BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 127| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 127 Author: Calderon (D) Amended: 5/20/09 Vote: 21 SENATE JUDICIARY COMMITTEE : 3-2, 5/12/09 AYES: Corbett, Florez, Leno NOES: Harman, Walters SUBJECT : Mortgages SOURCE : Author DIGEST : This bill requires a mortgagee or trustee to make specified disclosures on an Internet web site or in a 24-hour telephone recording at least once a week before the scheduled sale of a property. This bill (1) requires a beneficiary to provide an opening bid to a trustee at least week prior to the first scheduled sale date, and (2) require a trustee to provide a list of liens and encumbrances on a foreclosed property and to charge a reasonable fee for that information, as specified. ANALYSIS : Existing law regulates the non-judicial foreclosure of properties pursuant to the power of sale contained within a mortgage contract. To commence the process, existing state law requires the trustee, mortgagee, or beneficiary to record a Notice of Default and allow three months to lapse before setting a date for sale of the property. (Civil Code Sections 22924, 2924f.) CONTINUED SB 127 Page 2 Existing law governs the issuance of the Notice of Sale and requires that notice to be recorded at least 14 days prior to the date of sale. (Civil Code Section 2924f.) Existing law requires a mortgagee, trustee, or other person authorized to record the Notice of Default or Notice of Sale to make specified disclosures after the recording of those notices and prior to the sale of the property. (Civil Code Section 2924b.) This bill additionally requires the mortgagee, trustee, or other person authorized to record the notice of sale to make information available about each property at least one week before sale. This bill requires that information to be posted on an Internet web site or in a telephone recording that is accessible 24 hours a day, at least one week before the scheduled sale of property. The information shall include (1) a contract name and phone number; (2) the identifying number for the sale of the property; (3) the date, time, and location of the sale; (4) the estimated total amount of debt; (5) the minimum opening bid, if any; (6) the outcome of the auction, as specified; and (6) a statement that any interested bidder may request information about liens and encumbrances for a reasonable fee. The statement shall also notify the borrower that the information does not necessarily disclose all liens and encumbrances, and that the provided list of liens and encumbrances does not include any information regarding taxes or assessments, reservations in patents, easements, rights-of-way, reservation of mineral rights, covenants, conditions, or restrictions. Any errors must be corrected as soon as practicable after identifying the error or being informed of the error. This bill, upon oral, written, or electronic request by a person, and if known by the trustee, requires the trustee to provide a list of the liens and encumbrances on a property as of a date certain. That list shall include a statement that the provided information does not necessarily disclose all liens and encumbrances, and that the information does not include any information regarding taxes or assessments, reservations in patents, easements, SB 127 Page 3 rights-of-way, reservation of mineral rights, covenants, conditions, or restrictions. The trustee may charge a reasonable fee not to exceed $30, per property, for providing that information. This bill requires each beneficiary (i.e., the lender) to provide an opening bid on property to the trustee at least one week prior to the first scheduled sale date. The beneficiary may update that bid at any time prior to the sale, and the trustee shall update its information regarding the sale on its phone recording or Internet web site as soon as practicable after receiving the revised opening bid. A beneficiary who provides an opening bid to a trustee may accept a higher bid on the property. This bill also extends the time during which the notice of sale must be recorded from 14 to 20 days. Existing law generally regulates the conduct of trustees in the above process, and their actions at the resulting trustee's sale. (Civil Code Section 2924h.) Existing law also exempts a trustee form liability for any good faith error resulting from reliance on information provided in good faith by the beneficiary regarding the nature and the amount of the default. (Civil Code Section 2924(b).) This bill, instead, exempts a trustee from liability for any good faith error resulting from reliance on information provided in good faith by the beneficiary, or resulting from any clerical error the trustee makes, despite adherence to procedures intended to prevent the error. Existing law limits the costs and expenses that may be charged in the non-judicial foreclosure process to, among other things, the costs incurred for the recording, mailing, publishing, and posting of notices. (Civil Code Section 2924c(c).) This bill includes the cost of posting information on an Internet web site or making that information available on a 24-hour telephone recording not to exceed $50. According to the author's office, "California's housing market is currently suffering from historically high rates SB 127 Page 4 of default and foreclosure. Nearly 250,000 properties were sold through non-judicial foreclosure in California during 2008, and nearly all of those properties (96.4%) reverted to the lender, after no bid was received on the property from a third party. Lenders are trying to draw bids from third parties by discounting properties sharply, but are still failing to attract bidders. In December 2008, 40% of the properties up for auction on the courthouse steps were discounted by at least 50%. "When lenders take back properties through non-judicial foreclosure, the properties often remain unoccupied and unsold for months. Financial institutions are overwhelmed by the vast number of properties they have taken back onto their books, and are selling these properties any way they can - often at deep discounts. These vacant, deeply discounted properties are depressing property values in the neighborhoods in which they are located, harming hardworking, neighboring homeowners who are watching their own home values plummet through no fault of their own. "Decreasing the number of properties that revert to financial institutions on the courthouse steps by increasing the number of people who bid at non-judicial foreclosure sales will help reverse harmful housing trends in several ways. First, the properties will spend less time vacant, which, in turn, will reduce levels of blight and other problems, like theft and vandalism, which frequently characterize vacant, foreclosed properties. Second, housing values will begin to stabilize at levels higher than those at which the banks are currently selling their bank-owned inventory. Third, reducing the number of bank-owned properties will help financial institutions to focus on helping borrowers before they enter foreclosure. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No RJG:cm 5/20/09 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END ****