Georgia Passes Landmark Mortgage Licensing Law

On May 2, 2022, Georgia Governor Brian Kemp signed SB 470, which amends provisions in Georgia’s banking laws relating to the denial or revocation of a mortgage license or registration due to certain convictions for crime. SB 470 will reduce the impact on mortgage companies due to Georgia’s current ban on employing previously convicted felons.

While the federal SAFE Act imposes requirements on mortgage originator license holders that require these individuals to undergo a criminal background check and restrict obtaining a license if they have been convicted of a crime in the previous seven years, some states have requirements that go beyond these SAFE Act requirements. Georgia has historically faced rampant mortgage fraud and as a result maintains significant protections regarding the employment of felons. Specifically, the Georgia Residential Mortgage Act has historically prevented the vast majority of individuals who have been convicted of a felony from being employed by a Georgia Mortgage Lender Licensee or Mortgage Broker/Licensee Georgia processor. The impact of this provision extended far beyond Georgia and included employees and mortgage originators in other states, even those who did not have a license to make loans in Georgia. State of Georgia.

The new law, known as Law 796, amends Georgia Code Title 7, Chapter 1, Section 13 and introduces a newly defined term for a covered employee. Specifically, a “covered employee” is defined as “any employee of a Mortgage Lender or Mortgage Broker who is involved in residential mortgage-related business for property located in Georgia and includes, but is not limited to, an originator, processor, or underwriter of mortgage loan, or other employee who has access to residential mortgage loan information about the origination, processing or underwriting of a mortgage loan.“The practical impact of this language is that as long as employers with a Georgia mortgage license can ensure that their employees located outside of Georgia do not engage in origination, processing or underwriting activities related to Georgian loans, and do not have access to information related to Georgian loans, the employment of individuals who may have previously been convicted of a crime will not constitute a compliance violation that could expose the holder license to enforcement actions, including possible license revocation, by the Ministry of Banking and Finance of Georgia. Ultimately, the Ministry of Banking and Finance may promulgate additional rules or issue directives on the how it will administer this requirement. However, we understand that the intent of the legislation is to allow companies to hire more freely outside of Georgia, with the understanding u that it is possible to hire someone who may have a felony background as long as the individual is not in Georgia and working with Georgia loan files.

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