California Loan Modification Laws

California Loan Modification Laws

CALIFORNIA Loan Modification Laws

An act to amend Sections 10026, 10085, 10133.1, and 10177 of, to
add Section 10147.6 to, and to add and repeal Sections 6106.3 and
10085.6 of, the Business and Professions Code, to amend Section 2945.1
of, to add Section 2944.6 to, and to add and repeal Section 2944.7 of,
the Civil Code, and to amend Section 22161 of the Financial Code,
relating to mortgage loans, and declaring the urgency thereof, to take
effect immediately.

legislative counsel’s digest

SB 94, as amended, Calderon. Mortgage loans.

(1) The Real Estate Law provides for the regulation and licensure of real estate brokers and real estate salespersons by the Real Estate Commissioner. The California Finance Lenders Law provides for the regulation and licensure of finance lenders and brokers by the Commissioner of Corporations. The California Residential Mortgage Lending Act provides for the regulation and licensure of residential mortgage lenders and servicers by the Commissioner of Corporations.

The Banking Law provides for the regulation of state commercial banks by the Commissioner of Financial Institutions. The California Credit Union Law provides for the regulation of state credit unions by the Commissioner of Financial Institutions. A willful violation of specified provisions of those acts is a crime.

This bill would, until January 1, 2013, prohibit any person, including a real estate licensee, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform residential mortgage loan modifications or other forms of mortgage loan forbearance, as
specified, for a fee or other compensation paid by a borrower, from demanding or receiving any pre performance compensation, as specified, requiring any security as collateral for final compensation, or taking a power of attorney from a borrower, and would make a violation of that
prohibition a misdemeanor or subject to specified fines. By creating a new crime, the bill would impose a state-mandated local program. This bill would also require any person, including a real estate licensee, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform residential mortgage loan modifications or other forms of mortgage loan forbearance, as specified, for a fee or other compensation paid by a borrower, to provide a
specified 14-point bold type statement regarding loan modification fees. The bill would make a violation of that prohibition a misdemeanor or subject to specified fines, thereby creating a new crime and imposing a state-mandated local program. The bill would also provide that a real
estate licensee who fails to comply with specified provisions related to mortgages, including the loan modification provisions, would be subject to disciplinary action by the Real Estate Commissioner, and would provide that a violation of the above by an attorney may also subject
him or her to disciplinary action. The bill would add to the California Finance Lenders Law a prohibition on making a materially false or misleading statement or representation to a borrower about the terms or conditions of that borrower’s loan, when making or brokering a loan.
Because a willful violation of these provisions by certain licensees may be punished as crimes under their respective licensing laws, this bill would impose a state-mandated local program.

The bill would also provide that these provisions do not apply to actions taken by a person who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, including, but not limited to, 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.

(2) The Real Estate Law provides for the regulation and licensure of real estate brokers and salespersons by the Real Estate Commissioner. Existing As used in the Real Estate Law, the term “advance fee” is defined as a fee that is claimed, demanded, charged, received, collected,
or contracted from a principal for a listing, advertisement, or offer to sell or lease property, and as specified. This bill would redefine the term “advance fee” to mean a fee, regardless of the form, that is claimed, demanded, charged, received, or collected by a licensee from a principal before fully completing each and every service the licensee contracted to perform, or represented
would be performed, as specified.

(3) Existing law provides that certain persons are exempt from regulation under certain provisions of the Real Estate Law dealing with real estate loans. This bill would further exempt from those provisions specified organizations that have been approved by the United States Department
of Housing and Urban Development to provide counseling services, when those services are provided at no cost and in connection with residential mortgage loan modifications.

(4) Existing law defines a foreclosure consultant as a person who offers, for compensation, to perform specified services for a homeowner relating to a foreclosure sale, and imposes regulations upon foreclosure consultants when servicing a foreclosure sale, as specified. Existing law excludes specified persons from the definition of a foreclosure consultant, including a person licensed under the Real Estate Law when to make loans as a finance lender, subject to the authority of the Commissioner of Corporations to terminate this exclusion, as specified. This bill would instead specify that a real estate licensee and a finance
lender are excluded from the definition of a foreclosure consultant when acting under the authority of that person’s license, and would delete the commissioner’s authority to terminate the finance lender’s exclusion. The bill would also delete obsolete statutory references from those
provisions.

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

(6) This bill would declare that it is to take effect immediately as an urgency statute.