Georgia Lender Fined Over Unlicensed Loan Officer Claims

State regulators fined Southeast Mortgage of Georgia in Lawrenceville $22,500 following allegations that the nonbank lender was doing business with an unlicensed loan originator.

The consent order from the Georgia Department of Banking and Finance also requires Southeast Mortgage to pay $2,000 to support the Nationwide Mortgage Licensing System. The company's president and chief executive, Reginald Haupt, was ordered to contribute $1,000 to the system.

Southeast Mortgage was also ordered to develop policies that will prevent it from doing business with unlicensed mortgage loan originators in the future, according to a Monday press release from the department.

The company must "maintain a record of the license number or exemption status of any loan originator, broker, lender or processor" with whom it works and verify the status of those licenses, according to the consent order filed on March 6. In addition, the firm was ordered to develop a method for monitoring employee compliance with the verification process.

The Georgia consent order is reminiscent of similar actions in the state against Generation Mortgage, broker Nicholas Yeargin, and Cornerstone Mortgage.

Loan officers at nonbank lenders must have state licenses—which in Georgia are issued by the Department of Banking and Finance—and register with the NMLS. Loan officers employed by federally regulated depositories are required only to register with the NMLS.

The disparity has created an environment in which an individual can be denied a state license to originate loans at a nonbank lender, but still be gainfully employed by a bank lender in the same state.

For example, in the case of Cornerstone Mortgage's 2011 consent order, two employees, Sheldon Mark Henry Baker and Charles Lee "Bo" Carter, were issued cease-and-desist orders for allegedly originating mortgages without the proper licenses. Both received a five-year ban from employment by a state-licensed mortgage brokerage or lender in Georgia.

In Carter’s case, the Department of Banking and Finance said it denied his application for a mortgage originator license in July 2010. But after receiving the cease-and-desist letter that ended his employment at Cornerstone, Carter went on to work as a loan officer at two federally regulated depositories in Georgia, according to self-reported employment history submitted to the NMLS.

Baker's self-reported employment history shows he was briefly employed by a depository lender following his cease-and-desist letter, and his NMLS record shows he never received or was denied a state license. Neither Carter nor Baker is currently employed in the mortgage industry, according to the NMLS.

— Austin Kilgore contributed to this report.