The Law Office of D. Joshua Staub has experience representing clients in real estate litigation, and transactions including land use, entitlements, acquisition, disposition, lease, and finance of real property.
SUMMARY OF RECENT CALIFORNIA LAWS AFFECTING REAL ESTATE TRANSACTIONS (2009-2010 LEGISLATIVE SESSION)
PROHIBITION OF ADVANCE FEES FOR LOAN MODIFICATION SERVICES (SB 94). Senate Bill 94, until January 1, 2013, prohibits 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 also provides that its 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.
SB 94 also requires 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. SB 94 makes a violation of that prohibition a misdemeanor or subject to specified fines, thereby creating a new crime and imposing a state-mandated local program. SB 94 provides that a real estate licensee who fails to comply with specified provisions related to mortgages, including the loan modification provisions, is subject to disciplinary action by the Real Estate Commissioner, and provides that a violation of the above by an attorney may also subject him or her to disciplinary action. SB 94 adds 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.
SB 94 redefines 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. SB 94 increases the maximum fine for using any advance fee agreement that the commissioner has ordered not to be used from $1,000 to $2,500.
Existing law provides that certain persons are exempt from regulation under certain provisions of the Real Estate Law dealing with real estate loans. SB 94 further exempts 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.
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. SB 94 instead specifies 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.
REO SELLERS CANNOT REQUIRE USE OF ESCROW AND TITLE INSURANCE PROVIDERS (Assembly Bill 957). Effective October 11, 2009, the purchaser of residential property (1 to 4 units), the Buyer’s Choice Act prohibits the seller of an REO property (mortgagee or beneficiary under a deed of trust) from requiring, directly or indirectly, a buyer to use a particular title company, escrow settlement or other real estate service provider. A seller’s agent that violates this law is subject to disciplinary action. A seller that violates this law is liable for three times the escrow and title insurance charges that the buyer incurred. The Buyer’s Choice Act expires on January 1, 2015.
Mortage Brokers, Mortgage Lenders, and Finance Lenders must participate in the Nationwide Mortgage Licensing System and Registry and meet other requirements (SB 36). The Real Estate Law, governs the licensing and regulation of real estate licensees, as defined, as administered by the Real Estate Commissioner. Existing law imposes specified requirements on real estate brokers who solicit borrowers or lenders or negotiate loans or collect payments or perform services for borrowers or lenders relative to loans secured by real property. A willful violation of the Real Estate Law is a crime.
SB 36 requires a real estate license endorsement from the commissioner to engage in the business of a mortgage loan originator, as defined. SB 36 establishes penalties if a real estate licensee fails to obtain a license endorsement before conducting business as a mortgage loan originator and authorizes the commissioner to suspend or revoke a real estate license for a failure to pay these penalties. SB 36 requires applicants for a license endorsement as a mortgage loan originator to furnish specified background information to the Nationwide Mortgage Licensing System and Registry. SB 36 establishes standards for issuance and renewal of a license endorsement to act as a mortgage loan originator, including satisfying specified educational requirements.
SB 36 requires these real estate licensees to annually submit business activities reports, and other reports that may be required, to the commissioner. SB 36 authorizes the commissioner to examine the affairs of real estate brokers, including those that obtain license endorsement as a mortgage loan originator. SB 36 requires the commissioner to report violations of the provisions regulating real estate brokers and mortgage loan originators to the Nationwide Mortgage Licensing System and Registry. SB 36 requires recipients of a license endorsement as a mortgage loan originator to use or disclose a specified unique identifier provided by the Nationwide Mortgage Licensing System and Registry in advertisements and solicitations of the mortgage loan originator.
Existing law provides for the licensure and regulation of finance lenders and brokers and residential mortgage lenders and servicers by the Department of Corporations. A willful violation of the laws regulating these licensees is a crime.
SB 36 requires the licensure and regulation of mortgage loan originators, as defined, under the California Finance Lenders Law and the California Residential Mortgage Lending Act. SB 36 requires mortgage loan originators to also be licensed and registered through the Nationwide Mortgage Licensing System and Registry. SB 36 requires applicants for licensure as a mortgage loan originator to furnish specified background information to the Nationwide Mortgage Licensing System and Registry and requires applicants for licensure or license renewal to satisfy certain requirements, including educational requirements. SB 36 requires finance lenders and brokers, and residential mortgage lenders and servicers, that employ a mortgage loan originator to maintain a minimum net worth of $250,000. SB 36 authorizes the commissioner to require finance lenders and brokers, and residential mortgage lenders and servicers, that employ a mortgage loan originator to submit reports of condition to the Nationwide Mortgage Licensing System and Registry. SB 36 prescribes prohibited acts and authorizes various types of disciplinary action to be taken against mortgage loan originators and require the commission to report violations of these provisions to the Nationwide Mortgage Licensing System and Registry. SB 36 authorizes the commissioner to establish relationships or contracts with the Nationwide Mortgage Licensing System and Registry, as specified, for the purposes of implementing these provisions of the bill. SB 36 requires a mortgage loan originator to use or disclose a specified unique identifier on all mortgage loan applications, solicitations, or advertisements.
SB 36 provides that no person is required to have a mortgage loan originator license under the California Finance Lenders Law or the California Residential Mortgage Lending Act before July 1, 2010, nor a mortgage loan originator license endorsement under the Real Estate Law, as set forth in the bill, before December 1, 2010.
TERMINATION OF RESIDENTIAL LEASES (TENANCIES) (SB 290). An owner of a residential dwelling shall give notice at least 60 days prior to the proposed date of termination. A tenant giving notice pursuant to this section shall give notice for a period at least as long as the term of the periodic tenancy prior to the proposed date of termination. A landlord must give 30 days of notice to terminate a tenancy if the tenant has resided there for less than one year. Alternatively, a landlord must give 30 days of notice to terminate a tenancy if the landlord has [1] contracted to sell the dwelling or unit to a bona fide purchaser for value; [2] established an escrow with a licensed escrow agent, as defined in Sections 17004 and 17200 of the Financial Code, or a licensed real estate broker, as defined in Section 10131 of the Business and Professions Code; [3] The purchaser is a natural person or persons; [4] The notice is given no more than 120 days after the escrow has been established; [5] Notice was not previously given to the tenant pursuant to this section; [6] The purchaser in good faith intends to reside in the property for at least one full year after the termination of the tenancy. The notices required by this section shall be given in the manner prescribed in Section 1162 of the Code of Civil Procedure or by sending a copy by certified or registered mail
HOMESTEAD EXEMPTION INCREASES (AB 1046). Effective on January 1, 2010, the homestead exemption protecting a homeowner's equity from judgment creditors will be as follows: $75,000 for individuals (up from $50,000), $100,000 for married couples or family units (up from $75,000), and $175,000 for persons over 65 years, disabled, or over 55 years with limited income as specified (up from $150,000).
Mortgage Fraud a CALIFORNIA Crime (SB 239): Effective January 1, 2010, anyone making a misrepresentation or omission during the mortgage lending process with the intent of influencing that process will be guilty of mortgage fraud under California law. Such conduct will constitute a crime punishable by one-year imprisonment in the state prison or in a county jail for not more than one year. Federal law currently provides that loan fraud against a federally-insured lender is a crime punishable by a $1 million fine, plus one-year imprisonment (18 U.S.C. section 1014).
MORTGAGE BROKERS ARE THE BORROWER’S FIDUCIARIES (AB 260).The bill provides that a mortgage broker, as defined, providing mortgage brokerage services, as defined, to a borrower is the fiduciary of the borrower, and any violation of the broker's fiduciary duties is a violation of the mortgage broker's licensing law and specified civil penalty and liability provisions. This fiduciary duty includes a requirement that the mortgage broker place the economic interest of the borrower ahead of his or her own economic interest.
FEDERAL LENDING LAW VIOLATIONS CONSTITUTE STATE VIOLATIONS (AB 260). A violation of specified federal lending laws or regulations by real estate brokers, commercial banks, credit unions, finance lenders, and residential mortgage lenders is also a violation of California licensing law of the licensee.
HIGHER PRICED MORTGAGES DEFINED AND REGULATED (AB 260). AB 260 establishes "higher-priced mortgage loans," as defined, as a new category of regulated loans. The bill limits prepayment penalties and prohibit provisions for negative amortization. The bill prohibits a licensed person, as defined, from making false, deceptive, or misleading statements or representations in connection with higher-priced mortgage loans. The bill prohibits a mortgage broker, as defined, who arranges higher-priced mortgage loans with prepayment penalties from receiving a compensation that exceeds certain amounts. The bill provides that a violation of the provisions regulating higher-priced mortgage loans by a licensed person is also a violation of the person's licensing law. The bill authorizes a licensing agency or the Attorney General to enforce the provisions regulating higher-priced mortgage loans. The bill authorizes civil penalties in an amount up to $10,000 against a licensed person who willfully and knowingly violates the provisions regulating higher-priced mortgage loans, and nullifies prepayment penalties or yield spread premiums that violate these provisions. The bill establishes specified duties for mortgage brokers performing mortgage brokerage services for higher-priced mortgage loans. The bill's provisions apply to higher-priced mortgage loans originated on or after July 1, 2010.
WATER CONSERVATION (SB 407). SB 407 establishes requirements for residential and commercial real property built and available for use on or before January 1, 1994, for replacing plumbing fixtures that are not water conserving, as defined as noncompliant plumbing fixtures. On and after January 1, 2014, SB 407 requires, for all building alterations or improvements to single-family residential real property, as defined, that water-conserving plumbing fixtures replace other noncompliant plumbing fixtures as a condition for issuance of a certificate of final completion and occupancy or final permit approval by the local building department. By creating a new duty to inspect for local officials, this bill would impose a state-mandated local program. SB 407 requires, on or before January 1, 2017, that all noncompliant plumbing fixtures in any single-family residential real property shall be replaced by the property owner with water-conserving plumbing fixtures.
SB 407 requires, on or before January 1, 2019, that all noncompliant plumbing fixtures in multifamily residential real property and commercial real property, as defined, be replaced with water-conserving plumbing fixtures. SB 407 requires, on and after January 1, 2014, for specified building alterations or improvements to multifamily residential real property and commercial real property, that water-conserving plumbing fixtures replace other noncompliant plumbing fixtures as a condition for issuance of a certificate of final completion and occupancy or final permit approval by the local building department.
SB 407 requires, on and after January 1, 2017, that a seller or transferor of single-family residential real property, multifamily residential real property, or commercial real property disclose to a purchaser or transferee, in writing, specified requirements for replacing plumbing fixtures, and whether the real property includes noncompliant plumbing. SB 407 requires, on and after January 1, 2017, a seller of certain residential real property to make a specified disclosure in this regard. SB 407 permits an owner or the owner's agent to enter rental property for the purpose of installing, repairing, testing, and maintaining water-conserving plumbing fixtures, as specified, and requires, on and after January 1, 2019, that the water-conserving plumbing fixtures prescribed by the bill operate at the manufacturer's rated water consumption at the time that a tenant takes possession, as specified. SB 407 provides that the application of its requirements may be postponed up to one year, as specified, with respect to a building for which a demolition permit has been issued. SB 407 permits a city or county or retail water supplier to enact a local ordinance or policy that promotes compliance with the bill's provisions or that will result in greater water savings than otherwise provided by the bill. SB 407 provides that any city, county, or city and county that has adopted an ordinance requiring retrofit of noncompliant plumbing fixtures prior to July 1, 2009, is exempt from its requirements so long as the ordinance remains in effect.
MOBILEHOME PARKS CANNOT REQUIRE USE OF SPECIFIC BROKERS (SB 804). SB 804 prohibits the management from requiring a homeowner, who is replacing a mobilehome or manufactured home on a space in the park, in which he or she resides, to use a specific broker, dealer, or other person as an agent in the purchase or installation of the replacement home.