BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2143


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          Date of Hearing:  May 18, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2143 (Irwin) - As Amended April 12, 2016


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill, until January 1, 2027, allows additional persons and  
          entities to deliver electronic records to county recorders for  
          recording, and expands the types of electronic records that may  
          be delivered to a county recorder for recording.


          FISCAL EFFECT:


          1)Unknown costs to the California Department of Insurance (CDI),  
            but likely less than $150,000, to address inconsistencies in  
            terminology being introduced by this bill. (See Comment #3  








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            below.)


          2)Minor and absorbable costs to the Department of Justice (DOJ)  
            to update regulations.


          3)Potential cost savings for counties from increased  
            e-recordings. County Recorders assert that e-recordings are  
            more cost effective than traditional paper recordings. This  
            bill will expand the potential use of e-recordings by counties  
            that already use it, as well as encourage counties that do not  
            currently allow e-recording to make the transition.


          COMMENTS:


          1)Purpose.  According to the author, "Current law allows  
            specified title organizations and financial institutions to  
            electronically record certain legal documents with county  
            recorders provided that they register with the DOJ and meet  
            minimum liability requirements.  AB 2143 will expand  
            electronic recording to all entities that register with the  
            DOJ and hold minimum liability insurance.  Since 2004,  
            electronic recording has proven to be safe, efficient, and  
            cost effective for both private enterprise and government  
            entities.  It's time to expand this to all entities and bring  
            California into the 21st century."  



          2)Background.  Generally, county recorders are responsible for  
            examining and recording all documents that deal with  
            establishing ownership of land in counties.  This includes the  
            recording of title documents, notes, and home loan payoffs by  
            homeowners, title companies, mortgage companies and government  
            agencies involved in real estate transactions.  









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            AB 578 (Leno), Chapter 621, Statutes of 2004, established the  
            Electronic Recording Delivery Act of 2004 (ERDA) and created a  
            statewide system for county recorders to record electronic  
            records of real property instruments.  AB 578 required the  
            State Attorney General (AG) to adopt regulations for  
            certification and oversight of electronic recording delivery  
            system (ERDS) and associated software and other services.


            In order to establish an ERDS, a county recorder must be  
            authorized by resolution of the county board and must obtain  
            system certification from the ERDS Program, which is  
            administered by the AG.  A county's ERDS must meet specified  
            security standards and all persons with a secure access role  
            are required to undergo fingerprint criminal history checks.  
            To date, the AG has certified ERDS for 24 counties. Both the  
            AG and the County Recorders Association of California attest  
            that there have been no instances of fraud connected with the  
            use of ERDS since it became operational.  


          3)CDI Suggested Amendment.  CDI annually surveys the county  
            recorders to ascertain the number of documents recorded.  This  
            information is tabulated and used by the CDI to determine a  
            underwritten title company's (UTC's) net worth; to determine  
            UTC renewal of license fees; and, as of July 1, 2016, to  
            determine the financial responsibility for UTCs which are  
            licensed to perform as enacted effective July 1, 2016.  

            AB 2143 provides for the electronic delivery of "records," not  
            documents. Since the language of the bill doesn't match that  
            of the Insurance Code, which requires a county recorder  
            document count, there is a question presented as to how  
            electronic delivery of records may impact the count of  
            recorded documents.  It helps to answer the question of  
            whether a record is the same as a document, and also if  
            electronic records as proposed to be submitted under the bill  








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            be included in the document count.  CDI has proposed a  
            clarifying amendment to address this issue, and it will remove  
            the fiscal impact to CDI.



          4)Prior Legislation.  



             a)   AB 1738 (Committee on Local Government), Chapter 520,  
               Statutes of 2005, required a federal background check to be  
               conducted before any person could be authorized secure  
               access to an ERDS.



             b)   AB 578 (Leno), Chapter 621, Statutes of 2004,  
               established ERDA and created a statewide system for county  
               recorders to record electronic records of real property  
               instruments.

             c)   AB 3296 (Brewer), Chapter 842, Statutes of 1996, allowed  
               Orange County and San Bernardino County to accept digitized  
               property records from title companies under specified  
               conditions, until January 1, 1999.





             d)   AB 1906  (Brewer), Chapter 463,  Statutes of 1998,  
               extended the pilot program allowing Orange County and San  
               Bernardino County to accept digitized property records from  
               title companies, and required the AG to appoint a task  
               force to address technical, legal, security, and economic  
               issues associated with electronic recordation.










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          Analysis Prepared by:Jennifer Swenson / APPR. / (916)  
          319-2081