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F I S C A L I M P A C T R E P O R T

SPONSOR Rawson

DATE TYPED 3/05/05

HB

SHORT TITLE Real Estate Transaction Funding Deadlines

SB 652/aSJC/aSFC

ANALYST Ford

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

None

(Parenthesis ( ) Indicate Expenditure Decreases)

Conflicts with

SB 675

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General (AGO)

Department of Finance and Administration (DFA)

Economic Development Department (EDD)

Regulation and Licensing Department (RLD)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee amendment removes the appropriation from the bill.

Synopsis of SJC Amendment

The Senate Judiciary Committee amendment makes clarifying changes by changing the defini-

tion of “lender” to refer to mortgage loans instead of real property loans and by removing the

definition of “real property.”

Senate Bill 652/aSJC/aSFC-- Page 2

Synopsis of Original Bill

Senate Bill 652 appropriates $50 thousand from the general fund to the financial institutions di-

vision (FID) of the RLD for the purpose of enforcing new requirements on lenders regarding the

funding of real estate transactions.

The bill establishes deadlines for funding real estate transactions. It provides that a closing agent

shall not allow any party to a real property transaction to finalize the transaction unless the nec-

essary consideration has been previously delivered to the seller or the closing agent.

The bill establishes deadlines for lenders, requiring that lenders provide funds to complete the

real property purchase at the time they provide the documentation to the closing agent. It also

requires lenders, within 2 business days from the time the lender receives the copies of the re-

quired documents, to authorize the closing agent to record with the county clerk, advise the clos-

ing agent if any lender’s funding conditions have not been met, or advise the closing agent that

the documentation does not satisfy instructions.

Lenders who do not comply with these requirements, unreasonably refuse to approve documents

or unreasonably delay authorization of recordation of the documents may have their licenses re-

voked or suspended.

FISCAL IMPLICATIONS

The appropriation of $50 thousand contained in this bill is a recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of FY 06 shall revert to

the general fund.

The AGO writes that, as the administrative prosecutor for FID, it too may incur enforcement

costs for which there is no appropriation.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

This bill conflicts with Senate Bill 675, which seeks to repeal the existing Mortgage Loan Com-

pany and Loan Broker Act and enact a new act in its place.

TECHNICAL ISSUES

Section 2 of the bill, which establishes requirements for closing agents, presents enforcement

issues because the closing agents it seeks to regulate are not licensed by or registered with FID.

RLD notes that the definition of a “real property loan” includes “personal property” which may

conflict with the terms “real property” and “real estate transaction” used throughout this bill. It

also notes that the definition does not exclude commercial real estate transactions.

The AGO notes that the term “lender” as defined in Section 2 of the bill includes federally char-

tered entities that are not subject to regulation by the State.

RLD notes that the definition of closing agent may be unintentionally limiting the described

functions performed by a closing agent. This could be addressed by amending the definition of

Senate Bill 652/aSJC/aSFC-- Page 3

closing agent to include, but not be limited to, the list of actions functions.

EF/yr:lg:rs