California Financial Code 4995.2 – (a) This division shall apply to any licensed person who in bad …
(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.
Terms Used In California Financial Code 4995.2
- Amortization: Paying off a loan by regular installments.
- Complaint: A written statement by the plaintiff stating the wrongs allegedly committed by the defendant.
- Discovery: Lawyers' examination, before trial, of facts and documents in possession of the opponents to help the lawyers prepare for trial.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
- Person: includes any person, firm, partnership, association, corporation, company, limited liability company, syndicate, estate, trust, business trust, or organization of any kind. See California Financial Code 18
- Restitution: The court-ordered payment of money by the defendant to the victim for damages caused by the criminal action.
- Writing: includes any form of recorded message capable of comprehension by ordinary visual means. See California Financial Code 8
(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.
(Added by Stats. 2009, Ch. 629, Sec. 4. (AB 260) Effective January 1, 2010.)