BILL ANALYSIS Ó
SB 376
Page 1
Date of Hearing: June 14, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 376 (Fuller) - As Amended: April 7, 2011
SENATE VOTE : 40-0
SUBJECT : Real estate brokers.
SUMMARY : Revises the definition of "real estate broker" to
allow brokers to make, arrange, or service chattel mobilehome
loans under their Department of Real Estate (DRE) license,
without having to secure an additional finance lender or broker
license from the Department of Corporations. Specifically, this
bill :
1)Defines "real estate broker" to include a person who, among
other things:
a) Solicits borrowers or lenders for or negotiates loans or
collects payments or performs services for borrowers or
lenders or note owners in connection with loans secured
directly or collaterally by liens on real property, or
chattel mobilehome loans if the mobilehome has been
registered pursuant to current law, or on a business
opportunity; or
b) Sells or offers to sell, buys or offers to buy, or
exchanges or offers to exchange a real property sales
contract, or a promissory note secured directly or
collaterally by a lien on real property, or chattel
mobilehome loans if the mobilehome has been registered
pursuant to current law, or a business opportunity, and
performs services for the holders thereof.
2)Specifies that a person licensed as a real estate broker who
acts pursuant to specified current law or a) or b), above, and
who makes, arranges, or services chattel mobilehome loans, if
the mobilehome has been registered pursuant to current law,
need only meet the requirements for licensure under the Real
Estate Law.
EXISTING LAW
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Federal law:
1)Pursuant to the federal Secure and Fair Enforcement for
Mortgage Licensing Act of 2008 (SAFE Act), requires all states
to license and register their mortgage loan originators
through a nationwide registry.
2)Under the SAFE Act, defines "mortgage loan originator" as
(generally speaking) one who takes a residential mortgage loan
application or offers or negotiates terms of a residential
mortgage loan for compensation or gain.
3)Under the SAFE Act, redefines "residential mortgage loans"
(mortgage loan secured by real property) to include chattel
loans on mobilehomes, whether or not they are attached to real
property.
California Real Estate Law:
1)Licenses and regulates real estate brokers under DRE.
2)Defines "real estate broker" to include a person who, among
other things:
a) Solicits borrowers or lenders for or negotiates loans or
collects payments or performs services for borrowers or
lenders or note owners in connection with loans secured
directly or collaterally by liens on real property or on a
business opportunity; or
b) Sells or offers to sell, buys or offers to buy, or
exchanges or offers to exchange a real property sales
contract, or a promissory note secured directly or
collaterally by a lien on real property or a business
opportunity, and performs services for the holders thereof.
3)Defines a "mortgage loan originator" as an individual who
takes a residential mortgage loan application or offers or
negotiates terms of a residential mortgage loan for
compensation or gain.
4)Defines "residential mortgage loan" as any loan primarily for
personal, family, or household use that is secured by a
mortgage, deed of trust, or other equivalent consensual
security interest on a dwelling, or residential real estate
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upon which is constructed or intended to be constructed a
dwelling. "Dwelling" means a residential structure that
contains one to four units, whether or not that structure is
attached to real property, and includes an individual
mobilehome if it is used as a residence.
5)Requires a mortgage loan originator to obtain and maintain a
real estate license and to obtain and maintain a real estate
license endorsement, as specified, identifying that individual
as a licensed mortgage loan originator.
California Financial Code:
1)Defines "residential mortgage loan" as any loan primarily for
personal, family, or household use that is secured by a
mortgage, deed of trust, or other equivalent consensual
security interest on a dwelling as defined in the federal
Truth in Lending Act, or residential real estate upon which is
constructed or intended to be constructed a dwelling.
"Dwelling" means a residential structure that contains one to
four units, whether or not that structure is attached to real
property, and includes an individual mobilehome if it is used
as a residence.
2)Defines "mortgage loan originator" as an individual who, for
compensation or gain, or in the expectation of compensation or
gain, takes a residential mortgage loan application or offer
or negotiates terms of a residential mortgage loan.
3)Provides that a mortgage loan originator does not include an
individual who is already licensed pursuant to provisions of
the Real Estate Law and the SAFE Act.
4)Specifies that no person shall engage in the business of a
finance lender or broker without obtaining a license from the
Commissioner of the Department of Corporations (Commissioner).
5)Specifies that no person shall engage in the business of a
mortgage loan originator without submitting an application to
obtain a license as specified from the Commissioner.
6)Specifies that every licensee engaging in the business of
making or brokering residential mortgage loans shall require
that every mortgage loan originator employed or compensated by
that licensee obtain and maintain a mortgage loan originator
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license from the Commissioner or obtain a license endorsement
from the Commissioner of Real Estate.
7)Specifies that a finance lender or broker may not make or
broker a residential mortgage loan unless that loan is offered
by, negotiated by, or applied for through a licensed mortgage
loan originator.
California Health and Safety Code:
Requires annual registration of mobilehomes with the Department
of Housing and Community Development.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office,
"Recently enacted federal and state statutes have redefined a
mortgage loan secured by real property to include chattel loans
on mobile homes. This will prevent lending of mobile home
chattel loans by requiring mobile home park owners to become
licensed finance lenders. This bill will exempt those who issue
chattel mobile home loans from this requirement so that these
loans may continue."
Background . The SAFE Act, part of the Housing and Economic
Recovery Act of 2008, requires all states to license and
register their mortgage loan originators through a nationwide
registry. California began pursuing legislation to comply with
the SAFE act in 2009, and continues refining state law in
conformity with regulations implementing the SAFE Act, which are
still being developed.
According to the Western Manufactured Housing Communities
Association (WMA), sponsor of this bill, the SAFE Act and newly
amended provisions of the federal Truth in Lending Act pose a
substantial problem for the state's mobile home parks. Before
these federal measures and state legislation implementing the
SAFE Act were in place, park owners were making seller carry
back chattel loans on used mobile homes using their own money to
fund the loans. This was necessary because traditional lenders
were not willing to make $5,000 to $20,000 chattel loans on used
mobile homes that park owners acquired through default,
abandonment, or warehouse liens. Park owners were not required
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to be licensed as lenders by the Department of Corporations,
because these loans were not categorized as "engaged in the
business of chattel lending" and did not trigger the need for a
finance lender license.
WMA states, "The S.A.F.E. Act redefined Residential Mortgage
Loans to include chattel loans on mobile homes whether or not
they were attached to real property?Thus, park owners who are
engaged in making seller carry back loans on mobilehomes?are
required to be licensed as mortgage loan originators (MLOs) and
to be licensed as a consumer finance lender by the Department of
Corporations in order to finance homes which they own and
self-finance. This is a very costly and difficult process for a
parkowner who makes an occasional seller financed chattel loan.
"The process of becoming a licensed finance lender takes months,
as does the mortgage loan originator license?Congress has
essentially created a legal fiction by folding chattel loans on
mobile homes into the definition of a mortgage loan secured by
real property. Lending on these used homes will cease if relief
from the S.A.F.E Act is not provided by legislation."
This bill amends California Real Estate Law to allow property
management companies that manage mobilehome parks and already
must be licensed as real estate brokers by DRE to make used
mobile home loans under their DRE Broker license and an MLO
license endorsement (required under the SAFE Act), without
having to acquire an additional finance lender license from the
Department of Corporations.
Support . The Western Manufactured Housing Communities
Association states, "WMA is sponsoring SB 367?to allow property
management companies who manage properties for a fee and are
already required to be licensed as Real Estate Brokers by the
Department of Real Estate to make these used mobilehome loans
under their DRE Broker license and an MLO license instead of
having to acquire an additional license as a finance lender by
the Department of Corporations."
Related Legislation . AB 278 (Hill) authorizes the Real Estate
Commissioner to adopt regulations that establish a system for
the issuance of citations to DRE licensees and for issuance of
administrative citations to unlicensed persons acting in the
capacity of a real estate licensee. This bill is pending in
Senate Business, Professions and Economic Development Committee.
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SB 6 (Ron Calderon and Vargas) updates California's Real Estate
Law, Appraisal Law, and Civil Code to reflect recent changes
enacted at the federal level pursuant to the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank). This
bill is pending in Assembly Business, Professions and Consumer
Protection Committee.
SB 53 (Ron Calderon and Vargas) revises the Real Estate Law to
give DRE more enforcement tools to regulate mortgage fraud as
well as other violations of the Real Estate Law. This bill is
pending in Assembly Business, Professions and Consumer
Protection Committee.
SB 510 (Correa) establishes various minimum requirements for an
individual to become a real estate brokerage branch manager and
authorizes the Commissioner of DRE to discipline a branch
manager for failure to supervise branch operations. This bill
is pending in Assembly Rules.
SB 706 (Price) makes numerous enforcement enhancements to DRE
and the Office of Real Estate Appraisers; requires licensing
boards to post information about licensees on the internet, as
specified; and, makes updating and conforming changes. This
bill is pending in Assembly Rules.
Previous Legislation .
SB 1137 (Committee on Banking, Finance and Insurance) Chapter
287, Statutes of 2010, made technical and clarifying changes
pursuant to the implementation of the SAFE Act and SB 36 of
2009.
SB 36 (Ron Calderon) Chapter 160, Statutes of 2009, brings
California in compliance with the SAFE Act by requires licensing
of all mortgage loan originators, as well as registration with
the Nationwide Mortgage Licensing System and Registry.
AB 34 (Nava) of 2009 establishes requirements for state mortgage
loan originator licenses to conform to the SAFE Act. This bill
was substantially amended to address an unrelated issue.
SB 491 (Maldonado) of 2009 begins the process of amending
California's mortgage lending and brokering laws in compliance
with the SAFE Act. This bill was held in Senate Banking,
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Finance and Insurance Committee.
SB 1240 (Machado) of 2007 requires real estate brokers that
make, arrange, or service residential mortgage loans on property
containing one to four residential units to notify DRE within 30
days of entering the mortgage field and upon exiting that field,
and requires these brokers to file specified reports with DRE on
an annual or biannual basis. This bill was vetoed by the
Governor citing that recent federal legislation provided for a
comprehensive loan originator licensing system that establishes
national standards, and encouraging the Legislature to pursue
legislation to implement the federal legislation.
REGISTERED SUPPORT / OPPOSITION :
Support
Western Manufactured Housing Communities Association (sponsor)
Opposition
None on file
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301