BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 878 (Liu)
As Amended April 7, 2010
Hearing Date: May 4, 2010
Fiscal: No
Urgency: No
BP/GW
SUBJECT
Local Government: Los Angeles County: Notice of Recordation
DESCRIPTION
This bill would expand the scope of existing law to allow the
sponsor, Los Angeles County, and the Los Angeles County Recorder
to notify affected parties, including occupants of the property,
when a notice of default or notice of sale has been recorded.
This bill would also allow for the Los Angeles County Recorder
to collect a fee of up to $7 in order to cover the costs of
notifying the parties and providing information about housing
assistance and counseling.
BACKGROUND
Currently, the Los Angeles County Recorder may send notice to
the executing parties that a deed, quitclaim deed, or deed of
trust has been recorded. The county does this in order to
protect homeowners against forged real estate documents by
notifying occupants that their residence is subject to a
recently filed document that could affect their property
interests. Included with the notice is information about
commonly filed real estate documents, real estate fraud, and who
the resident should contact if they believe a real estate
document has been fraudulently filed. Los Angeles County does
this to protect its residents from real estate con artists who
prey on unsuspecting homeowners who may be unknowledgeable about
the housing process.
Taking into consideration the nationwide foreclosure crisis, Los
(more)
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Angeles County is equally concerned about scam artists preying
on homeowners after a notice of default or notice of sale has
been filed against the property. According to the Los Angeles
County's "Report and Recommendations to Address Foreclosures and
Real Estate Fraud," the county should focus on the needs of
homeowners, renters, and residents in order to adequately
address the issues caused by real estate fraud, predatory
lending, and foreclosure.
To help address these needs, this bill would allow Los Angeles
County to protect its tenants and homeowners even further by
allowing the Los Angeles County Recorder to notify residents
that a notice of default or notice of sale has been recorded,
coupled with information about rental and housing scams.
According to the sponsor, that supplemental notice would also
warn occupants of loan modification scams and rental listing
agency scams, and would provide occupants with a list of
resources they may turn to for assistance.
CHANGES TO EXISTING LAW
Existing law requires a mortgagee, trustee, beneficiary, or
authorized agent to send residents of the property a notice by
first class mail indicating that the property is subject to
foreclosure. The notification shall contain specific language,
advising the residents of their right to be given a 60 day
eviction notice, or be assigned a new lease agreement. The
notification also advises the property residents of the right to
contact a lawyer to discuss any rights the occupant may have.
(Civ. Code Sec. 2924.8.)
Existing law requires that for notices of default, the trustee,
mortgagee, or beneficiary must record the notice at least three
months before setting the date of sale. For notices of sale,
notices must be recorded at least 20 days before the date of
sale. (Civ. Code Secs. 2924(a)(3), 2924f.)
Existing law provides the Los Angeles County Recorder with the
authority to send a notice to the parties executing a deed, a
quitclaim deed, or a deed of trust within 30 days of the
document's recordation. The notice shall be sent by mail, and
the Los Angeles County Recorder may collect a filing fee of up
to $7 to cover the mailing costs of sending notice. (Gov. Code
Secs. 27297.6, 27387.1.)
This bill would allow the Los Angeles County Recorder to notify
affected parties, within 20 days of recordation, that a notice
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of default or notice of sale had been recorded.
This bill would authorize the Los Angeles County Recorder to
collect a filing fee, not to exceed $7, to cover the mailing
costs of the notices and to provide Los Angeles County residents
with housing information, counseling, or assistance.
This bill would provide that the notice may also be sent to
parties which are subject to the document, including occupants
of the real property described in the document.
COMMENT
1. Stated need for the bill
The author writes:
The purpose of the bill is to give Los Angeles County
authority to notify and assist homeowners and occupants of
possible foreclosure and to charge a fee, not to exceed $7, to
provide the notification and consumer assistance. Current law
allows Los Angeles County to charge a fee, not to exceed $7,
to notify homeowners when a deed, quitclaim deed, or deed of
trust is recorded. Notices of default and notices of sale are
not covered by the current law.
Notices of default and notices of sale are public documents.
Criminals, acting as foreclosure consultants and loan
modification specialists, contact homeowners in foreclosure.
They promise homeowners they will stop the foreclosure or
obtain a loan modification. They charge homeowners thousands
of dollars but never stop the foreclosure, obtain the promised
loan modification, or provide any other service of value.
This bill would address this problem by allowing Los Angeles
County to mail a written notification to homeowners and
occupants who are subject to a notice of default or notice of
sale. The notification would warn homeowners about the
unscrupulous foreclosure and loan modification consultants who
contact them. The bill also allows Los Angeles County to
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offer counseling and assistance to these homeowners.
2.Supplemental notice and information would be sent to Los
Angeles County homeowners and residents in order to avoid
unnecessary foreclosures and housing scams
a. Notices of default and notices of sale sent under
existing law
In California, a notice of default (NOD) is the first step in
the foreclosure process and is typically filed after the
borrower has fallen behind on payments for at least three
months. The NOD must be filed with the county recorder of the
county in which the property is located; and after recording,
the filing party must also send a copy of the notice to the
borrower. The NOD must contain specific statutory language,
stating that the borrower is behind on payments, and that his
or her property may be sold without any court action.
If after three months the borrower has failed to cure the
default, the mortgagee may exercise its power of sale on the
property. If the mortgagee chooses to exercise the power of
sale, a notice of sale (NOS) must be posted both publicly and
on the property to be sold. The NOS that is posted publicly
must contain the time and place of the sale, and be recorded
with the county recorder at least 20 days before the date of
sale. The NOS must also contain specific language indicating
that the property may be sold at a public sale and directing
the homeowner to contact a lawyer if assistance is needed.
Additionally, the recording party must post a statutory notice
on the property, informing tenants of their eviction rights;
and mail a copy of the statutory notice with a copy of the NOS
to any residents of the foreclosed property.
b. Notices of default and notices of sale sent by Los Angeles
County
This bill would authorize the Los Angeles County Recorder to
send a supplemental notice to occupants of the foreclosing
property and to parties who are subject to the notice of
default or notice of sale. Included in the Los Angeles County
notice would be a copy of the NOD or NOS, information about
housing and foreclosure scams, and contact information for the
Los Angeles County Department of Consumer Affairs. The
information included would differ depending on whether a NOD
or NOS was filed, but would be specially drafted to prevent
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Los Angeles County residents from becoming victims of fraud.
The sponsor asserts that the information being sent is not
included in the general NODs and NOSs sent under existing law.
In comparison, Los Angeles County's current notice that is
sent in relation to the recording of a deed includes a copy of
the document filed, the number for the County of Los Angeles
Department of Consumer Affairs Real Estate Fraud and
Information Program, the number for the County of Los Angeles
Department of Consumer Affairs, and information about possible
real estate scams. The sponsor states that notices sent for
NODs and NOSs would be substantially different from those
currently sent for deeds, and would contain information
relevant to the parties and their situation.
The sponsor asserts that supplying additional notice to the
foreclosing property would assist Los Angeles residents
because the notice would contain information educating
residents on how to avoid housing and rental scams, and would
also provide information on local housing resources.
1.Multiple notices may be confusing to tenants
As discussed above, existing law provides that when an NOD has
been recorded, a copy of the NOD must be sent to the borrower
within one month of recordation. (See Comment 2.) If after
three months, a mortgagee wishes to exercise its power of sale,
a NOS must be posted both in a public place and on the property.
Additionally, a copy of the NOS and statutory notice of tenant
eviction rights must be sent to any residents of the foreclosed
property, and posted on the property, at least 20 days before
the date of sale. (See Comment 2.) These statutory notices
inform homeowners and tenants of specified information related
to the foreclosure. As a result, tenants living in a property
subject to foreclosure currently see a posted NOS, a posted
notice of their rights, a mailed NOS, and a mailed copy of their
rights.
In addition to notices that are sent pursuant to existing law,
Los Angeles County would like to send another notice when a NOD
has been filed or when a NOS has been posted. (See Comment 2.)
Therefore, tenants living on foreclosed property would receive a
total of five notices: one NOD, another NOD coupled with Los
Angeles County housing information, one posting notice of
tenants rights, one mailing notice of tenants rights, and one
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NOS coupled with Los Angeles County housing information.
Tenants who are unfamiliar with the foreclosure process may find
the multiple notices confusing, especially if the notices differ
in content. Under current law, tenants would receive a posting
on the property which indicates the time and place of the sale,
a statutory posting informing the resident of any tenant
protection rights, and a statutory notice also informing the
resident of tenant protection rights. Los Angeles County is
still in the process of drafting the information that would be
sent to tenants and homeowners upon the filing of a NOD or NOS.
In drafting that notice, Los Angeles County should carefully
evaluate all of the current required notices to ensure that the
information contained in their notice is consistent with those
notices and not confusing to the receiving party.
Especially in times of a housing crisis, avoiding tenant
confusion over the housing process should be a primary concern.
It has not yet been decided whether Los Angeles County would
have separate notices drafted specifically for tenants or
homeowners, or if both parties would be sent the same notice.
If both tenants and homeowners are sent identical notices,
containing applicable information for both parties, it is
important that the information provided is presented in a manner
that clearly distinguishes the differences between the two
parties' rights and responsibilities. Therefore, the sponsor
should continue to work with committee staff to ensure that the
information given to tenants and homeowners reflects the intent
of the bill and is not presented in a confusing manner.
2.Los Angeles County Recorder to send NOS within 20 days of
recordation
Existing law provides that after a NOS is recorded with the
county recorder's office, and at least 20 days before the date
of sale, the mortgagee, trustee, beneficiary, or authorized
agent must do the following: (1) post the NOS publicly; (2)
post the NOS on the property to be sold; and (3) concurrently
mail a NOS to the residents of the property. (Civ. Code Secs.
2924.8, 2924b(b)(2).) However, SB 878 would give the county
recorder 20 days from the date of recordation to send a copy of
the NOS to parties who are subject to the document, including
occupants of the property. As a result, the NOS sent by the Los
Angeles County Recorder could potentially be mailed the same day
as the date of sale, and potentially arrive either on or after
the date of sale.
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In response to concerns about timing, the sponsor asserts that
the Los Angeles County Recorder believes it could reasonably
process a notice of default or notice of sale within 20 days.
As the largest county in California, the sponsor asserts that
the Los Angeles County Recorder handles an abundance of
documents which must be properly processed, a procedure which
contains many steps. The sponsor asserts that even if occupants
or tenants were to receive the notice on the same day as the
date of sale, occupants would still be protected under the
federal Protecting Tenants at Foreclosure Act of 2009. The
Protecting Tenants at Foreclosure Act requires that tenants be
given 90 days notice of eviction after the foreclosure. During
this 90 day time period, the Los Angeles County Department of
Consumer Affairs would be able to assist occupants and tenants
with their concerns and housing needs.
Considering that the information provided would arguably be more
useful if received before the property is actually sold, the
author may wish to consider amending the bill to instead require
the notice to be mailed within 5 days, but in any event no more
than 20 days, of recordation.
Suggested amendment
On page 2, line 16 - 17, delete "within 20 days of
recordation" and insert "within 5 days, but in any event no
more than 20 days, of recordation."
3.County Recorder may collect a $7 fee in order to cover costs
of mailing notice and also to fund programs which provide
housing assistance and counseling
Los Angeles County is currently authorized to charge up to $7
for the filing of deeds, quitclaim deeds, and deeds of trust,
but only charges $4. The fee is used to cover mailing costs
associated with sending supplemental information to executing
parties regarding deeds and Los Angeles housing agencies.
Under the bill, Los Angeles County would also be authorized to
collect up to a $7 filing fee for the filing notices of default
and notices of sale. According to the sponsor, this fee is
necessary in order to cover the costs of mailing the notice and
housing information; and to help fund Los Angeles County housing
assistance programs. These assistance programs, whose contact
information would be included with the notice, would provide Los
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Angeles County residents with housing information, counseling,
and assistance. According to the sponsor, the Los Angeles
County housing assistance programs are losing effectiveness due
to budgetary constraints. This incremental fee would allow for
Los Angeles County to continue to fund these important programs
and to continue assisting Los Angeles County residents with
their housing needs.
The notices which are sent by the Los Angeles County Recorder,
pursuant to this bill, and by the recording party, pursuant to
existing law, are both paid for by the recording party.
4.Amendment to include a sunset date of January 1, 2015
In order to give the Legislature an opportunity to review the
program and evaluate the program's effectiveness, the author has
agreed to include a sunset date of January 1, 2015. This sunset
date would only be applicable to the changes that have been made
by SB 878, and would not affect any pre-existing programs.
As a part of that sunset, Los Angeles County should prepare a
report reviewing its findings and effectiveness of sending the
proposed notices to the homeowners and tenants in Los Angeles
County. The report, to be sent to the Senate and Assembly
Committees on the Judiciary, should be completed prior to
January 1, 2014, and include copies of the notices that are sent
to Los Angeles County residents and homeowners; data indicating
the number of NOD and NOS that were filed, the amount of money
collected pursuant to the filing of NODs and NOSs, and the
amount of money spent to operate the necessary Los Angeles
housing assistance hotlines.
5.Clarifying amendment required to ensure that recording fee is
limited to Los Angeles County
SB 878, as currently written, removes the link between the
Government Code section which allows the Los Angeles County
Recorder to send notice and the Government Code section which
allows the Los Angeles County Recorder to collect a fee for that
notice. As a result, this bill would authorize any recorder in
any county, not just Los Angeles County, to charge a filing fee
for deeds, quitclaim deeds, deeds of trust, notices of default,
and notices of sale.
In order to more accurately reflect the original purpose of
Government Code Section 27387.1, committee staff suggests the
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following amendment:
Suggested Amendment
On page 3, lines 21 - 22, delete "the recorder may collect a
fee" and insert "the recorder, pursuant to Section 27297.6,
may collect a fee".
Support : California Consumer Affairs Association; California
Rural Legal Assistance Foundation; Consumers Union
Opposition : None Known
HISTORY
Source : County of Los Angeles
Related Pending Legislation :
AB 2618 (Nestande) would permit all California county recorders
to send notices that a deed, quitclaim deed, and deed of trust
has been filed to the executing parties. This bill is currently
in Senate Rules Committee.
SB 1275 (Leno) would require that before a mortgagee, trustee,
or beneficiary files a notice of default, they must provide the
borrower written information regarding loan modifications and
specified notice regarding borrower's rights during the
foreclosure process. This bill is currently in the Senate
Committee on Appropriations.
SB 1149 (Corbett) would require that any notice to quit a rental
housing unit shall include a separate cover sheet for renters,
providing additional notice with specified information regarding
tenants' rights. This bill is currently in the Assembly.
Prior Legislation :
SB 1631 (Watson, Chapter 177, Statutes of 1996) added Sections
27297.6 and 27387.1 to California's Government Code.
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