Bill Text: GA SB57 | 2009-2010 | Regular Session | Engrossed

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Bill Title: Georgia Fair Lending Act; definitions; provide for limitations on homeloans; fees for filling documents

Spectrum: Slight Partisan Bill (Democrat 4-2)

Status: (Engrossed - Dead) 2010-04-12 - House Committee Favorably Reported [SB57 Detail]

Download: Georgia-2009-SB57-Engrossed.html

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09 LC 38 0858S(SCS)

Senate Bill 57

By: Senators Hamrick of the 30th, Harbison of the 15th, Hudgens of the 47th, Tarver of the 22nd, Orrock of the 36th and others

AS PASSED SENATE

A BILL TO BE ENTITLED
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 definitions; to provide for limitations on home loans; to provide for limitations on subprime home loans; 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 subparagraph (B) of paragraph (17) and adding paragraphs (10.1) and (16.1), as follows:

"(10.1) 'Mortgage broker' means any person who directly or indirectly for compensation solicits, processes, places, or negotiates a home loan for others or offers to solicit, process, place, or negotiate home loans for others and 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."

"(16.1) 'Subprime home loan' means a home loan in which the difference between the annual percentage rate for the loan and the yield on United States Treasury securities having comparable periods of maturity is either equal to or greater than three percent, if the loan is secured by a first lien mortgage or deed of trust, or five percent, if the loan is secured by a subordinate lien mortgage or deed of trust. Without regard to whether the loan is subject to or reportable under the provisions of the federal Home Mortgage Disclosure Act, 12 U.S.C. Section 2801 et seq., the difference between the annual percentage rate and the yield on United States Treasury securities having comparable periods of maturity shall be determined using the same procedures and calculation methods applicable to loans that are subject to the reporting requirements of the federal Home Mortgage Disclosure Act, as those procedures and calculation methods are amended, provided that the yield on United States Treasury securities shall be determined as of the fifteenth day of the month prior to the date of the application for the loan."

"(B) The total points and fees payable in connection with the loan, excluding not more than two bona fide discount points, exceed: (i) 5 percent of the total loan amount if the total loan amount is $20,000.00 or more or (ii) the lesser of 8 percent of the total loan amount or $1,000.00 if the total loan amount is less than $20,000.00."

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.

All home Home loans or subprime home loans, as specified in each respective provision, shall be subject to the following limitations, standards, 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 fees or penalties shall be charged or collected under the terms of a subprime home loan. Any prepayment penalty in violation of this paragraph shall be unenforceable. However, mortgage interest that 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 fee or penalty;

(6) No person may provide, and no mortgage broker may receive, directly or indirectly, any compensation that is based on, or varies with, the terms of any Federal Housing Administration insured loan or subprime home loan. This paragraph shall not prohibit compensation based on the principal balance of the loan;

(7)(A) No creditor shall make a subprime home loan to a borrower unless a creditor reasonably and in good faith believes at the time the subprime loan is closed that the borrower residing in the home will be able to make the scheduled loan payments, real estate tax payments, and insurance payments associated with the subprime home loan.

(B) The determination of a borrower's reasonable ability to repay a subprime home loan shall include, without limitation, consideration of: the borrower's current and expected income, credit history, current obligations, and employment status; the debt-to-income ratio of the borrower's monthly gross income inclusive of all debt payments and total monthly housing payments including taxes, insurance, any required homeowner or condominium fees, and any subordinate mortgages including those that will be made contemporaneously to the same borrower; and other available financial resources other than the borrower's equity in the principal dwelling that secures or would secure the subprime home loan.

(C) The calculation assumptions used in evaluating the ability to repay for subprime home loans shall include:

(i) The monthly payment amounts based on, at a minimum, the fully indexed rate at the time of closing, assuming a fully amortizing repayment schedule;

(ii) Verification of all sources of income by tax returns, payroll receipts, bank records, or other similar reliable documentation. Verification shall be based on the most appropriate form of documentation; and

(iii) For subprime home loans that permit negative amortization, the repayment analysis based upon the initial loan amount plus any balance increase that may accrue from the negative amortization provision;

A creditor's analysis of a borrower's ability to repay a subprime home loan may utilize reasonable commercially recognized underwriting standards and methodologies, including automated underwriting systems, provided the standards and methodologies comply with the provisions of this Code section.

(D) A creditor in a subprime home loan who, when acting in good faith, fails to comply with this Code section shall not be deemed to have violated this Code section if the creditor established that either:

(i) Within 90 days of the loan closing and prior to the institution of any action against the creditor under this Code section, the borrower was notified of the compliance failure; the creditor tendered appropriate restitution; the creditor offered, at the borrower's option, either to make the subprime home loan comply with this Code section or change the terms of the subprime home loan in a manner beneficial to the borrower so that the loan will no longer be considered a subprime home loan subject to the provisions of this Code section; and within a reasonable period of time following the borrower's election of remedies, the creditor took appropriate action based on the borrower's choice; or

(ii) The compliance failure was not intentional and resulted in a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid such errors and within 120 days after the discovery of the compliance failure and prior to the institution of any action against the creditor under this Code section or the creditor's receipt of written notice of the compliance failure, the provisions of division (i) of this subparagraph were met. Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person's obligations under this Code section shall not be a bona fide error;

(8) No creditor shall engage in the act or practice of flipping a subprime home loan. For purposes of this paragraph, 'flipping a subprime home loan' means the making or arranging of a subprime home loan to a borrower who refinances an existing home loan when the new loan does not have reasonable, tangible net benefit to the borrower considering all of the circumstances including, but not limited to, the terms of both the new and refinanced loans, the cost of the new loan, and the borrower's circumstances; and

(9) A mortgage broker, in addition to duties imposed by other statutes or at common law, shall be considered an agent of the borrower in all cases and shall:

(A) Act in the borrower's best interest and in the utmost good faith toward the borrower and shall not compromise a borrower's right or interest in favor of another's right or interest, including a right or interest of the mortgage broker;

(B) Safeguard and account for any money handled for the borrower;

(C) Follow reasonable and lawful instructions from the borrower;

(D) Use reasonable skill, care, and diligence;

(E) Before closing, notify each lender of the particulars of each of the other lenders' loans if the mortgage broker knows that more than one mortgage loan will be made by different lenders contemporaneously to a borrower secured by the same real property;

(F) Clearly disclose to the borrower, in a timely fashion, all material information, as specified by the department, that might reasonably affect the borrower's rights, interests, or ability to receive the borrower's intended benefit from the home loan, including total compensation the broker would receive from any of the loan options the broker presents to the borrower; and

(G) Make reasonable efforts to secure a loan that is in the best interests of the borrower considering all the circumstances, including the product type, rates, charges, and repayment terms of the home loan."

SECTION 3.

Said chapter is further amended in Code Section 7-6A-5, relating to limitations on high-cost home loans, by revising paragraph (1) as follows:

"(1) No prepayment fees or penalties shall be provided for in the loan documents for a high-cost home loan or charged to 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;"

SECTION 4.

This Act shall become effective on July 1, 2009.

SECTION 5.

All laws and parts of laws in conflict with this Act are repealed.