PennyMac and subsidiary PennyMac Loan Services are no longer allowed to conduct residential mortgage business in the state of Georgia. Late last month, the Georgia Department of Banking and Finance finalized two orders to Cease and Desist after the company and its respective servicing branch were found to be operating without a license. Rod Carnes, deputy commissioner for Non-Depository Financial Institutions, the department that issued the orders, said he couldn't give details on what started the investigation into PennyMac's  business. "We can't go into the investigation side but, basically, Penny Mac did not have a license to broker mortgages in Georgia," he said. The documents show that PennyMac was given 30 days to produce a mortgage license and the Cease and Desist was issued when the firm failed to do so. "In the event we receive info that someone is operating without a license in the state, we will take that information and issue an appropriate administrative response," he said. PennyMac says it will co-operate with the order, and defends the legality of its operations in the state. However, officially, the firm disagrees with the banking department's conclusion it conducts residential mortgage activity which requires a license. "[T]he companies are vigilant about compliance and will continue to make every effort to abide with applicable state and federal laws," Penny Mac said in a statement. According to the Federal S.A.F.E. Mortgage Licensing Act of 2008, any residential mortgage originator that does not work for an insured depository or its owned and controlled subsidiary that is regulated by a federal bank or the Farm Credit Administration must be registered with the state in which they originate loans. Under the SAFE Act, Penny Mac would not automatically have a right to an administrative hearing in its defense. The Georgia Residential Mortgage Act states "it shall be prohibited for any person to transact business in this state directly or indirectly as a mortgage broker, a mortgage lender, or a mortgage loan originator" unless they are licensed. As it stands, PennyMac Corp. and PennyMac Loan Services are liable for a $1,000 fine for each violation, according to the law. It is unknown how long the cease and desist will last or if PennyMac will apply for a state license in Georgia. Write to Christine Ricciardi. Jacob Gaffney contributed to this report.