Loan originators, reverse mortgage lenders and appraisal management companies are all impacted by sweeping new mortgage laws in California. Lenders to non-English speaking borrowers and lenders on higher priced loans are also impacted.
California Gov. Arnold Schwarzenegger yesterday signed several bills designed to protect borrowers from risky loan products and predatory lenders, according to a press release yesterday. The legislation will provide law enforcement with more tools to combat deceitful lending practices.
Among the new laws was AB 260, the Higher-Priced Mortgage Loan Law. According to the state, the bill “would codify a fiduciary duty for mortgage brokers” and authorize state regulators to apply specific federal mortgage lending laws and regulations to mortgage licensees. It also limits prepayment penalties and yield-spread premiums.
SB 36 standardizes licensing requirements for residential loan originators.
Mortgage fraud is now a felony under SB 239, which could land convicted defendants in jail for up to a year. The bill also makes it easier for law enforcement to obtain a search warrant for real estate records and documents needed to prove that mortgage fraud has occurred.
Reverse mortgage borrowers will see more protection under AB 239, the Reverse Mortgage Elder Protection Act of 2009. The bill requires that the consequences of taking out a reverse mortgage are fully explained in a clear and informative disclosure statement before borrowers are counseled. Reverse lenders are also required to provide a written checklist pertaining to the risks and suitability of a reverse mortgage
Appraisal management companies will now need to be registered with the Office of Real Estate Appraisers as a result of SB 237.
AB 957 mandates that buyers of foreclosed properties have the option of using a local escrow company and prohibits sellers from requiring the use of any particular escrow or title company without good cause.
Loan documents must be translated into the language that verbal negotiations were conducted under based on AB 1160. Lenders would be required to translate documents into Spanish, Chinese, Tagalong, Korean or Vietnamese.
