Bill Text: CA AB1950 | 2011-2012 | Regular Session | Introduced

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

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Bill Title: Prohibited business practices: enforcement.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2012-09-25 - Chaptered by Secretary of State - Chapter 569, Statutes of 2012. [AB1950 Detail]

Download: California-2011-AB1950-Introduced.html

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BILL NUMBER: AB 1950	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Davis

                        FEBRUARY 23, 2012

   An act to amend Section 2944.7 of the Civil Code, to amend Section
27388 of the Government Code, and to amend Section 802 of the Penal
Code, relating to mortgages.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1950, as introduced, Davis. Mortgages and deeds of trust:
prohibited practices: enforcement.
   Existing law, until January 1, 2013, prohibits any person who
negotiates or arranges residential mortgage loan modifications, as
specified, for a fee, from demanding or receiving preperformance
compensation, as specified, or requiring security as collateral or
taking a power of attorney from the borrower.
   Existing law, until January 1, 2013, makes a violation of that
prohibition a misdemeanor subject to specified fines.
   Existing law, until January 1, 2013, provides that those
prohibitions do not apply to actions taken by a person who offers a
loan modification, as specified, for a loan owned or serviced by that
person.
   This bill would extend the operation of the above-described
provisions indefinitely. By extending the operation of an existing
offense, this bill would impose a state-mandated local program.
   Existing law provides that in addition to other recording fees,
upon adoption of a resolution by the county board of supervisors, a
fee of up to $3 shall be paid at the time of recording of specified
real estate instruments, to be placed in the Real Estate Fraud
Prosecution Trust Fund and to be expended to fund programs for the
local police and prosecutors to prosecute real estate fraud crimes.
   This bill would authorize counties to distribute all or part of
the $3 fee to the Department of Justice to prosecute real estate
fraud crimes. The bill would also impose an additional $25 fee to be
paid at the time of recording a notice of default. The fee would be
deposited in the State Real Estate Fraud Prosecution Account of the
General Fund, which is created by the bill, to be available, upon
appropriation by the Legislature, for purposes of combating real
estate fraud crimes, as specified. The bill would make additional
technical changes.
   Existing law requires any person who performs a mortgage loan
modification or other form of mortgage loan forbearance for a fee or
other compensation, as specified, to provide a specified notice to
the borrower, concerning 3rd parties arranging loan modifications.
Existing law also prohibits certain conduct by that person including,
among other things, demanding compensation before service is fully
performed, taking a lien on property or a wage assignment, or taking
a power of attorney from the borrower. Existing law provides that a
violation of the requirements or prohibitions described above is a
misdemeanor with specified penalties. Existing law requires that a
prosecution for these offenses be commenced within one year of the
commission of the offense.
   This bill would extend the time to commence a prosecution for
these offenses to 3 years from the commission of the offense.
   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.
   This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII  A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
   Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


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

  SECTION 1.  Section 2944.7 of the Civil Code is amended 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. 2.  Section 27388 of the Government Code is amended to read:
   27388.  (a)  (1)    In addition to any other
recording fees specified in this code,  upon the adoption of
a resolution by the county board of supervisors,  a fee of
up to three dollars ($3) shall be paid at the time of recording of
every real estate instrument, paper, or notice required or permitted
by law to be recorded within that county, except those expressly
exempted from payment of recording fees.  "Real estate
instrument" is defined for the purpose of this section as a deed of
trust, an assignment of deed of trust, a reconveyance, a request for
notice, a notice of default, a substitution of trustee, a notice of
trustee sale, and a notice of rescission of declaration of default.
"Real estate instrument" does not include any deed, instrument, or
writing subject to the imposition of a documentary transfer tax as
defined in Section 11911 of the Revenue and Taxation Code, nor any
document required to facilitate the transfer subject to the
documentary transfer tax.  The fees, after deduction of any
actual and necessary administrative costs incurred by the county in
carrying out this section, shall be paid quarterly to the county
auditor or director of finance, to be placed in the Real Estate Fraud
Prosecution Trust Fund. The amount deducted for administrative costs
shall not exceed 10 percent of the fees paid pursuant to this
section. 
   (2) "Real estate instrument" is defined for the purposes of this
section as a deed of trust, an assignment of deed of trust, a
reconveyance, a request for notice, a notice of default, a
substitution of trustee, a notice of trustee sale, and a notice of
rescission or declaration of default. "Real estate instrument" does
not include any deed, instrument, or writing subject to the
imposition of a documentary transfer tax as defined in Section 11911
of the Revenue and Taxation Code, or any document required to
facilitate the transfer subject to the documentary transfer tax.
 
   (3) An additional fee of twenty-five dollars ($25) shall be paid
at the time of recording a notice of default pursuant to Section 2924
of the Civil Code. Counties shall transmit the twenty-five-dollar
($25) fee, less administrative costs of transmittal, to the
Department of Justice. 
   (b)  (1)    Money placed in the Real Estate
Fraud Prosecution Trust Fund shall be expended to fund programs to
enhance the capacity of  the Department of Justice and 
local police and prosecutors to deter, investigate, and prosecute
real estate fraud crimes.  After 
    (2)     Except as provided in paragraph (4)
and a   fter  deduction of the actual and necessary
administrative costs referred to in subdivision (a), 60 percent of
the funds shall be distributed to district attorneys subject to
review pursuant to subdivision  (d)   (e) 
, and 40 percent of the funds shall be distributed to local law
enforcement agencies within the county in accordance with subdivision
 (c)   (d)  .  In 
    (3)     Except as provided in paragraph
(4), i   n  those counties where the investigation of
real estate fraud is done exclusively by the district attorney, after
deduction of the actual and necessary administrative costs referred
to in subdivision (a), 100 percent of the funds shall be distributed
to the district attorney, subject to review pursuant to subdivision
(d). The funds so distributed shall be expended for the exclusive
purpose of deterring, investigating, and prosecuting real estate
fraud crimes. 
   (4) Counties may distribute all or a part of the three-dollar ($3)
fee described in subdivision (a) from the Real Estate Fraud
Prosecution Trust Fund to the department.  
   (c) Moneys transmitted pursuant to paragraph (3) of subdivision
(a) shall be deposited in the State Real Estate Fraud Prosecution
Account of the General Fund, which is hereby created, to be
available, upon appropriation by the Legislature, for expenditure by
the department for the purpose of determining, investigating, and
prosecuting real estate fraud crimes.  
   (c) 
    (d)  The county auditor or director of finance shall
distribute funds in the Real Estate Fraud Prosecution Trust Fund to
eligible law enforcement agencies within the county pursuant to
subdivision (b), as determined by a Real Estate Fraud Prosecution
Trust Fund Committee composed of the district attorney, the county
chief administrative officer, the chief officer responsible for
consumer protection within the county, and the chief law enforcement
officer of one law enforcement agency receiving funding from the Real
Estate Fraud Prosecution Trust Fund, the latter being selected by a
majority of the other three members of the committee. The chief law
enforcement officer shall be a nonvoting member of the committee and
shall serve a one-year term, which may be renewed. Members may
appoint representatives of their offices to serve on the committee.
If a county lacks a chief officer responsible for consumer
protection, the county board of supervisors may appoint an
appropriate representative to serve on the committee. The committee
shall establish and publish deadlines and written procedures for
local law enforcement agencies within the county to apply for the use
of funds and shall review applications and make determinations by
majority vote as to the award of funds using the following criteria:
   (1) Each law enforcement agency that seeks funds shall submit a
written application to the committee setting forth in detail the
agency's proposed use of the funds.
   (2) In order to qualify for receipt of funds, each law enforcement
agency submitting an application shall provide written evidence that
the agency either:
   (A) Has a unit, division, or section devoted to the investigation
or prosecution of real estate fraud, or both, and the unit, division,
or section has been in existence for at least one year prior to the
application date.
   (B) Has on a regular basis, during the three years immediately
preceding the application date, accepted for investigation or
prosecution, or both, and assigned to specific persons employed by
the agency, cases of suspected real estate fraud, and actively
investigated and prosecuted those cases.
   (3) The committee's determination to award funds to a law
enforcement agency shall be based on, but not be limited to, 
(A)  the number of real estate fraud cases filed in the
prior year  ; (B)   ,  the number of real
estate fraud cases investigated in the prior year  ; (C)
  ,  the number of victims involved in the cases
filed  ;   ,  and  (D) 
the total aggregated monetary loss suffered by victims, including
individuals, associations, institutions, or corporations, as a result
of the real estate fraud cases filed, and those under active
investigation by that law enforcement agency.
   (4) Each law enforcement agency that, pursuant to this section,
has been awarded funds in the previous year, upon reapplication for
funds to the committee in each successive year, in addition to any
information the committee may require in paragraph (3), shall be
required to submit a detailed accounting of funds received and
expended in the prior year. The accounting shall include  (A)
 the amount of funds received and expended  ; (B)
  ,  the uses to which those funds were put,
including payment of salaries and expenses, purchase of equipment and
supplies, and other expenditures by type  ; (C) 
 ,  the number of filed complaints, investigations, arrests,
and convictions that resulted from the expenditure of the funds
 ;   ,  and  (D)  other
relevant information the committee may reasonably require. 
   (d) 
    (e)  The county board of supervisors shall annually
review the effectiveness of the district attorney in deterring,
investigating, and prosecuting real estate fraud crimes based upon
information provided by the district attorney in an annual report.
The district attorney shall submit the annual report to the board and
to the Legislative Analyst's Office on or before September 1 of each
year. The Legislative Analyst's Office shall compile the results and
report to the Legislature, detailing both:
   (1) Facts, based upon, but not limited to,  (A) 
the number of real estate fraud cases filed in the prior year
 ; (B)   ,  the number of real estate fraud
cases investigated in the prior year  ; (C)   ,
 the number of victims involved in the cases filed  ;
(D)   ,  the number of convictions obtained in the
prior year  ;   ,  and  (E)
 the total aggregated monetary loss suffered by victims,
including individuals, associations, institutions, corporations, and
other relevant public entities, according to the number of cases
filed, investigations, prosecutions, and convictions obtained.
   (2) An accounting of funds received and expended in the prior
year, which shall include  (A)  the amount of funds
received and expended  ; (B)   ,  the uses
to which those funds were put, including payment of salaries and
expenses, purchase of equipment and supplies, and other expenditures
by type  ; (C)   ,  the number of filed
complaints, investigations, prosecutions, and convictions that
resulted from the expenditure of funds  ;   ,
 and  (D)  other relevant information provided
at the discretion of the district attorney. 
   (e) 
    (f)  A county in which a district attorney fails to
submit an annual report to the Legislative Analyst's Office pursuant
to the requirements of subdivision  (d)   (e)
 shall not expend funds held in that county's Real Estate Fraud
Prosecution Trust Fund until the district attorney has submitted an
annual report for the county's most recent full fiscal year. 

   (f) 
    (g)  Annual reports submitted to the Legislative Analyst'
s Office pursuant to subdivision  (d)   (e)
 shall be made in a standard form and manner determined by the
Legislative Analyst's Office, in consultation with participating law
enforcement agencies. 
   (g) 
    (h)  The intent of the Legislature in enacting this
section is to have an impact on real estate fraud involving the
largest number of victims. To the extent possible, an emphasis should
be placed on fraud against individuals whose residences are in
danger of, or are in, foreclosure as defined in subdivision (b) of
Section 1695.1 of the Civil Code. Case filing decisions continue to
be at the discretion of the prosecutor. 
   (h) 
    (i)  A district attorney's office or a local enforcement
agency that has undertaken investigations and prosecutions that will
continue into a subsequent program year may receive nonexpended
funds from the previous fiscal year subsequent to the annual
submission of information detailing the accounting of funds received
and expended in the prior year. 
   (i) 
    (j)  No money collected pursuant to this section shall
be expended to offset a reduction in any other source of funds. Funds
from the Real Estate Fraud Prosecution Trust Fund shall be used only
in connection with criminal investigations or prosecutions involving
recorded real estate documents.
  SEC. 3.  Section 802 of the Penal Code is amended to read:
   802.  (a) Except as provided in subdivision (b), (c),  or
 (d),  or (e),  prosecution for an offense not
punishable by death or imprisonment in the state prison shall be
commenced within one year after commission of the offense.
   (b) Prosecution for a misdemeanor violation of Section 647.6 or
former Section 647a committed with or upon a minor under the age of
14 years shall be commenced within three years after commission of
the offense.
   (c) Prosecution of a misdemeanor violation of Section 729 of the
Business and Professions Code shall be commenced within two years
after commission of the offense.
   (d) Prosecution of a misdemeanor violation of Chapter 9
(commencing with Section 7000) of Division 3 of the Business and
Professions Code shall be commenced as follows:
   (1) With respect to Sections 7028.17, 7068.5, and 7068.7 of the
Business and Professions Code, within one year of the commission of
the offense.
   (2) With respect to Sections 7027.1, 7028.1, 7028.15, 7118.4,
7118.5, 7118.6, 7126, 7153, 7156, 7157, 7158, 7159.5 (licensee only),
7159.14 (licensee only), 7161, and 7189 of the Business and
Professions Code, within two years of the commission of the offense.
   (3) With respect to Sections 7027.3 and 7028.16 of the Business
and Professions Code, within three years of the commission of the
offense.
   (4) With respect to Sections 7028, 7159.5 (nonlicensee only) and
7159.14 (nonlicensee only), of the Business and Professions Code,
within four years of the commission of the offense. 
   (e) Prosecution for a misdemeanor violation of Section 2944.6 or
2944.7 of the Civil Code shall be commenced within three years of the
commission of the offense.  
   (e) 
    (f)  This section shall become operative on July 1,
2005, only if Senate Bill 30 of the 2003-04 Regular Session is
enacted and becomes effective on or before January 1, 2005.
  SEC. 4.  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.