BILL ANALYSIS �
AB 1730
Page 1
Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
AB 1730 (Wagner) - As Amended: April 23, 2014
SUBJECT : Mortgage loan modification.
SUMMARY : Enhances civil and criminal penalties for violations
with respect to advance fees for loan modification services.
Specifically, this bill :
1)Provides that a violation of existing prohibitions concerning
advance fees for loan modification services could be punished
as a felony, and as a civil violation resulting in a civil
penalty of $20,000 for each violation brought by a public
prosecutor.
2)Specifies that if the victim is a disabled person, as defined
under existing law, or a senior citizen, then in addition to
the penalties in #1, the violator may be liable for a civil
penalty of $2,500 per violation. In determining whether to
impose a civil penalty if the victim is disable or a senior
citizen 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:
a) Whether the defendant knew or should have known that his
or her conduct was directed to one or more senior citizens
or disabled persons;
b) 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;
and,
c) 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
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health or infirmity, impaired understanding, restricted
mobility, or disability, and actually suffered substantial
physical, emotional, or economic damage resulting from the
defendant's conduct.
3)Allows a court to 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.
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 : Unknown
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 law. In other
words, the existing crime would be made a "wobbler." In
addition to the criminal penalties, a public prosecutor may
bring an action for a violation and recover a civil penalty of
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$20,000 per violation. In the event the victim is disabled or a
senior citizen the civil penalty would be $2,500 per violation
in addition to the $20,000 per violation penalty.
Existing law prohibits the acceptance of any advance fee in
assisting a homeowner with a loan modification. This provision
became law in 2009 and was a result of a cottage industry of
scammers preying on struggling homeowners. Many homeowners
faced the prospect of losing their home due to overpromised
results from loan modification scammers that would further
victimize the homeowner.
The foreclosure crisis has slowed since its heights, but
concerns still remain that these scams still exist. The changes
called for in AB 1730 will assist prosecutors with bringing
actions and hopefully demonstrate, short of guillotine in the
public square, that perpetrators of these scams will face
serious consequences.
REGISTERED SUPPORT / OPPOSITION :
Support
California District Attorneys Association (CDAA)
Taxpayers for Improving Public Safety (TiPS)
Opposition
None on file.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081