BILL ANALYSIS Ó
SB 827
Page 1
Date of Hearing: June 4, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 827 (Liu) - As Amended: April 8, 2014
SENATE VOTE : 25-10
SUBJECT : Local government: Los Angeles County: notice of
recordation.
SUMMARY : Extends the sunset date on Los Angeles County's
authority to notify specified parties when a notice of default
or a notice of sale is recorded, and to collect associated fees.
Specifically, this bill :
1)Extends, from January 1, 2015, to January 1, 2020, the sunset
date on Los Angeles County's (L.A. County) authority to allow
the L.A. County Recorder (Recorder) to notify by mail the
party or parties subject to a notice of default or a notice of
sale, including the occupants
of that property, as specified.
2)Reduces, from 20 days to 14 days of recordation, the time by
which the Recorder is to notify the party or parties subject
to a notice of default or a notice of sale.
3)Changes, from January 1, 2014, to January 1, 2019, the date by
which L.A. County must submit a report to the Senate Committee
on Judiciary and the Assembly Committee on Local Government
regarding the notifications authorized pursuant to 1), above,
and requires the following additional information to be
included in the report:
a) Documented examples showing how L.A. 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 to avoid falling victim to real estate fraud;
b) An evaluation of whether L.A. County's homeowner
notification program, in comparison to other available
policy tools in the County of L.A. is a cost-effective
approach to combating real estate fraud and reducing
foreclosures;
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c) An evaluation of whether L.A. 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,
d) An assessment of how L.A. 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.
4)Extends, from January 1, 2015, to January 1, 2020, the sunset
date on the Recorder's authority to collect a fee of up to $7
from the party filing a notice of default or notice of sale,
as specified.
5)Finds and declares that a special law is necessary and that a
general law cannot be made applicable within the meaning of
Section 16 of Article IV of the California Constitution
because the County of L.A. is experiencing a unique and
prolonged recovery from the financial and real estate fraud
crisis.
EXISTING LAW :
1)Allows the Recorder, upon the adoption of an authorizing
resolution by the L.A. County Board of Supervisors, to mail a
notice to the party or parties executing a deed, quitclaim
deed, or deed of trust, within 30 days of recordation.
2)Allows the Recorder to collect an additional fee from the
party filing a deed, quitclaim deed, or deed of trust, to
implement the above provision. This fee shall not exceed the
mailing cost of the above notice, not to exceed $7.
3)Allows the Recorder, upon adoption of an authorizing
resolution by the L.A. County Board of Supervisors, to notify
the party or parties subject to a notice of default or notice
of sale, including the occupants of that property. The
Recorder may notify those individuals by mail within five
days, but in any event no more than 20 days, of the recording
of those documents.
4)Allows the Recorder to collect an additional fee from a party
filing a notice of default or notice of sale. This fee shall
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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, not to exceed $7. This 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.
5)Sunsets the Recorder's authority 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, on
January 1, 2015.
6)Requires a trustee or authorized agent that represents a
foreclosing financial institution to post and mail a notice
informing the residents of a property about a pending
foreclosure sale. This 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.
FISCAL EFFECT : None
COMMENTS :
1)Purpose of this bill . This bill extends, until January 1,
2020, the sunset date on L.A. County's authority to authorize
its Recorder to notify by mail the party or parties subject to
a notice of default or a notice of sale, including the
occupants of that property, and to collect fees for this
purpose from those recording such documents. The existing
sunset date is January 1, 2015. This bill also adds several
elements to a report that L.A. County must submit to specified
legislative committees. This bill is sponsored by the L.A.
County Board of Supervisors.
2)Author's statement . According to the author, "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
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existing state law for the County, due to the severity of the
home foreclosure crisis in Los Angeles County.
"SB 827 extends the authority of the Los Angeles County
Registrar Recorder to notify parties of the recording of a
notice of default or notice of sale, and to collect a fee not
to exceed $7, from the party recording the notice, through
January 1, 2020. This bill extends the reporting requirements
and fraud-alert program authorized by SB 62, which Sen. Liu
authored in 2011.
"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 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."
3)Background . State law generally provides that any instrument
or judgment affecting the title to or possession of real
property may be recorded at a county recorder's office.
Recordable instruments include:
a) Various types of deeds, which are used to transfer or
convey title to real property;
b) Notices of default, which must be recorded to initiate
foreclosure proceedings; and,
c) Notices of sale, which must be recorded before real
property can be sold through the foreclosure process.
4)Los Angeles County Homeowner Notification Program . The Los
Angeles County Homeowner Notification Program was authorized
by SB 1842 (Watson), Chapter 815, Statutes of 1992, which
allowed L.A. County to establish a three-year real estate
anti-fraud pilot program to address a significant crisis in
the county with foreclosures related to falsified real estate
loan documents. Under the program, L.A. County notifies
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homeowners by mail when a deed, quitclaim deed, or deed of
trust is recorded against their property. The mailing
instructs homeowners to contact the County Department of
Consumer Affairs (DCA) if they suspect forgery or fraud, or if
they need additional assistance. Initially, the Recorder was
allowed to charge an additional fee for filing these documents
to cover the cost of the notifications, not to exceed $10.
The program was re-authorized in 1996 without a sunset date
and with the authority for the Recorder to collect an
additional fee of up to $7 from the party filing a deed,
quitclaim deed, or deed of trust, to cover the cost of mailing
the notice.
SB 62 (Liu), Chapter 141, Statutes of 2011, expanded the
program by allowing the Recorder to notify property owners and
tenants when a notice of default or a notice of sale is
recorded. The fee authority was expanded to cover the mailing
cost and the actual cost to provide information, counseling,
or assistance to a person who receives the notice, not to
exceed $7. SB 62 also required the Board of Supervisors to
submit a report by January 1, 2014, to the Senate Committee on
Judiciary and the Assembly Committee on Local Government 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. These statutes sunset on January
1, 2015.
While this extended authority was enacted in 2011, L.A. County
didn't begin implementing these provisions until December of
2013. Because the County did not begin implementing SB 62's
provisions until late last year, the County had no data to
include in the report it submitted to the Legislature by
January 1, 2014. However, the L.A. County DCA "has performed
1657 counseling calls and opened 121 cases of Real Estate
fraud and 86 cases of foreclosure protection," according to
the Consumer Federation of California.
According to the L.A. County Board of Supervisors, sponsor of
this bill, "DCA currently receives approximately 10,000 calls
annually from homeowners on the existing program for deeds,
and conducts more than 500 fraud investigations. DCA projects
that more than 700,000 notifications were mailed in 2013, and
notes that a recent survey showed that more than 96% of
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homeowners support the notification program."
This bill extends the sunset date on the program's authority
to notify property owners and tenants when a notice of default
or a notice of sale is recorded, including the $7 fee
authority, and requires the report to the Senate Committee on
Judiciary and the Assembly Committee on Local Government to
include the following additional components:
a) Documented examples showing how L.A. 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;
b) An evaluation of whether L.A. County's homeowner
notification program, in comparison to other available
policy tools in the County of L.A., is a cost-effective
approach to combating real estate fraud and reducing
foreclosures;
c) An evaluation of whether L.A. 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,
d) An assessment of how L.A. 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.
5)Proposition 26 . In the November 2010 election, California
voters approved Proposition 26, which amended the California
Constitution to expand the definitions of local taxes and tax
increases that require voter approval. Under Proposition 26,
any levy, charge, or exaction of any kind imposed by a local
government is a tax, requiring voter approval, with the
following exceptions:
a) A charge for a benefit or privilege conveyed directly to
the payor and not conveyed to those not charged;
b) A charge for a service or product provided directly to
the payor and not provided to those not charged;
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c) A fee to cover certain costs of regulation;
d) Entrance fees for state or local property;
e) Fines imposed by a court or a local government;
f) A charge imposed as a condition of property development;
and,
g) Assessments and property related fees governed by
Proposition 218.
It is unclear whether L.A. County's fees on recorded real
estate documents to fund the homeowner notification program
qualify under any of these exceptions.
6)Previous legislation . SB 62 (Liu), Chapter 141, Statutes of
2011, allowed L.A. County, until January 1, 2015, to authorize
its recorder to notify by mail the party or parties subject to
a notice of default or a notice of sale, including the
occupants of that property, and to collect fees for this
purpose from those recording such documents.
SB 878 (Liu) of 2010 would have authorized a notification
program identical to that in
SB 62. SB 878 was vetoed with the following message:
"While the goals of SB 878 are laudable, the bill is
unnecessary as foreclosure statutes require that notices of
default and notices of sale be mailed to the owner of the
property. Moreover, notices of sale, in addition to being
mailed to the property owner, must also be posted on the
property, providing notice to both the occupant and owner
of a pending foreclosure action, effectively making SB 878
redundant."
AB 2618 (Nestande), Chapter 44, Statutes of 2010, authorized
the board of supervisors of every county in the state to adopt
a resolution to authorize the county recorder to notify the
party or parties executing a deed, quitclaim deed, or deed of
trust of the recordation of the deed.
SB 1631 (Watson), Chapter 177, Statutes of 1996, reauthorized
the County of Los Angeles to notify property owners whenever a
deed, quitclaim deed, or deed of trust is recorded on their
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title. This bill permitted the L.A. County 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
L.A. County 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 L.A. County
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.
7)Arguments in support . The Los Angeles County Board of
Supervisors, sponsor of this bill, states, "Despite an
improving Los Angeles County housing market, foreclosure
remains a significant problem for homeowners. Real estate
scammers often locate and contact their victims from County
records of foreclosures. As the real estate market improves,
DCA also expects to see an increase in real estate fraud
complaints as scammers try to exploit increasing property
values. SB 827 will allow the County to continue to provide
needed assistance to property owners and to occupants who are
subject to real estate and foreclosure fraud."
8)Arguments in opposition . None on file.
9)Double-referral . This bill is double-referred to the Assembly
Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Los Angeles County Board of Supervisors [SPONSOR]
California Rural Legal Assistance Foundation
California State Council of the Service Employees International
Union
Consumer Federation of California
Los Angeles City Attorney, Michael N. Feuer
Los Angeles County District Attorney's Office
Los Angeles County Sheriff's Department
Service Employees International Union, Local 721
Western Center on Law and Poverty
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Opposition
None on file
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958