BILL ANALYSIS                                                                                                                                                                                                    






                             SENATE JUDICIARY COMMITTEE
                           Senator Ellen M. Corbett, Chair
                              2009-2010 Regular Session


          AB 2618 (Nestande)
          As Amended March 25, 2010
          Hearing Date: June 10, 2010
          Fiscal: No
          Urgency: No
          BCP:jd
                    

                                        SUBJECT
                                           
                          Local Government: County Recorder

                                      DESCRIPTION  

          This bill would authorize the board of supervisors of any county  
          to adopt a resolution authorizing the county recorder to notify  
          a party of the execution of an instrument affecting their  
          interest in real property, within 30 days of the resolution, as  
          specified.

                                      BACKGROUND  

          Real estate fraud has impacted struggling homeowners throughout  
          the state for many years.  In response to several scams taking  
          place in the early 1990s, the Legislature approved SB 1842  
          (Watson, Chapter 815, Statutes of 1992), which permitted the Los  
          Angeles County Recorder to notify property owners within 30 days  
          after the recording of a deed.  That notification sought to  
          respond to scams where homeowners were tricked into signing a  
          quitclaim deed for their property (thus, transferring the home),  
          and where "foreclosure sharks" forge an owner's signature and  
          take out a loan on the property without their knowledge or  
          consent.  While that bill sunset on January 1, 1996, SB 1631  
          (Watson, Chapter 177, Statutes of 1996) permanently continued  
          its provisions the following year.  Specifically, that bill  
          permitted the Los Angeles County Board of Supervisors to adopt a  
          resolution authorizing the county recorder to notify the parties  
          executing specified documents affecting their interest in real  
          property. 

          As a result of concerns about fraud in Riverside County, SB 1287  
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          (Hollingsworth, Chapter 117, Statutes of 2008) enacted similar  
          provisions with regards to that county.  The extension was  
          supported by two cases where several undeveloped properties were  
          sold without the owners' knowledge.  Given the remote nature of  
          the properties, the owners did not know that their property had  
          been sold and in one case, the owner only discovered the scam  
          when he drove past the property and discovered a "for sale"  
          sign. 

          This bill would further extend the above program to any county,  
          thus permitting any board of supervisors to implement the  
          notification requirements in any county.

                                CHANGES TO EXISTING LAW
           
           Existing law  authorizes the Los Angeles County Board of  
          Supervisors and the Riverside County Board of Supervisors to  
          adopt a resolution authorizing the county recorder to notify the  
          parties or parties executing a deed, quitclaim deed, or deed of  
          trust.   (Gov. Code Secs. 27297.6, 27297.7.)

           Existing law  permits the Los Angeles County recorder to collect  
          a fee from the party filing a deed, quitclaim deed, or deed of  
          trust.  That fee, capped at $7, may not exceed the mailing cost  
          of the above notice. (Gov. Code Sec. 27387.1.)

           This bill  would expand the above authorization statewide by  
          permitting a board of supervisors of any county to adopt a  
          resolution authorizing the county recorder to notify the parties  
          executing a deed, quitclaim deed, or deed of trust.  This bill  
          would not extend the fee authority statewide.

                                        COMMENT
           
          1.   Stated need for the bill  

          According to the author:

            Assembly Bill 2618 is designed to equip counties with a tool  
            that will enable individuals to fight real estate fraud.   
            There are horror stories of people having had their home  
            unknowingly sold.  Citizens are better able to protect  
            themselves and seek help once they gain knowledge of  
            recordations affecting their property.  AB 2618 would allow  
            a county a mechanism to accomplish this protection.

                                                                      



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          2.   Notification program extended statewide  

          By removing county specific language currently in Government  
          Code Section 27297.7, this bill would permit any board of  
          supervisors to pass a resolution authorizing the county recorder  
          to, within 30 days of recordation, notify the parties executing  
          certain documents that affect their interest in real property.   
          Those documents, a deed, quitclaim deed, or deed of trust, all  
          act to transfer the individual's property interest to another  
          party.  Once a property has been fraudulently transferred, the  
          perpetrator may then attempt to take out a loan secured by the  
          newly transferred property or even turn around and sell the  
          property.  Although that notification would not prevent a  
          fraudulent transfer, it would alert the property owner that such  
          a transfer has occurred - that individual can then notify  
          authorities and take the necessary steps to clear the title to  
          their property.

          Regarding the actual process being used to "steal" a person's  
          home, the AARP's Scam Alert: Home, Stolen Home, contends that:

            [a]rmed with property records, crooks can . . . purchase $10  
            property transfer forms at any office supply store.  The  
            signatures of "sellers" are forged, and paperwork is filed  
            with the city or county recorder's office.  In many states,  
            deed recorders and those who oversee property closings are  
            not required to authenticate the identities of buyers or  
            sellers.  Some crooks simply create fake IDs, stealing the  
            real homeowner's identity.

            With a newly issued deed, stolen homes are sometimes sold .  
            . . for a fraction of their worth to cash-paying buyers (who  
            are also scammed).  But more often, hijacked homes are used  
            as collateral to get new loans.  Lenders are more likely to  
            issue new loans to homeowners with no existing mortgage.   
            "The elderly are most often targeted because they usually  
            don't have a mortgage," says Molly Butters of the Indiana  
            Attorney General's Office.

          Provided that an individual promptly responds to a notification  
          that their property has been transferred without their consent,  
          that individual may be able to reduce the repercussions of that  
          fraudulent transfer.  

          3.   No fee authority  

                                                                      



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          Under existing law, the Los Angeles County recorder may collect  
          a fee of up to $7 from the party filing a deed, quitclaim deed,  
          or deed of trust to cover the cost of mailing the notices sent  
          to homeowners.  In extending the program to Riverside County, SB  
          1287 (Hollingsworth, 2008) did not authorize Riverside County to  
          charge a fee to cover costs associated with the program.  This  
          bill would similarly expand the program, but not grant fee  
          authority to additional counties who do want to notify  
          homeowners of the filing of these documents.  As this is a  
          voluntary program, counties would likely authorize the program  
          only where there were sufficient funds to support the sending of  
          these notices. 
           

          Support  :  California District Attorneys Association

           Opposition  :  None Known

                                        HISTORY
           
           Source  :  County Recorders Association of California (CRAC)

           Related Pending Legislation  :  SB 878 (Liu), would expand the  
          scope of existing law to allow Los Angeles County to notify  
          affected parties, including occupants of the property, when a  
          notice of default or notice of sale has been recorded.  The bill  
          would also allow for the Los Angeles County Recorder to collect  
          a fee of up to $7 in order to cover the costs of notifying the  
          parties and providing information about housing assistance and  
          counseling.

           Prior Legislation  :

          SB 1842 (Watson, Chapter 815, Statutes of 1992) (See  
          Background.)

          SB 1631 (Watson, Chapter 177, Statutes of 1996) (See  
          Background.)

          SB 1287 (Hollingsworth, Chapter 117, Statutes of 2008) (See  
          Background.)

           Prior Vote  :

          Assembly Local Government Committee (Ayes 8, Noes 0)
          Assembly Floor (Ayes 74, Noes 0)
                                                                      



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