Georgia Revises Category of Individuals Covered Under Licensing Restrictions for Record of a Prior Felony

Georgia recently revised the mortgage lenders and mortgage brokers licensing law (Article 13 of Chapter 1 of Title 7 of the Official Code of Georgia Annotated).  Of note is the amendment of subsection (h), which previously stated that the Georgia Department of Banking and Finance (Department) will deny or revoke a license or registration if it finds that certain persons have been convicted of a felony in any jurisdiction or of a crime, which, if committed within Georgia, would constitute a felony under the laws of the state.  Such persons included: any person who is a director, officer, partner, agent, employee, or ultimate equitable owner of 10 percent or more of the mortgage broker or mortgage lender applicant registrant, or licensee, or any individual who directs the affairs or establishes the policy for the applicant, registrant, or licensee (e.g., a control person).  This was essentially a prohibition on licensees from employing any individuals with a felony conviction or its equivalent in any role.

The revision made by the Georgia legislature removes the term “agent” from the subsection and narrows the term “employee” by replacing the term with “covered employee”.  “Covered employee” is defined in part as an employee of a mortgage broker or mortgage lender who has access to residential mortgage loan origination, processing, or underwriting information.  The term therefore does not cover staff whose role is completely separate from any work or access to information involving mortgage loan origination, processing, or underwriting.  This would perhaps be most applicable to support staff, custodians, and other employees whose job functions do not involve, even tangentially, work with loan origination, processing, or underwriting.  Such personnel may now work at mortgage lenders and mortgage brokers, even if they were previously convicted of a felony, without the employer having its Georgia mortgage broker or lender license or registration revoked.

Importantly, the impact of this revision is limited only to such staff and does not include directors, officers, partners, owners, and other employees whose job functions involve, or who have access to, information relating to loan origination, processing, and underwriting, as well as any individual who directs the affairs or establishes policy for the mortgage broker or mortgage lender applicant, registrant, or licensee.  Thus, the prohibition on employing individuals with a felony conviction remains broad, even after the amendment becomes effective.  Additionally, entities will be responsible for demonstrating to the Department that any employee not included in subsection (h) that has a felony is far removed from any function involving mortgage loan origination, processing, or underwriting.