BILL ANALYSIS
AB 34
Page 1
Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 34 (Nava) - As Amended: April 2, 2009
Policy Committee: Banking and
Finance Vote: 10-1
Business and Professions 9-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes new requirements for the licensing of
mortgage loan originators to meet the requirements of a recently
enacted federal law - the Secure and Fair Enforcement of
Mortgage Licensing Act (SAFE). Specifically, this bill
requires:
1)Registration of the loan originator with a nationwide registry
called the Nationwide Mortgage Licensing System and Registry.
2)State licensing agencies (either the Department of Real Estate
or Department of Corporations) to deny licenses to applicants
that have been convicted of a felony in the past seven years
(or at any time if the crime involved fraud, money laundering
or a breach of trust), or if the applicant has not completed
the required training and test requirements.
3)Advertising materials used by mortgage brokers in connection
with mortgage origination activity to be submitted to the
department of Real Estate for approval.
4)Specific training requirements.
5)A real estate broker to supply the state with business
activities report that contains various information about the
loans.
FISCAL EFFECT
1)Major increase in regulatory costs, likely in the millions of
AB 34
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dollars to DRE and DOC to comply with SAFE (federal law),
offset by new SAFE fees charged to industry applicants.
2)According to DRE, the one significant provision of this bill
not required by SAFE is the mandatory approval of advertising
material, which it claims will require substantial increases
in staffing.
COMMENTS
1)Rationale . This bill is intended to place California in
compliance with recently enacted federal legislation, which
requires enhanced regulatory requirements for loan
originators.
2)Background . Loan originators are either mortgage brokers
licensed by the Department of Real Estate or are employees of
lending institutions governed by federal or state laws. While
brokers have specific licensing and training requirements,
loan originators working in other venues are not subject to
these regulatory requirements, but are authorized to make
loans under the umbrella of their employer's license. The lack
of consistent industry standards is one of the many concerns
that have arisen following the mortgage meltdown of the past
few years.
In response to these concerns, federal legislation (HR 3221)
was signed into law in mid-2008. Among its many provisions, HR
3221 contains a section known as the Secure and Fair
Enforcement of Mortgage Licensing Act (SAFE), which includes
major increases in licensing and regulation requirements for
mortgage originators. The SAFE Act requires California and
other states to have a framework in place by August 1, 2009,
or face direct oversight from the Federal Department of
Housing and Urban Development (HUD).
The SAFE Act is designed to encourage every state to establish
a Nationwide Mortgage Licensing Registration System. The key
features of this system are (a) registration with the new
system, (b) background and criminal history checks, (c)
education requirements, and (d) various loan activity
disclosures.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081