BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 983|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: SB 983
Author: Morrell (R)
Amended: 5/16/16
Vote: 21
SENATE JUDICIARY COMMITTEE: 7-0, 4/26/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SUBJECT: Mortgages and deeds of trust
SOURCE: United Trustees Association
DIGEST: This bill increases the statutory base rate trustees
may charge at various stages in the non-judicial foreclosure
process, and makes other clarifying and technical changes to
existing law.
Senate Floor Amendments of 5/16/16 strike a provision that
states, in limited circumstances, that a trustee is not the
legal owner of property for purposes of the duty to maintain
such property.
ANALYSIS:
Existing law:
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1)Regulates the non-judicial foreclosure of properties pursuant
to a power of sale clause contained within a mortgage
contract. To commence the process, existing law requires the
trustee, mortgagee, or beneficiary to record a Notice of
Default and allow three months to lapse before setting a date
for sale of the property. (Civ. Code Secs. 2924.)
2)Provides that trustee's or attorney's fees which may be
charged during the non-judicial foreclosure process or until
the notice of sale is deposited in the mail to the trustor or
at any time prior to the decree of foreclosure, shall not
exceed $300 if the unpaid principal sum secured is $150,000 or
less, or $250 if the unpaid principal sum secured exceeds
$150,000, plus a specified percentage of the unpaid principal
sum. (Civ. Code Sec. 2924c.)
3)States that commencing with the date that the notice of sale
is deposited in the mail and until the property is sold
pursuant to the power of sale contained in the mortgage or
deed of trust, a beneficiary, trustee, or mortgagee may demand
and receive from a trustor or mortgagor reasonable costs and
expenses actually incurred in enforcing the terms of the
obligation, as specified, and trustee's or attorney's fees in
an amount that does not exceed $425 if the unpaid principal
sum secured is $150,000 or less, or $360 if the unpaid
principal sum secured exceeds $150,000, plus a specified
percentage of the unpaid principal sum. (Civ. Code Sec.
2924d.)
This bill:
1)Increases the base amount of trustee's or attorney's fees that
may be charged pursuant to the above provisions by $50,
resulting in new base fees of $350 and $300, and $475 and
$410, respectively.
2)Makes other technical and clarifying changes to existing law.
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Background
In California, homes are typically purchased with a loan secured
by a deed of trust against the subject property. A trustee
holds legal title to the property in trust for the beneficiary,
which is often the lender. Should the borrower (trustor) fail
to meet his or her obligations under the loan, the trustee
through a power of sale clause in the deed of trust can commence
foreclosure, wherein the property is typically put up for
auction by the trustee and title transfers to the highest
bidder.
Foreclosures in California are generally non-judicial, meaning
that they are accomplished without court involvement. The first
step in the non-judicial foreclosure process is the filing of a
Notice of Default, which generally occurs after three or more
months of delinquency. The foreclosing entity, typically the
trustee, must then generally wait at least three months before
noticing the sale of the property, which is posted, published,
and filed with the county recorder. Existing law requires a
foreclosing entity to provide borrowers with a copy of the
recorded Notice of Default that includes a summary of the
notice, and similarly, a copy of a recorded Notice of Sale that
also includes a summary.
During non-judicial foreclosure, existing law places certain
duties on trustees and beneficiaries to maintain vacant
properties, governs how trustee sales may be conducted, and
limits the compensation rate trustees may charge. This bill
increases the statutory base rate trustees may charge at various
stages in the non-judicial foreclosure process, and makes other
clarifying and technical changes to existing law.
Comments
The author writes:
When a borrower defaults in the payment of a real estate loan,
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California law provides lenders with two main remedies to
recover the property: judicial and nonjudicial foreclosures.
Judicial foreclosures require court action and are quite rare.
Nearly every foreclosure in California is nonjudicial.
Because courts are not involved, California law is extremely
precise in prescribing foreclosure procedures. The entire
process is provided in the Civil Code.
In order to obtain a real estate loan in California, a
borrower executes a "deed of trust" (commonly referred to as a
mortgage) in favor of the lender. Technically, the deed of
trust transfers bare legal title to the trustee, a third party
with only two duties: re-convey the deed of trust if the loan
is paid off, and commence foreclosure if the borrower
defaults. Trustees perform these functions in strict
accordance with the Civil Code.
SB 983 addresses certain issues relating to nonjudicial
foreclosures by trustees. Current provisions of the Civil
Code prescribe maximum trustee's fees for conducting
foreclosures. The law provides base fees with additional
percentages based upon the size of the loan in default. These
base fees have not been increased since 2001. SB 983 provides
for modest increases in the base fees, amounting to less than
one percent per year since the last increase.
Related/Prior Legislation
SB 4 (Calderon, et al., Chapter 229, Statutes of 2011) required,
among other things, that a notice of sale given pursuant to a
deed of trust or mortgage secured by real property contain
language notifying potential bidders of specified risks involved
in bidding on property at a trustee's sale, as well as a notice
to the property owner informing the owner about how to obtain
information regarding any postponement of the sale.
SB 1137 (Perata, et al., Chapter 69, Statutes of 2008) enacted
several changes to the procedures that must be followed before
the holder of a mortgage may issue a notice of default or notice
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of trustee sale, required the holder of a mortgage to mail a
specified notice to the tenant(s) of a property on which
foreclosure proceedings have begun, and imposed penalties on
property owners who failed to adequately maintain foreclosed
properties, as specified.
SB 958 (Ackerman, Chapter 438, Statutes of 2001) implemented the
current maximum levels of compensation a trustee may receive for
executing the non-judicial foreclosure process.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified5/16/16)
United Trustee's Association (source)
OPPOSITION: (Verified5/16/16)
None received
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
5/18/16 16:27:53
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