BILL ANALYSIS
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THIRD READING
Bill No: AB 957
Author: Galgiani (D)
Amended: 6/26/09 in Senate
Vote: 27 - Urgency
SENATE JUDICIARY COMMITTEE : 4-0, 6/23/09
AYES: Corbett, Harman, Florez, Leno
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 77-0, 5/26/09 - See last page for vote
SUBJECT : Residential real estate transfers
SOURCE : Author
DIGEST : This bill prohibits a seller of residential real
property from requiring a buyer to purchase title insurance
or escrow services, in connection with the sale of a
property, from a company chosen by the seller, as
specified. This bill limits its provision to properties
purchased at a foreclosure sale. The provisions of the
bill sunset on January 1, 2105.
ANALYSIS :
Existing law:
Existing federal law, the federal Real Estate Settlement
Procedures Act (RESPA), regulates transactions between
buyers, sellers, and mortgagees involving "settlement
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services" (including title insurance and escrow services).
That Act generally requires that borrowers receive certain
timely disclosures relating to the costs of those
settlement services, and prohibits certain practices on the
part of a mortgagee that increase the costs of settlement
services. (12 United States Constitution Section 2601 et
seq.)
Existing federal law provides, under RESPA, that no seller
of property that will be purchased with the assistance of a
federally related mortgage loan shall require directly or
indirectly, as a condition to selling the property, which
title insurance covering the property be purchased by the
buyer from any particular title company. Any seller who
violates that provision is liable to the buyer in an amount
equal to three times all charges made for such title
insurance. (12 United States Constitution Section 2608.)
Existing state law, the Escrow Law, provides for the
licensing of escrow agents by the Department of
Corporations, and states that any person subject to the
Escrow Law who violates any provision of RESPA, or any
regulation promulgated thereunder, violates the Escrow Law.
(Financial Code Section 17425.)
Existing state law requires a real property seller, or the
seller's agent, to disclose to buyers any material facts
that would have a significant and measurable effect on the
value or desirability of the property (if the buyer does
not know, and would not reasonably discover, those facts).
( Karoutas v. Homefed Bank (1991) 232 California Appeals 3d
767; Reed v. King (1983) 145 California Appeals 3d 261.)
Existing state law requires a seller, or the seller's agent
in certain cases, to disclose to a buyer when a property is
in a specified natural hazard zone, and requires the
disclosure to be on a Natural Hazard Disclosure Statement,
as specified. (Civil Code Sections. 1103, 1103.2.)
Existing law permits a seller to use an expert report or
opinion from an engineer, land surveyor, geologist, or
expert in natural hazard discovery to fulfill his or her
natural hazard notification requirements. (Civil Code
Section 1103.4.)
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Existing state law exempts certain transfers from the above
requirement to provide a natural hazard disclosure
statement, including transfers of property acquired at a
foreclosure sale. (Civil Code Section 1103.1.) Existing
law provides that neither the seller, nor their agent,
shall be liable for any error, inaccuracy, or omission of
any information delivered if the error, inaccuracy, or
omission was not within the personal knowledge of the
transferor or the listing or selling agent, as specified.
(Civil Code Section 1103.4.)
This bill, enacts the Buyer's Choice Act, and prohibits a
seller from directly or indirectly, as a condition of
receiving offers or selling residential real property to a
buyer, require the buyer to purchase title insurance, or
escrow services, in connection with the sale of that
property from a company chosen by the seller.
This bill defines "seller" as a mortgagee, or beneficiary
under a deed or trust who acquired title to residential
real property at a foreclosure sale, including a trustee,
agent, officer, or other employee of any such mortgagee,
beneficiary, or other person.
This bill states that a seller who violates the bill's
provisions shall be liable in an amount equal to three
times all charges made for the title insurance, escrow
service, or Natural Hazard Disclosure Statement. In
addition, any person who violates this section shall be
deemed to have violated his or her license law and shall be
subject to discipline by his or her licensing entity.
This bill provides that a transaction subject to the bill's
provisions shall not be invalidated solely because of the
failure of any person to comply with any provision of the
Act.
This bill sunset on January 1, 2015.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/7/09)
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Escrow Institute of California
Property ID
ARGUMENTS IN SUPPORT : According to the author's office,
since the last major bout of foreclosures during the
downturn of the 1990's, a practice has developed in the
foreclosure market that is having significant consequences
to many groups, including home buyers. Banks and the
Housing and Urban Development Department are increasingly
requiring the use of specific service providers when they
are the seller of residential property, regardless of who
pays for the service. This practice is illegal under
federal laws and regulations. This bill seeks to strengthen
state law to further curtail this practice. Small
businesses are the undisputed heart of the American
economy. Local businesses, which offer the best resources
and solutions for relieving the current housing crisis, are
being shut out of the Real Estate Owned (REO) market.
Instead of local businesses assisting homeowners and
expediting the transfer of foreclosed properties to
purchasers, they're literally on the outside with no way to
get in. Excluding local businesses from competition for
services, eliminates local job creation that stimulates
local economies and violates anti-competition and
anti-trust laws.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Gilmore,
Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber,
Huffman, Jones, Knight, Krekorian, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, John A. Perez, V. Manuel Perez,
Portantino, Price, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: DeVore, Garrick, Jeffries
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RJG:do 7/8/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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