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