BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 2666
Author: Assembly Banking and Finance Committee
Amended: 6/12/12 in Senate
Vote: 21
SENATE BANKING & FINACIAL INST. COMMITTEE : 7-0, 6/20/12
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla,
Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 5/17/12 (Consent) - See last page
for vote
SUBJECT : Mortgage loan originators
SOURCE : Author
DIGEST : This bill makes technical and clarifying changes
to provisions of the California Finance Lenders Law (CFLL)
and California Residential Mortgage Lending Act (CRMLA)
that implement the federal Secure and Fair Enforcement for
Mortgage Licensing Act (SAFE Act) of 2008.
ANALYSIS : Existing federal law provides for the SAFE
Act, pursuant to Title V of the provisions of the Housing
and Economic Recovery Act of 2008 (HR 3221; Public Law
110-289). The SAFE Act required all states to license and
register their mortgage loan originators, as defined,
through a nationwide organization called the Nationwide
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Mortgage Licensing System and Registry. Any state that
failed to implement a mortgage loan originator licensing
system, in compliance with the SAFE Act, by July 30, 2009
risked direct intervention by the U.S. Department of
Housing and Urban Development (HUD). Under the SAFE Act,
HUD is authorized to establish and maintain a mortgage loan
originator system in any state that fails to voluntarily
comply with SAFE. Authority for SAFE Act oversight was
transferred from HUD to the Consumer Financial Protection
Bureau (CFPB) in July 2011.
Existing law, pursuant to SB 36 (Calderon, Chapter 160,
Statutes of 2009), SB 1137 (Senate Banking, Finance and
Insurance Committee, Chapter 287, Statutes of 2010), and SB
217 (Vargas, Chapter 444, Statutes of 2011), conforms
California's Real Estate Law, CFLL, and CRMLA to the SAFE
Act, thus preserving California's ability to continue
regulating mortgage loan origination by non-depository
institutions operating in California.
This bill:
1. Adds California's Penal Code definition of "expungement"
to the CFLL and CRMLA.
2. Amends the CFLL and CRMLA to exempt the following
individuals from the definition of a mortgage loan
originator:
A. Employees of federal, state, or local government
agencies or housing finance agencies, who act as
mortgage loan originators only in their official
duties as employees of those agencies.
B. Employees of bona fide nonprofit organizations,
who exclusively originate residential mortgage loans
for those bona fide nonprofit organizations, and who
act as mortgage loan originators only with respect to
residential mortgage loans with terms that are
favorable to the borrower, as defined. To qualify
for the exemption, a bona fide nonprofit organization
must register with the Department of Corporations
(DOC); provide specified documentation to DOC
regarding its activities on an annual basis;
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periodically provide reports regarding its
activities, as requested by the Commissioner of DOC
(Commissioner); and subject itself to periodic
examinations of its books and records by the
Commissioner, as specified. The Commissioner is
given the authority to revoke a nonprofit
organization's status as a registered bona fide
nonprofit organization (and thus revoke the exemption
provided to its employees), if the organization fails
to provide required documentation to DOC or does not
continue to meet specified criteria.
3. Amends the CFLL to authorize companies that are "not
subject to" the CFLL and amend the CRMLA to authorize
companies that are "exempt from" the CRMLA to apply to
the Commissioner for exempt company registrations.
4. Amends the CFLL and CRMLA to clarify that applications
and other documents held in the Nationwide Mortgage
Licensing System and Registry are deemed to be valid
original records, upon printing to paper.
5. Clarifies the CFLL by expressly stating that:
A. An individual may not engage in the business of a
mortgage loan originator with respect to any dwelling
located in this state, without first obtaining and
maintaining annually a license in accordance with the
requirements of the CFLL.
B. A registered mortgage loan originator is exempt
from licensure under the CFLL when that individual is
employed by a depository institution, a subsidiary of
a depository institution owned and controlled by a
depository institution and regulated by a federal
banking agency, or an institution regulated by the
Farm Credit Administration.
C. A finance lender, finance broker, or mortgage loan
originator licensed under the CFLL may not pay any
commission, fee, or other compensation to an
unlicensed individual for conducting activities that
require a license, unless that unlicensed individual
is exempt from licensure pursuant to the CFLL.
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Comments
Background and discussion . The federal SAFE Act was
enacted in July of 2008, and gave jurisdiction to HUD to
implement regulations clarifying its operation. On June
30th, 2011, shortly before its authority to administer the
SAFE Act was transferred to the CFPB, HUD issued its final
rules implementing the SAFE Act (Federal Register Volume
76, Number 126, Thursday, July 30th, 2011, pp. 38464 -
38501).
SB 217, referenced above, was enacted to incorporate some
of the changes reflected in the HUD final regulations, and
to authorize certain companies, which did not require
lending licenses from the state of California, but whose
employees engaged in activities which required mortgage
loan originator licenses pursuant to the SAFE Act, to
obtain so-called "exempt company registrations" from DOC.
These exempt company registrations allow the companies to
sponsor their employees on the Nationwide Mortgage
Licensing System and Registry (a database used to
facilitate the licensing of mortgage loan originators
nationwide), and thus enable their employees to obtain
mortgage loan originator licenses.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 7/2/12)
Housing Trust Fund of Santa Barbara County
San Luis Obispo County Housing Trust Fund
ASSEMBLY FLOOR : 75-0, 5/17/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
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Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller,
Mitchell, Monning, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, V. Manuel Pérez, Portantino, Silva, Smyth,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, John A. Pérez
NO VOTE RECORDED: Fletcher, Bonnie Lowenthal, Perea,
Skinner, Yamada
JJA:m 7/2/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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