Georgia Fair Lending Act Review

After a series of ant-predatory lending ordinances were passed, and then ruled unenforceable in Atlanta and DeKalb County in 2001, the Georgia State Legislature took action in March and April of 2002, adopting House Bill 1361.  The bill was signed into law by Governor Roy Barnes on May 1, 2002, to go into effect on October 1, 2002. 

 

Because of provisions regarding assignee liability Fitch and Standard and Poor's opted "not  to rate transactions with uncapped assignee liability as detailed in the Georgia Fair Lending Act (GFLA)."  Concerns that mortgages from Georgia could not re-sold on the secondary market, and thereby limit credit availability to Georgia residents, changes were made in the legislation modifying the assignee liability section and signed by the Governor on 6/18/03.  The following is a summary of the current Georgia Fair Lending Act.

 

The act was adopted "...to prohibit abusive home loan practices; to provide definitions; to provide for prohibited practices and limitations relating to covered home loans and high-cost home loans; to create specific and numerous consumer protections for covered home loans and high-cost home loans; to provide for penalties and enforcement; to provide for exceptions for unintentional violations; to provide for related matters; to provide for severability; to provide for legislative intent; to provide for applicability and an effective date..." 

 

The following is a review the Act's key provisions:

• Prepayment Penalties " no prepayment penalties after 24 months.
• Flipping " no refinancing of existing mortgages within five years without tangible benefits test.
• Single premium insurance " no financing of credit insurance
• Financial literacy counseling " no loan without receiving certification from a counselor with a third party non-profit
• Balloon payments " no balloon payments
• Ability to Pay " no loan without review of ability to pay
• Call Provisions " no acceleration of payments permitted
• Interest rate after default " no increased interest rate after a default
• Advance payments " no advance payments permitted
• Modification or deferral of fees " no fees for modification of an existing loan
• Home improvement contractors " no payment without an affidavit of completion or a joining instrument of payment to both parties
• Encouraging default " no recommending or encouraging default on an existing loan
• Fee for payoff information  - no fee for payoff information; must be provided in five business days
• Arbitration " does not permit any provision requiring a claim or defense to be made in a form that is less convenient, more costly, or more dilatory than a judicial form; nor provision that forces a wavier of judicial hearing.
• Disclosure " requires full disclosure of specified documents and truthfulness in the loan process.
• Financing of special mortgages " financing of zero interest or other types of special mortgages is not permitted in the first five years of the mortgage.

---