BILL ANALYSIS �
SB 310
Page 1
Date of Hearing: August 13, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
SB 310 (Calderon) - As Amended: May 14, 2013
PROPOSED CONSENT
SENATE VOTE : 37-0
SUBJECT : MORTGAGES: FORECLOSURE NOTICES: TITLE COMPANIES
KEY ISSUE : SHOULD TITLE COMPANIES BE EXEMPT FROM LIABILITY FOR
SPECIFED VIOLATIONS OF THE HOMEOWNERS' BILL OF RIGHTS IF THEY
MEET CERTAIN CONDITIONS?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill, sponsored by the California Land Title Association
(CLTA), would exempt a title company from liability if it
records a notice of default or notice of sale in violation of
the Homeowners' Bill of Rights, if it is acting in good faith
and in the normal course of its business activities at the
request of a trustee, substitute trustee, or beneficiary.
However, when a title company is acting as a trustee, it would
not be exempt. The exemption is intended to protect title
companies from liability when they are acting purely in a
ministerial role, recording documents at the request of some
other trustee, and have no way of verifying whether the trustee
complied with the Homeowners' Bill of Rights requirements. The
bill would not affect the liability of a trustee or beneficiary
who requests the recordation.
SUMMARY : Exempts title companies from liability for violations
of the Homeowners' Bill of Rights in certain circumstances.
Specifically, this bill :
1)Provides that, unless acting in the capacity of a trustee, a
licensed title company or underwritten title company shall not
be liable for a violation of specified sections of the
Homeowners' Bill of Rights in the Civil Code if it records or
causes to record a notice of default or notice of sale at the
SB 310
Page 2
request of a trustee, substitute trustee, or beneficiary, in
good faith and in the normal course of its business
activities.
2)Provides that specified sections of the Homeowners' Bill of
Rights in the Civil Code shall 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 notice of default or notice of sale.
EXISTING LAW :
1)For specified institutions or persons with fewer than 175
foreclosures in the previous year:
a) Prohibits recording a notice of default (NOD) until 30
days after initial contact with the borrower, as specified,
or 30 days after due diligence, as specified; and the
mortgagor has complied with requirements regarding the
first lien loan modification application, as specified.
(Civil Code Sections 2923.5 and 2924.18. All references
hereinafter are to this code unless otherwise noted.)
b) Until January 1, 2018, prohibits recording an NOD or
notice of sale (NOS), or conducting a trustee's sale, while
the first lien loan modification is pending, as specified,
or, when a borrower has been approved for a foreclosure
prevention alternative in writing by the servicer, if the
borrower is in compliance or a foreclosure prevention
alternative has been approved in writing by all parties,
and proof of funds or financing has been provided to the
servicer. (Section 2924.18.)
c) Beginning January 1, 2018, prohibits recording an NOD if
a foreclosure prevention alternative is approved in writing
prior to the recordation of an NOD, and if the borrower is
in compliance or a foreclosure prevention alternative has
been approved in writing by all parties. (Subdivision
2924.11(a).)
d) Beginning January 1, 2018, prohibits recording an NOS or
conducting a trustee's sale if a foreclosure prevention
alternative is approved in writing after the recordation of
an NOD, and if the borrower is in compliance, as specified,
or a foreclosure prevention alternative has been approved
SB 310
Page 3
in writing by all parties, as specified. (Subdivision
2924.11(b).)
2)For other institutions or persons:
a) Until January 1, 2018, prohibits recording an NOD until
the mortgage servicer has sent specified information in
writing to the borrower and similar requirements to those
for entities with fewer than 175 foreclosures are met, as
specified. Beginning January 1, 2018, the requirements
become identical to the requirements for entities with
fewer than 175 foreclosures, as specified above. (Sections
2923.55 and 2923.6.)
b) Until January 1, 2018, prohibits recording an NOD or
NOS, or conducting a trustee's sale, while the complete
first lien loan modification application is pending and
until specified deadline expire. (Section 2923.6.)
c) Prohibits recording an NOD if a foreclosure prevention
alternative is approved in writing prior to the recordation
of an NOD, and if the borrower is in compliance, as
specified, or a foreclosure prevention alternative has been
approved in writing by all parties. (Subdivision
2924.11(a).)
d) Prohibits recording an NOS or conducting a trustee's
sale if a foreclosure prevention alternative is approved in
writing after the recordation of an NOD, and if the
borrower is in compliance, as specified, or a foreclosure
prevention alternative has been approved in writing by all
parties, as specified. (Subdivision 2924.11(b).)
3)Provides a private right of action for injunctive relief and
damages for violations of these provisions. (Section
2924.12.)
COMMENTS : According to the author, this bill would close a
loophole that could otherwise result in liability for the title
company if they record a notice of default or notice of sale, in
good faith, but in violation of Homeowners' Bill of Rights.
In support of the bill, the sponsor writes:
SB 310 is a simple bill designed to codify the intent of the
SB 310
Page 4
2012 Conference Committee on SB 900 (Ch. 87, Statutes of 2012)
[regarding] liability for title companies seeking to record
documents, such as notices of default and other related
documents, at the request of a trustee, lender, or mortgage
servicer.
The Conference Committee specifically stated in its report,
dated July 2nd, 2012, that the bill was NOT intended to create
liability for the ministerial act of recordation . . . . In
short, CLTA seeks only to codify this intent in statute so
that no ambiguity exists under the new law.
CLTA further explains:
[T]itle companies rely almost exclusively on a search of
recorded documents to determine the status of title and
compliance with the law. Unfortunately, all of the new
requirements (single point of contact, notices, loan
modification offers, etc.) imposed on lenders and mortgage
servicers cannot be verified through all search and inspection
of notice of default, notice of sale, or any other documents
the lenders have recorded or will be asking title companies to
record.
Thus, that means these new obligations are all "off record"
requirements for lenders and mortgage servicers that title
companies have no ability to double-check. As a result, title
companies are simply left with assurances by the lender and/or
mortgage servicer that it has complied with all of the new
requirements. Relying on this assurance exposes title
companies to huge liability that was not intended by SB 900.
REGISTERED SUPPORT / OPPOSITION :
Support
California Land Title Association (sponsor)
First American Title
Fidelity National Financial
Opposition
None known
Analysis Prepared by : Kevin G. Baker and Tom Watts / JUD. /
SB 310
Page 5
(916) 319-2334