Bill Text: CA AB1091 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Finance and mortgage lenders.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2013-09-06 - Chaptered by Secretary of State - Chapter 243, Statutes of 2013. [AB1091 Detail]

Download: California-2013-AB1091-Amended.html

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BILL NUMBER: AB 1091	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 18, 2013

INTRODUCED BY   Assembly Member Skinner

                        FEBRUARY 22, 2013

    An act to amend Sections 2923.3 and 2924 of the Civil
Code, relating to mortgages.   An act to amend Section
22050 of, and to add Sections 22173, 22707.5, 22709.5, and 50501.5
to, the Financial Code, relating to lending. 


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1091, as amended, Skinner.  Mortgages: notice of
default.   Finance and mortgage lenders.  
   Existing law, the California Finance Lenders Law, provides for the
licensure and regulation of finance lenders and brokers. Existing
law, the California Residential Mortgage Lending Act, provides for
the regulation and licensure of residential mortgage lenders,
servicers, and originators. Existing law makes the Commissioner of
Corporations responsible for administering the law and act until July
1, 2013, and thereafter the Deputy Commissioner of Business
Oversight for the Division of Corporations will be responsible,
pursuant to the Governor's Reorganization Plan No. 2 of 2012. A
willful violation of the law or act is a crime.  
   Existing law exempts, among others, California business and
industrial development corporations, licensed pawnbrokers, and
persons making no more than one commercial loan in a 12-month period
from the California Finance Lenders Law.  
   This bill would exempt from the California Finance Lenders Law
California business and industrial development corporations when
acting under federal law or other state authority, licensed
pawnbrokers when acting under the authority of that license, and
persons making no more than 5 commercial loans in a 12-month period
as long as the loans are incidental to the business of the person
relying on the exemption. The bill would, among other things,
prohibit a finance lender or broker from knowingly misrepresenting
any material information regarding a transaction and committing any
act that constitutes fraud or dishonest dealings. By expanding the
definition of a crime, the bill would impose a state-mandated local
program.  
   Upon inspection, examination, or investigation, if the
commissioner has cause to believe that a licensee under the
California Finance Lenders Law or the California Residential Mortgage
Lending Act is violating the respective law applicable to the
licensee, or that any other person is violating those laws, the bill
would authorize the commissioner to issue a citation to the licensee
or person that may contain an order to desist and refrain and an
assessment of an administrative penalty not to exceed $2,500 per
violation. The bill would require the commissioner, if the
commissioner after investigation has reasonable grounds to believe
that a finance lender or broker is conducting business in an unsafe
or injurious manner, to issue a written order directing the
discontinuance of the unsafe or injurious practice.  
   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.  
   Existing law requires that, upon a breach of the obligation of a
mortgage or transfer of an interest in property, the mortgagee,
trustee, or beneficiary record a notice of default in the office of
the county recorder where the mortgaged or trust property is situated
and mail the notice of default to the mortgagor or trustor. Existing
law specifies other requirements and procedures for completion of a
foreclosure sale, including recording a notice of sale prior to
exercising a power of sale. Existing law requires, under a notice of
default, that a summary of mortgage terms be provided to the
mortgagor or trustor, as specified.  
   This bill would require a notice of default and the summary of
mortgage terms provided to a mortgagor or trustor to include a
statement that includes the telephone number of the Homeowners Home
Ownership and Opportunity for People Everywhere (HOPE) program or a
similar mortgage payment assistance program of the United States
Department of Treasury or Housing and Urban Development. 
   Vote: majority. Appropriation: no. Fiscal committee:  no
  yes  . State-mandated local program:  no
  yes  .


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 22050 of the  
Financial Code   is amended to read: 
   22050.  (a) This division does not apply to any person doing
business under any law of any state or of the United States relating
to banks, trust companies, savings and loan associations, insurance
premium finance agencies, credit unions, small business investment
companies, community advantage lenders, California business and
industrial development  corporations,  
corporations when acting under federal law  or  other state
authority, or  licensed  pawnbrokers.  
pawnbrokers when acting under the authority of that license. 
   "Community advantage lender" means an entity authorized by the
United States Small Business Administration to deliver community
advantage loans.
   (b) This division does not apply to a check casher who holds a
valid permit issued pursuant to Section 1789.37 of the Civil Code
when acting under the authority of that permit, and shall not apply
to a person holding a valid license issued pursuant to Section 23005
of the Financial Code when acting under the authority of that
license.
   (c) This division does not apply to a college or university making
a loan for the purpose of permitting a person to pursue a program or
course of study leading to a degree or certificate.
   (d) This division does not apply to a broker-dealer acting
pursuant to a certificate then in effect and issued pursuant to
Section 25211 of the Corporations Code.
   (e) This division does not apply to any person who makes no more
than  one loan   five loans in a 12-month
period  as long as that loan is a   , these
loans are  commercial  loan   loans 
as defined in Section  22502.   22502, and the
loans are incidental to the business of the person relying upon the
exemption. 
   (f) This division does not apply to any public corporation as
defined in Section 67510 of the Government Code, any public entity
other than the state as defined in Section 811.2 of the Government
Code, or any agency of any one or more of the foregoing, when making
any loan so long as the public corporation, public entity, or agency
of any one or more of the foregoing complies with all applicable
federal and state laws and regulations.
   SEC. 2.    Section 22173 is added to the  
Financial Code   , to read:  
   22173.  A licensee shall not do any of the following:
   (a) Commit an act in violation of Section 1695.13 of the Civil
Code.
   (b) Engage in any acts in violation of Section 17200 or 17500 of
the Business and Professions Code.
   (c) Knowingly misrepresent, circumvent, or conceal, through
subterfuge or device, any material aspect or information regarding a
transaction to which the licensee is a party.
   (d) Commit an act that constitutes fraud or dishonest dealings.

   SEC. 3.    Section 22707.5 is added to the  
Financial Code   , to read:  
   22707.5.  (a) If, upon inspection, examination, or investigation,
the commissioner has cause to believe that a licensee or person is
violating any provision of this division or any rule or order
thereunder, the commissioner may issue a citation to the licensee or
person in writing, describing with particularity the basis of the
citation. Each citation may contain an order to desist and refrain
and an assessment of an administrative penalty not to exceed two
thousand five hundred dollars ($2,500) per violation. All penalties
collected under this section shall be deposited in the State
Corporations Fund.
   (b) The sanctions authorized under this section shall be separate
from, and in addition to, all other administrative, civil, or
criminal remedies.
   (c) If, within 30 days from the receipt of the citation, the
licensee or person cited fails to notify the department that he or
she intends to request a hearing as described in subdivision (d), the
citation shall be deemed final.
   (d) Any hearing under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code.
   (e) After the exhaustion of the review procedures provided for in
this section, the commissioner may apply to the appropriate superior
court for a judgment in the amount of the administrative penalty and
an order compelling the cited licensee or person to comply with the
order of the commissioner. The application, which shall include a
certified copy of the final order of the commissioner, shall
constitute a sufficient showing to warrant the issuance of the
judgment and order. 
   SEC. 4.    Section 22709.5 is added to the  
Financial Code   , to read:  
   22709.5.  If, after investigation, the commissioner has reasonable
grounds to believe that any licensee is conducting business in an
unsafe or injurious manner, the commissioner shall, by written order
addressed to the licensee, direct the discontinuance of the unsafe or
injurious practices. The order shall be effective immediately, but
shall not become final except in accordance with the provisions of
Section 22717. 
   SEC. 5.    Section 50501.5 is added to the  
Financial Code   , to read:  
   50501.5.  (a) If, upon inspection, examination, or investigation,
the department has cause to believe that a licensee or person is
violating any provision of this division or any rule or order
thereunder, the commissioner may issue a citation to that person in
writing, describing with particularity the basis of the citation.
Each citation may contain an order to desist and refrain and an
assessment of an administrative penalty not to exceed two thousand
five hundred dollars ($2,500) per violation. All penalties collected
under this section shall be deposited in the State Corporations Fund.

   (b) The sanctions authorized under this section shall be separate
from, and in addition to, all other administrative, civil, or
criminal remedies.
   (c) If, within 30 days from the receipt of the citation, the
person cited fails to notify the department that the person intends
to request a hearing as described in subdivision (d), the citation
shall be deemed final.
   (d) Any hearing under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code.
   (e) After the exhaustion of the review procedures provided for in
this section, the commissioner may apply to the appropriate superior
court for a judgment in the amount of the administrative penalty and
an order compelling the cited person to comply with the order of the
commissioner. The application, which shall include a certified copy
of the final order of the commissioner, shall constitute a sufficient
showing to warrant the issuance of the judgment and order. 
   SEC. 6.    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.  
  SECTION 1.    Section 2923.3 of the Civil Code is
amended to read:
   2923.3.  (a) With respect to residential real property containing
no more than four dwelling units, a mortgagee, trustee, beneficiary,
or authorized agent shall provide to the mortgagor or trustor a copy
of the recorded notice of default with an attached separate summary
document of the notice of default in English and the languages
described in Section 1632, as set forth in subdivision (c), and a
copy of the recorded notice of sale with an attached separate summary
document of the information required to be contained in the notice
of sale in English and the languages described in Section 1632, as
set forth in subdivision (d). These summaries are not required to be
recorded or published. This subdivision shall become operative on
April 1, 2013, or 90 days following the issuance of the translations
by the Department of Corporations, pursuant to subdivision (b),
whichever is later.
   (b) (1) The Department of Corporations shall provide a standard
translation of the statement in paragraph (1) of subdivision (c), and
of the summary of the notice of default, as set forth in paragraph
(2) of subdivision (c) in the languages described in Section 1632.
   (2) The Department of Corporations shall provide a standard
translation of the statement in paragraph (1) of subdivision (d), and
of the summary of the notice of sale, as set forth in paragraph (2)
of subdivision (d).
   (3) The department shall make the translations described in
paragraphs (1) and (2) available without charge on its Internet Web
site. Any mortgagee, trustee, beneficiary, or authorized agent who
provides the department's translations in the manner prescribed by
this section shall be in compliance with this section.
   (c) (1) The following statement shall appear in the languages
described in Section 1632 at the beginning of the notice of default:

   NOTE: THERE IS A SUMMARY OF THE INFORMATION IN THIS DOCUMENT
ATTACHED.

   (2) The following summary of key information shall be attached to
the copy of the notice of default provided to the mortgagor or
trustor:


   SUMMARY OF KEY INFORMATION

   The attached notice of default was sent to  name of the
trustor], in relation to description of the property that secures the
mortgage or deed of trust in default]. This property may be sold to
satisfy your obligation and any other obligation secured by the deed
of trust or mortgage that is in default. Trustor] has, as described
in the notice of default, breached the mortgage or deed of trust on
the property described above.
   IMPORTANT NOTICE: IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU
ARE BEHIND IN YOUR PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT ACTION,
and you may have the legal right to bring your account in good
standing by paying all of your past due payments plus permitted costs
and expenses within the time permitted by law for reinstatement of
your account, which is normally five business days prior to the date
set for the sale of your property. No sale date may be set until
approximately 90 days from the date the attached notice of default
may be recorded (which date of recordation appears on the notice).
   This amount is ____________ as of ___(date)____________and will
increase until your account becomes current.
   While your property is in foreclosure, you still must pay other
obligations (such as insurance and taxes) required by your note and
deed of trust or mortgage. If you fail to make future payments on the
loan, pay taxes on the property, provide insurance on the property,
or pay other obligations as required in the note and deed of trust or
mortgage, the beneficiary or mortgagee may insist that you do so in
order to reinstate your account in good standing. In addition, the
beneficiary or mortgagee may require as a condition to reinstatement
that you provide reliable written evidence that you paid all senior
liens, property taxes, and hazard insurance premiums.
   Upon your written request, the beneficiary or mortgagee will give
you a written itemization of the entire amount you must pay. You may
not have to pay the entire unpaid portion of your account, even
though full payment was demanded, but you must pay all amounts in
default at the time payment is made. However, you and your
beneficiary or mortgagee may mutually agree in writing prior to the
time the notice of sale is posted (which may not be earlier than
three months after this notice of default is recorded) to, among
other things, (1) provide additional time in which to cure the
default by transfer of the property or otherwise; or (2) establish a
schedule of payments in order to cure your default; or both (1) and
(2).
   Following the expiration of the time period referred to in the
first paragraph of this notice, unless the obligation being
foreclosed upon or a separate written agreement between you and your
creditor permits a longer period, you have only the legal right to
stop the sale of your property by paying the entire amount demanded
by your creditor.
   To find out the amount you must pay, or to arrange for payment to
stop the foreclosure, or if your property is in foreclosure for any
other reason, contact:
   ____________________________________
   (Name of beneficiary or mortgagee)
   ____________________________________
   (Mailing address)
   ____________________________________
   (Telephone)
   If you have any questions, you should contact a lawyer or the
governmental agency which may have insured your loan.
   Notwithstanding the fact that your property is in foreclosure, you
may offer your property for sale, provided the sale is concluded
prior to the conclusion of the foreclosure.
   Remember, YOU MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT
ACTION.
   If you would like additional copies of this summary, you may
obtain them by calling insert telephone number].
   (d) (1) The following statement shall appear in the languages
described in Section 1632 at the beginning of the notice of sale:

   NOTE: THERE IS A SUMMARY OF THE INFORMATION IN THIS DOCUMENT
ATTACHED.

   (2) The following summary of key information shall be attached to
the copy of the notice of sale provided to the mortgagor or trustor:


   SUMMARY OF KEY INFORMATION

   The attached notice of sale was sent to trustor], in relation to
description of the property that secures the mortgage or deed of
trust in default].
   YOU ARE IN DEFAULT UNDER A (Deed of trust or mortgage) DATED ____.
UNLESS YOU TAKE ACTION TO PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A
PUBLIC SALE.
   IF YOU NEED AN EXPLANATION OF THE NATURE OF THE PROCEEDING AGAINST
YOU, YOU SHOULD CONTACT A LAWYER.
   The total amount due in the notice of sale is ____.
   Your property is scheduled to be sold on insert date and time of
sale] at insert location of sale].
   However, the sale date shown on the attached notice of sale may be
postponed one or more times by the mortgagee, beneficiary, trustee,
or a court, pursuant to Section 2924g of the California Civil Code.
The law requires that information about trustee sale postponements be
made available to you and to the public, as a courtesy to those not
present at the sale. If you wish to learn whether your sale date has
been postponed, and, if applicable, the rescheduled time and date for
the sale of this property, you may call telephone number for
information regarding the trustee's sale] or visit this Internet Web
site Internet Web site address for information regarding the sale of
this property], using the file number assigned to this case case file
number]. Information about postponements that are very short in
duration or that occur close in time to the scheduled sale may not
immediately be reflected in the telephone information or on the
Internet Web site. The best way to verify postponement information is
to attend the scheduled sale.
   If you would like additional copies of this summary, you may
obtain them by calling insert telephone number].
   (e) Failure to provide these summaries to the mortgagor or trustor
shall have the same effect as if the notice of default or notice of
sale were incomplete or not provided.
   (f) This section sets forth a requirement for translation in
languages other than English, and a document complying with the
provisions of this section may be recorded pursuant to subdivision
(b) of Section 27293 of the Government Code. A document that complies
with this section shall not be rejected for recordation on the
ground that some part of the document is in a language other than
English.
   (g) The statement required pursuant to subdivision (c) shall also
include the telephone number of the Homeowners Home Ownership and
Opportunity for People Everywhere (HOPE) program or a similar
mortgage payment assistance program of the United States Department
of Treasury or Housing and Urban Development.
 
  SEC. 2.    Section 2924 of the Civil Code is
amended to read:
   2924.  (a) Every transfer of an interest in property, other than
in trust, made only as a security for the performance of another act,
is to be deemed a mortgage, except when in the case of personal
property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after
July 27, 1917, of any estate in real property, other than an estate
at will or for years, less than two, or in any transfer in trust made
after July 27, 1917, of a like estate to secure the performance of
an obligation, a power of sale is conferred upon the mortgagee,
trustee, or any other person, to be exercised after a breach of the
obligation for which that mortgage or transfer is a security, the
power shall not be exercised except where the mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record,
or to secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the
provisions of the Public Utilities Act, until all of the following
apply:
   (1) The trustee, mortgagee, or beneficiary, or any of their
authorized agents shall first file for record, in the office of the
recorder of each county wherein the mortgaged or trust property or
some part or parcel thereof is situated, a notice of default. That
notice of default shall include all of the following:
   (A) A statement identifying the mortgage or deed of trust by
stating the name or names of the trustor or trustors and giving the
book and page, or instrument number, if applicable, where the
mortgage or deed of trust is recorded or a description of the
mortgaged or trust property.
   (B) A statement that a breach of the obligation for which the
mortgage or transfer in trust is security has occurred.
   (C) A statement setting forth the nature of each breach actually
known to the beneficiary and of his or her election to sell or cause
to be sold the property to satisfy that obligation and any other
obligation secured by the deed of trust or mortgage that is in
default.
   (D) If the default is curable pursuant to Section 2924c, the
statement specified in paragraph (1) of subdivision (b) of Section
2924c.
   (E) A statement that includes the telephone number of the
Homeowners Home Ownership and Opportunity for People Everywhere
(HOPE) program or a similar mortgage payment assistance program of
the United States Department of Treasury or Housing and Urban
Development.
   (2) Not less than three months shall elapse from the filing of the
notice of default.
   (3) Except as provided in paragraph (4), after the lapse of the
three months described in paragraph (2), the mortgagee, trustee, or
other person authorized to take the sale shall give notice of sale,
stating the time and place thereof, in the manner and for a time not
less than that set forth in Section 2924f.
   (4) Notwithstanding paragraph (3), the mortgagee, trustee, or
other person authorized to take sale may record a notice of sale
pursuant to Section 2924f up to five days before the lapse of the
three-month period described in paragraph (2), provided that the date
of sale is no earlier than three months and 20 days after the
recording of the notice of default.
   (5) Until January 1, 2018, whenever a sale is postponed for a
period of at least 10 business days pursuant to Section 2924g, a
mortgagee, beneficiary, or authorized agent shall provide written
notice to a borrower regarding the new sale date and time, within
five business days following the postponement. Information provided
pursuant to this paragraph shall not constitute the public
declaration required by subdivision (d) of Section 2924g. Failure to
comply with this paragraph shall not invalidate any sale that would
otherwise be valid under Section 2924f. This paragraph shall be
inoperative on January 1, 2018.
   (6) No entity shall record or cause a notice of default to be
recorded or otherwise initiate the foreclosure process unless it is
the holder of the beneficial interest under the mortgage or deed of
trust, the original trustee or the substituted trustee under the deed
of trust, or the designated agent of the holder of the beneficial
interest. No agent of the holder of the beneficial interest under the
mortgage or deed of trust, original trustee or substituted trustee
under the deed of trust may record a notice of default or otherwise
commence the foreclosure process except when acting within the scope
of authority designated by the holder of the beneficial interest.
   (b) In performing acts required by this article, the trustee shall
incur no liability for any good faith error resulting from reliance
on information provided in good faith by the beneficiary regarding
the nature and the amount of the default under the secured
obligation, deed of trust, or mortgage. In performing the acts
required by this article, a trustee shall not be subject to Title
1.6c (commencing with Section 1788) of Part 4.
   (c) A recital in the deed executed pursuant to the power of sale
of compliance with all requirements of law regarding the mailing of
copies of notices or the publication of a copy of the notice of
default or the personal delivery of the copy of the notice of default
or the posting of copies of the notice of sale or the publication of
a copy thereof shall constitute prima facie evidence of compliance
with these requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice.
   (d) All of the following shall constitute privileged
communications pursuant to Section 47:
   (1) The mailing, publication, and delivery of notices as required
by this section.
   (2) Performance of the procedures set forth in this article.
   (3) Performance of the functions and procedures set forth in this
article if those functions and procedures are necessary to carry out
the duties described in Sections 729.040, 729.050, and 729.080 of the
Code of Civil Procedure.
   (e) There is a rebuttable presumption that the beneficiary
actually knew of all unpaid loan payments on the obligation owed to
the beneficiary and secured by the deed of trust or mortgage subject
to the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the
beneficiary shall not be precluded from asserting a claim to this
omitted default or defaults in a separate notice of default.
   (f) With respect to residential real property containing no more
than four dwelling units, a separate document containing a summary of
the notice of default information in English and the languages
described in Section 1632 shall be attached to the notice of default
provided to the mortgagor or trustor pursuant to Section 2923.3.