Action by Governor Brown Threatens Extinction of Mortgage Brokers

In his most recent Budget Proposal, Governor Brown has included plans to consolidate all businesses in the financial industry under one head. He proposes the elimination of the Department of Real Estate and the Office of Real Estate Appraisers and placing jurisdiction of these licensees under the Department of Consumer Affairs. At the same time the Department of Corporations and the Department of Financial Institutions will be merged into one new entity called the Department of Business Oversight.

It seems that the Governor wants the consumer groups to limit the operations of the mortgage brokers, and the regulators of the big banks to regulate all the lenders and securities dealers.

These changes may well result in the elimination of the opportunity for real estate brokers to arrange loans for private investors.

Please see the analysis, by Guy Puccio, below.

We welcome your comments on this issue.


As you may know, Governor Brown is proposing to shut down a number of offices and the consolidation of a number of departments and agencies in the Executive Branch of state government.  Included is the apparent restructuring of BT&H into a new Department of Business and Consumer Services. Consolidation of DFI and DOC will likely shift most of the control of the industries and the services previously regulated by the DOC to the large banks, savings banks, and thrifts.

I am concerned about the proposal to eliminate the DRE and the OREA and to transfer their licensing function to Bureaus within the Department of Consumer Affairs (“DCA”). The better option would be to consolidate DRE and OREA and leave the DRE as an independent department under the proposed Department of Business and Consumer Services. The second option is to create a separate division within the proposed consolidation of the DFI and DOC consistent with the proposal for consolidation submitted to the previous administration.

A subsequent clarification has been issued regarding mortgage brokers who would be separated from the DRE and restructured within the consolidated entity, i.e., the proposed Department of Business and Consumer Services. The remaining licensing functions of the DRE would be transferred to a bureau within the DCA.

In my opinion, the regulation of the real estate and mortgage brokerage industries is a complex endeavor and not an activity with which the DCA has any recognized experience.

Will this consolidation plan shift most of the enforcement to the feds and to the California AG removing the legal section of the DRE that is currently responsible for the enforcement of the Real Estate Law? This is similar to a proposal advanced by Governor Brown when he was Attorney General.

The following are excerpts from the recently-released Governor’s Budget Proposal:

Consolidate Oversight of Financial Businesses into a Single Department —

The Department of Corporations regulates a variety of entities involved in the financial industry including securities brokers and dealers, mortgage lenders that are not affiliated with banks, and financial planners. The Department of Financial Institutions regulates state‑chartered banks, credit unions, and money transmitters.  This proposal eliminates the Department of Financial Institutions and the Department of Corporations and consolidates their functions into a new Department of Business Oversight because both of these departments perform the same fundamental mission (i.e. the licensing and regulation of business entities). The new Department will be part of the Business and Consumer Services Agency.

Consolidate Professional Licensing Functions within the Department of Consumer Affairs —

The Department of Real Estate and the Office of Real Estate Appraisers license and oversee professionals, which is the core function of most of the bureaus in the Department of Consumer Affairs (DCA). This proposal eliminates the Department of Real Estate and the Office of Real Estate Appraisers and places them as bureaus under the DCA in order to achieve administrative savings and efficiencies. Similarly, the Structural Pest Control Board and the Board of Chiropractic Examiners will be placed under the DCA.

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2 Responses to Action by Governor Brown Threatens Extinction of Mortgage Brokers

  1. Jo Ann on March 30, 2012 at 2:53 pm

    Hello!

    I was wondering if you could help me with the following question. Have you heard if the DOC in CA will require mortgage operations staff to be NMLS licensed (i.e. underwriting manager)?

    Any feedback would be greatly appreciated!
    Thanks!

    • N. Mitchell Feinstein on December 21, 2012 at 11:43 am

      Yes, if a CFL employee is dealing with one to four owner occuppied, they and the company need to be NMLS licensed.

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