A bill to help California's smaller title companies compete in the foreclosure resale market has cleared the Assembly and is now in the Senate.
The Buyer's Choice Act, introduced in February by Assemblywoman Cathleen Galgiani, D-Stockton, will likely be sent in the coming weeks to the Banking, Finance and Insurance Committee and later to the Judiciary Committee. It could be on the Senate floor in July.
The bill's passage would be a boost to title companies that have been hard-up for business as the market has shifted from real estate agents selling new homes for developers to unloading foreclosed ones for banks.
The bill, AB 957, would establish penalties for banks that force buyers to use a particular title and escrow company.
"If it happens, it will be huge for the small companies in the state," USA National Title Co. President Dale Rincon said Tuesday.
The practice of forcing buyers to use certain title insurance companies is illegal under the federal government's Real Estate Settlement Procedures Act, though there's been little enforcement.
State leaders are looking to crack down by allowing buyers to seek a fine against banks that forced them to use a particular title company.
Banks would be forced to pay the buyer three times what was spent on the title and escrow services. Locally, title transaction fees can run about $1,000, though agents have seen bills double or triple that from other firms. In such instances, banks could be paying thousands back to the home buyer.
Rincon's been following the bill because its passage would boost business for his Huntington Beach-based firm.
He's been in the business since 1975 and said the only steady work is in clearing titles for the foreclosed homes sold by banks.
The problem for Rincon and others is that major banks contract with large title companies, shutting out smaller companies.
"It's making it hard to survive," he said. "Yet (the big firms) are overflowing with business."
For soon-to-be homeowners, it can lead to higher fees and headaches when they're trying to work with someone in another time zone.
So far, there hasn't been any opposition to the bill. It passed the Assembly with a 77-0 vote. No title companies or lobbyists have come out against it.
"The opposition doesn't want to raise their head," Galgiani spokesman Robin Adam said. "What's the case to make?"
The Escrow Institute of California is sponsoring the bill. The California Association of Realtors agreed to support it after a couple of changes.
The bill, if approved, will expire at the beginning of 2015.
Reporter Scott Jason can be reached at (209) 385-2453 or email@example.com.