Bill Text: CA AB1770 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Real property liens: equity lines of credit: suspend and close.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2014-08-15 - Chaptered by Secretary of State - Chapter 206, Statutes of 2014. [AB1770 Detail]

Download: California-2013-AB1770-Amended.html

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BILL NUMBER: AB 1770	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JUNE 9, 2014
	AMENDED IN ASSEMBLY  MAY 8, 2014
	AMENDED IN ASSEMBLY  MARCH 28, 2014

INTRODUCED BY   Assembly Member Dababneh

                        FEBRUARY 14, 2014

    An act to add Section 2941.8 to the Civil Code, relating
to real property.   An act to add Section 2943.1 to the
Civil Code, relating to real property. 


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1770, as amended, Dababneh.  Real property liens:
request to terminate home equity line of credit.   Real
property liens: revolving lines of credit: suspend and close. 
   Under existing law, within 30 days after a mortgage has been
satisfied, the mortgagee or the assignee of the mortgagee is required
to execute a certificate of the discharge of the mortgage, as
specified, and to deliver, upon the request of the mortgagor or
another authorized person, the original note and mortgage to the
person making the request.
   Existing law requires a creditor to make certain disclosures to a
consumer applying for a home equity loan, as defined. Existing
federal law relating to lending practices specifies certain
circumstances under which a lender may reduce or terminate an
existing home equity line of credit. 
   This bill would require a lender, upon receipt of a written
request from an authorized person, as defined, to terminate a
borrower's equity line of credit, as defined, when the secured
property is in escrow. This bill would prescribe the contents of this
written request, and would require the authorized person to provide
a copy of the written request to the borrower, along with a notice to
the borrower relating to the effect of the termination of the home
equity line of credit.  
   This bill would, on and after July 1, 2015, require a lender, upon
receipt of a specified written request from a borrower and a
specified payment, to close a borrower's revolving line of credit, as
defined, and to release or reconvey the property secured by the
revolving line of credit, as specified. The bill would prescribe the
contents of the written request. 
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 2943.1 is added to the 
 Civil Code   , to read:  
   2943.1.  (a) For purposes of this section, the following
definitions apply:
   (1) "Beneficiary" has the same meaning as defined in Section 2943.

   (2) "Borrower's Instruction to Suspend and Close" means the
instruction described in subdivision (c), signed by the borrower or
borrowers under a revolving line of credit.
   (3) "Entitled person" has the same meaning as defined in Section
2943.
   (4) "Payoff demand statement" has the same meaning as defined in
Section 2943.
   (5) "Revolving line of credit" means an open-end revolving loan
that is established pursuant to a written agreement between a
borrower and a lender on residential real property consisting of one
to four dwelling units in which the lender agrees to lend the
borrower money on a continuing basis for as long as the outstanding
principal amount owed by the borrower does not exceed a specified
amount, and which is secured by a mortgage or deed of trust on real
property.
   (6) "Suspend" means to prohibit the borrower from drawing on,
increasing, or incurring any additional principal debt on the
revolving line of credit.
   (b) Notwithstanding paragraph (5) of subdivision (a) of Section
2943, a payoff demand statement issued by a beneficiary in connection
with a revolving line of credit shall include an email address, fax
number, or mailing address designated by the beneficiary for delivery
of the Borrower's Instruction to Suspend and Close by the entitled
person.
   (c) Upon receipt from an entitled person of a Borrower's
Instruction to Suspend and Close Revolving Line of Credit, signed by
a borrower, a beneficiary shall suspend the revolving line of credit
for a minimum of 45 days. A Borrower's Instruction to Suspend and
Close shall be effective if made substantially in the following form
and signed by the borrower:

       ""Borrower's Instruction to Suspend and 
                        Close 
               Revolving Line of Credit 
 Lender: (Name of Lender) 
 Borrower(s): (Name of Borrower(s)) 
 Account Number of the Equity Line of Credit: 
 (Account Number) 
 Encumbered Property Address: (Property Address) 
 Escrow or Settlement Agent: (Name of Agent): 
 In connection with a sale or refinance of the 
 above-referenced property, my Escrow or 
 Settlement Agent has requested a payoff demand 
 statement for the above-described revolving line 
 of credit. I understand my ability to use this 
 account has been suspended for at least 45 days 
 to accommodate this pending transaction. I 
 understand that I cannot use any credit cards, 
 debit cards, or checks associated with this 
 account while my account is suspended and all 
 amounts will be due and payable upon close of 
 escrow. I also understand that when payment is 
 made in accordance with the payoff demand 
 statement, my revolving line of credit will be 
 closed. If any amounts remain due after the 
 payment is made, I understand I will remain 
 personally liable for those amounts even if the 
 account has been closed and the property 
 released. 
 This is my written authorization and instruction 
 that you are to close my revolving line of 
 credit account and cause the secured lien 
 against this property to be released when you 
 are in receipt of both this instruction and 
 payment in accordance with your payoff demand
 statement. 
                      ___________________ 
 ________             (Signature of Each 
 (Date)              __________'' 
                      Borrower) 



   (d) When a beneficiary is in receipt of both a Borrower's
Instruction to Suspend and Close Revolving Line of Credit and payment
in accordance with the payoff demand statement as set forth in
Section 2943, the beneficiary shall do all of the following:
   (1) Close the revolving line of credit.
   (2) Release or reconvey the property securing the revolving line
of credit, as provided by this chapter.
   (e) This section shall become operative on July 1, 2015. 

  SECTION 1.    Section 2941.8 is added to the Civil
Code, to read:
   2941.8.  (a) Upon receipt of a written request from an authorized
person to terminate an equity line of credit, the lender shall do all
of the following:
   (1) Terminate the borrower's right to obtain advances under the
borrower's equity line of credit.
   (2) Apply all sums subsequently paid by or on behalf of the
borrower in connection with the equity line of credit to the
satisfaction of the equity line of credit.
   (3) Reconvey the mortgage or deed of trust when the home equity
line of credit has a zero balance outstanding.
   (b) The written request provided to the lender to terminate an
equity line of credit shall contain at least the following:
   (1) The name of each borrower.
   (2) The account number of the equity line of credit.
   (3) The street address of the property, if appropriate.
   (c) For purposes of this section "authorized person" includes a
licensed title insurance company, underwritten title company, or
controlled escrow company, as defined in Sections 12340.4, 12340.5,
and 12340.6, respectively, of the Insurance Code, or an escrow
company as used in the Financial Code, that is acting on behalf of
the borrower.
   (d) For purposes of this section, "equity line of credit" means a
revolving line of credit secured by a mortgage or deed of trust.
   (e) For purposes of this section, "receipt of a written request"
includes confirmation delivered by first-class mail, registered or
certified mail, express mail, overnight delivery by an express
services carrier, email, facsimile, or other electronic means.
   (f) A written request to terminate an equity line of credit from
an authorized person shall be provided to the borrower and be
accompanied by the following language:

   "NOTICE TO BORROWER
   You have a home equity line of credit with _____, secured by a
mortgage or deed of trust, and lien, on real property located at
______________.
   Our company is handling the escrow for your transaction. We are
sending the attached notice to your lender, requesting cancellation
of your home equity line of credit. Our reason for making this
request is: ________________________.
   When your lender receives our request, your lender will close your
home equity line of credit, and you will no longer be able to obtain
credit advances. However, this notice to cancel your home equity
line of credit does not release you from liability for amounts owed
under the account. Any funds sent to your lender in connection with
your home equity line of credit, including any funds we may send to
your lender, will be applied by your lender to the satisfaction of
your account. When the balance of your account becomes zero, your
lender will be required to remove the lien against the property that
is connected to the home equity line of credit.
   If you have questions about this notice or our action, or believe
you have received this notice in error, please contact ___________ by
calling us at __________________ or writing to us at ______________.

   __________________________
   (Name of Company)"