BUSINESS AND PROFESSIONS CODE
SECTION 10240-10248.3
10240. (a) Every real estate broker, upon acting within the meaning
of subdivision (d) of Section 10131, who negotiates a loan to be
secured directly or collaterally by a lien on real property shall,
within three business days after receipt of a completed written loan
application or before the borrower becomes obligated on the note,
whichever is earlier, cause to be delivered to the borrower a
statement in writing, containing all the information required by
Section 10241. It shall be personally signed by the borrower and by
the real estate broker negotiating the loan or by a real estate
licensee acting for the broker in negotiating the loan. When so
executed, an exact copy thereof shall be delivered to the borrower at
the time of its execution. The real estate broker negotiating the
loan shall retain on file for a period of three years a true and
correct copy of the statement as signed by the borrower.
No real estate licensee shall permit the statement to be signed by
a borrower if any information required by Section 10241 is omitted.
(b) For the purposes of applying the provisions of this article, a
real estate broker is acting within the meaning of subdivision (d)
of Section 10131 if he or she solicits borrowers, or causes borrowers
to be solicited, through express or implied representations that the
broker will act as an agent in arranging a loan, but in fact makes
the loan to the borrower from funds belonging to the broker.
(c) In a federally regulated residential mortgage loan transaction
in which the principal loan amount exceeds the principal loan levels
set forth in Section 10245, a real estate broker satisfies the
requirements of this section if the borrower receives (1) a "good
faith estimate" that satisfies the requirements of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C.A. 2601 et seq.), and
that sets forth the broker's real estate license number and a clear
and conspicuous statement on the face of the document stating that
the "good faith estimate" does not constitute a loan commitment, (2)
all applicable disclosures required by the Truth in Lending Act (15
U.S.C.A. 1601 et seq.), and (3) if the loan contains a balloon
payment provision, the disclosure described in subdivision (h) of
Section 10241, the balloon disclosure required for that loan by
Fannie Mae or Freddie Mac, or an alternative disclosure determined by
the commissioner to satisfy the requirements of the Truth in Lending
Act.
Prior to becoming obligated on the loan the borrower shall
acknowledge, in writing, receipt of the "good faith estimate" and all
applicable disclosures required by the Truth in Lending Act. The
real estate broker shall retain on file for a period of three years a
true and correct copy of the signed acknowledgment and a true and
correct copy of the "good faith estimate" and all applicable
disclosures required by the Truth in Lending Act as acknowledged by
the borrower.
10240.1. The provisions of this article, exclusive of the
provisions of Section 10240, apply only to loans secured by a
dwelling.
10240.2. As used in this article, " dwelling" means any of the
following units which are owned by a signatory to the mortgage or
deed of trust secured by the dwelling unit at the time of execution
of the mortgage or deed of trust:
(a) A single dwelling unit in a condominium or cooperative.
(b) Any parcel containing only residential buildings if the total
number of units on the parcel is four or less.
10240.3. (a) The commissioner shall apply the guidance on
nontraditional mortgage product risks published on November 14, 2006,
by the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators, and the Statement on
Subprime Mortgage Lending published on July 17, 2007, by the
aforementioned entities and the National Association of Consumer
Credit Administrators, to real estate brokers acting within the
meaning of Section 10131.1 or subdivision (d) of Section 10131.
(b) The commissioner may adopt emergency and final regulations to
clarify the application of this section as soon as possible.
(c) A real estate broker acting within the meaning of Section
10131.1 or subdivision (d) of Section 10131 shall adopt and adhere to
policies and procedures that are reasonably intended to achieve the
objectives set forth in the documents described in subdivision (a).
10241. The statement required by Section 10240, the form of which
shall be approved by the commissioner, shall set forth separately the
following items:
(a) The estimated maximum costs and expenses of making the loan,
which are to be paid by the borrower, including but not limited to,
the following:
(1) Appraisal fees.
(2) Escrow fees.
(3) Title charges.
(4) Notary fees.
(5) Recording fees.
(6) Credit investigation fees.
If a real estate licensee performs or is to perform any of the
services for which costs and expenses are disclosed pursuant to this
subdivision, the licensee shall be entitled to those costs and
expenses in addition to the charges specified in subdivision (b).
(b) The total of the brokerage or commissions contracted for, or
to be received by, the real estate broker for services performed as
an agent in negotiating, procuring, or arranging the loan or the
total of loan origination fees, points, bonuses, and other charges in
lieu of interest to be received by the broker if he or she elects to
act as a lender rather than agent in the transaction.
(c) Any liens against the real property, as disclosed by the
borrower, the approximate amount thereof, and whether each lien will
remain senior, or will be subordinate, to the lien that will secure
the loan.
(d) The estimated amounts to be paid on the order of the borrower,
as disclosed by the borrower, including, but not limited to:
(1) Fire insurance premiums.
(2) Amounts due on prior liens, including interest or other
charges arising in connection with the payment, release,
reconveyance, extinction, or other removal of record of the prior
liens.
(3) Amounts due other creditors.
(4) Assumption, transfer, forwarding, and beneficiary statement
fees.
(e) The estimated balance of the loan funds to be paid to the
borrower after deducting the total of amounts disclosed pursuant to
subdivisions (a), (b), and (d).
(f) The principal amount of the loan.
(g) The rate of interest.
(h) The term of the loan, the number of installments, the amount
of each installment, and the approximate balance due at maturity, and
the following notice in 10-point bold typeface:
"NOTICE TO BORROWER: IF YOU DO NOT HAVE THE FUNDS TO PAY THE BALLOON
PAYMENT WHEN IT COMES DUE, YOU MAY HAVE TO OBTAIN A NEW LOAN AGAINST
YOUR PROPERTY TO MAKE THE BALLOON PAYMENT. IN THAT CASE, YOU MAY
AGAIN HAVE TO PAY COMMISSIONS, FEES, AND EXPENSES FOR THE ARRANGING
OF THE NEW LOAN. IN ADDITION, IF YOU ARE UNABLE TO MAKE THE MONTHLY
PAYMENTS OR THE BALLOON PAYMENT, YOU MAY LOSE THE PROPERTY AND ALL OF
YOUR EQUITY THROUGH FORECLOSURE. KEEP THIS IN MIND IN DECIDING UPON
THE AMOUNT AND TERMS OF THIS LOAN."
(i) A statement containing the name of the real estate broker
negotiating the loan, his or her license number, and the address of
his or her licensed place of business.
(j) If the broker anticipates that the loan to the borrower may be
made wholly or in part from broker-controlled funds, a statement to
that effect.
For purposes of this section, "broker-controlled funds" means
funds owned by the broker, by a spouse, child, parent, grandparent,
brother, sister, father-in-law, mother-in-law, brother-in-law, or
sister-in-law of the broker, or by any entity in which the broker
alone or together with any of the above relatives of the broker has
an ownership interest of 10 percent or more.
(k) The terms of prepayment privileges and penalties, if any.
(l) A statement that the purchase of credit or credit disability
insurance is not required as a condition for the making of the loan.
(m) If the loan is one that is within the limits specified in
Section 10245, a certification by the real estate licensee
negotiating the loan that the loan is being made in compliance with
the provisions of this article.
10241.1. (a) The purchase of credit life insurance on the life of
the borrower or credit disability insurance to provide indemnity for
payments becoming due on the indebtedness shall not be required as a
condition of making a loan under this article.
(b) The licensee may provide through duly licensed agents, and
collect from the borrower the costs of purchasing, credit life
insurance on the life of a borrower and credit disability insurance
to provide indemnity for payments becoming due on the indebtedness,
with the borrower's consent. The form and rate of the insurance shall
be approved by the Insurance Commissioner, as provided in Section
779.9 of the Insurance Code. The insurance shall be in an amount not
in excess of that reasonably necessary to discharge the obligation of
the borrower, and for a term not exceeding the term of the loan.
Only one premium for credit disability insurance may be collected by
the licensee in connection with any loan contract irrespective of the
number of borrowers, and only one borrower may be insured, except
that where more than one borrower is a party to a loan contract and
each borrower is a wage earner whose earnings are reasonably relied
upon by the lender for the repayment of the loan, each borrower may
be insured.
(c) The licensee may collect from the borrower the costs of
purchasing fire and hazard insurance on the property offered as
security for a loan in order to reasonably insure against loss for a
reasonable term considering the circumstances of the loan, (1) if the
policy or policies of insurance are made payable to the borrower or
any member of his or her family, regardless of whether a customary
mortgagee clause is attached, and (2) if the insurance is sold at
standard rates through duly licensed agents.
(d) If premiums for any insurance provided under this section are
to be paid from the proceeds of the loan, any amount so paid and any
commission under subdivision (b) of Section 10242 attributable to
borrowing that amount, shall not be considered in determining whether
the loan is exempt from this article under Section 10245.
10241.2. If the broker elects to make a loan subject to Section
10240 which consists wholly or in part of broker-controlled funds as
defined in subdivision (j) of Section 10241, the broker shall advise
the borrower of that fact not later than the next business day after
making the election, but in any event before the close of escrow of
the loan transaction.
10241.3. In any loan transaction in which a fee is charged to a
borrower for an appraisal of the real property that will serve as
security for the loan, a copy of the appraisal report shall be given
by or on behalf of the broker to both the borrower and the lender at
or before the closing of the loan transaction.
10241.4. (a) Prior to a borrower becoming obligated on any loan
secured by a dwelling that provides for a balloon payment and is
otherwise subject to Section 10240, if any agreement includes a
promise, representation, or similar undertaking to extend or seek the
extension of the term of the loan or refinancing of the loan, and
the undertaking is not set forth in the promissory note evidencing
the loan or in a rider to that note, the undertaking shall be in
writing and the notice required by this section shall be provided to
the borrower.
(b) The notice required by subdivision (a), shall state in at
least 10-point boldface capitalized type:
"AS THIS LOAN PROVIDES FOR A BALLOON PAYMENT, SEE THE MORTGAGE
LOAN DISCLOSURE STATEMENT/GOOD FAITH ESTIMATE FOR IMPORTANT
INFORMATION ON BALLOON PAYMENTS. ALSO, REFER TO THE LOAN DOCUMENTS
AND THIS EXTENSION AGREEMENT FOR YOUR SPECIFIC RIGHTS AND
OBLIGATIONS."
(c) The notice shall also contain, in at least 10-point boldface
capitalized type, either of the following statements depending upon
which statement best describes the nature of the undertaking:
(1) The lender or noteholder has agreed to an extension,
refinancing, or renegotiation of the terms of this loan, and the
lender's or noteholder's signed agreement is attached (or the notice
may describe the method used to furnish that signed document).
Transmission by a broker of a lender's or noteholder's undertaking or
the broker's representation of that undertaking, pursuant to this
section, does not of itself, create or alter any agency or similar
relationship between the lender or noteholder and the borrower, or
the lender or noteholder and the broker.
(2) The broker, ____ (insert name of broker making or arranging
the loan), has agreed to use his or her best efforts to obtain a
future extension, refinancing, or renegotiation of the loan by the
lender or note owner. There can be no assurance or guarantee that the
lender or note owner will agree.
10242. The maximum amount of expenses, charges and interest to be
paid by a borrower with respect to any loan subject to this article
shall be as follows:
(a) The maximum amount of all costs and expenses referred to in
subdivision (a) of Section 10241, exclusive of actual title charges
and recording fees, shall not exceed 5 percent of the principal
amount of the loan or three hundred ninety dollars ($390), whichever
is greater but in no event to exceed seven hundred dollars ($700),
provided that in no event shall said maximum amount exceed actual
costs and expenses paid, incurred or reasonably earned.
(b) The maximum amount of the charges referred to in subdivision
(b) of Section 10241 shall not exceed the following amounts:
(1) In the case of a loan secured directly or collaterally, in
whole or in part by a first trust deed, 5 percent of the principal
amount of the loan where the term of the loan is a period of less
than three years and 10 percent where the term is a period of three
years or more.
(2) In the case of a loan secured directly or collaterally by a
trust deed other than a first trust deed, 5 percent of the principal
amount of the loan where the term of the loan is a period of less
than two years, 10 percent where the term is a period of two years
but less than three years, and 15 percent where the term is a period
of three years or more.
(3) With respect to a further advance on a note, the charges shall
not exceed the charges for an original loan in the same amount as
the further advance and made for a term equal to the remaining term
of the note on which the further advance is being made, including any
extension thereof.
(c) No interest may be charged with respect to any period prior to
the date that the proceeds of the loan are made available to the
borrower or are deposited in escrow.
10242.5. (a) A charge imposed for late payment of an installment
due on a loan secured by a mortgage or deed of trust on real property
shall not exceed an amount equal to 10 percent of the installment
due, except that a minimum charge of five dollars ($5) may be imposed
when the late charge permitted by this section would otherwise be
less than that minimum charge.
The charge permitted by this section may be assessed only as a
percentage of the increment of any installment due that is
attributable to principal and interest.
(b) No charge may be imposed more than once for the same late
payment of an installment. No late charge may be imposed on any
installment which is paid or tendered in full within 10 days after
its scheduled due date, even though an earlier maturing installment
or a late charge on an earlier installment may not have been paid in
full. For purposes of this subdivision, a payment or tender of
payment made within 10 days of a scheduled installment due date shall
be deemed to have been made or tendered for payment of that
installment.
(c) A late-payment charge may be imposed pursuant to this
subdivision for the payment of any balloon payment more than 10 days
after the date due. The charge shall not exceed an amount equal to
the maximum late charge that could have been assessed with respect to
the largest single monthly installment previously due, other than
the balloon payment, multiplied by the sum of one plus the number of
months occurring since the late-payment charge began to accrue. For
purposes of this subdivision, "month" means the period between a
particular day of a calendar month and the same day of the next
calendar month.
10242.6. (a) The principal and accrued interest on any loan secured
by a mortgage or deed of trust on real property containing only a
single-family, owner-occupied dwelling may be prepaid in whole or in
part at any time but only a prepayment made within seven years of the
date of execution of such mortgage or deed of trust may be subject
to a prepayment charge and then solely as herein set forth. An amount
not exceeding 20 percent of the unpaid balance may be prepaid in any
12-month period. A prepayment charge may be imposed on any amount
prepaid in any 12-month period in excess of 20 percent of the unpaid
balance which charge shall not exceed an amount equal to the payment
of six months' advance interest on the amount prepaid in excess of 20
percent of the unpaid balance.
(b) Notwithstanding subdivision (a), there shall be no prepayment
penalty charged to a borrower under a loan subject to this section if
the dwelling securing the loan has been damaged to such an extent by
a natural disaster for which a state of emergency is declared by the
Governor, pursuant to Chapter 7 (commencing with Section 8550) of
Division 1 of Title 2 of the Government Code, that the dwelling
cannot be occupied and the prepayment is causally related thereto.
(c) As used in this section, "owner-occupied dwelling" means a
dwelling which will be owned and occupied by a signatory to the
mortgage or deed of trust secured by the dwelling within 90 days of
the execution of the mortgage or deed of trust.
10243. If the loan is not consummated due to the failure of the
borrower to disclose the outstanding liens of record or the correct
current vested title which is material to the loan upon the real
property as provided by subdivision (c) of Section 10241, the
borrower shall be liable for the costs and expenses provided in
subdivision (a) of Section 10241 which have been paid or incurred,
and shall be liable for the payment of one-half of the charges
provided in subdivision (b) of Section 10241. An exclusive agreement
authorizing or employing a licensee to negotiate a loan secured
directly or collaterally by a lien on real property shall be limited
to a term of not more than 45 days.
If the loan is not consummated and the broker is entitled to any
charges, costs or expenses authorized by this article, he or she may
not record a lien or encumbrance against the borrower's property
except subsequent to the filing of a legal action pursuant to the
Code of Civil Procedure to recover said charges, costs or expenses.
However, nothing contained herein shall prohibit a broker from
recording a lien pursuant to a voluntary lien agreement in
conjunction with a stipulation to dismiss an actual or proposed
complaint for damages entitling the broker to such charges, costs or
expenses after written notice to the borrower that the broker
proposes or has initiated a complaint for damages pursuant to the
Code of Civil Procedure.
10244. Any loan made by any person and secured directly by a lien
on real property, other than a note given back to the seller by the
purchaser on account of the purchase price, which provides for
installment payments and the term of which is less than three years,
shall require substantially equal installment payments over the
period of the loan with the final payment not payable until the
maturity date thereof. No installment including the final installment
shall be greater than twice the amount of the smallest installment.
If any loan having an original maturity period of less than three
(3) years is renewed or refinanced, the total amount of charges to be
paid on both the original obligation and the balance of such
obligation, as renewed or refinanced, shall not in the aggregate
exceed the amount of charges as provided in Section 10242, and if
such a loan is renewed or refinanced through the person who
negotiated the original loan, the total amount of costs and expenses
to be paid on both the original obligation and the renewed or
refinanced obligation shall not exceed in the aggregate the amount of
costs and expenses authorized in subdivision (a) of said section.
The provisions of this section do not apply to a bona fide loan,
secured by a first trust deed on real property, made in connection
with the financing of the usual costs of the development of a
residential, commercial or industrial building or buildings on the
property under a written agreement providing for the disbursement of
the loan funds as costs are incurred or in relation to the progress
of the work and providing for title insurance insuring the priority
of the security as against mechanic's and materialmen's liens or for
the final disbursement of at least ten (10) percent of the loan funds
after the expiration of the period for the filing of mechanics and
materialmen's liens.
10244.1. Notwithstanding the provisions of Section 10244, on a loan
secured directly or collaterally by a lien on real property
comprising an owner-occupied dwelling, for a term of six years or
less, no installment, whether providing for payment of principal and
interest or interest only, shall be greater than twice the amount of
the smallest installment. This section does not apply to a note given
back to the seller by the purchaser on account for the purchase
price or any collateral loans secured solely by such a note. As used
in this section, "owner-occupied dwelling" means a single dwelling
unit in a condominium or cooperative or a residential building of
less than three separate dwelling units, one of which will be owned
and occupied by a signatory to the mortgage or deed of trust secured
by such dwelling within 90 days of the execution of the mortgage or
deed of trust.
10245. The provisions of this article, exclusive of the provisions
of Sections 10240, 10240.3, 10242.5, and 10242.6, do not apply to any
bona fide loan secured directly or collaterally by a first trust
deed, the principal of which is thirty thousand dollars ($30,000) or
more, or to any bona fide loan secured directly or collaterally by
any lien junior thereto, the principal of which is twenty thousand
dollars ($20,000) or more.
10246. If any amount:
(a) In excess of the charges referred to in Section 10241 and
limited by Section 10242,
(b) In excess of the charges permitted by Section 10242.5, or
(c) Prohibited by Section 10248.1, is received, the borrower may
recover, from the person who shall have taken or received the excess
or prohibited amount, three times the amount of the excess or
prohibited amount and the borrower shall be entitled to costs and a
reasonable attorney's fee; provided that any action for recovery must
be brought within two (2) years from the date such excess or
prohibited charge was received. However, if the excess or prohibited
amount is the result of a bona fide error the borrower may only
recover such excess or prohibited amount.
10247. The provisions of this article pertaining to maximum costs
and expenses, charges and interest, together with the penalties
stated in this article, shall apply to any transaction involving a
third party as a purported lender or any other transaction which is
used as a subterfuge or means of avoiding or evading the provisions
of this article.
10248. Every person who, for compensation to be received directly
or indirectly, sells, offers to sell, purchases for resale or offers
to purchase for resale, or who negotiates or arranges for the
purchase, sale or exchange of a promissory note secured directly or
collaterally by a lien on real property, may receive only the maximum
total charges provided for in Section 10242.
10248.1. No real estate licensee shall charge, receive, or
negotiate for the payment by the borrower of any service charge or
fee other than charges and fees specified in Sections 10241, 10241.1,
10242, and 10242.5, prepayment penalties as authorized by law,
beneficiary-statement, payoff-demand, extinction, release,
reconveyance or other removal of record fees, and trustee's costs and
fees, and any other fees if in accordance with the Civil Code and
the Code of Civil Procedure.
10248.2. (a) A borrower may not waive any right or remedy under
this article. This subdivision shall not be deemed to prohibit a bona
fide settlement, release or compromise of any claim under this
article.
(b) If a loan is negotiated in violation of any section of this
article, the licensee, on demand, shall return to the borrower any
bonus, brokerage or commission paid or payable under subdivision (b)
of Section 10242 for negotiation of such loans. In the event such
demand is not satisfied within 20 days from the date of written
demand, the borrower may commence an action under this subdivision
and may recover actual damages or twice any bonus, brokerage, or
commission paid or payable under subdivision (b) of Section 10242 for
the negotiation of said loan whichever is greater, plus costs and
reasonable attorney's fees.
The "date of written demand" shall mean either the date upon which
the written demand is personally delivered to the licensee or the
date upon which the written demand is mailed to the licensee.
A licensee may not be held liable in any action brought under this
section for a violation of this article if the licensee shows by a
preponderance of evidence that the violation was not intentional and
resulted from a bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error.
If the borrower proceeds under this section he may not proceed
under Section 10246 as to the same breach.
(c) If a real estate licensee subject to the provisions of this
article violates any provision of Section 10241.1 he shall be liable
for, and pay over to the borrower, any commission or experience
rating dividend attributable to the insurance written on that loan
received by the licensee as a result of the sale of such insurance to
the borrower in violation of Section 10241.1 in addition to any
premium loss due to short rate cancellation of any insurance subject
to Section 10248.1 which was purchased by the borrower.
(d) No action for damages shall be maintained under this section
unless brought within two years after the maturity of the loan.
(e) The provisions of this article are not exclusive. The remedies
provided for herein shall be in addition to any other procedures or
remedies provided under law.
10248.3. The provisions of this article shall apply only to those
loans otherwise subject to this article which are made or negotiated
by real estate brokers acting within the meaning of subdivision (d)
of Section 10131 or subdivision (b) of Section 10240.
BUSINESS AND PROFESSIONS CODE
SECTION 10240-10248.3
10240. (a) Every real estate broker, upon acting within the meaning
of subdivision (d) of Section 10131, who negotiates a loan to be
secured directly or collaterally by a lien on real property shall,
within three business days after receipt of a completed written loan
application or before the borrower becomes obligated on the note,
whichever is earlier, cause to be delivered to the borrower a
statement in writing, containing all the information required by
Section 10241. It shall be personally signed by the borrower and by
the real estate broker negotiating the loan or by a real estate
licensee acting for the broker in negotiating the loan. When so
executed, an exact copy thereof shall be delivered to the borrower at
the time of its execution. The real estate broker negotiating the
loan shall retain on file for a period of three years a true and
correct copy of the statement as signed by the borrower.
No real estate licensee shall permit the statement to be signed by
a borrower if any information required by Section 10241 is omitted.
(b) For the purposes of applying the provisions of this article, a
real estate broker is acting within the meaning of subdivision (d)
of Section 10131 if he or she solicits borrowers, or causes borrowers
to be solicited, through express or implied representations that the
broker will act as an agent in arranging a loan, but in fact makes
the loan to the borrower from funds belonging to the broker.
(c) In a federally regulated residential mortgage loan transaction
in which the principal loan amount exceeds the principal loan levels
set forth in Section 10245, a real estate broker satisfies the
requirements of this section if the borrower receives (1) a "good
faith estimate" that satisfies the requirements of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C.A. 2601 et seq.), and
that sets forth the broker's real estate license number and a clear
and conspicuous statement on the face of the document stating that
the "good faith estimate" does not constitute a loan commitment, (2)
all applicable disclosures required by the Truth in Lending Act (15
U.S.C.A. 1601 et seq.), and (3) if the loan contains a balloon
payment provision, the disclosure described in subdivision (h) of
Section 10241, the balloon disclosure required for that loan by
Fannie Mae or Freddie Mac, or an alternative disclosure determined by
the commissioner to satisfy the requirements of the Truth in Lending
Act.
Prior to becoming obligated on the loan the borrower shall
acknowledge, in writing, receipt of the "good faith estimate" and all
applicable disclosures required by the Truth in Lending Act. The
real estate broker shall retain on file for a period of three years a
true and correct copy of the signed acknowledgment and a true and
correct copy of the "good faith estimate" and all applicable
disclosures required by the Truth in Lending Act as acknowledged by
the borrower.
10240.1. The provisions of this article, exclusive of the
provisions of Section 10240, apply only to loans secured by a
dwelling.
10240.2. As used in this article, " dwelling" means any of the
following units which are owned by a signatory to the mortgage or
deed of trust secured by the dwelling unit at the time of execution
of the mortgage or deed of trust:
(a) A single dwelling unit in a condominium or cooperative.
(b) Any parcel containing only residential buildings if the total
number of units on the parcel is four or less.
10240.3. (a) The commissioner shall apply the guidance on
nontraditional mortgage product risks published on November 14, 2006,
by the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators, and the Statement on
Subprime Mortgage Lending published on July 17, 2007, by the
aforementioned entities and the National Association of Consumer
Credit Administrators, to real estate brokers acting within the
meaning of Section 10131.1 or subdivision (d) of Section 10131.
(b) The commissioner may adopt emergency and final regulations to
clarify the application of this section as soon as possible.
(c) A real estate broker acting within the meaning of Section
10131.1 or subdivision (d) of Section 10131 shall adopt and adhere to
policies and procedures that are reasonably intended to achieve the
objectives set forth in the documents described in subdivision (a).
10241. The statement required by Section 10240, the form of which
shall be approved by the commissioner, shall set forth separately the
following items:
(a) The estimated maximum costs and expenses of making the loan,
which are to be paid by the borrower, including but not limited to,
the following:
(1) Appraisal fees.
(2) Escrow fees.
(3) Title charges.
(4) Notary fees.
(5) Recording fees.
(6) Credit investigation fees.
If a real estate licensee performs or is to perform any of the
services for which costs and expenses are disclosed pursuant to this
subdivision, the licensee shall be entitled to those costs and
expenses in addition to the charges specified in subdivision (b).
(b) The total of the brokerage or commissions contracted for, or
to be received by, the real estate broker for services performed as
an agent in negotiating, procuring, or arranging the loan or the
total of loan origination fees, points, bonuses, and other charges in
lieu of interest to be received by the broker if he or she elects to
act as a lender rather than agent in the transaction.
(c) Any liens against the real property, as disclosed by the
borrower, the approximate amount thereof, and whether each lien will
remain senior, or will be subordinate, to the lien that will secure
the loan.
(d) The estimated amounts to be paid on the order of the borrower,
as disclosed by the borrower, including, but not limited to:
(1) Fire insurance premiums.
(2) Amounts due on prior liens, including interest or other
charges arising in connection with the payment, release,
reconveyance, extinction, or other removal of record of the prior
liens.
(3) Amounts due other creditors.
(4) Assumption, transfer, forwarding, and beneficiary statement
fees.
(e) The estimated balance of the loan funds to be paid to the
borrower after deducting the total of amounts disclosed pursuant to
subdivisions (a), (b), and (d).
(f) The principal amount of the loan.
(g) The rate of interest.
(h) The term of the loan, the number of installments, the amount
of each installment, and the approximate balance due at maturity, and
the following notice in 10-point bold typeface:
"NOTICE TO BORROWER: IF YOU DO NOT HAVE THE FUNDS TO PAY THE BALLOON
PAYMENT WHEN IT COMES DUE, YOU MAY HAVE TO OBTAIN A NEW LOAN AGAINST
YOUR PROPERTY TO MAKE THE BALLOON PAYMENT. IN THAT CASE, YOU MAY
AGAIN HAVE TO PAY COMMISSIONS, FEES, AND EXPENSES FOR THE ARRANGING
OF THE NEW LOAN. IN ADDITION, IF YOU ARE UNABLE TO MAKE THE MONTHLY
PAYMENTS OR THE BALLOON PAYMENT, YOU MAY LOSE THE PROPERTY AND ALL OF
YOUR EQUITY THROUGH FORECLOSURE. KEEP THIS IN MIND IN DECIDING UPON
THE AMOUNT AND TERMS OF THIS LOAN."
(i) A statement containing the name of the real estate broker
negotiating the loan, his or her license number, and the address of
his or her licensed place of business.
(j) If the broker anticipates that the loan to the borrower may be
made wholly or in part from broker-controlled funds, a statement to
that effect.
For purposes of this section, "broker-controlled funds" means
funds owned by the broker, by a spouse, child, parent, grandparent,
brother, sister, father-in-law, mother-in-law, brother-in-law, or
sister-in-law of the broker, or by any entity in which the broker
alone or together with any of the above relatives of the broker has
an ownership interest of 10 percent or more.
(k) The terms of prepayment privileges and penalties, if any.
(l) A statement that the purchase of credit or credit disability
insurance is not required as a condition for the making of the loan.
(m) If the loan is one that is within the limits specified in
Section 10245, a certification by the real estate licensee
negotiating the loan that the loan is being made in compliance with
the provisions of this article.
10241.1. (a) The purchase of credit life insurance on the life of
the borrower or credit disability insurance to provide indemnity for
payments becoming due on the indebtedness shall not be required as a
condition of making a loan under this article.
(b) The licensee may provide through duly licensed agents, and
collect from the borrower the costs of purchasing, credit life
insurance on the life of a borrower and credit disability insurance
to provide indemnity for payments becoming due on the indebtedness,
with the borrower's consent. The form and rate of the insurance shall
be approved by the Insurance Commissioner, as provided in Section
779.9 of the Insurance Code. The insurance shall be in an amount not
in excess of that reasonably necessary to discharge the obligation of
the borrower, and for a term not exceeding the term of the loan.
Only one premium for credit disability insurance may be collected by
the licensee in connection with any loan contract irrespective of the
number of borrowers, and only one borrower may be insured, except
that where more than one borrower is a party to a loan contract and
each borrower is a wage earner whose earnings are reasonably relied
upon by the lender for the repayment of the loan, each borrower may
be insured.
(c) The licensee may collect from the borrower the costs of
purchasing fire and hazard insurance on the property offered as
security for a loan in order to reasonably insure against loss for a
reasonable term considering the circumstances of the loan, (1) if the
policy or policies of insurance are made payable to the borrower or
any member of his or her family, regardless of whether a customary
mortgagee clause is attached, and (2) if the insurance is sold at
standard rates through duly licensed agents.
(d) If premiums for any insurance provided under this section are
to be paid from the proceeds of the loan, any amount so paid and any
commission under subdivision (b) of Section 10242 attributable to
borrowing that amount, shall not be considered in determining whether
the loan is exempt from this article under Section 10245.
10241.2. If the broker elects to make a loan subject to Section
10240 which consists wholly or in part of broker-controlled funds as
defined in subdivision (j) of Section 10241, the broker shall advise
the borrower of that fact not later than the next business day after
making the election, but in any event before the close of escrow of
the loan transaction.
10241.3. In any loan transaction in which a fee is charged to a
borrower for an appraisal of the real property that will serve as
security for the loan, a copy of the appraisal report shall be given
by or on behalf of the broker to both the borrower and the lender at
or before the closing of the loan transaction.
10241.4. (a) Prior to a borrower becoming obligated on any loan
secured by a dwelling that provides for a balloon payment and is
otherwise subject to Section 10240, if any agreement includes a
promise, representation, or similar undertaking to extend or seek the
extension of the term of the loan or refinancing of the loan, and
the undertaking is not set forth in the promissory note evidencing
the loan or in a rider to that note, the undertaking shall be in
writing and the notice required by this section shall be provided to
the borrower.
(b) The notice required by subdivision (a), shall state in at
least 10-point boldface capitalized type:
"AS THIS LOAN PROVIDES FOR A BALLOON PAYMENT, SEE THE MORTGAGE
LOAN DISCLOSURE STATEMENT/GOOD FAITH ESTIMATE FOR IMPORTANT
INFORMATION ON BALLOON PAYMENTS. ALSO, REFER TO THE LOAN DOCUMENTS
AND THIS EXTENSION AGREEMENT FOR YOUR SPECIFIC RIGHTS AND
OBLIGATIONS."
(c) The notice shall also contain, in at least 10-point boldface
capitalized type, either of the following statements depending upon
which statement best describes the nature of the undertaking:
(1) The lender or noteholder has agreed to an extension,
refinancing, or renegotiation of the terms of this loan, and the
lender's or noteholder's signed agreement is attached (or the notice
may describe the method used to furnish that signed document).
Transmission by a broker of a lender's or noteholder's undertaking or
the broker's representation of that undertaking, pursuant to this
section, does not of itself, create or alter any agency or similar
relationship between the lender or noteholder and the borrower, or
the lender or noteholder and the broker.
(2) The broker, ____ (insert name of broker making or arranging
the loan), has agreed to use his or her best efforts to obtain a
future extension, refinancing, or renegotiation of the loan by the
lender or note owner. There can be no assurance or guarantee that the
lender or note owner will agree.
10242. The maximum amount of expenses, charges and interest to be
paid by a borrower with respect to any loan subject to this article
shall be as follows:
(a) The maximum amount of all costs and expenses referred to in
subdivision (a) of Section 10241, exclusive of actual title charges
and recording fees, shall not exceed 5 percent of the principal
amount of the loan or three hundred ninety dollars ($390), whichever
is greater but in no event to exceed seven hundred dollars ($700),
provided that in no event shall said maximum amount exceed actual
costs and expenses paid, incurred or reasonably earned.
(b) The maximum amount of the charges referred to in subdivision
(b) of Section 10241 shall not exceed the following amounts:
(1) In the case of a loan secured directly or collaterally, in
whole or in part by a first trust deed, 5 percent of the principal
amount of the loan where the term of the loan is a period of less
than three years and 10 percent where the term is a period of three
years or more.
(2) In the case of a loan secured directly or collaterally by a
trust deed other than a first trust deed, 5 percent of the principal
amount of the loan where the term of the loan is a period of less
than two years, 10 percent where the term is a period of two years
but less than three years, and 15 percent where the term is a period
of three years or more.
(3) With respect to a further advance on a note, the charges shall
not exceed the charges for an original loan in the same amount as
the further advance and made for a term equal to the remaining term
of the note on which the further advance is being made, including any
extension thereof.
(c) No interest may be charged with respect to any period prior to
the date that the proceeds of the loan are made available to the
borrower or are deposited in escrow.
10242.5. (a) A charge imposed for late payment of an installment
due on a loan secured by a mortgage or deed of trust on real property
shall not exceed an amount equal to 10 percent of the installment
due, except that a minimum charge of five dollars ($5) may be imposed
when the late charge permitted by this section would otherwise be
less than that minimum charge.
The charge permitted by this section may be assessed only as a
percentage of the increment of any installment due that is
attributable to principal and interest.
(b) No charge may be imposed more than once for the same late
payment of an installment. No late charge may be imposed on any
installment which is paid or tendered in full within 10 days after
its scheduled due date, even though an earlier maturing installment
or a late charge on an earlier installment may not have been paid in
full. For purposes of this subdivision, a payment or tender of
payment made within 10 days of a scheduled installment due date shall
be deemed to have been made or tendered for payment of that
installment.
(c) A late-payment charge may be imposed pursuant to this
subdivision for the payment of any balloon payment more than 10 days
after the date due. The charge shall not exceed an amount equal to
the maximum late charge that could have been assessed with respect to
the largest single monthly installment previously due, other than
the balloon payment, multiplied by the sum of one plus the number of
months occurring since the late-payment charge began to accrue. For
purposes of this subdivision, "month" means the period between a
particular day of a calendar month and the same day of the next
calendar month.
10242.6. (a) The principal and accrued interest on any loan secured
by a mortgage or deed of trust on real property containing only a
single-family, owner-occupied dwelling may be prepaid in whole or in
part at any time but only a prepayment made within seven years of the
date of execution of such mortgage or deed of trust may be subject
to a prepayment charge and then solely as herein set forth. An amount
not exceeding 20 percent of the unpaid balance may be prepaid in any
12-month period. A prepayment charge may be imposed on any amount
prepaid in any 12-month period in excess of 20 percent of the unpaid
balance which charge shall not exceed an amount equal to the payment
of six months' advance interest on the amount prepaid in excess of 20
percent of the unpaid balance.
(b) Notwithstanding subdivision (a), there shall be no prepayment
penalty charged to a borrower under a loan subject to this section if
the dwelling securing the loan has been damaged to such an extent by
a natural disaster for which a state of emergency is declared by the
Governor, pursuant to Chapter 7 (commencing with Section 8550) of
Division 1 of Title 2 of the Government Code, that the dwelling
cannot be occupied and the prepayment is causally related thereto.
(c) As used in this section, "owner-occupied dwelling" means a
dwelling which will be owned and occupied by a signatory to the
mortgage or deed of trust secured by the dwelling within 90 days of
the execution of the mortgage or deed of trust.
10243. If the loan is not consummated due to the failure of the
borrower to disclose the outstanding liens of record or the correct
current vested title which is material to the loan upon the real
property as provided by subdivision (c) of Section 10241, the
borrower shall be liable for the costs and expenses provided in
subdivision (a) of Section 10241 which have been paid or incurred,
and shall be liable for the payment of one-half of the charges
provided in subdivision (b) of Section 10241. An exclusive agreement
authorizing or employing a licensee to negotiate a loan secured
directly or collaterally by a lien on real property shall be limited
to a term of not more than 45 days.
If the loan is not consummated and the broker is entitled to any
charges, costs or expenses authorized by this article, he or she may
not record a lien or encumbrance against the borrower's property
except subsequent to the filing of a legal action pursuant to the
Code of Civil Procedure to recover said charges, costs or expenses.
However, nothing contained herein shall prohibit a broker from
recording a lien pursuant to a voluntary lien agreement in
conjunction with a stipulation to dismiss an actual or proposed
complaint for damages entitling the broker to such charges, costs or
expenses after written notice to the borrower that the broker
proposes or has initiated a complaint for damages pursuant to the
Code of Civil Procedure.
10244. Any loan made by any person and secured directly by a lien
on real property, other than a note given back to the seller by the
purchaser on account of the purchase price, which provides for
installment payments and the term of which is less than three years,
shall require substantially equal installment payments over the
period of the loan with the final payment not payable until the
maturity date thereof. No installment including the final installment
shall be greater than twice the amount of the smallest installment.
If any loan having an original maturity period of less than three
(3) years is renewed or refinanced, the total amount of charges to be
paid on both the original obligation and the balance of such
obligation, as renewed or refinanced, shall not in the aggregate
exceed the amount of charges as provided in Section 10242, and if
such a loan is renewed or refinanced through the person who
negotiated the original loan, the total amount of costs and expenses
to be paid on both the original obligation and the renewed or
refinanced obligation shall not exceed in the aggregate the amount of
costs and expenses authorized in subdivision (a) of said section.
The provisions of this section do not apply to a bona fide loan,
secured by a first trust deed on real property, made in connection
with the financing of the usual costs of the development of a
residential, commercial or industrial building or buildings on the
property under a written agreement providing for the disbursement of
the loan funds as costs are incurred or in relation to the progress
of the work and providing for title insurance insuring the priority
of the security as against mechanic's and materialmen's liens or for
the final disbursement of at least ten (10) percent of the loan funds
after the expiration of the period for the filing of mechanics and
materialmen's liens.
10244.1. Notwithstanding the provisions of Section 10244, on a loan
secured directly or collaterally by a lien on real property
comprising an owner-occupied dwelling, for a term of six years or
less, no installment, whether providing for payment of principal and
interest or interest only, shall be greater than twice the amount of
the smallest installment. This section does not apply to a note given
back to the seller by the purchaser on account for the purchase
price or any collateral loans secured solely by such a note. As used
in this section, "owner-occupied dwelling" means a single dwelling
unit in a condominium or cooperative or a residential building of
less than three separate dwelling units, one of which will be owned
and occupied by a signatory to the mortgage or deed of trust secured
by such dwelling within 90 days of the execution of the mortgage or
deed of trust.
10245. The provisions of this article, exclusive of the provisions
of Sections 10240, 10240.3, 10242.5, and 10242.6, do not apply to any
bona fide loan secured directly or collaterally by a first trust
deed, the principal of which is thirty thousand dollars ($30,000) or
more, or to any bona fide loan secured directly or collaterally by
any lien junior thereto, the principal of which is twenty thousand
dollars ($20,000) or more.
10246. If any amount:
(a) In excess of the charges referred to in Section 10241 and
limited by Section 10242,
(b) In excess of the charges permitted by Section 10242.5, or
(c) Prohibited by Section 10248.1, is received, the borrower may
recover, from the person who shall have taken or received the excess
or prohibited amount, three times the amount of the excess or
prohibited amount and the borrower shall be entitled to costs and a
reasonable attorney's fee; provided that any action for recovery must
be brought within two (2) years from the date such excess or
prohibited charge was received. However, if the excess or prohibited
amount is the result of a bona fide error the borrower may only
recover such excess or prohibited amount.
10247. The provisions of this article pertaining to maximum costs
and expenses, charges and interest, together with the penalties
stated in this article, shall apply to any transaction involving a
third party as a purported lender or any other transaction which is
used as a subterfuge or means of avoiding or evading the provisions
of this article.
10248. Every person who, for compensation to be received directly
or indirectly, sells, offers to sell, purchases for resale or offers
to purchase for resale, or who negotiates or arranges for the
purchase, sale or exchange of a promissory note secured directly or
collaterally by a lien on real property, may receive only the maximum
total charges provided for in Section 10242.
10248.1. No real estate licensee shall charge, receive, or
negotiate for the payment by the borrower of any service charge or
fee other than charges and fees specified in Sections 10241, 10241.1,
10242, and 10242.5, prepayment penalties as authorized by law,
beneficiary-statement, payoff-demand, extinction, release,
reconveyance or other removal of record fees, and trustee's costs and
fees, and any other fees if in accordance with the Civil Code and
the Code of Civil Procedure.
10248.2. (a) A borrower may not waive any right or remedy under
this article. This subdivision shall not be deemed to prohibit a bona
fide settlement, release or compromise of any claim under this
article.
(b) If a loan is negotiated in violation of any section of this
article, the licensee, on demand, shall return to the borrower any
bonus, brokerage or commission paid or payable under subdivision (b)
of Section 10242 for negotiation of such loans. In the event such
demand is not satisfied within 20 days from the date of written
demand, the borrower may commence an action under this subdivision
and may recover actual damages or twice any bonus, brokerage, or
commission paid or payable under subdivision (b) of Section 10242 for
the negotiation of said loan whichever is greater, plus costs and
reasonable attorney's fees.
The "date of written demand" shall mean either the date upon which
the written demand is personally delivered to the licensee or the
date upon which the written demand is mailed to the licensee.
A licensee may not be held liable in any action brought under this
section for a violation of this article if the licensee shows by a
preponderance of evidence that the violation was not intentional and
resulted from a bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error.
If the borrower proceeds under this section he may not proceed
under Section 10246 as to the same breach.
(c) If a real estate licensee subject to the provisions of this
article violates any provision of Section 10241.1 he shall be liable
for, and pay over to the borrower, any commission or experience
rating dividend attributable to the insurance written on that loan
received by the licensee as a result of the sale of such insurance to
the borrower in violation of Section 10241.1 in addition to any
premium loss due to short rate cancellation of any insurance subject
to Section 10248.1 which was purchased by the borrower.
(d) No action for damages shall be maintained under this section
unless brought within two years after the maturity of the loan.
(e) The provisions of this article are not exclusive. The remedies
provided for herein shall be in addition to any other procedures or
remedies provided under law.
10248.3. The provisions of this article shall apply only to those
loans otherwise subject to this article which are made or negotiated
by real estate brokers acting within the meaning of subdivision (d)
of Section 10131 or subdivision (b) of Section 10240.
BUSINESS AND PROFESSIONS CODE
SECTION 10240-10248.3
10240. (a) Every real estate broker, upon acting within the meaning
of subdivision (d) of Section 10131, who negotiates a loan to be
secured directly or collaterally by a lien on real property shall,
within three business days after receipt of a completed written loan
application or before the borrower becomes obligated on the note,
whichever is earlier, cause to be delivered to the borrower a
statement in writing, containing all the information required by
Section 10241. It shall be personally signed by the borrower and by
the real estate broker negotiating the loan or by a real estate
licensee acting for the broker in negotiating the loan. When so
executed, an exact copy thereof shall be delivered to the borrower at
the time of its execution. The real estate broker negotiating the
loan shall retain on file for a period of three years a true and
correct copy of the statement as signed by the borrower.
No real estate licensee shall permit the statement to be signed by
a borrower if any information required by Section 10241 is omitted.
(b) For the purposes of applying the provisions of this article, a
real estate broker is acting within the meaning of subdivision (d)
of Section 10131 if he or she solicits borrowers, or causes borrowers
to be solicited, through express or implied representations that the
broker will act as an agent in arranging a loan, but in fact makes
the loan to the borrower from funds belonging to the broker.
(c) In a federally regulated residential mortgage loan transaction
in which the principal loan amount exceeds the principal loan levels
set forth in Section 10245, a real estate broker satisfies the
requirements of this section if the borrower receives (1) a "good
faith estimate" that satisfies the requirements of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C.A. 2601 et seq.), and
that sets forth the broker's real estate license number and a clear
and conspicuous statement on the face of the document stating that
the "good faith estimate" does not constitute a loan commitment, (2)
all applicable disclosures required by the Truth in Lending Act (15
U.S.C.A. 1601 et seq.), and (3) if the loan contains a balloon
payment provision, the disclosure described in subdivision (h) of
Section 10241, the balloon disclosure required for that loan by
Fannie Mae or Freddie Mac, or an alternative disclosure determined by
the commissioner to satisfy the requirements of the Truth in Lending
Act.
Prior to becoming obligated on the loan the borrower shall
acknowledge, in writing, receipt of the "good faith estimate" and all
applicable disclosures required by the Truth in Lending Act. The
real estate broker shall retain on file for a period of three years a
true and correct copy of the signed acknowledgment and a true and
correct copy of the "good faith estimate" and all applicable
disclosures required by the Truth in Lending Act as acknowledged by
the borrower.
10240.1. The provisions of this article, exclusive of the
provisions of Section 10240, apply only to loans secured by a
dwelling.
10240.2. As used in this article, " dwelling" means any of the
following units which are owned by a signatory to the mortgage or
deed of trust secured by the dwelling unit at the time of execution
of the mortgage or deed of trust:
(a) A single dwelling unit in a condominium or cooperative.
(b) Any parcel containing only residential buildings if the total
number of units on the parcel is four or less.
10240.3. (a) The commissioner shall apply the guidance on
nontraditional mortgage product risks published on November 14, 2006,
by the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators, and the Statement on
Subprime Mortgage Lending published on July 17, 2007, by the
aforementioned entities and the National Association of Consumer
Credit Administrators, to real estate brokers acting within the
meaning of Section 10131.1 or subdivision (d) of Section 10131.
(b) The commissioner may adopt emergency and final regulations to
clarify the application of this section as soon as possible.
(c) A real estate broker acting within the meaning of Section
10131.1 or subdivision (d) of Section 10131 shall adopt and adhere to
policies and procedures that are reasonably intended to achieve the
objectives set forth in the documents described in subdivision (a).
10241. The statement required by Section 10240, the form of which
shall be approved by the commissioner, shall set forth separately the
following items:
(a) The estimated maximum costs and expenses of making the loan,
which are to be paid by the borrower, including but not limited to,
the following:
(1) Appraisal fees.
(2) Escrow fees.
(3) Title charges.
(4) Notary fees.
(5) Recording fees.
(6) Credit investigation fees.
If a real estate licensee performs or is to perform any of the
services for which costs and expenses are disclosed pursuant to this
subdivision, the licensee shall be entitled to those costs and
expenses in addition to the charges specified in subdivision (b).
(b) The total of the brokerage or commissions contracted for, or
to be received by, the real estate broker for services performed as
an agent in negotiating, procuring, or arranging the loan or the
total of loan origination fees, points, bonuses, and other charges in
lieu of interest to be received by the broker if he or she elects to
act as a lender rather than agent in the transaction.
(c) Any liens against the real property, as disclosed by the
borrower, the approximate amount thereof, and whether each lien will
remain senior, or will be subordinate, to the lien that will secure
the loan.
(d) The estimated amounts to be paid on the order of the borrower,
as disclosed by the borrower, including, but not limited to:
(1) Fire insurance premiums.
(2) Amounts due on prior liens, including interest or other
charges arising in connection with the payment, release,
reconveyance, extinction, or other removal of record of the prior
liens.
(3) Amounts due other creditors.
(4) Assumption, transfer, forwarding, and beneficiary statement
fees.
(e) The estimated balance of the loan funds to be paid to the
borrower after deducting the total of amounts disclosed pursuant to
subdivisions (a), (b), and (d).
(f) The principal amount of the loan.
(g) The rate of interest.
(h) The term of the loan, the number of installments, the amount
of each installment, and the approximate balance due at maturity, and
the following notice in 10-point bold typeface:
"NOTICE TO BORROWER: IF YOU DO NOT HAVE THE FUNDS TO PAY THE BALLOON
PAYMENT WHEN IT COMES DUE, YOU MAY HAVE TO OBTAIN A NEW LOAN AGAINST
YOUR PROPERTY TO MAKE THE BALLOON PAYMENT. IN THAT CASE, YOU MAY
AGAIN HAVE TO PAY COMMISSIONS, FEES, AND EXPENSES FOR THE ARRANGING
OF THE NEW LOAN. IN ADDITION, IF YOU ARE UNABLE TO MAKE THE MONTHLY
PAYMENTS OR THE BALLOON PAYMENT, YOU MAY LOSE THE PROPERTY AND ALL OF
YOUR EQUITY THROUGH FORECLOSURE. KEEP THIS IN MIND IN DECIDING UPON
THE AMOUNT AND TERMS OF THIS LOAN."
(i) A statement containing the name of the real estate broker
negotiating the loan, his or her license number, and the address of
his or her licensed place of business.
(j) If the broker anticipates that the loan to the borrower may be
made wholly or in part from broker-controlled funds, a statement to
that effect.
For purposes of this section, "broker-controlled funds" means
funds owned by the broker, by a spouse, child, parent, grandparent,
brother, sister, father-in-law, mother-in-law, brother-in-law, or
sister-in-law of the broker, or by any entity in which the broker
alone or together with any of the above relatives of the broker has
an ownership interest of 10 percent or more.
(k) The terms of prepayment privileges and penalties, if any.
(l) A statement that the purchase of credit or credit disability
insurance is not required as a condition for the making of the loan.
(m) If the loan is one that is within the limits specified in
Section 10245, a certification by the real estate licensee
negotiating the loan that the loan is being made in compliance with
the provisions of this article.
10241.1. (a) The purchase of credit life insurance on the life of
the borrower or credit disability insurance to provide indemnity for
payments becoming due on the indebtedness shall not be required as a
condition of making a loan under this article.
(b) The licensee may provide through duly licensed agents, and
collect from the borrower the costs of purchasing, credit life
insurance on the life of a borrower and credit disability insurance
to provide indemnity for payments becoming due on the indebtedness,
with the borrower's consent. The form and rate of the insurance shall
be approved by the Insurance Commissioner, as provided in Section
779.9 of the Insurance Code. The insurance shall be in an amount not
in excess of that reasonably necessary to discharge the obligation of
the borrower, and for a term not exceeding the term of the loan.
Only one premium for credit disability insurance may be collected by
the licensee in connection with any loan contract irrespective of the
number of borrowers, and only one borrower may be insured, except
that where more than one borrower is a party to a loan contract and
each borrower is a wage earner whose earnings are reasonably relied
upon by the lender for the repayment of the loan, each borrower may
be insured.
(c) The licensee may collect from the borrower the costs of
purchasing fire and hazard insurance on the property offered as
security for a loan in order to reasonably insure against loss for a
reasonable term considering the circumstances of the loan, (1) if the
policy or policies of insurance are made payable to the borrower or
any member of his or her family, regardless of whether a customary
mortgagee clause is attached, and (2) if the insurance is sold at
standard rates through duly licensed agents.
(d) If premiums for any insurance provided under this section are
to be paid from the proceeds of the loan, any amount so paid and any
commission under subdivision (b) of Section 10242 attributable to
borrowing that amount, shall not be considered in determining whether
the loan is exempt from this article under Section 10245.
10241.2. If the broker elects to make a loan subject to Section
10240 which consists wholly or in part of broker-controlled funds as
defined in subdivision (j) of Section 10241, the broker shall advise
the borrower of that fact not later than the next business day after
making the election, but in any event before the close of escrow of
the loan transaction.
10241.3. In any loan transaction in which a fee is charged to a
borrower for an appraisal of the real property that will serve as
security for the loan, a copy of the appraisal report shall be given
by or on behalf of the broker to both the borrower and the lender at
or before the closing of the loan transaction.
10241.4. (a) Prior to a borrower becoming obligated on any loan
secured by a dwelling that provides for a balloon payment and is
otherwise subject to Section 10240, if any agreement includes a
promise, representation, or similar undertaking to extend or seek the
extension of the term of the loan or refinancing of the loan, and
the undertaking is not set forth in the promissory note evidencing
the loan or in a rider to that note, the undertaking shall be in
writing and the notice required by this section shall be provided to
the borrower.
(b) The notice required by subdivision (a), shall state in at
least 10-point boldface capitalized type:
"AS THIS LOAN PROVIDES FOR A BALLOON PAYMENT, SEE THE MORTGAGE
LOAN DISCLOSURE STATEMENT/GOOD FAITH ESTIMATE FOR IMPORTANT
INFORMATION ON BALLOON PAYMENTS. ALSO, REFER TO THE LOAN DOCUMENTS
AND THIS EXTENSION AGREEMENT FOR YOUR SPECIFIC RIGHTS AND
OBLIGATIONS."
(c) The notice shall also contain, in at least 10-point boldface
capitalized type, either of the following statements depending upon
which statement best describes the nature of the undertaking:
(1) The lender or noteholder has agreed to an extension,
refinancing, or renegotiation of the terms of this loan, and the
lender's or noteholder's signed agreement is attached (or the notice
may describe the method used to furnish that signed document).
Transmission by a broker of a lender's or noteholder's undertaking or
the broker's representation of that undertaking, pursuant to this
section, does not of itself, create or alter any agency or similar
relationship between the lender or noteholder and the borrower, or
the lender or noteholder and the broker.
(2) The broker, ____ (insert name of broker making or arranging
the loan), has agreed to use his or her best efforts to obtain a
future extension, refinancing, or renegotiation of the loan by the
lender or note owner. There can be no assurance or guarantee that the
lender or note owner will agree.
10242. The maximum amount of expenses, charges and interest to be
paid by a borrower with respect to any loan subject to this article
shall be as follows:
(a) The maximum amount of all costs and expenses referred to in
subdivision (a) of Section 10241, exclusive of actual title charges
and recording fees, shall not exceed 5 percent of the principal
amount of the loan or three hundred ninety dollars ($390), whichever
is greater but in no event to exceed seven hundred dollars ($700),
provided that in no event shall said maximum amount exceed actual
costs and expenses paid, incurred or reasonably earned.
(b) The maximum amount of the charges referred to in subdivision
(b) of Section 10241 shall not exceed the following amounts:
(1) In the case of a loan secured directly or collaterally, in
whole or in part by a first trust deed, 5 percent of the principal
amount of the loan where the term of the loan is a period of less
than three years and 10 percent where the term is a period of three
years or more.
(2) In the case of a loan secured directly or collaterally by a
trust deed other than a first trust deed, 5 percent of the principal
amount of the loan where the term of the loan is a period of less
than two years, 10 percent where the term is a period of two years
but less than three years, and 15 percent where the term is a period
of three years or more.
(3) With respect to a further advance on a note, the charges shall
not exceed the charges for an original loan in the same amount as
the further advance and made for a term equal to the remaining term
of the note on which the further advance is being made, including any
extension thereof.
(c) No interest may be charged with respect to any period prior to
the date that the proceeds of the loan are made available to the
borrower or are deposited in escrow.
10242.5. (a) A charge imposed for late payment of an installment
due on a loan secured by a mortgage or deed of trust on real property
shall not exceed an amount equal to 10 percent of the installment
due, except that a minimum charge of five dollars ($5) may be imposed
when the late charge permitted by this section would otherwise be
less than that minimum charge.
The charge permitted by this section may be assessed only as a
percentage of the increment of any installment due that is
attributable to principal and interest.
(b) No charge may be imposed more than once for the same late
payment of an installment. No late charge may be imposed on any
installment which is paid or tendered in full within 10 days after
its scheduled due date, even though an earlier maturing installment
or a late charge on an earlier installment may not have been paid in
full. For purposes of this subdivision, a payment or tender of
payment made within 10 days of a scheduled installment due date shall
be deemed to have been made or tendered for payment of that
installment.
(c) A late-payment charge may be imposed pursuant to this
subdivision for the payment of any balloon payment more than 10 days
after the date due. The charge shall not exceed an amount equal to
the maximum late charge that could have been assessed with respect to
the largest single monthly installment previously due, other than
the balloon payment, multiplied by the sum of one plus the number of
months occurring since the late-payment charge began to accrue. For
purposes of this subdivision, "month" means the period between a
particular day of a calendar month and the same day of the next
calendar month.
10242.6. (a) The principal and accrued interest on any loan secured
by a mortgage or deed of trust on real property containing only a
single-family, owner-occupied dwelling may be prepaid in whole or in
part at any time but only a prepayment made within seven years of the
date of execution of such mortgage or deed of trust may be subject
to a prepayment charge and then solely as herein set forth. An amount
not exceeding 20 percent of the unpaid balance may be prepaid in any
12-month period. A prepayment charge may be imposed on any amount
prepaid in any 12-month period in excess of 20 percent of the unpaid
balance which charge shall not exceed an amount equal to the payment
of six months' advance interest on the amount prepaid in excess of 20
percent of the unpaid balance.
(b) Notwithstanding subdivision (a), there shall be no prepayment
penalty charged to a borrower under a loan subject to this section if
the dwelling securing the loan has been damaged to such an extent by
a natural disaster for which a state of emergency is declared by the
Governor, pursuant to Chapter 7 (commencing with Section 8550) of
Division 1 of Title 2 of the Government Code, that the dwelling
cannot be occupied and the prepayment is causally related thereto.
(c) As used in this section, "owner-occupied dwelling" means a
dwelling which will be owned and occupied by a signatory to the
mortgage or deed of trust secured by the dwelling within 90 days of
the execution of the mortgage or deed of trust.
10243. If the loan is not consummated due to the failure of the
borrower to disclose the outstanding liens of record or the correct
current vested title which is material to the loan upon the real
property as provided by subdivision (c) of Section 10241, the
borrower shall be liable for the costs and expenses provided in
subdivision (a) of Section 10241 which have been paid or incurred,
and shall be liable for the payment of one-half of the charges
provided in subdivision (b) of Section 10241. An exclusive agreement
authorizing or employing a licensee to negotiate a loan secured
directly or collaterally by a lien on real property shall be limited
to a term of not more than 45 days.
If the loan is not consummated and the broker is entitled to any
charges, costs or expenses authorized by this article, he or she may
not record a lien or encumbrance against the borrower's property
except subsequent to the filing of a legal action pursuant to the
Code of Civil Procedure to recover said charges, costs or expenses.
However, nothing contained herein shall prohibit a broker from
recording a lien pursuant to a voluntary lien agreement in
conjunction with a stipulation to dismiss an actual or proposed
complaint for damages entitling the broker to such charges, costs or
expenses after written notice to the borrower that the broker
proposes or has initiated a complaint for damages pursuant to the
Code of Civil Procedure.
10244. Any loan made by any person and secured directly by a lien
on real property, other than a note given back to the seller by the
purchaser on account of the purchase price, which provides for
installment payments and the term of which is less than three years,
shall require substantially equal installment payments over the
period of the loan with the final payment not payable until the
maturity date thereof. No installment including the final installment
shall be greater than twice the amount of the smallest installment.
If any loan having an original maturity period of less than three
(3) years is renewed or refinanced, the total amount of charges to be
paid on both the original obligation and the balance of such
obligation, as renewed or refinanced, shall not in the aggregate
exceed the amount of charges as provided in Section 10242, and if
such a loan is renewed or refinanced through the person who
negotiated the original loan, the total amount of costs and expenses
to be paid on both the original obligation and the renewed or
refinanced obligation shall not exceed in the aggregate the amount of
costs and expenses authorized in subdivision (a) of said section.
The provisions of this section do not apply to a bona fide loan,
secured by a first trust deed on real property, made in connection
with the financing of the usual costs of the development of a
residential, commercial or industrial building or buildings on the
property under a written agreement providing for the disbursement of
the loan funds as costs are incurred or in relation to the progress
of the work and providing for title insurance insuring the priority
of the security as against mechanic's and materialmen's liens or for
the final disbursement of at least ten (10) percent of the loan funds
after the expiration of the period for the filing of mechanics and
materialmen's liens.
10244.1. Notwithstanding the provisions of Section 10244, on a loan
secured directly or collaterally by a lien on real property
comprising an owner-occupied dwelling, for a term of six years or
less, no installment, whether providing for payment of principal and
interest or interest only, shall be greater than twice the amount of
the smallest installment. This section does not apply to a note given
back to the seller by the purchaser on account for the purchase
price or any collateral loans secured solely by such a note. As used
in this section, "owner-occupied dwelling" means a single dwelling
unit in a condominium or cooperative or a residential building of
less than three separate dwelling units, one of which will be owned
and occupied by a signatory to the mortgage or deed of trust secured
by such dwelling within 90 days of the execution of the mortgage or
deed of trust.
10245. The provisions of this article, exclusive of the provisions
of Sections 10240, 10240.3, 10242.5, and 10242.6, do not apply to any
bona fide loan secured directly or collaterally by a first trust
deed, the principal of which is thirty thousand dollars ($30,000) or
more, or to any bona fide loan secured directly or collaterally by
any lien junior thereto, the principal of which is twenty thousand
dollars ($20,000) or more.
10246. If any amount:
(a) In excess of the charges referred to in Section 10241 and
limited by Section 10242,
(b) In excess of the charges permitted by Section 10242.5, or
(c) Prohibited by Section 10248.1, is received, the borrower may
recover, from the person who shall have taken or received the excess
or prohibited amount, three times the amount of the excess or
prohibited amount and the borrower shall be entitled to costs and a
reasonable attorney's fee; provided that any action for recovery must
be brought within two (2) years from the date such excess or
prohibited charge was received. However, if the excess or prohibited
amount is the result of a bona fide error the borrower may only
recover such excess or prohibited amount.
10247. The provisions of this article pertaining to maximum costs
and expenses, charges and interest, together with the penalties
stated in this article, shall apply to any transaction involving a
third party as a purported lender or any other transaction which is
used as a subterfuge or means of avoiding or evading the provisions
of this article.
10248. Every person who, for compensation to be received directly
or indirectly, sells, offers to sell, purchases for resale or offers
to purchase for resale, or who negotiates or arranges for the
purchase, sale or exchange of a promissory note secured directly or
collaterally by a lien on real property, may receive only the maximum
total charges provided for in Section 10242.
10248.1. No real estate licensee shall charge, receive, or
negotiate for the payment by the borrower of any service charge or
fee other than charges and fees specified in Sections 10241, 10241.1,
10242, and 10242.5, prepayment penalties as authorized by law,
beneficiary-statement, payoff-demand, extinction, release,
reconveyance or other removal of record fees, and trustee's costs and
fees, and any other fees if in accordance with the Civil Code and
the Code of Civil Procedure.
10248.2. (a) A borrower may not waive any right or remedy under
this article. This subdivision shall not be deemed to prohibit a bona
fide settlement, release or compromise of any claim under this
article.
(b) If a loan is negotiated in violation of any section of this
article, the licensee, on demand, shall return to the borrower any
bonus, brokerage or commission paid or payable under subdivision (b)
of Section 10242 for negotiation of such loans. In the event such
demand is not satisfied within 20 days from the date of written
demand, the borrower may commence an action under this subdivision
and may recover actual damages or twice any bonus, brokerage, or
commission paid or payable under subdivision (b) of Section 10242 for
the negotiation of said loan whichever is greater, plus costs and
reasonable attorney's fees.
The "date of written demand" shall mean either the date upon which
the written demand is personally delivered to the licensee or the
date upon which the written demand is mailed to the licensee.
A licensee may not be held liable in any action brought under this
section for a violation of this article if the licensee shows by a
preponderance of evidence that the violation was not intentional and
resulted from a bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error.
If the borrower proceeds under this section he may not proceed
under Section 10246 as to the same breach.
(c) If a real estate licensee subject to the provisions of this
article violates any provision of Section 10241.1 he shall be liable
for, and pay over to the borrower, any commission or experience
rating dividend attributable to the insurance written on that loan
received by the licensee as a result of the sale of such insurance to
the borrower in violation of Section 10241.1 in addition to any
premium loss due to short rate cancellation of any insurance subject
to Section 10248.1 which was purchased by the borrower.
(d) No action for damages shall be maintained under this section
unless brought within two years after the maturity of the loan.
(e) The provisions of this article are not exclusive. The remedies
provided for herein shall be in addition to any other procedures or
remedies provided under law.
10248.3. The provisions of this article shall apply only to those
loans otherwise subject to this article which are made or negotiated
by real estate brokers acting within the meaning of subdivision (d)
of Section 10131 or subdivision (b) of Section 10240.
