BILL NUMBER: SB 94 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Calderon
JANUARY 22, 2009
An act to amend Sections 10085.5 and 10177 of, and to add Section
10147.6 to, the Business and Professions Code, to amend Section
2945.1 of, and to add Sections 2944.6 and 2944.7 to, the Civil Code,
and to amend Sections 22161 and 22301 of, and to add Section 50002.5
to, the Financial Code, relating to mortgage loans.
LEGISLATIVE COUNSEL'S DIGEST
SB 94, as introduced, Calderon. Mortgage loans.
(1) The Real Estate Law provides for the regulation and licensure
of real estate brokers and real estate salespersons by the Real
Estate Commissioner. The California Finance Lenders Law provides for
the regulation and licensure of finance lenders and brokers by the
Commissioner of Corporations. The California Residential Mortgage
Lending Act provides for the regulation and licensure of residential
mortgage lenders and servicers by the Commissioner of Corporations. A
willful violation of any provision of those acts is a crime.
This bill would prohibit real estate licensees from charging or
receiving an advance fee, and finance lenders and brokers and
residential mortgage lenders and servicers from charging or receiving
any interest or charge, for performing services for borrowers in
connection with the modification of the terms of a loan secured
directly or collaterally by a lien on single-family residential real
property, except as specified. The bill would also require any person
who, for compensation, solicits customers for mortgage loan
modifications to provide a specified 10-point bold type statement
regarding loan modification fees, and would prohibit those persons
from receiving any preperformance compensation, as specified, or
requiring any security as collateral for final compensation. The bill
would also provide that a real estate licensee who fails to comply
with specified provisions related to mortgages would be subject to
disciplinary action by the Real Estate Commissioner. The bill would
add to the California Finance Lenders Law a prohibition on making any
false, deceptive, or misleading statement or representation in
connection with a loan.
Because a violation of these provisions by certain licensees may
be punished as crimes under their respective licensing laws, this
bill would impose a state-mandated local program.
(2) Existing law defines a foreclosure consultant as a person who
offers, for compensation, to perform specified services for a
homeowner relating to a foreclosure sale, and imposes regulations
upon foreclosure consultants when servicing a foreclosure sale, as
specified. Existing law excludes specified persons from the
definition of a foreclosure consultant, including a person licensed
under the Real Estate Law when making a direct loan or engaging in
specified acts, and a person licensed to make loans as a finance
lender, subject to the authority of the Commissioner of Corporations
to terminate this exclusion, as specified.
This bill would instead specify that a real estate licensee and a
finance lender are excluded from the definition of a foreclosure
consultant when acting under the authority of that person's license,
and would delete the commissioner's authority to terminate the
finance lender's exclusion. The bill would also delete obsolete
statutory references from those provisions.
(3) 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 10085.5 of the Business and Professions Code is
amended to read:
10085.5. (a) It shall be unlawful for any person to claim,
demand, charge, receive, collect, or contract for an advance fee (1)
for soliciting lenders on behalf of borrowers or performing services
for borrowers in connection with loans to be secured directly or
collaterally by a lien on real property, before the borrower becomes
obligated to complete the loan or , (2) for
performing services for borrowers in connection with the
modification of the terms of a loan secured directly or collaterally
by a lien on single-family residential real property, or (3) for
performing any other activities for which a license is
required, unless the person is a licensed real estate broker and has
complied with the provisions of this part.
(b) This section does not prohibit the acceptance or receipt of an
advance fee by any bank, savings association, credit union,
industrial loan company, or person acting within the scope of a
license issued to that person pursuant to Division 9 (commencing with
Section 22000) of the Financial Code, in connection with loans to be
secured directly or collaterally by a lien on real property. This
section does not apply to charges made by title insurers and
controlled escrow companies pursuant to Chapter 1 (commencing with
Section 12340) of Part 6 of Division 2 of the Insurance Code.
(c) A violation of this section is a public offense punishable by
a fine not exceeding ten thousand dollars ($10,000), by imprisonment
in the county jail for a term not to exceed six months, or by both
that fine and imprisonment, or if by a corporation, the violation is
punishable by a fine not exceeding fifty thousand dollars ($50,000).
SEC. 2. Section 10147.6 is added to the Business and Professions
Code, to read:
10147.6. Any licensee who solicits customers for the purpose of
helping negotiate a mortgage loan modification or other form of
mortgage loan forbearance for a fee or other form of compensation, or
who otherwise offers to perform these services for a borrower for a
fee or other form of compensation, shall provide the following
statement in not less than 10-point bold type to the borrower, prior
to entering into any fee agreement with the borrower:
IT IS NOT NECESSARY TO PAY A THIRD PARTY TO ARRANGE FOR A LOAN
MODIFICATION OR OTHER FORM OF FORBEARANCE FROM YOUR MORTGAGE LENDER
OR SERVICER. NONPROFIT HOUSING COUNSELING AGENCIES OFFER THESE AND
OTHER FORMS OF BORROWER ASSISTANCE FREE OF CHARGE. A LIST OF
NONPROFIT HOUSING COUNSELING AGENCIES APPROVED BY THE UNITED STATES
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) IS AVAILABLE FROM
YOUR LOCAL HUD OFFICE OR BY VISITING WWW.HUD.GOV.
SEC. 3. Section 10177 of the Business and Professions Code is
amended to read:
10177. The commissioner may suspend or revoke the license of a
real estate licensee, or may deny the issuance of a license to an
applicant, who has done any of the following, or may suspend or
revoke the license of a corporation, or deny the issuance of a
license to a corporation, if an officer, director, or person owning
or controlling 10 percent or more of the corporation's stock has done
any of the following:
(a) Procured, or attempted to procure, a real estate license or
license renewal, for himself or herself or a salesperson, by fraud,
misrepresentation, or deceit, or by making a material misstatement of
fact in an application for a real estate license, license renewal,
or reinstatement.
(b) Entered a plea of guilty or nolo contendere to, or been found
guilty of, or been convicted of, a felony, or a crime substantially
related to the qualifications, functions, or duties of a real estate
licensee, and the time for appeal has elapsed or the judgment of
conviction has been affirmed on appeal, irrespective of an order
granting probation following that conviction, suspending the
imposition of sentence, or of a subsequent order under Section 1203.4
of the Penal Code allowing that licensee to withdraw his or her plea
of guilty and to enter a plea of not guilty, or dismissing the
accusation or information.
(c) Knowingly authorized, directed, connived at, or aided in the
publication, advertisement, distribution, or circulation of a
material false statement or representation concerning his or her
designation or certification of special education, credential, trade
organization membership, or business, or concerning a business
opportunity or a land or subdivision, as defined in Chapter 1
(commencing with Section 11000) of Part 2, offered for sale.
(d) Willfully disregarded or violated the Real Estate Law (Part 1
(commencing with Section 10000)) or Chapter 1 (commencing with
Section 11000) of Part 2 or the rules and regulations of the
commissioner for the administration and enforcement of the Real
Estate Law and Chapter 1 (commencing with Section 11000) of Part 2.
(e) Willfully used the term "realtor" or a trade name or insignia
of membership in a real estate organization of which the licensee is
not a member.
(f) Acted or conducted himself or herself in a manner that would
have warranted the denial of his or her application for a real estate
license, or has either had a license denied or had a license issued
by another agency of this state, another state, or the federal
government revoked or suspended for acts that, if done by a real
estate licensee, would be grounds for the suspension or revocation of
a California real estate license, if the action of denial,
revocation, or suspension by the other agency or entity was taken
only after giving the licensee or applicant fair notice of the
charges, an opportunity for a hearing, and other due process
protections comparable to the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340), Chapter 4 (commencing with
Section 11370), and Chapter 5 (commencing with Section 11500) of Part
1 of Division 3 of Title 2 of the Government Code), and only upon an
express finding of a violation of law by the agency or entity.
(g) Demonstrated negligence or incompetence in performing an act
for which he or she is required to hold a license.
(h) As a broker licensee, failed to exercise reasonable
supervision over the activities of his or her salespersons, or, as
the officer designated by a corporate broker licensee, failed to
exercise reasonable supervision and control of the activities of the
corporation for which a real estate license is required.
(i) Has used his or her employment by a governmental agency in a
capacity giving access to records, other than public records, in a
manner that violates the confidential nature of the records.
(j) Engaged in any other conduct, whether of the same or a
different character than specified in this section, which constitutes
fraud or dishonest dealing.
(k) Violated any of the terms, conditions, restrictions, and
limitations contained in an order granting a restricted license.
(l) (1) Solicited or induced the sale, lease, or listing for sale
or lease of residential property on the ground, wholly or in part, of
loss of value, increase in crime, or decline of the quality of the
schools due to the present or prospective entry into the neighborhood
of a person or persons having a characteristic listed in subdivision
(a) or (d) of Section 12955 of the Government Code, as those
characteristics are defined in Sections 12926, 12926.1, subdivision
(m), and paragraph (1) of subdivision (p) of Section 12955, and
Section 12955.2 of the Government Code.
(2) Notwithstanding paragraph (1), with respect to familial
status, paragraph (1) shall not be construed to apply to housing for
older persons, as defined in Section 12955.9 of the Government Code.
With respect to familial status, nothing in paragraph (1) shall be
construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and
799.5 of the Civil Code, relating to housing for senior citizens.
Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government
Code shall apply to paragraph (1).
(m) Violated the Franchise Investment Law (Division 5 (commencing
with Section 31000) of Title 4 of the Corporations Code) or
regulations of the Commissioner of Corporations pertaining thereto.
(n) Violated the Corporate Securities Law of 1968 (Division 1
(commencing with Section 25000) of Title 4 of the Corporations Code)
or the regulations of the Commissioner of Corporations pertaining
thereto.
(o) Failed to disclose to the buyer of real property, in a
transaction in which the licensee is an agent for the buyer, the
nature and extent of a licensee's direct or indirect ownership
interest in that real property. The direct or indirect ownership
interest in the property by a person related to the licensee by blood
or marriage, by an entity in which the licensee has an ownership
interest, or by any other person with whom the licensee has a special
relationship shall be disclosed to the buyer.
(p) Violated Article 6 (commencing with Section 10237).
(q) Violated or failed to comply with Chapter 2 (commencing with
Section 2920) of Title 14 of Part 4 of Division 3 of the Civil Code,
related to mortgages.
If a real estate broker that is a corporation has not done any of
the foregoing acts, either directly or through its employees, agents,
officers, directors, or persons owning or controlling 10 percent or
more of the corporation's stock, the commissioner may not deny the
issuance of a real estate license to, or suspend or revoke the real
estate license of, the corporation, provided that any offending
officer, director, or stockholder, who has done any of the foregoing
acts individually and not on behalf of the corporation, has been
completely disassociated from any affiliation or ownership in the
corporation.
SEC. 4. Section 2944.6 is added to the Civil Code, to read:
2944.6. Notwithstanding any other provision of law, any person
who solicits customers for the purpose of helping negotiate a
mortgage loan modification or other form of mortgage loan forbearance
for a fee or other compensation, or who otherwise offers to perform
these services for a borrower for a fee or other compensation, shall
provide the following statement in not less than 10-point bold type
to the borrower, prior to entering into any fee agreement with the
borrower:
IT IS NOT NECESSARY TO PAY A THIRD PARTY TO ARRANGE FOR A LOAN
MODIFICATION OR OTHER FORM OF FORBEARANCE FROM YOUR MORTGAGE LENDER
OR SERVICER. NONPROFIT HOUSING COUNSELING AGENCIES OFFER THESE AND
OTHER FORMS OF BORROWER ASSISTANCE FREE OF CHARGE. A LIST OF
NONPROFIT HOUSING COUNSELING AGENCIES APPROVED BY THE UNITED STATES
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) IS AVAILABLE FROM
YOUR LOCAL HUD OFFICE OR BY VISITING WWW.HUD.GOV.
SEC. 5. Section 2944.7 is added to the Civil Code, to read:
2944.7. Notwithstanding any other provision of law, it shall be
unlawful for any person who solicits customers for the purpose of
helping negotiate a mortgage loan modification or other form of
mortgage loan forbearance for a fee or other compensation, or who
otherwise offers to perform these services for a borrower for a fee
or other compensation, to do either of the following:
(a) Claim, demand, charge, collect, or receive any compensation
until after the person has fully performed each and every service the
person contracted to perform or represented that he or she would
perform.
(b) Take any wage assignment, any lien of any type on real or
personal property, or other security to secure the payment of
compensation.
SEC. 6. Section 2945.1 of the Civil Code is amended to read:
2945.1. The following definitions apply to this chapter:
(a) "Foreclosure consultant" means any person who makes any
solicitation, representation, or offer to any owner to perform for
compensation or who, for compensation, performs any service which the
person in any manner represents will in any manner do any of the
following:
(1) Stop or postpone the foreclosure sale.
(2) Obtain any forbearance from any beneficiary or mortgagee.
(3) Assist the owner to exercise the right of reinstatement
provided in Section 2924c.
(4) Obtain any extension of the period within which the owner may
reinstate his or her obligation.
(5) Obtain any waiver of an acceleration clause contained in any
promissory note or contract secured by a deed of trust or mortgage on
a residence in foreclosure or contained that deed of trust or
mortgage.
(6) Assist the owner to obtain a loan or advance of funds.
(7) Avoid or ameliorate the impairment of the owner's credit
resulting from the recording of a notice of default or the conduct of
a foreclosure sale.
(8) Save the owner's residence from foreclosure.
(9) Assist the owner in obtaining from the beneficiary, mortgagee,
trustee under a power of sale, or counsel for the beneficiary,
mortgagee, or trustee, the remaining proceeds from the foreclosure
sale of the owner's residence.
(b) A foreclosure consultant does not include any of the
following:
(1) A person licensed to practice law in this state when the
person renders service in the course of his or her practice as an
attorney at law.
(2) A person licensed under Division 3 (commencing with Section
12000) of the Financial Code when the person is acting as a prorater
as defined therein.
(3) A person licensed under Part 1 (commencing with Section 10000)
of Division 4 of the Business and Professions Code when the person
makes a direct loan or when the person (A) engages in acts
whose performance requires licensure under that part, (B) is entitled
to compensation for the acts performed in connection with the sale
of a residence in foreclosure or with the arranging of a loan secured
by a lien on a residence in foreclosure, (C) does not claim, demand,
charge, collect, or receive any compensation until the acts have
been performed or cannot be performed because of an owner's failure
to make the disclosures set forth in Section 10243 of the Business
and Professions Code or failure to accept an offer from a purchaser
or lender ready, willing, and able to purchase a residence in
foreclosure or make a loan secured by a lien on a residence in
foreclosure on the terms prescribed in a listing or a loan agreement,
and (D) does not acquire any interest in a residence in foreclosure
directly from an owner for whom the person agreed to perform the acts
other than as a trustee or beneficiary under a deed of trust given
to secure the payment of a loan or that compensation. For the
purposes of this paragraph, a "direct loan" means a loan of a real
estate broker's own funds secured by a deed of trust on the residence
in foreclosure, which loan and deed of trust the broker in good
faith attempts to assign to a lender, for an amount at least
sufficient to cure all of the defaults on obligations which are then
subject to a recorded notice of default, provided that, if a
foreclosure sale is conducted with respect to the deed of trust, the
person conducting the foreclosure sale has no interest in the
residence in foreclosure or in the outcome of the sale and is not
owned, controlled, or managed by the lending broker; the lending
broker does not acquire any interest in the residence in foreclosure
directly from the owner other than as a beneficiary under the deed of
trust; and the loan is not made for the purpose or effect of
avoiding or evading the provisions of this article is
acting under the authority of that license .
(4) A person licensed under Chapter 1 (commencing with Section
5000) of Division 3 of the Business and Professions Code when the
person is acting in any capacity for which the person is licensed
under those provisions.
(5) A person or his or her authorized agent acting under the
express authority or written approval of the Department of Housing
and Urban Development or other department or agency of the United
States or this state to provide services.
(6) A person who holds or is owed an obligation secured by a lien
on any residence in foreclosure when the person performs services in
connection with this obligation or lien.
(7) Any person licensed to make loans pursuant to Division 9
(commencing with Section 22000) , 10 (commencing with
Section 24000), or 11 (commencing with Section 26000) of
the Financial Code , subject to the authority of the
Commissioner of Corporations to terminate this exclusion, after
notice and hearing, for any person licensed pursuant to any of those
divisions upon a finding that the licensee is found to have engaged
in practices described in subdivision (a) of Section 2945
when the person is acting under the authority of that license
.
(8) Any person or entity doing business under any law of this
state, or of the United States relating to banks, trust companies,
savings and loan associations, industrial loan companies, pension
trusts, credit unions, insurance companies, or any person or entity
authorized under the laws of this state to conduct a title or escrow
business, or a mortgagee which is a United States Department of
Housing and Urban Development approved mortgagee and any subsidiary
or affiliate of the above, and any agent or employee of the above
while engaged in the business of these persons or entities.
(9) A person licensed as a residential mortgage lender or servicer
pursuant to Division 20 (commencing with Section 50000) of the
Financial Code, when acting under the authority of that license.
(c) Notwithstanding subdivision (b), any person who provides
services pursuant to paragraph (9) of subdivision (a) is a
foreclosure consultant unless he or she is the owner's attorney.
(d) "Person" means any individual, partnership, corporation,
limited liability company, association or other group, however
organized.
(e) "Service" means and includes, but is not limited to, any of
the following:
(1) Debt, budget, or financial counseling of any type.
(2) Receiving money for the purpose of distributing it to
creditors in payment or partial payment of any obligation secured by
a lien on a residence in foreclosure.
(3) Contacting creditors on behalf of an owner of a residence in
foreclosure.
(4) Arranging or attempting to arrange for an extension of the
period within which the owner of a residence in foreclosure may cure
his or her default and reinstate his or her obligation pursuant to
Section 2924c.
(5) Arranging or attempting to arrange for any delay or
postponement of the time of sale of the residence in foreclosure.
(6) Advising the filing of any document or assisting in any manner
in the preparation of any document for filing with any bankruptcy
court.
(7) Giving any advice, explanation or instruction to an owner of a
residence in foreclosure which in any manner relates to the cure of
a default in or the reinstatement of an obligation secured by a lien
on the residence in foreclosure, the full satisfaction of that
obligation, or the postponement or avoidance of a sale of a residence
in foreclosure pursuant to a power of sale contained in any deed of
trust.
(8) Arranging or attempting to arrange for the payment by the
beneficiary, mortgagee, trustee under a power of sale, or counsel for
the beneficiary, mortgagee, or trustee, of the remaining proceeds to
which the owner is entitled from a foreclosure sale of the owner's
residence in foreclosure. Arranging or attempting to arrange for the
payment shall include any arrangement where the owner transfers or
assigns the right to the remaining proceeds of a foreclosure sale to
the foreclosure consultant or any person designated by the
foreclosure consultant, whether that transfer is effected by
agreement, assignment, deed, power of attorney, or assignment of
claim.
(f) "Residence in foreclosure" means a residence in foreclosure as
defined in Section 1695.1.
(g) "Owner" means a property owner as defined in Section 1695.1.
(h) "Contract" means any agreement, or any term thereof, between a
foreclosure consultant and an owner for the rendition of any service
as defined in subdivision (e).
SEC. 7. Section 22161 of the Financial Code is amended to read:
22161. (a) No person shall make a
false, deceptive, or misleading statement or representation in
connection with a loan.
(b) No person shall advertise, print,
display, publish, distribute, or broadcast, or cause or permit to be
advertised, printed, displayed, published, distributed, or broadcast
in any manner, any statement or representation with regard to the
business subject to the provisions of this division, including the
rates, terms, or conditions for making or negotiating loans, that is
false, misleading, or deceptive, or that omits material information
that is necessary to make the statements not false, misleading, or
deceptive, or in the case of a licensee, that refers to the
supervision of the business by the state or any department or
official of the state.
SEC. 8. Section 22301 of the Financial Code is amended to read:
22301. (a) No licensee shall directly or indirectly charge,
contract for, or receive any interest or charge of any nature with
respect to a loan of five thousand dollars ($5,000) or more unless
the loan is made.
(b) Notwithstanding subdivision (a), whenever a loan of five
thousand dollars ($5,000) or more is not consummated because of the
borrower's failure to disclose outstanding liens or other information
essential to making the loan or solely because of the borrower's
failure to complete the loan in accordance with the loan application,
a licensee may charge, contract for, and receive an amount equal to
the actual expenses incurred by the licensee in connection with the
preparation for the loan.
(c) No licensee shall directly or indirectly charge, contract for,
or receive any interest or charge of any nature for performing
services for a borrower in connection with the modification of the
terms of a loan secured directly or collaterally by a lien on
single-family residential real property. Nothing in this section
precludes a licensee from collecting interest or other charges
pursuant to the terms of a loan that has been modified.
SEC. 9. Section 50002.5 is added to the Financial Code, to read:
50002.5. No licensee shall directly or indirectly charge,
contract for, or receive any interest or charge of any nature for
performing services for a borrower in connection with the
modification of the terms of a loan secured directly or collaterally
by a lien on single-family residential real property. Nothing in this
section precludes a licensee from collecting interest or other
charges pursuant to the terms of a loan that has been modified.
SEC. 10. 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.