17 Jul Georgia Regulatory Update
Georgia Rules Chapter 80
The Georgia Department of Banking and Finance (the “Department”) adopted Final Rules, which were filed with the Secretary of State on June 29, 2017, to be effective July 19, 2017.
Many rules were changed that affect requirements relating to the organization, investments and capital of banks and credit unions. Following are the rules that affect mortgage lending.
Any person who is required to be licensed or registered under state law as a mortgage broker or any lender acting as a broker who fails to maintain a loan file for each mortgage loan transaction or who fails to have all required documents in such file shall be subject to a fine of $1,000 per file not maintained or not accessible.
Any person who is required to be licensed or registered under state law as a mortgage lender who fails to maintain a servicer file for each mortgage loan it services or who fails to have all required documents in such file shall be subject to a fine of $1,000 per file not maintained or not accessible.
A new chapter has been added, which is entitled Mortgage Servicing (hereinafter, the “Rule”). In this chapter, the following definitions apply:
- “Complete loss mitigation application” means an application in which a servicer has received all of the information that the servicer requires from a borrower in evaluating applications for loss mitigation options available to the borrower. A servicer must exercise reasonable diligence in obtaining documents and information to complete a lost mitigation application.
- “Notice of error” means any written notice from the borrower that asserts an error and that includes the name of the borrower, information that enables the servicer to identify the borrower’s mortgage loan account, and the error the borrower believes has occurred. A notice on a payment coupon or other payment form supplied by the servicer need not be treated by the servicer as a notice of error.
The mortgage servicer standards set forth in the Rule apply only to persons licensed, registered, or required to be licensed or registered under the Georgia laws. Except as otherwise set forth in the Rule, any person who services a mortgage loan must:
- Act with reasonable skill, care, and diligence;
- Not charge fees for:
- Handling borrower disputes;
- Facilitating routine borrower collections;
- Arranging repayment or forbearance plans;
- Sending borrower notice of nonpayment;
- Updating records to reinstate a mortgage loan; and
- Late payment in excess of the initial late payment fee as set forth in federal law.
- Not commence a foreclosure process while a borrower’s complete loss mitigation application is pending (referred to as “dual-tracking”);
- Not conduct a foreclosure sale before evaluating the borrower’s complete loss mitigation application (if such is received after the foreclosure process has been commenced);
- Consider loss mitigation whenever possible and, at a minimum:
- Acknowledge receipt of borrower’s initial application within 5 business days of receipt;
- Upon receipt of a borrower’s initial application, provide name, address, and a collect call/toll-free telephone number for an employee or department of the servicer that can be contacted by the borrower regarding loss mitigation application inquiries;
- Upon receipt of a borrower’s initial application, identify requirements for loss mitigation options, if available; and
- Evaluate a borrower’s eligibility for available loss mitigation options within 30 days of receipt of application;
- Have a process for borrowers to appeal loss mitigation disputes, including, but not limited to, a formal review of options by personnel different than those responsible for previous evaluations or provide an option for borrowers to mediate such disputes;
- Have an error resolution process for all borrowers, unless expressly excluded pursuant to federal Regulation X (12 CFR 1024.35) which must, at a minimum:
- Acknowledge receipt of a borrower’s notice of error within 5 business days of receipt;
- Conduct a reasonable investigation; and
- Within 45 days, except where prompter compliance is required or alternative compliance is provided (under federal Regulation X), provide a borrower with a written notification of:
- The correction of error; or
- The determination that no error occurred and the reason for such determination.
- Apply payments to the principal and interest first, rather than the insurance, taxes, and fees of the mortgage loan, except where inconsistent with federal law;
- Not assess any charge or fee related to force-placed insurance unless the servicer has a reasonable basis to believe the borrower has failed to comply with the mortgage contract’s requirements to maintain insurance; and
- Not obtain force-placed insurance that imposes an unreasonable charge or fee for a borrower.
If the terms of a mortgage loan require the borrower to make payments for deposit into an escrow account to pay taxes, insurance premiums, and other charges, the servicer must make payments from the escrow account in a timely manner, that is, on or before the deadline to avoid a penalty, as long as the borrower’s payment is not more than 30 days overdue.
Each servicer must submit to the Nationwide Multistate Licensing System and Registry reports of condition in accordance with Georgia law, containing the information required.
Each servicer must make the following disclosures in writing to borrower:
- Whenever a servicer acquires the right to service the mortgage loan:
- Complete and current schedule of servicing fees;
- Name, address, and a collect call/toll-free telephone number for an employee or department that can be contacted by the borrower regarding servicing; and
- Statement of the mortgage servicer standards set forth in this Rule, including a description of the servicer’s appeal process.
- As required by federal law, upon the transfer of its right to service a mortgage loan within the period of time required by federal law, the following subsequent disclosures:
- Effective date of the transfer of servicing;
- Name, address, and a collect call/toll-free telephone number for an employee or department of the transferee servicer that can be contacted by the borrower for servicing transfer inquiries;
- Date on which the transferor servicer will cease to accept payments and the date on which the transferee servicer will begin to accept such payments (can be same date or consecutive days);
- Whether the transfer will affect the terms or the continued availability of mortgage life/disability insurance, or any other optional insurance, and any action borrower must take to maintain such coverage; and
- Statement that the transfer of servicing does not affect any term or condition of the mortgage loan other than terms directly related to the servicing.
If a servicer discovers a violation of the standards above, the servicer:
- Has a duty to mitigate the harm to borrower;
- Must maintain a record of such violation; and
- Must report to the Department within 10 days of discovery any violation that, at the time of discovery, has the potential to result in aggregate financial harm to the borrower(s) in excess of $1000.
The Rule includes an exemption for a small servicer, as that term is defined under federal law.
Failure to comply with the standards may result in revocation of the license or registration and will subject the licensee/registrant to fines.
A servicer must maintain required books, accounts, and records (hereinafter, all referred to as “records”) at the principal place of business. If records are to be maintained elsewhere, the servicer must notify the Department in writing prior to maintaining the records in any place other than the principal place of business; such notice must be submitted to Department of Banking and Finance, 2990 Brandywine Road, Suite 200, Atlanta, GA 30341.
All records maintained at a location other than the principal place of business must be made available to the Department within 5 business days from date of a written request and at a reasonable and convenient location acceptable to the Department.
“Principal place of business” means the location designated in the initial written application for licensure or registration or as amended thereafter in writing.
All records must be maintained for a period of 5 years after the date a mortgage loan is discharged or servicing rights are transferred or otherwise terminated.
Records may be maintained in the original form on microfiche or other electronic media, provided:
- That the records shall be made available to the Department as set forth above; and
- At the request of the Department, the records must be printed on paper for inspection or examination.
The penalty for maintaining records at a location other than the principal place of business without first having provided written notification to the Department may be suspension of license, other administrative action or fine.
The penalty for refusal to permit an investigation or examination of records (after reasonable request by Department) is revocation of the license or registration.
A servicer must maintain in its records:
- Copies of all documents required under the chapter on the Department Rules for Administrative Fines and Penalties (including licensing of persons and offices, changes in ownership or officers, individual employment records confirming qualification for conducting mortgage business, payment of fees, reporting of events, funding loans, advertising, complaint responses, background checks, filing of call reports, and proper updating on the Nationwide Multi-State Licensing System and Registry);
- List of all servicer’s violation, if any, of the mortgage servicer standards set forth in Georgia law;
- Servicer file for each loan containing:
- Name of each borrower;
- Copies of all contracts, deeds, assignments, letters, notes, and memos regarding the borrower;
- Documents related to assignment, sale, or transfer of the loan servicing;
- Copies of all disclosures or notices provided to the borrower as required by law (state and federal);
- Copies of all written requests for information received from the borrower and the servicer’s response, as required by law (state and federal);
- Full payment history that identifies and itemizes payments made by or on behalf of the borrower, all fees and charges assessed, and escrow account activity;
- Copy of any bankruptcy plan approved in a proceeding filed by the borrower or a co-owner of the secured property;
- Communications log, which documents all verbal communication with the borrower or his/her representative;
- A record of all efforts to comply with the duties required for loss mitigation;
- Copy of all notices sent to the borrower related to any foreclosure proceeding;
- Records regarding the final disposition of the mortgage loan including a copy of any collateral release document, records of servicing transfers, charge-off information, or REO disposition.
Failure to maintain the records may result in suspension of the license or registration or other administrative action and will subject the licensee or registrant to fines.