By Michael Belote, Esq., California Advocates, UTA California Lobbyist
Every year, as sure as the sunrise, the California legislature introduces around 2500 separate pieces of legislation, enacting perhaps 1000 into law. The vast majority receive little public attention, and are designed merely to keep the engine of government moving forward. While not of general public interest, all of the bills are important to some group; UTA is but one of literally thousands of interest groups lobbying the legislature for changes to the laws.
As this column is written, the legislature has adjourned the 2023-2024 two-year session at midnight August 31, as required by the state constitution. And as of the midpoint in September, Governor Newsom still has over 900 bills to sign or veto by the constitutional deadline of September 30. If you ever thought it would be fun to be Governor of California, it is not true in September!
Two of those 991 bills awaiting action are of critical interest to trustees, and a third bill has already been signed into law. Taken together, these three bills make 2024 potentially the most impactful in decades in terms of trustee practice. Each bill is summarized below:
AB 295 (Lowethal): Regular readers of this column will recall how a UTA-sponsored bill was held on the Assembly floor during the last night of session in September 2023, due to a personal issues between legislators, completely unrelated to the contents of the bill. In fact, the problem was so unrelated to the bill that many legislators acknowledged that the bill itself was actually good for consumers; they were just unhappy with the author of the bill itself. This year, Assembly Member Josh Lowenthal from Long Beach graciously agreed to amend the contents of last year’s bill into one of his bills, which became AB 295. An “urgency clause” was added, which meant that AB 295 would take effect immediately upon the Governor’s signature, rather than the customary January 1, 2025. AB 295 was in fact signed and effective on July 18, 2024. The bill contains a number of elements of benefit to trustees (and consumers), including a prohibition on contact with defaulted borrowers by “surplus chasers” for 90 days following the recordation of the trustee’s deed, liability protection for trustees for any good faith error in simply communicating payoff or reinstatement information from lenders, a clearer prohibition on successive bids under SB 1079, an increase in the statutory postponement fee from $50 to $100, clarification that title remains with the trustor until the property sale is deemed final, and much more.
SB 1146 (Wilk): Next, UTA- cosponsored SB 1146 by Senator Scott Wilk from Santa Clarita is awaiting signature by Governor Newsom, and if signed, will be effective on January 1, 2025. This bill also contains a number of beneficial provisions for trustees, including clarification that lender/servicers who make and service fewer than seven loans per year, thus requiring no license from the state, are treated as small servicers (under 175 per year foreclosures) for purposes of the Homeowner’s Bill of Rights, the elimination of the obligation to record a notice of rescission of the notice of default if a full reconveyance has been recorded, provisions relating to “force majeure” when natural disasters or civil strife prevent a sale from occurring, the ability of a trustee to require bidders to make cashier’s checks payable to the trustee upon demand, and more. Please consult the actual bill, available through the UTA website, for the complete contents.
AB 2424 (Schiavo): Finally, UTA was prominent among a group of stakeholders working with consumer groups to enact a compromise emerging out of SB 1323 from 2022. UTA members will recall that SB 1323 would have required trustees to list properties with a broker, evaluate offers, and potentially sell properties during pending nonjudicial foreclosures, and without the involvement of trustors. An enormous group of real estate associations joined UTA in opposition, and the bill died late in the 2022 legislative year. The follow-on compromise has been incorporated into AB 2424, which if signed by Governor Newsom, will be effective in January. Rather than the cumbersome SB 1323 process, the essence of AB 2424 would be to provide defaulting trustors with 45-day postponements of sale if trustors have a valid listing to sell the property, and a one-time, additional 45-day postponement if they have a bona fide contract to sell the property. Additionally, for properties going to sale, lenders would be required to provide trustees with an estimated fair market value of property, from an appraisal, BPO, or AVM, and bidding would begin at two-thirds of the fair market value. If no qualifying bids are forthcoming at the initial sale, a postponement of at least seven days would occur, and the property would be sold to the highest bidder at the subsequent sale.
There are additional details in AB 2424 which are not summarized here, including new notices to borrowers, so it is imperative that the actual bill be consulted for changes in trustee practice.
All in all, it was a monumental year for UTA in Sacramento. Thanks are due to the UTA leadership and to Legislative Chair Michelle Mierzwa for successfully steering the ship of state! For more details and color commentary, plan to attend the UTA Conference in November!