October 18, 2010
Authored by: Barry Hester and Bryan Cave Leighton Paisner
On September 23, 2010, the Georgia Department of Banking and Finance (DBF) published proposed new and amended loan-to-one-borrower and mortgage industry rules to conform DBF rules to statutory changes adopted in the 2010 legislative session. The DBF invites comments on the rules through October 25, 2010.
The primary rule change affecting community banks is a clarification of the DBF’s interpretation of the exception from the state’s legal lending limit for the renewal and restructuring of maturing loans.
In addition, new definitions would clarify the reach of the DBF’s loan-stacking rule and the limitation applicable to loans to “corporate groups.” “Control,” “capital,” and “surplus” would track definitions in Regulation O, 12 C.F.R. § 215, and in the context of national banks. Under the loan-stacking or “common enterprise” concept, loans to separate borrowers are aggregated for purposes of the lending limit in part when there is a relationship between the parties that includes control and financial interdependence. Loans to corporate groups—corporations and their subsidiaries—are separately capped at 50% of capital and surplus, as defined.
Further proposed rules clarify DBF assessments in cases where banks have failed or merged, and changes would be made to reflect the 2010 increase in the mortgage loan closing fee mandated by O.C.G.A. § 7-1-1000(21) from $6.50 to $10.00. Most of the other changes make small modifications to record-keeping and administrative requirements applicable to mortgage originators and other DBF licensees. Several of these changes are based on compliance obligations under Georgia’s implementation of the federal S.A.F.E. Act and the Nationwide Mortgage Licensing System and Registry.
One rule change highlights the importance of due diligence by parties purchasing or selling loans or loan applications. Existing Rule 80-11-4-.05 prohibits the knowing purchase, sale, or transfer of a mortgage loan or loan application to or from an unlicensed mortgage loan originator, mortgage lender or broker, unless that entity is exempt from licensing. Proposed changes would emphasize the availability of license status information on the DBF’s website.