BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 310
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          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  








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            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  








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               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  








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            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. /  








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