BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 34
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          Date of Hearing:   April 28, 2009

                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
                                 Mary Hayashi, Chair
                      AB 34 (Nava) - As Amended:  April 2, 2009
           
          SUBJECT  :   Real estate, finance lender and residential mortgage  
          lender licenses: mortgage loan originators.

           SUMMARY  :   Establishes new requirements for the licensing of all  
          mortgage loan originators to conform state law to recently  
          enacted federal laws known as the Secure and Fair Enforcement of  
          Mortgage Licensing Act (SAFE).  Specifically,  this bill  :  

          1)Establishes standards, requirements, prohibitions for mortgage  
            loan originators operating under the real estate law, the  
            California finance lenders law (CFLL) and the Residential  
            Mortgage Lending Act (RMLA) in order to comply with the Secure  
            and Fair Enforcement for Mortgage Licensing (SAFE) Act (Public  
            Law 110-289).

          2)Prohibits any individual from engaging in the business as a  
            mortgage loan originator without first obtaining and  
            maintaining a loan originator's license and registering with  
            the Nationwide Mortgage Licensing System and Registry NMLSR.

          3)Provides for the following definitions:

             a)   "Mortgage loan originator" means an individual who takes  
               a residential mortgage loan application or offers or  
               negotiates terms of a residential mortgage loan for  
               compensation or gain. An individual real estate licensee  
               acting within the meaning of paragraph (d) of Section 10131  
               is a mortgage loan originator for purposes of this article  
               with respect to activities involving residential mortgage  
               loans.

             b)   Mortgage loan originator does not include any of the  
               following:

               i)     An individual who performs purely administrative or  
                 clerical tasks on behalf of a person meeting the  
                 definition of a mortgage loan originator, except as  
                 otherwise provided in subdivision (d) of Section  
                 10166.03. The term "administrative or clerical tasks"  








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                 means the receipt, collection, and distribution of  
                 information common for the processing or underwriting of  
                 a loan in the mortgage industry and communication with a  
                 consumer to obtain information necessary for the  
                 processing or underwriting of a residential mortgage  
                 loan.

               ii)    An individual that is not compensated by a lender,  
                 other mortgage loan originator, or by any agent of any  
                 lender or other mortgage loan originator.

               iii)   An individual that is solely involved in extensions  
                 of credit relating to timeshare plans, as that term is  
                 defined in Section 101(53D) of Title 11 of the United  
                 States Code.

               iv)    An individual licensed or registered as a mortgage  
                 loan originator pursuant to the provisions of the  
                 Financial Code and the SAFE Act.

             c)   "Nationwide Mortgage Licensing System and Registry"  
               means a mortgage licensing system developed and maintained  
               by the Conference of State Bank Supervisors and the  
               American Association of Residential Mortgage Regulators for  
               the licensing and registration of mortgage loan  
               originators.

             d)   "Residential mortgage loan" means any loan primarily for  
               personal, family, or household use that is secured by a  
               mortgage, deed of trust, or other equivalent consensual  
               security interest on a dwelling, or residential real estate  
               upon which is constructed or intended to be constructed a  
               dwelling. "Dwelling" means a residential structure that  
               contains one to four units, whether or not that structure  
               is attached to real property. The term includes an  
               individual condominium unit, cooperative unit, mobile home,  
               or trailer, if it is used as a residence.

             e)   "Unique identifier" means a number or other identifier  
               assigned by protocols established by the Nationwide  
               Mortgage Licensing System and Registry.

             f)   "Loan processor or underwriter" means an individual who  
               performs clerical or support duties as an employee at the  
               direction of, and subject to the supervision and  








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               instruction of, a mortgage loan originator. 

             g)   "Nontraditional mortgage product" means any mortgage  
               product other than a 30-year fixed rate mortgage

             h)   "Registered mortgage loan originator" means any  
               individual who:

               i)     Meets the definition of a mortgage loan originator  
                 and is an employee of either:

                  (1)       A depository institution.

                  (2)       A subsidiary that is owned and controlled by a  
                    depository institution and regulated by a federal  
                    banking agency.

               ii)    An institution regulated by the Farm Credit  
                 Administration.

               iii)   Is registered with, and maintains a unique  
                 identifier through, the Nationwide Mortgage Licensing  
                 System and Registry.

          4)Requires real estate brokers to notify to the Department of  
            Real Estate (DRE) within 30 days of implementation of this  
            legislation or upon commencing specific activities under the  
            real estate law, such as listing properties or arranging loans  
            secured by real property.

          5)Provides that no individual shall engage in the business of a  
            loan originator under the real estate law without the  
            following:

             a)   Obtaining and maintaining a real estate license; and,

             b)   Obtaining and maintaining a real estate license  
               endorsement identifying that individual as a licensed  
               mortgage loan originator.

          6)Specifies that a license endorsement shall be valid for  
            one-year and the application for the endorsement shall be in  
            the form prescribed by the commissioner.

          7)Provides that the penalty for a real estate broker who fails  








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            to notify DRE of their activities, or who fails to obtain a  
            license endorsement shall be assessed a penalty of fifty  
            dollars per day for each day written notification has not been  
            received or a license endorsement has not been obtained up to  
            the 31st day.  On or after the 31st day, the fine shall be  
            $100 dollars per day, not to exceed a penalty of ten thousand  
            dollars.  Failure to pay a penalty may result in the  
            suspension or revocation of a license.

          8)Requires that in connection with an application to DRE for a  
            license endorsement as a mortgage loan originator, every  
            applicant shall furnish to NMLSR information concerning the  
            applicant's identity including fingerprints for the purpose of  
            conducting a criminal background check and personal history  
            and experience in a form prescribed by NMLSR.

          9)Provides that the commissioner of DRE shall not issue a  
            license endorsement to act as a mortgage loan originator to an  
            applicant unless the commissioner makes all of the following  
            findings:

             a)   The applicant has never had a mortgage loan originator  
               license revoked in any other governmental jurisdiction.

             b)   The applicant has not been convicted of, or pled guilty  
               or nolo contendere to, a felony in a domestic, foreign, or  
               military court, under either of the following conditions,  
               however, any conviction expunged from the applicant's  
               record shall not be considered a conviction for purposes of  
               this subdivision:

               i)     During the seven year period preceding the date of  
                 the application for licensing.

               ii)    At any time preceding the date of application, if  
                 the felony involved an act of fraud, dishonesty, a breach  
                 of trust, or money laundering.

             c)   The applicant has demonstrated such financial  
               responsibility, character, and general fitness as to  
               command the confidence of the community and warrant a  
               determination that the mortgage loan originator will  
               operate honestly, fairly, and efficiently within the  
               purposes of the article.









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             d)   The applicant has complied with the appropriate  
               education and written testing requirements.

          10)Requires an applicant for a license endorsement as a mortgage  
            loan originator to complete at least 20 hours of education  
            courses, which shall include at least the following:

             a)   Three hours of federal law and regulations;

             b)   Three hours of ethics, which shall include instruction  
               on fraud, consumer protection, and fair lending issues;  
               and,

             c)   Two hours of training related to lending standards for  
               the nontraditional mortgage product marketplace.

          11)Requires an applicant applying for registration to NMLSR to  
            provide the following:

             a)   A credit report from a consumer reporting agency; and,

             b)   Information related to any administrative civil, or  
               criminal findings by any governmental jurisdiction.

          12)Allows a person who successfully completes the education  
            requirements approved by the Nationwide Mortgage Licensing  
            System and Registry in any state other than California to be  
            granted credit toward completion of the education requirements  
            of required by this bill. 

          13)Requires, before being issued a license endorsement to act as  
            a mortgage loan originator, that an individual shall pass a  
            qualified written test developed or otherwise deemed  
            acceptable by the NMLSR and administered by a test provider  
            approved or otherwise deemed acceptable by NMLSR.

          14)Requires an individual to achieve a test score of not less  
            than 75%.

          15)Allow an individual who fails the qualified written test to  
            retake the test up to three consecutive times, with at least  
            30 days passing between each retest.  Subsequent to failing  
            three consecutive times, the applicant must wait at least six  
            months before retest.









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          16)Provides that a mortgage loan originator who fails to  
            maintain a valid license for a period of five years shall  
            retake the test.

          17)Provides that education courses are only acceptable if they  
            have been reviewed and approved, or otherwise deemed  
            acceptable, by the NMLSR, in accordance with the SAFE Act, and  
            by the commissioners of DRE and DOC.  

          18)Requires a real estate broker who makes, arranges or services  
            one or more loans in a calendar year to provide to DRE with a  
            business activities report for the fiscal year that discloses  
            the following:

             a)   Name and license number of the supervising broker and  
               names and license numbers of the real estate brokers and  
               salespersons under that broker's supervision. The report  
               shall include brokers and salespersons who were under the  
               supervising broker's supervision for all or part of the  
               year.

             b)   A list of the real estate-related activities in which  
               the supervising broker and the brokers and salespersons  
               under his or her supervision engaged during the prior year.  
               This listing shall identify all of the following.

               i)     Activities relating to mortgages, including  
                 arranging, making, or servicing.

               ii)    Other activities performed under the real estate  
                 broker's or salesperson's license.

               iii)   Activities performed under related licenses,  
                 including, but not limited to, a license to engage as a  
                 finance lender or a finance broker under the California  
                 Finance Lenders Law (Division 9 (commencing with Section  
                 22000) of the Financial Code), or a license to engage as  
                 a residential mortgage lender or residential mortgage  
                 loan servicer under the California Residential Mortgage  
                 Lending Act (Division 20 (commencing with Section 50000)  
                 of the Financial Code).

             c)   A list of the forms of media used by the broker and  
               those under his or her supervision to advertise to the  
               public, including print, radio, television, the Internet,  








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               or other means.

             d)   For fixed rate loans made, brokered, or serviced, all of  
               the following:

               i)     The total number, aggregate principal amount, lowest  
                 interest rate, highest interest rate, and a list of the  
                 institutional lenders of record. If the loan was funded  
                 by any lender other than an institutional lender, the  
                 broker shall categorize the loan as privately funded.

               ii)    The total number and aggregate principal amount of  
                 covered loans, as defined in Section 4970 of the  
                 Financial Code.

               iii)   The total number and aggregate principal amount of  
                 loans for which Department of Real Estate form RE Form  
                 885 or an equivalent is required.

             e)   For adjustable rate loans made, brokered, or serviced,  
               all of the following:

               i)     The total number, aggregate principal amount, lowest  
                 beginning interest rate, highest beginning interest rate,  
                 highest margin, and a list of the institutional lenders  
                 of record. If the loan was funded by any lender other  
                 than an institutional lender, the broker shall categorize  
                 the loan as privately funded.

               ii)    The total number and aggregate principal amount of  
                 covered loans, as defined in Section 4970 of the  
                 Financial Code.

               iii)   The total number and aggregate principal amount of  
                 loans for which Department of Real Estate form RE Form  
                 885 or an equivalent is required.

             f)   For all loans made, brokered, or serviced, the total  
               number and aggregate principal amount of loans funded by  
               institutional lenders, and the total number and aggregate  
               principal amount of loans funded by private lenders.

             g)   For all loans made, brokered, or serviced, the total  
               number and aggregate principal amount of loans that  
               included a prepayment penalty, the minimum prepayment  








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               penalty length, the maximum prepayment penalty length, and  
               the number of loans with prepayment penalties whose length  
               exceeded the length of time before the borrower's loan  
               payment amount could increase.

             h)   For all loans brokered, the total compensation received  
               by the broker, including yield spread premiums,  
               commissions, and rebates, but excluding compensation used  
               to pay fees for third-party services on behalf of the  
               borrower.

             i)   For all mortgage loans made or brokered, the total  
               number of loans for which a mortgage loan disclosure  
               statement was provided in a language other than English,  
               and the number of forms provided per language other than  
               English.

             j)   For all mortgage loans serviced, the total amount of  
               funds advanced to be applied toward a payment to protect  
               the security of the note being serviced.

          19)Requires each mortgage loan originator to submit reports of  
            condition to the NMLSR.

          20)Provides for the following minimum standards for renewal to  
            act as a mortgage loan originator:

             a)   The mortgage loan originator constitutes to meet the  
               minimum act as a mortgage loan originator; and,

             b)   Maintains continuing education requirements.

          21)Requires a mortgage loan originator to complete at least  
            eight hours of continuing education requirements annually.

          22)Provides and clarifies that real estate brokers shall  
            maintain certain records and documents that will enable the  
            commissioner of DRE to determine compliance with the  
            requirements of the SAFE act.

          23)Provides authority to the DRE to conduct examinations of real  
            estate licensees as often as deemed necessary by the  
            commissioner.

          24)Requires a real estate broker to make any special reports to  








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            the commissioner of DRE as may be requested.

          25)Provides DRE with the authority and permission to participate  
            in the NMLSR and in order to participate, may make rules,  
            regulations and orders as necessary.

          26)Require a real estate licensee to submit a true copy of  
            advertising to DRE for approval prior to its use.

          27)Prohibits the dissemination of any advertisement by a real  
            estate license or mortgage loan originator unless the  
            advertisement includes the license number and unique  
            identifier assigned to that licensee by NMLSR.

          28) Specifies that an application for a finance lender or broker  
            licenses under the CFL may be made through the NMLSR including  
            fingerprints, fees, financial statements, and other supporting  
            documents.

          29)Requires a finance lender or broker under the CFL in the  
            business of making or brokering residential mortgage loans  
            shall maintain a net worth of at least $250,000.

          30)Allows the commissioner of DOC to deny an application for  
            licensure as a CLF or RML if the applicant employs a mortgage  
            loan originator who is not licensed in California.

          31)Provides the commissioner of DOC with authority to require  
            additional bond amounts for CFL licensees who employ one or  
            more mortgage loan originators, based on the dollar amount of  
            residential mortgage loans originated by the licensee.

          32)Requires CFL and RML licensees to maintain copies of all  
            advertising material for a period of 90 days after its first  
            use, and required that the commissioner of DOC approve the  
            advertising prior to its first use.

          33)Requires every CFL licensee engaged in the business of making  
            or brokering residential mortgage loans shall establish a  
            record with the Nationwide Mortgage Licensing System and  
            Registry.

          34)Requires every CFL licensee engaged in the business of making  
            or brokering residential mortgage loans to ensure that every  
            mortgage loan originator employed or compensated by the  








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            licensee is licensed or registered as a mortgage loan  
            originator 

          35)Provides that a CFL licensee engaged in the business of  
            making or brokering residential mortgage loans may not make or  
            broker a loan that was offered by, negotiated by, or applied  
            for through, a mortgage loan originator not licensed or  
            registered through the Nationwide Mortgage Licensing System  
            and Registry.

          36)Provides that under the CFL and RMLA laws that an applicant  
            for licensure as a mortgage loan originator shall apply  
            through the submission of the uniform form prescribed by the  
            NMLSR and allows the commissioner of DOC to require the  
            submission of additional information or supporting  
            documentation to the department.  Additionally requires the  
            following for CFL and RML employees who seek to act as loan  
            originators:

             a)   At the time of filing the application, the applicant  
               shall pay to the commissioner a sum to be determined by the  
               commissioner as an application fee for processing the  
               application and investigating the applicant. The  
               application and investigating fee are not refundable if an  
               application is denied or withdrawn; and,

             b)   In connection with an application for licensing as a  
               mortgage loan originator, the applicant shall, at a  
               minimum, furnish to the NMLSR information concerning the  
               applicant's identity, including the following:

               i)     Fingerprints for submission to the Federal Bureau of  
                 Investigation, and any governmental agency or entity  
                 authorized to receive such information for a state,  
                 national, and international criminal history background  
                 check.

               ii)    Personal history and experience in a form prescribed  
                 by the NMLSR, including the submission of authorization  
                 for the NMLSR and the commissioner to obtain the  
                 following.

               iii)   An independent credit report obtained from a  
                 consumer reporting agency.
               iv)    Information related to any administrative, civil, or  








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                 criminal findings by any governmental jurisdiction.

          37)Provides that the commissioner of DOC shall not issue a  
            mortgage loan originator license under the CFLL or RMLA unless  
            the commissioner makes, at a minimum, the following findings:

             a)   The applicant has never had a mortgage loan originator  
               license revoked in any governmental jurisdiction, except  
               that a subsequent formal rescission of the revocation shall  
               not be deemed a revocation;

             b)   The applicant has not been convicted of, or pled guilty  
               or nolo contendere to, a felony in a domestic, foreign, or  
               military court during the seven-year period preceding the  
               date of the application for licensing and registration, or  
               at any time preceding the date of application, if the  
               felony involved an act of fraud, dishonesty, or a breach of  
               trust, or money laundering. For purposes of this  
               subdivision, any pardon of a conviction shall not be a  
               conviction; 

             c)   The applicant has demonstrated financial responsibility,  
               character, and general fitness such as to command the  
               confidence of the community and to warrant a determination  
               that the mortgage loan originator will operate honestly,  
               fairly, and efficiently within the purposes of the Secure  
               and Fair Enforcement for Mortgage Licensing Act of 2008  
               (Public Law 110-289);

             d)   The applicant has completed the pre-licensing education  
                                                                   requirement described in; 

             e)   The applicant has passed a written test that meets the  
               test requirement described in; and,

             f)   The surety bond of the RML or CFL or servicer employing  
               or intending to employ the applicant covers the activities  
               of the applicant, or the applicant is otherwise covered by  
               a bond or recovery fund.

          38)Requires an individual who seeks licensure as a loan  
            originator under the RMLA or the CFLL shall complete at least  
            20 hours of approved education which shall include at least  
            the following:









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             a)   Three hours of federal law and regulations;

             b)   Two hours of state law and regulations;

             c)   Three hours of ethics, which shall include instruction  
               on fraud, consumer protection, and fair lending issues;  
               and,

             d)   Two hours of training related to lending standards for  
               the nontraditional mortgage product marketplace.



          39)Provides that each mortgage loan originator under the CFLL  
            and RMLL shall submit to the NMLSR reports of condition, which  
            shall be in the form and shall contain that information as the  
            NMLSR may require.

          40)Provides that under the RMLA and CFLL laws that the following  
            are minimum standards for license renewal for mortgage loan  
            originators:

             a)   The originator meets minimum standards and requirements;

             b)   The originator has paid all fees; and,

             c)   The originator has satisfied annual continuing  
               educational requirements.

          41)Allows the commissioner of DOC to do any of the following:

             a)   Deny, suspend, revoke, condition, or decline to renew a  
               mortgage loan originator license for a violation of this  
               division, or any rules or regulations adopted under this  
               division;

             b)   Deny, suspend, revoke, condition, or decline to renew a  
               mortgage loan originator license if an applicant or  
               licensee fails at any time to meet the requirements of  
               Section 22183 or 22187, or withholds information or makes a  
               material misstatement in an application for a license or  
               renewal of a license;

             c)   Order restitution against a mortgage loan originator or  
               any finance lender or broker licensee employing a mortgage  








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               loan originator for violations of this division;

             d)   Impose fines on a mortgage loan originator or any  
               finance lender or broker licensee employing a mortgage loan  
               originator pursuant to subdivisions (b), (c), and (d);

             e)   Issue orders or directives under this division as  
               follows; or,

               i)     Order or direct a mortgage loan originator or any  
                 finance lender or broker licensee employing a mortgage  
                 loan originator to cease and desist from conducting  
                 business, including immediate temporary orders to cease  
                 and desist.

               ii)    Order or direct a mortgage loan originator or any  
                 finance lender or broker licensee employing a mortgage  
                 loan originator to cease any harmful activities or  
                 violations of this division, including immediate  
                 temporary orders to cease and desist.

               iii)   Enter immediate temporary orders to cease business  
                 under a license if the commissioner determines that the  
                 license was erroneously granted or the licensee is  
                 currently in violation of this division.

             f)   Order or direct any other affirmative action as the  
               commissioner deems necessary.

          42)Provides that the commissioner of DOC may impose a civil  
            penalty on a mortgage loan originator or any finance lender or  
            broker licensee, or RML licensee employing a mortgage loan  
            originator, if the commissioner finds, on the record after  
            notice and opportunity for hearing, that the mortgage loan  
            originator or any finance lender or broker licensee employing  
            a mortgage loan originator has violated or failed to comply  
            with any requirement of this division or any regulation  
            prescribed by the commissioner under this division or order  
            issued under authority of this division.

             a)   The maximum amount of penalty for each act or omission  
               described above shall be twenty-five thousand dollars  
               ($25,000).

          43)Provides that the unique identifier of any person originating  








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            a residential mortgage loan under the RMLA or CFLL, shall be  
            clearly shown on all residential mortgage loan application  
            forms, solicitations or advertisements, including business  
            cards or Internet Web sites, and any other documents as  
            established by rule, regulation, or order of the commissioner.

          44)Requires RML licensees to maintain a surety bond in the  
            amount that reflects the dollar amount of loan originated as  
            determined by the commissioner based on loan volume and  
            provides that the amount of the bond shall not be less than  
            $50,000.

          45)Specifies, that a loan processor or underwriter who does not  
            represent to the public, through advertising or other means of  
            communicating or providing information, including the use of  
            business cards, stationery, brochures, signs, rate lists, or  
            other promotional items, that the individual can or will  
            perform any of the activities of a mortgage loan originator is  
            exempt from licensing and registration

          46)Provides that an independent contractor who is employed by a  
            mortgage loan originator may not engage in the activities of a  
            loan processor or underwriter for a residential mortgage loan  
            unless the independent contractor loan processor or  
            underwriter obtains and maintains an endorsement as a mortgage  
            loan originator under this article. Each independent  
            contractor loan processor or underwriter who obtains and  
            maintains an endorsement as a mortgage loan originator under  
            this article shall have and maintain a valid unique identifier  
            issued by the Nationwide Mortgage Licensing System and  
            Registry.

           EXISTING LAW 

          1)Regulates RMLs under the RMLA and the DOC.  (Financial Code,  
            Section 50000 et seq.)

          2)Regulates CFLs under the CFLL and the DOC.  (Financial Code,  
            Section 22000 et seq.)

          3)Regulates real estate brokers, who make or service residential  
            mortgage loans under the Real Estate law administered by DRE.

           FISCAL EFFECT  :   Unknown









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           COMMENTS  :   

           Purpose of this bill  .  According to the author's office, "On  
          July 30, 2008 President Bush signed into law HR 3221, the  
          Housing and Economic Recovery Act of 2008.  Among its many  
          provisions, HR 3221 contained a section known as the Secure and  
          Fair Enforcement of Mortgage Licensing Act (SAFE) Act (  Title V  
          of P.L. 110-289  ), a wholesale regulatory change of the licensing  
          and regulation of mortgage originators.

          The SAFE Act requires California and other states to have a  
          framework in place by August 1, 2009, or face direct oversight  
          and implantation from the Federal Department of Housing and  
          Urban Development (HUD).   

          The SAFE Act is designed to encourage every state, through  
          consultation and coordination with the Conference of State Bank  
          Supervisors and the American Association of Residential Mortgage  
          Regulators to establish a Nationwide Mortgage Licensing System  
          that will require:

          1)Registration with the NMLSR which will ensure that those  
            persons who have committed violations in other states are not  
            allowed to become licensed in California.  Additionally, this  
            registration system will assist regulators with tracking and,  
            if necessary, instituting disciplinary action against  
            originators of mortgage loans.

          2)Pass background and criminal history checks.

          3)Disclosure on all advertising materials their unique  
            identifier that is obtained from the NMLSR.

          4)Meet minimum and continuing educational requirements that  
            include education in federal law and regulations, as well as,  
            issues relating to the non-traditional mortgage market place.

          5)Meet and maintain net worth and/or bonding requirements."

           Background  .  Under California law, mortgage loans can be made  
          and originated under several different structures and licensing  
          regimes.  Mortgages can be originated under a real estate  
          license from the Department of Real Estate.  This license  
          requires several hours of educational training and ongoing  
          direct oversight by the department.  Additionally, common law  








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          has determined that real estate brokers owe their customers a  
          fiduciary duty.

          Under the CFLL or the RMLA, originators offer loans under the  
          umbrella license of the company they work for.  Under this  
          structure, the loan originator is not individually licensed nor  
          statutorily mandated to maintain certain levels of educational  
          experience.  This is the similar to a loan officer who works at  
          a bank or credit union.  The logic with this model is that the  
          wrongdoing of an individual places the whole license in jeopardy  
          so institutions are more likely to self regulate.  Some  
          distinctions have been made in recent years regarding individual  
          employees.  For example, several legislative proposals have come  
          forward in recent years that have put some requirements on  
          individuals in these cases such as expanded background checks.

          On July 30, 2008 President Bush signed into law HR 3221, the  
          Housing and Economic Recovery Act of 2008.  This legislation  
          provides reforms for Fannie Mae and Freddie Mac, as well as, new  
          programs designed to assist homeowners facing foreclosure.   
          Among its many provisions, HR 3221 contained a section known as  
          the SAFE Act (  Title V of P.L. 110-289  ), a wholesale regulatory  
          change of the licensing and regulation of mortgage originators.   


          The SAFE Act is designed to require every state, through  
          consultation and coordination with the Conference of State Bank  
          Supervisors and the American Association of Residential Mortgage  
          Regulators to establish a Nationwide Mortgage Licensing System  
          that will accomplish the following:

          1)Provides uniform license applications and reporting  
            requirements for State-licensed loan originators.

          2)Provides a comprehensive licensing and supervisory database.

          3)Aggregates and improves the flow of information to and between  
            regulators.

          4)Provides increased accountability and tracking of loan  
            originators.

          5)Streamlines the licensing process and reduces the regulatory  
            burden.









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          6)Enhances consumer protections and supports anti-fraud  
            measures.

          7)Provides consumers with easily accessible information, offered  
            at no charge, utilizing electronic media, including the  
            Internet, regarding the employment history of, and publicly  
            adjudicated disciplinary and enforcement actions against, loan  
            originators.

          8)Establishes a means by which residential mortgage loan  
            originators would to the extent possible, be required to act  
            in the best interest of the consumer.

          9)Facilitates responsible behavior in the subprime mortgage  
            market place and provides comprehensive training and  
            examination requirements related to subprime mortgage lending.

          10)Facilitates the collection and disbursement of consumer  
            complaints on behalf of State and Federal mortgage regulators.

          The SAFE Act requires California and other states to have a  
          framework in place by August 1, 2009, or face direct oversight  
          and implantation from the Federal Department of Housing and  
          Urban Development (HUD).   States may receive an extension if  
          they are making a good faith effort to implement the  
          requirements.  Since the creation of California's multi-layered  
          framework, the system has been somewhat of an arbitrage where  
          lenders could pick and choose licenses based on their business  
          models or market needs.  Some lenders have acquired licenses  
          across all licensing laws.
           
           AB 34 reflects the challenges and difficulties imposed when  
          attempting to craft, what is for the most part, a entirely new  
          regulatory system for mortgage loan originators.   Imposing  
          these new requirements is somewhat easier for DRE licensed  
          brokers as they already are licensed individually and meet  
          several of the mandatory requirements imposed by the SAFE Act.   
          A change to the requirements of the SAFE Act will require a  
          wholesale restructure of those licensing frameworks.

           Related Legislation  .

          SB 36 (Calderon), also implements changes to the RMLA, CFL and  
          real estate law in order to comply with the SAFE Act.  This bill  
          is currently pending Senate Business and Professions Committee.








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           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          AARP

           Opposition 
           
          None on file.
           
          Analysis Prepared by  :    Ross Warren / B. & P. / (916) 319-3301