SB 57 is legislation that seeks to amend the Georgia Fair Lending Act (GFLA) as it applies to mortgage lending, and is supported heavily by the House Leadership who wants the bill passed. Credit unions currently have a federal preemption to the majority of the requirements of this bill even if enacted.  The Government Influence Team has been working on this legislation to protect credit unions, regardless if the preemption was in place or not as a safety precaution in the event the preemption is modified or eliminated in the future.  The bill sets definitions for many practices, outlines mortgage broker duties, and defines a subprime home loan as one with an APR that exceeds the average prime offer rate as published by the Fed for a comparable term by 1.5 % or more for first liens and 3.5% or more of second liens. This definition intentionally parallels the definition of “Higher Priced Mortgage Loans” in section 226.35 of Regulation Z.  It also:

1. Bans prepayment penalties on any home loans, (unless it is paid in full during the first three years of an extension of an open-ended home equity line).
2. Prohibits yield spread premiums (on all loans unless it is credited entirely for the benefit of the borrower).
3. Bans negative amortization for any subprime home loan.
4. Prohibits the act of flipping a subprime home loan.
5. Requires the creditor to make subprime home loans only if the ability to repay has been verified.
6. Creates a safe-harbor for verifying the above “ability to repay” as long as the borrower’s monthly debt (including the pending subprime loan) does not exceed 50% of the borrower’s gross income.
7. Allows for subprime home loans with a balloon payment after five years to not re-verify when it comes due.
8. Provides for a right to cure a foreclosure within the 30 day notice period.
9. Requires that a copy of the deed under power which has been filed for record is secured before filing for foreclosure. 

uch of the bill is directed at mortgage brokers as financial institutions would be exempted from the above points 1 through 7 by the current federal preemption.