BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 827| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 827 Author: Liu (D) Amended: 4/8/14 Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 5-2, 3/19/14 AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu NOES: Knight, Vidak SENATE JUDICIARY COMMITTEE : 5-2, 4/1/14 AYES: Jackson, Corbett, Lara, Leno, Monning NOES: Anderson, Vidak SUBJECT : Local government: Los Angeles County: notice of recordation SOURCE : Los Angeles County DIGEST : This bill extends, from January 1, 2015, to January 1, 2020, the authority of the Los Angeles County Recorder to notify affected parties, including occupants of the property, when a notice of default or notice of sale has been recorded on a property. The Los Angeles County Recorder may collect a fee of up to $7 in order to cover the cost of notifying the parties and providing information about housing assistance and counseling. ANALYSIS : Existing law permits the Los Angeles County Recorder (Recorder), upon the adoption of an authorizing resolution by the Los Angeles Board of Supervisors (Board), to CONTINUED SB 827 Page 2 mail a notice to the party or parties executing a deed, quitclaim deed, or deed of trust, within 30 days of recordation. (Government Code [GOV] Section 27297.6.) Existing law provides that failure to provide the above notice shall not result in any liability against the Recorder and the county, and requires the Recorder to use a competitive bid process if it contracts for the processing or mailing of the notice. (GOV Section 27297.6.) Existing law permits the Recorder to collect an additional fee from the party filing a deed, quitclaim deed, or deed of trust, to implement the above provision. That fee shall not exceed the mailing cost of the above notice, but in no case be greater than $7. (GOV Section 27387.1.) Existing law requires the trustee, or authorized agent, that represents the foreclosing financial institution to post and mail a notice informing the residents of a property about a pending foreclosure sale. That notice informs residents that the property may be sold at a foreclosure sale, the requirements of an eviction notice, and that they may wish to contact a lawyer or a local legal aid or housing counseling agency to discuss any rights they may have. (Civil Code Section 2924.8.) Existing law additionally permits the Recorder, upon adoption of an authorizing resolution by the Board, to notify the party or parties subject to a notice of default or notice of sale, including the occupants of that property. The Recorder must notify those individuals by mail within five days, but in any event no more than 20 days, of the recording of those documents. (GOV Section 27297.6.) Existing law additionally authorizes the Recorder to collect an additional fee from a party filing a notice of default or notice of sale. That fee, not to exceed seven dollars, shall not exceed the mailing cost of the notice and the actual cost, if any, to provide information, counseling, or assistance to a person who receives the notice. That fee may include specified administrative costs to carry out the notification program, but such administrative costs shall not exceed 10% of the total fee collected. (GOV Section 27387.1.) Existing law provides that the authority of the Recorder to CONTINUED SB 827 Page 3 notify parties of the recording of a notice of default or a notice of sale, and to collect an additional fee from the party recording the notice, shall remain in effect only until January 1, 2015, and as of that date shall be repealed, unless a later enacted statute, that is enacted before January 1, 2015, deletes or extends that date. (GOV Section 27297.6.) Existing law requires the Board to submit a report to the Senate Judiciary Committee and the Assembly Local Government Committee that includes, but is not limited to, a copy of the type of notices mailed, the number of recorded notices of default and sale for which a fee was collected, the amount of fees collected, and the amount of fees spent to provide housing information, counseling, and assistance. The report must be submitted on or before January 1, 2014. (GOV Section 27297.6.) This bill extends the authority of the Recorder to notify parties of the recording of a notice of default or a notice of sale, and to collect an additional fee from the party recording the notice, to January 1, 2020. The Recorder must notify the party or parties subject to a notice of default or notice of sale, including the occupants of that property by mail within five days, but in any event no more than 14 days, of the recording of those documents. This bill extends, until January 1, 2019, the date by which the Board must submit a report to the Legislature containing the following additional information: Documented examples showing how the county's homeowner notification program led to successful investigations of real estate fraud activity, referrals to prosecuting agencies, avoided foreclosures, or helped property owners and residents avoid falling victim to real estate fraud; An evaluation of whether the county's homeowner notification program, in comparison to other available policy tools in Los Angeles County, is a cost-effective approach to combating real estate fraud and reducing foreclosures; CONTINUED SB 827 Page 4 An evaluation of whether the county's homeowner notification program is an effective way to inform tenants of an impending foreclosure and to combat abusive post-foreclosure practices by property owners; and An assessment of how the county's homeowner notification program compares to real estate fraud and foreclosure prevention programs being implemented in at least three other large, urban California counties. Background Los Angeles County has, since 1992, operated a county-specific "Homeowner Notification Program" that is designed to help combat real estate fraud in Los Angeles County. Under existing law, the Recorder is authorized to collect a distinct fee from parties that record certain documents evidencing the transfer of title, specifically deeds, quitclaim deeds, and deeds of trust. That fee is used to mail a notice of recordation to the party that purportedly executed the document, and to fund a help line at the Los Angeles County Department of Consumer Affairs (DCA) that property owners who receive these notices can call to receive information and assistance. This notification program, enacted in 1992 and renewed in 1996, seeks to address problems related to forged real estate documents by notifying property owners that their real estate is subject to a recently filed document that could affect their property interests. By informing property owners about recently filed title transfer documents, the notice allows these owners to contact law enforcement if they suspect that the documents are fraudulent. The Homeowner Notification Program was expanded in 2012 to allow the Recorder to also notify owners of a property (and occupants of the home) when a notice of default or notice of sale is recorded against the property. Those documents signify either the beginning of the non-judicial foreclosure process (notice of default), or the announcement of the sale date (notice of sale), which means that the home could be very close to being sold at auction. Although existing law mandates mailing or posting several other statutory notices to both property owners and tenants impacted by a non-judicial foreclosure, this additional notice allows Los Angeles County to send region-specific information to help affected individuals both become aware of available resources, and aware of potential scams that may CONTINUED SB 827 Page 5 target owners of distressed properties. As with the recording of deeds, quitclaim deeds, and deeds of trust, the expanded Homeowner Notification Program authorizes the Recorder to collect a distinct fee from parties that record notices of default and notices of sale in order to fund the program. These fees are used to cover the cost of mailing the notices as well as to provide foreclosure avoidance assistance and housing counseling via the DCA help line. Authorization for this expanded component of the Homeowner Notification Program is set to expire on January 1, 2015. Comments The author writes: The home foreclosure crisis has created opportunities for more fraudulent transactions, as well as displacing renters who had no idea that the home they occupy was in the process of foreclosure. A Los Angeles County Real Estate Fraud/Predatory Lending Task Force in 2009 made a series of recommendations, including adding notices about default and sale to the existing state law for the County. The County has established the initial framework to implement the SB 62 notice program, but the original bill expires on January 1, 2015. The County needs more time to implement the notice program, given the size of Los Angeles County and the large number of foreclosures. This bill will help prevent property sale fraud and protect homeowners and renters in Los Angeles County. When the County records a notice of default or notice of sale for a home, the occupants will receive a notice in the mail. Residents will know that a home is being sold, foreclosed on, or is possibly involved in a fraudulent transaction. This bill extends for five years the reporting requirements and fraud-alert program authorized by SB 62, which Sen. Liu authored in 2011. Prior Legislation SB 62 (Liu, Chapter 141, Statutes of 2011) authorized the Recorder to notify affected parties, including occupants of the CONTINUED SB 827 Page 6 property, when a notice of default or notice of sale has been recorded on a property. This bill permits the Recorder to collect a fee of up to $7 in order to cover the costs of notifying the parties and providing information about housing assistance and counseling. SB 878 (Liu, 2010) would have authorized a notification program identical to that in SB 62 (Liu, Chapter 141, Statutes of 2011), but was vetoed by Governor Schwarzenegger out of concern that the proposed notices would be redundant. SB 1631 (Watson, Chapter 177, Statutes of 1996) reauthorized Los Angeles County to notify property owners whenever a deed, quitclaim deed, or deed of trust is recorded on their title. This bill permitted the Recorder to collect a fee not to exceed $7 from a party recording such deeds in order to fund the notification program. SB 1842 (Watson, Chapter 815, Statutes of 1992) permitted the Recorder, within 30 days of recordation of a deed, quitclaim deed, or deed of trust, to notify by mail the party executing the document. This bill permitted the Recorder to collect a fee not to exceed $10 from a party recording such deeds in order to fund the notification program, and included a repeal provision to sunset the bill on January 1, 1996. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 4/8/14) Los Angeles County (source) California State Council of the Service Employees International Union Consumer Federation of California Los Angeles County District Attorney's Office Los Angeles County Sheriff's Department Western Center on Law and Poverty AB:d 4/8/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE CONTINUED SB 827 Page 7 **** END **** CONTINUED