Amended in Senate August 19, 2014

Amended in Senate June 5, 2014

Amended in Assembly April 23, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1730

Introduced by Assembly Member Wagner

February 14, 2014

An act to amend Section 2944.7 of, and to add Sections 2944.8 and 2944.10 to, the Civil Code, relating to mortgages.

LEGISLATIVE COUNSEL’S DIGEST

AB 1730, as amended, Wagner. Mortgage loan modification.

Existing law, applicable to residential mortgages, prohibits a person who negotiates, arranges, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation from, among other things, demanding or receiving any compensation until every service that the person contracted to perform or represented that he or she would perform is accomplished. Existing law makes a violation of these provisions by a natural person a misdemeanor punishable by a specified fine or imprisonment, or both.

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This bill would authorize a violation of these provisions to be punished as a felony with imprisonment, as specified. By changing the definition of a crime, the bill would impose a state-mandated local program.

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This bill would begin delete also end delete require the assessment of civil penalties for a violation of these provisions and would authorize designated state and local government officials to commence civil actions to recover those penalties.

This bill would, in addition to the civil penalties described above, authorize further civil penalties for unlawful mortgage modifications perpetrated against a senior citizen or disabled person, as defined, and provide criteria for the assessment of these additional penalties. The bill would authorize a court to order the offender to pay restitution to the senior citizen or disabled person, as specified.

This bill would impose a 4-year statute of limitations for actions brought pursuant to these provisions.

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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.

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This bill would provide that no reimbursement is required by this act for a specified reason.

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Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program:  begin delete yes end delete begin insert no end insert .

The people of the State of California do enact as follows:

SECTION 1.  

Section 2944.7 of the Civil Code is amended to
read:

2944.7.  

(a) Notwithstanding any other law, it shall be unlawful
for any person who negotiates, attempts to negotiate, arranges,
attempts to arrange, or otherwise offers to perform a mortgage
loan modification or other form of mortgage loan forbearance for
a fee or other compensation paid by the borrower, to do any of the
following:

(1) Claim, demand, charge, collect, or receive any compensation
until after the person has fully performed each and every service
the person contracted to perform or represented that he or she
would perform.

(2) Take any wage assignment, any lien of any type on real or
personal property, or other security to secure the payment of
compensation.

(3) Take any power of attorney from the borrower for any
purpose.

(b) A violation of this section by a natural person is punishable
by a fine not exceeding ten thousand dollars ($10,000), by
imprisonment in the county jail for a term not to exceed one year,
or begin delete imprisonment pursuant to subdivision (h) of Section 1170 of
the Penal Code, or end delete by both that fine and imprisonment, or if by a
business entity, the violation is punishable by a fine not exceeding
fifty thousand dollars ($50,000). These penalties are cumulative
to any other remedies or penalties provided by law.

(c) In addition to the penalties and remedies provided by Chapter
5 (commencing with Section 17200) of Part 2 of Division 7 of the
Business and Professions Code, a person who violates this section
shall be liable for a civil penalty not to exceed twenty thousand
dollars ($20,000) for each violation, which shall be assessed and
recovered in a civil action brought in the name of the people of
the State of California by the Attorney General, by any district
attorney, by any county counsel authorized by agreement with the
district attorney in actions involving a violation of a county
ordinance, by any city attorney of a city having a population in
excess of 750,000, by any city attorney of any city and county, or,
with the consent of the district attorney, by a city prosecutor in
any city having a full-time city prosecutor, in any court of
competent jurisdiction pursuant to Chapter 5 (commencing with
Section 17200) of Part 2 of Division 7 of the Business and
Professions Code.

(d) Nothing in this section precludes a person, or an agent acting
on that person’s behalf, who offers loan modification or other loan
forbearance services for a loan owned or serviced by that person,
from doing any of the following:

(1) Collecting principal, interest, or other charges under the
terms of a loan, before the loan is modified, including charges to
establish a new payment schedule for a nondelinquent loan, after
the borrower reduces the unpaid principal balance of that loan for
the express purpose of lowering the monthly payment due under
the terms of the loan.

(2) Collecting principal, interest, or other charges under the
terms of a loan, after the loan is modified.

(3) Accepting payment from a federal agency in connection
with the federal Making Home Affordable Plan or other federal
plan intended to help borrowers refinance or modify their loans
or otherwise avoid foreclosures.

(e) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.

SEC. 2.  

Section 2944.8 is added to the Civil Code, to read:

2944.8.  

(a) In addition to any liability for a civil penalty
pursuant to Section 2944.7, if a person violates Section 2944.7
with respect to a victim who is a senior citizen or a disabled person,
the violator may be liable for a civil penalty not to exceed two
thousand five hundred dollars ($2,500) for each violation, which
may be assessed and recovered in a civil action.

(b) As used in this section, the following terms have the
following meanings:

(1) “Disabled person” means a person who has a physical or
mental disability, as defined in Sections 12926 and 12926.1 of the
Government Code.

(2) “Senior citizen” means a person who is 65 years of age or
older.

(c) In determining whether to impose a civil penalty pursuant
to subdivision (a) and the amount thereof, the court shall consider,
in addition to any other appropriate factors, the extent to which
one or more of the following factors are present:

(1) Whether the defendant knew or should have known that his
or her conduct was directed to one or more senior citizens or
disabled persons.

(2) Whether the defendant’s conduct caused one or more senior
citizens or disabled persons to suffer any of the following: loss or
encumbrance of a primary residence, principal employment, or
source of income, substantial loss of property set aside for
retirement, or for personal or family care and maintenance, or
substantial loss of payments received under a pension or retirement
plan or a government benefits program, or assets essential to the
health or welfare of the senior citizen or disabled person.

(3) Whether one or more senior citizens or disabled persons are
substantially more vulnerable than other members of the public to
the defendant’s conduct because of age, poor health or infirmity,
impaired understanding, restricted mobility, or disability, and
actually suffered substantial physical, emotional, or economic
damage resulting from the defendant’s conduct.

(d) A court of competent jurisdiction hearing an action pursuant
to this section may make orders and judgments as necessary to
restore to a senior citizen or disabled person money or property,
real or personal, that may have been acquired by means of a
violation of Section 2944.7.

SEC. 3.  

Section 2944.10 is added to the Civil Code, to read:

2944.10.  

Any action to enforce any cause of action pursuant
to Section 2944.7 or 2944.8 shall be commenced within four years
after the cause of action accrued. No cause of action barred under
existing law on the effective date of this section shall be revived
by its enactment.

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SEC. 4.  

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.

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