BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 34
                                                                  Page  1

          Date of Hearing:   May 13, 2009

                                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


          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  

          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  

           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.


           1)Rationale  . This bill is intended to place California in  
            compliance with recently enacted federal legislation, which  
            requires enhanced regulatory requirements for loan  

           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  

           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081