BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 94
                                                                  Page  1

          Date of Hearing:   August 19, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                    SB 94 (Calderon) - As Amended:  July 23, 2009 

          Policy Committee:                             Banking and  
          Finance      Vote:                            9-1
                       Judiciary                              8-2

          Urgency:     Yes                  State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY 

          This bill prohibits, through December 31, 2012, individuals or  
          corporations from charging advance fees to borrowers in  
          connection with a loan modification, and requires those who wish  
          to charge a fee for loan modification services to provide a  
          notice to borrowers regarding other options available to the  
          borrower.  Specifically, the bill:

          1)Requires that the notice be provided in 14 point type and that  
            a translated copy be provided to borrowers in cases where the  
            loan modification is negotiated in Spanish, Korean,  
            Vietnamese, Tagalog, or Chinese.

          2)Provides that a violation of the advanced fee and notice  
            requirements is a public offense, punishable by a fine not  
            exceeding $10,000 for an individual or $50,000 for a  
            corporation, or by imprisonment in a county jail for up to one  
            year, or by both a fine and imprisonment.  

          3)Authorizes the Department of Real Estate (DRE) to enforce  
            violations of the sections of the Civil Code relating to  
            mortgages. 

          4)Prohibits any California Finance Lender Law licensee from  
            making a materially false or misleading statement or  
            representation to a borrower about the terms or conditions of  
            that borrower's loan, when making or brokering the loan.

           FISCAL EFFECT  









                                                                  SB 94
                                                                  Page  2

          The DRE and DOC indicate that regulatory costs resulting from  
          the bill would be minor and absorbable.

           COMMENTS  

           1)Rationale  . According to the proponents, the purpose of this  
            bill is to regulate loan modification businesses, which have  
            proliferated during the past few years and whose actions have  
            generated numerous consumer complaints. It does so by  
            eliminating advanced fees and ensuring that borrowers are  
            aware that the services provided can be received for free  
            through direct contract with lenders, or through non-profit  
            agencies.

           2)Related legislation.   This bill is similar to AB 764 (Nava,  
            Bass, Feuer), which would prohibit persons from charging fees  
            to borrowers in connection with the modification of the terms  
            of the borrower's loan until the terms of the loan have been  
            modified, and would require those who wish to charge a fee for  
            loan modification services to provide a specified notice to  
            borrowers regarding other options available to the borrower.  
            That measure is currently pending in the Senate Appropriations  
            Committee. 

           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081