BILL ANALYSIS
SB 1137
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Date of Hearing: June 21, 2010
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
SB 1137 (B.F. & I.) - As Amended: June 3, 2010
SENATE VOTE : 35-0
SUBJECT : Mortgage Lending
SUMMARY : Makes several technical changes to the statutes
enacted to conform to the requirements of the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008 (SAFE Act).
Specifically, this bill :
1)Provides that a California Finance Lender (CFL)that employs
one or more mortgage loan originators and that arranges but
does not make residential mortgage loans, shall continuously
maintain a minimum net worth of least $50,000.
EXISTING FEDERAL LAW , provides for the SAFE Act, pursuant to
Title V of the provisions of the Housing and Economic Recovery
Act of 2008 (HR 3221; Public Law 110-289). The SAFE Act
required all states to license and register their mortgage loan
originators, as defined, through a nationwide organization
called the Nationwide Mortgage Licensing System and Registry.
Any state that failed to implement a mortgage loan originator
licensing system, in compliance with the SAFE Act, by July 30,
2009 risked direct intervention by the U.S. Department of
Housing and Urban Development (HUD). Under the SAFE Act, HUD is
authorized to establish and maintain a mortgage loan originator
system in any state that fails to voluntarily comply with SAFE.
EXISTING STATE LAW , pursuant to SB 36 (Calderon), Chapter 160,
Statutes of 2009, conforms California's Real Estate Law, Finance
Lenders Law, and Residential Mortgage Lending Act to the SAFE
Act, thus preserving California's ability to continue regulating
mortgage loan origination by non-depository institutions
operating in California
FISCAL EFFECT : None
COMMENTS :
SB 1137
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This bill is intended to provide clean-up to legislation passed
last year to ensure that California law complies with provisions
of the SAFE Act. The SAFE Act required all states to individual
license mortgage loan originators and to ensure their
registration with a nationwide database. Currently, the
Department of Corporations (DOC) and Department of Real Estate
are engaged in establishing rules and regulations to carry out
the provisions of SAFE.
An additional provision of this bill concerns the net worth
requirements of CFL brokers. Under current law a CFL broker
whether making or arranging mortgage loans is required to
maintain $250,000 of net worth at all times. This bill would
provide a finer delineation of this requirement by allowing a
CFL broker that employs one or more mortgage loan originators
that only arranges mortgage loans to maintain a net worth of
$50,000. The reasoning behind this change is that smaller CFL
licensees that only arrange loans, are losing their licenses due
to the net worth requirement coupled with the current economic
downturn. While the net worth requirements are being changed,
CFL licensees would continue to have to maintain a surety bond
of $25,000. Additionally, DOC expects to promulgate
regulations, to ensure that minimum net worth requirements for
CFL licensees employing individuals with mortgage loan
originator licenses appropriately reflect the gross revenue
derived by those licensees from mortgage loan origination
activities. Committee staff and the author's office intend to
monitor the development of these regulations to ensure they
provide adequate flexibility and protection of the public's
general welfare.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081