BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
36 (Calderon)
Hearing Date: 5/28/09 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 beginning
August 1, 2010.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
DRE costs $12,730
$10,731 $10,731 Special*
----all
potentially offset by fee revenue----
Licensing/registry $2,000
$1,000 $1,000
------unknown fee revenue--------- Special**
*Real Estate Fund **Corporations Fund
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STAFF COMMENTS: 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.
The Department of Real Estate currently licenses 9,770 real
estate brokers and corporations that will need to seek a loan
originator license/endorsement. In addition, these 9,770
brokers and corporations employ 34,016 real estate salespeople
who will also need to licensed and endorsed as mortgage loan
originators. 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
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SB 36 (Calderon)
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. Therefore,
the department will not only be responsible for licensing over
43,000 licensees annually, but staff must also handle an
estimated 10,000 to 15,000 changes (addres, anme, affiliation,
etc.) to these license records through out the year. Under the
SAFE Act, all licenses must be renewed as of December 31st of
each year. Therefore, the DRE's current system of rolling
renewals will not be allowed and California will be unable to
spread out the workload associated with license renewals across
a twelve month period. 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.
In a preliminary fiscal estimate, the DRE anticipates the need
for 129 PYs resulting in annual costs of approximately $10.3
million. Most costs will be offset by license fee revenue
estimated at this time to be between $250 and $300 per licensee.
The breakdown of staffing requirements is as follows:
14 PYs - Mortgage Lending Unit
17 PYs - Auditing Division
38 PYs - Enforcement Program
28 PYs - Legal Section
24 PYs - Licensing Program
2 PYs - Information Technology Unit
6 PYs - Administrative Support
Other costs identified by the DRE include the following:
Information Technology Modification:
One-time: $1,315,540 and annual ongoing $263,671
Office Network and Equipment Costs:
First year costs of $911,722 and second year $114,929
In addition, all DRE office facilities are at maximum occupancy
and cannot house the additional staff nor the document storage
equipment required to support the requirements of the SAFE Act.
Anticipated one-time facility costs are $201,606, with ongoing
rent at $50,430 for the additional space.
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
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SB 36 (Calderon)
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.