Monthly summary of mortgage activities, Mar. 2005

Monthly Summary of Mortgage Activities
Georgia Department of Banking & Finance
2990 Brandywine Road, Suite 200, Atlanta, GA 30341-5565 Telephone: (770) 986-1269 Fax: (770) 986-1029
FOR THE PERIOD ENDING MARCH 2005
SUMMARY OF ACTIVITIES - MORTGAGE DIVISION
WEB SITE: www.state.ga.us/dbf
News Items
THANK YOU!!
ON-LINE LICENSE RENEWALS - FY 2006
Many thanks to all who participated in the on-line process and who worked with the Department to make our first year of open on-line renewals for all licensees such a success. Over 70% of current licensees used the on-line system. And to those of you who worked with us through a few of the processing glitches, we greatly appreciate your patience. Next year we hope for 100% participation, and with your help we can meet this goal.
FY2005 HOUSEKEEPING BILL-LICENSING FINANCIAL REQUIREMENT CHANGES
The Department's Housekeeping Bill for this legislative session was 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 housekeeping bill can be found on the internet at http://www.legis.state.ga.us/legis/2005_06/sum/sb82.htm. The bill becomes effective upon the signature of the Governor.
However, the provisions relating to the financial requirements for licensing, Section 7-1-1003.2 noted below, are to be implemented beginning July 1, 2005. By providing a later implementation date, licensees who would have difficulty meeting the financial requirements in a timely manner for the Fiscal Year 2006 renewal period will have until the Fiscal Year 2007 renewal period to meet the requirement.
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It is significant for licensees to note that use of audited financial statements, demonstrating a

required minimum net worth, will no longer be accepted for either a broker or lender license, and

this change also applies to HUD approved lenders and correspondents. Beginning July 1, 2005, brokers

must have a surety bond or letter of credit from a federally insured financial institution in the amount

of $50,000, and lenders must have either a bond or letter of credit as noted in the amount of

$150,000.

The bond form is available on the Department's website at

www.state.ga.us/dbf/mortgage_forms.html, along with a list of bonding companies, as noted below.

The list is neither a recommendation of the companies nor a required list of providers, but may assist you in locating a bonding company for your business.

Please note that those companies whose audited financial statements expire within the period of July 1, 2005 and June 30, 2006 will have to provide a bond or letter of credit in order to maintain their license and avoid revocation for failure to maintain the required financial standards. An example of this is a company whose last audit was for fiscal year ending 10/31/2004. For the current renewal period, this audit is acceptable, as it is less than 15 months old. However, as of January 31, 2006, this audit would no longer qualify an applicant for licensing. To avoid revocation action, the licensee will have to provide a bond or letter of credit in the required amount for their license type.
Bonds can be written for multi-year periods. However, the expiration date of any bond in any given year must be June 30, to coincide with the annual license expiration/renewal period.

FY2005 HOUSEKEEPING BILL-CHANGES

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.

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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" and "licensee" where necessary 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 definitions 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."
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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.

REAL ESTATE BROKERS, UNLAWFUL RESIDENTIAL MORTGAGE ACTIVITIES, & RESPA
A question continues to arise 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 mortgage licensees may compensate real estate companies for mortgage business referrals, regardless of whether or not an application is made. Often such compensation is made under the guise of an affiliated or controlled business arrangement, as defined in RESPA. Such arrangements must meet guidelines established by RESPA, and based on recent enforcement actions by HUD concerning these affiliated transactions, it would appear that some of this activity, particularly that using affiliated business arrangements, is in violation of the Real Estate Settlement Procedures Act (RESPA), as has been previously noted to our licensees. Please refer to HUD News Release HUD No. 05-032, March 21, 2005 for additional information.
Real estate agents working with licensees 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 the 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

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WEB SITES AND ADVERTISING LAW/REGULATION COMPLIANCE
Remember, all licensees must register their web site domain names with the Department as a d/b/a name if it is different than the name(s) licensed/registered with the Department. A web site name is a d/b/a name and as such must be registered with the Department pursuant to the requirements of O.C.G.A Section 7-1-1006 (d) which states that "No licensee may conduct business under any name other than that designated in the license." Further, "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 which the licensee is licensed to do business if the licensee is licensed in more than one state. Any unregistered d/b/a name which comes to the attention of the Department will subject the licensee to a minimum $500 fine. It has been noted that many licensees do not list their Georgia license number on their website, note Georgia as a state in which they are licensed, or state "Georgia Residential Mortgage Licensee". In many of these cases the URL will not have been registered as a d/b/a name. Understand that fines will be assessed for failure to register the name and for failure to properly advertise your license number.
For proper registration of domain names with the Department, the names must be registered as d/b/a (trade) names with the Superior Court Clerk in the Georgia county/counties where or from which business is conducted. If there is no Georgia location, d/b/a names should be registered with the appropriate authority in the licensee's home state. The recorded registration document(s) and surety bond or bond rider, if applicable, should be sent to the Department. After the appropriate documents are received and there are no conflicts with approved registered d/b/a names of other licensees, the web site domain name d/b/a will be added to the licensee's Department record and displayed on the Department web site. The form to be used to apply for the approval of the d/b/a name with the Department is available on the Department's web site at: http://www.ganet.org/dbf/pdfdoc/DBARegis_R0804.pdf.
Please use this form and submit it with the required documentation as noted in the instructions. If you have additional questions regarding domain registration, please do not hesitate to contact the Mortgage Division.

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
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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.
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".

ADMINISTRATIVE ACTIONS AND ISSUES

CEASE AND DESIST ORDERS - Issued
Adeniji, Adesegun "Ade", Lithonia, GA - Cease and Desist Order issued February 9, 2005 became final on March 1, 2005.
The Chattachoochee Mortgage & Investments Corp., Carrollton, GA (license no. 7006) - Cease and Desist Order issued February 24, 2005 became final on March 17, 2005.
Crawford, Darrel A., Lilburn, GA - Cease and Desist Order issued January 12, 2005 became final on March 14, 2005.
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CEASE AND DESIST ORDERS Issued (Continued)
Jordan, James, Alpharetta, GA - Cease and Desist Order issued February 14, 2005 became final on March 17, 2005.
LFG Processing Corporation, Richmond, VA (license no. 19566) - Cease and Desist Order issued February 25, 2005 became final on March 28, 2005.
Olafuyi, Saburi dba Tri-Valley Financial, Hiram, GA (license no. 17270) - Cease and Desist Order issued February 9, 2005 became final on March 1, 2005.
CEASE AND DESIST ORDERS - Lifted
None
FINAL CONSENT ORDERS - Issued
Cost, Carla, Ellenwood, GA - Consent Order issued March 17, 2005, became final March 17, 2005.
Ealy, Lynn, Norcross, GA - Consent Order issued March 25, 2005, became final March 25, 2005.
New City Mortgage Company, Norcross, GA (license no. 18383) - Consent Order issued March 25, 2005 became final March 25, 2005.
SUPERIOR COURT INJUNCTIONS None
FINE PUBLICATION

FINE REASON

2 Licensees fined for Advertising Violations 21 Licensees fined for Audit filed late 1 Licensee fined for Books and Records 3 Licensees fined for Unapproved Branch 3 Licensees fined for Unapproved Branch Manager

1 Licensees fined for Employment of a Felon 1 Licensee fined for Miscellaneous Acts/Other 2 Licensees fined for Check returned for insufficient
fund 46 Licensees fined for $6.50 fee not paid

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
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LICENSEES/REGISTRANTS APPROVED OR REINSTATED IN MARCH 2005

ID# COMPANY NAME

CITY

ST MB ORIGINAL RENEWAL REINSTATED CODE APPROVAL

20048 20096

MHD Acceptance, LLC Quotemearate.com, Inc.

CARROLLTON GA

L

HOUSTON

TX

L

20153 Milestone Residential Mortgage, WARNER ROBINS GA

B

20166 American TraIdition Mortgage

EDISON

NJ

L

20173

Robert AC. Washington

ATLANTA

GA

B

20192

HMB Funding Corp. III

ATLANTA

GA

L

5889 Springfield Financial Corp. *

DOUGLASVILLE GA

L

15182 Mortgage 4U of Georgia, Inc.*

DULUTH

GA

L

20202 Accelerated Mortgage Services,

16059

First StarLtLMCortgage *

20105 CapitalCLendingiGro*up, Inc.

DALLAS DECATUR DULUTH

GA

B

GA

L

GA

B

11534 12978

Guardhill Financial Corp. * K&B Capital Corporation +

NEW YORK

NY

L

BOCA RATON

FL

B

13522

Fidelity Financial, LLC *

NORCROSS

GA

L

19197

NII Capital, LLC

WAUWATOSA

WI

B

7340 Advantage Home Mortgage, Inc.

MARIETTA

GA

B

TOTAL: 16

03/04/2005 03/04/2005 03/04/2005 03/04/2005 03/04/2005 03/04/2005 06/18/1993 11/19/1999 03/11/2005 12/29/2000 03/18/2005 04/12/1996 11/14/1997 05/08/1998 06/25/2004 09/29/1995

03/04/2005 03/04/2005 03/04/2005 03/04/2005 03/04/2005 03/04/2005 03/11/2005 03/11/2005 03/11/2005 03/18/2005 03/18/2005 03/25/2005 03/25/2005 03/25/2005 03/11/2005 03/25/2005

03/11/2005 03/25/2005

MB CODES B = BROKER L = LENDER R = REGISTRANT

*

Upgrade Broker to Lender

+

Downgrade Lender to Broker

#

Upgrade Lender to Registrant



Downgrade Registrant to Lender

LICENSEES/REGISTRANTS REVOKED, EXPIRED, SUSPENDED, WITHDRAWN OR DENIED IN MARCH 2005

ID# NAME

6313 PRESTIGE MTG SVCS INC 12530 TRINITY MTG AFFILATES

12813

BELLCO MTG INC

13535 INTEGRITY MTG SVCS INC

13656 WESTERN THRIFT & LN

16247 GREENFIELD MTG INC

18022

TOKASH, EDWARD W

18383

NEW CITY MTG CO

19032 GARDEN GATE MTG INC

19281 AMER TOWN MTG INC

19566 LFG PROCESSING CORP

19651 CAGGIULA, CHARLES

TOTAL: 12

C

CODE
BD LD BD BD LD LD BD BD BD BD PD BD

REVOKED EXPIRED 03/25/2005

SUSPENDED

WITHDRAWN
03/31/2005 03/09/2005 03/31/2005 03/18/2005 03/04/2005 03/07/2005 03/07/2005

DENIED

03/31/2005 03/04/2005 03/04/2005 03/31/2005

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