SB 1079
Page 1
Date of Hearing: August 12, 2020
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
SB 1079 (Skinner) – As Amended August 10, 2020
SENATE VOTE: 30-10
SUBJECT: RESIDENTIAL PROPERTY: FORECLOSURE: SALES
KEY ISSUE: SHOULD CALIFORNIA ALLOW TENANTS, PROSPECTIVE OWNEROCCUPANTS, NONPROFIT AFFORABLE HOUSING PROVIDERS, AND PUBLIC
ENTITIES AN OPPORTUNITY TO MATCH OR EXCEED THE HIGHEST OFFER MADE
AT A FORECLOSURE AUCTION IN ORDER TO INCREASE OWNER OCCUPANCY OF
SINGLE FAMILY HOMES, SAFEGUARD AGAINST TENANT DISPLACEMENT,
PROTECT COMMUNITIES FROM THE NEGATIVE EFFECTS CAUSED BY CORPORATE
OWNERSHIP OF HOMES THAT ENTER FORECLOSURE?
SYNOPSIS
This important author-sponsored bill seeks to curb further purchases of single-family homes at
foreclosure auctions by companies that then operate them as rental properties. This business
model, which has developed over the past decade, strips the middle class of assets, leads to
abuses of tenants, leaves many properties vacant, and has a significantly negative effect on
communities of color. This bill would do the following:
1. Provide tenants, prospective owner-occupants, nonprofit affordable housing providers,
community land trusts, limited-equity housing cooperatives, and public entities a 45-day
window to match (in the case of tenants) or exceed (in the case of other purchasers) the last
and highest bid made on single-family homes at foreclosure auctions, and if they do so,
grant them title.
2. Prohibit sales of bundled properties at foreclosure auctions.
3. Increase local governments’ authority to assess fines on owners of blighted properties
acquired at foreclosure sales, while also requiring local governments to provide these
owners with more detail as to the alleged blight and giving owners more time to remedy
issues before assessing fines.
This analysis addresses four counterarguments raised by the opposition: that the bill is
unnecessary because interested buyers are currently already free to bid at foreclosure auctions;
that it will reduce the amount of equity foreclosed borrowers ultimately recoup; that lenders will
be harmed by the additional waiting period; and that the bill is unlawful and unconstitutional.
This bill is supported by over 30 nonprofit organizations, including the California Reinvestment
Coalition and the Western Center on Law & Poverty. It is opposed by 11 industry groups,
including the California Bankers Association and the National Rental Home Council.
SUMMARY: Provides tenants, prospective owner-occupants, nonprofit affordable housing
providers, and public entities a 45-day window to purchase residential properties of 1-4 units if

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they are able to match or exceed the highest bid at a preceding foreclosure auction. Increases the
civil fines that local governments can assess against owners who fail to maintain properties
acquired at foreclosure sale, while also providing these owners with more information about
alleged violations and additional time to remedy violations. Specifically, this bill:
1) Forbids a foreclosure trustee from bundling properties for sale at a foreclosure auction,
instead requiring that each property be bid on separately. The only exception to this
restriction is if the deed of trust or mortgage requires otherwise.
2) Defines a “prospective owner-occupant” as a natural person who presents an affidavit to a
foreclosure trustee that they:
a) Will occupy a property acquired through a foreclosure sale within 60 days of when the
trustee’s deed upon sale is recorded and for at least one year thereafter;
b) Are not the previous homeowner, or the child, spouse, or parent of the previous
homeowner; and
c) Are not acting as the agent of any other person or entity in purchasing the property.
3) Defines an “eligible tenant buyer” as a natural person who at the time of the trustee’s sale:
a) Is occupying the real property as their primary residence;
b) Is occupying the real property under a rental or lease agreement entered into as the result
of an arm’s length transaction with the previous owner prior to the date on which a
Notice of Default was recorded against the property; and
c) Is not the previous homeowner, or the child, spouse, or parent of the previous
homeowner.
4) Provides that an eligible tenant buyer can, if they meet the statutory requirements, also be
deemed a prospective owner-occupant.
5) Defines an “eligible bidder” as any of the following:
a) A prospective owner-occupant.
b) An eligible tenant buyer.
c) A nonprofit association, nonprofit corporation, or cooperative corporation in which a
prospective owner-occupant or eligible tenant buyer is a voting member or director.
d) An eligible nonprofit corporation based in California whose primary activity is the
development and preservation of affordable rental housing.
e) A limited partnership in which the managing general partner is an eligible nonprofit
corporation based in California whose primary activity is the development and
preservation of affordable housing.

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f) A limited liability company in which the managing member is an eligible nonprofit
corporation based in California whose primary activity is the development and
preservation of affordable rental housing.
g) A community land trust, as defined.
h) A limited-equity housing cooperative, as defined.
i) The state, the Regents of the University of California, a county, city, district, public
authority, or public agency, and any other political subdivision or public corporation in
the state.
6) Provides that a foreclosure trustee may reasonably rely on an affidavit from a person that
they satisfy the requirements of one of the categories described above in 2), 3), and 5).
7) Enacts a statutory scheme whereby prospective owner-occupants, eligible tenant buyers, and
other eligible bidders may acquire properties consisting of one to four residential units
offered at a foreclosure auction by matching or exceeding the last and highest offer made at
the auction, as follows:
a) If a prospective owner-occupant made the last and highest bid at the foreclosure auction,
then that person will take title to the property.
b) Otherwise, a 15-day window opens after the foreclosure sale.
c) During this 15-day window, a representative of all of the current tenants in the property
has a right of first refusal to match the foreclosure sale price. If, at any time during the
15-day window, this representative matches the foreclosure sale price, the sale is
immediately deemed final and the tenants will take title to the property.
d) During the same 15-day window, any current tenant in the property and all other eligible
bidders can submit higher offers than the foreclosure sale price OR a non-binding notice
of intent to bid.
e) If neither of these occurs, the party that made the last and highest offer at the initial
foreclosure auction will take title to the property.
f) Otherwise, if either of these occurs, an additional window opens up which lasts until 45
days after the foreclosure sale.
g) During the 45-day window, a representative of all of the current tenant in the house again
has a right of first refusal to match the foreclosure sale price. If, at any time during the
45 days, this representative matches the foreclosure sale price, the sale is immediately
deemed final and the tenant will take title to the property.
h) During the same 45-day window, any current tenant in the property and all other eligible
bidders can submit higher offers than the foreclosure sale price.
i) If, during the 45 days, one or more of the eligible bidders submits a bid that exceeds the
foreclosure sale price, the sale is deemed final at the conclusion of the 45 days, and the
eligible bidder that made the highest offer will take title to the property.

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j) Otherwise, the sale is deemed final at the conclusion of the 45 days, and the party that
made the last and highest offer at the initial foreclosure auction will take title to the
property.
8) Requires the foreclosure trustee to make available the date on which the foreclosure auction
took place, the amount of the last and highest bid, and the address at which it can receive
mail and overnight deliveries. Specifies that this information must be made available within
48 hours of the conclusion of the foreclosure auction via internet and telephone.
9) Specifies that the notice of foreclosure sale for a property consisting of one to four residential
units include a specified “NOTICE TO TENANT,” which includes a summary of the right to
purchase the property, and an internet website address and a telephone number at which
information about the sale date, the amount of the last and highest bid, and trustee’s address
can be obtained, 24 hours a day, seven days a week, using a specific case file number printed
on the notice.
10) Establishes that, so long as the trustee’s deed upon sale is recorded within 45 calendar days
of the foreclosure sale, that it shall be deemed perfected as of 8 a.m. on the date the
foreclosure sale was held.
11) Sunsets the provisions described above effective January 1, 2026.
12) Declares that no provision of the article of the Civil Code governing mortgage liens relieves
the legal owner of real property after a foreclosure sale is final from complying with
applicable law regarding the eviction or displacement of tenants, including but not limited to,
notice requirements, requirements for the provision of temporary or permanent relocation
assistance, the right to return, and just cause eviction requirements.
13) Permits a governmental entity to impose a civil fine if a legal owner fails to maintain vacant
residential property purchased by that owner at a foreclosure sale, provided the following
requirements are met:
a) The governmental entity must give the owner a notice that includes a detailed description
of the alleged violation.
b) The owner then has a period of not less than 14 business days to begin remedying the
violation and to notify the entity of its remedial actions. This period can be extended by
an additional 10 business days at the request of the owner if the owner needs clarification
as to the remedial actions needed.
c) After this initial period, the owner then has 16 business days to complete remedying the
violation.
d) If the owner fails to remedy the violation within the allotted time, then the governmental
entity may impose a civil fine of up to $2,000 per day for the next 30 days, and a civil
fine of up to $5,000 per day thereafter.
e) The governmental entity must make a hearing and an opportunity to contest the fine
available to the owner.

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EXISTING LAW:
1) Requires notice of a foreclosure sale to be given using the methods prescribed in statute,
including by posting the notice in a conspicuous place on the property to be sold at least 20
days before the date of sale. Specifies that if the property is a single- family residence, the
notice must be posted on the door of the residence, if that is possible. (Civil Code Section
2924f (b)(3). All further statutory references are to this code, unless otherwise indicated.)
2) Specifies that the notice of foreclosure sale for a property consisting of one to four residential
units include a specified “NOTICE TO PROPERTY OWNER,” which includes an internet
website address and a telephone number at which information about the sale date and any
postponement can be obtained using a specific case file number printed on the notice.
(Section 2924f (b)(8).)
3) Establishes comprehensive procedures for conducting a foreclosure sale in the form of an
auction. (Sections 2924g and 2924h.)
4) Establishes that each and every bid made by a bidder at a foreclosure sale shall be deemed an
irrevocable offer by that bidder to purchase the property for the amount of the bid. (Section
2924h (a).)
5) Establishes that, so long as the trustee’s deed upon sale is recorded within 15 calendar days
of the foreclosure sale, that it shall be deemed perfected as of 8 a.m. on the date the
foreclosure sale was held. (Section 2924h (c).)
6) Requires a legal owner to maintain vacant residential property purchased by that owner at a
foreclosure sale. Permits a governmental entity to impose a civil fine of up to $1,000 per day
for failure to meet this requirement, after providing the owner with notice, a period of not
less than 30 days to remedy the violation, and the availability of a hearing and an opportunity
to contest the fine. (Section 2929.3.)
FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.
COMMENTS: California’s last economic crisis caused millions of single-family homes to go
into foreclosure. Many of these homes were purchased by corporate investors and turned into
rental properties. The result was a decrease in middle-class wealth, abusive landlord practices,
vacant properties that were kept off of both the sale and rental markets in the midst of a
homelessness crisis, and blight: conditions which have disproportionately harmed communities
of color. As the economic crisis precipitated by the COVID-19 pandemic threatens to send many
more Californians into foreclosure, this bill offers a means to at least slow this pattern from
repeating. According to the author:
With the wave of foreclosures during the last recession, large corporate owners purchased
single family homes at rock bottom prices, causing owner occupied home ownership to drop,
leaving many homes vacant and creating a new corporate home rental asset class with leases
that contain onerous fees and many new, and largely unfair, provisions. SB 1079 is aimed at
preventing a repeat of this scenario by limiting the bulk sale and purchase of foreclosed
homes. During the last financial crisis, large corporations and private investment firms
purchased a significant number of foreclosed homes up and down the state. Many homes
were flipped for profit, others were kept vacant, and some were held and rented at rents

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above the prevailing neighborhood market. Such practices reduced the number of available
homes, reduced owner occupied home ownership and amplified California’s affordability
crisis. […]
Providing tenants, local governments, and nonprofit providers of affordable housing the right
to purchase homes that have been kept vacant or are under foreclosure can help ensure these
residential units are more available for owner occupants and not used merely for investment
purposes. […]
SB 1079 has 3 key elements:
(1) Creates window for local governments, public agencies, non-profits, and prospective
owner-occupants to purchase homes ahead of investors.
(2) Makes purchase of large number of foreclosed homes at single auction more difficult.
(3) Allows local governments to increase fines on vacant, unmaintained foreclosed
properties.
This bill has drawn national attention. Senator Elizabeth Warren and Carroll Fife of the Alliance
of Californians for Community Empowerment (ACCE) write:
[T]o prevent predatory companies from further destabilizing neighborhoods and profiting off
the displacement of families…[s]tates should also implement protections: In California, state
Sen. Nancy Skinner’s S.B. 1079 would bar the bulk sale of auctioned foreclosed properties,
give occupants and nonprofits the right of first refusal to buy foreclosed homes, and raise
penalties for vacant properties. (Warren & Fife, Families see a looming catastrophe. Private
equity firms see dollar signs, Wash. Post (Aug. 6, 2020), available at
https://www.washingtonpost.com/opinions/2020/08/06/nation-is-facing-housing-crisisprivate-equity-firms-just-see-dollar-signs/.)
As detailed in this analysis, SB 1079 gives California a rare opportunity to learn from, and avoid,
the mistakes of its recent past.
The rise of the corporate single-family rental. According to data provided by the Assembly
Banking Committee, between 2007 and 2012, almost one million California homes were sold at
foreclosure auctions. During the same period, another 750,000 homes changed hands through
“REO sales,” that is, private sales of foreclosed properties by lenders. The direct harms (lost
homes and lost wealth) inflicted on the owners of these properties, and their tenants, who were
evicted through no fault of their own, were both obvious at the time, and unfathomably painful.
What has become increasingly evident in the years since are the continuing harms inflicted on
Californians, especially our low-income residents and communities of color, as a result of these
sales. The harms are largely due to the fact that corporate landlords bought these foreclosed
homes. As author Aaron Glantz writes:
Most of the beneficiaries of the foreclosure crisis were not first-time homebuyers who
secured a thirty-year fixed mortgage with family support. Instead, they were a new breed of
corporate landlord that bought up entire neighborhoods and held homes in shell companies,
with the true identities of their owner unknown to most of the new tenants. In Oakland, for
example, a nonprofit organization called the Urban Strategies Council found that between
January 2007 and October 2011, more than 40 percent of the 10,508 homes that went into
foreclosure in the hard-hit city had been purchased by real estate investors—usually with
cash. (Glantz, Homewreckers (2019) p. xix.)

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Corporate ownership of single- family home rentals is a genuinely new phenomenon. “Before
2010, institutional landlords didn’t exist in the single-family-rental market; now there are 25 to
30 of them.” (Mari, A $60 Billion Housing Grab by Wall Street, N.Y. Times (Mar. 4, 2020),
available at https://www.nytimes.com/2020/03/04/magazine/wall-street-landlords.html.) The
trend is only growing. According to a report by ACCE, Americans for Financial Reform, and
Public Advocates:
Industry spokespeople portray the single-family rental boom as a temporary phenomenon.
But while there has been some retrenchment recently, many of the big players clearly see
more growth ahead. [In November 2017,] the merger between Blackstone’s Invitation
Homes and Starwood Waypoint Homes was completed, giving the new merged entity,
operating as Invitation Homes, approximately 82,000 properties. This makes them the largest
landlord of single- family homes in the country and the second largest real-estate company in
the world. (ACCE, et al., Wall Street Landlords turn American Dream into a Nightmare, p.
10, available at https://www.publicadvocates.org/wp-content/uploads/
wallstreetlandlordsfinalreport.pdf.)
As early as September 2014, the Federal Reserve Bank of San Francisco released a research brief
in which it raised concerns about the effects of corporate ownership of single- family rentals:
Single- family rental housing has become the fastest growing component of the rental market.
This trend of growing absentee ownership raises important community development
questions around the issues of neighborhood stabilization, rental costs, property maintenance,
and lost asset building opportunities for potential first-time homebuyers. (Choi, Federal
Reserve Bank of San Francisco, The Rise of Single-Family Rentals in Arizona, California,
and Nevada (Sep. 2014) p. 2, available at https://www.frbsf.org/communitydevelopment/publications/community-development-research-briefs/2014/september/the-riseof-single- family-rentals- in-arizona-california-and- nevada/.)
The Fed’s concerns have proven prescient.
The decline of owner-occupancy rates in California and its negative effects. In 2019,
California’s homeownership rate—the percentage of California homes owned by their
occupants—stood at 54.8%, approximately where it was in 1991. (U.S Census Bureau,
Homeownership Rate for California, available at https://fred.stlouisfed.org/series/CAHOWN.)
This rate is down from a high of 60.2% in 2006, at the peak of the housing bubble.
Author Aaron Glantz explains the effect that the transformation of single-family homes from
owner-occupied to renter-occupied has on household wealth:
Every month, when a homeowner makes a mortgage payment, she basically makes two
payments. The first is a tax-deductible check to the bank that covers the interest, and the
other is to herself, in the form of additional equity in her home. By buying up large numbers
of homes during the bust, real estate magnates removed properties from the market and stole
this opportunity from millions of Americans. (Glantz, supra, pp. xxi-xxii.)
The ACCE report quoted above explains how this lost wealth has been transferred to corporate
investors:

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This increasing dominance of finance as a means of wealth accumulation has resulted in
windfall profits for the financial elite, and led to unprecedented levels of wage and wealth
inequality by redistributing tenants’ rent payments to wealthy investors and redirecting the
benefits of home price appreciation to private equity funds and corporate executives rather
than homeowners. (ACCE, supra, p. 28.)
People who have lost the opportunity to buy homes are not the only ones whose wealth has been
depleted by corporate entities of various forms that amass large holdings of single-family homes
that are operated as rental properties (collectively known as “single-family rental companies”).
“Edward Coulson, director of the Center for Real Estate at the University of California, Irvine,
found that if single- family-rental ownership in a neighborhood went up by 10 percent, property
values went down by 4 to 7 percent.” (Mari, supra.) In other words, significant corporate
ownership of single- family homes appears to reduce home values throughout a neighborhood.
Single-family rental companies as landlords. There are numerous reports of single- family
rental companies overcharging tenants as part of their business models, failing to timely and
properly carry out repairs, and being quick to evict tenants.
According to the ACCE report quoted above, one single-family rental company’s 34-page lease
includes the following provisions, which place responsibility for the following maintenance and
repair items on tenants:
[R]outine insect control…checking and maintaining smoke and carbon monoxide detectors,
maintenance of exterior landscaping… maintenance and repair of the appliances at the
premises, repair and maintenance of all sewer and sink backups and blockages [and] repair of
any broken glass, regardless of cause. (ACCE, supra, p. 25.)
Last March, The New York Times published a lengthy feature on the single- family rental
companies which detailed a litany of abuses perpetrated by such companies against their tenants,
many of them in California. It quoted Maya Abood, a researcher at the Massachusetts Institute
of Technology, as saying:
What is really dangerous to tenants and communities is the full integration of housing within
financial markets…. Because of the way our financial markets are structured, stockholders
expect ever-increasing returns. All of this creates so much pressure on the companies that
even if they wanted to do the right thing . . . all of the entanglements lead to an incentive of
not investing in maintenance, transferring all the costs onto tenants, constantly raising rents.
Even little, tiny nickel-and-diming, if it’s done across your entire portfolio, like little fees
here and there — you can model those, you can predict those. And then that can be a huge
revenue source. (Mari, supra.)
The feature goes on to detail a number of ways in which tenants are squeezed by these landlords:
requiring them to pay rent using an online payment portal that charges a $121 “convenience fee,”
charging landscaping fees for a landscaper who rarely appears, assessing $35 delivery fees for
service of late-payment notices (on top of the late fees themselves), and years-long waits to fix
serious problems like leaks, rot, and mold. (Ibid.) While some of this conduct may violate
California law, tenants have little recourse to lawyers beyond already-overburdened legal aid
attorneys.

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Finally, there is evidence that single- family rental companies are more likely to evict their
tenants than traditional landlords. In a study of Fulton County, Georgia, the Federal Reserve
Bank of Atlanta found “that investor size is correlated with higher levels of housing instability.”
They caveat this finding by noting that “there appears to be a company effect, with some firms
having significant, and substantially higher eviction rates than other firms….” (Raymond, et al.,
Corporate Landlords, Institutional Investors,and Displacement: Eviction Rates in Single-Family
Rentals, (Dec. 2016) p.19, available at https://www.frbatlanta.org//media/documents/community-development/publications/discussion-papers/2016/04-corporatelandlords-institutional- investors-and-displacement-2016-12-21.pdf.)
Single-family rental companies and vacant homes. Last winter, national attention was drawn to
the issue of California homes being acquired by corporate investors and then left vacant for
months at a time, this in a state with 25% of the nation’s homeless population. The group Moms
4 Housing, made up of homeless mothers and their children, moved into a vacant three-bedroom
house in West Oakland and then sought to resist eviction by the Alameda County Sheriff’s
Office. As one news story described:
Frustration over inadequate housing policies has sparked a debate over vacant homes and the
corporate companies that own them. Last year, the city of Oakland reported having 4,366
vacant properties, including empty homes like the one [Moms 4 Housing] have occupied.
Meanwhile, the city has seen a 47% uptick in unhoused people over the last two years….
Wedgewood, a Redondo Beach-based real estate investment company that owns the
property, operates real estate investments throughout the Western U.S. and in Florida.
According to its website, the company describes itself as “a leading acquirer of distressed
residential real estate.” (Solomon, Moms Who Occupied Vacant House in West Oakland
Fight Eviction in Court, KQED News (Dec. 16, 2019), available at
https://www.kqed.org/news/11791573/moms-4-housing- fights-eviction- in-court.)
Ultimately, the Oakland Community Land Trust (a group that might be an eligible bidder under
this bill) was able to negotiate to purchase the home. It is hoped that by giving such groups an
opportunity to purchase foreclosed properties, that this bill will lead to lower home vacancy rates
and reduced homelessness.
Single-family rental companies and race. The shift from owner occupancy to rentals of singlefamily housing appears to have had a disparate and harmful impact on people of color. As
author Aaron Glantz writes, “You can’t understand the housing bust—or the massive transfer of
wealth that occurred as a result—without considering the extremely powerful role that racial
discrimination played in determining the winners and losers of our recent economic disaster.”
(Glantz, supra, p. 184.)
The New York Times describes the deprivation of wealth-building opportunities for people of
color:
“Neighborhoods that were formerly ownership neighborhoods that were one of the few ways
that working-class families and communities of color could build wealth and gain stability
are being slowly, or not so slowly, turned into renter communities, and not renter
communities owned by mom-and-pop landlords but by some of the biggest private-equity
firms in the world,” says Peter Kuhns, the former Los Angeles director of the activist group
[ACCE]. Around Los Angeles, the companies scooped up properties in the majority-

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minority areas of South Los Angeles, the San Gabriel Valley, the San Fernando Valley and
Riverside. (Mari, supra.)
ACCE’s report cites an analysis by MIT researcher Maya Abood, quoted above, which found
that census block groups in California with no homes held by institutional investors have an
average 5% African-American population; by comparison, those census block groups with more
than 15 homes owned by institutional investors have an average 15% African-American
populations. (ACCE, supra, p. 30.) In Los Angeles County, the numbers are 6% and 30%,
respectively. (Ibid., pp. 30-31.)
Perhaps most tragically, as noted by Senator Warren and Carroll Fife, “Just a handful of years
after Black homeownership hit its highest point, the devastating wave of foreclosures [beginning
in 2008 has] wiped out nearly all of the growth in Black homeownership since the Fair Housing
Act repealed Jim Crow redlining in 1968.” (Warren & Fife, supra.)
COVID-19 as a trigger for another foreclosure crisis and increase in corporate ownership of
single-family homes. Data shows that the COVID-19 pandemic may trigger another wave of
foreclosures. U.S. Census Bureau data from July 16-21, 2020 indicates that an estimated
1,176,525 California homeowners were having difficulty paying their home mortgages. Of
these, 791,153 did not make their monthly mortgage payments, while another 385,372 obtained a
deferral of their monthly payment. In addition, 1,867,615 California homeowners reported
having “slight” or “no” confidence in their ability to make their next month’s mortgage payment,
representing 13% of the total 14,414,988 estimated homeowners in the state. (U.S. Census
Bureau, Week 12 Household Pulse Survey (Jul. 29, 2020), available at
https://www.census.gov/data/tables/2020/demo/hhp/hhp12.html.)
News reports show that investors are fully aware of the opportunity presented. The Wall Street
Journal reports, “A growing number of property investors are preparing for what they believe
could be a once-in-a generation opportunity to buy distressed real-estate assets at bargain prices.”
(Putzier & Grant, Real Estate Investors Eye Potential Bonanza in Distressed Sales, Wall Street
Journal (Apr. 7, 2020), available at https://www.wsj.com/articles/real-estate-investors-eyepotential-bonanza-in-distressed-sales-11586260801.) The Real Deal, a publication focused on
the real estate market, writes:
Single- family rental giant Invitation Homes Inc. is looking to take advantage of low
mortgage rates…. The publicly traded company raised $448 million in a share sale in June
and plans to use two-thirds of that to buy more properties…. CEO Dallas Tanner said that
“housing fundamentals are spectacular in the U.S. right now…. We can certainly handle
much more scale on our platform,” he said. “Is that two times our current footprint? Maybe.”
The company has been culling its portfolio over the last few years, but it still has around
80,000 properties. Adding another 80,000 may take some time. Many jurisdictions are
maintaining restrictions on foreclosures amid the coronavirus pandemic, but a wave of
foreclosures may come after moratoriums are lifted. (Staff, Invitation Homes may double its
single-family portfolio, The Real Deal (Aug. 8. 2020), available at
https://therealdeal.com/miami/2020/08/08/invitation-homes- may-double-its-single-familyportfolio/.)
Laws passed in the wake of the last foreclosure crisis—including California’s Homeowner Bill
of Rights (HBOR)—may give owners facing foreclosure a better chance of retaining their homes

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than before. However, obtaining a loan modification under HBOR depends on the homeowner
having sufficient monthly income to afford a modified loan payment. Continued unemployment
and small business failures might make demonstrating the necessary income impossible for many
homeowners.
If the status quo described above—with reduced wealth-building opportunities for families, poor
landlord behavior, vacant properties, and racially disparate impacts on communities—is
unacceptable, then California will soon have to decide how to avoid repeating its recent past.
How would this bill help limit increased corporate ownership of single-family rental homes
and its negative consequences? The mechanism that this bill provides for non-investors to buy
single- family homes is to delineate three categories of buyers, and after a foreclosure auction,
provide these buyers up to 45 days to match or exceed the last and highest offer made at the
auction. If this happens, in most cases, the buyer that makes the highest bid is deemed the
purchaser.
The three categories of buyers are prospective owner-occupants (individuals who pledge to live
in the home for at least one year, a category meant to increase owners’ home occupancy);
eligible tenant buyers (individuals renting the home, as well as nonprofits in which the tenant is a
voting member or director, a category meant to increase home ownership opportunities for
tenants); and eligible bidders (which, in addition to the aforementioned prospective owneroccupants and eligible tenant buyers, includes nonprofit affordable housing providers,
community land trusts, limited equity housing cooperatives, and public entities, categories meant
to increase the stock of affordable rental housing). Item 7) of the SUMMARY of the bill, above,
gives a detailed description of how the post-foreclosure auction bid process would work.
It is perhaps unrealistic that this bill, by itself, will stabilize single- family home ownership and
tenancies in California. Corporate investors have billions of dollars to spend on foreclosed
homes; the level of assets that eligible bidders under this bill may be able to marshal is unknown.
It may be that more resources will need to be directed to eligible bidders. But this bill is an
important first step. It will at least allow these categories of buyers an opportunity to purchase
single- family homes after foreclosure, an opportunity that is largely closed off under present law.
The bill’s sunset date of January 1, 2026 should give the Legislature sufficient time to evaluate
its efficacy.
Counterargument #1: eligible bidders under this bill should just purchase properties at
auction. A coalition of nine bill opponents (American Financial Services Association, California
Association of Realtors, California Bankers Association, California Chamber of Commerce,
California Credit Union League, California Land Title Association, California Mortgage
Association, California Mortgage Bankers Association, National Rental Home Council, and
United Trustees Association) argues: “The very people specified in the bill who can buy the
property during the 45-day period, all of whom could have bid at the foreclosure sale, will have
every incentive to wait until after the sale. … [T]he same entities who could have bid at the
foreclosure sale can now wait and bid $1 more than the foreclosure sale amount.” (Emphasis in
original.)
This argument—that the eligible bidders identified in this bill have an equal chance to purchase
properties at a foreclosure auction—is belied by the way corporate investors have captured the
auction system. These investors send agents to foreclosure auctions equipped with cashier’s
checks in every possible denomination that might be needed to purchase the properties being

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auctioned. This agent is thereby equipped to go “one dollar over every other bid until the other
bidders concede[].” (Getlen, How corporations are buying up houses – robbing families of the
American Dream, N.Y. Post (Jul. 18, 2020), available at
https://nypost.com/2020/07/18/corporations-are-buying- houses-robbing- families-of-americandream/.) No ordinary person could possibly afford the fees required to simultaneously obtain
that many cashier’s checks at one time.
Markets, including the market for foreclosed properties, are structured in large part by the law, in
this case, the law in the Civil Code governing foreclosures. As Columbia University law
professor Katharina Pistor writes:
[M]ost observers treat law as a sideshow when in fact it is the very cloth from which capital
is cut. [O]rdinary assets are turned into capital…[through a] process by which lawyers can
convert just about any asset into capital. The wealthy often claim special skills, hard work,
and the personal sacrifice they themselves or their parents or forefathers have made as
justifications for the wealth they hold today. These factors may well have contributed to
their fortunes. Yet…[a]ccumulating wealth over long stretches of time requires additional
fortification that only a code backed by the coercive powers of a state can offer. (Pistor, The
Code of Capital (2019) p. 4.)
California has structured its home foreclosure sale process in such a way that corporate investors
will almost certainly win any auction in which they participate, with all of the resulting harms
detailed above. Offering these homes for sale only through an auction process means that
bidders equipped with hundreds of certified checks will prevail. In other words, corporate
single- family rentals are the demonstrated, predictable outcome that California law provides in
the market for foreclosed homes. This bill, recognizing that outcome and its attendant harms,
would deliberately restructure this market in order to give the eligible bidders it identifies a
chance to participate in this market, with the expectation that the resulting outcome will be better
for the state as a whole. The opportunity for eligible bidders to participate is the option this bill
presents to the Legislature.
Counterargument #2: this bill will reduce the amount of equity the foreclosed borrower can
ultimately recoup. The coalition of opponents argues that this bill will depress bid amounts,
thereby harming the foreclosed borrower:
The entire objective of the [current] law is to provide an orderly, fair and public process to
maximize the sale price at a trustee’s sale. This is not primarily for the benefit of the lender,
who is entitled only to the amount of the loan in default and costs. For nearly 100 years, the
point of the process is to maximize the foreclosure sale price for the benefit of the borrower,
who is entitled to any equity realized above the amount necessary to satisfy the lender.
Therefore, any proposal which discourages bidding at foreclosure sales goes against nearly a
century of public policy and threatens to harm owners losing their homes, not lenders. We
believe that providing a post-sale, 45-day period for specified persons to “outbid” the
purchaser at the foreclosure sale will discourage and depress bidding. (Emphasis in original.)
This argument carries some weight, as, unlike the Great Recession, we are not in a situation
where numerous homeowners are underwater on their mortgages after the crash of a housing
bubble. Many homeowners may have equity in their homes that they would benefit from
retaining to any extent possible.

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That said, the opponents’ argument is entirely speculative. It may be that the process created by
this bill has exactly the opposite effect: that interested buyers might drive up bids in order to
outbid any potential eligible bidders during the post-auction 45-day window.
It is also worth noting that opening up the bid process will tend to limit opportunities for bidrigging by a small pool of buyers. This is not an idle concern. The California Department of
Justice regularly investigates and prosecutes investors for this crime. (See, e.g., Two Real Estate
Investors Plead Guilty to Bid Rigging in Northern California (Sep. 20, 2017), available at
https://www.justice.gov/opa/pr/two-real-estate- investors-plead-guilty-bid-rigging-northerncalifornia [“Today’s guilty pleas are the result of the Department’s ongoing investigation into bid
rigging at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa, and
Alameda counties, California. To date, 62 individuals have agreed to plead or have pleaded
guilty.”])
Counterargument #3: lenders will be harmed during the 45-day bid window. The coalition of
opponents argues that the 45-day post-auction window will harm the lender:
During the 45-day period, very negative circumstances can occur, despite attempts to make
the bid at the foreclosure sale “irrevocable”. This sounds good in theory but will be
ineffective in practice. The successful bidder could file for bankruptcy during the period,
cancel the cashier’s check intended to purchase the property, decide to purchase another
property, all without any practical or realistic recourse. Again, during this period, the
property is likely not being maintained, and property taxes not brought current.
This argument ignores several realities. First, foreclosure auction bids are irrevocable. (Civil
Code Section 2924h (a).) Second, cashier’s checks cannot be voided for a period of 90 days
from their date of issuance. (Commercial Code Section 3312 (b)(1).) Third, and perhaps most
importantly, numerous nonjudicial foreclosure statutes provide for a post-sale redemption period,
in which foreclosed homeowners can re-acquire the home after a foreclosure sale by reimbursing
the purchaser for the purchase price. States in which these statutes operate include Alabama,
Maryland, Michigan, Minnesota, Missouri, North Carolina, South Dakota, Tennessee (subject to
loan restrictions), and Wyoming. (See Loftsgordon, Key Aspects of State Foreclosure Law: 50State Chart, Nolo Press, available at https://www.nolo.com/legal-encyclopedia/50-state-chartkey-aspects-state-foreclosure-law.html.) Lenders are obviously comfortable with managing
properties during the applicable post-foreclosure windows in these states; there is no reason to
expect otherwise in California.
Finally, the author has recently amended the bill to provide for a 15-day initial window in which
eligible bidders must either place a bid or submit a non-binding notice of intent to place a bid. If
(and only if) one of these happens does the full 45-day window open. The intent of this
amendment is to ensure that the lender’s and purchaser’s time is not wasted if there are no
eligible bidders interested in buying the property. Nevertheless, bill opponents dismiss this
provision, writing:
There have been discussions about providing a shorter window during the 45-day period for
entitled persons to file an “expression of interest” in purchasing the property. This too
sounds better in theory than in practice. If the property is rented, the tenant will have every
incentive to file such an expression, in order to stay in the property as long as possible
without paying rent. And there is no realistic way to penalize those who file an expression of
interest but cannot or do not follow through with the purchase.

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The bill requires that notices be sent to foreclosure trustees by a method which provides for
confirmation of delivery within the 15-day window. It is hoped that the relative expense and
inconvenience of using such a method will discourage frivolous notices. Also, it is highly
unlikely that tenants would have the wherewithal to file a notice—for a mere 15-day delay—
unless they had the financial knowledge, sophistication, and support to follow through.
Counterargument #4: this bill is unlawful and unconstitutional. The National Rental Home
Council, a group that represents single- family rental home companies, writes: “SB 1079 may
also be both inconsistent with contract law and unconstitutional by arbitrarily limiting willing
parties from entering into a lawful contract.”
This argument is unpersuasive. Under this bill, no binding contract would be entered into at a
foreclosure auction by the last and highest bidder and the lender for the simple reason that the
law would prevent such a contract from being formed until the conditions prescribed by the bill
are met. The last and highest bidder’s offer cannot be deemed accepted until that time, so there
would be no interference with a contract.
As for the constitutional issue, it is worth considering Washington, D.C.’s Tenant Opportunity to
Purchase Act, D.C. Code Section 42-3404.01 et seq. (TOPA), which provides purchase rights to
tenants residing in a property if the owner wishes to sell it. One TOPA provision, which has
been in place since 1980, gives tenants a 15-day right to match any third party contract. (D.C
Code Section 42-3404.08 [“In addition to any and all other rights specified in this subchapter, a
tenant or tenant organization shall also have the right of first refusal during the 15 days after the
tenant or tenant organization has received from the owner a valid sales contract to purchase by a
third party”].) No court has found this TOPA provision unconstitutional, despite the fact that it
interposes a tenant into an already-executed contract between the owner and the third party
buyer. What SB 1079 proposes is far short of TOPA, as every bidder lacks settled contractual
expectations and enters the foreclosure auction fully aware that a bid may be superseded by an
offer made by one of the eligible bidders identified by this bill.
Addressing blight. Current California law requires the legal owner of property acquired at a
foreclosure sale to maintain the property, and permits local governments to fine owners up to
$1,000/day for a failure to maintain their property, after the government provides owners with
notice, an opportunity to cure the violation, and an opportunity for a hearing. (Civil Code
Section 2929.3.) According to the author, the City of Richmond, in her district, has at times been
unable to obtain timely owner compliance even when utilizing the $1,000/day fine, perpetuating
post-foreclosure neighborhood blight. When the bill was first referred to this Committee, it
would have addressed this issue by raising permissible fines to $10,000/day. Opponents
protested that fines at such a high level might come to be viewed by local governments as a
source of revenue rather than a penalty for noncompliance.
After discussions with bill opponents, the author agreed to modify this provision to provide
owners with detailed notice describing any alleged violations and additional time to remedy
violations. Only if an owner failed to bring the property into compliance within this time would
local governments be permitted to fine the owner: up to $2,000/day for 30 days, and then up to
$5,000/day thereafter. The California Apartment Association removed its opposition to the bill
based on the author’s agreement to make these amendments.
ARGUMENTS IN SUPPORT: A coalition of thirty-one organization argues against repeating
the mistakes of the recent past:

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[Our] members were on the front lines of the foreclosure crisis, and saw vast wealth
transferred from Black Indigenous and People of Color (BIPOC) communities into the hands
of Wall Street, private equity and Real Estate Investment Trust (REIT) firms. This property
and wealth transfer deprived first time homebuyers the opportunity to build equity, subjected
tenants to problematic landlords, and changed neighborhoods. This bill will help to ensure
these mistakes are not repeated.
During the wave of foreclosures in the last recession, large corporate owners purchased
hundreds of thousands of single-family homes in California, causing owner-occupied
homeownership to drop and leaving many homes vacant and unmaintained. This mass
corporate buyout also created a new corporate home-rental class with leases that contained
onerous fees and many new and largely unfair provisions. Such practices reduced the
number of available affordable homes and intensified California’s affordability crisis. […]
This bill aims to prevent this same scenario from happening again.
ARGUMENTS IN OPPOSITION: A coalition of nine bill opponents contends that the bill will
fail to achieve its goals:
[W]e understand and appreciate the author’s good faith objective of promoting the
acquisition of residential properties by owner-occupants. […] Despite all good intentions,
we believe this change will not materially increase owner-occupancy in residential
neighborhoods, could very well harm owners losing their properties to foreclosure, and will
prolong a lack of maintenance of properties, contributing to blight.
REGISTERED SUPPORT / OPPOSITION:
Support
Asian, Inc.
Bend the Arc California
California Reinvestment Coalition
California Coalition for Rural Housing
California Community Economic Development Association (CCEDA)
California Low-Income Consumer Coalition (CLICC)
California Rural Legal Assistance Foundation
City of Oakland
Community HousingWorks
Consumer Advocates Against Reverse Mortgage Abuse (CAARMA)
East Bay for Everyone
East Bay Housing Organizations
East Los Angeles Community Corporation
Esperanza Community Housing Corporation
Fair Housing Council of San Fernando Valley
Faith and Community Empowerment
Greenlining Institute
Haven Neighborhood Services
Home Preservation and Prevention, Inc
Homeownership San Francisco
Housing California
Inclusive Action for the City

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Institute on Aging
Jakara Movement
LA Forward
Mission Economic Development Agency (MEDA)
Neighborhood Partnership Housing Services, Inc. (NPHS)
New Economics for Women (NEW)
Non-Profit Housing Association of Northern California (NPHANC)
Oakland City Council
Opportunity Fund
Public Counsel
Public Law Center
Renaissance Entrepreneurship Center
Richmond Community Foundation
Richmond Land
Simi Valley Democratic Club (SVDC)
Sustainable Economies Law Center
TechEquity Collaborative
Tenants Together
The Two Hundred
Urban Possibilities
Urban Strategies Council
Western Center on Law & Poverty
Oppose Unless Amended
Southern California Rental Housing Association
Opposition
American Financial Services Association
California Association of Realtors
California Bankers Association
California Chamber of Commerce
California Credit Union League
California Land Title Association
California Mortgage Association
California Mortgage Bankers Association
National Rental Home Council
United Trustees Association
Analysis Prepared by: Jith Meganathan / JUD. / (916) 319-2334