BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 127|
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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
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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,
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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
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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
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