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Georgia Passes Historic Mortgage Licensing Law

On May 2, 2022, Georgia Gov. Brian Kemp signed SB 470, which amends provisions of Georgia’s banking laws relating to the denial or revocation of a mortgage license or registration due to certain felony convictions. SB 470 will reduce the impact on mortgage companies as a result of Georgia’s existing prohibition on the employment of previously convicted felons.

While the federal SAFE Act imposes requirements on mortgage loan originator licensees that require such individuals to be subject to criminal background checks and limits such individuals from being licensed if they have been convicted of a felony during the previous seven years, certain states have requirements that go beyond those SAFE Act requirements. Georgia had historically been challenged by rampant mortgage fraud and, as a result, maintains significant protections regarding the employment of felons. Specifically, the Georgia Residential Mortgage Act historically has restricted the overwhelming majority of individuals who have been convicted of a felony from being employed by a Georgia mortgage lender licensee or a Georgia mortgage broker/processor licensee. The impact of this provision extended well beyond Georgia and included employees and mortgage originators in other states, even those without a license to make loans in the state of Georgia. 

The new law, styled as Act 796, amends Article 13 of Chapter 1 of Title 7 of the Georgia Code 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 loan related activities for property located in Georgia and includes, but is not limited to, a mortgage loan originator, processor, or underwriter, or other employee who has access to residential mortgage loan origination, processing, or underwriting information.” The practical impact of this language is that so long as employers who hold a Georgia mortgage license can ensure that their employees located outside of Georgia are not engaging in origination, processing, or underwriting activities relating to Georgia loans, and do not have access to information relating to Georgia loans, the employment of individuals who may have been previously convicted of a felony will not be a compliance violation that could subject the licensee to enforcement action, including potential license revocation, by the Georgia Department of Banking and Finance.  Ultimately, the Department of Banking and Finance may promulgate additional rules or issue guidelines on how it will administer this requirement. However, we understand the intent of the legislation is to allow companies to hire more freely outside of Georgia, with the understanding that it is possible to hire someone who may have a felony in their background so long as the individual is not within Georgia and will not work with Georgia loan files.

© 2023 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 129

About this Author

Robert S. Niemi CMB Banking Financial Services Advisor Bradley Arant Boult Cummings Tampa
Senior Advisor

Bob Niemi is a senior advisor* for the Banking & Financial Services team in Bradley’s Tampa and Washington, D.C. offices. As a mortgage leader and industry advocate for more than 25 years, Bob understands the challenges facing clients in today’s regulatory environment. He has extensive experience in all facets of the lending industry, including auto finance, consumer and small dollar lending. As a CMB, he possesses training-level knowledge of the mortgage process and has a deep understanding of changing mortgage regulations.

During the...

Haydn J. Richards Jr. Financial Services Attorney Bradley Arant Boult Cummings Washington DC

Through his actions and collective experience, Haydn Richards has demonstrated that he is one of the foremost leaders in state financial services law and financial services licensing matters. Haydn is a nationally recognized leader on mortgage and financial services licensing matters, including counseling clients relating to the formation of financial services companies and strategic acquisitions. He regularly interacts on behalf of financial services companies with federal and state regulatory agencies, both in adversarial and non-adversarial matters. Haydn counsels...