BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 69|
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THIRD READING
Bill No: AB 69
Author: Lieu (D), et al
Amended: 8/11/08 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 7-4, 6/18/08
AYES: Machado, Correa, Florez, Kehoe, Lowenthal, Scott,
Wiggins
NOES: Runner, Cox, Hollingsworth, Margett
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 49-22, 1/29/08 - See last page for vote
SUBJECT : Mortgage lending: reporting
SOURCE : Author
DIGEST : This bill authorizes the Commissioner of the
Department of Corporations (DOC), as he/she deems
necessary, to require finance lender and residential
mortgage lender licensees to provide specified information
regarding their residential mortgage loan servicing
activities, and directs the Commissioner to post aggregated
survey results on DOC's web site, as specified.
Senate Floor Amendments of 8/11/08, which were suggested by
DOC, intend to limit DOC's responsibilities in connection
with the bill and ensure that the bill does not in any way
limit DOC's existing regulatory authority under the Finance
CONTINUED
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Lenders Law or Residential Mortgage Lending Act.
ANALYSIS : Existing federal law provides for the Real
Estate Settlement Procedures Act (12 USC, Section 2601 et
seq.) and the Truth in Lending Act (15 USC, 1601 et seq.)
both of which contain provisions that govern the activities
of mortgage loan servicers.
Existing law:
1. Provides for the California Finance Lenders Law (CFLL)
[Section 22000 et seq. of the Financial Code] and the
California Residential Mortgage Lending Act (CRMLA)
[Section 50000 et seq. of the Financial Code), and
authorizes the DOC to administer both laws. A person
may be licensed under the CFLL as a finance lender or a
finance broker, or both. A person may be licensed under
the CRMLA as a residential mortgage lender or
residential mortgage loan servicer, or both.
2. Requires CFLL licensees to submit annual reports to the
Commissioner, and "make any other special reports that
may be required by the commissioner" (Section 22159 of
the Financial Code).
3. Requires CRMLA licensees to submit annual reports to the
Commissioner, and "to make any other special reports to
the commissioner that the commissioner may, from time to
time, require" (Section 50307 of the Financial Code).
4. Defines "mortgage servicer" or "residential mortgage
loan servicer" under the CRMLA as a person that is:
A. An approved servicer for the Federal Housing
Administration, Veterans Administration, Farmers Home
Administration, Government National Mortgage
Association, Federal National Mortgage Association,
or Federal Home Loan Mortgage Corporation.
B. Directly services or offers to service mortgage
loans (Section 50003 of the Financial Code).
5. Does not expressly define or authorize mortgage
servicing activities under the CFLL, but does not
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expressly prohibit CFLL licensees from engaging in
mortgage servicing activities.
6. Pursuant to the Banking Law, Credit Union Law, and Real
Estate Law, respectively, authorizes state-chartered
banks, state-chartered credit unions, and state-licensed
real estate brokers to service residential mortgage
loans, as specified.
This bill:
1. Authorizes the Commissioner, under both the CFLL and the
CRMLA, as he/she deems necessary, to require licensees
to provide reports concerning their residential mortgage
loan servicing activities, including, but not limited
to, information similar to that collected in connection
with the Mortgage Servicers Survey, first published by
the DOC in December 2007.
2. Authorizes the Commissioner, under both the CFLL and
CRMLA, to seek and accept information provided on a
voluntary basis by residential mortgage loan servicers
not subject to the Commissioner's jurisdiction.
3. Requires the Commissioner to post only aggregated survey
results on the DOC's web site, and requires the
Commissioner to note the number of loan servicers
submitting data included in the aggregated totals and
the estimated percentage of outstanding mortgage loans
to Californians that are serviced by these loan
servicers.
4. Defines "mortgage loan servicing activity" under the
CFLL as receiving more than three installment payments
of principal, interest, or other amounts placed in
escrow, pursuant to the terms of a mortgage loan, and
performing services relating to that receipt or the
enforcement of its receipt, on behalf of
the holder of the note evidencing that loan.
5. Limits DOC's responsibilities in connection with the
bill and ensures that the bill does not in any way limit
DOC's existing regulatory authority under CFLL or CRMLA.
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Background
In August 2007, the Senate Banking, Finance, and Insurance
Committee held its third informational hearing on
residential mortgage lending and foreclosure avoidance.
During that hearing, Senator Machado asked the
Commissioners of the Department of Financial Institutions
(DFI) and the DOC to brainstorm additional ways in which
they could be proactive in reaching out to provide
leadership to, and in issuing behavioral guidelines and
expectations to their licensees. He stressed that he was
encouraging prompt action, rather than action which
required use of the lengthy regulatory rulemaking process.
He directed the Commissioners to report back to the
Committee on ideas regarding what they could do in these
areas.
In response to the Chair's directive, Commissioner Kelley
(DFI's acting Commissioner) and Commissioner DuFauchard,
DOC's Commissioner, surveyed their licensees regarding the
licensees' mortgage lending and servicing activities.
The DFI took a self-described conservative approach to the
issue of subprime lending, by requesting information on all
nontraditional mortgages held in portfolio or serviced for
other institutions by its licensees.
Commissioner DuFauchard released DOC's first response to
the Chair's request in December 2007, after surveying DOC's
largest CFLL and CRMLA licensees about the types of loans
in their portfolios, collections data, loss mitigation
data, workouts closed by type, and adjustable rate mortgage
reset volume. DOC's first survey included results for
June, July, August, and September 2007, broken down by
month. The survey data included responses from licensees
that service over 90 percent of the loan volume serviced by
California licensees, as measured by the 2006 year-end
figures provided by residential mortgage lenders. It is
unclear how many servicers contributed information, nor
what percentage of the total loan volume held by
Californians is serviced by these lenders.
In February 2008, the State Foreclosure Prevention Working
Group, released its first of two reports, summarizing data
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collected by a working group comprised of the Conference of
State Bank Supervisors and representatives of the Attorneys
General of 11 states, including California.
In February 2008, the HOPE NOW Alliance released its first
set of national data, and has subsequently added
state-specific data. The HOPE NOW Alliance is an
industry-led group that has grown to include virtually all
of the large, federally-regulated financial institutions
that service residential mortgage loans, as well as many of
the large state-regulated institutions.
All of the data collection efforts described above have
released aggregated data (i.e., specific information
reported by individual companies has been grouped together
and reported without specific attribution to the individual
companies that provided the data). Reasons for this are
multiple and varied, and include, but are not limited to,
the importance of securing voluntary participation from the
financial institutions that contribute to the efforts, and
the potential, negative impact that releasing
lender-specific data could have on individual institutions
and on the markets, in general.
Related Legislation
AB 2740 (Brownley) regulates the fees that can be imposed
by a residential mortgage loan servicer, establish various
prohibited acts and requirements applicable to the
servicing of residential mortgage loans, and authorizes the
recovery of damages by a borrower or other party who is
injured by a servicer's violation of the bill's provisions.
The bill failed passage in the Senate Banking, Finance,
and Insurance Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/11/08)
Aaron Myers, Attorney at Law
ByDesign Financial Solutions
California Coalition for Rural Housing
Center for California Homeowner Association Law
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CHARO Community Development Corporation
Chrysalis Consulting Group, LLC
Civic Center Barrio Housing Corporation
Congressman Dennis Cardoza
Consumer Action
EARN
East Bay Asian Local Development Corporation
East Palo Alto Council of Tenants
Fair Housing Council of San Diego
Fair Housing Law Project
Fair Housing of Marin
Gray Panthers
Human Rights/Fair Housing Commission of the City and County
of Sacramento
Just Cause Oakland
Law Center for Families
Mission Community Financial Assistance
Nehemiah Community Reinvestment Fund
Pacific Asian Consortium in Employment
Predatory Lending Clinic University of San Francisco School
of Law
Project Sentinel HUD Housing Counseling Programs
Public Interest Law Firm
Renaissance Entrepreneurship Center
Sacramento Mutual Housing Association
San Antonio Community Development Corporation
Sierra Planning & Housing Alliance, Inc.
OPPOSITION : (Verified 8/11/08)
California Bankers Association
California Financial Services Association
California Independent Bankers
California Mortgage Bankers Association
California Reinvestment Coalition
Center for Responsible Lending
ARGUMENTS IN SUPPORT : According to the author:
"Current efforts to report data on loan modification
plans are incomplete and inadequate. Current DOC
regulations only require data reporting on a yearly basis
and only for a few general categories of serviced loans.
Additionally, loan servicers are required, by servicing
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agreements, to report specific data on loan modifications
to investors, but this data is not publicly available nor
is it available for policy makers.
?
"[AB 69] requires mortgage servicers to report
information regarding their loan loss mitigation efforts.
This data would include the number of loans in default
and foreclosure. This bill clarifies that the
commissioner of DOC has authority to request this
specific data from his licensees."
ARGUMENTS IN OPPOSITION : The California Reinvestment
Coalition initially supported this bill, but is opposed to
the current version, unless it is amended to re-insert
lender-specific data reporting provisions.
The Center for Responsible Lending is opposed to this bill,
unless it is amended, based on the bill's absence of
lender-specific reporting.
The California Financial Services Association (CFSA) is
opposed to this bill, unless it is amended to include
specificity as to how frequently information may be
collected, what information may be collected, and most
importantly, how information that is collected shall be
treated. The CFSA believes that it is crucial to specify
that the information collected by the Commissioner must be
treated as confidential and may only be posted in aggregate
form without attribution to a particular servicer.
ASSEMBLY FLOOR :
AYES: Aghazarian, Arambula, Bass, Beall, Berg, Brownley,
Caballero, Charles Calderon, Carter, Coto, Davis, De La
Torre, De Leon, DeSaulnier, Dymally, Eng, Evans, Feuer,
Fuentes, Galgiani, Hancock, Hayashi, Hernandez, Horton,
Houston, Huffman, Jones, Karnette, Krekorian, Laird,
Leno, Levine, Lieber, Lieu, Ma, Mendoza, Mullin, Nava,
Parra, Portantino, Price, Ruskin, Salas, Saldana,
Solorio, Swanson, Torrico, Wolk, Nunez
NOES: Anderson, Benoit, Blakeslee, DeVore, Duvall,
Emmerson, Fuller, Garrick, Huff, Jeffries, Keene, La
Malfa, Maze, Nakanishi, Niello, Plescia, Silva, Smyth,
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Strickland, Tran, Villines, Walters
NO VOTE RECORDED: Adams, Berryhill, Cook, Gaines, Garcia,
Sharon Runner, Soto, Spitzer, Vacancy
GFC:mw 8/11/08 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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