UTA, Other Bills Introduced in California

Michael Belote

By Michael Belote, Esq., California Advocates

Like most states, California is absolutely drowning in red ink.  Not surprisingly, the epic deficits mean that states do not have money to dedicate to expensive new programs, and thus bills which cost money largely will be dead on arrival.  Perhaps surprisingly, though, the sheer number of bills introduced for 2011, at least in California, has not declined from recent years.  As of the bill introduction deadline in Sacramento on February 18, nearly 2,400 new bills were introduced.

While there are likely many reasons why the number of bills introduced is not declining, there are two of particular note.  The first is prosaic: California possesses a highly codified body of law, and most bills are simply cleaning up or tweaking existing statutes, to make them work better.  The second, highly relevant to UTA, is that even when there is no money for new programs, there are still high profile issues on which legislators wish to be seen as proactive.  Like, for example, foreclosures.

Already for 2011, UTA has identified nearly three dozen bills of potential interest to trustees.  Probably the biggest news relates to SB 729 (Leno), which is similar to, but broader than SB 1275 from last year.  The bill proposes extensive obligations on lenders and servicers prior to and concurrent with foreclosures, relating to potential loan modifications.  UTA and a host of lender organizations opposed SB 1275 last year; the bill passed the Senate and a number of Assembly committees, but died late in the session on the Assembly floor.

A very preliminary review suggests that SB 729 is broader than last year’s proposal, in a number of particulars.  First, the bill dramatically expands the compliance statement under Civil Code Section 2923.5, which must be recorded along with the notice of default.  Second, the bill appears to require actual possession of the note in order to foreclose, or a statement that the party foreclosing has made a reasonable attempt to obtain possession of the note.  Third, the borrower must be sent a “life of loan” accounting along with the NOD, detailing payment history, allocations between principal and interest, and all charges imposed in connection with the default.

If the debate over SB 729 is similar to the debate last year over SB 1275, there will be both macro and micro arguments made by opponents.  At the macro level, the argument is that the extensive obligations under the bill will slow down foreclosures, delay recovery, and do nothing about the increasing prevalence of “strategic defaults.”  At the micro level, opponents have expressed concern about the sheer complexity of the bill, which could make individual foreclosures subject to challenge.

Other bills of note already introduced for 2011 include AB 406, prohibiting balloon payments in adjustable rate mortgages; AB 407, prohibiting prepayment penalties on loans for 1-4 dwelling units;  AB 643, requiring mortgage brokers to provide “prepurchase counseling” on loan options; AB 645, imposing a similar requirement on brokers; AB 1090, recreating a property tax deferment program which expired several years ago; AB 1321, requiring assignments to be recorded within 30 days of execution; SB 4, which would require specified notices to trustors and to potential bidders at sale, and require trustees to provide sale information either telephonically or on a website, and SB 561, which could significantly limit the ability of trustees to perform assessment lien foreclosure services.

Finally, for 2011 UTA has secured the introduction of a sponsored bill, making changes to the Civil Code resulting from the UTA legislative “wish list” process. The bill is SB 435 by Senator Tom Harman (R-Huntington Beach).  At the present time, the bill makes only technical changes to Civil Code sections 2924c, 2924g, and 2934a, but further amendments are likely as the legislative process unfolds.

All bills of interest for UTA are available here, (user:  uta and password: 204), including UTA-sponsored SB 435.