BILL NUMBER: AB 645	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Davis

                        FEBRUARY 16, 2011

   An act to amend Section 2923.1 of the Civil Code, relating to real
property transactions.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 645, as introduced, Davis. Real property transactions.
   Existing law provides that a mortgage broker, as defined, who
provides mortgage brokerage services to a borrower is the fiduciary
of the borrower and any violation of the broker's fiduciary duty is a
violation of the broker's license law. Existing law provides that
this fiduciary duty includes a requirement that the mortgage broker
place the economic interest of the borrower ahead of his or her own
economic interest. Under existing law, a violation of the licensing
laws of certain mortgage brokers is a crime
   This bill would provide that the fiduciary duty owed to a borrower
includes a requirement that the mortgage broker provide information
to a borrower regarding the advantages and disadvantages of the loan
options available to the borrower based upon the borrower's income
and credit rating. The bill would also provide that the fiduciary
duty owed to a borrower includes, if a broker arranges a loan that is
less advantageous than a loan for which the borrower is otherwise
qualified and the borrower defaults on the loan, sending a letter to
any consumer reporting agency indicating that the broker arranged the
loan and that the loan was less advantageous than a loan the broker
could have arranged for which the borrower was otherwise qualified.
Because a violation of this requirement by certain mortgage brokers
would be a crime, this bill would impose a state-mandated local
program.
   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.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 2923.1 of the Civil Code is amended to read:
   2923.1.  (a) A mortgage broker providing mortgage brokerage
services to a borrower is the fiduciary of the borrower, and any
violation of the broker's fiduciary duties shall be a violation of
the mortgage broker's license law. This fiduciary duty includes a
requirement that the mortgage broker place the economic interest of
the borrower ahead of his or her own economic interest  and a
requirement that the mortgage broker provide information to the
borrower regarding the advantages and disadvantages of the loan
options available to the borrower based upon the borrower's income
and credit rating. If, after providing this information to a
borrower, a mortgage broker arranges a loan that is less advantageous
than a loan for which the borrower is otherwise qualified and the
borrower   defaults on the loan, the mortgage broker shall
also have a fiduciary duty to send a letter to any consumer credit
reporting agency, as defined in Section 1785.3, indicating that the
broker arranged the loan and that loan was less advantageous than a
loan the broker could have arranged for which the borrower was
otherwise qualified  . A mortgage broker who provides mortgage
brokerage services to the borrower owes this fiduciary duty to the
borrower regardless of whether the mortgage broker is acting as an
agent for any other party in connection with the residential mortgage
loan transaction.
   (b) For purposes of this section, the following definitions apply:

   (1) "Licensed person" means a real estate broker licensed under
the Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code), a finance lender or
broker licensed under the California Finance Lenders Law (Division 9
(commencing with Section 22000) of the Financial Code), a
residential mortgage lender licensed under the California Residential
Mortgage Lending Act (Division 20 (commencing with Section 50000) of
the Financial Code), a commercial or industrial bank organized under
the Banking Law (Division 1 (commencing with Section 99) of the
Financial Code), a savings association organized under the Savings
Association Law (Division 2 (commencing with Section 5000) of the
Financial Code), and a credit union organized under the California
Credit Union Law (Division 5 (commencing with Section 14000) of the
Financial Code).
   (2) "Mortgage broker" means a licensed person who provides
mortgage brokerage services. For purposes of this section, a licensed
person who makes a residential mortgage loan is a "mortgage broker,"
and subject to the requirements of this section applicable to
mortgage brokers, only with respect to transactions in which the
licensed person provides mortgage brokerage services.
   (3) "Mortgage brokerage services" means arranging or attempting to
arrange, as exclusive agent for the borrower or as dual agent for
the borrower and lender, for compensation or in expectation of
compensation, paid directly or indirectly, a residential mortgage
loan made by an unaffiliated third party.
   (4) "Residential mortgage loan" means a consumer credit
transaction that is secured by residential real property that is
improved by four or fewer residential units.
   (c) The duties set forth in this section shall not be construed to
limit or narrow any other fiduciary duty of a mortgage broker.
  SEC. 2.  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.