BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 483|
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CONSENT
Bill No: SB 483
Author: Corbett (D)
Amended: 4/2/09
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 5/12/09
AYES: Corbett, Harman, Florez, Leno, Walters
SUBJECT : Mortgages: foreclosure
SOURCE : Author
DIGEST : This bill clarifies existing law relating to
bankruptcy exceptions by stating that the existing
requirements do not apply if a case has been filed by the
borrower under Chapter 7, 11, 12, or 13 of Title 11 of the
United States Code, and the bankruptcy court has not
entered an order closing or dismissing the bankruptcy case
or granting relief from a stay of foreclosure.
ANALYSIS : Existing law regulates the non-judicial
foreclosure of properties pursuant to the power of sale
contained within a mortgage contract. To commence the
process, existing state 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. (Sections 2924 and 2924f of the Civil
Code)
Existing law prohibits a mortgagee, trustee, or authorized
CONTINUED
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agent from filing a notice of default until 30 days after
contact is made, as specified. That notice of default must
include a declaration that the mortgagee, beneficiary, or
authorized agent has contacted the borrower, tried with due
diligence to contact the borrower, or the borrower has
surrendered the property, as specified. (Section 2923.5
(a) and (b) of the Civil Code)
Existing law provides that the above requirements relating
to contact do not apply in various circumstances, including
where the borrower has filed for bankruptcy and the
proceedings have not been finalized. (Section 2923.5 (h)
of the Civil Code)
This bill clarifies that the above bankruptcy exception
applies where a case has been filed by the borrower under
Chapter 7, 11, 12, or 13 of Title 11 of the United States
Code, and the bankruptcy court has not entered an order
closing or dismissing the bankruptcy case or granting
relief from a stay of foreclosure.
Background
Foreclosures in California are generally non-judicial,
meaning that they are accomplished without court
involvement. The first step in the foreclosure process is
the filing of a Notice of Default, which generally occurs
after three or more months of delinquency. The foreclosing
entity must then wait at least three months before noticing
the sale of the property. In an effort to help those for
whom foreclosure may be avoided, the Legislature passed,
and the Governor signed, SB 1137 (Perata), Chapter 69,
Statutes of 2008.
That urgency bill sought to increase protections for both
borrowers and tenants in the foreclosure process by
requiring, among other things, contact prior to the filing
of a Notice of Default. Those requirements do not apply
under certain circumstances, including when the borrower
has filed for bankruptcy, and the proceedings have not yet
been finalized.
In response to concerns about ambiguities in the bankruptcy
exception language, this bill clarifies that the exemption
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applies when a bankruptcy case has been filed and the court
has not entered an order closing or dismissing the case or
granting relief from a stay of foreclosure.
Prior legislation . SB 1137 (Perata), Chapter 69, Statutes
of 2008, which passed the Senate with a vote of 32-8 on
July 2, 2008, enacted changes to the procedures that must
be followed before the holder of a mortgage may issue a
notice of default or notice of trustee sale, requires the
holder of a mortgage to mail a specified notice to the
tenant(s) of a property on which foreclosure proceedings
have begun, and imposes penalties on property owners who
fail to adequately maintain foreclosed properties, as
specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
ARGUMENTS IN SUPPORT : The author's office states that
this bill seeks to address concerns about ambiguities in
the bankruptcy exception language in SB 1137 (Perata),
Chapter 69, Statutes of 2008. The proposed language is
identical to language contained in SB 7XX (Corbett),
Chapter 4, Statues of 2009-10 Second Extraordinary Session,
that exempted properties from the provisions of that bill
if a borrower was in bankruptcy. (SB 7XX added an
additional 90 days to the foreclosure process unless the
servicer of the borrower's loan has a comprehensive loan
modification program.)
RJG:mw 5/13/09 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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