BILL ANALYSIS                                                                                                                                                                                                    






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


          SB 1221 (Calderon)
          As Introduced
          Hearing Date: March 23, 2010
          Fiscal: No
          Urgency: No
          BCP:jd
                    

                                       SUBJECT
                                           
                              Mortgages: Notice of Sale

                                      DESCRIPTION 

          This bill would allow a trustee to notice the sale of a property  
          in non-judicial foreclosure approximately five days earlier by  
          allowing a Notice of Sale to be given 85 days, instead of three  
          months, after the filing of a Notice of Default.  

                                      BACKGROUND  

          Foreclosures in California are generally non-judicial, meaning  
          that they are accomplished without court involvement.  The first  
          step in the foreclosure process is the filing of a Notice of  
          Default, which generally occurs after three or more months of  
          delinquency.  The foreclosing entity must then wait at least  
          three months before noticing the sale of the property, which  
          must be posted, published, and filed with the county recorder  
          before the date of sale.  

          Prior to January 1, 2010, then-existing law required the Notice  
          of Sale to be published and posted at least 20 days before the  
          sale of the property.  Those provisions also required the notice  
          to be filed with the county recorder at least 14 days before  
          sale.  To conform those timing requirements and provide greater  
          advance notice, SB 306 (Calderon, Chapter 43, Statutes of 2009),  
          effective January 1, 2010, instead required the Notice of Sale  
          to be filed 20 days before sale.  That change conformed the  
          posting, publishing, and filing requirements to the same 20-day  
          period.

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          In response to workability issues regarding the ability to file  
          a notice of sale within the new statutory timeframe, this bill  
          would permit the mortgagee, trustee, or beneficiary to give a  
          notice of sale approximately five days earlier (85 days instead  
          of three months after the filing of the notice of default).


                                CHANGES TO EXISTING LAW
           
           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 law  
          authorizes the trustee, mortgagee, or beneficiary to record a  
          Notice of Default and requires three months to lapse before  
          noticing the sale of the property. (Civ. Code Secs. 2924,  
          2924f.) 

           Existing law  requires the Notice of Sale to be posted,  
          published, and filed with the county recorder at least 20 days  
          before the sale of the property.  (Civ. Code Sec. 2924f.)

           This bill  would, instead, authorize a trustee, mortgagee, or  
          beneficiary to give notice of sale after the lapse of 85 days  
          from the filing of the Notice of Default.

           This bill  would make a corresponding change to the codified  
          notice that must be included in the notice of default. 

                                        COMMENT
           
          1.   Stated need for the bill  

          According to the author:

            Prior to enactment of SB 306, notices of sale were required  
            to be published in newspapers of general circulation at  
            least 20 days prior to the sale of the property, and  
            recorded with the county recorder at least 14 days prior to  
            the sale.  SB 306 conformed these dates, so that notices of  
            sale must now be published and recorded at least 20 days  
            prior to sale.  The change was intended to give the public  
            and those relying on the recording process as much advance  
            notice of sales as possible.

            The problem with the law, as amended by SB 306, is that,  
            while publication dates can be coordinated very precisely  
                                                                      



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            between trustees and newspapers, the recording process is  
            subject to greater opportunity for error.  If recorders  
            close early on a given day due to budget cutbacks, or if the  
            notice of sale document is delivered to the recorder's  
            office, but not actually recorded until the next day, a  
            technical violation of the law can occur.  

          To address that issue, SB 1221 would permit a notice of sale to  
          be given five days earlier in the process - 85 days after  
          recording the Notice of Default, rather than three months after  
          the notice of default is recorded.  The author notes that those  
          extra five days seek to account for any delays in the recording  
          process, and states that the bill is not intended to propose any  
          change in sale dates.


          2.   Intent to not modify the duration of the foreclosure process  
           

          SB 1221 would permit a Notice of Sale ("NOS") to be filed,  
          posted, and published around five days sooner - 85 days instead  
          of three months after the Notice of Default is filed.  Since the  
          actual sale may occur 20 days after the NOS is given, the  
          proposed change could potentially reduce the foreclosure process  
          by several days (depending on days of the month and duration of  
          the filing process).  Staff notes that the intent of the bill is  
          not to modify the duration of the foreclosure process but to  
          address a workability issue that may occur if there is any delay  
          in the recording of a NOS.  The United Trustees Association,  
          sponsor, maintains that those delays may result in "a technical  
          violation of the foreclosure laws [and] lead to significant  
          expenses in postponing sales."  This bill seeks to address that  
          issue by allowing for the earlier filing of the NOS by the  
          trustee - that earlier filing seeks to ensure that the NOS is  
          actually recorded at least 20 days before the sale date.

          Given that the intent is not to shorten the foreclosure process,  
          the author has agreed to the following amendment that would  
          allow the earlier filing of the NOS while ensuring that the  
          duration of the foreclosure process remains unchanged.  That  
          amendment would allow a NOS to be filed up to five days earlier  
          and specifically provide that the actual sale date must be no  
          earlier than under existing law - three months and twenty days  
          after the filing of a Notice of Default.

             Amendment:
                                                                      



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             Strike out Sections 1 and 2, and insert:

            Amend Section 2924 of the Civil Code to read:

            ?
            (2) Not less than three months shall elapse from the filing of  
            the notice of default.
            (3) Except as provided in paragraph (4), a  fter the lapse of  
            the three months described in paragraph (2), the mortgagee,  
            trustee, or other person authorized to take the sale shall  
            give notice of sale, stating the time and place thereof, in  
            the manner and for a time not less than that set forth in  
            Section 2924f.
             (4) Notwithstanding paragraph (3), the mortgagee, trustee, or  
            other person authorized to take sale may file a notice of sale  
            pursuant to 2924f up to five days before the lapse of the  
            three month period described in paragraph (2), provided that  
            the date of sale is no earlier than three months and 20 days  
            after the filing of the notice of default.  

          3.   Conforming change to Civil Code Section 2924c  

          Under existing law, every Notice of Default must contain a  
          statutory notice that informs the homeowner about the  
          foreclosure, including information about the timing of the sale  
          date and the Notice of Sale. (Civ. Code Sec. 2924c(b).)  To  
          conform to the 85-day period discussed in Comment 2, SB 1221  
          would modify that statutory notice by replacing references to  
          "three months" with "85 days."

          Given that the amendment suggested in Comment 2 would no longer  
          refer to "85 days," the following clarifying amendments are  
          suggested to conform the statutory notice to the amendment  
          suggested above.

             Suggested amendments:

             1)   On page 7, line 37, after "until" insert: "approximately"

            2)  On page 8, line 23, strike out "the end of the 85-day  
            period stated above" and insert: "three months after this  
            notice of default is recorded"


           Support  : None Known
                                                                      



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           Opposition  : None Known

                                        HISTORY
           
           Source  :  United Trustees Association

           Related Pending Legislation  :  None Known

           Prior Legislation  :  SB 306 (Calderon, Chapter 43, Statutes of  
          2009), conformed the time period in which a Notice of Sale must  
          be posted, published, and filed.

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