09 LC 29
3879S
The
House Committee on Judiciary offers the following substitute to SB
57:
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Chapter 6A of Title 7 of the Official Code of Georgia Annotated, relating
to the "Georgia Fair Lending Act," so as to provide for and change definitions;
to provide for limitations on home loans and high-interest home loans; to
provide for duties for mortgage brokers; to provide for related matters; to
provide for an effective date; to repeal conflicting laws; and for other
purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
Chapter
6A of Title 7 of the Official Code of Georgia Annotated, relating to the
"Georgia Fair Lending Act," is amended in Code Section 7-6A-2, relating to
definitions, by revising paragraph (6) and adding new paragraphs (6.1), (10.1),
(10.2), (11.1), and (19), to read as follows:
"(6)
'Creditor' means a person
who
or entity
that both regularly extends consumer
credit that is subject to a finance charge or is payable by written agreement in
more than four installments and is a person
or
entity to
whom
which
the debt arising from the home loan transaction is initially payable.
Creditor
shall also mean any person brokering a home loan, which shall include any person
who directly or indirectly for compensation solicits, processes, places, or
negotiates home loans for others or offers to solicit, process, place, or
negotiate home loans for others or who closes home loans which may be in the
person's own name with funds provided by others and which loans are thereafter
assigned to the person providing the funding of such loans, provided that
creditor
Creditor shall
also include mortgage brokers. Creditor
shall not include a person who is an attorney providing legal services in
association with the closing of a home loan. A creditor shall not include: (A)
a servicer; (B) an assignee; (C) a purchaser; or (D) any state or local housing
finance agency or any other state or local governmental or quasi-governmental
entity."
"(6.1)
'Department' means the Department of Banking and
Finance."
"(10.1)
'Mortgage broker' means any person or entity brokering a home loan, which shall
include any person or entity that directly or indirectly for compensation
solicits, places, or negotiates home loans for others or offers to solicit,
place, or negotiate home loans for others or that closes home loans which may be
in the person's or entity's own name with funds provided by others and which
loans are thereafter assigned to the person or entity providing the funding of
such loans.
(10.2)
'Negative amortization' means any payment term under which the outstanding
principal balance on a home loan will increase at any time over the course of
the home loan because the regular periodic payments do not cover the full amount
of the interest that accrues on the underlying principal. Such term shall not
include reverse mortgage
transactions."
"(11.1)
'Prepayment charge' means any fee, charge, penalty, or premium that is required
to be paid to a lender when all or any portion of the outstanding principal
amount is repaid on a home loan before its scheduled time of
maturity."
"(19)
'Yield spread premium' means any form of direct or indirect compensation that a
mortgage broker, acting as the intermediary between a borrower and a lender,
receives in connection with placing a borrower in a home loan with a higher
interest rate than the lender's par rate for which the borrower
qualifies."
SECTION
2.
Said
chapter is further amended by revising Code Section 7-6A-3, relating to
limitations on home loans, as follows:
"7-6A-3.
(a)
All home loans shall be subject to the following limitations and prohibited
practices:
(1)
No creditor shall make a home loan that finances, directly or
indirectly:
(A)
Any credit life, credit accident, credit health, credit personal property, or
credit loss-of-income insurance, debt suspension coverage, or debt cancellation
coverage, whether or not such coverage is insurance under applicable law, that
provides for cancellation of all or part of a borrower's liability in the event
of loss of life, health, personal property, or income or in the case of accident
written in connection with a home loan; or
(B)
Any life, accident, health, or loss-of-income insurance without regard to the
identity of the ultimate beneficiary of such insurance;
provided,
however, that for the purposes of this Code section, any premiums or charges
calculated and paid on a monthly basis shall not be considered financed directly
or indirectly by the creditor;
(2)
No creditor or servicer shall recommend or encourage default on an existing loan
or other debt prior to and in connection with the closing or planned closing of
a home loan that refinances all or any portion of such existing loan or
debt;
(3)
No creditor or servicer may charge a borrower a late payment charge unless the
loan documents specifically authorize the charge, the charge is not imposed
unless the payment is past due for ten days or more, and the charge does not
exceed 5 percent of the amount of the late payment. A late payment charge
may
shall
not be imposed more than once
with
respect to
on
a particular late payment. If a late payment charge is deducted from a payment
made on the home loan and such deduction results in a subsequent default on a
subsequent payment, no late payment charge
may
shall
be imposed for such default. A lender may apply any payment made in the order
of maturity to a prior period's payment due even if the result is late payment
charges accruing on subsequent payments due;
and
(4)
No creditor or servicer may charge a fee for informing or transmitting to any
person the balance due to pay off a home loan or to provide a release upon
prepayment. When such information is provided by facsimile or if it is provided
upon request within 60 days of the fulfillment of a previous request, a creditor
or servicer may charge a processing fee up to $10.00. Payoff balances shall be
provided within a reasonable time but in any event no more than five business
days after the
request.;
(5)
No prepayment charge shall be assessed or collected under the terms of a home
loan. Any prepayment charge in violation of this paragraph shall be void and
unenforceable; provided, however, that mortgage interest which may accrue in
advance of payment in full of a loan made under a local, state, or federal
government sponsored mortgage insurance or guaranty program, including a Federal
Housing Administration program, shall not be considered to be a prepayment
charge;
(6)
No home loan shall include indebtedness which encompasses or contemplates
negative amortization. Any amount of principal derived from negative
amortization and included in a home loan shall be void and unenforceable;
and
(7)
Yield spread premiums are prohibited in the origination and closing of home
loans to the extent that any such premium exceeds the amount of direct payments
by the mortgage broker to third parties, unaffiliated with the mortgage broker,
of closing costs on behalf of the borrower.
(b)
A creditor shall not make a home loan unless a reasonable creditor would believe
at the time the loan is consummated that the borrower will be able to make the
scheduled payments associated with the loan based upon a consideration of his or
her current and expected income, current obligations, employment status, and
other financial resources, other than the borrower's equity in the collateral
that secures repayment of the loan. There is a rebuttable presumption that the
borrower is able to make the scheduled payments to repay the obligation if, at
the time the loan is consummated, said borrower's total monthly debts, including
amounts under the loan, do not exceed 50 percent of said borrower's monthly
gross income as verified by tax returns, payroll receipts, or other third-party
income verification. In a refinance of a home loan on the same real property,
there shall be a rebuttable presumption that the borrower will be able to make
the scheduled payments to repay the debt obligation without reverification of
income and debts so long as all payments on the refinanced home loan are less
than the remaining payments on the original home
loan."
SECTION
3.
Said
chapter is further amended by revising Code Section 7-6A-5, relating to
limitations on high-cost home loans, as follows:
"7-6A-5.
In
addition to the limitations and prohibited practices on home loans in this
chapter, high-cost
High-cost
home loans shall be subject to the following limitations and prohibited
practices:
(1)
No prepayment fees or penalties shall be provided for in the loan documents for
a high-cost home loan or charged the borrower after the last day of the
twenty-fourth month following the loan closing or which exceed in the
aggregate:
(A)
In the first 12 months after the loan closing, more than 2 percent of the loan
amount prepaid; or
(B)
In the second 12 months after the loan closing, more than 1 percent of the
amount prepaid;
(2)(1)
A high-cost home loan shall not contain a scheduled payment that is more than
twice as large as the average of earlier scheduled payments. This provision
does not apply when the payment schedule is adjusted to the seasonal or
irregular income of the borrower;
(3)(2)
A high-cost home loan shall not include payment terms under which the
outstanding principal balance will increase at any time over the course of the
loan because the regular periodic payments do not cover the full amount of
interest due;
(4)(3)
A high-cost home loan shall not contain a provision that increases the interest
rate after default. This provision does not apply to interest rate changes in a
variable rate loan otherwise consistent with the provisions of the loan
documents, provided that the change in the interest rate is not triggered by the
event of default or the acceleration of the indebtedness;
(5)(4)
A high-cost home loan shall not include terms under which more than two periodic
payments required under the loan are consolidated and paid in advance from the
loan proceeds provided to the borrower;
(6)(5)
Without regard to whether a borrower is acting individually or on behalf of
others similarly situated, any provision of a high-cost home loan agreement that
allows a party to require a borrower to assert any claim or defense in a forum
that is less convenient, more costly, or more dilatory for the resolution of a
dispute than a judicial forum established in this state where the borrower may
otherwise properly bring the claim or defense or limits in any way any claim or
defense the borrower may have is unconscionable and void;
(7)(6)
A creditor shall not make a high-cost home loan without first receiving
certification from a counselor with a third-party nonprofit organization
approved by the United States Department of Housing and Urban Development or the
Georgia Housing and Finance Authority that the borrower has received counseling
on the advisability of the loan transaction. No creditor, servicer, or its
institution shall be required to contribute to the funding of any nonprofit
organization that provides counseling required pursuant to this
paragraph;
(8)
A creditor shall not make a high-cost home loan unless a reasonable creditor
would believe at the time the loan is consummated that the borrower residing in
the home will be able to make the scheduled payments associated with the loan
based upon a consideration of his or her current and expected income, current
obligations, employment status, and other financial resources, other than the
borrower's equity in the collateral that secures repayment of the loan. There
is a rebuttable presumption that the borrower residing in the home is able to
make the scheduled payments to repay the obligation if, at the time the loan is
consummated, said borrower's total monthly debts, including amounts under the
loan, do not exceed 50 percent of said borrower's monthly gross income as
verified by tax returns, payroll receipts, and other third-party income
verification;
(9)(7)
A creditor or servicer shall not pay a contractor under a home improvement
contract from the proceeds of a high-cost home loan unless:
(A)
The creditor or servicer is presented with an affidavit of the contractor that
the work has been completed, which affidavit meets the requirements of Code
Section 44-14-361.2; and
(B)
The proceeds are disbursed in an instrument payable to the borrower or jointly
to the borrower and the contractor or, at the election of the borrower, through
a third-party escrow agent in accordance with terms established in a written
agreement signed by the borrower, the drafter of the instrument, and the
contractor prior to the disbursement;
(10)(8)
A creditor or servicer shall not charge a borrower any fees or other charges to
modify, renew, extend, or amend a high-cost home loan or to defer any payment
due under the terms of a high-cost home loan;
(11)(9)
A creditor who makes a high-cost home loan and who has the legal right to
foreclose shall provide notice of the intent to foreclose to the borrower in
writing by certified mail, return receipt requested, to the address of the
borrower last known to the creditor. Such notice shall be sent to the borrower
at least 14 days prior to the publication of the legal advertisement required by
Code Section 44-14-162;
(12)(10)
If a creditor or servicer asserts that grounds for acceleration of a high-cost
home loan exist and requires the payment in full of all sums secured by the
security instrument, the borrower or anyone authorized to act on the borrower's
behalf shall have the right at any time, up to the time title is transferred by
means of foreclosure by judicial proceeding and sale or otherwise, to cure the
default and reinstate the high-cost home loan by tendering the total amount of
principal, interest, late fees, and escrow deposits in arrears, not including
any acceleration. Cure of default as provided in this paragraph shall reinstate
the borrower to the same position as if the default had not occurred and shall
nullify as of the date of the cure any acceleration of any obligation under the
security instrument or note arising from the default;
(13)(11)(A)
To cure a default under this Code section, a borrower shall not be required to
pay any charge, fee, or penalty attributable to the exercise of the right to
cure a default as provided for in this Code section, other than the fees
specifically allowed by this Code section. The borrower shall not be liable for
any attorneys' fees relating to the borrower's default that are incurred by the
creditor or servicer prior to or during the 30 day period set forth in this
paragraph, nor for any such fees in excess of $100.00 that are incurred by the
creditor or servicer after the expiration of the 30 day period but prior to the
time the creditor or servicer files a foreclosure action or takes other action
to seize or transfer ownership of the home. After the creditor or servicer
files a foreclosure action or takes other action to seize or transfer ownership
of the home, the borrower shall only be liable for attorneys' fees that are
reasonable and actually incurred by the creditor or servicer based on a
reasonable hourly rate and a reasonable number of hours plus any other
reasonable and necessary expenses incurred by the creditor or
servicer.
(B)
If a default is cured prior to the initiation of any action to foreclose or to
seize or transfer a home, the creditor or servicer shall not institute the
foreclosure proceeding or other action for that default. If a default is cured
after the initiation of any action to foreclose, the creditor or servicer shall
take such steps as are necessary to terminate the foreclosure proceeding or
other action.
(C)
Before any action is filed to foreclose upon the home or other action is taken
to seize or transfer ownership of a home, a notice of the right to cure the
default must be delivered to the borrower informing the borrower of the
following:
(i)
The nature of the default claimed on the high-cost home loan and of the
borrower's right to cure the default by paying the sum of money required to cure
the default. If the amount necessary to cure the default will change during the
30 day period after the effective date of the notice due to the application of a
daily interest rate or the addition of late fees as allowed by this chapter, the
notice shall give sufficient information to enable the borrower to calculate the
amount at any point during the 30 day period;
(ii)
The date by which the borrower shall cure the default to avoid acceleration and
initiation of foreclosure or other action to seize the home which date shall not
be less than 30 days after the date the notice is effective and the name and
address and phone number of a person to whom the payment or tender shall be
made;
(iii)
That, if the borrower does not cure the default by the date specified, the
creditor or servicer may take steps to terminate the borrower's ownership in the
property by commencing a foreclosure proceeding or other action to seize the
home; and
(iv)
The name and address of the creditor or servicer and the telephone number of a
representative of the creditor or servicer whom the borrower may contact if the
borrower disagrees with the creditor's or servicer's assertion that a default
has occurred or the correctness of the creditor's or servicer's calculation of
the amount required to cure the default;
(14)(12)
A high-cost home loan shall not contain nor shall a creditor or servicer enforce
a provision that permits a creditor or servicer, in its sole discretion, to
accelerate the indebtedness. This paragraph does not prohibit acceleration of
the loan in good faith due to the borrower's failure to abide by the material
terms of the loan; and
(15)(13)
All high-cost home loan documents that create a debt or pledge property as
collateral shall contain the following notice on the first page in a conspicuous
manner: 'Notice: This is a mortgage subject to special rules under the "Georgia
Fair Lending Act." Purchasers or assignees of this mortgage may be liable for
all claims and defenses by the borrower with respect to the
mortgage.'"
SECTION
4.
Said
chapter is further amended by adding a new Code section to read as
follows:
"7-6A-6.1.
A
mortgage broker shall:
(1)
Act in good faith and with fair dealing in any transaction, practice, or course
of business in connection with the making of any home loan or high-interest home
loan;
(2)
Use reasonable skill, care, and diligence;
(3)
Safeguard and account for any money handled for the borrower;
and
(4)
Before closing:
(A)
Notify each lender in writing of the particulars of each of the other lenders'
home loans, if the mortgage broker knows that more than one home loan will be
made by different lenders contemporaneously to a borrower secured by the same
real property;
(B)
Clearly disclose to the borrower in writing the dollar amounts and sources of
all compensation the mortgage broker has received or will receive in connection
with any home loan the mortgage broker has secured for the borrower. Such
disclosure shall include, but shall not be limited to, any compensation which is
derived from a yield spread premium; and
(C)
Clearly disclose to the borrower all material information, as specified by the
department, that might affect the borrower's rights, interests, or ability to
receive the borrower's intended benefit from the home
loan."
SECTION
5.
Said
chapter is further amended by adding a new Code section to read as
follows:
"7-6A-8.1.
Nothing
contained in this chapter shall limit any rights, duties, remedies, or penalties
imposed by law, including, without limitation, Part 2 of Article 15 of Chapter 1
of Title 10, the 'Fair Business Practices Act of
1975.'"
SECTION
6.
This
Act shall become effective on August 1, 2009.
SECTION
7.
All
laws and parts of laws in conflict with this Act are repealed.