BILL NUMBER: AB 180 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 2, 2008
AMENDED IN SENATE JUNE 12, 2008
AMENDED IN ASSEMBLY JANUARY 24, 2008
AMENDED IN ASSEMBLY JANUARY 7, 2008
INTRODUCED BY Assembly Members Bass and Lieu
(Coauthors: Assembly Members Lieber and Wolk)
JANUARY 24, 2007
An act to amend Sections 2945.1, 2945.2,
2945.3, and 2945.4 of, and to add Section 2945.45 to, the Civil Code,
relating to mortgages.
LEGISLATIVE COUNSEL'S DIGEST
AB 180, as amended, Bass. Mortgages: foreclosure consultants.
Existing law defines a foreclosure consultant as a person who
offers, for compensation, to perform specified services for a
homeowner relating to a foreclosure sale, except as specified.
Existing law prohibits a foreclosure consultant from entering into an
agreement to assist the owner in arranging, or arrange for the
owner, the release of surplus funds prior to 65 days after the
trustee's sale is conducted.
This bill would, instead, prohibit a foreclosure consultant from
entering into an agreement described above at any time.
Existing law allows a homeowner to cancel a contract with a
foreclosure consultant within 3 days after signing the contract by
providing written notice of the cancellation at the address provided
by the foreclosure consultant. Existing law requires that the
contract be written in the same language as principally used by the
foreclosure consultant to describe his or her services or to
negotiate the contract. Existing law prohibits a foreclosure
consultant from taking any power of attorney from an owner, except to
inspect documents as provided by law.
This bill would instead allow a homeowner to cancel a contract
with a foreclosure consultant within 5 days after signing the
contract, and to do so by mail, e-mail, or facsimile. It would
require that a contract with a foreclosure consultant be written in
the language principally used by the foreclosure consultant to
describe his or her services or to negotiate the contract, and would
require the foreclosure consultant, in specified circumstances, to
provide the owner, before the owner signs the contract, with one or
more copies of a completed contract written in other languages. The
bill would prohibit a foreclosure consultant from taking any power of
attorney from an owner for any purpose.
The bill would require a foreclosure consultant to register with
the Department of Justice in accordance with certain requirements,
and to obtain and maintain a surety bond for each transaction of
$100,000. A violation of these provisions would be a crime. By
creating a new crime, the bill would impose a state-mandated local
program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 2945.1 of the Civil Code is
amended to read:
2945.1. The following definitions apply to this chapter:
(a) "Foreclosure consultant" means any person who makes any
solicitation, representation, or offer to any owner to perform for
any compensation or who, for any compensation, performs any service
that the person in any manner represents will in any manner do any of
the following:
(1) Stop or postpone the foreclosure sale.
(2) Obtain any forbearance from any beneficiary or mortgagee.
(3) Assist the owner to exercise the right of reinstatement
provided in Section 2924c.
(4) Obtain any extension of the period within which the owner may
reinstate his or her obligation.
(5) Obtain any waiver of an acceleration clause contained in any
promissory note or contract secured by a deed of trust or mortgage on
a residence in foreclosure or contained in that deed of trust or
mortgage.
(6) Assist the owner to obtain a loan or advance of funds.
(7) Avoid or ameliorate the impairment of the owner's credit
resulting from the recording of a notice of default or the conduct of
a foreclosure sale.
(8) Save the owner's residence from foreclosure.
(9) Assist the owner in obtaining from the beneficiary, mortgagee,
trustee under a power of sale, or counsel for the beneficiary,
mortgagee, or trustee, the remaining proceeds from the foreclosure
sale of the owner's residence.
(b) A foreclosure consultant does not include any of the
following:
(1) A person licensed to practice law in this state when the
person renders service in the course of his or her practice as an
attorney at law.
(2) A person licensed under Division 3 (commencing with Section
12000) of the Financial Code when the person is acting as a prorater,
as defined in that division.
(3) A person licensed under Part 1 (commencing with Section 10000)
of Division 4 of the Business and Professions Code when the person
makes a direct loan or when the person satisfies all of the
following:
(A) The person engages in acts whose performance requires
licensure under that part.
(B) The person is entitled to compensation for the acts performed
in connection with the sale of a residence in foreclosure or with the
arranging of a loan secured by a lien on a residence in foreclosure.
(C) The person does not claim, demand, charge, collect, or receive
any compensation until the acts have been performed or cannot be
performed because of an owner's failure to make the disclosures set
forth in Section 10243 of the Business and Professions Code or
failure to accept an offer from a purchaser or lender ready, willing,
and able to purchase a residence in foreclosure or make a loan
secured by a lien on a residence in foreclosure on the terms
prescribed in a listing or a loan agreement.
(D) The person does not acquire any interest in a residence in
foreclosure directly from an owner for whom the person agreed to
perform the acts, other than as a trustee or beneficiary under a deed
of trust given to secure the payment of a loan or that compensation.
For the purposes of this paragraph, a "direct loan" means a loan of
a real estate broker's own funds secured by a deed of trust on the
residence in foreclosure, which loan and deed of trust the broker in
good faith attempts to assign to a lender, for an amount at least
sufficient to cure all of the defaults on obligations that are then
subject to a recorded notice of default, provided that, if a
foreclosure sale is conducted with respect to the deed of trust, the
person conducting the foreclosure sale has no interest in the
residence in foreclosure or in the outcome of the sale and the
residence is not owned, controlled, or managed by the lending broker;
the lending broker does not acquire any interest in the residence in
foreclosure directly from the owner, other than as a beneficiary
under the deed of trust; and the loan is not made for the purpose or
effect of avoiding or evading the provisions of this article.
(4) A person licensed under Chapter 1 (commencing with Section
5000) of Division 3 of the Business and Professions Code when the
person is acting in any capacity for which the person is licensed
under those provisions.
(5) A person or his or her authorized agent acting under the
express authority or written approval of the Department of Housing
and Urban Development or other department or agency of the United
States or this state to provide services.
(6) A person who holds or is owed an obligation secured by a lien
on any residence in foreclosure when the person performs services in
connection with this obligation or lien.
(7) Any person licensed to make loans pursuant to Division 9
(commencing with Section 22000), 10 (commencing with Section 24000),
or 11 (commencing with Section 26000) of the Financial Code, subject
to the authority of the Commissioner of Corporations to terminate
this exclusion, after notice and hearing, for any person licensed
pursuant to any of those divisions upon a finding that the licensee
is found to have engaged in practices described in subdivision (a) of
Section 2945.
(8) Any of the following persons or entities:
(A) A person or entity doing business under any law of this state,
or of the United States, relating to banks, trust companies, savings
and loan associations, industrial loan companies, pension trusts,
credit unions, insurance companies.
(B) A person or entity authorized under the laws of this state to
conduct a title or escrow business.
(C) A mortgagee that is an approved mortgagee of the United States
Department of Housing and Urban Development.
(D) A subsidiary or affiliate of any person or entity described in
subparagraphs (A) to (C), inclusive, and any agent or employee of
such a person or entity while engaged in the business of that person
or entity.
(9) A person licensed as a residential mortgage lender or servicer
pursuant to Division 20 (commencing with Section 50000) of the
Financial Code, when acting under the authority of that license.
(c) "Person" means any individual, partnership, corporation,
limited liability company, association or other group, however
organized.
(d) "Service" means and includes, but is not limited to, any of
the following:
(1) Debt, budget, or financial counseling of any type.
(2) Receiving money for the purpose of distributing it to
creditors in payment or partial payment of any obligation secured by
a lien on a residence in foreclosure.
(3) Contacting creditors on behalf of an owner of a residence in
foreclosure.
(4) Arranging or attempting to arrange for an extension of the
period within which the owner of a residence in foreclosure may cure
his or her default and reinstate his or her obligation pursuant to
Section 2924c.
(5) Arranging or attempting to arrange for any delay or
postponement of the time of sale of the residence in foreclosure.
(6) Advising the filing of any document or assisting in any manner
in the preparation of any document for filing with any bankruptcy
court.
(7) Giving any advice, explanation or instruction to an owner of a
residence in foreclosure that in any manner relates to the cure of a
default in or the reinstatement of an obligation secured by a lien
on the residence in foreclosure, the full satisfaction of that
obligation, or the postponement or avoidance of a sale of a residence
in foreclosure pursuant to a power of sale contained in any deed of
trust.
(e) "Residence in foreclosure" means a residence in foreclosure as
defined in Section 1695.1.
(f) "Owner" means a property owner as defined in Section 1695.1.
(g) "Contract" means any agreement, or any term thereof, between a
foreclosure consultant and an owner for the rendition of any service
as defined in subdivision (d).
SEC. 2. SECTION 1. Section 2945.2 of
the Civil Code is amended to read:
2945.2. (a) In addition to any other right under law to rescind a
contract, an owner has the right to cancel such a contract until
midnight of the fifth business day, as defined in subdivision (e) of
Section 1689.5, after the day on which the owner signs a contract
that complies with Section 2945.3.
(b) Cancellation occurs when the owner gives written notice of
cancellation to the foreclosure consultant by mail at the address
specified in the contract, or by facsimile or electronic mail at the
number or address identified in the contract.
(c) Notice of cancellation, if given by mail, is effective when
deposited in the mail properly addressed with postage prepaid. If
given by facsimile or electronic mail, notice of cancellation is
effective when successfully transmitted.
(d) Notice of cancellation given by the owner need not take the
particular form as provided with the contract and, however expressed,
is effective if it indicates the intention of the owner not to be
bound by the contract.
SEC. 3. SEC. 2. Section 2945.3 of
the Civil Code is amended to read:
2945.3. (a) Every contract shall be in writing and shall fully
disclose the exact nature of the foreclosure consultant's services
and the total amount and terms of compensation.
(b) The following notice, printed in at least 14-point boldface
type and completed with the name of the foreclosure consultant, shall
be printed immediately above the statement required by subdivision
(c) (d) :
""NOTICE REQUIRED BY CALIFORNIA LAW
_______________________________________or anyone
working
(Name)
for him or her CANNOT:
(1) Take any money from you or ask you for
money
until________________________________________has
(Name)
completely finished doing everything he or she
said he or she would do; and
(2) Ask you to sign or have you sign any lien,
deed of trust, or deed.''
(c) The contract shall be written in the same language as
principally used by the foreclosure consultant to describe his or her
services or to negotiate the contract. In addition, the foreclosure
consultant shall provide the owner, before the owner signs the
contract, with a copy of a completed contract written in any other
language used in any communication between the foreclosure consultant
and the owner and in any language requested by the owner. If English
is the language principally used by the foreclosure consultant to
describe the foreclosure consultant's services or to negotiate the
contract, the foreclosure consultant shall notify the owner orally
and in writing before the owner signs the contract that the owner has
the right to ask for a completed copy of the contract in a language
other than English.
(d) The contract shall be dated and signed by the owner and shall
contain in immediate proximity to the space reserved for the owner's
signature a conspicuous statement in a size equal to at least
10-point boldface type, as follows: "You, the owner, may cancel this
transaction at any time prior to midnight of the fifth business
day after the date of this transaction . See the attached
notice of cancellation form for an explanation of this right."
(e) The contract shall contain on the first page, in a type size
no smaller than that generally used in the body of the document, each
of the following:
(1) The name, mailing address, electronic mail address, and
facsimile number of the foreclosure consultant to which the notice of
cancellation is to be mailed.
(2) The date the owner signed the contract.
(f) The contract shall be accompanied by a completed form in
duplicate, captioned "notice of cancellation," which shall be
attached to the contract, shall be easily detachable, and shall
contain in type of at least 10-point the following statement written
in the same language as used in the contract:
""NOTICE OF CANCELLATION
_____________________________
(Enter date of transaction) (Date)
You may cancel this transaction, without any penalty
or
obligation, within five business days from the above
date.
To cancel this transaction, mail or deliver a signed
and dated copy of this cancellation notice, or any
other written notice, or send a telegram,
to __________________________________________________
(Name of foreclosure consultant)
at __________________________________________________
(Address of foreclosure consultant's place of
business)
You may also cancel by sending a facsimile (fax) of
a signed and dated copy of this cancellation notice,
or any other written notice, to the following
number:
_____________________________________________________
(Facsimile telephone number of foreclosure
consultant's place of business)
You may also cancel by sending an e-mail canceling
this transaction to the following e-mail address:
_____________________________________________________
(E-mail address of foreclosure consultant's
business)
I hereby cancel this
transaction
____________________________________________________.
(Date)
_________________________''
(Owner's signature)
(g) The foreclosure consultant shall provide the owner with a copy
of the contract and the attached notice of cancellation.
(h) Until the foreclosure consultant has complied with this
section, the owner may cancel the contract.
SEC. 4. SEC. 3. Section 2945.4 of
the Civil Code is amended to read:
2945.4. It shall be a violation for a foreclosure consultant to:
(a) Claim, demand, charge, collect, or receive any compensation
until after the foreclosure consultant has fully performed each and
every service the foreclosure consultant contracted to perform or
represented that he or she would perform.
(b) Claim, demand, charge, collect, or receive any fee, interest,
or any other compensation for any reason which exceeds 10 percent per
annum of the amount of any loan which the foreclosure consultant may
make to the owner.
(c) Take any wage assignment, any lien of any type on real or
personal property, or other security to secure the payment of
compensation. That security shall be void and unenforceable.
(d) Receive any consideration from any third party in connection
with services rendered to an owner unless that consideration is fully
disclosed to the owner.
(e) Acquire any interest in a residence in foreclosure from an
owner with whom the foreclosure consultant has contracted. Any
interest acquired in violation of this subdivision shall be voidable,
provided that nothing herein shall affect or defeat the title of a
bona fide purchaser or encumbrancer for value and without notice of a
violation of this article. Knowledge that the property was
"residential real property in foreclosure," does not constitute
notice of a violation of this article. This subdivision may not be
deemed to abrogate any duty of inquiry which exists as to rights or
interests of persons in possession of residential real property in
foreclosure.
(f) Take any power of attorney from an owner for any purpose.
(g) Induce or attempt to induce any owner to enter into a contract
which does not comply in all respects with Sections 2945.2 and
2945.3.
(h) Enter into an agreement at any time to assist the owner in
arranging, or arrange for the owner, the release of surplus funds
after the trustee's sale is conducted, whether the agreement involves
direct payment, assignment, deed, power of attorney, assignment of
claim from an owner to the foreclosure consultant or any person
designated by the foreclosure consultant, or any other compensation.
SEC. 5. SEC. 4. Section 2945.45 is
added to the Civil Code, to read:
2945.45. (a) Except as provided in subdivision (b) of Section
2945.1, a person shall not take any action specified in subdivision
(a) of Section 2945.1 unless the person satisfies the following
requirements:
(1) The person registers with, and is issued and maintains a
certificate of registration from, the Department of Justice in
accordance with the following requirements:
(A) The person shall submit a completed registration form, along
with applicable fees, to the department. The registration form shall
include the name, address, and telephone number of the foreclosure
consultant, all of the names, addresses, telephone numbers, Internet
Web sites, and e-mail addresses used or proposed to be used in
connection with acting as a foreclosure consultant, a statement that
the person has not been convicted of, or pled nolo contendere to, any
crime involving fraud, misrepresentation, dishonesty, or a violation
of this article, a statement that the person has not been liable
under any civil judgment for fraud, misrepresentation, or violations
of this article or of Section 17200 or 17500 of the Business and
Professions Code, and any additional information required by the
department.
(B) The registration form shall be accompanied by a copy of all
print or electronic advertising and other promotional material, and
scripts of all telephonic or broadcast advertising and other
statements used or proposed to be used in connection with acting as a
foreclosure consultant.
(C) The registration form shall be accompanied by a copy of the
bond required pursuant to paragraph (2).
(D) The person shall file an update of any material change in the
information required by subparagraphs (A) and (B) with the
department.
(E) The person shall pay any fee set by the department to defray
reasonable costs incurred in connection with the department's
responsibilities under this article.
(2) The person obtains and maintains in force a surety bond for
each transaction in the amount of one hundred thousand dollars
($100,000). The bond shall be executed by a corporate surety admitted
to do business in this state. The bond shall be made in favor of the
homeowner or, if the homeowner cannot be found, in favor of the
State of California for the benefit of the homeowner for damages
caused by the foreclosure consultant's violation of this article or
any other provision of law. A copy of the bond shall be filed with
the Secretary of State, with a copy provided to the department
pursuant to subparagraph (C) of paragraph (1).
(b) The Department of Justice may refuse to issue, or may revoke,
a certificate of registration because of any misstatement in the
registration form, because the foreclosure consultant has been held
liable for the violation of any law described in subparagraph (A) of
paragraph (1) of subdivision (a), or because the foreclosure
consultant has failed to maintain the bond required under paragraph
(2) of subdivision (a).
(c) A person who violates subdivision (a) shall be punished, for
each violation, by a fine of not less than one thousand dollars
($1,000) and not more than twenty-five thousand dollars ($25,000), by
imprisonment in the county jail for not more than one year, or by
both that fine and imprisonment. The imposition of a penalty pursuant
to this subdivision shall not be affected by the availability of any
other relief, remedy, or penalty provided by law, and shall not
affect the availability of any such relief, remedy, or penalty.
SEC. 6. SEC. 5. No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.