BILL ANALYSIS
AB 1762
Page 1
ASSEMBLY THIRD READING
AB 1762 (Hayashi)
As Introduced February 9, 2010
Majority vote
BUSINESS & PROFRESSIONS 10-0
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|Ayes:|Hayashi, Emmerson, Conway, Eng, | | |
| |Hernandez, Hill, Ma, Nava, | | |
| |Niello, Ruskin | | |
|-----+---------------------------------+-+-----------------------|
| | | | |
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SUMMARY : Redefines "advance fee" to exclude fees charged or
collected for advertising or promotion, for referral fees to other
real estate brokers or salespersons in connection with mortgage loan
origination, or fees associated with prepaid rental listings.
EXISTING LAW :
1)Provides for the regulation and licensure of real estate brokers
and salespersons by the Department of Real Estate (DRE).
2)Defines "advance fee" as a fee, regardless of the form, claimed,
demanded, charged, received, or collected by a licensee from a
principal before fully completing each and every service the
licensee contracted to perform, or represented would be performed.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS : According to the author's office, recent legislation, SB
94 (Calderon), Chapter 630, Statutes of 2009,"prohibited persons from
charging advance fees to borrowers in connection with a loan
modification. Loan modification companies were increasingly charging
homeowners thousands of dollars in advance fees without following
through on services.
"However, following the enactment of SB 94, DRE began receiving
numerous questions regarding the effect, scope, and applicability of
the bill. For example, the advance fee has most commonly been an
issue in loan modification or loan brokerage contracts, but can apply
to other arrangements such as a Prepaid Rental Listing Service.
Unfortunately, SB 94 can be broadly interpreted to include a real
estate listing agreement or any contract involving progressive or
'fee for service' payment, as a prohibited advance fee, even though
AB 1762
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the transactions are legitimate. AB 1762 resolves these unintended
consequences."
SB 94 prohibited any person, including real estate licensees and
attorneys, from demanding or collecting advance fees for loan
modification or mortgage loan forbearance services affecting
residential dwellings with four units or less. Prior to SB 94's
enactment, attorneys and real estate brokers with DRE-approved
agreements were able to collect advance fees.
As of October 2009, DRE was investigating over 1,300 loan
modification complaints. DRE issued nearly 400 desist and refrain
orders and accusations against individuals for illegally collecting
advance fees for the prior year. Most of these cases involved a
person who fraudulently collected an advance fee in exchange for a
promise that the homeowner would receive a sustainable loan
modification. However, once the fee was paid, little or nothing was
done to modify the borrower's loan.
Analysis Prepared by : Joanna Gin / B. & P. / (916) 319-3301 FN:
0003796