BILL NUMBER: AB 764 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 1, 2009
PASSED THE ASSEMBLY SEPTEMBER 9, 2009
AMENDED IN SENATE JULY 23, 2009
AMENDED IN SENATE JUNE 22, 2009
AMENDED IN ASSEMBLY JUNE 2, 2009
AMENDED IN ASSEMBLY APRIL 20, 2009
AMENDED IN ASSEMBLY APRIL 2, 2009
INTRODUCED BY Assembly Members Nava, Bass, and Feuer
(Coauthor: Assembly Member Galgiani)
(Coauthors: Senators Corbett and Leno)
FEBRUARY 26, 2009
An act to amend Sections 10085, 10085.5, and 10133.1 of, to add
and repeal Section 6106.4 of, and to add, repeal, and add Section
10085.6 of, the Business and Professions Code, and to add and repeal
Section 2944.6 of the Civil Code, relating to real estate brokers.
LEGISLATIVE COUNSEL'S DIGEST
AB 764, Nava. Real estate brokers.
The Real Estate Law provides for the regulation and licensure of
real estate brokers and real estate salespersons by the Real Estate
Commissioner. Existing law authorizes the commissioner to require
that materials used in obtaining advance fee agreements be submitted
to him or her at least 10 calendar days before the materials are used
and makes it a misdemeanor, punishable by a fine not exceeding
$1,000, or imprisonment in the county jail not exceeding 6 months, or
both, to use any agreement that the commissioner has ordered not to
be used. Existing law authorizes the commissioner to determine the
form of the advance fee agreements.
This bill would instead require the commissioner to determine the
form of advance fee agreements and to mandate the submission of
advance fee agreement materials prior to their use. The bill would
also prohibit advertisements used in obtaining advance fee agreements
from using words, letters, initials, symbols, or other devices that
are similar to those used by a governmental agency or nonprofit
entity, as specified. The bill would also increase the maximum fine
for using any agreement that the commissioner has ordered not to be
used from $1,000 to $2,500, and would increase the maximum
imprisonment time for a violation to 12 months. By expanding the
scope of a crime, the bill would impose a state-mandated local
program.
The Real Estate Law makes it unlawful for any person to claim,
demand, charge, receive, collect, or contract for an advance fee for
soliciting lenders on behalf of borrowers or performing services for
borrowers in connection with a mortgage loan before the borrower
becomes obligated to complete the loan and for performing any other
activity for which a license is required, unless the person is a
licensed real estate broker and has complied with the provisions of
the Real Estate Law. A violation of that provision constitutes a
public offense punishable by a fine of up to $10,000 for an
individual or $50,000 for a corporation. Existing law exempts from
that prohibition state-chartered banks, savings associations, credit
unions, industrial loan companies, and licensed finance lenders and
brokers.
This bill would increase those fines to $20,000 and $60,000,
respectively, and would increase the maximum imprisonment time for a
violation to 12 months. The bill would also make it unlawful, until
January 1, 2013, for a real estate broker, or any other person who
performs loan modification services, as specified, to claim, demand,
charge, receive, or collect a fee paid for by a borrower for a loan
modification agreement, as defined, until the terms of the loan have
been modified, and would require provision of a specified notice
prior to entering into a loan modification agreement with a borrower.
By creating a new crime, the bill would impose a state-mandated
local program. The bill would make an attorney subject to
disciplinary sanctions if he or she claims, demands, charges,
receives, or collects a fee paid for by a borrower in connection with
a loan modification agreement until the terms of the loan have been
modified. The bill would further exempt from the fee prohibition
licensed residential mortgage lenders and servicers. The bill would
also exempt nonprofit community-based organizations, and employees of
those organizations, that provide counseling services at no cost to
borrowers in connection with loan modifications from certain
provisions of the Real Estate Law regulating certain activities of
real estate brokers and salespersons.
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.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6106.4 is added to the Business and Professions
Code, to read:
6106.4. (a) It shall constitute cause for the imposition of
discipline of an attorney within the meaning of this chapter for an
attorney to engage in any conduct prohibited under Section 2944.6 of
the Civil Code.
(b) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 2. Section 10085 of the Business and Professions Code is
amended to read:
10085. (a) The commissioner shall require that any or all
materials used in obtaining advance fee agreements, including, but
not limited to, the contract forms, letters, or cards used to solicit
prospective sellers or borrowers, and radio and television
advertising be submitted to him or her at least 10 calendar days
before they are used. Should the commissioner determine that any such
matter, when used alone or with any other matter, would tend to
mislead, he or she may, within 10 calendar days of the date he or she
receives same, order that it not be used, disseminated, nor
published.
(1) Advertisements used in obtaining advance fee agreements shall
not employ words, letters, initials, symbols, or other devices that
are so similar to those used by a governmental agency, nonprofit or
charitable institution, or senior organization that they could have
the capacity or tendency to mislead the public. Examples of
misleading materials include, but are not limited to, those that
imply either of the following:
(A) The advertised services are in any manner provided or endorsed
by a governmental agency, nonprofit or charitable institution, or
senior organization.
(B) The advertiser is the same as, connected with, or endorsed by,
a governmental agency, nonprofit or charitable institution, or
senior organization.
(2) Any person using, disseminating, or publishing any matter that
the commissioner has ordered, pursuant to this section, not to be
used, published, or disseminated shall be guilty of a misdemeanor
punishable by a fine not exceeding two thousand five hundred dollars
($2,500), or by imprisonment in the county jail not exceeding 12
months, or both, for each use, dissemination, or publication.
(b) The commissioner shall determine the form of the advance fee
agreements, and all material used in soliciting prospective owners,
sellers, and borrowers shall be used in the form and manner which he
or she determines is necessary to carry out the purposes and intent
of this part.
(c) Any violation of any of the provisions of this part or of the
rules, regulations, orders, or requirements of the commissioner
thereunder shall constitute grounds for disciplinary action against a
licensee, or for proceedings under Section 10081, or both. These
sanctions are in addition to the criminal proceedings hereinbefore
provided.
SEC. 3. Section 10085.5 of the Business and Professions Code is
amended to read:
10085.5. (a) It shall be unlawful for any person to claim,
demand, charge, receive, collect, or contract for an advance fee (1)
for soliciting lenders on behalf of borrowers or performing services
for borrowers in connection with loans to be secured directly or
collaterally by a lien on real property, before the borrower becomes
obligated to complete the loan or, (2) for performing any other
activities for which a license is required, unless the person is a
licensed real estate broker and has complied with the provisions of
this part.
(b) This section does not prohibit the acceptance or receipt of
any fee by a bank, savings association, credit union, industrial loan
company, person acting within the scope of a license issued to that
person pursuant to Division 9 (commencing with Section 22000) of the
Financial Code, or person acting within the scope of a license issued
to that person pursuant to Division 20 (commencing with Section
50000) of the Financial Code, in connection with loans to be secured
directly or collaterally by a lien on real property. This section
does not apply to charges made by title insurers and controlled
escrow companies pursuant to Chapter 1 (commencing with Section
12340) of Part 6 of Division 2 of the Insurance Code.
(c) A violation of this section is a public offense punishable by
a fine not exceeding twenty thousand dollars ($20,000), by
imprisonment in the county jail for a term not to exceed 12 months,
or by both that fine and imprisonment, or if by a corporation, the
violation is punishable by a fine not exceeding sixty thousand
dollars ($60,000).
SEC. 4. Section 10085.6 is added to the Business and Professions
Code, to read:
10085.6. (a) It shall be unlawful for a licensed real estate
broker to claim, demand, charge, receive, or collect a fee paid for
by the borrower for loan modification agreements until the terms of
that loan have been modified.
(b) For purposes of this section, "loan modification agreement"
means a contract for the performance of services for a borrower in
connection with the modification of the terms of a loan secured
directly or collaterally by a lien on residential real property
containing four or fewer dwelling units.
(c) (1) A licensed real estate broker who performs a loan
modification service as described in subdivision (b) for a fee paid
for by the borrower shall provide the following prior to entering
into a loan modification agreement with the borrower:
(A) As a separate statement, in not less than 14-point bold type:
"It is not necessary to pay a third party to arrange for a loan
modification from your mortgage lender or servicer. You may call your
lender directly to ask for a change in your loan terms. Nonprofit
housing counseling agencies also offer these and other forms of
borrower assistance free of charge. A list of nonprofit housing
counseling agencies approved by the United States Department of
Housing and Urban Development (HUD) is available from your local HUD
office or by visiting www.hud.gov."
(B) The licensed real estate broker's license number.
(2) If a loan modification agreement is offered or negotiated in
one of the foreign languages set forth in Section 1632 of the Civil
Code, a translated copy of the statement in subparagraph (A) of
paragraph (1) and the information required under subparagraph (B) of
paragraph (1) shall be provided to the borrower in that foreign
language.
(d) A licensed real estate broker who performs loan modification
services as described in subdivision (b) shall notify the department
in writing in a form prescribed by the commissioner within 30 days
from the first performance of a loan modification agreement and shall
notify the department in writing within 30 days from the last
performance of a loan modification agreement by that licensed real
estate broker.
(e) This section does not prohibit the acceptance or receipt of a
fee by a bank, savings association, credit union, industrial loan
company, person acting within the scope of a license issued to that
person pursuant to Division 9 (commencing with Section 22000) of the
Financial Code, or person acting within the scope of a license issued
to that person pursuant to Division 20 (commencing with Section
50000) of the Financial Code, in connection with the modification of
the terms of a loan secured directly or collaterally by a lien on
real property. This section does not apply to charges made by title
insurers and controlled escrow companies pursuant to Chapter 1
(commencing with Section 12340) of Part 6 of Division 2 of the
Insurance Code.
(f) A violation of this section is a public offense punishable by
a fine not exceeding twenty thousand dollars ($20,000), by
imprisonment in the county jail for a term not to exceed 12 months,
or by both that fine and imprisonment, or if by a corporation, the
violation is punishable by a fine not exceeding sixty thousand
dollars ($60,000). These penalties shall not be cumulative, or in
addition to, the penalties provided by subdivision (d) of Section
2944.6 of the Civil Code.
(g) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
(h) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 5. Section 10085.6 is added to the Business and Professions
Code, to read:
10085.6. (a) A licensed real estate broker who performs loan
modification services as described in subdivision (b) shall notify
the department in writing in a form prescribed by the commissioner
within 30 days from the first performance of a loan modification
agreement and shall notify the department in writing within 30 days
from the last performance of a loan modification agreement by that
licensed real estate broker.
(b) For purposes of this section, "loan modification agreement"
means a contract for the performance of services for a borrower in
connection with the modification of the terms of a loan secured
directly or collaterally by a lien on residential real property
containing four or fewer dwelling units.
(c) This section shall become operative on January 1, 2013.
SEC. 6. Section 10133.1 of the Business and Professions Code is
amended to read:
10133.1. (a) Subdivisions (d) and (e) of Section 10131, Section
10131.1, Article 5 (commencing with Section 10230), and Article 7
(commencing with Section 10240) of this code and Section 1695.13 of
the Civil Code do not apply to any of the following:
(1) Any person or employee thereof doing business under any law of
this state, any other state, or the United States relating to banks,
trust companies, savings and loan associations, industrial loan
companies, pension trusts, credit unions, or insurance companies.
(2) Any nonprofit cooperative association organized under Chapter
1 (commencing with Section 54001) of Division 20 of the Food and
Agricultural Code, in loaning or advancing money in connection with
any activity mentioned therein.
(3) Any corporation, association, syndicate, joint stock company,
or partnership engaged exclusively in the business of marketing
agricultural, horticultural, viticultural, dairy, livestock, poultry,
or bee products on a cooperative nonprofit basis, in loaning or
advancing money to the members thereof or in connection with any
business of that type.
(4) Any corporation securing money or credit from any federal
intermediate credit bank organized and existing pursuant to the
provisions of an act of Congress entitled the "Agricultural Credits
Act of 1923," in loaning or advancing money or credit so secured.
(5) Any person licensed to practice law in this state, not
actively and principally engaged in the business of negotiating loans
secured by real property, when that person renders services in the
course of his or her practice as an attorney at law, and the
disbursements of that person, whether paid by the borrower or other
person, are not charges or costs and expenses regulated by or subject
to the limitations of Article 7 (commencing with Section 10240), and
the fees and disbursements are not shared, directly or indirectly,
with the person negotiating the loan or the lender.
(6) Any person licensed as a finance lender when acting under the
authority of that license.
(7) Any cemetery authority as defined by Section 7018 of the
Health and Safety Code, that is authorized to do business in this
state or its authorized agent.
(8) Any person authorized in writing by a savings institution to
act as an agent of that institution, as authorized by Section 6520 of
the Financial Code or comparable authority of the Office of Thrift
Supervision of the United States Department of the Treasury by its
regulations, when acting under the authority of that written
authorization.
(9) Any person who is licensed as a securities broker or
securities dealer under any law of this state, or of the United
States, or any employee, officer, or agent of that person, if that
person, employee, officer, or agent is acting within the scope of
authority granted by that license in connection with a transaction
involving the offer, sale, purchase, or exchange of a security
representing an ownership interest in a pool of promissory notes
secured directly or indirectly by liens on real property, which
transaction is subject to any law of this state or the United States
regulating the offer or sale of securities.
(10) Any person licensed as a residential mortgage lender or
servicer when acting under the authority of that license.
(11) Any nonprofit, community-based organization, or an employee
of such an organization, that has been approved by the United States
Department of Housing and Urban Development pursuant to Section 106
(a)(1)(iii) of the federal Housing and Urban Development Act of 1968
(12 U.S.C. Sec. 1701x), to provide counseling services, when those
services are provided at no cost to the borrower and are in
connection with the modification of the terms of a loan secured
directly or collaterally by a lien on single-family residential real
property.
(b) Persons described in paragraph (1), (2), or (3), as follows,
are exempt from the provisions of subdivisions (d) and (e) of Section
10131 or Section 10131.1 with respect to the collection of payments
or performance of services for lenders or on notes of owners in
connection with loans secured directly or collaterally by liens on
real property:
(1) The person makes collections on 10 or less of those loans, or
in amounts of forty thousand dollars ($40,000) or less, in any
calendar year.
(2) The person is a corporation licensed as an escrow agent under
Division 6 (commencing with Section 17000) of the Financial Code and
the payments are deposited and maintained in the escrow agent's trust
account.
(3) An employee of a real estate broker who is acting as the agent
of a person described in paragraph (4) of subdivision (b) of Section
10232.4.
For purposes of this subdivision, performance of services does not
include soliciting borrowers, lenders, or purchasers for, or
negotiating, loans secured directly or collaterally by a lien on real
property.
(c) (1) Subdivision (d) of Section 10131 does not apply to an
employee of a real estate broker who, on behalf of the broker,
assists the broker in meeting the broker's obligations to its
customers in residential mortgage loan transactions, as defined in
Section 50003 of the Financial Code, where the lender is an
institutional lender, as defined in Section 50003 of the Financial
Code, provided the employee does not participate in any negotiations
occurring between the principals.
(2) A broker shall exercise reasonable supervision and control
over the activities of nonlicensed employees acting under this
subdivision, and shall comply with Section 10163 for each location
where the nonlicensed persons are employed.
This section does not restrict the ability of the commissioner to
discipline a broker or corporate broker licensee or its designated
officer, or both the corporate broker licensee and its designated
officer, for misconduct of a nonlicensed employee acting under this
subdivision, or, pursuant to Section 10080, to adopt, amend, or
repeal rules or regulations governing the employment or supervision
of an employee who is a nonlicensed person as described in this
subdivision.
SEC. 7. Section 2944.6 is added to the Civil Code, to read:
2944.6. (a) Notwithstanding any other provision of law, it shall
be unlawful for any person who performs loan modification services as
described in subdivision (b) to claim, demand, charge, receive, or
collect a fee paid for by the borrower for loan modification
agreements until the terms of that loan have been modified.
(b) For purposes of this section, "loan modification agreement"
means a contract for the performance of services for the borrower in
connection with the modification of the terms of a loan secured
directly or collaterally by a lien on residential real property
containing four or fewer dwelling units.
(c) (1) A person who performs a loan modification service as
described in subdivision (b) for a fee paid for by the borrower shall
provide the following prior to entering into a loan modification
agreement with the borrower:
"It is not necessary to pay a third party to arrange for a loan
modification from your mortgage lender or servicer. You may call your
lender directly to ask for a change in your loan terms. Nonprofit
housing counseling agencies also offer these and other forms of
borrower assistance free of charge. A list of nonprofit housing
counseling agencies approved by the United States Department of
Housing and Urban Development (HUD) is available from your local HUD
office or by visiting www.hud.gov."
(2) If a loan modification agreement is offered or negotiated in
one of the foreign languages set forth in Section 1632 of the Civil
Code, a translated copy of the statement in paragraph (1) shall be
provided to the borrower in that foreign language.
(d) A violation of this section by a natural person is a public
offense punishable by a fine not exceeding twenty thousand dollars
($20,000), by imprisonment in the county jail for a term not to
exceed 12 months, or by both that fine and imprisonment, or if by a
corporation, the violation is punishable by a fine not exceeding
sixty thousand dollars ($60,000). Except as provided in subdivision
(f) of Section 10085.6 of the Business and Professions Code, these
penalties are cumulative to any other remedies or penalties provided
by law.
(e) This section does not apply to a person, or an agent acting on
that person's behalf, offering loan modification or other loan
forbearance services for a loan owned or serviced by that person.
(f) Nothing in this section precludes a person, or an agent acting
on that person's behalf, who performs a loan modification agreement
for a loan owned or serviced by that person, from doing any of the
following:
(1) Collecting principal, interest, or other charges under the
terms of a loan, before the loan is modified, including charges to
establish a new payment schedule, after the borrower reduces the
unpaid principal balance for the express purpose of lowering the
monthly payment due under the terms of the loan.
(2) Collecting principal, interest, or other charges under the
terms of a loan, after the loan is modified.
(3) Accepting payment from a federal agency in connection with the
federal Making Home Affordable Plan or other federal plan intended
to help borrowers refinance or modify their loans or otherwise avoid
foreclosures.
(g) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
(h) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, 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.