Georgia Gov. Brian Kemp recently signed Georgia House Bill 876 (“HB 876”) into law. The bill includes amendments to Title 7 of the Official Code of Georgia Annotated (“O.C.G.A.”) related to entities regulated by the Georgia Department of Banking and Finance, including banks, credit unions, installment lenders and mortgage lenders.
HB 876 makes changes across several sections of the Georgia banking law including:
- Updates the definition of “subsidiary” under code section 7-1-4 to expand on what it means for a corporation or company to be under the control of a financial institution.
- Repeals language with “registrants” and “registration requirements” while maintaining language for “licensees” and “license requirements”.
- Code Section 7-1-393 updated to revise procedures concerning the approval of banks and trust companies applying for incorporation. If the GA Department of Banking and Finance approves the proposed bank or trust company, it must deliver written approval to the Secretary of State and notify the incorporators.
- In relation to credit unions, a new definition for the term “executive officer” was added under Code Section 7-1-630. Additionally, “limited liability companies” was added to the types of entities that are eligible for membership to credit unions, under the same conditions as individuals. Other amendments under Title 7, related to credit unions, include revisions to the duties of a credit union director, changes to the requirements for loans to executive members of the credit union, and changes to the requirements for meetings of credit union members.
Amendments added to Code Section 7-1-1001 affecting exemption requirements for a mortgage loan originator, mortgage broker, or mortgage lender license. Under subsection (19), an individual who purchases or holds closed mortgage loans for 14 days or less and does not service the loans is exempt from being licensed as a mortgage lender. Under new subsection (20) a trust, the trustee of which is a bank, is exempt from licensure if it “purchases or holds closed mortgage loans for the sole purpose of securitization or otherwise transferring the loans into a secondary market.” If the trust commences a foreclosure proceeding on a mortgage held by the trust, it no longer qualifies for the exemption.
Another notable section of HB 876 is an amendment to Code Section 7-6A-2, paragraph (4) definition of “bona fide discount points” under the Georgia Fair Lending Act. To be considered a bona fide discount point, a loan discount point must be knowingly paid by the borrower for the express purpose of reducing the interest rate and must actually result in a bona fide reduction of the interest rate. Additionally, to be considered bona fide, the current definition requires the undiscounted interest rate to not exceed by more than one percentage point the required net yield for a 90-day standard mandatory delivery commitment for a home loan with a reasonably comparable term from either Fannie Mae or Freddie Mac. Under Part II of HB 876, the undiscounted interest rate must “not exceed by more than one percentage point the average prime offer rate (APOR) as defined in 12 C.F.R. 1026.35 that applies to a comparable transaction, as published by the United States Consumer Financial Protection Bureau as of the last date the discounted interest rate for the transaction is set before consummation.”
The update to the definition of “bona fide discount points” is effective on June 1, 2024. All other amendments are effective on July 1, 2024.
DocMagic will be updating the Georgia high-cost test to exclude up to two bona fide discount points based on the new comparison of the undiscounted rate to the average prime offer rate applicable at the time the rate is set, plus one percentage point. This update will be available as of the June 1, 2024, effective date.
To view House Bill 876, click here.
