BILL ANALYSIS Ó AB 2143 Page 1 Date of Hearing: May 18, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2143 (Irwin) - As Amended April 12, 2016 ----------------------------------------------------------------- |Policy |Local Government |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 AB 2143 Page 2 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. AB 2143 Page 3 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 AB 2143 Page 4 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. AB 2143 Page 5 Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081