BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1051|
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THIRD READING
Bill No: SB 1051
Author: Galgiani (D), et al.
Amended: As introduced
Vote: 21
SENATE JUDICIARY COMMITTEE : 7-0, 4/1/14
AYES: Jackson, Anderson, Corbett, Lara, Leno, Monning, Vidak
SUBJECT : Buyers Choice Act
SOURCE : Escrow Institute of California
DIGEST : This bill extends the sunset date for the Buyers
Choice Act (BCA) from January 1, 2015 to January 1, 2019.
ANALYSIS : Existing federal law, the federal Real Estate
Settlement Procedures Act (RESPA):
1.Regulates transactions between buyers, sellers, and mortgagees
involving "settlement services" (including title insurance and
escrow services). The Act generally requires that borrowers
receive certain timely disclosures relating to the costs of
those settlement services, and prohibits certain practices on
the part of a mortgagee that increase the costs of settlement
services.
2.Provides that no seller of property that will be purchased
with the assistance of a federally related mortgage loan shall
require, directly or indirectly, as a condition to selling the
property, that title insurance covering the property be
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purchased by the buyer from any particular title company. Any
seller who violates that provision is liable to the buyer in
an amount equal to three times all charges made for such title
insurance.
Existing state law:
The Escrow Law provides for the licensing of escrow agents by
the Department of Corporations, and states that any person
subject to the Escrow Law who violates any provision of RESPA,
or any regulation promulgated thereunder, violates the Escrow
Law.
The Buyer's Choice Act
1.Prohibits a seller from directly or indirectly, as a condition
of receiving offers or selling residential real property to a
buyer, requiring the buyer to purchase title insurance or
escrow services in connection with the sale of that property
from a company chosen by the seller.
2.Defines "seller" as a mortgagee or beneficiary under a deed of
trust who acquired title to residential real property improved
by four or fewer dwelling units at a foreclosure sale,
including a trustee, agent, officer, or other employee of any
such mortgagee or beneficiary.
3.States that a seller who violates the BCA shall be liable to a
buyer in an amount equal to three times all charges made for
the title insurance or escrow service. In addition, any
person who violates this section shall be deemed to have
violated his/her license law and shall be subject to
discipline by his/her licensing entity.
4.Provides that a transaction shall not be invalidated solely
because of the failure of any person to comply with any
provision of the BCA.
5.Sunsets on January 1, 2015 unless a later enacted statute
deletes or extends that date.
This bill extends the above sunset date to January 1, 2019.
Background
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In California, the nonjudicial foreclosure process begins with
the filing of a Notice of Default and concludes with a trustee's
sale where the property is sold to the highest bidder. If
there are no bids over and above the opening bid, the property
reverts back to the lender or servicer who placed that opening
bid (thus, becoming a bank owned property). Those lenders are
then left with an abundance of properties that may then be sold
or auctioned off at a later date.
In 2009, AB 957 (Galgiani, Chapter 264, Statutes of 2009)
enacted the BCA, in order to prevent the seller (the foreclosing
lender or servicer) from requiring a buyer to purchase title
insurance or escrow services from a specific company. In doing
so, the bill partially codified a prohibition in the RESPA that,
with respect to federally related mortgage loans, prohibits
sellers from requiring a buyer to purchase title insurance from
a particular title company. In response to opposition concerns
raised in earlier iterations of the bill, AB 957 included a
sunset date of January 1, 2015 in order to allow for the
Legislature to revisit the policy issues.
Comments
According to the author:
Since the last major bout of foreclosures during the downturn
of the 1990's, a practice was developed in the foreclosure
market that was having significant consequences to many
groups, including home buyers.
The Buyer's Choice Act was put in place to prevent certain
business arrangements that may involve unlawful referral fees
to third-party risk management companies. The Buyer's choice
act enables homebuyers to have more freedom of choice.
This bill, SB 1051 (Galgiani), would extend the sunset date of
[t]he Buyer's Choice Act from January 1, 2015 to January 1,
2019.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 4/2/14)
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Escrow Institute of California (source)
AL:k 4/2/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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