BILL ANALYSIS Ó SB 6 Page 1 Date of Hearing: August 17, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 6 (Calderon) - As Amended: July 7, 2011 Policy Committee: Banking and Finance Vote: 11-0 Urgency: No State Mandated Local Program: Yes Reimbursable: No SUMMARY This bill updates California's real estate and appraisal law to reflect recent changes enacted at the federal level pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Specifically, this bill: 1)Provides that no real estate licensee shall knowingly or intentionally misrepresent the value of real property, and, no real estate licensee that offers or provides an opinion of value of real property that is used as the basis for an origination of a mortgage loan shall have an interest in that property. 2)Clarifies that no person or entity acting in the capacity of an appraisal management company (AMC) shall improperly influence the development or review of any appraisal and no person or entity preparing an appraisal, or performing appraisal management functions shall have a direct or indirect interest in the property or the transaction. 3)Provides that no person with an interest in a real estate transaction involving a valuation shall improperly influence the valuation. FISCAL EFFECT Costs to the Department of Real Estate will be minor and absorbable. COMMENTS SB 6 Page 2 1)Purpose . According to the author's office, "In recent years, California has enacted legislation to ensure the integrity of the real property appraisal process. Until enactment of Dodd-Frank in July 2010, these California's laws were more comprehensive, and more protective of consumers than the federal rules. Since enactment of Dodd-Frank, however, California's rules have fallen behind some of those recently promulgated by federal regulators. Portions of state law are also now inconsistent with federal regulations in certain cases. 2)Background . Dodd-Frank, signed into law by President Obama in July 2010, was a response to the mortgage crisis in the middle of the last decade. Dodd-Frank made significant changes to the American financial regulatory environment and affects all federal financial regulatory agencies and almost every aspect of the nation's financial services industry. The Federal Reserve Board (FRB) recently promulgated regulations implementing Dodd-Frank. This bill updates state law to conform to provisions of Dodd-Frank that reform the mortgage business. 3)Support . The California Government Relations Subcommittee of the Appraisal Institute, sponsor of this measure, states, "SB 6 is largely technical, to make sure that federal rules and state rules align on important questions of inappropriate pressure on appraisers and conflicts of interest in rendering real property value conclusions. As the appraisal process has been implicated to some degree in evaluations of the national financial crisis, it is important that state and federal laws be consistent." 4)Previous legislation . a) SB 237 (Machado) Chapter 173, Statues of 2009, required management companies doing business in California to register with the Office of Real Estate Appraisers and enacted a set of allowable and prohibited actions for AMCs and appraisers. b) SB 223 (Machado) Chapter 291, Statutes of 2007, prohibits any person with an interest in a real estate transaction from inappropriately influencing, or attempting to inappropriately influence, a real property appraiser with the aim of convincing the appraiser to alter his or SB 6 Page 3 her value conclusion. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081