BILL ANALYSIS �
SB 310
Page A
Date of Hearing: June 10, 2013
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
SB 310 (Calderon) - As Amended: May 14, 2013
SENATE VOTE : 37-0
SUBJECT : Mortgages: foreclosure notices: title companies.
SUMMARY : This bill would exempt a licensed title company or
underwritten title company, except when it is acting as a
trustee, from liability for a violation of the Homeowners' Bill
of Rights (HOBR) if it records or causes to record a notice of
default (NOD) or notice of sale (NOS) at the request of a
trustee, substitute trustee, or beneficiary, in good faith and
in the normal course of its business activities. Specifically,
this bill :
1)Provides that when a title company or underwritten title
company records a NOD or NOS and is acting at the request of
the mortgage loan servicer then the title company or
underwritten title company shall not be liable for violations
of HOBR resulting from a failure to halt foreclosure when a
loan modification is under consideration.
2)Clarifies that the limited liability should not be construed
to affect the liability of a trustee, substitute trustee, or
beneficiary that requests a licensed title company or
underwritten title company to record a NOD or NOS.
EXISTING LAW
1)Regulates the nonjudicial foreclosure of properties pursuant
to the power of sale contained within a mortgage contract. To
commence the process, existing law requires the trustee,
mortgagee, or beneficiary to record a notice of default (NOD)
and allow three months to lapse before setting a date for sale
of the property. Existing law requires a notice of
nonjudicial foreclosure sale to be officially noticed in a
newspaper of general circulation, posted on the property, and
recorded at least 20 days before the sale date. (Civ. Code
Secs. 2924, 2924f.)
2)Provides that from January 1, 2013 through December 31, 2017,
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generally prohibits a mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent from recording a NOD until at
least 30 days after establishing contact with a delinquent
borrower or complying with specified due diligence
requirements to establish contact, and, if a borrower submits
a complete application for a first lien loan modification,
before that borrower has been provided with a written
determination by the servicer regarding that borrower's
eligibility for that loan modification. (Civ. Code Sec.
2923.5.)
3)States that beginning on January 1, 2018, generally prohibits
a mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent from recording an NOD until at least 30 days
after establishing contact with a delinquent borrower or
complying with specified due diligence requirements to
establish contact, and, if a borrower submits a complete
application for a foreclosure prevention alternative, before
that borrower has been provided with a written determination
by the servicer regarding eligibility for the requested
alternative. (Civ. Code Sec. 2923.5.)
4)Provides that from January 1, 2013 through December 31, 2017,
generally prohibits a mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent from recording a NOD: (1)
until the servicer provides specified information to the
borrower; (2) until at least 30 days after the servicer
establishes contact with a delinquent borrower or complies
with specified due diligence requirements to establish
contact; (3) while a complete first lien loan modification is
pending review; and (4) if a complete first lien loan
modification application has been submitted by a borrower,
until any of the following occurs: the servicer makes a
written determination that the borrower is not eligible for a
first lien loan modification, and any appeal period has
expired; the borrower does not accept an offered first lien
loan modification within 14 days of its offer; or, the
borrower accepts a written first lien loan modification, but
defaults on or otherwise breaches his or her obligation under
that loan modification agreement. (Civ. Code Sec. 2923.55.)
5)Requires that from January 1, 2013 through December 31, 2017,
generally prohibits a mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent from recording a NOD or NOS,
or from conducting a trustee's sale: (1) while a complete
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first lien loan modification is pending review; (2) if a
complete first lien loan modification application has been
submitted by a borrower, until any of the following occurs:
(a) the servicer makes a written determination that the
borrower is not eligible for a first lien loan modification,
and any appeal period has expired; (b) the borrower does not
accept an offered first lien loan modification within 14 days
of its offer; or, (3) the borrower accepts a written first
lien loan modification, but defaults or otherwise breaches his
or her obligation under that loan modification agreement.
(Civ. Code Sec. 2923.6.)
6)States that from January 1, 2013 through December 31, 2017,
generally prohibits a mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent from recording a NOD or NOS,
or conducting a trustee's sale, once a borrower has been
approved for a foreclosure prevention alternative in writing,
and as long as one of the following two conditions are met:
(1) the borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or
repayment plan; or (2) a foreclosure prevention alternative
has been approved in writing by all parties, and proof of
funds or financing has been provided to the servicer. (Civ.
Code Sec. 2924.11.)
7)Mandates that beginning on January 1, 2018, prohibits a
mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent from: (1) recording a NOS or conducting a
trustee's sale while a complete application for a foreclosure
prevention alternative is pending, and until the borrower has
been provided with a written determination by the servicer
regarding that borrower's eligibility for the requested
foreclosure prevention alternative; and (2) recording a NOD or
NOS, or conducting a trustee's sale, once a foreclosure
prevention alternative is approved in writing, and as long as
one of the following two conditions is met: (a) the borrower
is in compliance with the terms of a written trial or
permanent loan modification, forbearance, or repayment plan;
or (b) a foreclosure prevention alternative has been approved
in writing by all parties, and proof of funds or financing has
been provided to the servicer. (Civ. Code Sec. 2924.11.)
8)Requires from January 1, 2013 through December 31, 2017,
generally prohibits a mortgage servicer, trustee, mortgagee,
beneficiary, or authorized agent from recording a NOD or NOS,
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or from conducting a trustee's sale: (1) while a complete
first lien loan modification application is pending, and until
the borrower has been provided with a written determination by
the servicer regarding that borrower's eligibility for that
loan modification; and (2) under either of the following
circumstances, if a borrower has been approved for a
foreclosure prevention alternative in writing by the servicer:
(a) the borrower is in compliance with the terms of a written
trial or permanent loan modification, forbearance, or
repayment plan; or (b) a foreclosure prevention alternative
has been approved in writing by all parties, and proof of
funds or financing has been provided to the servicer. (Civ.
Code Sec. 2924.18.)
9)Provides for various remedies for violations of the above
provisions, including treble actual damages and statutory
damages. (Civ. Code Secs. 2924.12, 2924.19.)
FISCAL EFFECT : None
COMMENTS :
According to the author:
Civil Code Sections 2923.5, 2923.55 and 2924.11 provide that
"[a] mortgage servicer, mortgagee, trustee, beneficiary, or
authorized agent may not record a notice of default pursuant
to Section 2924 until?" specified pre-notice of default
requirements have been satisfied. Additionally, Civil Code
Section 2924 (a) (6) provides that "[n]o entity shall record
or cause a notice of default to be recorded?" unless
specified pre-notice of default requirements have been
satisfied.
. . . Licensed title companies and underwritten title
companies routinely record notices of default at the
direction of and acting as an "authorized agent" to a
mortgage servicer, mortgagee, trustee or beneficiary. The
recordation is a ministerial act and the title company or
underwritten title company does so in the regular course of
their business and in reliance upon a good faith belief that
the mortgage servicer, mortgagee, trustee or beneficiary
complied with law.
The author asserts that this bill would close a loophole that
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could otherwise result in liability for the title company if
they record a NOD, in good faith, but in violation of HOBR.
On June 27, 2012, the Conference Committee on the California
Foreclosure Crisis passed HOBR (AB 278 & SB 900) in order to
protect homeowners in the mortgage market, help keep families in
their homes, and revive the state's economy following historic
foreclosure rates and rampant abuse, fraud, and deception that
caused more than one million Californian's to lose their homes.
That bill package sought to: (1) stop the practice of
"dual-tracking;"<1> (2) establish a single point of contact for
homeowners with their lenders; and (3) mandate a chain of title
of the property. The HOBR also included various remedies for
violations of its provisions, including treble and statutory
damages.
Since the provisions of the HOBR are violated if foreclosure
documents (a NOD or NOS) are recorded without satisfying the
requirements of the act, the title insurance industry expressed
concern that the language of the legislation could result in
unintended liability for title insurers. That concern is based
on the assertion that title insurers routinely record
foreclosure documents at the direction of mortgage servicers and
trustees - title insurers assert that they cannot verify
information about the compliance of a mortgage servicer or
trustee because that information does not appear in recorded
documents. As a result of those concerns, Assemblymember Mike
Eng, co-chair of the Conference Committee, submitted the
following letter to the Journal on September 1, 2012 to clarify
the issue of liability for title companies:
On July 2, 2012, the California State Assembly passed
Assembly Bill 278 and Senate Bill 900. Both bills were
Chaptered by the Secretary of State on July 11, 2012, as
Chapter 86 and Chapter 87, Statutes of 2012, respectively. I
am providing this letter to the Journal to clarify the
intent of those bills.
Under existing law, pursuant to Civil Code Section 2924(b),
trustees do not have liability for any good faith error when
relying on information provided by the beneficiary regarding
the nature and amount of a default. Similarly, the
-------------------------
<1> "Dual tracking" generally refers the practice of a lender
pursue foreclosure even though the homeowner is applying for a
mortgage modification.
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conference committee amendments were not intended to impose
liability on an entity that records documents at the
direction of a trustee, substitute trustee, or beneficiary
who is acting within the scope of authority designated by
the holder of the beneficial interest and where the entity
is carrying out its recording duties in good faith in the
normal course of their activity.
Accordingly, this bill seeks to codify the intent, as stated
in that letter to the journal, that title companies not be
held liable for a violation of HOBR when they record a NOD or
NOS in good faith and in the normal course of their business
activities.
REGISTERED SUPPORT / OPPOSITION :
Support
California Land Title Association (CLTA)
Fidelity National Financial (FNF)
First American Financial Corporation
Opposition
None on file.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081