BILL ANALYSIS Ó
SB 474
Page 1
Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 474
(Wieckowski) - As Amended July 9, 2015
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Urgency: Yes State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill revises and recasts recently enacted law governing
real estate auctions to make unnecessary a statutory exception
for "credit bids" from the meaning of "shill bids," and deletes
SB 474
Page 2
the existing and hence unnecessary exception.
FISCAL EFFECT:
Negligible fiscal impact.
COMMENTS:
1)Background. Last year, the Legislature passed AB 2039
(Muratsuchi) to regulate short sale transactions, including
measures to ensure greater transparency in real estate
auctions to protect bidders. Among other things, the bill
prohibits any person, including the seller, auctioneer, or
their agents, from bidding at a real property auction for the
sole purpose of increasing the bid, unless two conditions are
met. First, all auction participants must receive advance
notice that such bidding will be allowed during the auction,
and secondly, the auctioneer or other person placing the bid
must contemporaneously disclose to all auction participants
that the bid has been placed on behalf of the seller.
After these requirements were amended into the bill in the
Senate, the California Bankers Association (CBA) raised
concerns that the bill may impact the existing practice of
creditors who offer credit bids on property during a
foreclosure auction. Unlike a bid placed on behalf of the
seller, a credit bid offered in a foreclosure auction can
result in the transfer of title to property since the bid is
backed by an interest in the property, such as a lien,
mortgage, or deed of trust. In response to CBA's concerns,
the author amended AB 2039 to expressly exclude credit bids
from the scope of the bill's general prohibition on bids
placed on behalf of sellers. According to CBA, this
exclusionary language "was offered instead of refining and
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clarifying the . . . underlying restrictions on auctioneer
practices."
2)Purpose. This bill seeks to narrow AB 2039's prohibition on
any bids being placed on behalf of sellers to cover only those
bids made by an auctioneer. Proponents contend that because
the auctioneer is never the same person as a creditor placing
a credit bid, the bill's narrower prohibition will have no
impact on credit bids made in a foreclosure auction.
According to CBA, the changes in this bill provide "clarity to
the confusing opening provision found in [existing law] and,
as amended, appropriately [focus] on the actions of the
auctioneer, making it clear that the auctioneer is prohibited
from stating an increased bid during an auction when one does
not exist." As a result of this clarification, CBA asserts,
"the exclusion for credit bids . . . is no longer necessary."
In short, this bill simplifies the changes enacted by AB 2039
by eliminating the creditor bid exemption and re-casting the
prohibition on placing a bid on behalf of the seller to apply
only to bids offered by an auctioneer.
Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081