BILL NUMBER: SB 239 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Pavley
FEBRUARY 24, 2009
An act to repeal and add Section 532f of the Penal Code, relating
to crimes.
LEGISLATIVE COUNSEL'S DIGEST
SB 239, as introduced, Pavley. Mortgage fraud.
Existing law provides that a person, other than the loan
applicant, who makes false financial statements in connection with an
application for a loan to be secured by real property is guilty of a
misdemeanor, punishable by a fine not exceeding $10,000, or by
imprisonment in a county jail not exceeding one year, or by both the
fine and imprisonment; and by restitution to the victim, as
specified.
This bill would delete this provision and provide instead for the
offense of mortgage fraud, as defined, a violation of which would be
a felony punishable by imprisonment in the state prison for 2, 3, or
4 years. A person who engages in a pattern of mortgage fraud, as
defined, would be subject to a penalty enhancement of an additional
2, 3, or 5 years in the state prison. By revising existing crimes and
creating new crimes and enhancements, 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 Section 532f of the Penal Code is repealed.
532f. (a) (1) A person, other than the loan applicant, who
commits a public offense under paragraph (1), (2), or (3) of Section
532a in connection with an application for a loan to be secured by
real property is guilty of a misdemeanor, punishable by a fine not
exceeding ten thousand dollars ($10,000), or by imprisonment in a
county jail not exceeding one year, or by both the fine and
imprisonment.
(2) The court shall determine the amount of any economic loss to a
victim caused by the criminal conduct of the defendant and shall, to
the extent possible, order the defendant to make restitution to the
victim in that amount.
(b) An applicant for a loan to be secured by real property who
violates paragraph (1), (2), or (3) of Section 532a is guilty of a
misdemeanor, punishable by a fine not exceeding ten thousand dollars
($10,000), or by imprisonment in a county jail not exceeding six
months, or by both the fine and imprisonment.
(c) This section shall not be construed to preclude the
application of any other law that may apply to a transaction.
SEC. 2. Section 532f is added to the Penal Code, to read:
532f. (a) A person commits mortgage fraud if, with the intent to
defraud, the person does any of the following:
(1) Knowingly makes any deliberate misstatement,
misrepresentation, or omission during the mortgage lending process
with the intention that it be relied on by a mortgage lender,
borrower, or any other party to the mortgage lending process.
(2) Knowingly uses or facilitates the use of any deliberate
misstatement, misrepresentation, or omission, knowing the same to
contain a misstatement, misrepresentation, or omission, during the
mortgage lending process with the intention that it be relied on by a
mortgage lender, borrower, or any other party to the mortgage
lending process.
(3) Receives any proceeds or any other funds in connection with a
mortgage loan closing that such person knew resulted from a violation
of paragraph (1) or (2) of this subdivision.
(4) Files or causes to be filed with the recorder of any county in
connection with a mortgage loan transaction any document the person
knows to contain a deliberate misstatement, misrepresentation, or
omission.
(b) An offense involving mortgage fraud shall not be based solely
on information lawfully disclosed pursuant to federal disclosure
laws, regulations, and interpretations related to the mortgage
lending process.
(c) (1) Notwithstanding any other provision of law, an order for
the production of any or all relevant records possessed by a real
estate recordholder in whatever form and however stored may be issued
by a judge upon a written ex parte application made under penalty of
perjury by a peace officer stating that there are reasonable grounds
to believe that the records sought are relevant and material to an
ongoing investigation of a felony fraud violation.
(2) The ex parte application shall specify with particularity the
records to be produced, which shall relate to a party or parties in
the criminal investigation.
(3) Relevant records may include, but are not limited to, purchase
contracts, loan applications, settlement statements, closing
statements, escrow instructions, payoff demands, disbursement
reports, and checks.
(4) The ex parte application and any subsequent judicial order may
be ordered sealed by the court upon a sufficient showing that it is
necessary for the effective continuation of the investigation.
(5) The records ordered to be produced shall be provided to the
peace officer applicant or his or her designee within a reasonable
time period after service of the order upon the real estate
recordholder.
(d) (1) Nothing in this section shall preclude the real estate
recordholder from notifying a customer of the receipt of the order
for production of records, unless a court orders the real estate
recordholder to withhold notification to the customer upon a finding
that this notice would impede the investigation.
(2) If a court has made an order to withhold notification to the
customer under this subdivision, the peace officer who or law
enforcement agency that obtained the records shall notify the
customer by delivering a copy of the ex parte order to the customer
within 10 days of the termination of the investigation.
(e) (1) Nothing in this section shall preclude the real estate
recordholder from voluntarily disclosing information or providing
records to law enforcement upon request.
(2) This section shall not preclude a real estate recordholder, in
its discretion, from initiating contact with, and thereafter
communicating with and disclosing records to, appropriate state or
local agencies concerning a suspected violation of any law.
(f) No real estate recordholder, or any officer, employee, or
agent of the real estate recordholder, shall be liable to any person
for either of the following:
(1) Disclosing information in response to an order pursuant to
this section.
(2) Complying with an order under this section not to disclose to
the customer the order, or the dissemination of information pursuant
to the order.
(g) Any records required to be produced pursuant to this section
shall be accompanied by an affidavit of a custodian of records of the
real estate recordholder or other qualified witness which states, or
includes in substance, all of the following:
(1) The affiant is the duly authorized custodian of the records or
other qualified witness and has authority to certify the records.
(2) The identity of the records.
(3) A description of the mode of preparation of the records.
(4) The records were prepared by the personnel of the business in
the regular course of business at or near the time of an act,
condition, or event.
(5) Any copies of records described in the order are true copies.
(h) A person who violates this section is guilty of a felony
punishable by imprisonment in the state prison for two, three, or
four years.
(i) (1) A person who engages in a pattern of mortgage fraud shall,
upon conviction of two or more felony violations of this section in
a single criminal proceeding, in addition and consecutive to the
punishment prescribed for the offenses of which he or she has been
convicted, be punished by a penalty enhancement of an additional two,
three, or five years in the state prison.
(2) This enhancement shall be imposed only once in a single
criminal proceeding.
(3) The additional prison term provided for in this subdivision
shall not be imposed unless the facts set forth in this subdivision
are charged in the accusatory pleading and admitted or found to be
true by the trier of fact.
(4) The additional prison term provided for in this subdivision
shall be in addition to any other punishment provided by law and
shall not be limited by any other provision of law.
(j) For the purposes of this section, the following terms shall
have the following meanings:
(1) "Person" means any individual, partnership, firm, association,
corporation, limited liability company, or other legal entity.
(2) "Mortgage lending process" means the process through which a
person seeks or obtains a mortgage loan, including, but not limited
to, solicitation, application, origination, negotiation of terms,
third-party provider services, underwriting, signing and closing, and
funding of the loan.
(3) "Mortgage loan" means a loan or agreement to extend credit to
a person that is secured by a deed of trust or other document
representing a security interest or lien upon any interest in real
property, including the renewal or refinancing of the loan.
(4) "Real estate recordholder" means any person, licensed or
unlicensed, that meets any of the following conditions:
(A) Is a title insurer that engages in the "business of title
insurance" as defined by Section 12340.3 of the Insurance Code, an
underwritten title company, or an escrow company.
(B) Functions as a broker or salesperson by engaging in any of the
type of acts set forth in Sections 10131, 10131.1, 10131.2, 10131.3,
10131.4, and 10131.6 of the Business and Professions Code.
(C) Engages in the making or servicing of loans secured by real
property.
(5) "Pattern of mortgage fraud" means engaging in at least two
felony violations of this section that involve two or more properties
and that have the same or similar purpose, result, principals,
victims, or methods of commission, or are otherwise interrelated by
distinguishing characteristics, and that are not isolated events.
SEC. 3. 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.