BILL ANALYSIS �
SB 376
Page 1
Date of Hearing: July 13, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 376 (Fuller) - As Amended: April 7, 2011
Policy Committee: Business and
Professions Vote: 9 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill revises the definition of "real estate broker" to
allow brokers to make, arrange, or service chattel (personal
property) mobile home loans under their Department of Real
Estate (DRE) license, without having to obtain a finance lender
or broker license from the Department of Corporations.
FISCAL EFFECT
Costs associated with this legislation would be minor and
absorbable within existing DRE resources.
COMMENTS
1)Rationale . According to the Western Manufactured Housing
Communities Association (WMA), sponsor of this bill, the
federal Secure and Fair Enforcement for Mortgage Licensing Act
of 2008 (SAFE Act) and newly amended provisions of the federal
Truth in Lending Act pose a substantial problem for the
state's mobile home parks. Before these federal measures and
state legislation implementing the SAFE Act were in place,
park owners were making seller carry back chattel loans on
used mobile homes using their own money to fund the loans.
This was necessary because traditional lenders were not
willing to make $5,000 to $20,000 chattel loans on used mobile
homes that park owners acquired through default, abandonment,
or warehouse liens. Park owners were not required to be
licensed as lenders by the Department of Corporations, because
these loans were not categorized as "engaged in the business
of chattel lending" and did not trigger the need for a finance
lender license.
SB 376
Page 2
WMA states, "The S.A.F.E. Act redefined Residential Mortgage
Loans to include chattel loans on mobile homes whether or not
they were attached to real property?Thus, park owners who are
engaged in making seller carry back loans on mobile homes?are
required to be licensed as mortgage loan originators (MLOs)
and to be licensed as a consumer finance lender by the
Department of Corporations in order to finance homes which
they own and self-finance."
This bill allows real estate brokers who are licensed as MLOs
to arrange for chattel mobile home loans without requiring
them to obtain a license from the Department of Corporations.
2)Are There Sufficient Consumer Protections? It is unclear from
this legislation that current consumer protections in place to
protect people who receive real property loans from brokers
would also be protected if they receive a chattel loan from
real estate brokers for the purchase of mobile homes. For
example, under current real estate law, a real estate broker
is required to provide a consumer with disclosures outlining
the terms of the loans. Those disclosures would not be
required for chattel loans. In addition, many of these loans
are likely to be under $30,000. Currently, there are limits
to the costs and expenses that the broker can charge the
consumer for these small real property loans. Under this law,
it is not clear that those limits would apply to chattel
loans.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081