BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
36 (Calderon)
Hearing Date: 4/27/09 Amended: 4/20/09
Consultant: Maureen Ortiz Policy Vote: B. F. & I. 9-0
B. P. & E. D. 7-1
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BILL SUMMARY: SB 36 will bring California's Real Estate Law,
Finance Lenders Law, and Residential Mortgage Lending Act into
compliance with the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (known as the SAFE Act) by
requiring the licensure of mortgage loan originators.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
DRE start-up costs ---potentially multi-million
one-time-- Special*
Endorsement/registry -------approximately $10,000
annually
potentially offset by fee revenue--- Special*
Licensing/registry $2,000
$1,000 $1,000 Special**
*Real Estate Fund **Corporations Fund
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STAFF COMMENTS: This bill meets the criteria for referral to
the Suspense file.
Department of Real Estate
SB 36 requires persons who have a real estate license under the
Department of Real Estate (DRE) to obtain an endorsement in
order to engage in the business of a mortgage loan originator.
The bill provides for penalties for those who fail to obtain the
endorsement and authorizes the commissioner to suspend or revoke
that individual's real estate license. SB 36 places numerous
criteria for licensees including educational requirements, and
annual reports on business activities. The commissioner will be
authorized to examine the affairs of real estate brokers that
obtain license endorsement as a mortgage loan originator, and be
required to report violations to the Nationwide Mortgage
Licensing System and Registry (NMLSR).
Additionally, the SAFE Act requires the licensee to directly
register with the NMLSR, and then requires the DRE to verify the
data provided by the licensee. The SAFE Act does not currently
allow for an electronic upload of the licensing data to be
transmitted, but will instead require DRE to manually input the
verification information. SB 36 provides that the provisions
under DRE will not be effective until the DRE issues a finding
that the NMLSR is capable of two-way electronic communication
with the enterprise information system maintained by the DRE.
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SB 36 (Calderon)
In a preliminary fiscal estimate, the DRE anticipates the need
for 131 PYs resulting in annual costs of approximately $12
million. Most costs will be offset by license fee revenue
estimated at this time to be between $236 and $281 per licensee.
However,
initial start up costs to the program not covered by new fee
revenue will be several million dollars.
Department of Corporations
SB 36 requires persons licensed as finance lenders and brokers
and residential mortgage lenders by the Department of
Corporations (DOC) to obtain an additional license in order to
engage as a mortgage loan originator. This provision, required
by the SAFE Act, also requires the licensing of employees who
are not currently required to obtain a license. The bill
requires finance lenders and brokers and residential mortgage
lenders that employ a mortgage loan originator to maintain a
minimum net worth of $250,000. The DOC in a preliminary fiscal
analysis estimates startup costs of at least $2 million, and an
additional $1 million annually, with an unknown amount of fee
revenue at this time.
SB 36 provides that no person will be required to obtain a
license as a mortgage loan originator under the California
Finance Lenders Law, the California Residential Mortgage Lending
Law, or the Real Estate Law until August 1, 2010.
The SAFE Act requires all states to individually license
mortgage loan originators, and then requires the mortgage loan
originators to register through a nationwide organization called
the Nationwide Mortgage Licensing System and Registry (NMLSR).
The SAFE Act provides that any state that does not implement a
mortgage loan originator licensing system in compliance with the
SAFE Act by July 30, 2009, risks direct intervention by the
Secretary of the U. S. Department of Housing and Urban
Development (HUD). However, states that are deemed as making a
good faith effort to establish a state licensing law may be
granted one additional year in which to comply.
"Mortgage loan originator" is generally defined as one who takes
a residential mortgage loan application or offers or negotiates
terms of a residential mortgage loan for compensation or gain.
Administrative and/or clerical employees are not included within
the definition, nor are real estate brokers who don't broker
mortgages.
Under the SAFE Act, mortgage loan originators who are not
employed by a depository institution must be both licensed by
their state and registered on the national registry. License
applicants must undergo background checks, submit to credit
checks, complete and successfully pass pre-licensing education
courses approved by the registry, complete continuing education
requirements and meet other specified criteria.
Mortgage loan originators who are employed by depository
institutions or their subsidiaries must register with the NMLSR,
but need not be licensed.