BILL NUMBER: SB 94 CHAPTERED
BILL TEXT
CHAPTER 630
FILED WITH SECRETARY OF STATE OCTOBER 11, 2009
APPROVED BY GOVERNOR OCTOBER 11, 2009
PASSED THE SENATE SEPTEMBER 8, 2009
PASSED THE ASSEMBLY SEPTEMBER 2, 2009
AMENDED IN ASSEMBLY AUGUST 31, 2009
AMENDED IN ASSEMBLY JULY 23, 2009
AMENDED IN ASSEMBLY JULY 15, 2009
AMENDED IN ASSEMBLY JUNE 11, 2009
AMENDED IN SENATE APRIL 28, 2009
AMENDED IN SENATE APRIL 13, 2009
AMENDED IN SENATE MARCH 23, 2009
AMENDED IN SENATE MARCH 9, 2009
INTRODUCED BY Senators Calderon, Corbett, and Steinberg
(Principal coauthor: Senator Correa)
(Coauthor: Senator Florez)
(Coauthor: Assembly Member Lieu)
JANUARY 22, 2009
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, 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
preperformance 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 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 for a
nondelinquent loan.
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.
(2) The Real Estate Law provides for the regulation and licensure
of real estate brokers and salespersons by the Real Estate
Commissioner. 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.
Existing law authorizes the commissioner to require that
materials used in obtaining advance fee agreements, as defined, be
submitted to him or her at least 10 calendar days before the
materials are used and makes it a misdemeanor, punishable by a fine
not exceeding $1,000, or imprisonment in the county jail not
exceeding 6 months, or both, to use any agreement that the
commissioner has ordered not to be used.
This bill would increase the maximum fine for using any advance
fee agreement that the commissioner has ordered not to be used from
$1,000 to $2,500.
(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 making a direct loan or engaging in
specified acts, and a person licensed 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.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6106.3 is added to the Business and Professions
Code, to read:
6106.3. (a) 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 Section 2944.6 or
2944.7 of the Civil Code.
(b) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 2. Section 6106.3 is added to the Business and Professions
Code, to read:
6106.3. (a) 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 Section 2944.6 of
the Civil Code.
(b) This section shall become operative on January 1, 2013.
SEC. 3. Section 10026 of the Business and Professions Code is
amended to read:
10026. The term "advance fee" as used in this part is a fee,
regardless of the form, 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. Neither an advance fee nor the services to be
performed shall be separated or divided into components for the
purpose of avoiding the application of this section. The term applies
to a fee for a listing, advertisement or offer to sell or lease
property, other than in a newspaper of general circulation, issued
primarily for the purpose of promoting the sale or lease of business
opportunities or real estate or for referral to real estate brokers
or salesmen, or soliciting borrowers or lenders for, or to negotiate
loans on, business opportunities or real estate. As used in this
section, "advance fee" does not include "security" as that term is
used in Section 1950.5 of the Civil Code, or a "screening fee" as
that term is used in Section 1950.6 of the Civil Code. This section
does not exempt from regulation the charging or collecting of a fee
under Section 1950.5 or 1950.6 of the Civil Code, but instead
regulates fees that are not subject to those sections.
SEC. 4. Section 10085 of the Business and Professions Code is
amended to read:
10085. The commissioner may require that any or all materials
used in obtaining advance fee agreements, including but not limited
to the contract forms, letters or cards used to solicit prospective
sellers, and radio and television advertising be submitted to him or
her at least 10 calendar days before they are used. Should the
commissioner determine that any such matter, when used alone or with
any other matter, would tend to mislead he or she may, within 10
calendar days of the date he or she receives same, order that it not
be used, disseminated, nor published. Any person or entity using,
disseminating, or publishing any matter which the commissioner has
ordered, pursuant to this section, not to be used, published, or
disseminated shall be guilty of a misdemeanor punishable by a fine
not exceeding two thousand five hundred dollars ($2,500) or by
imprisonment in the county jail not exceeding six months, or both,
for each such use, dissemination, or publication.
The commissioner may determine the form of the advance fee
agreements, and all material used in soliciting prospective owners
and sellers shall be used in the form and manner which he or she
determines is necessary to carry out the purposes and intent of this
part.
Any violation of any of the provisions of this part or of the
rules, regulations, orders or requirements of the commissioner
thereunder shall constitute grounds for disciplinary action against a
licensee, or for proceedings under Section 10081 of this code, or
both. These sanctions are in addition to the criminal proceedings
hereinbefore provided.
SEC. 5. Section 10085.6 is added to the Business and Professions
Code, to read:
10085.6. (a) Notwithstanding any other provision of law, it shall
be unlawful for any licensee 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 licensee has fully performed each and every service
the licensee contracted to perform or represented that he, she, or it
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.
(b) A violation of this section by a natural person who is a
licensee is a public offense punishable by a fine not exceeding ten
thousand dollars ($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 corporation, the violation is punishable by a fine not
exceeding fifty thousand dollars ($50,000). These penalties are
cumulative to any other remedies or penalties provided by law.
(c) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
(d) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 6. Section 10133.1 of the Business and Professions Code is
amended to read:
10133.1. (a) Subdivisions (d) and (e) of Section 10131, Section
10131.1, Article 5 (commencing with Section 10230), and Article 7
(commencing with Section 10240) of this code and Section 1695.13 of
the Civil Code do not apply to any of the following:
(1) Any person or employee thereof doing business under any law of
this state, any other state, or the United States relating to banks,
trust companies, savings and loan associations, industrial loan
companies, pension trusts, credit unions, or insurance companies.
(2) Any nonprofit cooperative association organized under Chapter
1 (commencing with Section 54001) of Division 20 of the Food and
Agricultural Code, in loaning or advancing money in connection with
any activity mentioned therein.
(3) Any corporation, association, syndicate, joint stock company,
or partnership engaged exclusively in the business of marketing
agricultural, horticultural, viticultural, dairy, livestock, poultry,
or bee products on a cooperative nonprofit basis, in loaning or
advancing money to the members thereof or in connection with any
business of that type.
(4) Any corporation securing money or credit from any federal
intermediate credit bank organized and existing pursuant to the
provisions of an act of Congress entitled the "Agricultural Credits
Act of 1923," in loaning or advancing money or credit so secured.
(5) Any person licensed to practice law in this state, not
actively and principally engaged in the business of negotiating loans
secured by real property, when that person renders services in the
course of his or her practice as an attorney at law, and the
disbursements of that person, whether paid by the borrower or other
person, are not charges or costs and expenses regulated by or subject
to the limitations of Article 7 (commencing with Section 10240), and
the fees and disbursements are not shared, directly or indirectly,
with the person negotiating the loan or the lender.
(6) Any person licensed as a finance lender when acting under the
authority of that license.
(7) Any cemetery authority as defined by Section 7018 of the
Health and Safety Code, that is authorized to do business in this
state or its authorized agent.
(8) Any person authorized in writing by a savings institution to
act as an agent of that institution, as authorized by Section 6520 of
the Financial Code or comparable authority of the Office of Thrift
Supervision of the United States Department of the Treasury by its
regulations, when acting under the authority of that written
authorization.
(9) Any person who is licensed as a securities broker or
securities dealer under any law of this state, or of the United
States, or any employee, officer, or agent of that person, if that
person, employee, officer, or agent is acting within the scope of
authority granted by that license in connection with a transaction
involving the offer, sale, purchase, or exchange of a security
representing an ownership interest in a pool of promissory notes
secured directly or indirectly by liens on real property, which
transaction is subject to any law of this state or the United States
regulating the offer or sale of securities.
(10) Any person licensed as a residential mortgage lender or
servicer when acting under the authority of that license.
(11) Any organization that has been approved by the United States
Department of Housing and Urban Development pursuant to Section 106
(a)(1)(iii) of the federal Housing and Urban Development Act of 1968
(12 U.S.C. Sec. 1701x), to provide counseling services, or an
employee of such an organization, when those services are provided at
no cost to the borrower and are in connection with the modification
of the terms of a loan secured directly or collaterally by a lien on
residential real property containing four or fewer dwelling units.
(b) Persons described in paragraph (1), (2), or (3), as follows,
are exempt from the provisions of subdivisions (d) and (e) of Section
10131 or Section 10131.1 with respect to the collection of payments
or performance of services for lenders or on notes of owners in
connection with loans secured directly or collaterally by liens on
real property:
(1) The person makes collections on 10 or less of those loans, or
in amounts of forty thousand dollars ($40,000) or less, in any
calendar year.
(2) The person is a corporation licensed as an escrow agent under
Division 6 (commencing with Section 17000) of the Financial Code and
the payments are deposited and maintained in the escrow agent's trust
account.
(3) An employee of a real estate broker who is acting as the agent
of a person described in paragraph (4) of subdivision (b) of Section
10232.4.
For purposes of this subdivision, performance of services does not
include soliciting borrowers, lenders, or purchasers for, or
negotiating, loans secured directly or collaterally by a lien on real
property.
(c) (1) Subdivision (d) of Section 10131 does not apply to an
employee of a real estate broker who, on behalf of the broker,
assists the broker in meeting the broker's obligations to its
customers in residential mortgage loan transactions, as defined in
Section 50003 of the Financial Code, where the lender is an
institutional lender, as defined in Section 50003 of the Financial
Code, provided the employee does not participate in any negotiations
occurring between the principals.
(2) A broker shall exercise reasonable supervision and control
over the activities of nonlicensed employees acting under this
subdivision, and shall comply with Section 10163 for each location
where the nonlicensed persons are employed.
This section does not restrict the ability of the commissioner to
discipline a broker or corporate broker licensee or its designated
officer, or both the corporate broker licensee and its designated
officer, for misconduct of a nonlicensed employee acting under this
subdivision, or, pursuant to Section 10080, to adopt, amend, or
repeal rules or regulations governing the employment or supervision
of an employee who is a nonlicensed person as described in this
subdivision.
SEC. 7. Section 10147.6 is added to the Business and Professions
Code, to read:
10147.6. (a) Any licensee 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 form of compensation paid by the borrower, shall
provide the following to the borrower, as a separate statement, in
not less than 14-point bold type, prior to entering into any fee
agreement with the borrower:
It is not necessary to pay a third party to arrange for a loan
modification or other form of forbearance from your mortgage lender
or servicer. You may call your lender directly to ask for a change in
your loan terms. Nonprofit housing counseling agencies also offer
these and other forms of borrower assistance free of charge. A list
of nonprofit housing counseling agencies approved by the United
States Department of Housing and Urban Development (HUD) is available
from your local HUD office or by visiting www.hud.gov.
(b) If loan modification or other mortgage loan forbearance
services are offered or negotiated in one of the languages set forth
in Section 1632 of the Civil Code, a translated copy of the statement
in subdivision (a) shall be provided to the borrower in that foreign
language.
(c) A violation of this section by a natural person who is a
licensee is a public offense punishable by a fine not exceeding ten
thousand dollars ($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 corporation, the violation is punishable by a fine not
exceeding fifty thousand dollars ($50,000). These penalties are
cumulative to any other remedies or penalties provided by law.
(d) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
SEC. 8. Section 10177 of the Business and Professions Code is
amended to read:
10177. The commissioner may suspend or revoke the license of a
real estate licensee, or may deny the issuance of a license to an
applicant, who has done any of the following, or may suspend or
revoke the license of a corporation, or deny the issuance of a
license to a corporation, if an officer, director, or person owning
or controlling 10 percent or more of the corporation's stock has done
any of the following:
(a) Procured, or attempted to procure, a real estate license or
license renewal, for himself or herself or a salesperson, by fraud,
misrepresentation, or deceit, or by making a material misstatement of
fact in an application for a real estate license, license renewal,
or reinstatement.
(b) Entered a plea of guilty or nolo contendere to, or been found
guilty of, or been convicted of, a felony, or a crime substantially
related to the qualifications, functions, or duties of a real estate
licensee, and the time for appeal has elapsed or the judgment of
conviction has been affirmed on appeal, irrespective of an order
granting probation following that conviction, suspending the
imposition of sentence, or of a subsequent order under Section 1203.4
of the Penal Code allowing that licensee to withdraw his or her plea
of guilty and to enter a plea of not guilty, or dismissing the
accusation or information.
(c) Knowingly authorized, directed, connived at, or aided in the
publication, advertisement, distribution, or circulation of a
material false statement or representation concerning his or her
designation or certification of special education, credential, trade
organization membership, or business, or concerning a business
opportunity or a land or subdivision, as defined in Chapter 1
(commencing with Section 11000) of Part 2, offered for sale.
(d) Willfully disregarded or violated the Real Estate Law (Part 1
(commencing with Section 10000)) or Chapter 1 (commencing with
Section 11000) of Part 2 or the rules and regulations of the
commissioner for the administration and enforcement of the Real
Estate Law and Chapter 1 (commencing with Section 11000) of Part 2.
(e) Willfully used the term "realtor" or a trade name or insignia
of membership in a real estate organization of which the licensee is
not a member.
(f) Acted or conducted himself or herself in a manner that would
have warranted the denial of his or her application for a real estate
license, or has either had a license denied or had a license issued
by another agency of this state, another state, or the federal
government revoked or suspended for acts that, if done by a real
estate licensee, would be grounds for the suspension or revocation of
a California real estate license, if the action of denial,
revocation, or suspension by the other agency or entity was taken
only after giving the licensee or applicant fair notice of the
charges, an opportunity for a hearing, and other due process
protections comparable to the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340), Chapter 4 (commencing with
Section 11370), and Chapter 5 (commencing with Section 11500) of Part
1 of Division 3 of Title 2 of the Government Code), and only upon an
express finding of a violation of law by the agency or entity.
(g) Demonstrated negligence or incompetence in performing an act
for which he or she is required to hold a license.
(h) As a broker licensee, failed to exercise reasonable
supervision over the activities of his or her salespersons, or, as
the officer designated by a corporate broker licensee, failed to
exercise reasonable supervision and control of the activities of the
corporation for which a real estate license is required.
(i) Has used his or her employment by a governmental agency in a
capacity giving access to records, other than public records, in a
manner that violates the confidential nature of the records.
(j) Engaged in any other conduct, whether of the same or a
different character than specified in this section, which constitutes
fraud or dishonest dealing.
(k) Violated any of the terms, conditions, restrictions, and
limitations contained in an order granting a restricted license.
(l) (1) Solicited or induced the sale, lease, or listing for sale
or lease of residential property on the ground, wholly or in part, of
loss of value, increase in crime, or decline of the quality of the
schools due to the present or prospective entry into the neighborhood
of a person or persons having a characteristic listed in subdivision
(a) or (d) of Section 12955 of the Government Code, as those
characteristics are defined in Sections 12926 and 12926.1,
subdivision (m) and paragraph (1) of subdivision (p) of Section
12955, and Section 12955.2 of the Government Code.
(2) Notwithstanding paragraph (1), with respect to familial
status, paragraph (1) shall not be construed to apply to housing for
older persons, as defined in Section 12955.9 of the Government Code.
With respect to familial status, nothing in paragraph (1) shall be
construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and
799.5 of the Civil Code, relating to housing for senior citizens.
Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government
Code shall apply to paragraph (1).
(m) Violated the Franchise Investment Law (Division 5 (commencing
with Section 31000) of Title 4 of the Corporations Code) or
regulations of the Commissioner of Corporations pertaining thereto.
(n) Violated the Corporate Securities Law of 1968 (Division 1
(commencing with Section 25000) of Title 4 of the Corporations Code)
or the regulations of the Commissioner of Corporations pertaining
thereto.
(o) Failed to disclose to the buyer of real property, in a
transaction in which the licensee is an agent for the buyer, the
nature and extent of a licensee's direct or indirect ownership
interest in that real property. The direct or indirect ownership
interest in the property by a person related to the licensee by blood
or marriage, by an entity in which the licensee has an ownership
interest, or by any other person with whom the licensee has a special
relationship shall be disclosed to the buyer.
(p) Violated Article 6 (commencing with Section 10237).
(q) Violated or failed to comply with Chapter 2 (commencing with
Section 2920) of Title 14 of Part 4 of Division 3 of the Civil Code,
related to mortgages.
If a real estate broker that is a corporation has not done any of
the foregoing acts, either directly or through its employees, agents,
officers, directors, or persons owning or controlling 10 percent or
more of the corporation's stock, the commissioner may not deny the
issuance of a real estate license to, or suspend or revoke the real
estate license of, the corporation, provided that any offending
officer, director, or stockholder, who has done any of the foregoing
acts individually and not on behalf of the corporation, has been
completely disassociated from any affiliation or ownership in the
corporation.
SEC. 9. Section 2944.6 is added to the Civil Code, to read:
2944.6. (a) Notwithstanding any other provision of law, 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, shall provide the following to the
borrower, as a separate statement, in not less than 14-point bold
type, prior to entering into any fee agreement with the borrower:
It is not necessary to pay a third party to arrange for a loan
modification or other form of forbearance from your mortgage lender
or servicer. You may call your lender directly to ask for a change in
your loan terms. Nonprofit housing counseling agencies also offer
these and other forms of borrower assistance free of charge. A list
of nonprofit housing counseling agencies approved by the United
States Department of Housing and Urban Development (HUD) is available
from your local HUD office or by visiting www.hud.gov.
(b) If loan modification or other mortgage loan forbearance
services are offered or negotiated in one of the languages set forth
in Section 1632, a translated copy of the statement in subdivision
(a) shall be provided to the borrower in that foreign language.
(c) A violation of this section by a natural person is a public
offense punishable by a fine not exceeding ten thousand dollars
($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
fifty thousand dollars ($50,000). These penalties are cumulative to
any other remedies or penalties provided by law.
(d) This section does not apply to a person, or an agent acting on
that person's behalf, offering loan modification or other loan
forbearance services for a loan owned or serviced by that person.
(e) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
SEC. 10. Section 2944.7 is added to the Civil Code, to read:
2944.7. (a) 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 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.
(b) A violation of this section by a natural person is a public
offense punishable by a fine not exceeding ten thousand dollars
($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
fifty thousand dollars ($50,000). These penalties are cumulative to
any other remedies or penalties provided by law.
(c) Nothing in this section precludes a person, or an agent acting
on that person's behalf, who offers loan modification or other loan
forbearance services for a loan owned or serviced by that person,
from doing any of the following:
(1) 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 for a nondelinquent loan, after the
borrower reduces the unpaid principal balance of that loan for the
express purpose of lowering the monthly payment due under the terms
of the loan.
(2) Collecting principal, interest, or other charges under the
terms of a loan, after the loan is modified.
(3) Accepting payment from a federal agency in connection with the
federal Making Home Affordable Plan or other federal plan intended
to help borrowers refinance or modify their loans or otherwise avoid
foreclosures.
(d) This section shall apply only to mortgages and deeds of trust
secured by residential real property containing four or fewer
dwelling units.
(e) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 11. Section 2945.1 of the Civil Code is amended to read:
2945.1. The following definitions apply to this chapter:
(a) "Foreclosure consultant" means any person who makes any
solicitation, representation, or offer to any owner to perform for
compensation or who, for compensation, performs any service which the
person in any manner represents will in any manner do any of the
following:
(1) Stop or postpone the foreclosure sale.
(2) Obtain any forbearance from any beneficiary or mortgagee.
(3) Assist the owner to exercise the right of reinstatement
provided in Section 2924c.
(4) Obtain any extension of the period within which the owner may
reinstate his or her obligation.
(5) Obtain any waiver of an acceleration clause contained in any
promissory note or contract secured by a deed of trust or mortgage on
a residence in foreclosure or contained that deed of trust or
mortgage.
(6) Assist the owner to obtain a loan or advance of funds.
(7) Avoid or ameliorate the impairment of the owner's credit
resulting from the recording of a notice of default or the conduct of
a foreclosure sale.
(8) Save the owner's residence from foreclosure.
(9) Assist the owner in obtaining from the beneficiary, mortgagee,
trustee under a power of sale, or counsel for the beneficiary,
mortgagee, or trustee, the
remaining proceeds from the foreclosure sale of the owner's
residence.
(b) A foreclosure consultant does not include any of the
following:
(1) A person licensed to practice law in this state when the
person renders service in the course of his or her practice as an
attorney at law.
(2) A person licensed under Division 3 (commencing with Section
12000) of the Financial Code when the person is acting as a prorater
as defined therein.
(3) A person licensed under Part 1 (commencing with Section 10000)
of Division 4 of the Business and Professions Code when the person
is acting under the authority of that license, as described in
Section 10131 or 10131.1 of the Business and Professions Code.
(4) A person licensed under Chapter 1 (commencing with Section
5000) of Division 3 of the Business and Professions Code when the
person is acting in any capacity for which the person is licensed
under those provisions.
(5) A person or his or her authorized agent acting under the
express authority or written approval of the Department of Housing
and Urban Development or other department or agency of the United
States or this state to provide services.
(6) A person who holds or is owed an obligation secured by a lien
on any residence in foreclosure when the person performs services in
connection with this obligation or lien.
(7) Any person licensed to make loans pursuant to Division 9
(commencing with Section 22000) of the Financial Code when the person
is acting under the authority of that license.
(8) Any person or entity doing business under any law of this
state, or of the United States relating to banks, trust companies,
savings and loan associations, industrial loan companies, pension
trusts, credit unions, insurance companies, or any person or entity
authorized under the laws of this state to conduct a title or escrow
business, or a mortgagee which is a United States Department of
Housing and Urban Development approved mortgagee and any subsidiary
or affiliate of the above, and any agent or employee of the above
while engaged in the business of these persons or entities.
(9) A person licensed as a residential mortgage lender or servicer
pursuant to Division 20 (commencing with Section 50000) of the
Financial Code, when acting under the authority of that license.
(c) Notwithstanding subdivision (b), any person who provides
services pursuant to paragraph (9) of subdivision (a) is a
foreclosure consultant unless he or she is the owner's attorney.
(d) "Person" means any individual, partnership, corporation,
limited liability company, association or other group, however
organized.
(e) "Service" means and includes, but is not limited to, any of
the following:
(1) Debt, budget, or financial counseling of any type.
(2) Receiving money for the purpose of distributing it to
creditors in payment or partial payment of any obligation secured by
a lien on a residence in foreclosure.
(3) Contacting creditors on behalf of an owner of a residence in
foreclosure.
(4) Arranging or attempting to arrange for an extension of the
period within which the owner of a residence in foreclosure may cure
his or her default and reinstate his or her obligation pursuant to
Section 2924c.
(5) Arranging or attempting to arrange for any delay or
postponement of the time of sale of the residence in foreclosure.
(6) Advising the filing of any document or assisting in any manner
in the preparation of any document for filing with any bankruptcy
court.
(7) Giving any advice, explanation or instruction to an owner of a
residence in foreclosure which in any manner relates to the cure of
a default in or the reinstatement of an obligation secured by a lien
on the residence in foreclosure, the full satisfaction of that
obligation, or the postponement or avoidance of a sale of a residence
in foreclosure pursuant to a power of sale contained in any deed of
trust.
(8) Arranging or attempting to arrange for the payment by the
beneficiary, mortgagee, trustee under a power of sale, or counsel for
the beneficiary, mortgagee, or trustee, of the remaining proceeds to
which the owner is entitled from a foreclosure sale of the owner's
residence in foreclosure. Arranging or attempting to arrange for the
payment shall include any arrangement where the owner transfers or
assigns the right to the remaining proceeds of a foreclosure sale to
the foreclosure consultant or any person designated by the
foreclosure consultant, whether that transfer is effected by
agreement, assignment, deed, power of attorney, or assignment of
claim.
(f) "Residence in foreclosure" means a residence in foreclosure as
defined in Section 1695.1.
(g) "Owner" means a property owner as defined in Section 1695.1.
(h) "Contract" means any agreement, or any term thereof, between a
foreclosure consultant and an owner for the rendition of any service
as defined in subdivision (e).
SEC. 12. Section 22161 of the Financial Code is amended to read:
22161. (a) No person shall make 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 the
loan.
(b) No person shall advertise, print, display, publish,
distribute, or broadcast, or cause or permit to be advertised,
printed, displayed, published, distributed, or broadcast in any
manner, any statement or representation with regard to the business
subject to the provisions of this division, including the rates,
terms, or conditions for making or negotiating loans, that is false,
misleading, or deceptive, or that omits material information that is
necessary to make the statements not false, misleading, or deceptive,
or in the case of a licensee, that refers to the supervision of the
business by the state or any department or official of the state.
SEC. 13. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 14. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
With foreclosures at historic levels, foreclosure rescue scams are
pervasive and rampant. In order to prevent financially stressed
homeowners from being victimized and to provide them with needed
protection at the earliest possible time, it is necessary that this
act take effect immediately.