BILL ANALYSIS Ó
SB 62
Page 1
Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 62 (Liu) - As Amended: June 16, 2011
SENATE VOTE : 28-11
SUBJECT : LOCAL GOVERNMENT: LOS ANGELES COUNTY: NOTICE OF
RECORDATION
KEY ISSUE : IN ORDER TO FURTHER PROTECT AGAINST FORECLOSURE AND
LOAN MODIFICATION SCAMS, SHOULD THE LOS ANGELES COUNTY RECORDER
BE AUTHORIZED TO NOTIFY OWNERS AND OCCUPANTS OF PROPERTY BY MAIL
WHEN A NOTICE OF DEFAULT OR NOTICE OF SALE HAS BEEN RECORDED ON
THE PROPERTY?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill seeks to allow the sponsor, Los Angeles County, to
authorize its County Recorder or a designee to notify owners and
occupants of a property by mail when a notice of default or
notice of sale has been recorded on the property. This
legislation represents the sponsor's modest efforts to build
upon an existing notification program in the County, whereby the
County Recorder currently mails a notice to the executing
parties when documents evidencing transfer of title have been
recorded on the property. This bill would also allow the Los
Angeles County Recorder to collect a fee of up to $7, as
specified, in order to cover the costs of notifying the parties,
as well as providing information about housing assistance and
counseling to callers to a telephone hotline publicized on the
mailed notice. Supporters of the bill, including consumer
advocates, district attorneys, and the Los Angeles County
Sheriff, contend that this bill will enable homeowners to act
promptly to protect their interests from possible fraud and
property-related scams. This bill was approved by the Assembly
Local Government Committee and has no registered opposition.
SUMMARY : Authorizes the Los Angeles County Recorder to mail a
notice of recordation to owners or occupants of property subject
to a notice of default or notice of sale within five to 20 days
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that the notice has been recorded. Specifically, this bill :
1)Permits the Los Angeles County Recorder, or a designee
authorized by the Los Angeles County Board of Supervisors
(Board), following the adoption of an authorizing resolution
by the Board, to notify the following parties by mail:
a) The party or parties executing a deed, quitclaim, deed,
or deed of trust, within 30 days of recordation.
b) The party or parties subject to a notice of default or
notice of sale, including the occupants of that property,
within five days, but not more than 20 days, of
recordation.
2)Authorizes the Recorder to collect a fee from the party filing
a notice of default or notice of sale, unless that party is a
government entity, but limits the fee to an amount not to
exceed the mailing cost of the notice and the actual cost to
provide information, counseling, or assistance to a person who
receives the notice, not to exceed $7.
3)Permits the actual costs comprising the fee to include
administrative costs incurred by the Recorder in carrying out
the above actions so long as they do not exceed 10% of the
total fee collected.
4)Requires the County of Los Angeles, if the Board adopts an
authorizing resolution to mail a notice of recordation to
parties subject to a notice of default or notice of sale, to
submit a report on or before January 1, 2014 to the Senate
Committee on Judiciary and the Assembly Committee on Local
Government containing all of the following information:
a) A copy of each type of notice mailed.
b) The number of filed notices of default and notices of
sale for which a fee was collected.
c) The amount of fees collected for the filing of notices
of default and notices of sale.
d) The amount of fees spent to provide housing information,
counseling, and assistance.
5)Establishes a sunset date of January 1, 2015, after which date
these provisions are repealed unless a later enacted statute
deletes or extends that date.
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EXISTING LAW :
1)Authorizes the Los Angeles County Recorder, upon the adoption
of an authorizing resolution by the Los Angeles County Board
of Supervisors, to notify by mail the party or parties
executing a deed, quitclaim deed, or deed of trust, within 30
days of the recordation of the deed. (Government Code Section
27297.6(a).)
2)Provides that failure to provide the above notice shall not
result in any liability against the recorder and the county,
and requires the county recorder to use a competitive bid
process if it contracts for the processing or mailing of the
notice. (Government Code Section 27297.6(c).)
3)Provides identical authority to the county recorder of any
county in California, upon adoption of an authorizing
resolution by the county board of supervisors, to mail a
notice of recordation to parties executing a deed, quitclaim
deed, or deed of trust, as provided. (Government Code Section
27297.7)
4)Permits the Los Angeles County Recorder to collect an
additional fee from the party filing a deed, quitclaim deed,
or deed of trust, to implement the notification provisions
above, and provides that the fee shall not exceed the mailing
cost of the above notice, but in no case be greater than $7.
(Government Code Section 27387.1.)
5)Requires the trustee, or authorized agent, that represents the
foreclosing financial institution to post and mail, a notice
informing the residents of a property about a pending
foreclosure sale. Specifically, the notice informs residents
that the property may be sold at a foreclosure sale, the
requirements of an eviction notice, and that they may wish to
contact a lawyer or a local legal aid or housing counseling
agency to discuss any rights they may have. (Civil Code
Section 2924.8.)
COMMENTS : This bill seeks to allow the sponsor, Los Angeles
County, to authorize its County Recorder or a designee to notify
owners and occupants of a property by mail when a notice of
default or notice of sale has been recorded on the property.
This legislation represents the sponsor's modest efforts to
build upon an existing notification program in the County,
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whereby the County Recorder currently mails a notice to the
executing parties when documents evidencing transfer of title
have been recorded on the property. This bill would also allow
the Los Angeles County Recorder to collect a fee of up to $7, as
specified, in order to cover the costs of notifying the parties,
as well as providing information about housing assistance and
counseling to callers to a telephone hotline publicized on the
mailed notice.
Need for the bill: According to the author and the sponsor, the
purpose of this bill is to prevent property sale fraud and to
protect homeowners and renters in Los Angeles County from
foreclosure and loan modification scams. With respect to
homeowners facing foreclosure, they state:
Notices of default and notices of sale are public
documents. Criminals, acting as foreclosure
consultants and loan modification specialists, contact
homeowners in foreclosure. They promise homeowners
they will stop the foreclosure or obtain a loan
modification. They charge homeowners thousands of
dollars but never stop the foreclosure, obtain the
promised loan modification, or provide any other
service of value.
This bill would address this problem by allowing Los
Angeles County to mail a written notification to
homeowners and occupants who are subject to a notice of
default or notice of sale. The notification would warn
homeowners about the unscrupulous foreclosure and loan
modification consultants who contact them. The County
Real Estate Fraud / Predatory Lending Task Force
requested this legislation . . . (which) builds upon a
successful fraud-prevention program already in statute
in L.A. County.
The author also contends that the bill will aid renters of
affected properties by providing additional warning that the
property may be in foreclosure and their tenancy may be subject
to termination.
This bill would caution homeowners and renters about scams and
inform them about resources to help them exercise their
respective rights. Existing law already requires that the owner
of property subject to foreclosure be noticed initially with a
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copy of the Notice of Default, and then at least three months
later with the Notice of Sale. Both notices generally provide
the owner with information about their rights at those
respective points in the foreclosure process. In addition,
Civil Code Section 2924.8 currently requires a codified
statement of rights to be mailed to tenants and posted on the
premises at the time the property is noticed for sale. (See
Civ. Code Sec. 2924.8.)
This bill would additionally allow the Los Angeles Board of
Supervisors to authorize the county recorder to send an
additional notice to parties subject to a notice of default or
notice of sale, including the occupants of the property. The
bill is substantially similar to last year's SB 878 (Liu), which
was vetoed by the Governor with the following veto message:
While the goals of SB 878 are laudable, the bill is
unnecessary as foreclosure statutes require that
notices of default and notices of sale be mailed to the
owner of the property. Moreover, notices of sale, in
addition to being mailed to the property owner, must
also be posted on the property, providing notice to
both the occupant and owner of a pending foreclosure
action, effectively making SB 878 redundant.
The author, however, contends that the notification required by
this bill provides useful information to recipients in addition
to that accompanying the Notice of Sale, and will effectively
notice more affected tenants in foreclosure properties by virtue
of being mailed rather than posted. The author describes why
the posted notice of sale alone sometimes is inadequate,
stating:
(Los Angeles) County has received numerous complaints
from tenants who said they had no idea that the
property they occupy was in foreclosure, even though
they continued paying rent to the owner. In some
cases, unscrupulous owners take down a mandatory notice
of sale, which is posted on the property door, and the
owner tells the renter nothing is wrong and they
shouldn't worry. These landlords continue collecting
rent until the day the property can be sold at a
foreclosure auction, providing tenants with no warning
and no ability to plan their move.
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A draft version of the SB 62 notification letter, provided by
Los Angeles County to this Committee for review, appears to
support the sponsor's contention that this notice does not
merely provide information that is redundant with existing
statutory notices that are sent to homeowners and/or posted on
the property to notice occupants. For example, homeowners are
warned against employing persons who may approach the homeowner
to "promise they can save your home if you pay them money," a
practice which the letter also states is against the law. Under
a separate heading, renters are cautioned to be wary of anyone
who claims to be the new owner of the property and demands rent
but cannot prove they are the new owner, and are informed that
they may contact the Department of Consumer Affairs hotline to
seek free help with housing resources and low-cost rental
options.
Generally speaking, the draft notice is addressed "TO: Property
Owners and Renters" with a heading in bold capital letters "THE
PROPERTY YOU OWN OR RENT IS IN FORECLOSURE." Although it
appears from the heading that the County has developed a single
notice to be sent to both owners and renters, the draft notice
itself presents the information in an organized manner that
clearly distinguishes the rights and responsibilities of
homeowners from those of renters. The draft notice urges the
recipient to read the brochure enclosed with the notice, samples
of which were also provided to the Committee. Homeowners will
receive a brochure titled "Saving Your Home" while renters
receive one titled "Renters and Foreclosure," but in either
case the brochures provide more specifically targeted
information for the two groups that can be displayed in the
one-page notification letter. Both homeowners and renters are
encouraged to contact the hotline number prominently displayed
at the bottom of the notice. In short, it appears that the
draft notice adequately addresses previous concerns with the
bill that the notice would provide only redundant or potentially
confusing information to recipients with no benefit to them.
The fee authorized by this bill is reasonably limited to actual
costs incurred by the county for mailing and providing services.
This bill would authorize the Los Angeles County Recorder to
collect a fee from the party filing the notice of default or
notice of sale, and provides that the fee shall not exceed the
cost of mailing the notice and the actual cost to provide
information, counseling, or assistance to recipients of the
notice, not to exceed $7. According to the County, the bill
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requires the notification letter to be sent to the appropriate
parties whenever the fee is collected from the party filing the
notice of default or notice of sale, without exception. The
bill also clarifies that the actual costs may include
administrative costs incurred by the County Recorder in
performing its duties, but that these administrative costs shall
not exceed 10 percent of the total fee collected. For these
reasons, the bill appears to limit the fee to no more than the
actual costs, including modest administrative costs, of
operating the notification program.
This bill would sunset in three years. This bill, including the
fee provision, has a sunset date of January 1, 2015. This
sunset date applies only to the specific provisions of this bill
(i.e. extension of the existing program to notices of default
and notices of sale), but would not affect continued operation
of the Recorder's existing notification program.
In order to ensure that the Legislature has adequate information
to review and evaluate the program's effectiveness, the bill
would require the County of Los Angeles to submit a report on or
before January 1, 2014 that includes, but is not limited to: (1)
a copy of each type of notice mailed pursuant to the bill; (2)
the number of filed notices of default and notices of sale for
which a fee was collected; (3) the amount of fees collected for
the filing of the notices of default and notices of sale; and
(4) the amount of fees spent to provide housing information,
counseling, and assistance.
ARGUMENTS IN SUPPORT : The Los Angeles County District
Attorney's Office writes in support of the bill:
The Los Angeles County Recorder notification program is
an example of a successful pioneering program that has
put vital information in the hands of homeowners who
might not otherwise know there is action against their
property that puts their ownership at risk. The simple
act of sending a postcard to an affected homeowner has
resulted in many homeowners taking action to
investigate and act to protect their homes from scam
artists perpetrating real estate fraud. Likewise,
extending the notices to also include notices of
default and notices of sale can alert homeowners to act
promptly to protect their interests. As foreclosures
occur in record numbers, particularly in Los Angeles
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County, this added protection can go a long way to help
prevent unnecessary foreclosures.
PRIOR LEGISLATION: SB 878 (Liu) of 2010, the predecessor to
this bill, would have enacted nearly identical provisions to
authorize the Los Angeles County Recorder to notify owners and
occupants of a property by mail when a notice of default or
notice of sale has been recorded on the property. SB 878 was
vetoed by Governor Schwarzenegger.
AB 2618 (Nestande), Ch. 44, Stats. 2010, authorized the board of
supervisors of every county in the state to adopt a resolution
to authorize the county recorder to notify the party or parties
executing a deed, quitclaim deed, or deed of trust of the
recordation of the deed. In other words, AB 2618 extended
authorization to all counties to adopt provisions reflecting the
existing scope of the Los Angeles homeowner notification
program.
REGISTERED SUPPORT / OPPOSITION :
Support
California District Attorneys Association
Consumer Federation of California
Consumer Federation of America
Consumers Union
Los Angeles County District Attorney's Office
Los Angeles County Sheriff's Department
Western Center on Law & Poverty
Opposition
None on file
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334