BILL ANALYSIS �
AB 1730
Page 1
Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 1730 (Wagner) - As Introduced: February 14, 2014
SUBJECT : MORTGAGE LOAN MODIFICATION
KEY ISSUE : SHOULD THE EXISTING CIVIL AND CRIMINAL PENALTIES FOR
VIOLATING THE PROHIIBITIONS AGAINST ACCEPTING ADVANCE FEES FOR
LOAN MODIFICATION SERVICES BE ENHANCED?
SYNOPSIS
This bill would enhance civil and criminal penalties for
violations of the existing prohibitions with respect to advance
fees for loan modification services. Under the bill, the
potential civil penalty would increase from $2500 to $20,000 per
violation in an action by a public prosecutor, and the current
misdemeanor penalty might in the discretion of the prosecutor be
chargeable as a felony - that is, the bill would create a
"wobbler." In addition, the bill would allow an action for
recovery of a further civil penalty of $2500 if the subject of
the wrongdoing was a senior or person with a disability. The
bill is supported by the District Attorneys Association. There
is no known opposition. Due to time constraints, amendments
accepted by the author will be taken in the Banking & Finance
Committee. This analysis reflects these amendments.
SUMMARY : Enhances potential civil and criminal penalties for
violation of existing prohibitions regarding mortgage loan
modification fees. Specifically, this bill :
1)Provides that a violation of Civil Code section 2944.7
regarding advance fees for mortgage loan modification and
related services may be punished by imprisonment pursuant to
subdivision (h) of Section 1170 of the Penal Code, which
generally provides that a felony punishable pursuant to this
subdivision shall be punishable by imprisonment in a county
jail for the term described in the underlying offense.
2)Provides that a violation of section 2944.7 shall be subject
to a civil penalty up to $20,000 per violation in an action by
a public prosecutor pursuant to existing authority under the
Unfair Competition Law.
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3)Provides that a violation of section 2944.7 shall be subject
to an additional civil penalty of up to $2500 in any action
where the subject of the violation was a person over the age
of 65 or a person with a disability.
4)Provides that 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.
EXISTING LAW :
1)Provides that 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.
(Civil Code section 2944.7(a).)
2)Provides that a violation of the foregoing by a natural person
is punishable by a fine not exceeding $10,000, by imprisonment
in the county jail for a term not to exceed one year, or by
both that fine and imprisonment, or if by a business entity,
the violation is punishable by a fine not exceeding $50,000.
These penalties are cumulative to any other remedies or
penalties provided by law. (Civil Code section 2944.7(b).)
3)Provides that any person who engages, has engaged, or proposes
to engage in unfair competition shall be liable for a civil
penalty not to exceed $2,500 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 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
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city having a full-time city prosecutor, in any court of
competent jurisdiction. (Business and Professions Code
section 17206.)
4)Provides that in addition to the civil penalty otherwise
available, a person who violates the loan modification fee
statute is liable for a civil penalty up to $2,500 for each
violation where the victim is over the age of 65 or a person
with a disability, which may be assessed and recovered in a
civil action by a public prosecutor. (Business and
Professions Code section 17206.1)
5)Provides that any person who intentionally violates any
injunction prohibiting unfair competition, including the
mortgage loan modification fee statute, issued pursuant to
Section 17203 shall be liable for a civil penalty not to
exceed $6,000 for each violation. (Business and Professions
Code section 17207.)
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
COMMENTS : According to the author, "Mortgage loan modification
fraud is a huge issue, especially amongst unwitting senior
citizens. Due to the deflation of real property values, either
(1) the liens securing the promissory note(s) for principal
residential property exceeds the value of the parcel or (2) the
loans which were made have resulted in mortgage payments beyond
the ability of the property owners to pay. As a consequence,
individuals desperate to save their homes have paid what little
money they may still have in advance to individuals who claim to
be able to save the home by obtaining a loan modification.
These individuals then take the money, abandon the homeowners,
and allow the property to be sold at foreclosure."
Under this bill, prosecutors would have the discretion to charge
mortgage loan modification violations as a felony - rather than
simply a misdemeanor, as permitted under existing. In other
words, the existing crime would be made a "wobbler." In
addition, wrongdoers would be subject to an additional civil
penalty in an action by public prosecutors, as well as an
enhanced civil penalty in any action involving seniors and
persons with disabilities.
The bill is supported by the California District Attorneys
Association.
AB 1730
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Author's Narrowing Amendments. In order to focus the bill on
the remedies not currently available to public prosecutors under
existing law, the author proposes judiciously to revise the bill
as indicated in the attached mock-up. In order to expedite
consideration of the bill, these amendments will be taken in the
Banking and Finance Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California District Attorneys Association
Opposition
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334