BILL ANALYSIS
AB 2347
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2347 (Feuer)
As Amended August 2, 2010
Majority vote
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|ASSEMBLY: |50-25|(June 1, 2010) |SENATE: |22-14|(August 23, |
| | | | | |2010) |
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Original Committee Reference: B. & F.
SUMMARY : Provides that if a property contains five or more
dwelling units and a public entity holds is part of a recorded
deed restriction or is a party to a recorded rent regulatory
agreement on the property, the public entity may, by written
notice to the trustee, postpone the sale date by no more than 60
days. Specifically, this bill:
1)Specifies that the ability to postpone the sale may only be
exercised one time, by one public entity.
2)Provides that if multiple parties are part of the recorded
deed restriction or parties to the rent regulatory agreement,
then only one party may request the foreclosure postponement.
3)Specifies that a postponement of the foreclosure sale may only
occur once.
4)Defines "public entity" as a city, county, city and county,
redevelopment agency, or any political subdivision thereof.
5)Define "recorded deed restriction" as a deed recorded as an
encumbrance against title to the property in the official
records of the county in which the property is located which
specifies that all or a portion of the property's usage is
restricted to rental to lower income households and identifies
the number of units restricted to use as a low-income housing.
6)Defines "regulatory agreement" as an enforceable and
verifiable agreement with a public entity that has provided
government financing for the acquisition, rehabilitation,
construction, development, or operation of low-income hosing
property that restricts all or a portion of the property's
usage for rental to lower income households. The regulatory
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agreement shall identify the number of units restricted for
use as low-income housing, specify the maximum rent allowed
for those unites, and be recorded in the county in which the
property is located.
The Senate amendments :
1)Provide that a request to postpone a sale can not extend
beyond 180 days past the filing of the notice of default.
2)Require the public entity to notify the trustee at least 72
hours prior to the schedule sale date.
3)Establish a sunset date of January 1, 2013.
4)Make other technical changes necessary for implementation.
EXISTING LAW :
1)Regulates the non-judicial foreclosure process pursuant to the
power of sale contained within a mortgage contract, and
provides that in order to commence the process, a trustee,
mortgagee, or beneficiary must record a notice of default
(NOD) and allow three months to lapse before setting a date
for sale of the property. [Civil Code Section 2924, all
further references are to the Civil Code].
2)Provides that the mortgagee, trustee or other person
authorized to make the sale must give notice of sale, and
requires notice of sale to be made, as specified, at least 20
days prior to the date of sale. [Section 2924f].
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the bill currently under consideration. Some exceptions
include the inclusion of a sunset date and clarification of the
notice and foreclosure timelines.
FISCAL EFFECT : None
COMMENTS : According to the author, this bill is intended to
mitigate the impacts of the foreclosure crisis on the
availability of affordable housing in California. When public
agencies provided financial assistance to multifamily properties
in exchange for securing some percentage of affordable housing
unites, the author states, those agencies should have an
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opportunity to intervene by either purchasing the property or
finding a purchaser for the property that will preserve the
affordable units before the trustee concludes foreclosure
proceedings.
The author states that AB 2347 would help local governments
protect their investments in affordable rental housing,
threatened by foreclosure, by providing 60 additional days
before an agency-assisted affordable development can be sold
through foreclosure.
Supporters note that public agencies, typically city or county
housing departments, frequently provide financial assistance to
multifamily properties. Deeds of trust and/or regulatory
agreements secure the loans and ensure that the properties
remain affordable to eligible families. These affordability
agreements are usually subordinated to mortgages or similar
interests held by private lenders. If the owner defaults on the
private loan and a foreclosure ensue, the public agency's
investment and affordability conditions are wiped out.
According to supporters, in the last three years in the City of
Los Angeles alone, 22 separate loans for multifamily
developments in the City's portfolio were threatened with
foreclosure. If all these loans were wiped out, the City of Los
Angeles would lose approximately $23 million, and the
affordability restrictions on many affordable rental units.
The author observes that a receiver is typically appointed to
evaluate and report on the property's operations and financial
condition in a foreclosure on a multifamily residence. A public
agency with a subordinated interest in the property uses the
receiver's report to conduct an economic analysis. This
analysis is the basis for a locality's action plan for the
property. The local legislative body must review and approve
the best fiduciary course of action regardless of its threatened
investment and loss of housing.
The problem, supporter's state, is that too often the report
arrives too late for the local government to utilize it for this
analysis. The foreclosure process requires that a foreclosed
multi-family property be sold at a public auction. In the
current process, government agencies that are the secondary loan
holder are not given ample time to approve the funds, make a
bid, cure a default or buy a distressed property to ensure that
it remains affordable.
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In order to allow public agencies an appropriate opportunity to
obtain a meaningful receiver's report, determine a course of
action, and take steps to protect public investments, this bill
would allow public agencies to send a written notice to the
trustee to temporarily postpone a foreclosure sale for up to 60
days. The postponement could only be exercised if: 1) the
public agency holds a trust deed or rent regulatory agreement on
the property; and, 2) the property contains two or more units.
AB 2347 would, supporters contend, ensure that local governments
have a fair opportunity to obtain the receiver's reports and
other assessments of the property - not just days before the
sale is scheduled, but in time to evaluate the information, and
decide whether to commit scarce financial resources to salvage
the long-term affordability of these valuable, rent-restricted
apartments.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081
FN: 0005477