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