BILL ANALYSIS �
SB 4
Page 1
Date of Hearing: June 14, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 4 (Calderon and Vargas) - As Amended: April 7, 2011
PROPOSED CONSENT (As Proposed to be Amended)
SENATE VOTE : 40-0
SUBJECT : FORECLOSURE AUCTIONS: NOTICE TO BIDDERS AND PROPERTY
OWNERS
KEY ISSUE : SHOULD TRUSTEES AND OTHERS BE REQUIRED TO PROVIDE
SPECIFIED INFORMATION TO BIDDERS AND OWNERS REGARDING
RESIDENTIAL FORECLOSURE AUCTIONS?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This modest and non-controversial measure is intended to provide
better information to both residential property owners whose
property is subject to a foreclosure sale, as well as to those
who wish to bid on the property at auction. The bill provides
that a notice of non-judicial foreclosure sale contain language
notifying potential bidders of specified risks involved in
bidding on the property, as well as a notice to the property
owner informing the owner about how to obtain information
regarding any postponement of the sale. Support is urged by the
mortgage industry.
SUMMARY : Provides additional information to homeowners and
bidders regarding residential foreclosure auction sales.
Specifically, this bill :
1)Requires a notice of sale on specified residential property to
contain language informing potential bidders on the nature of
the process, potential risks, and resources to assist them.
2)Further requires the notice of sale to provide information to
the homeowner whose property is subject to auction regarding
the auction sale date and postponements that may occur.
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3)Limits the rights and remedies for failure to comply with
these provisions.
EXISTING LAW regulates the non-judicial foreclosure of
properties pursuant to the power of sale; authorizes the
trustee, mortgagee, or beneficiary to provide a Notice of
Default, followed by a Notice of Sale at least 20 days before
the sale of the property; 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, requires that any
postponements may not exceed a total of 365 days from the date
set forth in the Notice of Sale or if the sale is postponed for
a total of more than 365 days, the sale must be re-noticed;
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. (Civil
Code sections 2924f; 2924g.)
COMMENTS : 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 generally wait at least three months before noticing
the sale of the property, which must be posted, published, and
filed with the county recorder. The sale date contained in the
Notice of Sale may be postponed by public proclamation (given at
the time and date of sale) for a total of up to 365 days. If
the property lien is actually sold at auction the bidder is
generally required to pay in cash or check, and takes the
property lien subject to any outstanding senior liens.
This bill seeks to address two different issues that have arisen
regarding foreclosure sales by adding two new provisos to the
Notice of Sale. First, this bill would inform homeowners that
their sale date may be postponed, provides them with direction
on how to receive updated information about that sale, and
imposes new duties on trustees consistent with that disclosure.
Second, this bill would inform a bidder of the nature of and
risks associated with foreclosure auctions. Supporters believe
these provisions would help alleviate some of the most common
sources of confusion experienced by homeowners and bidders,
regarding the non-judicial foreclosure sale process.
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Since homeowners rarely attend the foreclosure sale of their
home and, as a result, are not aware of the public declaration,
the authors note that it is extremely common for property owners
to be caught by surprise when their home is sold months after
they receive the Notice of Sale. For example, a homeowner could
have asked for a continuance of the sale date in order to
receive more time to complete a short sale, or the financial
institution could have continued the sale to ensure that the
necessary documents were in order before proceeding. If the
sale is continued multiple times, the owner could easily lose
track of the next sale date and, at some unknown time in the
future when the trustee or foreclosing institution elects not to
postpone the sale, the home could be sold unbeknownst to the
homeowner.
For individuals who seek to buy properties at trustee sale
(non-judicial foreclosure) auctions, the auction offers the
potential for getting a good "deal" on a home, but carries
significant risks if the bidder has not done extensive research
on the property. Most importantly, the legal right at auction
is not the property itself but a lien on the property, which may
be one of several liens. Although bidders may look at the home
and the neighborhood, it is essential for them to also do a
title search on the property to see if there are any senior
liens that are not going to be wiped out by the foreclosure
sale. Liens junior to the foreclosing lien are removed as a
result of the foreclosure sale, but senior liens remain intact.
If the bidder purchases a home subject to a senior lien, the
bidder must satisfy that senior lien or face foreclosure of
their interest by that lien.
Authors' technical amendments . In order to better capture the
intent of the bill the authors proposed the following helpful
amendments:
NOTICE TO POTENTIAL BIDDERS: If you are considering bidding
on this property lien , you should understand that there are
risks involved in bidding at a trustee auction. You will be
bidding on a lien, not on the property itself . Placing the
highest bid at a trustee auction does not automatically
entitle you to free and clear ownership of the property.
You should also be aware that the lien being auctioned off
may be a junior lien. 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
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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
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 you and 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 �telephone number for information regarding
the trustee's sale] or visit this Internet Web site
�Internet Web site address for information regarding the
sale of this property], using the file number assigned to
this case �case file number]. You may also attend the sale
to obtain postponement information. 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.
REGISTERED SUPPORT / OPPOSITION :
Support
California Bankers Association
United Trustees Association
Opposition
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
SB 4
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