BILL ANALYSIS Ó SB 720 Page 1 Date of Hearing: August 14, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair SB 720 (Correa) - As Amended: May 21, 2013 Policy Committee: JudiciaryVote: 9-0 Veterans Affairs 10-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill: 1)Extends to military reservists and National Guard members ordered to active federal or state military service enhanced financial protections provided to those military service members called to active duty as part of the Iraq and Afghanistan conflicts. The protections include: a) No interest charged or accumulated during the period when a payment of an obligation is deferred due to military service, or b) No foreclosure or repossession of property on which a payment has been deferred. 2)Extends commensurate safeguards for financial institutions regarding deferral of financial obligations, including: a) Requiring mortgage payments deferred during this period to be due and payable upon the occurrence of certain specified conditions, such as the sale of the property. b) Providing that a service member with a mortgage subject to an impound account for the payment of property taxes, special assessments, and certain insurance shall not be relieved from making monthly payments. FISCAL EFFECT SB 720 Page 2 Likely negligible state or local fiscal impact of expanded eligibility for payment deferrals. COMMENTS 1)Background . Current law permits military reservists and National Guard members ordered to active federal or state military service to defer certain loans and financial obligations under two different provisions of the Military and Veterans Code. Section 409.3 suspends enforcement of specified civil liabilities, including financial obligations such as mortgages, automobile loans, and installment contracts, for service members during periods of active military service. The relief afforded under this section is available only upon application to a court, and at the conclusion of the period of suspension, the maturity date of the financial obligation is extended by the period of military service, and all unpaid principal and accumulated interest is added to the principal balance of the financial obligation. Section 800 et seq., in contrast, permits service members called to active duty specifically as part of the Iraq or Afghanistan conflicts to defer payments on similar financial obligations for a period of up to six months. Rather than petitioning a court, a service member need only send a letter to their lender requesting deferment of a financial obligation in order to receive benefits under this provision. Additionally, Military and Veterans Code Section 804 provides that "[n]o interest shall be charged or accumulated on the principal or interest on which the payment was delayed." 2)Purpose . SB 720 makes two changes regarding the financial protections afforded deployed military reservists and National Guardsman from California. First, it harmonizes certain protections currently available under Section 800 et seq. with those available under Section 409.3, by eliminating the accrual of interest on deferred interest payable under pre-existing financial obligations, such as mortgages and real estate purchase installment contracts. Second, it incorporates certain protections afforded financial institutions under Section 800 et seq. into deferments authorized under Section 409.3. 3)Related Legislation . AB 526 (Melendez), pending in Senate Appropriations, extends certain financial protections to a SB 720 Page 3 larger class of military reservists and National Guard members, their spouses and legal dependents, and would add utility bills to the current list of obligations subject to deferment, which include mortgages, credit card payments, installment accounts, vehicle loans, and property taxes. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081