Those of you who have been coming here for a while know how much OTG loves to poke the Wine Dog. And truthfully, I love it when he does it because while it usually enrages me, it also makes me think. Here’s a little food for thought:
BILL NUMBER: AB 957 INTRODUCED
INTRODUCED BY Assembly Member Galgiani
FEBRUARY 26, 2009
An act to add Article 1.8 (commencing with Section 1103.20) to
Chapter 2 of Title 4 of Part 4 of Division 2 of the Civil Code,
relating to real property.
LEGISLATIVE COUNSEL’S DIGEST
AB 957, as introduced, Galgiani. Residential real estate
transfers: title insurance: escrow companies.
Existing law generally regulates the transfer of real property,
and imposes specified obligations on a seller of real property.
Existing law authorizes a mortgagee or beneficiary under a deed of
trust to sell property securing the mortgage or deed of trust at a
foreclosure sale under certain circumstances. Existing federal law
prohibits a seller of property that will be purchased with the
assistance of a federally related mortgage loan from requiring the
buyer to purchase insurance from any particular company.
This bill would enact the Buyer’s Choice Act, which would prohibit
a mortgagee, beneficiary under a deed of trust, or other person who
acquired title to residential real property at a foreclosure sale
from, as a condition of selling that real property to a buyer,
requiring the buyer to purchase title insurance or use escrow
services in connection with the sale from a company chosen by the
seller. The act would also prohibit such a seller from, without good
cause, disapproving the use of a title or escrow company chosen by a
buyer. A seller who violates these provisions would be liable to the
buyer for a specified civil penalty.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 1.8 (commencing with Section 1103.20) is added
to Chapter 2 of Title 4 of Part 4 of Division 2 of the Civil Code, to
Article 1.8. Buyer’s Choice Act
1103.20. This article shall be known, and may be cited, as the
Buyer’s Choice Act.
1103.21. (a) A seller shall not, directly or indirectly, as a
condition of selling residential real property to a buyer, require
the buyer to purchase title insurance or use escrow services in
connection with the sale of that property from a company chosen by
(b) A seller shall not, without good cause, disapprove the use of
a title or escrow company chosen by a buyer.
(c) A seller who violates subdivision (a) or (b) shall be liable
to the buyer for a civil penalty in an amount equal to 6 percent of
the sales price of the property.
(d) For purposes of this section, “seller” means a mortgagee,
beneficiary under a deed of trust, or other person who acquired title
to residential real property at a foreclosure sale.
Uh, isn’t this covered already by the Feds? Gosh, don’t they call this a RESPA violation? Isn’t this the same banks that have devastated our economy breaking more rules? Isn’t it time we said enough is enough? We give props to Cathleen Galgiani for seeing a webfooted, quacking water fowl and calling it what it is, but really how about enforcing what’s already on the books? (and doesn’t Assemblywoman Galgiani look like she should be representing the land of big hair Dallas?)
For the sake of reiteration, here is the CAR legal update on the subject as quoted in PBE last January 11, 2009:
No seller can require that the buyer purchase title insurance from any particular title insurance company. This rule pertains to transactions involving a federally-related mortgage loan for one-to-four residential units as defined under the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. section 2608). Although this is a well-established rule under RESPA, it bears repeating given the recent upsurge in REO transactions.
REO transactions are not exempt from RESPA requirements. If an REO lender chooses the title insurance company, as is often the case, it cannot require directly or indirectly, as a condition to selling the property, that the buyer purchase the title insurance policy. An REO lender that violates this RESPA requirement can be, among other things, held liable to the buyer in the amount equal to three times all charges made for such title insurance. Moreover, anyone who believes that RESPA has been violated may file a complaint (and may request confidentiality) to the U.S. Department of Housing and Urban Development (HUD). For more information about filing a RESPA complaint, go to http://www.hud.gov/offices/hsg/sfh/res/respamor.cfm#HE2.
And in case you missed it, there was a comment that day from the brilliant Roger Thieren:
just want to clear up one thing. You quote a CAR Legal Update as saying: â€œNo seller can require that the buyer purchase title insurance from any particular title insurance company.â€
True. But in counties where the seller traditionally pays for the buyerâ€™s title policy, that provision is inapplicable. If the seller pays for the buyerâ€™s title policy, then the seller is not requiring that the buyer purchase title insurance from anyone. (By the way, I donâ€™t have an ax to grind. I just want to be accurate.)
I didn’t miss it. In my book he’s one of the Gods of the Industry. So in the spirit of accuracy, hereâ€™s the direct quote from the RESPA website:
Section 9: Seller required title insurance
Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.
Assemblywoman Gaigiani, I appreciate your efforts but really, we just need to enforce what’s on the books and spend the money that would be spent writing a new law on enforcing the old one. Kind of like that SEC Bernie Madoff thing.