BILL ANALYSIS �
SB 1051
Page 1
SENATE THIRD READING
SB 1051 (Galgiani)
As Amended June 17, 2014
Majority vote
SENATE VOTE :35-0
BANKING & FINANCE 12-0 JUDICIARY 9-0
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|Ayes:|Dickinson, Allen, |Ayes:|Wieckowski, Wagner, |
| |Achadjian, Bonta, Chau, | |Alejo, Chau, Dickinson, |
| |Gatto, Harkey, Linder, | |Garcia, Maienschein, |
| |Perea, Rodriguez, Weber, | |Muratsuchi, Stone |
| |Williams | | |
| | | | |
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SUMMARY : Removes the sunset on, and thus makes permanent, the
California Buyer's Choice Act (BCA), which generally prohibits a seller
of a foreclosed property from requiring the buyer to use a particular
title insurance or escrow company as a condition of the sale.
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 United State Code
Section (U.S.C.) 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. Section
2608]
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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, until January 1, 2015, a mortgagee or
beneficiary under a deed of trust who acquired title to residential
real property at a foreclosure sale from requiring, as a condition of
selling the property, that the buyer purchase title insurance or
escrow services in connection with the sale from a particular title
insurer or escrow agent. [Civil Code Section 1103.22.]
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 BCA. 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
SB 1051
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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.
BCA
The BCA prohibits a seller from imposing, as a condition of a 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.
SB 1051
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Analysis Prepared by : Kathleen O'Malley / B. & F. / (916) 319-3081
FN: 0004083