On January 6, 2016, the Georgia Department of Banking and Finance (“Department”) reenacted provisions regarding disclosure requirements, amending and clarifying the Department’s prior rulemaking adopted October 27, 2015 (“the October rule”). The October rule was adopted in a purported attempt to align Georgia requirements with recent changes to Federal law including, but not limited to, the TILA-RESPA Integrated Disclosure Rule. The amended provisions are effective on January 26, 2016.
Notably, the rule clarifies that the disclosure requirements and other provisions of the rule only apply to persons licensed, registered, or required to be licensed or registered under the Georgia Residential Mortgage Act.
The rule maintains the October rule’s requirement that every mortgage lender or mortgage broker make the following disclosures in writing to applicants for residential mortgage loans, with certain clarifying amendments:
(a) within three business days of receipt of the application but no later than seven days before settlement or closing of the loan, a Loan Estimate, as required by federal law, including but not limited to 12 CFR § 1026.19 and 12 CFR § 1026.37 (note that the October rule linked this timing requirement to the loan consummation);
(b) no later than three business days before settlement or closing of the loan, a Closing Agreement, as required by federal law, including but not limited to 12 CFR § 1026.19 and 12 CFR § 1026.38 (note that the October rule linked this timing requirement to the loan consummation);
(c) prior to the acceptance of a fee, including, but not limited to, an application fee, credit report fee, property appraisal fee, and all other third-party fees, the amount of the fee;
(d) prior to the acceptance of a fee, whether all or any part of the fee or charge is refundable prior to settlement of the mortgage loan, and the terms and conditions for obtaining a refund if all or any part of the fee or charge is refundable;
(e) prior to the acceptance of any fees, the specific services which will be provided or performed for the application fee; and
(f) in cases where the fees are being accepted by a mortgage lender or mortgage broker that such lender or broker cannot guarantee approval of the loan application or acceptance into a particular loan program.
“Settlement and closing” under the regulation means the process of executing legally binding documents regarding a lien on residential property.
The rule clarifies that “business day” has the same definition as set forth in 12 CFR §1026.2. Moreover, while still not clear in the amended rule, presumably an “application” under the Georgia regulation is the same as that term is defined under the federal TILA-RESPA Integrated Disclosure Rule.
The regulation clarifies that mortgage lenders or mortgage brokers shall provide applicants for a home equity line of credit, a residential mortgage loan not secured by real property, such as a mobile home, or a residential mortgage loan related to a reverse mortgage, all disclosures required by federal law instead of the Loan Estimate and Closing Disclosure set forth in paragraph (2)(a) and (b) of the rule. This is in contrast to the October rule’s requirement that applicants of all such loans be provided with the GFE and HUD-1.
With respect to home equity lines of credit, non-real estate secured loans, and reverse mortgages, the Georgia regulation does not clearly specify a timing requirement for the necessary disclosures and removes the October rule’s requirement that the disclosures be provided prior to the acceptance of any fees.
Moreover, the rule carries forward the Georgia requirement that the disclosures, including the Loan Estimate and Closing Disclosure, be acknowledged in writing by the applicant and a copy of the acknowledgement be given to the applicant and maintained by the mortgage lender or mortgage broker required to make the disclosure.
The new rule amends the October rule’s provisions governing escrow account closing to provide that to the extent required by federal law including, but not limited to 12 CFR §1026.20, a mortgage lender shall provide the borrower an Escrow Closing Notice no later than three business days before the borrower’s escrow account is cancelled.
The rule also maintains the requirement that in the event that the residential mortgage loan is transferred, the transferee mortgage lender shall provide the borrower with a Mortgage Transfer Disclosure on or before the thirtieth calendar day following the date of the transfer, as required by federal law, which includes but is not limited to 12 CFR § 1026.39.
Further, the rule preserves the requirement that mortgage lenders and table funded mortgage brokers must provide borrowers with a pre-closing notice that if the borrower fails to meet loan conditions, the borrower may lose the home through foreclosure.
Finally, the new rule also provides additional factors the Department may consider in deciding whether to waive or modify an administrative fine.
The full text of the provisions is available at the following link: https://dbf.georgia.gov/sites/dbf.georgia.gov/files/related_files/document/notice%20of%20final%20rulemaking%20and%20adopted%20rules%20%201-6-16.pdf.