Due Diligence

Michael Belote, Esq.

There is an old saying, quoted and misquoted variously, that those who enjoy sausage and laws should watch neither being made.  The point is that legislating in a democratic process is a messy affair, where ends often justify means and bills can emerge from an almost miasmic chaos.  Thus, the need to try to keep up with the 2,189 new bills introduced in California this year, and equally important, the thousands of amendments to the bills.  Because a bill unrelated to UTA could be amended to apply to foreclosures at virtually any time.

The good news reported in the last UTA eNews is that thus far, 2013 has not seen a reopening of the Homeowner’s Bill of Rights which occupied so much time and effort last year.  One bill, AB 1091 (Skinner), had proposed adding a telephone number for homeowner’s assistance programs to the notice of default, but UTA and a host of other groups suggested that the system be given time to implement “HOBR” before making even relatively modest changes or additions.  AB 1091 was later amended to deal with a different subject, so the bill if enacted will not require changes to the NOD.

A second bill, AB 642 (Rendon) had proposed permitting Internet “publication” as an alternative to newspaper publication of legal notices, including notices of default and sale. Encountering strong opposition from the California Newspaper Publishers Association and other groups, AB 642 has stalled and will not be enacted this year.  UTA members were of divided thinking on the bill.

Yet another bill, AB 1240, would have included deeds of trust in the longtime Civil Code Section 2920 definition of “mortgage”.  Whether intentionally or not, UTA and others pointed out that the effect of the bill could have been to invalidate longstanding case law relating to recording of assignments.  This bill also will not be enacted in 2013.

Almost three dozen other bills of potential interest remain alive at this point in the legislative session, however.  These include various bills which propose creative ways to fund energy retrofit improvements to real property, sometimes without clear notice in the public record, and sometimes with the ability of encumbrances to survive foreclosure.  There also are bills dealing with unclaimed property procedures, secured transactions in personal property, deferral of obligations for military service members, reverse mortgage rules, and much more.

Two additional bills are worthy of mention.  The first is AB 1164 (Lowenthal), which would provide all employees of private employers the right to record a notice of lien for unpaid wages, against all real property of the employer and personal property subject to UCC financing statements.  Business groups are vehemently opposed to the bill, which permits a lien somewhat similar to a mechanics lien, for unproven allegations of unpaid wages.  Real estate groups also oppose, principally on the argument that title to real and personal property would become hopelessly clogged over wage and hour disputes.

A second bill garnering major controversy is SB 391 (DeSaulnier), which proposes a $75 surcharge for recording virtually any real estate-related document.  Intended to fund construction of low-income housing in California’s post-redevelopment world, the bill would apply to deeds of trust, assignments, reconveyances, substitutions, notices of default and sale, easements, and a host of other documents.  Estimates are that the surcharge would raise at least $500 million annually.  The bill is supported by many housing advocacy organizations, but is uniformly opposed by real estate and lending groups, and interestingly, by county recorders. 

This year’s legislative session will run until Friday, September 13.  The outcome of all of the bills discussed above, and others amended over the next four months, could well be decided in the final closing hours prior to adjournment, again putting a premium on being alert for last-minute changes.