California Loan Modification Laws and Regulations
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.














