GAR News

LEGISLATIVE UPDATE: Georgia Fair Lending Act Under Review The Georgia Fair Lending Act is also known as the Predatory Lending Law. This law was intended to prohibit abusive home loan practices and to provide for prohibited practices and limitations relating to high-cost home loans. The act sets two tests to determine if a home loan is a high cost loan.

First, it adopts the test for a high cost loan set under federal law for the annual percentage rate. Thanks to the current mortgage market, this interest rate trigger has not been a problem. Second, the act adopts a points and fees test. It sets the threshold for maximum points and fees at five percent of the total loan amount. Two percent of these maximum points can be used for discount points leaving a three percent margin. This trigger has become a problem because some loans, most notably VA and FHA, have funding fees that can be as high as 2.8 percent. Representative Larry O'Neal has introduced House Bill 82 to address this problem by excluding these funding fees from the five point maximum trigger. Standard & Poors said this week that it will not allow "high cost loans" from Georgia as collateral for bonds that it rates because of legal liabilities for bondholders.

This is a classic case of unintended consequences from well-intentioned lawmakers. Former Banks and Banking Chairman Butch Parrish has been working with the various banking interest to formulate a bill that would address the concerns of Standard & Poors. Based on GAR's meetings with a number of House and Senate Leaders, we expect quick action on legislation to amend the Georgia Fair Lending Act.

If you would like to follow the progress of this issue then please join the GAR State & Local Governmental Affairs Committee as we meet to discuss this and many other important bills each Monday at 10:00 am at the GAR headquarters beginning on January 27.