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 (more) AB 2618 (Nestande) Page 2 of ? (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. AB 2618 (Nestande) Page 3 of ? 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 AB 2618 (Nestande) Page 4 of ? 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) AB 2618 (Nestande) Page 5 of ? **************