Amended in Assembly June 13, 2016

Amended in Senate June 23, 2015

Amended in Senate April 21, 2015

Senate BillNo. 657


Introduced bybegin delete Senator Monningend deletebegin insert Senators Berryhill and Panend insert

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(Coauthor: Senator Jackson)

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begin insert

(Principal coauthor: Assembly Member Dababneh)

end insert
begin insert

(Coauthor: Assembly Member Cooley)

end insert

February 27, 2015


An act tobegin delete add Section 712 to the Public Utilities Code, relating to electricity, and declaring the urgency thereof, to take effect immediately.end deletebegin insert amend Sections 50003 and 50201 of the Financial Code, relating to mortgages.end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 657, as amended, begin deleteMonningend delete begin insertBerryhillend insert. begin deleteDiablo Canyon Units 1 and 2: enhanced seismic studies and review: independent peer review panel. end deletebegin insertThe California Residential Mortgage Lending Act: lenders: licensees.end insert

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Existing law defines specified terms for purposes of the California Residential Mortgage Lending Act, which generally prohibits a person from engaging in the business of making residential mortgage loans or servicing residential mortgage loans without first obtaining a license from the Commissioner of Business Oversight in accordance with the act. Existing law defines a lender as a person who is an approved lender for the Federal Housing Administration, the Veterans Administration, the Farmers Home Administration, the Government National Mortgage Association, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation, who directly makes residential mortgage loans, and who makes the credit decision in the loan transactions. Existing law requires a licensee issued a license for purposes of making or servicing residential mortgage loans to continuously maintain a minimum tangible net worth of $250,000.

end insert
begin insert

This bill would specify that the term “lender” includes a person, other than a natural person, and a natural person who is also an independent contractor, who engages in the activities of a loan processor or underwriter for residential mortgage loans. The bill would authorize the commissioner to require a licensee who is engaged in the processing or underwriting of residential mortgage loans to continuously maintain a minimum tangible net worth in an amount that is greater than $250,000, but that does not exceed the net worth required of an approved lender under the Federal Housing Administration.

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Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations. Existing law authorizes the commission to fix the rates and charges for every public utility, and requires that those rates and charges be just and reasonable. Existing law requires the commission, for purposes of establishing rates for any electrical corporation, to disallow expenses reflecting the direct or indirect costs resulting from any unreasonable error or omission relating to the planning, construction, or operation of any portion of the corporation’s plant which cost, or is estimated to have cost, more than $50,000,000, including any expenses resulting from delays caused by any unreasonable error or omission. For these purposes, “planning” includes activities related to the initial and subsequent assessments of the need for a plant construction project and includes investigation and interpretation of environmental factors such as seismic conditions.

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This bill would require the commission to convene, or continue, until August 26, 2025, an independent peer review panel to conduct an independent review of enhanced seismic studies and surveys of the Diablo Canyon Units 1 and 2 powerplant, including the surrounding areas of the facility and areas of nuclear waste storage.

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This bill would declare that it is to take effect immediately as an urgency statute.

end delete

Vote: begin delete23 end deletebegin insertmajorityend insert. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P3    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 50003 of the end insertbegin insertFinancial Codeend insertbegin insert is amended
2to read:end insert

3

50003.  

(a) “Annual audit” means a certified audit of the
4licensee’s books, records, and systems of internal control performed
5by an independent certified public accountant in accordance with
6generally accepted accounting principles and generally accepted
7auditing standards.

8(b) “Borrower” means the loan applicant.

9(c) “Buy” includes exchange, offer to buy, or solicitation to
10buy.

11(d) “Commissioner” means the Commissioner of Business
12Oversight.

13(e) “Control” means the possession, directly or indirectly, of
14the power to direct, or cause the direction of, the management and
15 policies of a licensee under this division, whether through voting
16or through the ownership of voting power of an entity that
17possesses voting power of the licensee, or otherwise. Control is
18presumed to exist if a person, directly or indirectly, owns, controls,
19or holds 10 percent or more of the voting power of a licensee or
20of an entity that owns, controls, or holds, with power to vote, 10
21percent or more of the voting power of a licensee. No person shall
22be deemed to control a licensee solely by reason of his or her status
23as an officer or director of the licensee.

24(f) “Depository institution” has the same meaning as in Section
253 of the Federal Deposit Insurance Act, and includes any credit
26union.

27(g) “Engage in the business” means the dissemination to the
28public, or any part of the public, by means of written, printed, or
29electronic communication or any communication by means of
30recorded telephone messages or spoken on radio, television, or
31similar communications media, of any information relating to the
32making of residential mortgage loans, the servicing of residential
33mortgage loans, or both. “Engage in the business” also means,
34without limitation, making residential mortgage loans or servicing
35residential mortgage loans, or both.

36(h) “Federal banking agencies” means the Board of Governors
37of the Federal Reserve System, the Comptroller of the Currency,
P4    1the National Credit Union Administration, and the Federal Deposit
2Insurance Corporation.

3(i) “In this state” includes any activity of a person relating to
4making or servicing a residential mortgage loan that originates
5from this state and is directed to persons outside this state, or that
6originates from outside this state and is directed to persons inside
7this state, or that originates inside this state and is directed to
8persons inside this state, or that leads to the formation of a contract
9and the offer or acceptance thereof is directed to a person in this
10state (whether from inside or outside this state and whether the
11offer was made inside or outside the state).

12(j) “Institutional investor” means the following:

13(1) The United States or any state, district, territory, or
14commonwealth thereof, or any city, county, city and county, public
15district, public authority, public corporation, public entity, or
16political subdivision of a state, district, territory, or commonwealth
17of the United States, or any agency or other instrumentality of any
18one or more of the foregoing, including, by way of example, the
19Federal National Mortgage Association and the Federal Home
20Loan Mortgage Corporation.

21(2) Any bank, trust company, savings bank or savings and loan
22association, credit union, industrial bank or industrial loan
23company, personal property broker, consumer finance lender,
24commercial finance lender, or insurance company, or subsidiary
25or affiliate of one of the preceding entities, doing business under
26the authority of or in accordance with a license, certificate, or
27charter issued by the United States or any state, district, territory,
28or commonwealth of the United States.

29(3) Trustees of pension, profit-sharing, or welfare funds, if the
30pension, profit-sharing, or welfare fund has a net worth of not less
31than fifteen million dollars ($15,000,000), except pension,
32profit-sharing, or welfare funds of a licensee or its affiliate,
33self-employed individual retirement plans, or individual retirement
34accounts.

35(4) A corporation or other entity with outstanding securities
36registered under Section 12 of the federal Securities Exchange Act
37of 1934 or a wholly owned subsidiary of that corporation or entity,
38provided that the purchaser represents either of the following:

P5    1(A) That it is purchasing for its own account for investment and
2not with a view to, or for sale in connection with, any distribution
3of a promissory note.

4(B) That it is purchasing for resale pursuant to an exemption
5under Rule 144A (17 C.F.R. 230.144A) of the Securities and
6Exchange Commission.

7(5) An investment company registered under the Investment
8Company Act of 1940; or a wholly owned and controlled subsidiary
9of that company, provided that the purchaser makes either of the
10representations provided in paragraph (4).

11(6) A residential mortgage lender or servicer licensed to make
12residential mortgage loans under this law or an affiliate or
13subsidiary of that person.

14(7) Any person who is licensed as a securities broker or
15securities dealer under any law of this state, or of the United States,
16or any employee, officer, or agent of that person, if that person is
17acting within the scope of authority granted by that license or an
18affiliate or subsidiary controlled by that broker or dealer, in
19connection with a transaction involving the offer, sale, purchase,
20or exchange of one or more promissory notes secured directly or
21indirectly by liens on real property or a security representing an
22ownership interest in a pool of promissory notes secured directly
23or indirectly by liens on real property, and the offer and sale of
24those securities is qualified under the California Corporate
25Securities Law of 1968 or registered under federal securities laws,
26or exempt from qualification or registration.

27(8) A licensed real estate broker selling the loan to an
28institutional investor specified in paragraphs (1) to (7), inclusive,
29or paragraph (9) or (10).

30(9) A business development company as defined in Section
312(a)(48) of the Investment Company Act of 1940 or a small
32business investment company licensed by the United States Small
33Business Administration under Section 301(c) or (d) of the Small
34Business Investment Act of 1958.

35(10) A syndication or other combination of any of the foregoing
36entities that is organized to purchase a promissory note.

37(11) A trust or other business entity established by an
38institutional investor for the purpose of issuing or facilitating the
39issuance of securities representing undivided interests in, or rights
40to receive payments from or to receive payments primarily from,
P6    1a pool of financial assets held by the trust or business entity,
2provided that all of the following apply:

3(A) The business entity is not a sole proprietorship.

4(B) The pool of assets consists of one or more of the following:

5(i) Interest-bearing obligations.

6(ii) Other contractual obligations representing the right to receive
7payments from the assets.

8(iii) Surety bonds, insurance policies, letters of credit, or other
9instruments providing credit enhancement for the assets.

10(C) The securities will be either one of the following:

11(i) Rated as “investment grade” by Standard and Poor’s
12Corporation or Moody’s Investors Service, Inc. “Investment grade”
13means that the securities will be rated by Standard and Poor’s
14Corporation as AAA, AA, A, or BBB or by Moody’s Investors
15Service, Inc. as Aaa, Aa, A, or Baa, including any of those ratings
16with “+” or “--” designation or other variations that occur within
17those ratings.

18(ii) Sold to an institutional investor.

19(D) The offer and sale of the securities is qualified under the
20California Corporate Securities Law of 1968 or registered under
21federal securities laws, or exempt from qualification or registration.

22(k) “Institutional lender” means the following:

23(1) The United States or any state, district, territory, or
24commonwealth thereof, or any city, county, city and county, public
25district, public authority, public corporation, public entity, or
26political subdivision of a state, district, territory, or commonwealth
27of the United States, or any agency or other instrumentality of any
28one or more of the foregoing, including, by way of example, the
29Federal National Mortgage Association and the Federal Home
30Loan Mortgage Corporation.

31(2) Any bank, trust company, savings bank or savings and loan
32association, credit union, industrial loan company, or insurance
33company, or service or investment company that is wholly owned
34and controlled by one of the preceding entities, doing business
35under the authority of and in accordance with a license, certificate,
36or charter issued by the United States or any state, district, territory,
37or commonwealth of the United States.

38(3) Any corporation with outstanding securities registered under
39Section 12 of the Securities Exchange Act of 1934 or any wholly
40owned subsidiary of that corporation.

P7    1(4) A residential mortgage lender or servicer licensed to make
2residential mortgage loans under this law.

3(l) “Law” means the California Residential Mortgage Lending
4Act.

5(m) “Lender” means a person thatbegin delete (1)end deletebegin deleteend deletebegin deleteis anend deletebegin insert satisfies either of
6the following:end insert

7
begin insert(1)end insertbegin insertend insertbegin insertThe person is or does all of the following:end insert

8begin insert(A)end insertbegin insertend insertbegin insertThe person is anend insert approved lender for the Federal Housing
9Administration, Veterans Administration, Farmers Home
10Administration, Government National Mortgage Association,
11Federal National Mortgage Association, or Federal Home Loan
12Mortgagebegin delete Corporation, (2) directlyend deletebegin insert Corporation.end insert

13begin insert(B)end insertbegin insertend insertbegin insertThe person directlyend insert makes residential mortgagebegin delete loans, and
14(3) makesend delete
begin insert loans.end insert

15begin insert(C)end insertbegin insertend insertbegin insertThe person makesend insert the credit decision in the loanbegin delete transactions.end delete
16
begin insert transactions.end insert

begin insert

17
(2) The person is either of the following:

end insert
begin insert

18
(A) Is not a natural person and engages in the activities of a
19loan processor or underwriter for a residential mortgage loan.

end insert
begin insert

20
(B) Is a natural person and an independent contractor who
21engages in the activities of a loan processor or underwriter for a
22residential mortgage loan as described in subdivision (c) of Section
2350003.6.

end insert

24(n) “Licensee” means, depending on the context, a person
25licensed under Chapter 2 (commencing with Section 50120),
26Chapter 3 (commencing with Section 50130), or Chapter 3.5
27(commencing with Section 50140).

28(o) “Makes or making residential mortgage loans” or “mortgage
29lending” means processing, underwriting, or as a lender using or
30advancing one’s own funds, or making a commitment to advance
31one’s own funds, to a loan applicant for a residential mortgage
32loan.

33(p) “Mortgage loan,” “residential mortgage loan,” or “home
34mortgage loan” means a federally related mortgage loan as defined
35in Section 1024.2 of Title 12 of the Code of Federal Regulations,
36or a loan made to finance construction of a one-to-four family
37dwelling.

38(q) “Mortgage servicer” or “residential mortgage loan servicer”
39means a person that (1) is an approved servicer for the Federal
40Housing Administration, Veterans Administration, Farmers Home
P8    1Administration, Government National Mortgage Association,
2Federal National Mortgage Association, or Federal Home Loan
3Mortgage Corporation, and (2) directly services or offers to service
4mortgage loans.

5(r) “Nationwide Mortgage Licensing System and Registry”
6means a mortgage licensing system developed and maintained by
7the Conference of State Bank Supervisors and the American
8Association of Residential Mortgage Regulators for the licensing
9and registration of licensed mortgage loan originators.

10(s) “Net worth” has the meaning set forth in Section 50201.

11(t) “Own funds” means (1) cash, corporate capital, or warehouse
12credit lines at commercial banks, savings banks, savings and loan
13associations, industrial loan companies, or other sources that are
14liability items on a lender’s financial statements, whether secured
15or unsecured, or (2) a lender’s affiliate’s cash, corporate capital,
16or warehouse credit lines at commercial banks or other sources
17that are liability items on the affiliate’s financial statements,
18whether secured or unsecured. “Own funds” does not include funds
19provided by a third party to fund a loan on condition that the third
20party will subsequently purchase or accept an assignment of that
21loan.

22(u) “Person” means a natural person, a sole proprietorship, a
23corporation, a partnership, a limited liability company, an
24association, a trust, a joint venture, an unincorporated organization,
25a joint stock company, a government or a political subdivision of
26a government, and any other entity.

27(v) “Residential real property” or “residential real estate” means
28real property located in this state that is improved by a one-to-four
29family dwelling.

30(w) “SAFE Act” means the federal Secure and Fair Enforcement
31for Mortgage Licensing Act of 2008 (Public Law 110-289).

32(x) “Service” or “servicing” means receiving more than three
33installment payments of principal, interest, or other amounts placed
34in escrow, pursuant to the terms of a mortgage loan and performing
35services by a licensee relating to that receipt or the enforcement
36of its receipt, on behalf of the holder of the note evidencing that
37loan.

38(y) “Sell” includes exchange, offer to sell, or solicitation to sell.

P9    1(z) “Unique identifier” means a number or other identifier
2assigned by protocols established by the Nationwide Mortgage
3Licensing System and Registry.

4(aa) For purposes of Sections 50142, 50143, and 50145,
5“nontraditional mortgage product” means any mortgage product
6other than a 30-year fixed rate mortgage.

7(ab) For purposes of Section 50141, “expungement” means the
8subsequent order under the provisions of Section 1203.4 of the
9Penal Code allowing such individual to withdraw his or her plea
10of guilty and to enter a plea of not guilty, or setting aside the verdict
11of guilty or dismissing the accusation, information, or indictment.
12With respect to criminal convictions in another state, that state’s
13definition of expungement will apply.

14begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 50201 of the end insertbegin insertFinancial Codeend insertbegin insert is amended to
15read:end insert

16

50201.  

(a) A licensee issued a license for purposes of making
17or servicing residential mortgage loans, including a licensee
18employing one or more mortgage loan originators, shall
19continuously maintain a minimum tangible net worth at all times
20of two hundred fifty thousand dollars ($250,000).begin insert The
21commissioner, in his or her discretion, may require a lender who
22engages in the activities described in paragraph (2) of subdivision
23(m) of Section 50003 to continuously maintain a minimum tangible
24net worth of an amount that is greater than two hundred fifty
25thousand dollars ($250,000), but that does not exceed the net worth
26required of an approved lender under the Federal Housing
27Administration.end insert

28(b) Tangible net worth shall be computed in accordance with
29generally accepted accounting principles.

30(c) The commissioner may promulgate rules or regulations with
31respect to the requirements for minimum net worth, as are
32necessary to accomplish the purposes of this division and comply
33with the SAFE Act.

begin delete
34

SECTION 1.  

Section 712 is added to the Public Utilities Code,
35to read:

36

712.  

(a) The commission shall convene, or continue, until
37August 26, 2025, an independent peer review panel to conduct an
38independent review of enhanced seismic studies and surveys of
39the Diablo Canyon Units 1 and 2 powerplant, including the
40surrounding areas of the facility and areas of nuclear waste storage.

P10   1(b) The independent peer review panel shall contract with the
2Energy Commission, the California Geological Survey of the
3Department of Conservation, the California Coastal Commission,
4the Alfred E. Alquist Seismic Safety Commission, the Office of
5Emergency Services, and the County of San Luis Obispo to
6participate on the panel and provide expertise.

7(c) The independent peer review panel shall review the seismic
8studies and hold public meetings.

9(d) The commission shall make reports by the independent peer
10review panel publicly available on the Internet Web site maintained
11by the commission.

12

SEC. 2.  

This act is an urgency statute necessary for the
13immediate preservation of the public peace, health, or safety within
14the meaning of Article IV of the Constitution and shall go into
15immediate effect. The facts constituting the necessity are:

16The Public Utilities Commission in Decision 10-08-003 (August
1712, 2010) convened an independent peer review panel to review
18the seismic studies conducted on behalf of Pacific Gas and Electric
19Company relative to the Diablo Canyon Units 1 and 2 powerplant.
20The independent peer review panel, in addition to providing
21 valuable expertise to the commission in evaluating the seismic
22studies, also operates to assure the public that the seismic studies
23are being performed in an appropriate manner. Because the
24commission’s current contracts for the independent peer review
25panel are set to expire on November 30, 2015, the Diablo Canyon
26Units 1 and 2 powerplant is authorized to operate until August 26,
272025, by the federal Nuclear Regulatory Commission, and there
28continues to be enhanced seismic studies and surveys conducted
29that warrant review by the independent peer review panel to ensure
30the safety of the public, it is necessary that this act take effect
31immediately.

end delete


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