BILL ANALYSIS Ó SB 376 Page 1 Date of Hearing: July 13, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 376 (Fuller) - As Amended: April 7, 2011 Policy Committee: Business and Professions Vote: 9 - 0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill revises the definition of "real estate broker" to allow brokers to make, arrange, or service chattel (personal property) mobile home loans under their Department of Real Estate (DRE) license, without having to obtain a finance lender or broker license from the Department of Corporations. FISCAL EFFECT Costs associated with this legislation would be minor and absorbable within existing DRE resources. COMMENTS 1)Rationale . According to the Western Manufactured Housing Communities Association (WMA), sponsor of this bill, the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (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 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. SB 376 Page 2 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 mobile homes?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 bill allows real estate brokers who are licensed as MLOs to arrange for chattel mobile home loans without requiring them to obtain a license from the Department of Corporations. 2)Are There Sufficient Consumer Protections? It is unclear from this legislation that current consumer protections in place to protect people who receive real property loans from brokers would also be protected if they receive a chattel loan from real estate brokers for the purchase of mobile homes. For example, under current real estate law, a real estate broker is required to provide a consumer with disclosures outlining the terms of the loans. Those disclosures would not be required for chattel loans. In addition, many of these loans are likely to be under $30,000. Currently, there are limits to the costs and expenses that the broker can charge the consumer for these small real property loans. Under this law, it is not clear that those limits would apply to chattel loans. Analysis Prepared by : Julie Salley-Gray / APPR. / (916) 319-2081