BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1950|
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THIRD READING
Bill No: AB 1950
Author: Davis (D)
Amended: 8/6/12 in Senate
Vote: 21
SENATE BANKING & FINANCIAL INST. COMM. : 6-0, 6/27/12
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Walters
NO VOTE RECORDED: Padilla
SENATE JUDICIARY COMMITTEE : 4-0, 7/3/12
AYES: Evans, Blakeslee, Corbett, Leno
NO VOTE RECORDED: Harman
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/16/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 56-22, 5/30/12 - See last page for vote
SUBJECT : Prohibited business practices: enforcement
SOURCE : Attorney General Kamala Harris
DIGEST : This bill deletes the sunset date on two
provisions of a 2009 bill that prohibited collecting
up-front fees in connection with offers to help borrowers
obtain mortgage loan modifications or other forms of
mortgage loan forbearance; extends the statute of
limitations from one year to three years on specified, real
estate-related misdemeanors; and makes a technical and
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clarifying change to the Real Estate Law.
ANALYSIS :
Existing law:
1. Until January 1, 2013, pursuant to Business and
Professions Code (BPC) Section 10085.6 and Civil Code
(CIV) Section 2944.6, provides that, notwithstanding any
other provision of law, it is 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:
A. 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, she, or
it would perform.
B. Take any wage assignment, any lien of any type on
real or personal property, or other security to
secure the payment of compensation.
C. Take any power of attorney from the borrower for
any purpose.
2. Applies the prohibition described in #1 above only to
mortgages and deeds of trust secured by residential real
property containing for or fewer dwelling units.
3. Until January 1, 2013, provides that a violation of CIV
Section 2944.6 by an attorney constitutes cause for the
imposition of discipline of that attorney by the State
Bar (BPC Section 6106.3).
4. Pursuant to BPC Section 10085.6 and CIV Section 2944.6,
provides that a violation of the prohibition described
in #1 above is a misdemeanor, punishable by a fine not
exceeding $10,000 ($50,000 if the party violating the
law is a corporation), imprisonment in a county jail for
up to one year, or by both a fine and imprisonment, and
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provides that those penalties are cumulative to any
other remedies or penalties provided by law.
5. Provides that no individual may engage in business as a
mortgage loan originator without first obtaining and
maintaining a real estate license and obtaining and
maintaining a real estate license endorsement pursuant
to specified provisions of the Real Estate Law (BPC
Section 10166.02).
6. Generally applies a one year statute of limitations to
the prosecution of misdemeanor violations of California
laws not punishable by death or imprisonment (Penal Code
Section 802).
This bill:
1. Deletes the January 1, 2013 sunset dates on BPC Section
10085.6 (relating to acts by real estate licensees) and
CIV Section 2944.6 (relating to acts by other persons),
which provide that, notwithstanding any other provision
of law, and only with respect to mortgages and deeds of
trust secured by residential real property containing
for or fewer dwelling units, it is 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:
A. 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, she, or
it would perform.
B. Take any wage assignment, any lien of any type on
real or personal property, or other security to
secure the payment of compensation.
C. Take any power of attorney from the borrower for
any purpose.
2. Extends the statute of limitations from one year to
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4
three years for prosecution of misdemeanor violations of
all of the following:
A. BPC Sections 6126 (prohibition against the
practice of law by unlicensed or disbarred persons);
B. BPC Section 10085.6 (prohibition against
collecting up-front fees in connection with offers to
help borrowers obtain mortgage loan modifications or
other forms of mortgage loan forbearance);
C. BPC Section 10139 (prohibition against the
practice of real estate by unlicensed persons);
D. BPC Section 10147.6 (requirement for real estate
licensees to provide a specified notice to borrowers
before entering into a fee agreement with them in
connection with offers to help obtain mortgage loan
modifications or other forms of mortgage loan
forbearance);
E. CIV Section 2944.6 (general prohibition against
collecting up-front fees in connection with offers to
help borrowers obtain mortgage loan modifications or
other forms of mortgage loan forbearance); and,
F. CIV Section 2944.7 (general requirement to provide
a specified notice to borrowers before entering into
a fee agreement with them in connection with offers
to help obtain mortgage loan modifications or other
forms of mortgage loan forbearance).
3. Clarifies that it is a violation of the Real Estate Law
for any person 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
holding a mortgage loan originator license endorsement.
Background
This bill has three provisions, each of which is discussed
separately below.
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I. Provision Deleting the Sunset Date on Portions of SB 94
(Calderon), Chapter 630, Statutes of 2009
This bill proposes to extend the sunset date on two
provisions of a 2009 urgency bill (SB 94), which cracked
down against unscrupulous individuals and businesses,
who were preying on troubled borrowers by charging them
up-front, often nonrefundable fees, under the guise of
helping the borrowers obtain loan modifications or other
forms of mortgage forbearance from their lenders.
All too frequently, these fees were charged for services
that were never provided, leaving thousands of troubled
borrowers worse off than they had been before seeking
help. SB 94 addressed that problem, by prohibiting
those who sought to charge borrowers a fee for helping
negotiate a loan modification or other form of mortgage
loan forbearance from collecting their fee until they
performed all agreed-upon services. The bill also
required those who sought to charge for these services
to clearly inform their potential customers that similar
services were available, free of charge, from non-profit
housing counseling agencies.
Although early versions of SB 94 lacked a sunset date,
the Schwarzenegger Administration requested that a
January 1, 2013 sunset date be added to the three loan
modification advance fee ban provision of the bill.
Because of that sunset date, the needed protections
added to California law by the bill will sunset at the
end of 2012, unless the Legislature acts to extend them.
This bill proposes to delete the sunset date on two of
the three provisions of SB 94 that will sunset on
January 1, 2013 (BPC Section 10085.6, relating to real
estate licensees, and CIV Section 2944.6, relating to
other persons). This bill does not propose to delete
the sunset date on BPC Section 6106.3, which authorizes
the State Bar to discipline attorneys who violate CIV
Sections 2944.6 and 2944.7.
II. Provision Extending the Statute of Limitations on
Certain Real Estate-Related Misdemeanors
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In May 2011, the Attorney General's (AG's) Office
established a Mortgage Fraud Strike Force to investigate
and prosecute civil and criminal violations of
California's mortgage and foreclosure laws. To be
effective, the Strike Force needs adequate time to
investigate and prepare prosecutions. The AG feels
limited in her ability to take the necessary time for
these investigations and preparations, because
misdemeanor violations of California laws that protect
homeowners in the foreclosure process are currently
subject to a one-year statute of limitations. She also
observes that, because the foreclosure process is
typically protracted, victims often do not discover law
violations, nor refer their cases to the AG's office or
the local district attorney's (DA's) office, in time for
the AG or DA to prosecute that case before the one-year
statute of limitations expires. The list of
misdemeanors whose statutes of limitations would be
extended to three years is listed under item #2 above.
III. Provision Clarifying the Real Estate Law
The AG is seeking a clarifying amendment, to make it
clear that no any person may 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 appropriately licensed. This clarification is not
new law, as the Real Estate Law already provides that no
individual may engage in business as a mortgage loan
originator without first obtaining and maintaining a
real estate license and mortgage loan originator license
endorsement (BPC Section 10166.02). However, the AG
believes that this change will make it easier to
prosecute mortgage-related fraud.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Ongoing court costs for increased misdemeanor filings
potentially in excess of $100,000 (General Fund) per
year, offset to a degree by fine revenue.
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Potential non-reimbursable local enforcement and
incarceration costs, offset to a degree by fine revenue.
While the impact of this bill independently on local
jails could be minor, the cumulative effect of
increasing the number of misdemeanors filed could create
General Fund cost pressure on capital outlay, staffing,
programming, the courts, and other resources in the
context of recently enacted 2011 Public Safety
Realignment.
SUPPORT : (Verified 8/16/12)
Attorney General Kamala Harris (source)
AFSCME, AFL-CIO
Alameda County Board of Supervisors
California Bankers Association
California Chamber of Commerce
California Independent Bankers
California Land Title Association
California Mortgage Bankers Association
California Nurses Association
California Professional Firefighters
Consumer Attorneys of California
Los Angeles County Democratic Party
National Asian American Coalition
National State Conference of the National Association for
the Advancement of Colored People
PICO California
United Trustees Association
ASSEMBLY FLOOR : 56-22, 5/30/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer,
Fong, Fuentes, Furutani, Galgiani, Gatto, Gordon, Gorell,
Hall, Hayashi, Roger Hernández, Hill, Huber, Hueso,
Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell,
Monning, Pan, Perea, V. Manuel Pérez, Portantino,
Skinner, Smyth, Solorio, Swanson, Torres, Wieckowski,
Williams, Yamada, John A. Pérez
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NOES: Conway, Cook, Donnelly, Beth Gaines, Garrick, Grove,
Hagman, Halderman, Harkey, Jeffries, Jones, Knight,
Logue, Mansoor, Miller, Morrell, Nestande, Nielsen,
Norby, Olsen, Silva, Wagner
NO VOTE RECORDED: Fletcher, Valadao
JJA:k 8/17/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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