causing to be submitted, documentation relating to an appraisal that does not satisfy FHA requirements grounds for administrative action by the Mortgagee Review Board. The final rule: codifies FHA's requirement that mortgagees are accountable, along with appraisers, for the quality of appraisals on properties securing FHA-insured mortgages; specifically provides that lenders that submit appraisals to HUD which do not meet FHA requirements are subject to the imposition of sanctions by the HUD Mortgagee Review Board; Applies to both sponsor lenders that underwrite loans and loan correspondent lenders that originate loans on behalf of their sponsors; and is designed to ensure that lenders are aware of their responsibilities with respect to appraisals and provide homeowners with an accurate statement of the appraised value of their home as well as help assure homeowners that the condition of the home meets FHA standards; clarifies that the standard of accountability to which lenders, sponsor lenders and loan correspondent lenders will be held is the same as the standard used to impose civil money penalties for program violations, and that standard is one of knowing (actual knowledge) or had reason to know. CEASE AND DESIST ORDERS - Issued Advantage Home Mortgage, Inc., Marietta, GA (license no. 7340) - Cease and Desist Order issued January 25, 2005 became final on February 24, 2005. Adeoni, "Ayo" Ayodeji, Snellvillle, GA - Cease and Desist Order issued February 8, 2005 became final on February 28, 2005. Benton Mortgage Group, Clearwater, FL - Cease and Desist Order issued January 14, 2005 became final on February 14, 2005. Dixie, Melinda W., College Park, GA - Cease and Desist Order issued March 16, 2004 became final February 11, 2005. Lawson, Roy, Corona, CA - Cease and Desist Order issued January 13, 2005 became final February 13, 2005. Morris, David, Roswell, GA - Cease and Desist Order issued January 5, 2005 became February 5, 2005. Ogunnoiki, Victor, Riverdale, GA - Cease and Desist Order issued February 8, 2005 became final February 28, 2005. Smith, Monica Lynne aka Monica Lynne Taylor, Suwanee, GA - Cease and Desist Order issued February 1, 2005 became final February 22, 2005. Southland Home Investment, Inc. aka Southland Properties, Corona, GA - Cease and Desist Order issued January 13, 2005 became final February 13, 2005. Thomas, Sharlene A., Lithonia, GA - Cease and Desist Order issued January 6, 2005 became final February 22, 2005. __________________________________________________________________________________________ ________ CEASE AND DESIST ORDERS - Lifted (None) __________________________________________________________________________________________ ________ FINAL CONSENT ORDERS - Issued First Security Home Mortgage Corporation, Atlanta, GA (license no. 16218) - Consent Order issued February 7, 2005 became final February 7, 2005. Smith, Rodney K., affiliated with First Security Home Mortgage Corporation, Atlanta, GA (licnese no. 16218) Consent Order issued February 7, 2005 became final on February 7, 2005. Varon, Shabtay, Premium One Mortgage, Atlanta, GA (license no. 7504) - Consent Order issued February 3, 2005 became final February 3, 2005. SUPERIOR COURT INJUNCTIONS Jonathan Rosser, Enforcement of Cease and Desist Order motion for summary judgment granted February 18, 2005. FINE REASON 1 Licensee fined for 1099 Employees 1 Licensee fined for Prohibited Acts 3 Licensees fined for Advertising Violations 3 Licensees fined for Background Check Violations 7 Licensees fined for Books and Records 4 Licensees fined for Loans Files not pro- perly maintained 1 Licensee fined for Unapproved Branch 1 Licensee fined for Unapproved Branch Manager 1 Licensee fined for Doing Business w/ unlicensed entity 1 Licensee fined for Miscellaneous Acts 1 Licensee fined for Acquisition of 25% ownership w/o approval 2 Licensees fined for Check returned for insufficient funds ___________________________________________________________________________________________ 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 LICENSEES/REGISTRANTS APPROVED OR REINSTATED IN FEBRUARY 2005 ID# COMPANY NAME CITY 19153 19797 19928 19947 19962 19999 20006 20010 20015 20016 Lakeside Lending, LLC + Lumina Mortgage Co., Inc. Instant Capital Funding Group, Mortgage Express, Inc. Jose P. Nedumpurath Lighthouse Mortgage Corp. Amanda Jacqueline Watkins Georgia Heritage Mortgage, LLC Abound Financial Group, Inc. Mortgage City Corp. DAWSONVILLE WILMINGTON ORANGE LAVISTA LAWRENCEVILLE HAUPPAUGE MARIETTA DALLAS MOHEGAN LAKE JACKSONVILLE ST MB CODE GA B NC R CA B NE L GA B NY B GA B GA B NY B FL B ORIGINAL APPROVAL 04/02/2004 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 RENEWAL 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 REINSTATED LICENSEES/REGISTRANTS APPROVED OR REINSTATED IN FEBRUARY 2005 ID# COMPANY NAME CITY 20028 20035 20042 20045 20058 20115 20119 20126 18936 20000 20051 20055 20069 20114 20128 20129 20131 20134 20135 20136 19855 20039 20044 20086 20098 20103 20112 20124 20141 20154 20156 7488 19956 19969 19984 20007 20023 20041 20046 20064 20144 20155 20175 6625 16144 17325 Executive Home Mortgage, LLc Lexim Mortgage, LLC Trinity Mortgage and Financial CapQuest Mortgage Services, WeVest, Inc. Mortgages, Inc. Imperial Mortgage Corp., Paragon Mortgage Embassy Mortgage, Inc. * Rina Agency Ronak Capital Corp. Maverick Residential Mortgage, American Dream Home Ronald Dean Phillips Eugene Abrams Express Power Mortgage, Inc. Direct Mortgage Of SC., Inc. Mortgage Options Financial, Inc. Rocky Van Le Grace Mortgage Services, Inc. A. Anderson Scott Mortgage First Choice Home Mortgage, Sher Financial Group, Inc. Primus Mortgage Group, LLC Antietam Mortgage, Inc. Marketplace Financial, LLC SouthStar Mortgage and On The Move Lending, Inc. Cheryl C. Franklin Kingsada Group, LLC Rufus James Baldwin, II HomeLoans USA, Inc. * Liberty Mortgage, Inc. (Utah) All About Mortgages, Inc. Provident Capital Mortgage, Inc. Mortgage Professionals, Inc. NBGI, Inc. Midland Mortgage Corporation of Lillian Elaine Shepard Michael H. Kim Equity United Mortgage Citizen First Financial, Inc. Commons People Mortgage, Inc. Druid Mortgage, LLC Rodney Smith, Inc. InTown Financing, Inc. HOCKESSIN BIRMINGHAM WEST COLUMBIA STONE MOUNTAIN LITHONIA ATLANTA INDIANAPOLIS CONYERS SILVER SPRINGS DORAVILLE PEARL RIVER FRISCO DOUGLASVILLE MACON FORT VALLEY LAKE SUCCESS CHARLESTON ESCONDIDO DACULA WOODSTOCK ROCKVILLE CARTERSVILLE TOWSON POWDER SPRINGS GAITHERSBURG PALM HARBOR COLUMBUS ALPHARETTA LAWRENCEVILLE ATLANTA LITHONIA ATLANTA SALT LAKE CITY LAWRENCEVILLE WARWICK OVERLAND PARK ENCINO COLUMBIA ATLANTA NORCROSS BALTIMORE ATLANTA LAWRENCEVILLE ATLANTA LAWRENCEVILLE ATLANTA ST MB CODE DE B AL L SC B GA B GA B GA B IN B GA B MD L GA B NY B TX L GA B GA B GA B NY L SC L CA L GA B GA B MD L GA B MD B GA B MD B FL L GA B GA B GA P GA B GA B GA L UT L GA B RI B KS B CA L SC L GA B GA B MD B GA B GA B GA B GA B GA B ORIGINAL APPROVAL 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 01/23/2004 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 12/08/1995 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 09/10/1993 10/27/2000 06/14/2002 RENEWAL 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/04/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/11/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/18/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/25/2005 02/04/2005 02/04/2005 02/04/2005 REINSTATED 02/04/2005 02/04/2005 02/04/2005 TOTAL: 56 B = BROKER L = LENDER R = REGISTRANT * Upgrade Broker to Lender + Downgrade Lender to Broker # Upgrade Lender to Registrant Downgrade Registrant to LICENSEES/REGISTRANTS REVOKED, EXPIRED, SUSPENDED, WITHDRAWN OR DENIED IN FEBRUARY 2005 ID# 7340 16218 16707 16843 16898 18482 NAME ADVANTAGE HM MTG INC 1ST SECURITY HM MTG CORP ALEGIS GRP LOAN SVC LLC ELITE MTG LLC DIVERSIFIED MTG SOL INC SUNCOAST MTG GRP LLC CODE BD BD LD BD BD LD REVOKED 02/07/2005 EXPIRED 02/24/2005 SUSPENDED WITHDRAWN 02/08/2005 02/07/2005 02/14/2005 02/10/2005 DENIED TOTAL: 6