October 13, 2009
Schwarzenegger has signed seven new laws into place designed to make the mortgage market less casino-like. The most interesting one, perhaps is SB 239, which now makes it a felony to commit fraud on a mortgage loan application. We’ve embedded the bill below and it seems this law is not confined to residential since it pertains to a loan to be secured by real property, and in the recitals of the bill, a “Mortgage loan” means a loan or agreement to extend credit to a person that is secured by a deed of trust or other document representing a security interest or lien upon any interest in real property, including the renewal or refinancing of the loan. We’re not legal experts, but the word residential doesn’t show up anywhere in the Bill. The first few paragraphs read as follows:
Existing law provides that a person, other than the loan applicant, who makes false financial statements in connection with an application for a loan to be secured by real property is guilty of a misdemeanor, punishable by a fine not exceeding $10,000, by imprisonment in a county jail not exceeding one year, or by both the fine and imprisonment; and by restitution to the victim, as specified. This bill would delete this provision and provide instead for the offense of mortgage fraud, as defined, a violation of which would be a public offense punishable by imprisonment in the state prison or in a county jail for not more than one year. The bill would provide that mortgage fraud may only be prosecuted when the value of the alleged fraud meets the threshold for grand theft, as specified. The bill would set forth legislative findings, declarations, and intent with respect to its enactment. By revising existing crimes and creating new crimes, this bill would impose a state-mandated local program.
- AB 260, by Assemblyman Ted Lieu (D-Torrance), tightens restrictions on mortgage brokers so they cannot steer borrowers to riskier, higher-interest loans when they qualify for less-expensive ones. Also, bans negative amortization loans, and limits prepayment penalties to no more than 2% of the loan balance.
- SB 36, by Sen. Ron Calderon (D-Montebello), sets licensing requirements for all residential loan originators.
- SB 239, by Sen. Fran Pavley (D-Agoura Hills), makes it a felony to commit fraud on a mortgage loan application.
- AB 329, by Assemblyman Mike Feuer (D-Los Angeles), requires lenders to give more and clearer information to those interested in reverse mortgages, which let seniors borrow against their homes’ equity.
- SB 237, by Calderon, creates a registration program for appraisal management firms.
- AB 957, by Assemblywoman Cathleen Galgiani (D-Stockton), allows buyers of foreclosed homes to choose local escrow officers, rather than being forced to use the escrow company chosen by the seller.
- AB 1160, by Assemblyman Paul Fong (D-Cupertino), requires that mortgage loan documents be written in the same language the verbal negotiations were conducted in.
- Taking Advantage of More Stringent Residential Lending Standards
- The Next Victim of the Housing Crisis: Privacy of Mortgage Professionals
- When Nobody Else Will Lend, Where Do You Go? Taxpayers
- January 2009 California Residential Foreclosure Numbers
- Housing Market Not As Healthy As Low End Would Suggest