BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 827 HEARING: 3/19/14
AUTHOR: Liu FISCAL: No
VERSION: 1/6/14 TAX LEVY: No
CONSULTANT: Weinberger
LOS ANGELES COUNTY NOTICES OF RECORDATION
Extends, until January 1, 2020, the date on which statutes
allowing Los Angeles County to charge fees and mail notices
related to recorded real estate documents will be repealed.
Background and Existing Law
State law generally provides that any instrument or
judgment affecting the title to or possession of real
property may be recorded at a county recorder's office.
Recordable instruments include:
Various types of deeds, which are used to transfer
or convey title to real property;
Notices of default, which must be recorded to
initiate foreclosure proceedings; and,
Notices of sale, which must be recorded before real
property can be sold through the foreclosure process.
Before 2012, state law allowed the Los Angeles County
Recorder, if authorized by the Board of Supervisors, to
mail a notice within 30 days after recording a deed,
quitclaim deed, or deed of trust to the party or parties
executing the document (SB 1631, Watson, 1996). The
Recorder could impose specified conditions on the
recordation of a deed, quitclaim deed, or deed of trust.
The Recorder's failure to provide the notice did not result
in any liability against the Recorder or the County. State
law specified the manner in which the Recorder could
contract for the processing or the mailing of the notice,
or both. The Recorder could collect a fee from a
non-governmental party filing a deed, quitclaim deed, or
deed of trust. The fee could not exceed the cost of
mailing the notice, not to exceed seven dollars. The
Legislature enacted this notice and fee authority to combat
real estate fraud by informing Los Angeles County property
owners and residents about recently recorded real estate
SB 827 -- 1/6/14 -- Page 2
instruments that could affect their property interests.
To combat fraud targeting owners of distressed properties
and to provide property owners and residents with
information about avoiding foreclosure, the Legislature
recently expanded Los Angeles County's notice and fee
authority (SB 62, Liu, 2011). SB 62 allowed the Recorder,
if authorized by the Board of Supervisors, to mail a notice
within a specified period of time after recording a notice
of default or notice of sale to any party subject to the
notice of default or notice of sale. SB 62 allowed the
Recorder to collect a fee from a party filing a notice of
default or notice of sale. The bill required that the
amount of the fee the Recorder collects from a party filing
a deed, quitclaim deed, deed of trust, notice of default,
or notice of sale cannot exceed the cost of mailing the
notice and the actual cost to provide information,
counseling, or assistance to a person who receives the
notice, not to exceed seven dollars. The fee amount also
can include specified administrative costs, which must not
exceed 10% of the total fee collected. SB 62 required Los
Angeles County to submit a report to the Legislature by
January 1, 2014 containing specified information about the
County's implementation of the bill's provisions.
Pursuant to this statutory authority, the County of Los
Angeles operates the "Homeowner Notification Program." The
program provides property owners and occupants with mailed
copies of documents that have been recorded against
properties and provides notices that explain how to report
errors or problems with the recorded documents, avoid
falling victim to real estate fraud, and get help saving
property from foreclosure. The notice and fee authority
enacted by SB 62 will automatically expire on January 1,
2015. Los Angeles County officials want to extend this
sunset date until 2020.
Proposed Law
Senate Bill 827 extends, until January 1, 2020, the date on
which Los Angeles County's statutory authority to charge
fees and mail notices related to specified recorded real
estate documents will be repealed. SB 827 also extends,
until January 1, 2019, the date by which Los Angeles County
must submit a report to the Legislature containing, but not
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limited to, the following information:
A copy of each type of notice mailed parties
subject to a notice of default or notice of sale.
The number of filed notices of default and notices
of sale for which a fee was collected.
The amount of the fees collected for the filing of
notices of default and notices of sale.
The amount of fees spent to provide housing
information, counseling, and assistance, as described
in state law.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . SB 827 allows Los Angeles County
to continue providing assistance to property owners and
residents who are at risk of becoming victims of real
estate fraud. The County's long-standing program notifying
property owners when deeds are recorded against their
properties generates approximately 10,000 annual calls from
homeowners which lead to more than 500 fraud
investigations. Last year, approximately 700,000
notifications were mailed to property owners. The County
is just beginning to implement the enhanced notice
provisions enacted by the 2011 Liu bill, which will allow
it to provide more property owners and residents with
information about fraud targeting distressed and foreclosed
properties and resources for avoiding foreclosure. The
County estimates that it could help lenders and homeowners
avoid 600 foreclosures in 2014, potentially saving lenders
$30,000,000. SB 827 gives Los Angeles County more time to
implement the expanded notification program that will
protect homeowners and residents throughout the county.
2. Better data . Because the County did not begin
implementing SB 62's provisions until late last year, the
County had no data to include in the report it submitted to
the Legislature by January 1, 2014. It is unclear whether
the data that SB 827 requires the county to report by
January 1, 2019 will be of much value to legislators
seeking to evaluate the county's homeowner notification
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program. Tracking the number of notices mailed and the
amount of fee revenues collected and spent does not
directly indicate whether the program is fulfilling its
goals. The Committee may wish to consider amending SB 827
to require that the report submitted by 2019 must include:
Documented examples showing how the homeowner
notification program led to successful investigations
of real estate fraud activity, avoided foreclosures,
or helped property owners and residents avoid falling
victim to real estate fraud.
An evaluation of whether the county's homeowner
notification program, in comparison to other available
policy tools, is a cost-effective approach to
combating real estate fraud and reducing foreclosures.
An assessment of how the county's homeowner
notification program compares to real estate fraud and
foreclosure prevention programs being implemented in
at least three other large, urban counties.
3. Fee or tax ? In the November 2010 election, California
voters approved Proposition 26, which amended the
California Constitution to expand the definitions of local
taxes and tax increases that require voter approval.
Under Proposition 26, any levy, charge, or exaction of any
kind imposed by a local government is a tax, requiring
voter approval, except for:
A charge for a benefit or privilege conveyed
directly to the payor and not conveyed to those not
charged.
A charge for a service or product provided directly
to the payor and not provided to those not charged.
A fee to cover certain costs of regulation.
Entrance fees for state or local property.
Fines imposed by a court or a local government.
A charge imposed as a condition of property
development.
Assessments and property related fees governed by
Proposition 218.
It is unclear whether Los Angeles County's fees on recorded
real estate documents to fund the homeowner notification
program qualify under any of Proposition 26's exceptions.
If fee revenue collected from a mortgage lender who files a
notice of lien is used to mail a notice and provide
counseling services to a homeowner who didn't pay any fee,
a narrow reading of Proposition 26 may define that fee as a
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"tax." Under a broader reading of Proposition 26, by
helping lenders avoid costs associated with the foreclosure
process, Los Angeles County's homeowner notification
program may provide a benefit to lenders that is not
provided to those who don't pay the fees.
4. Double-referral . The Senate Rules Committee has ordered
a double-referral of SB 827, first to the Senate Governance
& Finance Committee which has policy jurisdiction over
local government fees, and then to the Senate Judiciary
Committee, which has jurisdiction over notice requirements
for real estate transactions.
Support and Opposition (3/13/14)
Support : Los Angeles County Board of Supervisors; Los
Angeles County District Attorney's Office; Los Angeles
County Sheriff's Department; California Rural Legal
Assistance Foundation; Consumer Federation of America;
Consumer Federation of California; Service Employees
International Union, California; Western Center on Law and
Poverty.
Opposition : Unknown.