On October 12, 2009, the Governor signed the following eight mortgage related bills, making them the law in the State of California. Of the bills signed, CAMB opposed one and either supported or was neutral on the others:

AB 260 – Oppose unless amended
SB 94 - Support with amendments
SB 36 - Support
SB 239 – Neutral
AB 329 – Support
SB 237 – Support
AB 957 – Neutral
AB 1160 - Neutral

In past years, we have been tremendously successful in working with the legislature to arrive at bills CAMB believed were generally beneficial to California consumers. However, during this cycle, we believe the California consumer has suffered two losses:

AB 260
Although CAMB was instrumental in diluting this bill in its first appearance last year as AB1830, we were not able to keep it from being passed by both the Assembly and Senate. It was then vetoed by the Governor. This year the exact bill the Governor vetoed re-appeared as AB 260. Although it was tremendously mitigated from the form we saw at the beginning of last year, CAMB still took opposition for three reasons: 1) the wording of the proposed fiduciary duty, 2) poor anti-steering language for a new category of “higher priced loans,” and 3) private causes of action and attorney fee clauses.

In the 11th hour this year, the author dropped the attorney fee clause (#3), and apparently this was enough for the governor to change his opinion, and sign the bill. Although the bill’s impact will be primarily felt in this new category of higher priced loans (see below), CAMB believes consumer choice will be stifled and consumers will loose options.

SB 94
The portion of SB 94 CAMB would have liked to see amended was the absolute prohibition on loan modification upfront fees. CAMB believes participation by licensed DRE brokers who followed DRE rules and obtained advance fee agreements, and who charge reasonable fees for services rendered provided a service to a segment of consumers who may now go underserved.

Following is an overview of the pertinent California bills that will become law:

AB 260 Lieu (D-Torrance) - Higher-Priced Mortgage Loan Law
CAMB Position – Oppose unless amended
AB 260 codifies a fiduciary duty for all California licensed mortgage brokers.
AB 260 creates a new class of “higher priced” mortgages:
First mortgages 1.5 % above average rate for similar product
Second mortgages 3.5 % above
Includes owner occupied 1-4 units
Negative amortization not allowed, prepay penalties limited
No steering to higher cost loan within class than borrower qualifies for
Broker compensation cannot change based on source of compensation
Broker compensation cannot increase if pre-pay penalty

SB 94 Calderon (D-Montebello) – Loan Modification Law
CAMB Position - Support with amendments
Notwithstanding any other provision of 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 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.
It shall constitute cause for the imposition of discipline of an attorney within the meaning of this chapter for an attorney to engage in any conduct in violation of the above.

SB 36 Calderon (D-Montebello) - Adopt federal SAFE mortgage originator licensing regulation.
CAMB Position – Support
Adopts SAFE mortgage loan originator licensing structure as mandated by federal law.
Requires an annual Business Activity Report (BAR) and a federal National Mortgage Licensing Service (NMLS) report to be submitted by California brokers. Allows the commissioner to shrink the BAR to avoid redundancy with NMLS required reporting.
Creates review process for those whose licenses are revoked or denied.

SB 239 Pavley (D-Santa Monica) - Creates a separate fraud designation for fraud in connection with a mortgage application.
CAMB Position - Neutral
Mortgage fraud carries a penalty of imprisonment in the state prison or in a county jail up to one year.
The new law also provides law enforcement with the necessary tools to make it easier to obtain a search warrant for real estate records and documents believed to contain evidence of mortgage fraud.

AB 329 Feuer (D-Los Angeles) - Establish the Reverse Mortgage Elder Protection Act of 2009.
CAMB Position - Support
Prohibits cross-selling annuities and other financial products when offering a reverse mortgage.
Requires a list of 10 counseling agencies be provided.
Requires originators to review a checklist of potential short- and long-term implications that might occur after taking out a reverse mortgage.

SB 237 Calderon (D-Montebello) - This law will create a registration program for appraisal management companies (AMCs) and prohibits any person or entity from acting in the capacity of an AMC without first obtaining a certificate for registration from the Office of Real Estate Appraisers.
CAMB Position - Support

AB 957 Galgiani (D-Livingston) - This law will mandate that buyers of foreclosed homes would have the choice of using a local escrow office to handle the transaction. It also prohibits a seller of residential property from requiring the buyer to use an escrow service company or purchase title insurance chosen by the seller and would also prohibit a seller of residential property from, without good cause, disapproving the use of a title or escrow company chosen by the buyer.
CAMB Position - Neutral

AB 1160 Fong (D-Cupertino) – This law will require mortgage loan documents to be translated into the language the verbal negotiations were conducted. Mortgage documents would be translated into Spanish, Chinese, Tagalong, Korean, and Vietnamese languages.
CAMB Position – Neutral

If you would like more information about these issues or about CAMB’s government affairs efforts, please contact the CAMB Government Affairs team at (916) 448-8236 or at governmentaffairs@cambweb.org.