BILL ANALYSIS
SB 36
Page 1
Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 36 (Calderon) - As Amended: June 30, 2009
Policy Committee: Banking and
Finance Vote: 10-1
Business and Professions 11-0
Urgency: No State Mandated Local Program:
No Reimbursable:
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:
1)Requires a licensed real estate agent to obtain an endorsement
in order to act as a mortgage loan originator.
2)Requires registration of the loan originator with a nationwide
registry called the Nationwide Mortgage Licensing System and
Registry, and requires DRE to verify the data provided by the
licensee.
3)Requires 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.
4)Authorizes the Department of Real Estate to examine real
estate brokers that obtain licenses as mortgage loan
originators, and requires the department to report violations
to the national registry.
5)Specifies training requirements for mortgage originators.
6)Requires real estate brokers to supply the state with a
business activities report that contains various information
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about the loans they have originated.
FISCAL EFFECT
1)Increase in regulatory, licensing, and registry costs totaling
about $10 million annually to DRE and about $2 million to DOC
(special funds) to comply with SAFE (federal law), offset by
new SAFE fees charged to industry applicants.
2)Additional one-time costs, potentially up to several million
to DRE for start-up expenses, not fully reimbursed by fees.
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 background and criminal history
checks, education requirements, and various loan activity
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disclosures.
3)Related legislation . AB 34 (Nava) is identical to this bill.
It is currently in the Senate Appropriations Committee.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081