Gov. Schwarzenegger signed a bill into law over the weekend mandating that buyers of foreclosed homes be allowed to choose which title and escrow companies they hire.
Authored by Assemblywoman Cathleen Galgiani, D-Livingston, the Buyer’s Choice Act will take effect next week. Legislators approved it last month.
Galgiani introduced the bill in February in response to complaints that small title and escrow firms increasingly have been squeezed out of the market by national competitors. She worked with the Escrow Institute of California, a trade association, to draft a bill that she says will help homebuyers and local businesses.
As banks have become overloaded with foreclosures, many have chosen to close deals with major title and escrow companies because it’s easier for them to work with one large firm instead of several small ones.
That’s created what the Escrow Institute has called an “anti-competitive monopoly.” It’s also led to higher fees for buyers, according to real estate agents.
In a statement issued Monday, Galgiani said homebuyers often are better served by local firms, especially in today’s market.
“Local escrow businesses can expedite the transfer of foreclosed properties to homeowners at lower cost,” she said. “It also promotes competition for services and protects local jobs and our local economy.”
The new law will require that buyers be told that they can choose their title and escrow companies. It also will prohibit banks from vetoing firms chosen by buyers unless they can show good cause.
Unless it’s renewed, the legislation will expire in 2015.
Buyers already have a choice under federal law, but to date there’s been little enforcement. The Buyer’s Choice Act includes a provision that allows for fines of up to three times the cost of the escrow and title service if buyers aren’t told they can pick their firms.