RECENT CALIFORNIA FORECLOSURE DEVELOPMENTS 2005

CALIFORNIA LAWMAKERS INTRODUCE TWO BILLS REGARDING NONJUDICIAL FORECLOSURES

California lawmakers have filed two bills that would affect, among other things, the rights of homeowner associations to initiate nonjudicial foreclosures for delinquencies.

1. SENATE BILL BANNING “SMALL DEBT” FORECLOSURES

On March 28, 2005, the California Senate Judiciary Committee voted 4-1 to pass SB 137, a bill that would restrict foreclosures as a tool to collect small debts in private communities.  The bill would prohibit homeowner associations from foreclosing on homeowners for delinquencies under $2,500.  Foreclosure practices would be toughened generally, giving homeowners a 90-day redemption period following the sale of their home and requiring that buyers at auctions pay a minimum of 65 percent of the home’s value, exclusive of senior liens.

Senators Denise Ducheny, Joseph Dunn and Liz Figueroa authored the bill.  A full Senate vote is expected later this spring.

The Senate approved a similar bill in 2004 requiring homeowner associations use small claims courts to collect delinquencies under $2,500.  California governor Arnold Schwarzennegger vetoed the bill stating that it could unfairly require homeowners that pay their dues on time to shoulder the additional costs.

SB 137, can be found at:

http://www.leginfo.ca.gov/pub/bill/sen/sb_0101-0150/sb_137_bill_20050405_amended_sen.pdf

2. CALIFORNIA STATE ASSEMBLY BILL MODIFYING, BUT ALLOWING “SMALL DEBT” FORECLOSURES

On May 9, 2005, the lower house passed Assemblyman Tim Leslie’s (R-Roseville) bill, AB 619, that generally leaves the nonjudicial foreclosure process unchanged, but does require that an association’s board of directors approve any foreclosure action.

The bill would require homeowner's associations to send notifications regarding late assessments and foreclosure proceedings to homeowner's primary and secondary addresses.  The association would be required to offer a plan to pay off the late dues, penalties and interest, should the owner so request.  Additionally, the bill also would revise the contents of the annual notice provided by the association to its members to conform to these changes and to include a schedule of reasonable fees and costs that the owner could be charged throughout any portion of the nonjudicial collection process.

The bill is awaiting a Senate vote.

The text of AB 619 can be found at:

This page was last updated on May 27, 2005

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