Probably no one has ever drawn the comparison before, but actually nonjudicial foreclosures and the legislative process have a certain similarity: both proceed in a pace and rhythm imposed by law and tradition. One of the traditions relating to the legislative process is that a great deal of activity happens right before adjournment every fall. There are even some organizations and lobbyists famous for beginning their legislative programs in the final days of session!.

As this column is written, the California Legislature is within days of leaving for the fall recess, and a number of very high-profile issues remain unresolved. Will the health care system be “reformed”, in ways great or small? Will the process for creating legislative districts be transferred from the Legislature itself to an independent commission? Will the state address the quietly huge issue of storing and conveying water from Northern to Southern California?

While it is possible that one or more of these issues will be “solved”, or at least addressed, in the remaining days, it probably is more likely that the session will end with these issues hanging. It is also possible that the Legislature, not scheduled to return until January, will be called into special session by the Governor to address one or more of the issues. For now, though, the Legislature is approaching the end of session as if the 5:00 p.m. bell is about to ring.

That does not mean that nothing of concern to trustees will be enacted this year. To the contrary, of the thousand or so bills typically sent to the governor every year for signature, a couple of dozen will be of interest to UTA. Further, one bill contains an important clarification suggested by UTA. The final results of the session will not be known until Governor Schwarzenegger signs or vetoes the bills sent to him (he will have until mid-October to decide), but it is possible to present a brief rundown of some of the bills which are likely to pass, as well as some which will not pass:

• AB 239 (DeSaulnier): Recording Fees. Proposes a $25 recording fee surcharge on “real estate” documents, in Contra Costa and San Mateo counties only, to fund low-income housing programs. UTA opposed, on the basis that the surcharge would likely apply to foreclosure notices, with the perverse effect of making it harder for homeowners to keep their houses, in order to fund housing for others. The bill was held in the Senate Local Government Committee, and will not be enacted this year.
  
  
• AB 250 (DeVore): Nonprobate Transfers. Would have created the ability to record revocable “transfer on death” deeds, as a method of transferring property upon death without probate. Intended to simplify the process on death, many groups including UTA expressed concern that the proposal would actually make the law more complicated and make it much harder to determine who actually owns the applicable property. The bill was held in the Senate Judiciary Committee, and again will not be enacted this year.
  
  
• AB 434 (Silva): Notaries. Would impose a time limit on the current requirement that notaries, upon written request from specified individuals, either supply a photostatic copy of line items in the notary journal, or indicate that no such line items exist. The time limit would be 15 business days from receipt of the request, but the notary could defend against a disciplinary proceeding by showing exigent business or personal circumstances which prevented compliance. This bill is very likely to reach Governor Schwarzenegger’s desk for signature.
  
  
• AB 703 (Ruskin): Social Security Numbers. Proposes a requirement that any records containing a social security number be discarded or destroyed in a specified manner, and would require the encryption or locked storage of all records containing SSNs. Held in the Assembly Judiciary Committee, will not pass this year.
  
  
• AB 864 (Davis): Substandard Buildings. Imposes extensive new obligations on sellers and purchasers of property upon which a notice of substandard housing has been recorded. Contains an exemption for institutional lenders taking property back through foreclosure, but the exemption would not apply in the case of private loans made through mortgage brokers. There is extensive opposition to this bill, and a number of groups will be seeking a veto should the bill reach the Governor’s desk.
  
  
• AB 886 (Runner): Notaries. Makes extensive changes to notary laws, including broadening the thumbprint requirement, eliminating notarizations on “personal knowledge”, granting law enforcement expanded access to notary journals, imposing new fines for violations of requirements, and others. Sponsored by the Los Angeles District Attorney and Los Angeles County Sheriff. Likely to be enacted.
  
  
• AB 1020 (Runner): Recordings. This bill makes a clarifying change with respect to electronic recording, but of greater interest to UTA, the bill also contains an important amendment to change of ownership laws. UTA suggested an amendment to clarify that the recording of “certificates of sale” following nonjudicial foreclosures of CID assessment liens, does not constitute a change of ownership. Some counties have been refusing to record these certificates, whose recording is required by current law, unless change of ownership statements and even documentary transfer taxes are attached. Chances for passage of this bill appear excellent.
  
  
• AB 1168 (Jones): Public Records. Imposes a “truncation” requirement on county recorders to eliminate social security numbers from recorded documents. Expresses the intent that other public agencies also truncate their records containing SSNs. Funds the recorders program with a $1 surcharge per document. Requires that documents submitted for recordation include no more than the last four digits of the SSN. A second bill, SB 644 (Correa), which deletes the requirement that judgments contain a full SSN, instead requiring only the last four digits, has already been chaptered into law. AB 1168 appears to be heading for the Governor as well.

Given the continuing increase in defaults and foreclosures, we remain very concerned that someone will introduce legislation which will limit the ability of lenders to timely recover the security for loans. No bills of this nature were introduced in California this year, but given the public attention to the real estate market, some adverse legislation in this area is a real possibility for 2007. Stay tuned!

For previous articles by Michael Belote, click here.