Prohibit home foreclosures for sums under $2,500 owed to homeowner associations

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By Consumers Union on Friday, September 3rd, 2004

September 3, 2004

The Honorable Arnold Schwarzenegger
Governor of California
State Capitol Building
Sacramento, CA 95814

Re: AB 2598 (Steinberg)–SUPPORT

Dear Governor Schwarzenegger:

Consumers Union, the non profit publisher of Consumer Reports, supports AB 2598 (Steinberg) and respectfully requests that you sign this important measure into law to protect the equity interests that thousands of Californians living in common interest developments have in their homes.

This bill is directed at remedying some of the serious problems homeowners who live in common interest developments have experienced with losing their homes through non-judicial foreclosure. AB 2598 protects these homeowners from losing their homes arbitrarily by revising the procedures for collecting delinquent assessments for certain debts that arise on or after January 1, 2005. Specifically, AB 2598 will protect homeowners with delinquent assessments of less than $2,500, not including specified late charges and fees, by requiring a homeowner association to either file a civil action in small claims court or record a lien upon the property unless and until the amount equals or exceeds $2,500. As such, foreclosure cannot be the choice of first resort when the amount in dispute is minimal. The measure protects homeowners associations by nonetheless allowing them to use foreclosure (either judicial or nonjudicial) to collect amounts over $2500, but only by following certain specified rules, including the rule that the minimum bid for a property auctioned at a non-judicial foreclosure shall be 65% of the property’s recent appraised value. AB 2598 grants the owner the right to redeem the property 90 days after it is auctioned, instead of having to sue to recover the property. Finally, AB 2598 affords homeowners living in common interest developments the right to inspect and copy all homeowner association records, including contracts to which the association is or has been a party, a critical protection to resolve issues in dispute.

The protections afforded by AB 2598 are important and necessary to protect homeowners living in common interest developments who face the possibility of having their homes sold out from under them for pennies on the dollar due to delinquent assessments as claimed by a homeowner association, often without any opportunity to inspect and copy association records. This is a practice for which current law has not provided adequate protection and as a result, numerous California homeowners have had their homes sold on the auction block for a fraction of their value losing their home and all of their equity in the process.

California’s home equity is a precious commodity and experience has shown that once it is lost, it is rarely regained, a situation that is especially true and tragic for California’s seniors, many of whom live in common interest developments. AB 2598 has enjoyed strong bi-partisan support and is both sensible and necessary.

For all of these reasons, we respectfully urge your signature on this important measure.

Sincerely,

Norma P. Garcia
Senior Attorney
Consumers Union
West Coast Regional Office

Cc: Assemblymember Darrell Steinberg
Yolanda Benson, Governor’s Office

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