SACRAMENTO /California Newswire/ — To help prevent California homeowners and homebuyers from being negatively impacted by the fraudulent mortgage practices that have arisen in the aftermath of the national foreclosure crisis, Governor Arnold Schwarzenegger has signed legislation to increase protections for consumers in the lending market and provide law enforcement with more tools to crack down on deceitful mortgage practices. These bills aim to strengthen California’s reverse mortgage laws by providing senior homeowners with greater consumer protections when considering reverse mortgage agreements, make it a felony to commit fraud in connection with a mortgage application and promote responsibility and accountability in the real estate market.
“Fraudulent mortgage practices have become more prevalent as a result of the national foreclosure crisis that negatively impacted California’s housing market and economy,” said Governor Arnold Schwarzenegger. “This legislation helps crack down on abusive lending practices by giving law enforcement the tools to effectively investigate mortgage fraud crimes and provides Californians with greater consumer protections to promote homeownership in a safe and accountable environment.”
The Governor signed the following bills:
AB260 by Assemblymember Ted Lieu (D-Torrance) will enact the Higher-Priced Mortgage Loan Law which would codify a fiduciary duty for mortgage brokers, authorize California’s mortgage regulators to apply specified federal mortgage lending laws and regulations to their licensees and cap prepayment penalties and yield spread premiums on higher-priced loans.
SB 36 by Senator Ron Calderon (D-Montebello) to establish standardized licensing requirements for all individual loan originators who offer or negotiate residential mortgages.
SB 239 by Senator Fran Pavley (D-Santa Monica) to make it a felony to commit fraud in connection with a mortgage application. This bill makes individuals who engage in mortgage fraud guilty of a public offense punishable by imprisonment in the state prison or in a county jail up to one year. The bill 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 by Assemblymember Mike Feuer (D-Los Angeles) to establish the Reverse Mortgage Elder Protection Act of 2009 to provide senior homeowners with greater consumer protections to ensure that they are fully informed about the consequences of entering into a reverse mortgage agreement. Specifically, the bill requires lenders to provide prospective borrowers with a clear and informative written disclosure statement and a written checklist pertaining to the risks and suitability of a reverse mortgage, prior to borrower attending loan counseling.
SB 237 by Senator Ron Calderon (D-Montebello) to 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.
AB 957 by Assemblymember Cathleen Galgiani (D-Livingston) to 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.
AB 1160 by Assemblymember Paul Fong (D-Cupertino) to 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.
To protect Californians from abusive lending processes, promote homeownership and establish a more accountable and responsible real estate market, the Governor has taken the following actions:
· In 2008, the Governor signed a package of legislation to increase accountability in the real estate market and help Californians maintain homeownership in the aftermath of the foreclosure crisis. Additionally, he signed legislation giving Californians one more tool to help them stay in their homes. SB 1137 by former Senate President pro Tem Don Perata (D-Oakland) requires lenders to contact homeowners and explore restructuring options before initiating the foreclosure process. The Governor also previously signed SB 1448 by former Senator Jack Scott (D-Pasadena) increasing penalties for acting or advertising as a real estate broker or salesperson without a license.
· In 2008, the Governor also announced an aggressive plan to bring down foreclosure rates by helping both borrowers and lenders modify existing home loans in ways that benefit both parties and prescribed changes to the way mortgages are brokered and originated to make lenders more accountable, guard against risky mortgages and prevent unsustainable bubbles from ever arising again.
Additionally last year, the Governor signed the following legislation to help homeowners preserve their homeownership, increase protections for Californians who plan to purchase homes and expand affordable housing opportunities:
•SB 223 by former Senator Mike Machado (D-Linden) makes it a crime for licensed appraisers to engage in any appraisal activity that is connected to the purchase, sale, transfer, financing or development of property if their compensation is impacted by the final price generated by the appraisal.
•SB 385 also by former Senator Machado permits state agencies involved with residential mortgage lending and brokering to adopt emergency measures and new policies to ensure that all mortgage lenders and brokers are subject to federal guidelines on non-traditional mortgages. This law impacts the Department of Financial Institutions (DFI), the Department of Corporations (DOC) and the Department of Real Estate (DRE).
•AB 929 by former Assemblymember Sharon Runner (R-Lancaster) increases the amount of affordable housing in California by raising the total debt that the California Housing Finance Agency (CalHFA) can carry by $2 billion. CalHFA issues bonds to finance housing for low and moderate-income families.