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The California Legislature returned to Sacramento for the 2003-2004 Session on January 6, and was immediately confronted with a budget deficit of oh, say, $35 billion. That’s $35 billion with a big “B”, as in 35,000 millions. As in, if you laid off every state employee, you would still have a budget deficit. Or, if you closed every UC and CSU A budget deficit of this size threatens to overwhelm any consideration of all the other issues facing the state. Many new legislators have said that they do not intend to introduce significant numbers of bills this year, because all available time should be devoted to solving the budget crisis, both this year and in the long-term. In the past, members have managed to look past immediate budget crises and still introduce large numbers of bills, but this year, who knows? If there is serious consideration of other issues, there are certainly issues serious to CEA to consider. Three which come immediately to mind are CAL-FIRPTA, electronic recording, and the Radian Guarantee issue. The Radian issue, in particular, could become hugely contentious. For CEA members not familiar with the issue, Radian is a company which sells a product providing lenders with some degree of coverage against defaults resulting from lien defects. The Department of Insurance issued a cease and desist order against the product, contending that it is an unlicensed form of title insurance. Radian appealed the cease and desist order, contending instead that their guarantee product is a form of private mortgage insurance, a product they are licensed to sell in California. Recently an Administrative Law Judge found in favor of the Department. Assuming that newly-elected Insurance Commissioner Garamendi agrees with the position of his department, and approves the decision of the Administrative Law Judge, the issue is very likely to surface in the Legislature. CEA was recently advised that Senator Jackie Speier, Chair of the Senate Insurance Committee, has agreed to carry a bill which will in some fashion permit the sale of the Radian product. Both the California Land Title Association, and CEA, are very likely to oppose the bill. With respect to electronic recording, State Attorney General Bill Lockyer recently released an opinion, which confirmed an interpretation shared by many: current California law authorizes only Orange and San Bernardino Counties to accept electronically transmitted documents for recordation. Although a number of other counties had been proceeding to implement electronic recording programs, the Attorney General’s opinion has caused them to pull back. A bill, or bills, to allow other counties to participate in electronic recording are certain to be introduced this year. In recent years, bills to facilitate expanded electronic recording have failed passage in the California Legislature, chiefly over fears that the systems would be vulnerable to hacking and fraud. Some parties even began to argue that no change in current law is necessary to permit other counties to participate. This year, there appears to be renewed interest in getting something done, so that California can begin to catch up to other states in terms of new recording technology. Finally on the CAL-FIRPTA issue, there is growing consensus among escrow, title, Realtors and others that last year’s expansion of the withholding law is having very negative practical problems. Escrow officers report that deals really are falling apart as sellers learn that 3 1/3% will be withheld on the entire sales price in the transaction. The discussion is how best to address the issue, especially in light of the reality than any retrenchment from last year’s change will arguably result in revenue loss to the state, a death knell to any bill in light of the $35 billion facing California. The deadline for introducing new bills this year is February 21. The next issue of CEA News will report on new bills introduced, and the status of the issues raised in this column. |
by Michael D. Belote
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