BILL ANALYSIS
AB 1356
Page 1
Date of Hearing: January 24, 2008
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mark Leno, Chair
AB 1356 (Houston) - As Amended: January 22, 2008
Policy Committee:
JudiciaryVote:10-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill modifies what constitutes the required demonstration
of financial responsibility by the representative of an "equity
purchaser (i.e. one who buys properties facing foreclosure), in
providing written proof to the parties to the contract, under
penalty of perjury, that the representative has either:
1)Professional liability coverage equal to $1 million and an
unrestricted real estate license in good standing, as
specified.
2)A surety bond, as specified, for each contract in an amount
equal to at least one-third of the median home price for the
metropolitan area in which the foreclosed property is located.
FISCAL EFFECT
Potential, probably minor, non-reimbursable costs to counties
for enforcement of bill's requirements, offset to some extent by
fine revenues related to a perjury conviction.
COMMENTS
1)Background . Enactment of the Home Equity Sales Contracts Act
in 1979 was intended to protect homeowners faced with
foreclosure from unscrupulous individuals who, by means of
fraud or deceit, try to induce owners to sell their homes for
a fraction of the market value and often cause the owners to
lose their built-up equity. Because the so-called "equity
purchaser" who buys property under threat of foreclosure often
uses an agent or representative, the law was amended in 1990
AB 1356
Page 2
to require any representative of an equity purchaser to
provide all parties to the contract with written proof that
they have a valid California real estate license and are
bonded in an amount twice the fair market value of the subject
property. The 1990 amendment also made the equity purchaser
liable for all damages caused by the purchaser's
"representative."
2)Purpose . This bill allows the representative another
option-obtaining $1 million in liability coverage-to meet the
financial security requirements. According to the sponsor, the
California Association of Realtors (CAR), this option is
needed because surety bonds are not available in California.
CAR believes that professional liability insurance is an
adequate substitute for the existing surety bond requirement,
especially given the additional requirement that a
representative also have an unrestricted real estate license.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081