BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 239|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: SB 239
Author: Pavley (D), et al
Amended: 5/5/09
Vote: 21
SENATE PUBLIC SAFETY COMMITTEE : 7-0, 4/28/09
AYES: Leno, Benoit, Cedillo, Hancock, Huff, Steinberg,
Wright
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Mortgage fraud
SOURCE : California District Attorneys Association
DIGEST : This bill provides that fraud involving
mortgages be defined as a stand-alone statute in a specific
section of the Penal Code.
ANALYSIS : 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, 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 deletes this provision and provide instead for
the offense of mortgage fraud, as defined, a violation of
CONTINUED
SB 239
Page
2
which would be a public offense punishable by imprisonment
in the state prison or in a county jail for not more than
one year. The bill provides that mortgage fraud may only
be prosecuted when the value of the alleged fraud meets the
threshold for grand theft, as specified. The bill sets
forth legislative findings, declarations, and intent with
respect to its enactment.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 5/20/09)
California District Attorneys Association (source)
Consumers Union
Los Angeles District Attorney
San Francisco District Attorney
Santa Clara District Attorney
ARGUMENTS IN SUPPORT : According to the author's office,
"The nation's foreclosure crisis has given rise to a
variety of mortgage fraud scams that are targeting
distressed homeowners -- in particular, the widespread
practice of mortgage brokers using false information to
obtain loans for borrowers, who are in turn often misled
about the terms of those loans. The Federal Bureau of
Investigation currently estimates annual losses from
fraudulent schemes in the amount of $4 billion to $6
billion. The harms suffered by unsuspecting borrowers
caught up in fraud for profit schemes can be devastating.
"The investigations of mortgage fraud complaints are
complex and document driven. Time is of the essence in
these cases, especially in cases of foreclosure, but
frequently victim borrowers do not possess important
transaction related documents that would aid investigators.
Recovery of those documents from lenders and escrow
companies is necessary but extremely time consuming, made
ever more difficult by the avalanche of cases and the
increasing number of companies that are going out of
business. The bill would also allow law enforcement to
obtain crucial real estate records more quickly via a court
order."
The Santa Clara County District Attorney argues that
SB 239
Page
3
placing various forms of mortgage fraud in one section and
using consistent terms concerning loans secured by real
property will make the law clearer for prosecutors,
brokers, lenders and attorneys and advisors to parties to
mortgages. Further, under existing law prosecutors must
use a combination of investigative tools to obtain escrow
documents, financial records and loan document. Allowing
access to all loan documents through a single process will
simplify the investigative process for prosecutors and
interested parties.
RJG:nl 5/20/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****