California Mortgage Fraud Crackdown

On Sunday, October 11, 2009, California Governor Arnold Schwarzenegger pulls out 11th hour surprises and signs new laws to help prevent home buyers and homeowners from mortgage fraud. The bills meant to increase protection for consumers in the lending market and provide law enforcement with more tools to crack down on deceitful mortgage practices.

"Fraudulent mortgage practices have become more prevalent as a result of the national foreclosure crisis that negatively impacted California's housing market and economy." says Gov. 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 home-ownership in a safe and accountable environment."

The Specific Bills are:

AB260 by Assemblyman 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 Sen. Ron Calderon, D- Montebello, to establish standardized licensing requirements for all individual loan originators who offer or negotiate residential mortgages.

SB 239 by Sen. 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 the state prison or in 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 Assemblyman 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 revers 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.

SB237 by Sen. 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 form the Office of Real Estate Appraisers.

AB 957 by Assemblywomen 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 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 Assemblyman 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.