BILL NUMBER: AB 941 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 11, 2007
INTRODUCED BY Assembly Member Torrico
FEBRUARY 22, 2007
An act to add Section 50308.5 to the Financial
amend Section 10240 of the Business and Professions Code,
relating to lending.
LEGISLATIVE COUNSEL'S DIGEST
AB 941, as amended, Torrico. Adjustable rate mortgage
advertisements. Real property loans: written statement
to borrower.
Existing law, the California Residential Mortgage Lending Act,
provides for the licensure and regulation by the Commissioner of
Corporations of persons engaged in the business of making residential
mortgage loans or servicing those loans. Existing law provides that
if any person engaged in the business of making or servicing those
loans refers in any advertising to rates of interest, charges, or
costs of loans, the commissioner shall require that they are stated
fully and clearly in a manner that the commissioner deems necessary
to give adequate information to prospective borrowers. A willful
violation of the California Residential Mortgage Lending Act is a
crime.
This bill would require a person engaged in the business of making
or servicing residential mortgage loans who advertises option
adjustable rate mortgage loans and references a payment rate with a
negative amortization feature to include a specified disclosure in
the advertisements.
Existing law, the Real Estate Law, requires a real estate broker,
who negotiates a loan to be secured by a lien on real property, to
deliver to the borrower a statement in writing containing specified
information relating to the loan transaction. A willful violation of
the Real Estate Law is a crime.
This bill would require a real estate broker to provide a borrower
the option to receive a copy of this statement in an electronic
format.
Because a willful violation of the bill's requirements would be a
crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10240 of the
Business and Professions Code is amended to read:
10240. (a) Every real estate broker, upon acting within the
meaning of subdivision (d) of Section 10131, who negotiates a loan to
be secured directly or collaterally by a lien on real property
shall, within three business days after receipt of a completed
written loan application or before the borrower becomes obligated on
the note, whichever is earlier, cause to be delivered to the borrower
a statement in writing, containing all the information required by
Section 10241. It shall be personally signed by the borrower and by
the real estate broker negotiating the loan or by a real estate
licensee acting for the broker in negotiating the loan. When so
executed, an exact copy thereof shall be delivered to the borrower at
the time of its execution. The real estate broker negotiating the
loan shall retain on file for a period of three years a true and
correct copy of the statement as signed by the borrower.
No real estate licensee shall permit the statement to be signed by
a borrower if any information required by Section 10241 is omitted.
(b) For the purposes of applying the provisions of this article, a
real estate broker is acting within the meaning of subdivision (d)
of Section 10131 if he or she solicits borrowers, or causes borrowers
to be solicited, through express or implied representations that the
broker will act as an agent in arranging a loan, but in fact makes
the loan to the borrower from funds belonging to the broker.
(c) In a federally regulated residential mortgage loan transaction
in which the principal loan amount exceeds the principal loan levels
set forth in Section 10245, a real estate broker satisfies the
requirements of this section if the borrower receives (1) a "good
faith estimate" that satisfies the requirements of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C.A. 2601 et seq.), and
that sets forth the broker's real estate license number and a clear
and conspicuous statement on the face of the document stating that
the "good faith estimate" does not constitute a loan commitment, (2)
all applicable disclosures required by the Truth in Lending Act (15
U.S.C.A. 1601 et seq.), and (3) if the loan contains a balloon
payment provision, the disclosure described in subdivision (h) of
Section 10241, the balloon disclosure required for that loan by
Fannie Mae or Freddie Mac, or an alternative disclosure determined by
the commissioner to satisfy the requirements of the Truth in Lending
Act.
Prior to becoming obligated on the loan the borrower shall
acknowledge, in writing, receipt of the "good faith estimate" and all
applicable disclosures required by the Truth in Lending Act. The
real estate broker shall retain on file for a period of three years a
true and correct copy of the signed acknowledgment and a true and
correct copy of the "good faith estimate" and all applicable
disclosures required by the Truth in Lending Act as acknowledged by
the borrower.
(d) A real estate broker shall give a borrower the option to
receive a copy of the statement required by this section in
electronic format.
SECTION 1. Section 50308.5 is added to the
Financial Code, to read:
50308.5. (a) If a person engaged in the business regulated by
this division advertises option adjustable rate mortgage loans and
references a payment rate with a negative amortization feature, those
advertisements, whether written or broadcast through radio,
television, or computer, shall include the following disclosure:
"This advertised rate of ____ is not the actual interest rate. It
is the payment rate. If the borrower chooses to pay this advertised
rate, the principal balance of the loan will increase."
(b) The disclosure specified in subdivision (a) shall be in a font
no smaller than the prevailing font in the printed advertisement. If
the advertisement includes a monthly payment based on the payment
rate, the disclosure may be in the same font as the advertised
monthly payment as long as the font is not smaller than the
prevailing font in the printed advertisement. In the case of audible
advertisements, the disclosure shall be read before the end of the
advertisement.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.