BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2476
                                                                  Page 1
          Date of Hearing:  May 8, 2012

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
            AB 2476 (Veterans Affairs) - As Introduced:  February 24, 2012

                                  PROPOSED CONSENT

           SUBJECT  :  SERVICEMEMBER OBLIGATIONS:  INTEREST RATES

           KEY ISSUE  :  IN ORDER TO BETTER PROTECT DEPLOYED SERVICEMEMBERS 
          FROM FINANCIAL HARM, SHOULD CALIFORNIA TRACK FEDERAL LAW 
          LIMITING THE MORTGAGE INTEREST RATES THAT MAY BE CHARGED TO A 
          RETURNING VETERAN?

           FISCAL EFFECT  :  As currently in print this bill is keyed 
          non-fiscal.

                                      SYNOPSIS
          
          The federal Servicemembers Civil Relief Act (SCRA) provides 
          civil protections for servicemembers, including a limitation on 
          interest rates they may be charged while they are in the 
          military.  The federal Housing and Economic Recovery Act in 2008 
          made a number of changes to the SCRA.  One of the changes was 
          that servicemembers are protected from interest rates in excess 
          of 6 percent on mortgages during the period of service and also 
          for one year after their service is completed.  California law 
          had tracked this provision of the SCRA prior to its latest 
          amendment.  This bill amends California law to once again track 
          federal law by giving servicemembers an extra year, upon the end 
          of their service, at which interest rates on their homes will 
          remain low.  This bill is supported by veteran groups and the 
          financial services industry.  There is no known opposition to 
          the bill.

           SUMMARY  :  Extends the period during which mortgage interest 
          rates are capped for servicemembers.  Specifically,  this bill  
          prohibits, except as provided, an obligation or liability 
          incurred by a servicemember before that person's entry into 
          service from bearing interest in excess of six percent per year:

          1)During the period of military service and one year after, in 
            the case of an obligation or liability consisting of a 
            mortgage, trust deed, or other security in the nature of a 
            mortgage; or








                                                                  AB 2476
                                                                  Page 2

          2)During the period of military service, in the case of any 
            other obligation.

           EXISTING LAW  :

          1)Provides that no obligation or liability bearing interest at a 
            rate in excess of six percent per year incurred by a 
            servicemember before that person's entry into service shall, 
            during any part of the period of military service, bear 
            interest at a rate in excess of six percent per year unless, 
            in the opinion of the court, upon application by the obligee, 
            the ability of the servicemember to pay interest at a rate in 
            excess of six percent per year is not materially affected by 
            reason of that service, in which case the court may make that 
            order as in its opinion may be just.  Provides damages and 
            attorney's fees for violation of these provisions.  (Military 
            and Veterans Code Section 405.)

          2)Provides, under the SCRA, that an obligation or liability 
            bearing interest at a rate in excess of six percent per year 
            that is incurred by a servicemember, or the servicemember and 
            the servicemember's spouse jointly, before the servicemember 
            enters military service shall not bear interest at a rate in 
            excess of six percent:  (a) During the period of military 
            service and one year thereafter, in the case of an obligation 
            or liability consisting of a mortgage, trust deed, or other 
            security in the nature of a mortgage; or (b) during the period 
            of military service, in the case of any other obligation or 
            liability.  Allows a court to grant a creditor relief from 
            these provisions.  (50 U.S.C. Appx Section 527.)

           COMMENTS  :  The SCRA provides civil protections for 
          servicemembers who are deployed.  These protections include 
          limiting the interest rate that can be charged to servicemembers 
          during their period of service.  The passage of the federal 
          Housing and Economic Recovery Act in 2008 made a number of 
          changes to the SCRA.  One of those changes was that 
          servicemembers are protected from interest rates in excess of 
          six percent on mortgages not only during the period of service, 
          but also for one year after their service is completed.  
          California law had tracked this provision of the SCRA prior to 
          its latest amendment.  This bill amends California law to once 
          again track federal law by giving servicemembers an extra year, 
          upon their return from deployment, at which interest rates on 
          their homes will remain low.  








                                                                  AB 2476
                                                                  Page 3

          Both existing law and this bill still permit the obligee owed 
          the debt to petition for a rate greater than six percent.  To do 
          so, the obligee must show that the servicemember's ability to 
          pay a higher interest rate is not materially affected by his or 
          her service.  In that case, the court is allowed to make an 
          order that, in the opinion of the court, is just.

          Veterans groups support of the measure because it will "help 
          service members with financial matters during their transition 
          to civilian life."

           REGISTERED SUPPORT / OPPOSITION :   

           Support 

           AMVETS--Department of California
          American Legion--Department of California
          California Association of County Veterans Service Officers
          California Bankers Association 
          California Mortgage Bankers Association
          California State Commanders Veterans Council
          Vietnam Veterans of America--California State Council

           Opposition 

           None on file


           Analysis Prepared by  :  Leora Gershenzon  / JUD.  / (916) 
          319-2334