BILL ANALYSIS �
SB 1051
Page 1
Date of Hearing: June 9, 2014
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
SB 1051 (Galgiani) - As Introduced: February 18, 2014
SENATE VOTE : 35-0
SUBJECT : Buyer's Choice Act.
SUMMARY : Extends the sunset date for the Buyer's Choice Act
(BCA) from January 1, 2015 to January 1, 2019.
EXISTING FEDERAL LAW
1)Provides for the Real Estate Settlement Procedures Act
(RESPA), which regulates transactions between buyers, sellers,
and mortgagees involving "settlement services" (including
title insurance and escrow services). RESPA generally
requires that borrowers receive certain timely disclosures
relating to the costs of those settlement services, and
prohibits certain practices on the part of a mortgagee that
increase the costs of settlement services. [12 U.S.C. Sec.
2601 et seq.]
2)Provides, under RESPA, that no seller of property that will be
purchased with the assistance of a federally related mortgage
loan shall require, directly or indirectly, as a condition to
selling the property, that title insurance covering the
property be purchased by the buyer from any particular title
company. Any seller who violates that provision is liable to
the buyer in an amount equal to three times all charges made
for such title insurance. [12 U.S.C. Sec. 2608]
EXISTING STATE LAW
1)Establishes the Escrow Law, which provides for the licensing
of escrow agents by the Department of Business Oversight
(DBO), and states that any person subject to the Escrow Law
who violates any provision of RESPA, or any regulation
promulgated thereunder, violates the Escrow Law. [Financial
Code, Section 17425]
2)Prohibits under the BCA a seller from directly or indirectly,
as a condition of receiving offers or selling residential real
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property to a buyer, requiring the buyer to purchase title
insurance or escrow services in connection with the sale of
that property from a company chosen by the seller. [Civil
Code Section 1103.22(a)]
3)Defines "seller" as a mortgagee or beneficiary under a deed of
trust who acquired title to residential real property improved
by four or fewer dwelling units at a foreclosure sale,
including a trustee, agent, officer, or other employee of any
such mortgagee or beneficiary. The BCA states that a seller
who violates the BCA shall be liable to a buyer in an amount
equal to three times all charges made for the title insurance
or escrow service. In addition, any person who violates this
section shall be deemed to have violated his or her license
law and shall be subject to discipline by his or her licensing
entity. The BCA provides that a transaction shall not be
invalidated solely because of the failure of any person to
comply with any provision of the Act. The BCA will sunset on
January 1, 2015 unless a later enacted statute deletes or
extends that date. [Civil Code Section 1103.22]
FISCAL EFFECT : None.
COMMENTS :
According to the sponsor, the Escrow Institute of California,
"AB 957 was enacted to protect consumers by ensuring that they
have the right to choose their own real estate service providers
when purchasing foreclosed properties, and address an issue
where sellers of real estate owned (REO) properties were
directing and requiring the specific use of certain settlement
service providers by buyers of REO properties, regardless of
price or who pays for the service. The BCA provides certain
protections to a buyer when purchasing residential real property
improved by four or fewer dwelling units by either independently
selecting their own real agent recommended by the seller,
provided that a written notice of the right to make an
independent selection is provided by the seller to the buyer.
The real estate marketplace has shown some important
improvements over the last year, but not enough to let the
consumer protections in the BCA to sunset on January 1, 2015."
BCA
The BCA prohibits a seller from imposing, as a condition of a
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the sale of a foreclosed home, the purchase of title insurance
or escrow services from a particular title insurance or escrow
provider. The BCA only applies to properties improved by four
or fewer dwelling units purchased at a foreclosure sale. In
addition, the BCA requires a notice to be provided to buyers
informing them of their rights to choose their own title
insurance company or escrow service provider.
DBO formerly, Department of Corporations, issued a
Commissioner's Bulletin on December 5, 2012 notifying licensees
in regards to the law because DBO had become aware of certain
business arrangements that may have involved unlawful referral
fees to third-party risk management companies. The DBO
clarified that a lender mandating the use of a particular
service provider on a third-party risk management company's list
or prohibiting the use of a service provider not appearing on
such list, may be a violation of the BCA.
Previous Legislation
AB 957 (Galgiani, Chapter 264, Statutes of 2009) enacted the
BCA. Specified that a buyer is not prohibited from agreeing to
accept the services of a title insurer or escrow agent
recommended by the seller, provided that written notice of the
right to make an independent selection is first provided by the
seller to the buyer and Provided a violation by a seller, as
defined, shall be liable to the buyer in an amount equal to
three times all charges made for the title insurance or escrow
service. In addition, any person in violation shall be deemed
to have violated his or her license law and shall be subject to
discipline by his or her licensing entity.
Double-referral
Should this bill pass out of the Assembly Banking and Finance
Committee, the measure will proceed to the Assembly Judiciary
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Escrow Institute of California (Sponsor)
Opposition
SB 1051
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None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081