BILL NUMBER: SB 1242 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 24, 2008
INTRODUCED BY Senators Runner and Harman
FEBRUARY 14, 2008
An act to amend Section 1748.5 of the Civil Code,
relating to credit cards. An act to add Section
10177.7 to the Business and Profession s Code, to amend
Section 1695.17 of, and to add Sections 1922 and 2949.5 to, the Civil
Code, and to amend Section 17144 of, and to add and repeal Sections
17053.9 and 23606 of, the Revenue and Taxation Code, relating to
residential mortgages, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 1242, as amended, Runner. Credit cards.
Residential mortgages.
(1) Existing law, the Real Estate Law, requires listing and
selling agents, as defined, to provide sellers and buyers in a
residential real property transaction with a disclosure form, as
prescribed, containing general information on real estate agency
relationships. Existing law also requires the listing or selling
agent to disclose to the buyer and seller whether he or she is acting
as the buyer's agent exclusively, the seller's agent exclusively, or
as a dual agent representing both the buyer and the seller.
This bill would require a person or entity that arranges financing
in connection with a sale, lease, or exchange of real property and
acts as an agent with respect to that property to make a written
disclosure of those roles and his or her compensation, within 24
hours, to all parties to the sale, lease, or exchange and any related
loan transaction.
By imposing additional requirements under the Real Estate Law, the
willful violation of which would be a crime, this bill would impose
a state-mandated local program.
(2) Under existing law, an equity purchaser is liable for all
damages resulting from any statement made, or act committed by, the
representative of the equity purchaser, as defined, in any manner
connected with the equity purchaser's acquisition of a residence in
foreclosure, receipt of any consideration or property from or on
behalf of the equity seller, or the performance of certain prohibited
acts. Existing law requires the representative of the equity
purchaser to provide a statement in writing to all parties to the
contract, under penalty of perjury, and written proof of licensure
and bonding to the equity seller, as specified.
This bill would instead require the representative of an equity
purchaser to provide to the parties to a contract written proof of
licensure, as specified. The bill would also require the
representative to provide a statement under penalty of perjury and
written proof to the parties to the contract that he or she has
either (1) satisfied a certain minimum professional liability
coverage requirement and has an unrestricted real estate license in
good standing, as described by the regulations of the Real Estate
Commissioner, that is not restricted pursuant to the Real Estate
Recovery Program, as specified, or (2) met a certain minimum bonding
requirement.
Because this bill would expand the scope of the existing crime of
perjury, it would impose a state-mandated local program.
(3) Existing law requires every mortgage instrument to meet
specified requirements. Existing law invalidates any change in
interest provided for in any provision for a variable interest rate
contained in a security document, as defined, or evidence of debt
issued therewith, unless the provision is set forth in the security
document or evidence of debt, the document or documents contain,
among others, a statement notifying the borrower that the mortgage
may provide for changes in interest, principal loan balance, payment,
or loan terms, and, upon a change in interest rate, the borrower is
mailed specified information on the base index and interest rate
change.
This bill would require residential mortgage lenders or loan
servicers of higher-priced mortgage loans, as defined, with variable
interest rates to provide borrowers notice of any rate reset 120 days
prior to that reset, as specified.
(4) Existing law provides that any interest in real property that
is capable of being transferred may be mortgaged. Existing law
provides that a mortgage of real property may be made in a specified
form. Existing law provides for the regulation of mortgages relating
to, among other things, single-family, owner-occupied dwellings and
recordings and acknowledgments.
This bill would provide that any person who knowingly and
willfully defrauds a creditor by acknowledging in the documentation
for an owner-occupied residential mortgage loan that the property
secured by the loan is to be owner-occupied when that property is
actually intended, and used, as rental property, shall be liable for
a civil penalty not to exceed 20% of the total amount of the
residential mortgage loan, with specified exceptions.
(5) The Personal Income Tax Law and the Corporation Tax Law
authorize various credits against the taxes imposed by those laws.
This bill would authorize a credit against those taxes for each
taxable year beginning on or after January 1, 2008, and before
January 1, 2011, in an amount equal to 20% of any contribution made
by a qualified taxpayer, as defined, during the taxable year to any
nonprofit, HUD-approved credit counseling agency that assists
homeowners with mortgage problems. The bill would require the
Franchise Tax Board to report annually to the Legislature with regard
to those credits, as specified.
(6) The Personal Income Tax Law, in modified conformity with
federal income tax laws, authorizes an exclusion from gross income
for qualified principal residence indebtedness, as defined, but
requires specified discharges of indebtedness to be included in gross
income.
This bill would, in modified conformity with federal law, provide
for an exclusion from gross income for discharges of indebtedness on
a principal residence that occur on or after January 1, 2007.
(7) 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.
(8) This bill would declare that it is to take effect immediately
as an urgency statute.
Existing state and federal law regulate the terms and conditions
of credit cards. Existing state law permits a credit cardholder to
request the card issuer to inform the cardholder of the total amount
of finance charges assessed on the account during the preceding
calendar year and requires the card issuer to provide that
information to the cardholder within 30 days without charge, except
as specified.
This bill would make technical, nonsubstantive changes to these
provisions.
Vote: majority 2/3 . Appropriation:
no. Fiscal committee: no yes .
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10177.7 is added to the
Business and Professions Code , to read:
10177.7. When an agent undertakes to arrange financing in
connection with a sale, lease, or exchange of real property, or when
a person or entity arranging financing in connection with the sale,
lease, or exchange of real property undertakes to act as an agent
with respect to that property, that agent, person, or entity shall,
within 24 hours, make a written disclosure of those roles to all
parties to the sale, lease, or exchange, and any related loan
transaction. That disclosure shall also provide the basis for
compensation and the amount of expected compensation from these
activities. For purposes of this section, "agent" has the same
meaning as defined in subdivision (a) of Section 2079.13 of the Civil
Code.
SEC. 2. Section 1695.17 of the Civil
Code is amended to read:
1695.17. (a) Any A representative,
as defined in subdivision (b) of Section 1695.15, deemed to be the
agent or employee, or both the agent and the employee of the equity
purchaser shall be is required to
provide both of the following:
(1) Written
written proof to the equity
seller parties to the contract that the
representative has a valid current California Real Estate Sales
License and that the representative is bonded by an admitted
surety insurer in an amount equal to twice the fair market value of
the real property which is the subject of the contract.
(2) A statement in
writing, under penalty of perjury, that the representative has a
valid current California Real Estate Sales License, is bonded by an
admitted surety insurer in an amount equal to at least twice the
value of the real property which is the subject of the contract and
has complied with paragraph (1). The written statement required by
this paragraph shall be provided to all parties to the contract prior
to the transfer of any interest in the real property which is the
subject of the contract meets the financial
responsibility requirement described in subdivision (c) .
(b) The failure to comply with subdivision (a) shall at the option
of the equity seller render the equity purchase contract void and
the equity purchaser shall be liable to the equity seller for all
damages proximately caused by the failure to comply.
(c) For purposes of this section, a representative shall
demonstrate financial responsibility by providing written proof to
the parties to the contract and a statement under penalty of perjury
that he or she has obtained either of the following:
(1) Professional liability coverage in an amount equal to one
million dollars ($1,000,000) and an unrestricted real estate license
in good standing as described by the regulations of the Real Estate
Commissioner pursuant to Chapter 6 (commencing with Section 2705) of
Title 10 of the California Code of Regulations, that is not
restricted under the Real Estate Recovery Program pursuant to Chapter
6.5 (commencing with Section 10470) of Part 1 of Division 4 of the
Business and Professions Code.
(2) A surety bond for each contract in an amount equal to at least
one-third of the median home price, as published by the California
Association of Realtors, for the metropolitan area within which the
property is located or, if data for the metropolitan area is not
available, for the county in which the property is located. 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, the State of California for the
benefit of a homeowner for damages resulting from any statement made,
or act committed by, the representative in any manner connected with
the equity purchaser's acquisition of a residence in foreclosure,
receipt of any consideration or property from or on behalf of the
equity seller, or the performance of any act prohibited by this
chapter.
SEC. 3. Section 1922 is added to the
Civil Code , to read:
1922. (a) Notwithstanding any other provision of law, residential
mortgage lenders or loan servicers of higher-priced mortgage loans
with variable interest rates shall provide borrowers notice of any
rate reset 120 days prior to that reset. The notice shall include, at
a minimum, acknowledgment of the loan reset and that the borrower
may contact the lender or servicer with his or her questions.
(b) (1) (A) For purposes of this section, "higher-priced mortgage
loan" means a consumer credit transaction that is secured by the
consumer's principal dwelling in which the annual percentage rate at
consummation exceeds the yield on comparable Treasury securities by
three or more percentage points for loans secured by a first lien on
a dwelling, or by five or more percentage points for loans secured by
a subordinate lien on a dwelling.
(B) Comparable Treasury securities are determined as follows for
variable interest rate loans:
(i) For a loan with an initial rate that is fixed for more than
one year, securities with a maturity matching the duration of the
fixed-rate period, unless the fixed-rate period exceeds seven years,
in which case the lender or servicer shall use the rules applied to
nonvariable interest rate loans.
(ii) For all other loans, securities with a maturity of one year.
(C) Comparable Treasury securities are determined as follows for
nonvariable interest rate loans:
(i) For a loan with a term of 20 years or more, securities with a
maturity of 10 years.
(ii) For a loan with a term of more than seven years, but less
than 20 years, securities with a maturity of seven years.
(iii) For a loan with a term of seven years or less, securities
with a maturity matching the term of the transaction.
(D) The lender or servicer shall use the yield on Treasury
securities as of the 15th day of the preceding month if the lender or
servicer is to provide the notice described in subdivision (a)
between the 1st and the 14th day of the month or as of the 15th day
of the current month if the lender or servicer is to provide that
notice on or after the 15th day.
(2) For purposes of this section, "higher-priced mortgage loans
with variable interest rates" excludes transactions to finance the
initial construction of a dwelling, temporary or bridge loans with a
term of 12 months or less, such as a loan to purchase a new dwelling
where the consumer plans to sell a current dwelling within 12 months,
reverse-mortgage transactions, or home equity lines of credit.
SEC. 4. Section 2949.5 is added to the
Civil Code , to read:
2949.5. Any person who knowingly and willfully defrauds a
creditor by acknowledging in the documentation for an owner-occupied
residential mortgage loan that the property secured by the loan is to
be owner-occupied when that property is actually intended, and used,
as rental property shall be liable for a civil penalty not to exceed
20 percent of the total amount of the residential mortgage loan.
This section shall not apply to a good-faith borrower who vacates his
or her residence because of a significant change in circumstances,
including, but not limited to, job relocation, death in the family,
or unemployment. This section shall be construed to be in conformity
with the provisions of Section 121(a) of the Internal Revenue Code
regarding capital gains tax treatment of a taxpayer's primary
residential property.
SEC. 5. Section 17053.9 is added to the
Revenue and Taxation Code , to read:
17053.9. (a) For each taxable year beginning on or after January
1, 2008, and before January 1, 2011, there shall be allowed a credit,
as determined in subdivision (b), against the amount of "net tax,"
as defined in Section 17039, to a qualified taxpayer who makes a
contribution to any nonprofit, HUD-approved credit counseling agency
that assists homeowners with mortgage problems.
(b) The amount of credit shall constitute 20 percent of the
contribution described in subdivision (a).
(c) For purposes of this section, "qualified taxpayer" means a
taxpayer engaged in the practice of real estate with 20 percent or
more of that practice devoted to residential mortgage lending.
(d) The Franchise Tax Board shall report annually to the Budget
and Fiscal Review Committee of the Senate, the Budget Committee of
the Assembly, the Senate Committee on Revenue and Taxation, and the
Assembly Committee on Revenue and Taxation on the aggregate amount
claimed under this section.
(e) The requirements of subdivision (d) shall not apply if the
Department of Finance separately reports those aggregate numbers to
the Legislature or budget committees.
(f) This section shall remain in effect only until December 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before December 1, 2011, deletes or extends
that date.
SEC. 6. Section 17144 of the Revenue
and Taxation Code is amended to read:
17144. (a) Section 108(b)(2)(B) of the Internal Revenue Code,
relating to general business credit, is modified by substituting
"this part" in lieu of "Section 38 (relating to general business
credit)."
(b) Section 108(b)(2)(G) of the Internal Revenue Code, relating to
foreign tax credit carryovers, shall not apply.
(c) Section 108(b)(3)(B) of the Internal Revenue Code, relating to
credit carryover reduction, is modified by substituting "11.1 cents"
in lieu of "331/3 cents" in each place in which it appears. In the
case where more than one credit is allowable under this part, the
credits shall be reduced on a pro rata basis.
(d) Section 108(g)(3)(B) of the Internal Revenue Code, relating to
adjusted tax attributes, is modified by substituting "($9)" in lieu
of "($3)."
(e) (1) If a taxpayer makes an election for federal income tax
purposes under Section 108(c) of the Internal Revenue Code, relating
to treatment of discharge of qualified real property business
indebtedness, a separate election shall not be allowed under
paragraph (3) of subdivision (e) of Section 17024.5 and the federal
election shall be binding for purposes of this part.
(2) If a taxpayer has not made an election for federal income tax
purposes under Section 108(c) of the Internal Revenue Code, relating
to treatment of discharge of qualified real property business
indebtedness, then the taxpayer shall not be allowed to make that
election for purposes of this part.
(f) (1) Paragraph (1) of Section 108(a) of the Internal Revenue
Code is modified by striking "or" at the end of subparagraph (C), by
striking the period at the end of subparagraph (D) and inserting ",
or" and by inserting after subparagraph (D) the following new
subparagraph:
(E) The indebtedness discharged is qualified principal residence
indebtedness which is discharged before January 1, 2010.
(2) For purposes of this section, the term "qualified principal
residence indebtedness" means acquisition indebtedness (within the
meaning of Section 163 (h)(3)(B) of the Internal Revenue Code,
applied by substituting "$2,000,000 ($1,000,000" for "$1,000,000
($500,000" in clause (ii) thereof) with respect to the principal
residence of the taxpayer.
(g) For purposes of this section, all of the following rules shall
apply:
(1) The amount excluded from gross income by reason of Section 108
(a)(1)(E) of the Internal Revenue Code shall be applied to reduce
(but not below zero) the basis of the principal residence of the
taxpayer.
(2) Section 108(a)(1)(E) of the Internal Revenue Code shall not
apply to the discharge of a loan if the discharge is on account of
services performed for the lender or any other factor not directly
related to a decline in the value of the residence or to the
financial condition of the taxpayer.
(3) If any loan is discharged, in whole or in part, and only a
portion of that loan is qualified principal residence indebtedness,
Section 108(a)(1)(E) of the Internal Revenue Code shall apply only to
so much of the amount discharged as exceeds the amount of the loan
(as determined immediately before such discharge) that is not
qualified principal residence indebtedness.
(4) The term "principal residence" has the same meaning as when
used in Section 121 of the Internal Revenue Code.
(h) (1) Section 108(a)(2)(A) of the Internal Revenue Code is
modified by substituting "(D), and (E)" in lieu of "and D."
(2) Section 108(a)(1)(B) of the Internal Revenue Code shall not
apply to a discharge to which Section 108(a)(1)(E) of the Internal
Revenue Code, as modified by this section, applies unless the
taxpayer elects to apply paragraph (1)(B) of Section 108(a) of the
Internal Revenue Code in lieu of paragraph (1)(E) of Section 108(a)
of the Internal Revenue Code.
(i) The amendments to this section by the act adding this
subdivision shall apply to discharges of indebtedness that occur on
or after January 1, 2007.
SEC. 7. Section 23606 is added to the
Revenue and Taxation Code , to read:
23606. (a) For each taxable year beginning on or after January 1,
2008, and before January 1, 2011, there shall be allowed a credit,
as determined in subdivision (b), against the amount of "tax," as
defined in Section 23036, to a qualified taxpayer who makes a
contribution to any nonprofit, HUD-approved credit counseling agency
that assists homeowners with mortgage problems.
(b) The amount of credit shall constitute 20 percent of the
contribution described in subdivision (a).
(c) For purposes of this section, "qualified taxpayer" means a
taxpayer, other than a "C" corporation, as described in Subchapter C
of Chapter 1 of Subtitle A of the Internal Revenue Code, engaged in
the practice of real estate with 20 percent or more of that practice
devoted to residential mortgage lending.
(d) The Franchise Tax Board shall report annually to the Budget
and Fiscal Review Committee of the Senate, the Budget Committee of
the Assembly, the Senate Committee on Revenue and Taxation, and the
Assembly Committee on Revenue and Taxation on the aggregate amount
claimed under this section.
(e) The requirements of subdivision (d) shall not apply if the
Department of Finance separately reports those aggregate numbers to
the Legislature or budget committees.
(f) This section shall remain in effect only until December 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before December 1, 2011, deletes or extends
that date.
SEC. 8. 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.
SEC. 9. This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or safety
within the meaning of Article IV of the Constitution and shall go
into immediate effect. The facts constituting the necessity are:
In order to stabilize and protect the state and local economies
and housing market at the earliest possible time, it is necessary for
this act to take effect immediately.
SECTION 1. Section 1748.5 of the Civil Code is
amended to read:
1748.5. (a) A cardholder may request, not more frequently than
once a year, that the card issuer inform the cardholder of the total
amount of finance charges assessed on the account during the
preceding calendar year and the card issuer shall provide that
information to the cardholder within 30 days of receiving the
request, without charge.
If the cardholder's request for the information is made in
writing, the card issuer shall provide the information in writing.
However, if the card issuer is required to furnish the cardholder
with a periodic billing or periodic statement of account or furnishes
the billing or statement of account, the requested statement of
finance charges may be furnished along with the periodic billing or
periodic statement of account.
(b) This section does not apply to card issuers or cardholders who
issue or use credit cards in connection with a retail installment
account, as defined in Section 1802.7.