It has been almost 18 months since the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act or (as most people in the industry refer to it) the “Temporary Authority Act.” Section 106 of the act allows qualified applicants for mortgage loan originator (MLO) licenses to utilize temporary authority to continue to originate as a mortgage loan originator prior to being licensed by a state regulator. This situation would occur when an MLO is moving from employment with a federally regulated bank or bank affiliate to employment with a state-regulated independent mortgage banker or when a state licensed MLO is seeking licensure in an additional state. The act granting this temporary authority is set to go into effect November 24, 2019. Since the passage of the act earlier this year, many states are adjusting to this new temporary authority protocol and are creating their own rules and processes. However, the Georgia Department of Banking and Finance published a notice of proposed rulemaking on November 18, 2019, leaving only six days prior to the effective date of the act for the industry to review and react to the proposed rules.
The department has proposed several additional state requirements for MLOs seeking to utilize temporary authority in Georgia prior to being licensed. These additional requirements include additional steps with regard to loan disclosures, advertising, loan transaction journal entry, and record keeping requirements. The new proposed rules also include additional signature requirements and additional notice to the department if using temporary authority in Georgia.
In this blog we summarize the new rules that will apply (if they are finalized) to mortgage companies or mortgage brokers operating in the state of Georgia that choose to employ MLOs that utilize temporary authority.
New Georgia Disclosure Requirements
The proposed rule includes an additional disclosure to the customer indicating that the loan originator is not licensed and may not ultimately be granted a license. The exact language that must be used is the following:
“The Georgia Department of Banking and Finance requires that we inform you that the mortgage loan originator responsible for your loan is not currently licensed by the Georgia Department of Banking and Finance. The mortgage loan originator has applied for a mortgage loan originator license with the Georgia Department of Banking and Finance. Federal law (12 U.S.C. § 5117) authorizes certain mortgage loan originators to operate on a temporary basis in the state of Georgia while their application is pending. The Georgia Department of Banking and Finance may grant or deny the license. Further, the Georgia Department of Banking and Finance may take administrative action against the mortgage loan originator that may prevent such individual from acting as a mortgage loan originator before your loan closes.”
The language must appear on the loan documentation in 10-point bold-face type. The disclosure must be signed by the consumer and must be maintained by the company.
New Georgia Advertising Requirements
The proposed rules require any advertisement to “clearly and conspicuously” indicate that the MLO is originating under the temporary authority but is currently unlicensed and has submitted an MLO application to the department. Additionally, the advertisement must include the phrase, “Department may grant or deny the license application.”
New Georgia Transaction Journal Requirements
Under the proposed rules, Georgia mortgage companies must identify when any MLO utilized temporary authority at any point in the origination process. The transaction journal should also notate the outcome of MLO’s application as either “approved, withdrawn, or denied.”
New Georgia MLO Signature Requirements
Additionally, the proposed rules state that any MLO who utilizes temporary authority must indicate “TAO,” (temporary authority to operate) or a substantially similar notification next to any signature on a loan document, including any that relates to the negotiation of terms or the offering of a loan.
New Georgia Department Notification Requirements
Finally, the last additional requirement states that any MLO who wishes to utilize temporary authority must submit proof of enrollment in a class that would satisfy department education requirements. The MLO must also provide notification of registration to take the national MLO test. Both notifications must be submitted within 30 days of the application submission on the NMLS. We note that any MLO that utilizes temporary authority that is already licensed in another state would already have taken the national test and completed many education requirements.
We note that the department has broad authority under the federal SAFE Act and state statutes to make rules and procedures associated with the temporary authority granted in the Temporary Authority Act. However, many have sensed a real hesitation from Georgia to embrace this new MLO status. This appears to be reflected in the new proposed rules, in the timing of the rules, and even in some of the comments shared. We believe this hesitation is most reflected in the following proposed rule:
“Permitting unlicensed persons to engage in mortgage loan originator activities. Any licensee or registrant who employs a person who does not hold a mortgage loan originator’s license or does not satisfy the temporary authority to operate requirements set forth in 12 U.S.C. § 5117 but engages in licensed mortgage loan originator activities as set forth in O.C.G.A. § 7-1-1000(22) shall be subject to a fine of one thousand dollars ($1,000) per occurrence and the licensee or registrant shall be subject to suspension or revocation. Licensees are responsible for the actions of their employees.”