Bill Text: CA AB1730 | 2013-2014 | Regular Session | Amended

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

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Bill Title: Mortgage loan modification.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Passed) 2014-09-19 - Chaptered by Secretary of State - Chapter 457, Statutes of 2014. [AB1730 Detail]

Download: California-2013-AB1730-Amended.html

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BILL NUMBER: AB 1730	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 23, 2014

INTRODUCED BY   Assembly Member Wagner

                        FEBRUARY 14, 2014

   An act to amend Section 2944.7 of, and to add Sections 
2944.8, 2944.9,   2944.8  and 2944.10 to, the Civil
Code, relating to mortgages.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1730, as amended, Wagner. Mortgage loan modification.
   Existing law, applicable to residential mortgages, prohibits a
person who negotiates, arranges, or otherwise offers to perform a
mortgage loan modification or other form of mortgage loan forbearance
for a fee or other compensation from, among other things, demanding
or receiving any compensation until every service that the person
contracted to perform or represented that he or she would perform is
accomplished. Existing law makes a violation of these provisions by a
natural person a misdemeanor punishable by a specified fine or
imprisonment, or both.
   This bill would authorize a violation of these provisions to be
punished as a felony with imprisonment, as specified. By changing the
definition of a crime, the bill would impose a state-mandated local
program.
   This bill would also  prohibit any person who engages in
mortgage loan modification from accepting payment for services in
advance of the loan modification approval. The bill would assess
  require the assessment of  civil penalties for
 various related violations   a violation of
these provisions  and would authorize designated state and local
government officials to commence civil actions to recover those
penalties.  The bill would specify the manner of distribution
of penalties recovered and would establish the Mortgage Loan
Modification Fraud Account in the General Fund for deposit of funds
payable to the state, to be available for expenditure upon
appropriation by the Legislature. 
   This bill would, in addition to the civil penalties described
above, authorize further civil penalties for unlawful  or
fraudulent  mortgage modifications perpetrated against a
senior citizen or disabled person, as defined, and provide criteria
for the assessment of these additional penalties. The bill would
authorize a court to order the offender to pay restitution to the
senior citizen or disabled person, as specified. 
   This bill would also authorize the court to provide injunctive
relief, and would provide that a person who intentionally violates an
injunction prohibiting offering loan modification services for a fee
under these provisions is subject to civil penalties. The bill would
authorize designated state and local government officials to
commence civil actions to recover those penalties, and would specify
the manner of distribution of penalties recovered. 
   This bill would impose a 4-year statute of limitations for actions
brought pursuant to these provisions.
   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.
   Vote: majority. 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 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 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
imprisonment pursuant to subdivision (h) of Section 1170 of the
Penal Code, 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)  Any  In addition to the penalties and
  remedies provided by Chapter 5 (commencing with Section
17200) of Part 2 of Division 7 of the Business and Professions Code,
a    person who  engages, has engaged, or
proposes to engage in the mortgage loan modification business who
accepts a payment for the service in advance of the approval of the
loan modification   violates this section  shall be
liable for a civil penalty not to exceed twenty thousand dollars
($20,000) for each violation, which shall be assessed and recovered
in a civil action brought in the name of the people of the State of
California by the Attorney General, by any district attorney, by any
county counsel authorized by agreement with the district attorney in
actions involving violation of a county ordinance, by any city
attorney of a city having a population in excess of 750,000, by any
city attorney of any city and county, or, with the consent of the
district attorney, by a city prosecutor in any city having a
full-time city prosecutor, in any court of competent jurisdiction
 pursuant to   Chapter 5 (commencing with Section 17200)
of Part 2 of Division 7 of the Business an   d Professions
Code  . 
   (d) A violation of this section shall be deemed a fraud upon the
contracting parties and upon the state. A party described in
subdivision (c) shall file a civil action for each individual
violation of this section and shall recover the costs of
investigation and prosecution. In assessing the amount of the civil
penalty, the court shall consider any one or more of the relevant
circumstances presented by any of the parties to the case, including,
but not limited to, the following:  
   (1) The nature and seriousness of the misconduct, the number of
violations.  
   (2) The persistence of the misconduct.  
   (3) The length of time over which the misconduct occurred.
 
   (4) The willfulness of the defendant's misconduct. 

   (5) The defendant's assets, liabilities, and net worth. 

   (6) The amount taken from each complaining witness by the
defendant individual.  
   (e) If the action is brought by the Attorney General, one-half of
the penalty collected shall be paid to the treasurer of the county in
which the judgment was entered and one-half to the Mortgage Loan
Modification Fraud Account, established by this section within the
General Fund. If the action is brought by a district attorney or
county counsel, the penalty collected shall be paid to the treasurer
of the county in which the judgment was entered. If the action is
brought by a city attorney or city prosecutor, one-half of the
penalty collected shall be paid to the treasurer of the city in which
the judgment was entered, and one-half to the treasurer of the
county in which the judgment was entered. The funds described above
shall be for the exclusive use by the Attorney General, the district
attorney, the county counsel, and the city attorney for the
enforcement of consumer protection laws.  
   (f) The Mortgage Loan Modification Fraud Account is hereby created
as an account within the General Fund in the State Treasury. The
portion of penalties that is payable to the General Fund or to the
Treasurer recovered by the Attorney General from an action or
settlement of a claim made by the Attorney General pursuant to this
chapter shall be deposited into this account. Moneys in this account,
upon appropriation by the Legislature, shall be used by the Attorney
General to support investigations and prosecutions of California's
mortgage loan modification fraud, including implementation of
judgments obtained from these prosecutions or investigations and
other activities which are in furtherance of this chapter. 

   (g) (1) If the action is brought at the request of a board within
the Department of Consumer Affairs or a local consumer affairs
agency, the court shall determine the reasonable expenses incurred by
the board or local agency in the investigation and prosecution of
the action and approve reimbursement of those expenses at the court's
discretion.  
   (2) Before any penalty collected is paid out pursuant to
subdivision (c), the amount of any reasonable expenses incurred by
the board within the Department of Consumer Affairs or a local
consumer affairs agency shall be paid to the Treasurer for deposit in
the special fund of that board. If the board within the Department
of Consumer Affairs or a local consumer affairs agency has no such
special fund, the moneys shall be paid to the Treasurer. The amount
of any reasonable expenses incurred by a local consumer affairs
agency shall be paid to the general fund of the municipality or
county that funds that local agency.  
   (h) 
    (d)  If the action is brought by the city attorney of
the City and County of San Francisco, the entire amount of the
penalty collected shall be paid to the treasurer of the city and
county in which the judgment was entered for the exclusive use by the
city attorney for the enforcement of consumer protection laws.

   (i) 
    (e)  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. 
   (j) 
    (f)  This section shall apply only to mortgages and
deeds of trust secured by residential real property containing four
or fewer dwelling units.
  SEC. 2.  Section 2944.8 is added to the Civil Code, to read:
   2944.8.  (a) In addition to any liability for a civil penalty
pursuant to Section 2944.7, if a person violates  this
chapter   Section 2944.7  with respect to a victim
who is a senior citizen or a disabled person, the violator may be
liable for a civil penalty not to exceed two thousand five hundred
dollars ($2,500) for each violation, which may be assessed and
recovered in a civil action. 
   (b) Subject to subdivision (e), any civil penalty shall be paid as
prescribed by subdivisions (b) and (c) of Section 2944.7. 

   (c) 
    (b)  As used in this section, the following terms have
the following meanings:
   (1) "Disabled person" means a person who has a physical or mental
 impairment that substantially limits one or more major life
activities   disability, as defined in Sections 12926
and 12926.1 of the Government Code  . 
   (2) "Major life activities" means functions that include caring
for one's self, performing manual tasks, walking, seeing, hearing,
speaking, breathing, learning, and working.  
   (3) "Physical or mental impairment" means any of the following:
 
   (A) A physiological disorder or condition, cosmetic disfigurement,
or anatomical loss substantially affecting one or more of the
following body systems: neurological, musculoskeletal, special sense
organs, respiratory, including speech organs, cardiovascular,
reproductive, digestive, genitourinary, hemic and lymphatic, skin, or
endocrine.  
   (B) A mental or psychological disorder, including intellectual
disability, organic brain syndrome, emotional or mental illness, and
specific learning disabilities.  
   (C) Diseases and conditions including orthopedic, visual, speech
and hearing impairment, cerebral palsy, epilepsy, muscular dystrophy,
multiple sclerosis, cancer, heart disease, diabetes, intellectual
disability, and emotional illness.  
   (4) 
    (2)  "Senior citizen" means a person who is 65 years of
age or older. 
   (d) 
    (c)  In determining whether to impose a civil penalty
pursuant to subdivision (a) and the amount thereof, the court shall
consider, in addition to any other appropriate factors, the extent to
which one or more of the following factors are present:
   (1) Whether the defendant knew or should have known that his or
her conduct was directed to one or more senior citizens or disabled
persons.
   (2) Whether the defendant's conduct caused one or more senior
citizens or disabled persons to suffer any of the following: loss or
encumbrance of a primary residence, principal employment, or source
of income, substantial loss of property set aside for retirement, or
for personal or family care and maintenance, or substantial loss of
payments received under a pension or retirement plan or a government
benefits program, or assets essential to the health or welfare of the
senior citizen or disabled person.
   (3) Whether one or more senior citizens or disabled persons are
substantially more vulnerable than other members of the public to the
defendant's conduct because of age, poor health or infirmity,
impaired understanding, restricted mobility, or disability, and
actually suffered substantial physical, emotional, or economic damage
resulting from the defendant's conduct. 
   (e) 
    (d)  A court of competent jurisdiction hearing an action
pursuant to this section may make orders and judgments as necessary
to restore to a senior citizen or disabled person money or property,
real or personal, that may have been acquired by means of a violation
of  this chapter   Section 2944.7  .
 Restitution ordered pursuant to this subdivision shall be
given priority over recovery of a civil penalty imposed by the court
pursuant to subdivision (a), but shall not be given priority over a
civil penalty imposed pursuant to subdivision (c) of Section 2944.7.
If the court determines that full restitution cannot be made to those
senior citizens or disabled persons, either at the time of judgment
or by a future date determined by the court, then restitution under
this subdivision shall be made on a pro rata basis depending on the
amount of loss.  
  SEC. 3.    Section 2944.9 is added to the Civil
Code, to read:
   2944.9.  (a) In addition to any civil penalty imposed, the court
is authorized to provide injunctive relief in response to a violation
of Sections 2944.7 or Sections 2944.8
   (b) Any person who intentionally violates any injunction
prohibiting offering loan modification services for a fee issued
pursuant to Section 2944.7 shall be liable for a civil penalty not to
exceed ten thousand dollars ($10,000) for each violation. Where the
conduct constituting a violation is of a continuing nature, each day
of that conduct is a separate and distinct violation. In determining
the amount of the civil penalty, the court shall consider all
relevant circumstances, including:
   (1) The extent of the harm caused by the conduct constituting a
violation.
   (2) The nature and persistence of that conduct.
   (3) The length of time over which the conduct occurred.
   (4) The assets, liabilities, and net worth of the person, whether
corporate or individual.
   (5) Any corrective action taken by the defendant.
   (c) The civil penalty prescribed by this section shall be assessed
and recovered in a civil action brought in any county in which the
violation occurs or where the injunction was issued in the name of
the people of the State of California by the Attorney General or by
any district attorney, any county counsel authorized by agreement
with the district attorney in actions involving violation of a county
ordinance, or any city attorney in any court of competent
jurisdiction within his or her jurisdiction without regard to the
county from which the original injunction was issued. An action
brought pursuant to this section to recover civil penalties shall
take precedence over all civil matters on the calendar of the court,
except those matters to which equal or greater precedence on the
calendar is granted by law.
   (d) If an action is brought by the Attorney General, one-half of
the penalty collected pursuant to this section shall be paid to the
treasurer of the county in which the judgment was entered, and
one-half to the Treasurer. If brought by a district attorney or
county counsel the entire amount of the penalty collected shall be
paid to the treasurer of the county in which the judgment is entered.
If brought by a city attorney or city prosecutor, one-half of the
penalty shall be paid to the treasurer of the county in which the
judgment was entered and one-half to the city, except that if the
action was brought by a city attorney of a city and county the entire
amount of the penalty collected shall be paid to the treasurer of
the city and county in which the judgment is entered.
   (e) If the action is brought at the request of a board within the
Department of Consumer Affairs or a local consumer affairs agency,
the court shall determine the reasonable expenses incurred by the
board or local agency in the investigation and prosecution of the
action.
   Before any penalty collected is paid out pursuant to subdivision
(c), the amount of the reasonable expenses incurred by the board
shall be paid to the Treasurer for deposit in the special fund of the
board described above. If the board has no such special fund, the
moneys shall be paid to the Treasurer. The amount of the reasonable
expenses incurred by a local consumer affairs agency shall be paid to
the general fund of the municipality or county which funds the local
agency. 
   SEC. 4.   SEC. 3.   Section 2944.10 is
added to the Civil Code, to read:
   2944.10.  Any action to enforce any cause of action pursuant to
Section  2944.7,   2944.7 or  2944.8
 , or 2944.9,  shall be commenced within four years
after the cause of action accrued. No cause of action barred under
existing law on the effective date of this section shall be revived
by its enactment.
   SEC. 5.   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.