By Michael D. Belote, Esq.
CMA Legislative Advocate

Playing Defense

Every year in Sacramento, legislators introduce around 2,500 new bills, to address problems real and imagined. A very small handful are suggested by organizations such as CMA to make necessary changes in the law. Even the largest organizations try to limit these “sponsored” bills to perhaps a half-dozen annually.

For every one sponsored bill, however, most organizations seek to amend or defeat probably ten bills suggested by others. This reactive side of lobbying, or playing defense, is thus significantly more important than the affirmative side, although both play a role in an effective government relations program. The reactive side is so important that most organizations would be just as happy to forego the affirmative side if the legislature just promised to pass no bills in a given year!

2023 is no exception to this phenomenon. When the new two-year session of the legislature commenced in January, CMA and other real estate groups were concerned about the potential reintroduction of last year’s SB 1323, dealing with foreclosures. This bill,
which consumed enough oxygen for five legislative years, and was stopped just steps from the governor’s desk, would have mandated a parallel foreclosure track, with the trustee listing and potentially selling the subject property, all without the involvement of the actual owner or lender. It could have made to it practically impossible to recover the security upon default without the threat of lawsuits.

CMA and our real estate allies had a counterproposal ready if SB 1323 was reintroduced this year. With only weeks
remaining in the legislative year, thankfully we have not seen such a proposal. This illustrates the importance of reading every bill, and every amendment to every bill, because things can pop up late in any legislative year, with little time to react.

Two issues which have been raised, on the other hand, are elder abuse and “hidden fees.” SB 278 was designed to combat elder abuse, by equating “assisting” with a transaction which constitutes elder abuse with perpetrating the act itself. No one argues that accomplices should not be held accountable, but what if a CMA member simply makes a garden variety loan, with no notice of anything amiss, and it later turns out that someone had undue influence over the senior citizen?

Elder abuse is obviously a sensitive topic in Sacramento, but SB 278 has become a “two-year bill,” meaning it will not be enacted this year. On the other hand, SB 478 on hidden fees is likely to be enacted this year, to take effect on January 1, 2024. In an excellent example of industry working with the author and legislative committees, the bill has been amended to address problems raised by CMA and industry allies.

The hidden fee issue has become quite au courant. The subject was even raised in this year’s State of the Union address by President Biden. But the discussion normally focuses on “hidden” fees in hotel stays, ticket purchases and the like, not on highly regulated areas of commerce like real estate.

The problem was that, as first proposed, SB 478 would have subjected CMA members, other lenders, and others participating in the loan process to private lawsuits under the California Consumers Legal Remedies Act for even the smallest errors in fee disclosures. As such, the bill would have simply layered additional liability upon existing remedies available to regulators and consumers.

Working with the very fine author of SB 478, Senator Bill Dodd and an array of committee consultants, the bill has been amended to exclude persons subject to existing disclosure obligations under RESPA, TILA, HOEPA, the California’s Finance Lenders Law and
Real Estate Law. The bill itself remains controversial, and many groups are seeking exclusions, but it no longer raises concerns for CMA and our industry allies.

With the legislative fall recess commencing in mid-September, Governor Newsom will have until the middle of October to sign or veto the many hundreds of bills sent to his desk. In a typical year, approximately 1,000 new laws are enacted into the California Codes. Be sure to attend the CMA fall seminar in late September to learn about those bills relevant to your business!