BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 62 (Liu)
As Introduced
Hearing Date: April 12, 2011
Fiscal: No
Urgency: No
BCP:rm
SUBJECT
Local Government: Los Angeles County: Notice of Recordation
DESCRIPTION
This bill would 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 on a property.
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
Under existing law, the Los Angeles County Recorder is
authorized to collect an additional fee from the party filing
certain documents evidencing the transfer of title. That fee is
used to mail a notice of recordation to the party that
purportedly executed the document. That program, enacted in
1992 and renewed in 1996, sought to address problems related to
forged real estate documents by notifying occupants that their
residence is subject to a recently filed document that could
affect their property interests. By informing residents of the
filed document, the notice allows residents to reach out and
contact law enforcement if they suspect that the document is
fraudulent.
This bill would expand that program to allow the Los Angeles
County Recorder to also notify owners of a property (and
(more)
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occupants of the home) when a notice of default or notice of
sale is recorded. Those documents signify either the beginning
of the non-judicial foreclosure process (notice of default), or
the announcement of the sale date (notice of sale), which means
that the home could be very close to being sold at auction.
Although existing law includes several statutory notices to both
property owners and tenants, the proposed notice would allow Los
Angeles County to send region-specific information to help those
individuals both become aware of available resources, and to be
aware of potential scams that may target owners of distressed
properties.
This bill is identical to the enrolled version of SB 878 (Liu,
2010), which was vetoed due to concerns that the notices would
be redundant.
CHANGES TO EXISTING LAW
Existing law requires the Los Angeles County Recorder
(recorder), upon the adoption of an authorizing resolution by
the board of supervisors, to mail a notice to the party or
parties executing a deed, quitclaim deed, or deed of trust,
within 30 days of recordation. (Gov. Code Sec. 27297.6.)
Existing law provides that failure to provide the above notice
shall not result in any liability against the recorder and the
county, and requires the county recorder to use a competitive
bid process if it contracts for the processing or mailing of the
notice. (Gov. Code Sec. 27297.6.)
Existing law permits the recorder to collect an additional fee
from the party filing a deed, quitclaim deed, or deed of trust,
to implement the above provision. That fee shall not exceed the
mailing cost of the above notice, but in no case be greater than
$7. (Gov. Code Sec. 27387.1.)
Existing law requires the trustee, or authorized agent, that
represents the foreclosing financial institution to post and
mail, a notice informing the residents of a property about a
pending foreclosure sale. That notice informs residents that
the property may be sold at a foreclosure sale, the requirements
of an eviction notice, and that they may wish to contact a
lawyer or a local legal aid or housing counseling agency to
discuss any rights they may have. (Civ. Code Sec. 2924.8.)
This bill would additionally require the recorder, upon adoption
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of an authorizing resolution by the Los Angeles County Board of
Supervisors, to notify the party or parties subject to a notice
of default or notice of sale, including the occupants of that
property. The recorder must notify those individuals by mail
within five days, but in any even no more than 20 days, of the
recording of those documents.
This bill would authorize the recorder to collect an additional
fee from a party filing a notice of default or notice of sale.
That fee, not to exceed $7, shall not exceed the mailing cost of
the notice and the actual cost, if any, to provide information,
counseling, or assistance to a person who receives the notice.
This bill would require the board of supervisors to submit a
report to the Senate Committee on Judiciary and the Assembly
Committee on Local Government that includes, but is not limited
to, a copy of the type of notices mailed, the number of recorded
notices of default and sale for which a fee was collected, the
amount of fees collected, and the amount of fees spent to
provide housing information, counseling, and assistance. That
report must be submitted on or before January 1, 2014.
This bill would sunset on January 1, 2015.
COMMENT
1.Stated need for the bill
According to the author:
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
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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. In some cases, although foreclosure
notices are posted on a home, an unscrupulous owner will
remove the warning, tell tenants that nothing is wrong, and
keep collecting rent money. Tenants don't know the property
is in foreclosure until they are evicted. The notice
required by this bill provides additional warning.
2. Veto of SB 878; existing notice requirements
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. As a result, the property owner should receive (at a
minimum) a copy of the Notice of Default and Notice of Sale,
which generally provide the owner with information about their
rights at that point in the foreclosure process.
This bill would additionally allow the Los Angeles Board of
Supervisors to authorize the county recorder to send an
additional notice to parties subject to a notice of default or
notice of sale, including the occupants of the property. As
noted above, the author states that the intent of that
additional notice is to warn homeowners about unscrupulous
individuals who may contact them. This bill is identical to the
enrolled version of SB 878 (Liu, 2010) that was vetoed out of
concern that the proposed notices would be redundant.
Specifically, the Governor's veto message stated:
While the goals of SB 878 are laudable, the bill is
unnecessary as foreclosure statutes require that notices of
default and notices of sale be mailed to the owner of the
property. Moreover, notices of sale, in addition to being
mailed to the property owner, must also be posted on the
property, providing notice to both the occupant and owner of
a pending foreclosure action, effectively making SB 878
redundant.
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The veto message is correct about the multiple notices already
received by owners of the property -- those notices would
arguably notify the tenant of the start (and potential end) of
the non-judicial foreclosure process. The additional notice
authorized by this bill could provide additional information
specific to the Los Angeles region regarding the existence of
foreclosure scams, or even resources available to struggling
homeowners. The notice could also contain specific information
regarding the rights of any tenants who may be in the property,
but that information would be in addition to the codified
statement of rights that is already mailed to tenants (and
posted on the property) at the time the property is noticed for
sale. (See Civ. Code Sec. 2924.8.)
Although the additional information provided in the notice
authorized by this bill could be helpful, staff notes that the
sponsor has not formulated a copy of the notice that would be
sent to tenants and owners upon the filing of a notice of
default or sale. Given the number of notices already sent to
those individuals under existing law, Los Angeles County should
be extremely careful in its drafting to ensure that the
additional notice is consistent with those notices and not
confusing to the recipient.
Staff further notes that avoiding tenant confusion should be a
primary concern given the present housing crisis. 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.
3. Timing of notices
The Los Angeles County Recorder would be required to notify the
parties (including occupants) by mail within five days, but in
no event more than 20 days, of recordation of the notice of
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default or sale. While that time frame would not appear to pose
any issue with regards to the filing a notice of default since
there is a statutory 90-day wait before proceeding to sell the
property, the timing as applied to a notice of sale is very
close. Those notices are given at least 20 days before the
sale, thus, a mailing from the Los Angeles County Recorder that
reaches the individual on the 20th day may not be that useful if
the property is about to be sold. Staff notes that the time
frame would not pose issues in all cases since many sale dates
are postponed by the lender for various reasons.
Given the above, the sponsor should endeavor to send the notices
as soon as possible after recordation in order for the notice to
have the greatest impact.
4. Charging of a fee; counseling; and Proposition 26
This bill would authorize the county recorder to collect a fee
from the party filing the notice of default or notice of sale,
not to exceed $7, to cover the cost of mailing the notice and
the actual cost, if any, to provide information counseling, or
assistance to recipients of the notice. Staff notes that by
allowing those fees to also fund counseling or assistance
programs, the fee would provide financial assistance to Los
Angeles housing assistance programs that are losing funds due to
budget constraints. Recipients of the notice would likely be
given the contact information for those programs and would
therefore benefit from the collection of a fee to assist in
their funding.
Although, as written, that fee would essentially take effect
following the adoption of an authorizing resolution by the Los
Angeles County Board of Supervisors, Proposition 26 may
complicate the imposition of the fee by potentially requiring
that the $7 fee be approved by a vote of the people. That vote
may be required because Proposition 26 defined "tax" as "any
levy, charge or exaction of any kind imposed by a local
government . . ." (Emphasis added.) Of the seven exceptions to
the definition of tax included in Proposition 26, the first two
would appear to be the ones that could be applicable:
(1) A charge imposed for a specific benefit conferred or
privilege granted directly to the payor that is not provided
to those not charged, and which does not exceed the
reasonable costs to the local government of conferring the
benefit or granting the privilege.
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(2) A charge imposed for a specific government service or
product provided directly to the payor that is not provided
to those not charged, and which does not exceed the
reasonable costs to the local government of providing the
service or product. (Cal. Const. art. XIII C, sec. 1(e).) .
. .
In order to avoid placing the additional $7 fee on the ballot,
the sponsor would have to assert that both the mailing and
counseling services would only be provided to those who had paid
a fee not exceeding the reasonable costs. If those services are
provided to a person not charged, or if the fee exceeds the
reasonable costs, the new fee would arguably fall under the
definition of "tax." Since Proposition 26 also defined "special
tax" as meaning "any tax imposed for specific purposes,
including a tax imposed for specific purposes, which is placed
into a general fund," and special taxes require a two-thirds
vote of the public, Los Angeles County could also face the
hurdle of a super majority vote to assess the fee (which
arguably is for the specific purpose of providing information to
homeowners and tenants in foreclosure).
5. Sunset and report
In order to give the Legislature an opportunity to review the
program and evaluate the program's effectiveness, the author
agreed last year in this Committee 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 62 and would not affect
the pre-existing program.
To ensure that the Legislature has information necessary to
evaluate the success of this new program, this bill would
include a requirement that the County of Los Angeles submit a
report on or before January 1, 2014 that includes, but is not
limited to: (1) a copy of each type of notice mailed pursuant to
the bill; (2) the number of filed notices of default and notices
of sale for which a fee was collected; (3) the amount of fees
collected for the filing of the notices of default and notices
of sale; and (4) the amount of fees spent to provide housing
information, counseling, and assistance.
Support : California District Attorneys Association; Consumer
Federation of California; Consumer Federation of America;
Consumers Union
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Opposition : None Known
HISTORY
Source : County of Los Angeles
Related Pending Legislation : None Known
Prior Legislation : SB 878 (Liu, 2010), see Comment 2.
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