BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                     SB 4|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 445-6614         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  SB 4
          Author:   Calderon (D) and Vargas (D)
          Amended:  4/7/11
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  5-0, 4/26/11
          AYES:  Evans, Harman, Blakeslee, Corbett, Leno


           SUBJECT  :    Mortgages

           SOURCE  :     Author


           DIGEST  :    This bill requires, on and after April 1, 2012, 
          that a notice of non-judicial foreclosure sale contain:  
          (1) language notifying potential bidders of specified risks 
          involved in bidding on the property; and (2) a notice to 
          the property owner informing the owner about how to obtain 
          information regarding any postponement of the sale.  This 
          bill additionally requires a trustee handling the 
          foreclosure to make a good faith effort to provide 
          up-to-date information regarding sale dates and 
          postponements, 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 law authorizes the trustee, mortgagee, or 
          beneficiary to record a Notice of Default and generally 
          requires three months to lapse before noticing the sale of 
          the property. (Civil Code ÝCIV] Sections 2924, 2924f) 
                                                           CONTINUED





                                                                  SB 4
                                                                Page 
          2


          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 Section 2924f)  
           
          Existing law governs the manner in which the sale must be 
          conducted and permits the sale to be postponed at any time 
          prior to completion of the sale.  Any postponements may not 
          exceed a total of 365 days from the date set forth in the 
          Notice of Sale.  If the sale is postponed for a total of 
          more than 365 days, the sale must be re-noticed. (CIV 
          Section 2924g)

          Existing law requires notice of each postponement and the 
          reason therefore to be given by public declaration by the 
          trustee at the time and place last appointed for sale.  
          That declaration must set forth the new date, time, and 
          place of sale, as specified.  (CIV Section 2924g(d))

          This bill, on and after April 1, 2012, requires the notice 
          of sale to contain substantially the following language if 
          the property is between one and four single-family 
          residences:

            "NOTICE TO POTENTIAL BIDDERS:  If you are considering 
            bidding on this property, you should understand that 
            there are risks involved in bidding at a trustee auction. 
             Placing the highest bid at a trustee auction does not 
            automatically entitle you to free and clear ownership of 
            the property.  If you are the highest bidder at the 
            auction, you are or may be responsible for paying off all 
            liens senior to the lien being auctioned off, before you 
            can receive clear title to the property.  You should also 
            be aware that the lien being auctioned off may be a 
            junior lien.  You are encouraged to investigate the 
            existence, priority, and size of outstanding liens that 
            may exist on this property by contacting the county 
            recorder's office or a title insurance company, either of 
            which may charge you a fee for this information.  If you 
            consult either of these resources, you should be aware 
            that the same lender may hold more than one mortgage or 
            deed of trust on the property.

            "NOTICE TO PROPERTY OWNER:  The sale date shown on this 

                                                           CONTINUED





                                                                  SB 4
                                                                Page 
          3

            notice of sale may be postponed one or more times by the 
            mortgagee, beneficiary, trustee, or a court, pursuant to 
            Section 2924g of the California Civil Code.  The law 
            requires that information about trustee sale 
            postponements be made available to the public, as a 
            courtesy to those not present at the sale.  If you wish 
            to learn whether your sale date has been postponed, and, 
            if applicable, the rescheduled time and date for the sale 
            of this property, you may call Ýtelephone number for 
            information regarding the trustee's sale] or visit this 
            Internet Web site ÝInternet Web site address for 
            information regarding the sale of this property], using 
            the file number assigned to this case Ýcase file number]. 
            Information about postponements that are very short in 
            duration or that occur close in time to the scheduled 
            sale may not immediately be reflected in the telephone 
            information or on the Internet Web site.  The best way to 
            verify postponement information is to attend the 
            scheduled sale."

          This bill provides that nothing in the above disclosures is 
          intended to modify or create substantive rights or 
          obligations for any person providing, or specified in, 
          either of the required notices.  

          This bill requires the mortgagee, beneficiary, trustee, or 
          authorized agent to make a good faith effort to provide 
          up-to-date information regarding sale dates to persons who 
          request that information, and to make that information 
          available free of charge.  That information may be made 
          available via an Internet Web site, phone recording, or any 
          other means that allows 24 hour a day access, as specified; 
          disruption of those methods for reasonable maintenance or 
          due to a service outage is not deemed to be a violation of 
          the good faith standard.

          This bill provides that failure to comply with the above 
          provisions shall not invalidate any sale that would 
          otherwise be valid, and that the information required to be 
          provided above does not constitute the public declaration 
          required to postpone a trustee sale.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   
          Local:  No

                                                           CONTINUED





                                                                  SB 4
                                                                Page 
          4


           SUPPORT  :   (Verified  4/28/11)

          California Bankers Association
          United Trustees Association

           ARGUMENTS IN SUPPORT  :    According to the author:

            "Most residential real property foreclosures in 
            California are conducted nonjudicially, using a process 
            set forth in the Civil Code (Civil Code Sections 2924 et 
            seq.)  Although the nonjudicial foreclosure rules are 
            very precisely described in law and have been clarified 
            many times by the courts, the process can be quite 
            confusing to the uninitiated.  Two groups in particular 
            -- homeowners who have received a notice of trustee sale 
            and individuals who bid at a trustee sale, hoping to 
            acquire a good deal on residential real property - are 
            particularly at risk, both emotionally and financially, 
            if they fail to thoroughly understand the key rules that 
            govern their situations.

            "Two of the most common sources of confusion among these 
            groups involve: 1) the rules for postponing foreclosure 
            sales; and 2) the obligations of a bidder who places the 
            high bid at a foreclosure sale.
            . . .  
            SB 4 adds two informative paragraphs to the Notice of 
            Trustee Sale, a document which must be provided to 
            homeowners, filed with a county recorder, posted in a 
            public place, and published in a newspaper of general 
            circulation, before a home may be sold at foreclosure.  
            These informative paragraphs - one intended for 
            homeowners facing the sale of their home, and the other 
            intended for potential bidders at the foreclosure sale - 
            are designed to help alleviate some of the most common 
            sources of confusion experienced by homeowners and 
            bidders, regarding the non-judicial foreclosure sale 
            process."

          The United Trustees Association, in support, states that 
          their members "support the bill because it provides greater 
          information on the foreclosure process, which can be 
          mystifying to those not conversant with it."

                                                           CONTINUED





                                                                  SB 4
                                                                Page 
          5



          RJG:kc  4/28/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****






































                                                           CONTINUED