BILL NUMBER: AB 1950 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 21, 2012
AMENDED IN ASSEMBLY APRIL 19, 2012
AMENDED IN ASSEMBLY APRIL 10, 2012
INTRODUCED BY Assembly Member Davis
FEBRUARY 23, 2012
An act to amend Sections 10085.6 and 10130 of the Business and
Professions Code, to amend Section 2944.7 of the Civil Code,
to amend Section 27388 of the Government Code, and to
amend Section 802 of the Penal Code, relating to business.
LEGISLATIVE COUNSEL'S DIGEST
AB 1950, as amended, Davis. Prohibited business practices:
enforcement.
(1) Existing law prohibits any person from engaging in the
business, acting in the capacity of, advertising or assuming to act
as a real estate broker or a real estate salesman
salesperson without first obtaining a real estate license,
as specified.
This bill would additionally prohibit any person from engaging in
the business, acting in the capacity of, advertising or assuming to
act as a mortgage loan originator without being so licensed or
without having obtained a license endorsement, as specified.
(2) Existing law, until January 1, 2013, prohibits any person who
negotiates or arranges residential mortgage loan modifications, as
specified, for a fee, from demanding or receiving preperformance
compensation, as specified, or requiring security as collateral or
taking a power of attorney from the borrower and makes a violation of
that prohibition a misdemeanor subject to specified fines.
Existing law, until January 1, 2013, also prohibits certain
conduct by a real estate licensee in connection with a mortgage loan
modification or forbearance, including demanding compensation before
service is fully performed, taking a lien on property or wage
assignment, or taking a power of attorney from the borrower. A
violation of those prohibitions is a misdemeanor.
This bill would extend the operation of the above-described
provisions indefinitely. By extending the operation of existing
crimes, this bill would impose a state-mandated local program.
(3) Existing law provides that in addition to other recording
fees, upon adoption of a resolution by the county board of
supervisors, a fee of up to $3 shall be paid at the time of recording
of specified real estate instruments, to be placed in the Real
Estate Fraud Prosecution Trust Fund and to be expended to fund
programs for the local police and prosecutors to prosecute real
estate fraud crimes.
This bill would impose an additional $25 fee to be paid at the
time of recording a notice of default. The fee would be deposited in
the State Real Estate Fraud Prosecution Account of the General Fund,
which would be created by the bill, to be available, upon
appropriation by the Legislature, for purposes of combating real
estate fraud crimes, as specified. The bill would make additional
technical changes.
(4)
(3) Existing law provides that any person advertising
or holding himself or herself out as practicing or entitled to
practice law or otherwise practicing law who is not an active member
of the State Bar, or any person acting or advertising themselves as a
real estate broker, real estate salesperson, or mortgage loan
originator without a license or license endorsement, is guilty of a
misdemeanor. Existing law requires any person, including a person
licensed to practice law, who performs a mortgage loan modification
or other form of mortgage loan forbearance for a fee or other
compensation, as specified, to provide a specified notice to the
borrower concerning 3rd parties arranging loan modifications.
Existing law also prohibits certain conduct by that person including,
among other things, demanding compensation before service is fully
performed, taking a lien on property or a wage assignment, or taking
a power of attorney from the borrower. Existing law provides that a
violation of these requirements or prohibitions is a misdemeanor with
specified penalties. Existing law requires that a prosecution for
these offenses be commenced within one year of the commission of the
offense.
This bill would extend the time to commence a prosecution for
these offenses to 3 years from the discovery of the commission of the
offense, or within 3 years after completion of the offense,
whichever is later.
(5)
(4) 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.
(6) This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
Vote: 2/3 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 10085.6 of the Business and Professions Code is
amended to read:
10085.6. (a) Notwithstanding any other provision of law, it shall
be unlawful for any licensee who negotiates, attempts to negotiate,
arranges, attempts to arrange, or otherwise offers to perform a
mortgage loan modification or other form of mortgage loan forbearance
for a fee or other compensation paid by the borrower, to do any of
the following:
(1) Claim, demand, charge, collect, or receive any compensation
until after the licensee has fully performed each and every service
the licensee contracted to perform or represented that he, she, or it
would perform.
(2) Take any wage assignment, any lien of any type on real or
personal property, or other security to secure the payment of
compensation.
(3) Take any power of attorney from the borrower for any purpose.
(b) A violation of this section by a natural person who is a
licensee is a public offense punishable by a fine not exceeding ten
thousand dollars ($10,000), by imprisonment in the county jail for a
term not to exceed one year, or by both that fine and imprisonment,
or if by a corporation, the violation is punishable by a fine not
exceeding fifty thousand dollars ($50,000). These penalties are
cumulative to any other remedies or penalties provided by law.
(c) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
SEC. 2. Section 10130 of the Business and Professions Code is
amended to read:
10130. It is unlawful for any person to engage in the business
of , act in the capacity of, advertise as, or
assume to act as a real estate broker or a real estate
salesman salesperson within this state without
first obtaining a real estate license from the department, or to
engage in the business of , act in the capacity of,
advertise as, or assume to act as a mortgage loan
originator within this state without being so licensed or without
having obtained a license endorsement.
The commissioner may prefer a complaint for violation of this
section before any court of competent jurisdiction, and the
commissioner and his or her counsel, deputies or
assistants may assist in presenting the law or facts at the trial.
It is the duty of the district attorney of each county in this
state to prosecute all violations of this section in their respective
counties in which the violations occur.
SEC. 3. Section 2944.7 of the Civil Code is amended to read:
2944.7. (a) Notwithstanding any other provision of law, it shall
be unlawful for any person who negotiates, attempts to negotiate,
arranges, attempts to arrange, or otherwise offers to perform a
mortgage loan modification or other form of mortgage loan forbearance
for a fee or other compensation paid by the borrower, to do any of
the following:
(1) Claim, demand, charge, collect, or receive any compensation
until after the person has fully performed each and every service the
person contracted to perform or represented that he or she would
perform.
(2) Take any wage assignment, any lien of any type on real or
personal property, or other security to secure the payment of
compensation.
(3) Take any power of attorney from the borrower for any purpose.
(b) A violation of this section by a natural person is a public
offense punishable by a fine not exceeding ten thousand dollars
($10,000), by imprisonment in the county jail for a term not to
exceed one year, or by both that fine and imprisonment, or if by a
business entity, the violation is punishable by a fine not exceeding
fifty thousand dollars ($50,000). These penalties are cumulative to
any other remedies or penalties provided by law.
(c) Nothing in this section precludes a person, or an agent acting
on that person's behalf, who offers loan modification or other loan
forbearance services 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 for a nondelinquent loan, after the
borrower reduces the unpaid principal balance of that loan 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.
(d) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
SEC. 4. Section 27388 of the Government Code is
amended to read:
27388. (a) (1) In addition to any other recording fees specified
in this code, upon the adoption of a resolution by the county board
of supervisors, a fee of up to three dollars ($3) shall be paid at
the time of recording of every real estate instrument, paper, or
notice required or permitted by law to be recorded within that
county, except those expressly exempted from payment of recording
fees. The fees, after deduction of any actual and necessary
administrative costs incurred by the county in carrying out this
section, shall be paid quarterly to the county auditor or director of
finance, to be placed in the Real Estate Fraud Prosecution Trust
Fund. The amount deducted for administrative costs shall not exceed
10 percent of the fees paid pursuant to this section.
(2) "Real estate instrument" is defined for the purposes of this
section as a deed of trust, an assignment of deed of trust, a
reconveyance, a request for notice, a notice of default, a
substitution of trustee, a notice of trustee sale, and a notice of
rescission or declaration of default. "Real estate instrument" does
not include any deed, instrument, or writing subject to the
imposition of a documentary transfer tax as defined in Section 11911
of the Revenue and Taxation Code, or any document required to
facilitate the transfer subject to the documentary transfer tax.
(3) An additional fee of twenty-five dollars ($25) shall be paid
at the time of recording a notice of default pursuant to Section 2924
of the Civil Code. Counties shall transmit the twenty-five-dollar
($25) fee, less administrative costs of transmittal, to the
Department of Justice.
(b) (1) Money placed in the Real Estate Fraud Prosecution Trust
Fund shall be expended to fund programs to enhance the capacity of
local police and prosecutors to deter, investigate, and prosecute
real estate fraud crimes.
(2) After deduction of the actual and necessary administrative
costs referred to in paragraph (1) of subdivision (a), 60 percent of
the funds shall be distributed to district attorneys subject to
review pursuant to subdivision (e), and 40 percent of the funds shall
be distributed to local law enforcement agencies within the county
in accordance with subdivision (d).
(3) In those counties where the investigation of real estate fraud
is done exclusively by the district attorney, after deduction of the
actual and necessary administrative costs referred to in paragraph
(1) of subdivision (a), 100 percent of the funds shall be distributed
to the district attorney, subject to review pursuant to subdivision
(e). The funds so distributed shall be expended for the exclusive
purpose of deterring, investigating, and prosecuting real estate
fraud crimes.
(c) Moneys transmitted pursuant to paragraph (3) of subdivision
(a) shall be deposited in the State Real Estate Fraud Prosecution
Account of the General Fund, which is hereby created, to be
available, upon appropriation by the Legislature, for expenditure by
the department for the purpose of determining, investigating, and
prosecuting real estate fraud crimes.
(d) The county auditor or director of finance shall distribute
funds in the Real Estate Fraud Prosecution Trust Fund to eligible law
enforcement agencies within the county pursuant to subdivision (b),
as determined by a Real Estate Fraud Prosecution Trust Fund Committee
composed of the district attorney, the county chief administrative
officer, the chief officer responsible for consumer protection within
the county, and the chief law enforcement officer of one law
enforcement agency receiving funding from the Real Estate Fraud
Prosecution Trust Fund, the latter being selected by a majority of
the other three members of the committee. The chief law enforcement
officer shall be a nonvoting member of the committee and shall serve
a one-year term, which may be renewed. Members may appoint
representatives of their offices to serve on the committee. If a
county lacks a chief officer responsible for consumer protection, the
county board of supervisors may appoint an appropriate
representative to serve on the committee. The committee shall
establish and publish deadlines and written procedures for local law
enforcement agencies within the county to apply for the use of funds
and shall review applications and make determinations by majority
vote as to the award of funds using the following criteria:
(1) Each law enforcement agency that seeks funds shall submit a
written application to the committee setting forth in detail the
agency's proposed use of the funds.
(2) In order to qualify for receipt of funds, each law enforcement
agency submitting an application shall provide written evidence that
the agency either:
(A) Has a unit, division, or section devoted to the investigation
or prosecution of real estate fraud, or both, and the unit, division,
or section has been in existence for at least one year prior to the
application date.
(B) Has on a regular basis, during the three years immediately
preceding the application date, accepted for investigation or
prosecution, or both, and assigned to specific persons employed by
the agency, cases of suspected real estate fraud, and actively
investigated and prosecuted those cases.
(3) The committee's determination to award funds to a law
enforcement agency shall be based on, but not be limited to, the
number of real estate fraud cases filed in the prior year, the number
of real estate fraud cases investigated in the prior year, the
number of victims involved in the cases filed, and the total
aggregated monetary loss suffered by victims, including individuals,
associations, institutions, or corporations, as a result of the real
estate fraud cases filed, and those under active investigation by
that law enforcement agency.
(4) Each law enforcement agency that, pursuant to this section,
has been awarded funds in the previous year, upon reapplication for
funds to the committee in each successive year, in addition to any
information the committee may require in paragraph (3), shall be
required to submit a detailed accounting of funds received and
expended in the prior year. The accounting shall include the amount
of funds received and expended, the uses to which those funds were
put, including payment of salaries and expenses, purchase of
equipment and supplies, and other expenditures by type, the number of
filed complaints, investigations, arrests, and convictions that
resulted from the expenditure of the funds, and other relevant
information the committee may reasonably require.
(e) The county board of supervisors shall annually review the
effectiveness of the district attorney in deterring, investigating,
and prosecuting real estate fraud crimes based upon information
provided by the district attorney in an annual report. The district
attorney shall submit the annual report to the board and to the
Legislative Analyst's Office on or before September 1 of each year.
The Legislative Analyst's Office shall compile the results and report
to the Legislature, detailing both:
(1) Facts, based upon, but not limited to, the number of real
estate fraud cases filed in the prior year, the number of real estate
fraud cases investigated in the prior year, the number of victims
involved in the cases filed, the number of convictions obtained in
the prior year, and the total aggregated monetary loss suffered by
victims, including individuals, associations, institutions,
corporations, and other relevant public entities, according to the
number of cases filed, investigations, prosecutions, and convictions
obtained.
(2) An accounting of funds received and expended in the prior
year, which shall include the amount of funds received and expended,
the uses to which those funds were put, including payment of salaries
and expenses, purchase of equipment and supplies, and other
expenditures by type, the number of filed complaints, investigations,
prosecutions, and convictions that resulted from the expenditure of
funds, and other relevant information provided at the discretion of
the district attorney.
(f) A county in which a district attorney fails to submit an
annual report to the Legislative Analyst's Office pursuant to the
requirements of subdivision (e) shall not expend funds held in that
county's Real Estate Fraud Prosecution Trust Fund until the district
attorney has submitted an annual report for the county's most recent
full fiscal year.
(g) Annual reports submitted to the Legislative Analyst's Office
pursuant to subdivision (e) shall be made in a standard form and
manner determined by the Legislative Analyst's Office, in
consultation with participating law enforcement agencies.
(h) The intent of the Legislature in enacting this section is to
have an impact on real estate fraud involving the largest number of
victims. To the extent possible, an emphasis should be placed on
fraud against individuals whose residences are in danger of, or are
in, foreclosure as defined in subdivision (b) of Section 1695.1 of
the Civil Code. Case filing decisions continue to be at the
discretion of the prosecutor.
(i) A district attorney's office or a local enforcement agency
that has undertaken investigations and prosecutions that will
continue into a subsequent program year may receive nonexpended funds
from the previous fiscal year subsequent to the annual submission of
information detailing the accounting of funds received and expended
in the prior year.
(j) No money collected pursuant to this section shall be expended
to offset a reduction in any other source of funds. Funds from the
Real Estate Fraud Prosecution Trust Fund shall be used only in
connection with criminal investigations or prosecutions involving
recorded real estate documents.
SEC. 5. SEC. 4. Section 802 of the
Penal Code is amended to read:
802. (a) Except as provided in subdivision (b), (c), (d), or (e),
prosecution for an offense not punishable by death or imprisonment
in the state prison shall be commenced within one year after
commission of the offense.
(b) Prosecution for a misdemeanor violation of Section 647.6 or
former Section 647a committed with or upon a minor under the age of
14 years shall be commenced within three years after commission of
the offense.
(c) Prosecution of a misdemeanor violation of Section 729 of the
Business and Professions Code shall be commenced within two years
after commission of the offense.
(d) Prosecution of a misdemeanor violation of Chapter 9
(commencing with Section 7000) of Division 3 of the Business and
Professions Code shall be commenced as follows:
(1) With respect to Sections 7028.17, 7068.5, and 7068.7 of the
Business and Professions Code, within one year of the commission of
the offense.
(2) With respect to Sections 7027.1, 7028.1, 7028.15, 7118.4,
7118.5, 7118.6, 7126, 7153, 7156, 7157, 7158, 7159.5 (licensee only),
7159.14 (licensee only), 7161, and 7189 of the Business and
Professions Code, within two years of the commission of the offense.
(3) With respect to Sections 7027.3 and 7028.16 of the Business
and Professions Code, within three years of the commission of the
offense.
(4) With respect to Sections 7028, 7159.5 (nonlicensee only) and
7159.14 (nonlicensee only), of the Business and Professions Code,
within four years of the commission of the offense.
(e) Prosecution for a misdemeanor violation of Section
6106.3, 6126, 10085.6, 10139, or 10147.6 of the Business
and Professions Code or of Section 2944.6 or 2944.7 of the Civil Code
shall be commenced within three years after discovery of the
commission of the offense, or within three years after completion of
the offense, whichever is later.
SEC. 6. SEC. 5. 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.