Senator Ellen Corbett (D-San Leandro) has decided not to pursue SB 1375, legislation that would have provided for the use of some form of foreclosure report instead of a TSG.

SB 1375 would have provided: “as an alternative to the fee for a trustee’s sale guarantee, [the trustee may charge] the costs of a title and court records search” (New Product).  The bill was introduced by Senators Corbett, Midgen and Perata purportedly to “reduce the costs associated with the reinstatement of a mortgage for California homeowners facing foreclosure.”

 “A trustee would have been put into the position of taking risks dictated as cost savings by the beneficiary instead of the assurance of a TSG,” said Ron Roup, UTA’s Legislative Committee Chair.

Some of the concerns UTA noted, that were raised by the legislation were:

1. TSG prices are regulated by the California Department of Insurance and a borrower cannot be charged a fee in excess of that regulated fee in a nonjudicial foreclosure.  At this time, SB 1375 places no limitation or regulation over the price for this new product which is being touted as reducing costs to the borrower.
   
   
2. Neither the nature of the product nor information about who may provide the product is made clear in SB 1375.
   
   
3. The New Product is not a “guarantee” product containing specific assurance regarding the information needed by a trustee to process a nonjudicial foreclosure.  Therefore, if the New Product contains incorrect information, relied upon by the trustee in processing the nonjudicial foreclosure, will the product have the benefits and protections of a TSG?
   
   
4. There appears to be no requirements for a company producing the New Product, therefore, trustees and beneficiaries may incur liability because of the error of the producer of the New Product with no recourse other than suing the producer who may be insolvent or judgment proof.
   
   
5. There is uncertainty whether the new product would provide information for mailings relating to the general index for tax liens, ERISA liens, etc. which may result in the failure to give appropriate notice to the taxing authorities resulting in foreclosed sales being rescinded and started over or in the tax liens remaining on the foreclosed property creating potential liability for the Trustee or beneficiary.
   
   
6. When TSG’s are purchased, it is generally easy for the purchaser at the trustee’s sale to obtain post-sale title insurance.  Title companies may be hesitant to issue post-sale title insurance policies on properties following trustee’s sale where a TSG was not used.
   
   
7. Because the New Product does not provide the protections of a TSG, and there is no assurance that the producer will indemnify the trustee or beneficiary, it is feared that restarts and rescissions of sales will increase.  The result could be increased neighborhood blight as there would be a greater number of properties left vacant, or with occupants who do not have an interest in maintaining the properties, for longer periods of time.
   
   
8. If the new product is less expensive, but a trustee chooses a TSG, it raises the question of whether there would be exposure to liability for not choosing a less expensive product but less complete product.
   
   
9. Finally, the legislation circumvents the provisions of the Insurance Code for TSGs which is incorporated in CC § 2924c(c) as a limitation on the cost of the TSG.

UTA worked with a coalition regarding the legislation, including the California Land Title Association.