BILL ANALYSIS                                                                                                                                                                                                    







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        |Hearing Date:May 2, 2011           |Bill No:SB                         |
        |                                   |706                                |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                          Senator Curren D. Price, Jr., Chair
                                           

                          Bill No:        SB 706Author:Price
                     As Amended:April 25, 2011          Fiscal:Yes

        
        SUBJECT:  Business and Professions.
        
        SUMMARY:  Makes numerous enforcement enhancements to the Department of 
        Real Estate (DRE) and the Office of Real Estate Appraisers (OREA); 
        transfers OREA into DRE; requires DRE to appoint a Real Estate 
        Advisory Commission; requires licensing boards to post information 
        about licensees on the Internet, as specified; makes updating and 
        conforming changes. 

        Existing law:
        
        1) Provides for the licensure, and regulation of more than 483,000 
           real estate brokers, real estate salespersons, and more than 22,000 
           mortgage loan originator license endorsements by the Department of 
           Real Estate (DRE) in the Business, Transportation and Housing 
           Agency (BT&H).  The Real Estate Commissioner (Commissioner), who 
           serves as the chief executive of the Department, is appointed by 
           the Governor, subject to Senate confirmation.  The Commissioner is 
           mandated to enforce the Real Estate Law. (Business and Professions 
           Code (BPC) commencing with Section 10000).

        2) Provides for the licensure and regulation of more than 13,800 real 
           estate appraisers, and the certification of more than 200 appraisal 
           management companies (AMCs) by the Office of Real Estate Appraisers 
           (OREA) within BT&H.  The Director of OREA (Director) serves as the 
           chief executive of OREA, and is appointed by the Governor, subject 
           to Senate confirmation.  The Director is mandated to enforce the 
           Real Estate Appraisers Licensing and Certification Law. (BPC 
           commencing with Section 11300)






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        3) Requires specified boards within the Department of Consumer Affairs 
           (DCA) to disclose on the Internet information on their respective 
           licensees, including information on the status of every license, 
           suspensions and revocations of licenses issued and other related 
           enforcement actions. (BPC  27)


        This bill:

        1) Transfers OREA to DRE, provides that OREA is under the supervision 
           and control of the Commissioner; provides that the Director of OREA 
           shall serve at the pleasure of the Governor and administer the Real 
           Estate Appraisers Licensing and Certification Law, in consultation 
           with the Governor and the Commissioner.

        2) Requires firewalls to be maintained between DRE and OREA, to 
           insulate the appraisal regulatory function from the real estate 
           regulatory function, and to ensure that decisions related to 
           appraisal license issuance, revocation, and disciplinary actions 
           are made by the Director of OREA and not by the Real Estate 
           Commissioner.

        3) States that  protection of the public  shall be the highest priority 
           for DRE and OREA in exercising their licensing, regulatory, and 
           disciplinary functions and that whenever the protection of the 
           public is inconsistent with other interests sought to be promoted, 
           the protection of the public shall be paramount.

        4) Allows DRE and OREA to enter into a  settlement  with a  licensee  or 
            applicant  instead of the issuance of an accusation or statement of 
           issues against that licensee or applicant.  Requires the settlement 
           to identify the factual basis for the action being taken and the 
           statutes or regulations violated.  Specifies that a person who 
           enters a settlement is not precluded from filing a petition, in the 
           timeframe permitted by law, to modify the terms of the settlement 
           or petition for early termination of probation, if probation is 
           part of the settlement.  States that any settlement executed 
           against a licensee shall be considered discipline, and a public 
           record to be posted on the Internet Website.

        5) Authorizes an administrative law judge to order a licensee in a 
           disciplinary proceeding to pay, upon request of the Commissioner or 
           Director, the reasonable  costs of investigation and enforcement  of 
           the disciplinary case against the licensee (cost recovery).

        6) When a licensee is placed on probation, authorizes the Commissioner 





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           or Director to, in addition to any other terms and conditions 
           placed upon the licensee, require the licensee to pay the monetary 
           costs associated with monitoring the licensee's probation.

        7) Requires costs recovered pursuant to these disciplinary proceedings 
           to be deposited in either the Real Estate Fund or the Real Estate 
           Appraisers Regulation Fund, as specified, and makes the funds 
           available upon appropriation by the Legislature.

        8) Requires the automatic suspension of any licensee who is 
           incarcerated after conviction of a felony, regardless of whether 
           the conviction has been appealed.  Requires the DRE or OREA to 
           notify the licensee in writing of the suspension and of his or her 
           right to elect to have the issue of penalty heard, as specified

        9) Requires a  licensee  to submit a  written  report  of any of the 
           following to the DRE or OREA:  The bringing of an indictment or 
           information charging a felony against the licensee; arrest of the 
           licensee; conviction of the licensee, including any felony or 
           misdemeanor; and, any disciplinary action taken by another 
           licensing entity or authority of this state or of another state.  
           Requires the report to be made in writing within 30 days; and that 
           failure to make a report is a public offense punishable by a fine 
           not to exceed $5,000 and shall constitute unprofessional conduct.

        10)Requires a licensee to identify himself or herself as a licensee or 
           registrant of the DRE or the OREA to law enforcement and the court 
           upon an arrest or being charged with a crime.  Requires DRE and 
           OREA to inform licensees of this requirement.

        11)Requires the  clerk   of   the   court  to do the following:

           a)   Report to the DRE or OREA any judgment for a crime committed 
             or for any judgment in excess of $30,000, for which a licensee is 
             responsible due to negligence, error or omission in practice, or 
             rendering unauthorized professional services.

           b)   Transmit any felony preliminary hearing transcript concerning 
             a defendant licensee of the DRE or OREA.

        12)Requires the district attorney, city attorney, other prosecuting 
           agency, or clerk of the court to notify the DRE or OREA if a 
           licensee is charged with a felony immediately upon obtaining 
           information that the defendant is a licensee of the DRE or OREA.

        13)Requires the Commissioner to appoint a Real Estate Advisory 





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           Commission (REAC) comprised of 11 members, five of whom shall be 
           real estate brokers licensed under this part and six of whom shall 
           be public members.  Two of licensed members shall hold a mortgage 
           loan originator license endorsement; one public member shall be a 
           consumer advocate and one public member shall be a local law 
           enforcement representative.

           a)   Requires REAC to meet at least 4 times annually, subject to 
             specified procedures.  

           b)   Provides that the REAC shall consult with and advise the 
             Commissioner on the DRE's policies and procedures.

           c)   Requires all REAC meetings to be open to the public and 
             subject to the Bagley-Keen Open Meeting Act.

        14)Requires the Secretary of BT&H, by January 31, 2012, to appoint a 
           DRE Enforcement Program Monitor (Monitor), whose duties include:

           a)   Monitor and evaluate DRE's disciplinary system and procedures 
             and report his or her findings, as specified, to the DRE and the 
             Legislature no later than August 1, 2012 and every six months 
             thereafter, as specified.

           b)   Make his or her reports available to the public and to the 
             media.

        15)Sunsets the provisions relating to the Monitor on January 31, 2014.

        16)Provides the following regarding posting information about 
           licensees on the internet pursuant to BPC  27:

           a)   Requires the posted information to include:  suspensions, 
             revocations, and other related enforcement action, including 
             accusations filed pursuant to the Administrative Procedures Act.

           b)   Deletes certain healing arts boards within DCA from the 
             requirements to post licensee information in the Internet

           c)   Additionally requires the following to post information on the 
             Internet:

             i)     The Board of Accountancy.

             ii)         The Architects Board.






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             iii)        The State Athletic Commission.

             iv)         The State Board of Barbering and Cosmetology.

             v)     The State Board of Guide Dogs for the Blind.

             vi)         The State Board of Chiropractic Examiners.

             vii)        The Department of Real Estate.

             viii)       The Office of Real Estate Appraisers.


        FISCAL EFFECT:  Unknown.  This bill has been keyed "fiscal" by 
        Legislative Counsel.

        COMMENTS:
        
        1. Purpose.  The Author is the Sponsor of this measure.  According to 
           the Author, this bill is necessary to make appropriate changes to 
           DRE and effectively regulate real estate brokers, real estate 
           salespersons, and mortgage loan originator license endorsements in 
           California.  

           The Author additionally states that this bill is necessary to make 
           essential changes to the OREA in order to appropriately license and 
           regulate real estate appraisers in California, and to make other 
           changes to the Real Estate Appraisers Licensing and Certification 
           Law.

        2. Background.  Earlier this year, this Committee conducted oversight 
           of the Department of Real Estate and the Office of Real Estate 
           Appraisers.  The Committee also conducted oversight hearings to 
           review 9 boards under the Department of Consumer Affairs.  They 
           included the Board of Registered Nursing, the Board of Vocational 
           Nursing and Psychiatric Technicians, the Dental Board of 
           California, the State Athletic Commission, the Board of 
           Accountancy, Professional Fiduciaries Bureau, the Contractors State 
           License Board, the Board for Professional Engineers, Land Surveyors 
           and Geologists, the California Architects Board, the Landscape 
           Architects Technical Committee.  The Committee began its review of 
           these licensing agencies in March with three days of hearings.  
           This bill, and the accompanying sunset bills, is intended to 
           implement legislative changes as recommended in the Committee's 
           Background Papers for several licensing boards reviewed by the 
           Committee this year.





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        3. Department of Real Estate (DRE).  The DRE is responsible for 
           regulating the practice of real estate brokers and real estate 
           salespersons in California.  DRE currently licenses more than 
           483,000 persons in California, with over 20,800 new licenses issued 
           each year, and more than 95,000 licenses renewed each year.  
           Licensed salespersons (333,330) outnumber licensed brokers 
           (149,920) at a ratio of more than two to one.  The DRE licenses and 
           regulates real estate salespeople, brokers, and corporations.  To 
           implement mandates established by federal legislation (The Secure 
           and Fair Enforcement Mortgage Licensing Act, called the SAFE Act), 
           the California Legislature enacted SB 36 (Calderon, Chapter 160, 
           Statutes of 2009), which requires that beginning, January 1, 2011, 
           real estate licensees who wish to act as mortgage loan originators 
           must apply to DRE and obtain a mortgage loan originator (MLO) 
           license endorsement.  The Department issued over 22,000 MLO license 
           endorsements prior to the January 1, 2011 deadline.

        The Commissioner serves as the chief executive of the DRE and is 
           appointed by the Governor, subject to confirmation by the Senate 
           Committee on Rules.  The Commissioner is mandated to enforce the 
           Real Estate Law in a manner which achieves the maximum protection 
           for the purchasers of real property and those persons dealing with 
           real estate licensees.

        DRE's Enforcement and Audit sections investigate complaints regarding 
           alleged violations of the Real Estate Law, the Department's 
           regulations, and other applicable laws.  If a complaint is 
           supported by evidence, the Commissioner may, after providing an 
           opportunity for an administrative hearing, revoke, suspend, or deny 
           a real estate license.  The Commissioner may also issue desist and 
           refrain orders to stop activities that are in violation of these 
           laws.

        This is the initial review of the Department of Real Estate by this 
           Committee.  The BP&ED Committee's jurisdiction includes oversight 
           of the DRE. 

        4. Mortgage and Financial Crisis.  In the middle of the last decade, 
           what started out as a nontraditional and subprime mortgage problem 
           evolved into a global liquidity crisis and an economic downturn 
           that some labeled the Great Recession, because of its severity.  
           Major financial institutions failed; others merged or were acquired 
           in last-ditch efforts to save themselves.  The stock market went 
           into free fall.  California's unemployment rate climbed to more 
           than 12%.  Home equity became a vanishing commodity, eroding even 





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           more quickly than the retirement savings accounts of aging baby 
           boomers.  Consumer confidence fell to all-time lows.  Notices of 
           default and foreclosures grew to all-time highs.

        In 2008, nearly a quarter million Californians lost their homes to 
           foreclosure.  Over 96% of those properties reverted to the lender.  
           When it first began, the problem seemed limited to subprime 
           borrowers with poorly underwritten and inadequately disclosed 
           mortgage loans.  Yet, as the problem grew and the economy continues 
           to weaken, the effects of what was initially labeled "the subprime 
           mortgage crisis" spread to borrowers among all walks of life and 
           income levels, and to all types of loans.  For some, the problem 
           has been mortgage affordability.  Either mortgage payments grew to 
           levels that are no longer sustainable by borrowers, or borrowers' 
           financial situations have declined to levels that can no longer 
           accommodate an unchanged mortgage payment.

        Affordability, however, was only a symptom of a growing problem.  What 
           once appeared to be solely an affordability problem increasingly 
           became a negative equity problem.  More borrowers left mortgages 
           they could afford, because home values had fallen below the 
           mortgage values, and the borrowers would rather walk away from a 
           bad investment than spend years trying to rebuild home equity.


        On the Federal level, in 2009 Congress created the Financial Crisis 
           Inquiry Commission (FCIC) to examine the causes of the financial 
           crisis and to report its findings to the Congress, the President, 
           and the American people.  Chaired by former State Treasurer Phil 
           Angelides, the FCIC focused upon various factors of the financial 
           meltdown including:  fraudulent practices by mortgage lenders, 
           reckless risk-taking by Wall Street banks and other financial 
           institutions; the federal oversight of Fannie Mae and Freddie Mac, 
           the entities that supported the secondary market for mortgages, and 
           decades of government efforts to encourage homeownership.

        The FCIC released its final report on the causes of the financial 
           crisis on January 27, 2011, concluding that the financial crisis 
           was an "avoidable" disaster caused by widespread failures in 
           government regulation, corporate mismanagement and heedless 
           risk-taking by Wall Street.  The commission faulted shoddy mortgage 
           lending and the excessive packaging and sale of loans to investors 
           and risky securities backed by the loans.

        In September 2010 the Sacramento Bee reported that foreclosure sales 
           accounted for 43% of all property sales in California, the 





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           third-highest percentage among all states.  In the second quarter 
           of 2010, the April to June period, 62,492 California properties in 
           some stage of foreclosure were sold.

        Throughout the crisis, significant criticism has been focused upon 
           real estate practices.  Recent reports and articles have criticized 
           the DRE for its lack of taking action against licensed real estate 
           brokers and salespersons when necessary.

        On November 12, 2010 the Sacramento Bee published the results of a 
           study in which the newspaper found that of some 260 people charged 
           with a real estate-related crime or sued by the state in recent 
           years, at least 45 of those accused or convicted were still listed 
           as licensed brokers or salespeople by the DRE, and consumers would 
           have no way of knowing of the accusations.  Another dozen had their 
           real estate licenses suspended or revoked.

        In July 2009, the Washington, DC based non-profit Center for Public 
           Integrity published an investigation of the real estate appraisal 
           industry in California and Florida that found that since 2005, one 
           in six appraisers whose licenses were revoked or surrendered kept 
           their real estate sales or broker's licenses.  This allowed them to 
           continue working in the real estate industry negotiating sales to 
           homebuyers, who likely know little about their pasts.

        Considering the problems that have existed within this industry and 
           the current mortgage crisis, the DRE should be making a concerted 
           effort to take any necessary action against their licensees who may 
           have played a part in both the mortgage and lending crisis and who 
           may have been involved in unethical activities or violated the law.
         
        5. This Bill Includes the Following Statutory Changes Related to the 
           DRE Identified by this Committee during the March 2011 Oversight 
           Hearings:
         
            a.    Real Estate Advisory Commission (REAC).  Originally 
              established in 1935, as an advisory body to the Commissioner, 
              the REAC was repealed in 2005 through a Budget trailer bill (SB 
              64, Chapter 77, Statutes of 2005).  The elimination stemmed from 
              a recommendation of Governor Schwarzenegger's California 
              Performance Review.  A commission that consistently meets in a 
              public capacity, subject to the notice requirements of the open 
              meeting laws, is a valuable forum for input from the public, 
              including consumers and consumer interest groups, licensee 
              discussions, and issues raised by public members of that 
              commission.  In addition, such a commission enhances the 





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              transparency of the overseeing regulatory agency, such as the 
              DRE.  An advisory body such as REAC could be an effective forum 
              to better inform the DRE, the Administration and the Legislature 
              on policy decisions which need to be made for welfare of 
              consumers and  the future of the real estate profession in 
              California.  This especially seems to be true in light of the 
              complex issues that have arisen in the wake of the recent 
              financial meltdown and home mortgage crisis.   This bill 
              establishes a Real Estate Advisory Commission under the DRE.
             
            b.    Protection of the Public.  Consumer protection is the 
              essential purpose of all California's occupational licensing and 
              regulatory agencies.  However, in many instances statutory 
              schemes do not establish clearly that protecting consumers is 
              the agency's primary mission.  The absence of a clear statutory 
              mandate can lead to inconsistencies in agency policy over time 
              and may also contribute to inaccurate judicial interpretations 
              of the statutes.  Even though DRE has responsibility to regulate 
              the real estate profession, it is important to clarify that the 
              highest priority of DRE is to protect the public.   This bill 
              establishes that protection of the public shall be the highest 
              priority for the Department of Real Estate.  

            c.    Enforcement Program Monitor.  Significant issues have risen 
              in the last decade which have evolved into a global crisis and 
              economic downturn.  Home equity has eroded rapidly, and the 
              focus of real estate activity shifted dramatically.  Higher 
              incidence of fraudulent activity and violations of the Real 
              Estate Law have been documented by both DRE and by observers in 
              federal and state governments by consumers and by the news 
              media.  Foreclosures account for nearly half of all property 
              sales in California, and significant criticism has been focused 
              upon real estate practices.  Reports and articles have 
              criticized the DRE for its lack of taking action against 
              licensed real estate brokers and salespersons when necessary.  

            In recent years, when a significant question has arisen with the 
              enforcement and regulatory activities of various regulatory 
              boards within the Department of Consumer Affairs, this Committee 
              has recommended the appointment of an enforcement monitor.  
              Enforcement monitors have been appointed for the Contractors 
              State License Board, the Medical Board of California, the Bureau 
              of Automotive Repair, and the Bureau for Private Postsecondary 
              and Vocational Education.  The use of an enforcement monitor has 
              been extremely effective in assisting a regulatory agency in 
              improving the efficiency of its disciplinary and enforcement 





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              system.  An enforcement monitor would be charged with 
              investigating and evaluating the agency's discipline system and 
              procedures, making its highest priority the reform and 
              reengineering, as necessary, of the enforcement program and 
              operations, including the agency's complaint, investigation, 
                    accusation, and settlement policies and practices.   This bill 
              requires the appointment of an enforcement program monitor for 
              the DRE.  

        6. Office of Real Estate Appraisers (OREA)  The OREA is responsible 
           for regulating the practice of real estate appraisers in 
           California, by ensuring that only qualified persons are licensed to 
           conduct appraisals in federally related real estate loan 
           transactions and that all real estate appraisers licensed by the 
           state adhere to applicable laws, regulations, and standards.  
           Originally enacted in 1990, the OREA was established and charged 
           with developing and implementing a real estate appraiser licensing 
           program that complied with the federal mandate established by 
           Congress in 1989 as a result of the savings and loan disaster of 
           the late 1980's.  That mandate, Title XI of the Financial 
           Institutions Reform, Recovery and Enforcement Act, requires states 
           to license and certify real estate appraisers who appraise property 
           for federally related transactions.

        OREA currently licenses more than 13,800 licensed appraisers in 
           California, with some 200 new licenses issued and 6,000 licenses 
           renewed in FY 2009/2010.  There are four levels of appraiser 
           licensees:  appraiser trainee (AT); appraiser licensee (AL); 
           certified residential (AR); and certified general (AG).  Levels of 
           licensure are distinguished by increasing levels of education, 
           experience, and scope of practice (property type, transaction value 
           and supervision level).  When a licensee wishes to move to up to a 
           higher level of licensure, they must meet the qualifications and 
           apply to "upgrade" the license to a higher license classification.

        Beginning January 1, 2010, pursuant to SB 237 (Calderon, Chapter 173, 
           Statutes of 2009), companies which operate as third-party brokers 
           of appraisals between clients and appraisers must be registered and 
           certified by OREA as appraisal management companies (AMCs).  To 
           date, OREA has issued approximately 200 certificates of 
           registration to AMCs.

        OREA is comprised of two core components, licensing and enforcement.  
           The enforcement unit, operates under a federal mandate, and ensures 
           adherence to the federally-required Uniform Standards of 
           Professional Appraisal Practice (USPAP), California law and 





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           regulations.  Both licensing and enforcement functions are required 
           by the Appraisal Subcommittee (ASC), the federal government 
           organization which oversees all state real estate appraiser 
           licensing agencies.

        The Director of the Office of Real Estate Appraisers (Director), who 
           serves as the chief executive of the OREA, is appointed by the 
           Governor, subject to confirmation by the Senate Committee on Rules. 
            The Director is mandated to administer and enforce the Real Estate 
           Appraisers Licensing and Certification Law.

        This is the initial review of the Office of Real Estate Appraisers by 
           this Committee. The BP&ED Committee's jurisdiction includes 
           oversight of the OREA.

         7. Independence and Accuracy of the Appraisal Process.   Both 
           California law and federal regulations (Federal Register Volume 73, 
           No. 147, July 30, 2008, pp. 44522-44614 - Regulation Z, effective 
           October 1, 2009; and SB 223, Machado, Chapter 291, Statutes of 
           2007) were enacted to help prevent the improper influence of 
           appraisers, and to reduce the chances that appraisers would be 
           pressured to "hit" certain target property values or return 
           pre-determined, unsupported valuations when appraising real 
           property.

        The federal Home Valuation Code of Conduct (HVCC) became effective May 
           1, 2009. It is an agreement between Fannie Mae, Freddie Mac, the 
           Federal Housing Finance Agency (FHFA), and New York State Attorney 
           General Anthony Cuomo.  The intent of the HVCC is to enhance the 
           independence and accuracy of the appraisal process, and provide 
           added protections for homebuyers, mortgage investors and the 
           housing market.  Any lender that sells a mortgage loan to Fannie 
           Mae or Freddie Mac must adhere to the HVCC.
        Due to the increased use of AMCs by lending institutions, a 
           significant result of the HVCC agreement, the California 
           Legislature enacted  SB 237  (Calderon, Chapter 173, Statutes of 
           2009) requiring AMCs, as defined, to register with OREA, and 
           subjects them to the provisions of the Real Estate Appraisers 
           Licensing and Certification Law.  Effective January 21, 2010, OREA 
           adopted emergency regulations governing the implementation of the 
           registration process.

        The HVCC has no force and effect as of December 27, 2010, the 
           effective date of the Federal Reserve Board's interim final 
           regulations, implementing the provisions of the Dodd-Frank Wall 
           Street Reform and Consumer Protection Act (Dodd-Frank Act), signed 





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           into law on July 21, 2010.  Fannie Mae and Freddie Mac adopted 
           Appraiser Independence Requirements in October 2010 that replaced 
           the HVCC.  The requirements maintain the spirit and intent of the 
           HVCC, and are intended to support the integrity of the appraisal 
           process.  The Dodd-Frank Act does not directly provide states with 
           the authority to implement its requirements.  Rather, state 
           regulatory agencies, including OREA, must adopt and maintain 
           effective laws, regulations and policies aimed at maintaining 
           appraiser independence as consistent with the Act.  The Dodd-Frank 
           Act contains appraisal independence measures that are similar to 
           those contained in HVCC and in SB 223 in 2007.  In the current 
           Legislative Session, SB 6 (Calderon) was introduced to update 
           California's appraiser law to reflect changes made by the 
           Dodd-Frank Act and the Federal Reserve Board's regulations.

        There is some concern as to whether the OREA has been taking 
           appropriate disciplinary action against appraisers when necessary.  
           Considering the problems that have existed within this industry and 
           the current mortgage crisis, the OREA should be making a concerted 
           effort to take any necessary action against its licensees who may 
           have played a part in both the mortgage and lending crisis and who 
           may have been involved in unethical activities or violated the law.
         
        8. This Bill Includes the Following Statutory Changes Related to the 
           OREA Identified by this Committee during the March 2011 Oversight 
           Hearings:
         
            a.    Transfer of OREA into DRE.  In 2009, AB 33 (Nava) proposed 
              to consolidate the OREA with the DRE.  The bill also proposed a 
              number of other changes, including a complete reorganization of 
              several Departments in BT&H.  During the legislative process, 
              the provisions of the bill unrelated to the consolidation of 
              OREA and DRE became problematic and AB 33 was eventually changed 
              to another subject.  According to some familiar with the history 
              of OREA's creation, California originally intended to create 
              OREA as an independent division of DRE.  Placement of the 
              Appraisal Law in the Business and Professions Code, in code 
              adjacent to the Real Estate Law, is one reflection of those 
              original plans.  However, a last-minute decision resulted in the 
              creation of OREA as a separate body in 1990 when the Real Estate 
              Appraisers Licensing and Certification Laws were enacted (AB 
              527, Chapter 491, Statutes of 1990).  Periodic efforts have 
              surfaced to merge OREA with other regulatory agencies including, 
              SB 1866 (Figueroa) from 2002, a vetoed bill that would have 
              folded OREA into the Department of Corporations; the Governor's 
              2005 California Performance Review, which recommended 





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              consolidating the OREA and the DRE into a Division of Real 
              Estate Licensing.  

            OREA's Independence is a federal mandate, and any consolidation of 
              OREA with DRE must maintain OREA's ability to issue and revoke 
              licenses and act as the sole administrative (non-judicial) 
              arbiter of disciplinary actions involving appraiser licensees.  
               This bill transfers OREA to DRE, and requires firewalls to be 
              maintained between DRE and OREA, to insulate the appraisal 
              regulatory function from the real estate regulatory function, 
              and to ensure appraisal license and enforcement decisions are 
              made by the Director of OREA and not by the Real Estate 
              Commissioner  .

            b.    Protection of the Public.  Consumer protection is the 
              essential purpose of all occupational licensing and regulatory 
              agencies.  However, in many instances statutory schemes do not 
              establish clearly that protecting consumers is the agency's 
              primary mission.  The absence of a clear statutory mandate can 
              lead to inconsistencies in agency policy over time and may also 
              contribute to inaccurate judicial interpretations of the 
              statutes.  Even though OREA has responsibility to regulate real 
              estate appraisers profession, it is important to clarify that 
              the highest priority of OREA is to protect the public.   This 
              bill establishes that protection of the public shall be the 
              highest priority for the Office of Real Estate Appraisers.  

        9. Enforcement Provisions Relating to Both DRE and OREA.  A number of 
           the enforcement recommendations were made for both DRE and OREA due 
           to concerns about the overall abilities to address enforcement 
           issues in light of the current financial and mortgage crisis.  The 
           enforcement changes in this bill are an effort to give the DRE and 
           OREA an array of enforcement tools that are available to other 
           licensing agencies under this Committee's jurisdiction.

           a.    Stipulated settlements without filing an accusation.  The 
              Administrative Procedures Act (APA) requires an agency to file 
              an accusation or statement of issues against a licensee before 
              the regulatory agency can reach a stipulated settlement with the 
              licensee.  While many licensees will not agree to a stipulated 
              settlement without the pressure of a formal accusation having 
              been filed, it is the experience of a number of regulatory 
              boards that there are instances in which a licensee is willing 
              to agree to a stipulated settlement earlier on in the 
              investigation stage of the enforcement process in order to 
              minimize the cost of an administrative hearing, or in order to 





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              expedite the resolution of a disciplinary matter.   This bill 
              authorizes DRE and OREA to enter into a stipulated settlement 
              agreement with a licensee or applicant prior to the issuance of 
              an accusation or statement of issues against the licensee.  

           b.    Cost Recovery.  The ability to recover the costs for the 
              investigation and enforcement of a disciplinary case in which an 
              administrative law judge has found a licensee to have committed 
              violations of the licensing act is an important tool for 
              licensing and regulatory agencies.  This negatively impacts the 
              industry by laying enforcement costs upon the backs of the 
              entire licensing population rather than those that are being 
              disciplined.   This bill authorizes an administrative law judge 
              to order a licensee in a disciplinary proceeding to pay, upon 
              request of the Commissioner or Director, the reasonable costs of 
              investigation and enforcement of the disciplinary case against 
              the licensee  .

           c.    Probation Monitoring Costs.  Explicit statutory authority to 
              recover the costs associated with probation monitoring for a 
              disciplined licensee that has been placed upon probation is an 
              important regulatory tool.  A number of regulatory boards under 
              the DCA have explicit statutory authority to recover costs for 
              probation monitoring.  Such statutory authority will give DRE 
              and OREA greater explicit authority, lead to quicker resolution 
              of probation terms, and authorize DRE and OREA to refuse to 
              renew the license of a licensee who has not paid probation 
              costs.   This bill authorizes the Commissioner or Director to 
              require the licensee to pay the monetary costs associated with 
              monitoring the licensee's probation  .

           d.    Suspension Upon Incarceration.  A sharp criticism in the 
              November 2010 Sacramento Bee articles was that a number of DRE 
              licensees who had been convicted of crimes and incarcerated 
              still held untarnished licenses with DRE.  Giving DRE and OREA 
              the ability to automatically suspend a licensee who is suspended 
              will close this gap in DRE and OREA's enforcement arsenal, while 
              maintaining a licensee's due process rights.   This bill requires 
              the automatic suspension of any licensee who is incarcerated 
              after conviction of a felony, and requires DRE or OREA to give 
              written notification to the licensee of the suspension and of 
              his or her right to elect to a hearing on the penalty.  

           e.    Reporting of Indictment.  Applicants for original and renewal 
              licenses are typically required to disclose criminal violations, 
              prior disciplinary action taken against a professional license, 





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              or pending criminal charges.  In such cases, a license will only 
              be issued to the applicant after the receipt and review of the 
              confirming information from the Department of Justice.   This 
              bill requires a licensee to submit a written report of any of 
              the following to the DRE or OREA upon being indicted or charged 
              with a felony; arrest or conviction, including any felony or 
              misdemeanor; and, any disciplinary action taken by another 
              licensing entity or authority of this state or of another state.  

           f.    Identification of Licensure Upon Arrest.  Requiring a 
              licensee to inform law enforcement or the court that they are 
              licensed by the DRE or OREA enhances the ability of the 
              licensing agency to take appropriate enforcement action.   This 
              bill requires a licensee to identify himself or herself as a 
              licensee or registrant of DRE or OREA to law enforcement and the 
              court upon an arrest or being charged with a crime.  

           g.    Report by Court Clerk.  When a judgment is entered against a 
              licensee, or when a licensee is charged with a felony, it is 
              important for DRE or OREA to be notified so action can be taken 
              against a licensee if the circumstances of the judgment or 
              charge warrant disciplinary action.  Similar provisions already 
              apply to a number of regulatory boards under DCA.   This bill 
              requires the clerk of the court to report to DRE or OREA any 
              judgment for a crime committed or for any judgment in excess of 
              $30,000, for which a licensee is responsible due to negligence, 
              error or omission in practice, or rendering unauthorized 
              professional services, and to transmit any felony preliminary 
              hearing transcript concerning a defendant licensee of DRE or 
              OREA.  

        1. General Provisions - Internet Disclosures.  Currently, a number of 
           regulatory boards are required to post the status of every license, 
           including suspensions and revocations, whether or not the licensee 
           or former licensee is in good standing, or has been subject to 
           discipline by the board or by the licensing program of another 
           state.

        For some time, this Committee has taken the position that not 
           disclosing disciplinary actions is inconsistent with public 
           protection.  The Committee has further urged licensing boards and 
           bureaus to publicly disclose accusations filed against licensees.  
           An accusation is a public record under the Public Records Act 
           (PRA).  If a consumer made a PRA request to the DRE about a 
           particular licensee, DRE would have to disclose any pending 
           accusation.  An accusation means that the complaint has been fully 





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           investigated, the investigation is complete, and the prosecutor 
           (DRE's enforcement deputy) believes that there is "clear and 
           convincing evidence" of a violation that merits disciplinary 
           action.  An accusation is not a naked complaint.  The filing of the 
           accusation is what turns a confidential investigation into a matter 
           of public record.  There is no reason why DRE and OREA should not 
           disclose accusations that are already public records.  Once the 
           investigation is completed, and accusations are filed, the public 
           must be made aware of the charges against licensees. 

        This bill amends BPC  27 to additionally include the following:  

            a.    Specify that disciplinary actions, including accusations 
              under the Administrative Procedures Act must be disclosed on the 
              Internet.

                b.        Additionally requires the following boards to post 
                  information on the Internet:

                   The Board of Accountancy.
                   The Architects Board.
                   The State Athletic Commission.
                   The State Board of Barbering and Cosmetology.
                   The State Board of Guide Dogs for the Blind.
                   The State Board of Chiropractic Examiners.

            a.    Includes DRE and OREA with those agencies that are required 
              to post information on the internet about its licensees.

        1. Additional Enforcement Provisions To Be Considered.  There are 
           several additional protections and enforcement provisions which 
           were considered by the Committee during its Oversight Hearing of 
           DRE and OREA and may be added to this measure as further 
           discussions take place with DRE, OREA, consumer groups, industry 
           and other interested parties.  The Author is willing to bring this 
           bill back to Committee if any of these provisions prove to be 
           controversial.  These items for further discussion and possibly 
           inclusion in the bill are as follows:  

                     Examination development standards
                     Mortgage loan originator license endorsement issues
                     Reverse mortgages
                     Contracting with collection service to collect 
                outstanding fees
                     Investigators with peace officer status
                     Interim suspension authority under BPC  494





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                     Suspension of licenses pursuant to Penal Code  23
                     Accepting complaints online
                     DRE Recovery Account reforms
                     Modification of OREA continuing education requirements

             



        SUPPORT AND OPPOSITION:
        
         Support:    None received as of April 26, 2011

         Opposition:    None received as of April 26, 2011



        Consultant:G. V. Ayers