GBA e-Bulletin Legislative Update

GBA-Opposed Bill Limiting Recovery of Guarantor Obligations Amended

The House Banks and Banking Committee held hearings this week on the bill we've been telling you about that would limit the amount an acquirer of a loan or other debt obligation can recover from guarantors of the obligation under certain circumstances. The limit would be the lesser of either the amount the acquirer paid to buy the debt obligation, plus non-default rate interest, or the maximum permitted under the guaranty. The Senate unanimously passed this bill, S.B. 448, that was introduced by Sen. Don Balfour (R-Snellville). Click here to read our issue brief on the original bill. On Monday, Banking Commissioner Rob Braswell did a terrific job educating the committee on how note transfers work, the secondary market, and regulatory involvement related to real estate concentrations. On Wednesday, the committee met again and heard testimony from developers and other proponents. Those of us opposing the bill were given equal time. Testifying on behalf of GBA was an expert panel, and we thank them for doing an outstanding job: Kessel Stelling, CEO of Synovus Financial Corp., Jim Edwards, CEO of United Bank Corp., and Jerry Blanchard, Partner with Bryan Cave. Also testifying against the bill were Dan Oliver, Vinings Bank and CBA's Steve Bridges. All the bankers pointed out how they work with borrowers to find solutions, but that sometimes notes will be sold to third parties, which would get caught by the bill. The killing effect on the market, the black eye Georgia would get from the secondary market, the constitutional issues related about debt forgiveness and retroactively changing contracts were among the major issues raised as reasons the bill should not be adopted. Most members of the committee told us afterward that they heard no compelling reasons from the proponents to pass the bill in its current form. The committee met again on Thursday and reported a far different version. The bill now only applies to notes bought in the future by an individual directly from a federal bank regulatory agency. Notes bought and sold by financial institutions and individuals in the traditional market are exempted. The individual buying the note from a federal bank regulatory agency will know that the note comes with limits on what the buyer can collect on any guaranteed portion of the loan (discounted to the percentage discount the buyer paid for the note), and a non-default rate. Our thanks to the committee, especially committee chair Greg Morris (R-Vidalia), for handling a controversial and passion-filled hearing with courtesy to all sides. Next step is the House Rules Committee where they will decide if the bill moves forward to the full House. We also need to alert our members that a proposed substitute bill offered by Sen. Balfour would have changed Georgia's foreclosure process for all foreclosures. The proposal would apply to judicial foreclosures where a lender sues on a note. The change would have required a court to set the fair market value of the property securing the note and deduct that value from the default judgment. And further, if the lender sold the property at foreclosure and recovered more than the judge had previously determined was the value, the excess would be credited or returned to the borrower. This is a significant issue and had a surprising amount of support. We expect to hear more about that soon.

Braswell

Morris

GBA-Priority Bill Standardizing Local Foreclosure Ordinances Headed to Governor

After two years of marathon committee meetings, strategy sessions and hearings, H.B. 110 is on the way to the Governor's desk for his signature. Special thanks to Rep. Mike Jacobs (R-Atlanta) who worked tirelessly with us and a coalition of other interested organizations on this bill that will set uniform statewide standards for any municipality or county that decides to create a foreclosure registry. The registration fee would be capped at $175 and failure to register is capped at $500 per month to a maximum of $2,000. DeKalb County established the first registry in the state and other cities and counties quickly followed. Many of the registries also address vacant property, and each registry has its own unique requirements. Lenders with security interest in property in these jurisdictions are having a difficult time tracking the various registry requirements, and the bill will cause these local governments to modify their existing registries to comply with the new simplified statewide standards.

Jacobs

Several Other GBA-Tracked Bills Received Action this Week
Banking Department Housekeeping. The Banking Department's annual housekeeping bill was divided into two separate bills this year -- one dealing with banking supervision, H.B. 945, and the other dealing with mortgage supervision, H.B. 946. Two issues of interest are in the bill related to banking supervision. One provision would allow banks, with Department approval, to issue shares for less than par value. The other provision would allow, also with Department approval, a bank to pay dividends from sources other than retained earnings. The Senate Banking and Financial Institutions Committee reported both bills out this week. Committee chairman Jack Murphy (R-Cumming) will be handling the bills on the floor if they get on the Rules Calendar. GBA supports.

Foreclosure. The Senate Banking and Financial Institutions Committee reported H.B. 419 by Rep. Billy Mitchell (D-Stone Mountain), a bill that allows a default to be cured within five days of a foreclosure sale if the note has not been accelerated. GBA monitoring.

Real Estate Closing Attorneys. S.B. 365 was introduced by Sen. Bill Hamrick (R-Carrollton) but has since been shepherded by Sen. Jesse Stone (R-Waynesboro). The bill was introduced at the request of a group of closing attorneys who want to ensure that attorneys are used throughout the loan closing process. The bill that passed the Senate had some troubling language and we had serious concerns with several portions. Of most concern was some nebulous language that could be interpreted such that attorneys would have to be engaged in routine banking activities such as disbursing all checks or overseeing the renewal of loans when no change to the deed is involved. Sen. Stone addressed our concerns and those provisions were removed from the bill. The House Judiciary Reported the bill this week. GBA monitoring.

Mortgage Fraud. The Senate passed an amended version of H.B. 237 by Rep. Rich Golick (R-Smyrna), on behalf of Attorney General Sam Olens. The bill would extend the mortgage fraud statutes through the foreclosure process. We worked with the Attorney General and got certain provisions in the bill changed to narrow the focus to mortgage fraud. Significant concerns were raised by Senate members mostly related to giving additional subpoena power to the attorney general and local district attorneys and the Senate Judiciary removed those provisions. The bill is now pending in the House and is awaiting their concurrence or a request for a conference committee. GBA monitoring.

Condo Association Transfers. As introduced, S.B. 136 by Sen. Bill Hamrick provided that any lien filed by a homeowners association for past-due condo fees would be superior to the lien of any mortgage in a foreclosure for amounts represented by the lien equal to the previous 12 months of fees. At GBA's request, the author amended the bill to remove those provisions. The remaining provisions in the bill addressing how declarants transfer condo association governance to unit owners remained intact. That version was reported out of the House Judiciary Committee this week. GBA monitoring.

Garnishment Study Committee. A new resolution was introduced by Sen. Bill Hamrick this week, S.R. 1217, that creates a committee to study the entire issue of garnishment to determine the burdens the current process causes on business and whether it is a fair and equitable process to all concerned. The committee is to report recommendations to the 2013 session.

Limited Purpose Merchant Acquirer Bank. The Senate Banking and Financial Institutions Committee reported H.B. 898, which creates a new type of special-purpose state-chartered bank for companies that provide a variety of services for processing payments over payment card networks. The bill is being considered on behalf of Global Payments, an international processing company headquartered in Georgia. Other Georgia companies such as TSYS have been reported to be interested in pursuing such a charter. As we understand it, the main purpose for the charter is to allow the limited-purpose bank to enter the card networks directly rather than having to be sponsored by a financial institution. The limited-purpose bank will be solely supervised by the State Department of Banking and Finance, although the bank will have the option of applying for FDIC insurance. Several of our members had some initial concerns with certain provisions in the bill and those concerns have been addressed in the current version. Sen. Jeff Mullis (R-Chickamauga) will be handling the bill on the floor. GBA monitoring.

Murphy
Mitchell
Hamrick
Stone
Golick
Olens
Mullis

GBA at the Capitol
Stay tuned and follow our updates on the GBA’s State Issues Page on our website as it’s updated daily. If you Tweet – follow us on Twitter – we’ll be Tweeting significant events as they occur. GBA is well-represented again this year at the Capitol with Elizabeth Chandler, GBA’s Senior Vice President of Government Relations, coordinating our lobbying efforts. With questions about the session, bills of interest or anything related to the process, just give her a call at 404.420.2027.

Chandler