BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 706
                                                                  Page  1

          Date of Hearing:   August 17, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    SB 706 (Price) - As Amended:  August 15, 2011 

          Policy Committee:                              Business and 
          Professions  Vote:                            6 - 3 

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          This bill makes numerous enforcement enhancements to the 
          Department of Real Estate (DRE) and the Office of Real Estate 
          Appraisers (OREA), requires specified licensing boards to post 
          information about licensees on the internet, and makes updating 
          and conforming changes.  Specifically, this bill:   

          1)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. 

          2)Authorizes DRE to require a restricted licensee to pay the 
            monetary costs associated with monitoring the licensed 
            activities conducted pursuant to the restricted license or 
            restricted mortgage loan originator endorsement license. 

          3)Requires the automatic suspension of any license or 
            endorsement of a licensee during any time the licensee is 
            incarcerated after conviction of a felony, regardless of 
            whether the conviction has been appealed.

          4)Authorizes an administrative law judge (ALJ) to order a 
            licensee in a disciplinary proceeding to pay, upon request of 
            the DRE Commissioner the reasonable costs of investigation and 
            enforcement of the disciplinary case against the licensee

          5)Requires the State Auditor to conduct an audit of the DRE to 
            determine if the department is effectively and efficiently 
            carrying out its responsibilities with regard to the laws and 
            regulations related to the department's enforcement and 
            discipline program for its licensees.  Authorizes that funding 








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            from the Real Estate Fund be used to pay for the costs of the 
            audit.

          6)Requires the Secretary of BTH to review and evaluate OREA and 
            make recommendations to the Legislature by October 1, 2014, 
            regarding whether OREA should be consolidated within DRE.

           FISCAL EFFECT  

          1)Costs for the audit will likely be between $250,000 and 
            $300,000 (Real Estate Fund). 

          2)DRE estimates that they may be able to generate as much as $1 
            million per year in revenue by having the authority to recoup 
            the investigation and enforcement costs for disciplinary cases 
            against licensees.

          3)Workload costs for DRE and OREA are minor and absorbable 
            within existing resources. 

           COMMENTS  

           1)Purpose  . This bill increases the enforcement authority for 
            both DRE and OREA.  The author notes this bill is a reaction 
            to the public criticism related to the lack of disciplinary 
            action being taken against licensees during the continuing 
            mortgage crisis. The author argues, "Throughout the crisis, 
            significant criticism has been focused upon real estate 
            practices.  Recent reports and articles have criticized the 
            Department of Real Estate as well as the Office of Real Estate 
            Appraisers for a lack of taking action against licensees who 
            have violated the law?(This) bill gives both DRE and OREA a 
            set of tools to enhance their enforcement operations."

           2)Department of Real Estate.   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.  

            The Commissioner serves as the chief executive of the DRE and 








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            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.

           3)Office of Real Estate Appraisers  . 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. 
             
             The Director of the Office of Real Estate Appraisers, 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.

           4)Previous legislation  .  AB 33 (Nava) of 2009 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 BTH.  This bill was amended to 
            address a different subject.








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             SB 1737 (Machado), Statutes of 2008, allows DRE to ban from 
            real estate-related employment for up to three years anyone 
            guilty of violating the Real Estate Law or any crime related 
            to the qualification or duties of a licensee.  The bill allows 
            DRE to suspend or revoke a license if the licensee provides an 
            inaccurate opinion of value for a short sale for specified 
            purposes, and requires notice to all parties in a real estate 
            transaction when the same person arranges financing and acts 
            as the buyer's agent, seller's agent, or both.

             
             
           Analysis Prepared by  :    Julie Salley-Gray / APPR. / (916) 
          319-2081