AB 1830 - Mortgage Lending Reform - California Key Vote

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Title: Subprime Lending Regulations

Vote Smart's Synopsis:

Vote to pass a bill that creates new regulations related to subprime lending.


-Defines "licensed person" as a real estate broker, a finance lender or broker, a residential mortgage lender, a commercial or industrial bank, a savings association, or a credit union that is licensed under applicable laws (Sec. 2). -Provides that a licensed person shall not originate a subprime loan unless he or she "reasonably" believes that the borrower will be able to make the scheduled loan payments, real estate tax payments, and insurance payments associated with the loan (Sec. 3). -Prohibits prepayment fees or penalties for subprime loans (Sec. 3). -Mandates that a person originating a subprime loan shall not refinance a consumer loan into a new loan that does not result in a reasonable net tangible benefit to the borrower (Sec. 3). -Prohibits negative amortization provisions in subprime loans (Sec. 3). -Prohibits a licensed person from steering, counseling, or directing a borrower towards a loan with rates, charges, principal amount, or prepayment terms that are more costly than that for which the borrower qualifies (Sec. 3). -Prohibits a licensed person from receiving any direct or indirect incentive compensation, including a yield spread premium, for originating a subprime loan with interest higher than the wholesale par rate for which the borrower qualifies (Sec. 3). -Specifies penalties for violating lending regulations, including suspension or loss of license, administrative penalties of up to $10,000, and civil penalties or civil liability of up to $25,000 (Secs. 5-7).