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  









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          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  








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            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