BILL ANALYSIS
AB 2347
Page 1
ASSEMBLY THIRD READING
AB 2347 (Feuer)
As Amended May 6, 2010
Majority vote
JUDICIARY 7-2 BANKING & FINANCE 8-1
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|Ayes:|Feuer, Brownley, Evans, |Ayes:|Eng, Evans, Fong, |
| |Jones, Huffman, Monning, | |Fuentes, Mendoza, Nava, |
| |Nava | |Ruskin, Torres |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Hagman, Knight |Nays:|Gaines |
| | | | |
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SUMMARY : Provides that if a property contains five or more
dwelling units and a public entity holds a deed of trust or is a
party to a recorded rent regulatory agreement on the property,
the public entity may, by written notice to the trustee,
postpone the sale date by no more than 60 days. Additionally,
specifies that the ability to postpone the sale may only be
exercised one time, by one public entity.
EXISTING LAW :
1)Regulates the non-judicial foreclosure process pursuant to the
power of sale contained within a mortgage contract, and
provides that in order to commence the process, a trustee,
mortgagee, or beneficiary must record a notice of default
(NOD) and allow three months to lapse before setting a date
for sale of the property. [Civil Code Section 2924, all
further references are to the Civil Code].
2)Provides that the mortgagee, trustee or other person
authorized to make the sale must give notice of sale, and
requires notice of sale to be made, as specified, at least 20
days prior to the date of sale. [Section 2924f].
FISCAL EFFECT : Unknown
COMMENTS : According to the author, this bill is intended to
mitigate the impacts of the foreclosure crisis on the
availability of affordable housing in California. When public
AB 2347
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agencies provided financial assistance to multifamily properties
in exchange for securing some percentage of affordable housing
unites, the author states, those agencies should have an
opportunity to intervene by either purchasing the property or
finding a purchaser for the property that will preserve the
affordable units before the trustee concludes foreclosure
proceedings.
The author states that AB 2347 would help local governments
protect their investments in affordable rental housing,
threatened by foreclosure, by providing 60 additional days
before an agency-assisted affordable development can be sold
through foreclosure.
Supporters note that public agencies, typically city or county
housing departments, frequently provide financial assistance to
multifamily properties. Deeds of trust and/or regulatory
agreements secure the loans and ensure that the properties
remain affordable to eligible families. These affordability
agreements are usually subordinated to mortgages or similar
interests held by private lenders. If the owner defaults on the
private loan and a foreclosure ensues, the public agency's
investment and affordability conditions are wiped out.
According to supporters, in the last three years in the City of
Los Angeles alone, 22 separate loans for multifamily
developments in the City's portfolio were threatened with
foreclosure. If all these loans were wiped out, the City of Los
Angeles would lose approximately $23 million, and the
affordability restrictions on many affordable rental units.
The author observes that a receiver is typically appointed to
evaluate and report on the property's operations and financial
condition in a foreclosure on a multifamily residence. A public
agency with a subordinated interest in the property uses the
receiver's report to conduct an economic analysis. This
analysis is the basis for a locality's action plan for the
property. The local legislative body must review and approve
the best fiduciary course of action regardless of its threatened
investment and loss of housing.
The problem, supporters state, is that too often the report
arrives too late for the local government to utilize it for this
analysis. The foreclosure process requires that a foreclosed
multi-family property be sold at a public auction. In the
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current process, government agencies that are the secondary loan
holder are not given ample time to approve the funds, make a
bid, cure a default or buy a distressed property to ensure that
it remains affordable.
In order to allow public agencies an appropriate opportunity to
obtain a meaningful receiver's report, determine a course of
action, and take steps to protect public investments, this bill
would allow public agencies to send a written notice to the
trustee to temporarily postpone a foreclosure sale for up to 60
days. The postponement could only be exercised if: 1) the
public agency holds a trust deed or rent regulatory agreement on
the property; and, 2) the property contains two or more units.
AB 2347 would, supporters contend, ensure that local governments
have a fair opportunity to obtain the receiver's reports and
other assessments of the property - not just days before the
sale is scheduled, but in time to evaluate the information, and
decide whether to commit scarce financial resources to salvage
the long-term affordability of these valuable, rent-restricted
apartments.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081
FN: 0004231