4995. The following definitions shall apply for purposes of this
division:
(a) "Higher-priced mortgage loan" has the meaning set forth in
Part 226 of Title 12 of the Code of Federal Regulations.
(b) "Licensed person" means a real estate broker licensed under
the Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code), a finance lender or
broker licensed under the California Finance Lenders Law (Division 9
(commencing with Section 22000)), a residential mortgage lender
licensed under the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000)), a commercial or
industrial bank organized under the Banking Law (Division 1
(commencing with Section 99)), a savings association organized under
the Savings Association Law (Division 2 (commencing with Section
5000)), and a credit union organized under the California Credit
Union Law (Division 5 (commencing with Section 14000)).
(c) "Mortgage broker" means a licensed person who provides
mortgage brokerage services. For purposes of this division, a
licensed person who makes home loans is a "mortgage broker," and
subject to the requirements of this division applicable to mortgage
brokers, only with respect to transactions in which the licensed
person provides mortgage brokerage services.
(d) "Mortgage brokerage services" means arranging or attempting to
arrange, as exclusive agent for the borrower or as dual agent for
the borrower and lender, for compensation or in expectation of
compensation, paid directly or indirectly, a higher-priced mortgage
loan made by an unaffiliated third party.
4995.1. Notwithstanding any other provision of law, the maximum
amount of a prepayment penalty that may be imposed by a licensed
person in connection with a higher-priced mortgage loan shall not
exceed 2 percent of the principal balance prepaid, for prepayment of
the loan during the first 12 months following loan consummation or 1
percent of the principal balance prepaid, for prepayment of the loan
during the second 12 months following loan consummation.
4995.2. (a) This division shall apply to any licensed person who in
bad faith attempts to avoid the application of this division by
doing either of the following:
(1) Dividing any loan transaction into separate parts for the
purpose and with the intent of evading the provisions of this
division.
(2) Any other subterfuge.
(b) Notwithstanding any other provision of law, a licensed person
shall not make, or cause to be made, any false, deceptive, or
misleading statement or representation in connection with a
higher-priced mortgage loan.
(c) A mortgage broker who arranges only higher-priced mortgage
loans shall disclose that fact to a borrower, both orally and in
writing, at the time of initially engaging in mortgage brokerage
services with that borrower.
(d) A mortgage broker who provides mortgage brokerage services
shall not steer, counsel, or direct a borrower to accept a loan at a
higher cost than that for which the borrower could qualify based upon
the loans offered by the persons with whom the broker regularly does
business.
(e) (1) A mortgage broker who provides mortgage brokerage services
for a borrower shall not receive compensation, including a yield
spread premium, fee, commission, or any other compensation, for
arranging a higher-priced mortgage loan with a prepayment penalty
that exceeds the compensation that the mortgage broker would
otherwise receive for arranging that higher-priced mortgage loan
without a prepayment penalty.
(2) When providing mortgage brokerage services for a borrower, a
mortgage broker shall receive the same compensation for providing
those services whether paid by the lender, borrower, or a third
party.
(f) No licensed person shall recommend or encourage default on an
existing loan or other debt prior to and in connection with the
closing or planned closing of a higher-priced mortgage loan that
refinances all or any portion of the existing loan or debt.
(g) A licensed person shall not make a higher-priced mortgage loan
that contains a provision for negative amortization. This
subdivision shall not preclude a licensed person from entering into a
subsequent agreement with a borrower to capitalize payments as a
means of permitting a borrower to cure or prevent a delinquency.
(h) A licensed person who makes a higher-priced mortgage loan and
who, when acting in good faith, fails to comply with this section,
shall not be liable if the licensed person establishes either of the
following:
(1) Within 90 days of the loan closing and prior to the
institution of any action against the licensed person under this
section, the licensed person did all of the following:
(A) Notified the borrower of the compliance failure.
(B) Tendered appropriate restitution.
(C) Offered, at the borrower's option, either to make the
higher-priced mortgage loan comply with the requirements of this
division or change the terms of the loan in a manner beneficial to
the borrower so that the loan will no longer be considered a
higher-priced mortgage loan subject to the provisions of this
division.
(D) Within a reasonable period of time following the borrower's
election of remedies, took appropriate action based on the borrower's
choice.
(2) (A) The compliance failure was not intentional and resulted
from a bona fide error notwithstanding the maintenance of procedures
reasonably adopted to avoid those errors, and within 120 days after
receipt of a complaint or the discovery of the compliance failure or
the licensed person's receipt of written notice of the compliance
failure, the licensed person did all of the following:
(i) Notified the borrower of the compliance failure.
(ii) Tendered appropriate restitution.
(iii) Offered, at the borrower's option, either to make the
higher-priced mortgage loan comply with the requirements of this
division or change the terms of the loan in a manner beneficial to
the borrower so that the loan will no longer be considered a
higher-priced mortgage loan subject to the provisions of this
division.
(iv) Within a reasonable period of time following the borrower's
election of remedies, took appropriate action based on the borrower's
choice.
(B) For purposes of this subdivision, examples of a bona fide
error include clerical, calculation, computer malfunction and
programming, and printing errors.
4995.3. (a) Any licensed person who violates any provision of this
division shall be deemed to have violated that person's licensing
law.
(b) The licensing agency may, by order and after appropriate
administrative hearing, prohibit licensees under this division from
engaging in acts or practices in connection with higher-priced
mortgage loans that the licensing agency finds to be unfair,
deceptive, or designed to evade laws of this state.
(c) A violation of Section 2923.1 of the Civil Code in connection
with a higher-priced mortgage loan is a violation of this division.
(d) A violation of the provisions of Part 226 of Title 12 of the
Code of Federal Regulations, relating to prepayment penalties in
connection with higher-priced mortgage loans, is a violation of this
division.
(e) The provisions of this division may be enforced only by the
Attorney General or the licensed person's licensing agency. Any
licensed person who willfully and knowingly violates any provision of
this division shall be liable for a civil penalty of not more than
ten thousand dollars ($10,000) for each violation.
(f) A prepayment penalty or yield spread premium provision of a
higher-priced mortgage loan that violates this division shall be
unenforceable.
4995.4. The provisions of this division shall apply to
higher-priced mortgage loans originated on or after July 1, 2010.
4995.5. The provisions of this division are severable. If any
provision of this division or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
4995.6. Nothing in this division shall be construed to affect any
other rights or remedies otherwise available under the law.
4995. The following definitions shall apply for purposes of this
division:
(a) "Higher-priced mortgage loan" has the meaning set forth in
Part 226 of Title 12 of the Code of Federal Regulations.
(b) "Licensed person" means a real estate broker licensed under
the Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code), a finance lender or
broker licensed under the California Finance Lenders Law (Division 9
(commencing with Section 22000)), a residential mortgage lender
licensed under the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000)), a commercial or
industrial bank organized under the Banking Law (Division 1
(commencing with Section 99)), a savings association organized under
the Savings Association Law (Division 2 (commencing with Section
5000)), and a credit union organized under the California Credit
Union Law (Division 5 (commencing with Section 14000)).
(c) "Mortgage broker" means a licensed person who provides
mortgage brokerage services. For purposes of this division, a
licensed person who makes home loans is a "mortgage broker," and
subject to the requirements of this division applicable to mortgage
brokers, only with respect to transactions in which the licensed
person provides mortgage brokerage services.
(d) "Mortgage brokerage services" means arranging or attempting to
arrange, as exclusive agent for the borrower or as dual agent for
the borrower and lender, for compensation or in expectation of
compensation, paid directly or indirectly, a higher-priced mortgage
loan made by an unaffiliated third party.
4995.1. Notwithstanding any other provision of law, the maximum
amount of a prepayment penalty that may be imposed by a licensed
person in connection with a higher-priced mortgage loan shall not
exceed 2 percent of the principal balance prepaid, for prepayment of
the loan during the first 12 months following loan consummation or 1
percent of the principal balance prepaid, for prepayment of the loan
during the second 12 months following loan consummation.
4995.2. (a) This division shall apply to any licensed person who in
bad faith attempts to avoid the application of this division by
doing either of the following:
(1) Dividing any loan transaction into separate parts for the
purpose and with the intent of evading the provisions of this
division.
(2) Any other subterfuge.
(b) Notwithstanding any other provision of law, a licensed person
shall not make, or cause to be made, any false, deceptive, or
misleading statement or representation in connection with a
higher-priced mortgage loan.
(c) A mortgage broker who arranges only higher-priced mortgage
loans shall disclose that fact to a borrower, both orally and in
writing, at the time of initially engaging in mortgage brokerage
services with that borrower.
(d) A mortgage broker who provides mortgage brokerage services
shall not steer, counsel, or direct a borrower to accept a loan at a
higher cost than that for which the borrower could qualify based upon
the loans offered by the persons with whom the broker regularly does
business.
(e) (1) A mortgage broker who provides mortgage brokerage services
for a borrower shall not receive compensation, including a yield
spread premium, fee, commission, or any other compensation, for
arranging a higher-priced mortgage loan with a prepayment penalty
that exceeds the compensation that the mortgage broker would
otherwise receive for arranging that higher-priced mortgage loan
without a prepayment penalty.
(2) When providing mortgage brokerage services for a borrower, a
mortgage broker shall receive the same compensation for providing
those services whether paid by the lender, borrower, or a third
party.
(f) No licensed person shall recommend or encourage default on an
existing loan or other debt prior to and in connection with the
closing or planned closing of a higher-priced mortgage loan that
refinances all or any portion of the existing loan or debt.
(g) A licensed person shall not make a higher-priced mortgage loan
that contains a provision for negative amortization. This
subdivision shall not preclude a licensed person from entering into a
subsequent agreement with a borrower to capitalize payments as a
means of permitting a borrower to cure or prevent a delinquency.
(h) A licensed person who makes a higher-priced mortgage loan and
who, when acting in good faith, fails to comply with this section,
shall not be liable if the licensed person establishes either of the
following:
(1) Within 90 days of the loan closing and prior to the
institution of any action against the licensed person under this
section, the licensed person did all of the following:
(A) Notified the borrower of the compliance failure.
(B) Tendered appropriate restitution.
(C) Offered, at the borrower's option, either to make the
higher-priced mortgage loan comply with the requirements of this
division or change the terms of the loan in a manner beneficial to
the borrower so that the loan will no longer be considered a
higher-priced mortgage loan subject to the provisions of this
division.
(D) Within a reasonable period of time following the borrower's
election of remedies, took appropriate action based on the borrower's
choice.
(2) (A) The compliance failure was not intentional and resulted
from a bona fide error notwithstanding the maintenance of procedures
reasonably adopted to avoid those errors, and within 120 days after
receipt of a complaint or the discovery of the compliance failure or
the licensed person's receipt of written notice of the compliance
failure, the licensed person did all of the following:
(i) Notified the borrower of the compliance failure.
(ii) Tendered appropriate restitution.
(iii) Offered, at the borrower's option, either to make the
higher-priced mortgage loan comply with the requirements of this
division or change the terms of the loan in a manner beneficial to
the borrower so that the loan will no longer be considered a
higher-priced mortgage loan subject to the provisions of this
division.
(iv) Within a reasonable period of time following the borrower's
election of remedies, took appropriate action based on the borrower's
choice.
(B) For purposes of this subdivision, examples of a bona fide
error include clerical, calculation, computer malfunction and
programming, and printing errors.
4995.3. (a) Any licensed person who violates any provision of this
division shall be deemed to have violated that person's licensing
law.
(b) The licensing agency may, by order and after appropriate
administrative hearing, prohibit licensees under this division from
engaging in acts or practices in connection with higher-priced
mortgage loans that the licensing agency finds to be unfair,
deceptive, or designed to evade laws of this state.
(c) A violation of Section 2923.1 of the Civil Code in connection
with a higher-priced mortgage loan is a violation of this division.
(d) A violation of the provisions of Part 226 of Title 12 of the
Code of Federal Regulations, relating to prepayment penalties in
connection with higher-priced mortgage loans, is a violation of this
division.
(e) The provisions of this division may be enforced only by the
Attorney General or the licensed person's licensing agency. Any
licensed person who willfully and knowingly violates any provision of
this division shall be liable for a civil penalty of not more than
ten thousand dollars ($10,000) for each violation.
(f) A prepayment penalty or yield spread premium provision of a
higher-priced mortgage loan that violates this division shall be
unenforceable.
4995.4. The provisions of this division shall apply to
higher-priced mortgage loans originated on or after July 1, 2010.
4995.5. The provisions of this division are severable. If any
provision of this division or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
4995.6. Nothing in this division shall be construed to affect any
other rights or remedies otherwise available under the law.
4995. The following definitions shall apply for purposes of this
division:
(a) "Higher-priced mortgage loan" has the meaning set forth in
Part 226 of Title 12 of the Code of Federal Regulations.
(b) "Licensed person" means a real estate broker licensed under
the Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code), a finance lender or
broker licensed under the California Finance Lenders Law (Division 9
(commencing with Section 22000)), a residential mortgage lender
licensed under the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000)), a commercial or
industrial bank organized under the Banking Law (Division 1
(commencing with Section 99)), a savings association organized under
the Savings Association Law (Division 2 (commencing with Section
5000)), and a credit union organized under the California Credit
Union Law (Division 5 (commencing with Section 14000)).
(c) "Mortgage broker" means a licensed person who provides
mortgage brokerage services. For purposes of this division, a
licensed person who makes home loans is a "mortgage broker," and
subject to the requirements of this division applicable to mortgage
brokers, only with respect to transactions in which the licensed
person provides mortgage brokerage services.
(d) "Mortgage brokerage services" means arranging or attempting to
arrange, as exclusive agent for the borrower or as dual agent for
the borrower and lender, for compensation or in expectation of
compensation, paid directly or indirectly, a higher-priced mortgage
loan made by an unaffiliated third party.
4995.1. Notwithstanding any other provision of law, the maximum
amount of a prepayment penalty that may be imposed by a licensed
person in connection with a higher-priced mortgage loan shall not
exceed 2 percent of the principal balance prepaid, for prepayment of
the loan during the first 12 months following loan consummation or 1
percent of the principal balance prepaid, for prepayment of the loan
during the second 12 months following loan consummation.
4995.2. (a) This division shall apply to any licensed person who in
bad faith attempts to avoid the application of this division by
doing either of the following:
(1) Dividing any loan transaction into separate parts for the
purpose and with the intent of evading the provisions of this
division.
(2) Any other subterfuge.
(b) Notwithstanding any other provision of law, a licensed person
shall not make, or cause to be made, any false, deceptive, or
misleading statement or representation in connection with a
higher-priced mortgage loan.
(c) A mortgage broker who arranges only higher-priced mortgage
loans shall disclose that fact to a borrower, both orally and in
writing, at the time of initially engaging in mortgage brokerage
services with that borrower.
(d) A mortgage broker who provides mortgage brokerage services
shall not steer, counsel, or direct a borrower to accept a loan at a
higher cost than that for which the borrower could qualify based upon
the loans offered by the persons with whom the broker regularly does
business.
(e) (1) A mortgage broker who provides mortgage brokerage services
for a borrower shall not receive compensation, including a yield
spread premium, fee, commission, or any other compensation, for
arranging a higher-priced mortgage loan with a prepayment penalty
that exceeds the compensation that the mortgage broker would
otherwise receive for arranging that higher-priced mortgage loan
without a prepayment penalty.
(2) When providing mortgage brokerage services for a borrower, a
mortgage broker shall receive the same compensation for providing
those services whether paid by the lender, borrower, or a third
party.
(f) No licensed person shall recommend or encourage default on an
existing loan or other debt prior to and in connection with the
closing or planned closing of a higher-priced mortgage loan that
refinances all or any portion of the existing loan or debt.
(g) A licensed person shall not make a higher-priced mortgage loan
that contains a provision for negative amortization. This
subdivision shall not preclude a licensed person from entering into a
subsequent agreement with a borrower to capitalize payments as a
means of permitting a borrower to cure or prevent a delinquency.
(h) A licensed person who makes a higher-priced mortgage loan and
who, when acting in good faith, fails to comply with this section,
shall not be liable if the licensed person establishes either of the
following:
(1) Within 90 days of the loan closing and prior to the
institution of any action against the licensed person under this
section, the licensed person did all of the following:
(A) Notified the borrower of the compliance failure.
(B) Tendered appropriate restitution.
(C) Offered, at the borrower's option, either to make the
higher-priced mortgage loan comply with the requirements of this
division or change the terms of the loan in a manner beneficial to
the borrower so that the loan will no longer be considered a
higher-priced mortgage loan subject to the provisions of this
division.
(D) Within a reasonable period of time following the borrower's
election of remedies, took appropriate action based on the borrower's
choice.
(2) (A) The compliance failure was not intentional and resulted
from a bona fide error notwithstanding the maintenance of procedures
reasonably adopted to avoid those errors, and within 120 days after
receipt of a complaint or the discovery of the compliance failure or
the licensed person's receipt of written notice of the compliance
failure, the licensed person did all of the following:
(i) Notified the borrower of the compliance failure.
(ii) Tendered appropriate restitution.
(iii) Offered, at the borrower's option, either to make the
higher-priced mortgage loan comply with the requirements of this
division or change the terms of the loan in a manner beneficial to
the borrower so that the loan will no longer be considered a
higher-priced mortgage loan subject to the provisions of this
division.
(iv) Within a reasonable period of time following the borrower's
election of remedies, took appropriate action based on the borrower's
choice.
(B) For purposes of this subdivision, examples of a bona fide
error include clerical, calculation, computer malfunction and
programming, and printing errors.
4995.3. (a) Any licensed person who violates any provision of this
division shall be deemed to have violated that person's licensing
law.
(b) The licensing agency may, by order and after appropriate
administrative hearing, prohibit licensees under this division from
engaging in acts or practices in connection with higher-priced
mortgage loans that the licensing agency finds to be unfair,
deceptive, or designed to evade laws of this state.
(c) A violation of Section 2923.1 of the Civil Code in connection
with a higher-priced mortgage loan is a violation of this division.
(d) A violation of the provisions of Part 226 of Title 12 of the
Code of Federal Regulations, relating to prepayment penalties in
connection with higher-priced mortgage loans, is a violation of this
division.
(e) The provisions of this division may be enforced only by the
Attorney General or the licensed person's licensing agency. Any
licensed person who willfully and knowingly violates any provision of
this division shall be liable for a civil penalty of not more than
ten thousand dollars ($10,000) for each violation.
(f) A prepayment penalty or yield spread premium provision of a
higher-priced mortgage loan that violates this division shall be
unenforceable.
4995.4. The provisions of this division shall apply to
higher-priced mortgage loans originated on or after July 1, 2010.
4995.5. The provisions of this division are severable. If any
provision of this division or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
4995.6. Nothing in this division shall be construed to affect any
other rights or remedies otherwise available under the law.
