BILL ANALYSIS
SB 1137
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Date of Hearing: June 30, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1137 (Committee on Banking, Finance, and Insurance) - As
Amended: June 23, 2010
Policy Committee: Banking and
Finance Vote: 12-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill makes several, mostly technical, changes to
legislation passed last year that brought California into
conformity with the federal Secure and Fair Enforcement (SAFE)
Act for mortgage loan originators. Specifically, the bill:
1)Provides an exception to last year's increase in the minimum
net worth requirements for real estate brokers that
facilitate, but do not make, mortgage loans. Such brokers
would be required to maintain a net worth of at least $50,000
instead of the $250,000 minimum for other brokers.
2)Makes explicit the regulatory authority of the Department of
Real Estate to take enforcement actions for non-compliance
with federal law.
3)Makes other technical and conforming changes to the statutes
enacted last year.
FISCAL EFFECT
Negligible effect on state costs and revenues.
COMMENTS
1)Background . In 2008, Congress passed the SAFE Act, which
requires all states to license and register their mortgage
loan originators through a nationwide organization called the
Nationwide Mortgage Licensing System and Registry. Under the
SAFE Act, HUD is authorized to establish and maintain a
SB 1137
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mortgage loan originator system in any state that fails to
voluntarily comply with the federal provisions.
SB 36 (Calderon), Chapter 160, Statutes of 2009, conforms
California's Real Estate Law, Finance Lenders Law, and
Residential Mortgage Lending Act to the federal SAFE Act, thus
preserving California's ability to continue regulating
mortgage loan origination by non-depository institutions
operating in California.
2)Rationale . This bill is a clean up measure to SB 36. The
net-worth provisions are intended to address a problem that
has arisen with respect to smaller CFL brokers. SB 36 raised
the net worth minimum requirements from $25,000 to $250,000
for all brokers - both those making loans themselves and those
that simply arrange mortgages through other lenders. It did
not change the minimum requirement for surety bonds, which
remains at $25,000 for all lenders. Through regulations,
however, DOC is establishing a sliding scale for surety bond
amounts, starting at $25,000 and rising for brokers with a
larger volume of business.
The higher net worth requirement, coupled with the housing
downturn, is driving smaller brokers out of business. This
bill would enable DOC, in its final regulations, to create a
sliding scale for net worth requirements of brokers that
facilitate, but do not make, mortgage loans. The sliding
scale, starting at $50,000 and rising for brokers with larger
amounts of business, is intended to enable brokers that handle
only a modest number of mortgage loans to remain in business
while still providing consumer protections.
The remaining provisions of the bill (a) clarify the
regulatory authority of Department of Real Estate to enforce
compliance with the SAFE Act, by explicitly authorizing
enforcement actions - such as desist and refrain orders, or
license revocations - and (b) make a variety of other
technical and conforming changes.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081