BILL ANALYSIS
SENATE RULES COMMITTEE
Office of Senate Floor Analyses
1020 N Street, Suite 524
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UNFINISHED BUSINESS
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Bill No: SB 537
Author: Hughes (D)
Amended: 9/8/95
Vote: 21
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SENATE LOCAL GOVERNMENT COMMITTEE: 5-0, 5/3/95
AYES: Ayala, Calderon, Johnston, Russell, Craven
NOT VOTING: Kopp, Rosenthal
SENATE FLOOR: 21-10, 5/23/95
AYES: Alquist, Ayala, Boatwright, Calderon, Campbell,
Dills, Greene, Hayden, Hughes, Johnston, Killea, Lockyer,
Marks, O'Connell, Petris, Polanco, Rosenthal, Russell,
Solis, Thompson, Watson
NOES: Haynes, Kelley, Kopp, Leonard, Leslie, Maddy,
Monteith, Mountjoy, Peace, Wright
NOT VOTING: Beverly, Costa, Craven, Hurtt, Johannessen,
Johnson, Lewis, Mello, Rogers
ASSEMBLY FLOOR: 42-29, 9/11/95 - See last page for vote
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SUBJECT: County recorderos fees
SOURCE: Los Angeles County District Attorneyos Office
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DIGEST: This bill provides a county recorder with the
authority to impose an additional $2 recording fee at the
time of recording for every real estate instrument, paper,
or notice, as specified, for real estate fraud prevention
and prosecution.
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Assembly Amendments:
1.Increase the additional fee from $1 to $2.
2.Define real estate instrument for purposes of the bill.
3.Change the composition of the Trust Fund Committee to
include the county chief administrative officer rather
than the county auditor or director of finance. The
amendments also provide that if the county lacks a chief
officer responsible for consumer protection, the County
Board of Supervisors may appoint an appropriate
representative to serve on the trust committee.
4.Modify the criteria for awarding funding to law
enforcement agencies by requiring a law enforcement
agency submitting an application for funding to also
submit written evidence of having a program which, on a
regular basis for the past 3 years, accepted for
investigation, and assigned personnel to actively
investigate and prosecute, real estate fraud.
5.Require the County Board of Supervisors to annually
review the effectiveness of the district attorney in
deterring, investigating and prosecuting real estate
fraud cases by requiring the district attorney to provide
the board with an annual report, to include an accounting
of funds received and expended the previous year.
6.Add legislative intent language to the effect that the
bill shall impact real estate fraud involving the largest
number of victims, with emphasis placed on victims whose
residences are in danger of, or are in, foreclosure.
ANALYSIS: State law creates the office of county
recorder and specifies the recorder's duties and manner of
recording, indexing and reproducing legal documents.
State law also prescribes fees which may be charged by the
county recorder for various recording services, such as $4
for recording the first page, and $3 for each additional
page, of a document.
Pursuant to 1992 legislation (SB 1842 - Watson), Los
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Angeles County has begun a Fraud Notification Program,
which attempts to monitor the forgery of a property owner's
signature on real estate loan documents, which are then
recorded without the homeowner's knowledge, by authorizing
the Los Angeles County Recorder to mail actual notice to
the owner when a document is recorded. The recorder may
charge up to $10 for recording any such instrument.
As a result of the notification program, 3,876 cases, where
the property owner did not execute the deeds or loan
documents, have been discovered and referred to the Los
Angeles County District Attorney's Real Estate Fraud
Division since 1994.
This bill specifically provides:
1.Upon adoption of a resolution by a county board of
supervisors, in addition to existing fees prescribed by
law for recording documents, a $2 fee shall be paid at
the time of recording of every real estate instrument,
paper or notice required or permitted by law, unless the
document is specifically exempted by law from paying a
recording fee.
2.Revenue from the fee shall be paid by the County
quarterly to the auditor or director of finance to be
placed in a real estate fraud prosecution trust fund.
3.After deduction of the actual and necessary
administrative expenses, money placed in the Real Estate
Fraud Prosecution Trust Fund shall be distributed, 60% to
the district attorney, subject to review by the board of
supervisors, and 40% to local law enforcement agencies
within the county in accordance with certain
specifications, for deterring, investigating, and
prosecuting real estate fraud crimes.
In those counties where the investigation of real estate
fraud is done exclusively by the district attorney, after
deduction of the actual and necessary administration
costs are deducted, 100% of those funds shall be
distributed to the district attorney, subject to review
by the board of supervisors.
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4.Unexpended funds may be utilized by a district attorneyos
office or a local law enforcement agency which has
undertaken fraud investigations or prosecutions continued
in a subsequent program year.
5.The county auditor or director of finance shall
distribute funds in the Real Estate Fraud Prosecution
Trust Fund to eligible law enforcement agencies within
the county as determined by a Real Estate Fraud
Prosecution Trust Fund Committee composed of the district
attorney, the county chief administrative officer, and
the chief officer responsible for consumer protection
within the county, each of whom may appoint
representatives of their offices to serve on the
committee. The committee shall establish deadlines and
procedures for local law enforcement agencies within the
county to apply for the use of funds and shall review
applications and make determinations by majority vote as
to the award of funds using the following criteria:
a.Each law enforcement agency that seeks funds shall
submit an application to the committee setting forth
in detail the agency's proposed use of the funds.
b.In order to qualify for receipt of funds, each law
enforcement agency submitting an application shall
provide written evidence that the agency either:
(1)Has a unit, division, or section devoted to the
investigation or prosecution of real estate fraud,
or both, and the unit, division, or section has
been in existence for at least one year prior to
the application date.
(2)Has on a regular basis, during the three years
immediately preceding the application date,
accepted for investigation or prosecution, or
both, and assigned to specific persons employed by
the agency, cases of suspected real estate fraud,
and actively investigated and prosecuted those
cases.
The committee's determination to award funds to a law
enforcement agency shall be based on, but not be limited
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to, (1) the number of real estate fraud cases filed in the
prior year; (2) the number of real estate fraud cases
investigated in the prior year; (3) the number of victims
involved in the cases filed; and (4) the total aggregated
monetary loss suffered by victims, including individuals,
associations, institutions, or corporations, as a result of
the real estate fraud cases filed, and those under active
investigation by the law enforcement agency.
Each law enforcement agency that has been awarded funds in
the previous year, upon reapplication for funds to the
committee in each successive year, in addition to any
information the committee may require in paragraph c, shall
be required to submit a detailed accounting of funds
received and expended in the prior year. The accounting
shall include (1) the amount of funds received and
expended; (2) the uses to which those funds were put,
including payment of salaries and expenses, purchase of
equipment and supplies, and other expenditures by type; (3)
the number of filed complaints, investigations, arrests,
and convictions that resulted from the expenditure of the
funds; and (4) other relevant information the committee may
reasonably require.
6.That the county board of supervisors is required to
annually review the effectiveness of the district
attorney in deterring, investigating, and prosecuting
real estate fraud crimes based upon information provided
by the district attorney in an annual report submitted to
the board detailing both:
a.Facts, based upon, but not limited to, (1) the number
of real estate fraud cases filed in the prior year;
(2) the number of real estate fraud cases investigated
in the prior year; (3) the number of victims involved
in the cases filed; (4) the number of convictions
obtained in the prior year; and (5) the total
aggregated monetary loss suffered by victims,
including individuals, associations, institutions,
corporations, and other relevant public entities,
according to the number of cases filed,
investigations, prosecutions, and convictions
obtained.
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b.An accounting of funds received and expended in the
prior year, which shall include (1) the amount of
funds received and expended; (2) the uses to which
those funds were put, including payment of salaries
and expenses, purchase of equipment and supplies, and
other expenditures by type; (3) the number of filed
complaints, investigations, prosecutions, and
convictions that resulted from the expenditure of
funds; and (4) other relevant information provided at
the discretion of the district attorney.
7.States intent of the Legislature that in enacting this
bill it is to have an impact on real estate fraud
involving the largest number of victims. To the extent
possible, an emphasis should be placed on fraud against
individuals whose residences are in danger of, or are in,
foreclosure as defined under subdivision (b) of Section
1695.1 of the Civil Code. Case filing decisions continue
to be in the discretion of the prosecutor.
8.No funds dedicated to the purposes specified in SB 537
shall be used to offset a reduction in any other source
of funds.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No
Local: No
SUPPORT: (Verified 9/11/95)
Los Angeles County District Attorneyos Office (source)
California District Attorneys Association
Western Center on Law and Poverty
P.M.I. Mortgage Insurance
California Escrow Association
California Mortgage Bankers Association
Mortgage Guarantee Insurance Corp.
Escrow Agents Fidelity Corp.
Orange County District Attorney
OPPOSITION: (Verified 9/11/95)
California Association of Collectors
County Recorders Association
County of Ventura
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California Land Title Association
ARGUMENTS IN SUPPORT: According to the Los Angeles DA's
Office, the Los Angeles field office of the FBI handled
1,152 cases of fraud in the fiscal year ending September,
1994, of which 905 involved losses over $100,000. Despite
this number, the DA's office has only three investigators
assigned to its newly-created Real Estate Fraud Unit, with
16 open investigations. Presumably due to the limited
number of DAs assigned to prosecute fraud, only nine new
cases have been filed by the unit since July 1994. Many
cases involve total losses from real estate fraud in the
tens of millions of dollars, and the total loss from fraud
to victims overall is estimated at $183.8 million.
Los Angeles County estimates up to $2 million could be
raised by a $2 fee on approximately two million anticipated
document recordings.
The Western Center on Law and Poverty states that town hall
meetings and task forces on the issue of home equity fraud
have shown that there are glaring deficiencies in the
funding of law enforcement to pursue these defrauders.
ARGUMENTS IN OPPOSITION: The California Land Title
Association states that recordation fees should be limited
only to the amount necessary to cover the costs of an
efficient and expedient recording.
ASSEMBLY FLOOR:
AYES: Alpert, Archie-Hudson, Baca, Bates, Bowen, V. Brown,
W. Brown, Burton, Bustamante, Campbell, Cannella,
Cortese, Cunneen, Davis, Ducheny, Escutia, Figueroa,
Friedman, Gallegos, Hannigan, Hauser, Isenberg, Katz,
Knox, Kuehl, Lee, Machado, Martinez, Mazzoni, McDonald,
McPherson, K. Murray, W. Murray, Napolitano, Rainey,
Setencich, Sher, Speier, Sweeney, Vasconcellos,
Villaraigosa, Allen
NOES: Aguiar, Alby, Baldwin, Battin, Bordonaro, Bowler,
Brewer, Brulte, Caldera, Conroy, Granlund, Harvey, House,
Knight, Knowles, Kuykendall, Margett, Miller, Morrissey,
Morrow, Olberg, Poochigian, Pringle, Richter, Rogan,
Takasugi, Thompson, Weggeland, Woods
NOT VOTING: Boland, Firestone, Frusetta, Goldsmith,
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Hawkins, Hoge, Kaloogian, Tucker
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DLW:lm 9/11/95 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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