BILL NUMBER: AB 941	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Torrico

                        FEBRUARY 22, 2007

   An act to add Section 50308.5 to the Financial Code, relating to
lending.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 941, as introduced, Torrico. Adjustable rate mortgage
advertisements.
   Existing law, the California Residential Mortgage Lending Act,
provides for the licensure and regulation by the Commissioner of
Corporations of persons engaged in the business of making residential
mortgage loans or servicing those loans. Existing law provides that
if any person engaged in the business of making or servicing those
loans refers in any advertising to rates of interest, charges, or
costs of loans, the commissioner shall require that they are stated
fully and clearly in a manner that the commissioner deems necessary
to give adequate information to prospective borrowers. A willful
violation of the California Residential Mortgage Lending Act is a
crime.
   This bill would require a person engaged in the business of making
or servicing residential mortgage loans who advertises option
adjustable rate mortgage loans and references a payment rate with a
negative amortization feature to include a specified disclosure in
the advertisements.
   Because a willful violation of the bill's requirements would be a
crime, this 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 50308.5 is added to the Financial Code, to
read:
   50308.5.  (a) If a person engaged in the business regulated by
this division advertises option adjustable rate mortgage loans and
references a payment rate with a negative amortization feature, those
advertisements, whether written or broadcast through radio,
television, or computer, shall include the following disclosure:
   "This advertised rate of ____ is not the actual interest rate. It
is the payment rate. If the borrower chooses to pay this advertised
rate, the principal balance of the loan will increase."
   (b) The disclosure specified in subdivision (a) shall be in a font
no smaller than the prevailing font in the printed advertisement. If
the advertisement includes a monthly payment based on the payment
rate, the disclosure may be in the same font as the advertised
monthly payment as long as the font is not smaller than the
prevailing font in the printed advertisement. In the case of audible
advertisements, the disclosure shall be read before the end of the
advertisement.
  SEC. 2.  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.