BILL ANALYSIS Ó AB 1730 Page 1 Date of Hearing: May 14, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 1730 (Wagner) - As Amended: April 23, 2014 Policy Committee: JudiciaryVote:10-0 Banking and Finance 10-0 Urgency: No State Mandated Local Program: Yes Reimbursable: No SUMMARY This bill enhances civil and criminal penalties for violations with respect to advance fees for loan modification services. Specifically, this bill: 1)Provides that a violation of existing prohibitions concerning advance fees for loan modification services can be punished as a felony, subject to 16 months, two or three years in county jail, and as a civil violation resulting in a civil penalty of $20,000 for each violation brought by the Attorney General (AG) or a local prosecutor. 2)Specifies that if the victim is a disabled person, as defined under existing law, or a senior citizen, then in addition to the penalties in (1), the violator may be liable for a civil penalty of $2,500 per violation. 3)Allows a court to make orders and judgments as necessary, to restore to a senior citizen or disabled person, money or property that may have been acquired by means of a violation. FISCAL EFFECT 1)Any costs to the AG or local prosecutors would be absorbable, and would be offset to some extent by increased fine revenues. 2)Potential increased nonreimbursable incarceration costs to counties for felony convictions. (Currently law provides a misdemeanor penalty subject to up to one year in jail.) AB 1730 Page 2 COMMENTS Purpose . According to the author, "Mortgage loan modification fraud is a huge issue, especially amongst unwitting senior citizens. Due to the deflation of real property values, either (1) the liens securing the promissory note(s) for principal residential property exceeds the value of the parcel or (2) the loans which were made have resulted in mortgage payments beyond the ability of the property owners to pay. As a consequence, individuals desperate to save their homes have paid what little money they may still have in advance to individuals who claim to be able to save the home by obtaining a loan modification. These individuals then take the money, abandon the homeowners, and allow the property to be sold at foreclosure." Current law, effective 2009, prohibits acceptance of any advance fee for assisting a homeowner with a loan modification. This provision was the result of a cottage industry of scammers preying on struggling homeowners. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081