BILL ANALYSIS �
SB 4
Page 1
SENATE THIRD READING
SB 4 (Calderon and Vargas)
As Amended June 21, 2011
Majority vote
SENATE VOTE :40-0
JUDICIARY 10-0 BANKING & FINANCE
11-0
-----------------------------------------------------------------
|Ayes:|Feuer, Wagner, Atkins, |Ayes:|Eng, Achadjian, Fletcher, |
| |Dickinson, Beth Gaines, | |Fuentes, Gatto, Harkey, |
| |Huber, Huffman, Jones, | |Roger Hern�ndez, Lara, |
| |Monning, Wieckowski | |Morrell, Perea, Torres |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Provides additional information to homeowners and
bidders regarding residential foreclosure auction sales.
Specifically, this bill :
1)Requires a notice of sale on specified residential property to
contain language informing potential bidders on the nature of
the process, potential risks, and resources to assist them.
2)Requires the notice of sale to provide information to the
homeowner whose property is subject to auction regarding the
auction sale date and postponements that may occur.
3)Limits the rights and remedies for failure to comply with
these provisions.
FISCAL EFFECT : None
COMMENTS : 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 generally wait at least three months before noticing
the sale of the property, which must be posted, published, and
filed with the county recorder. The sale date contained in the
Notice of Sale may be postponed by public proclamation (given at
SB 4
Page 2
the time and date of sale) for a total of up to 365 days. If
the property lien is actually sold at auction the bidder is
generally required to pay in cash or check, and takes the
property lien subject to any outstanding senior liens.
This bill seeks to address two different issues that have arisen
regarding foreclosure sales by adding two new provisos to the
Notice of Sale. First, this bill would inform homeowners that
their sale date may be postponed, provides them with direction
on how to receive updated information about that sale, and
imposes new duties on trustees consistent with that disclosure.
Second, this bill would inform a bidder of the nature of and
risks associated with foreclosure auctions. Supporters believe
these provisions would help alleviate some of the most common
sources of confusion experienced by homeowners and bidders,
regarding the non-judicial foreclosure sale process.
Since homeowners rarely attend the foreclosure sale of their
home and, as a result, are not aware of the public declaration,
the authors note that it is extremely common for property owners
to be caught by surprise when their home is sold months after
they receive the Notice of Sale. For example, a homeowner could
have asked for a continuance of the sale date in order to
receive more time to complete a short sale, or the financial
institution could have continued the sale to ensure that the
necessary documents were in order before proceeding. If the
sale is continued multiple times, the owner could easily lose
track of the next sale date and, at some unknown time in the
future when the trustee or foreclosing institution elects not to
postpone the sale, the home could be sold unbeknownst to the
homeowner.
For individuals who seek to buy properties at trustee sale
(non-judicial foreclosure) auctions, the auction offers the
potential for getting a good "deal" on a home, but carries
significant risks if the bidder has not done extensive research
on the property. Most importantly, the legal right at auction
is not the property itself but a lien on the property, which may
be one of several liens. Although bidders may look at the home
and the neighborhood, it is essential for them to also do a
title search on the property to see if there are any senior
liens that are not going to be wiped out by the foreclosure
sale. Liens junior to the foreclosing lien are removed as a
result of the foreclosure sale, but senior liens remain intact.
SB 4
Page 3
If the bidder purchases a home subject to a senior lien, the
bidder must satisfy that senior lien or face foreclosure of
their interest by that lien.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0001441