Bill Text: CA SB1146 | 2023-2024 | Regular Session | Amended
Bill Title: Mortgages.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2024-09-25 - Chaptered by Secretary of State. Chapter 601, Statutes of 2024. [SB1146 Detail]
Download: California-2023-SB1146-Amended.html
Amended
IN
Senate
April 01, 2024 |
Introduced by Senator Wilk |
February 14, 2024 |
LEGISLATIVE COUNSEL'S DIGEST
This bill would provide that those provisions also do not apply to persons exempt from being licensed under the California Financing Law, the California Residential Mortgage Lending Act, or the Real Estate Law.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NOBill Text
The people of the State of California do enact as follows:
(a)A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default pursuant to Section 2924 until all of the following:
(1)The mortgage servicer has satisfied the requirements of paragraph (1) of subdivision (b).
(2)Either 30 days after initial contact is made as required by paragraph (2) of subdivision (b) or 30 days after satisfying the due diligence requirements as described in subdivision (f).
(3)The mortgage servicer complies with subdivision (c) of Section 2923.6, if the borrower has provided a complete application as
defined in subdivision (h) of Section 2923.6.
(b)(1)As specified in subdivision (a), a mortgage servicer shall send the following information in writing to the borrower:
(A)A statement that if the borrower is a servicemember or a dependent of a servicemember, they may be entitled to certain protections under the federal Servicemembers Civil Relief Act (50 U.S.C. Sec. 3901 et seq.) regarding the servicemember’s interest rate and the risk of foreclosure, and counseling for covered servicemembers that is available at agencies such as Military OneSource and Armed Forces Legal Assistance.
(B)A statement that the borrower may request the following:
(i)A copy of the borrower’s promissory note or other evidence of indebtedness.
(ii)A copy of the borrower’s deed of trust or mortgage.
(iii)A copy of any assignment, if applicable, of the borrower’s mortgage or deed of trust required to demonstrate the right of the mortgage servicer to foreclose.
(iv)A copy of the borrower’s payment history since the borrower was last less than 60 days past due.
(2)A mortgage servicer shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgage servicer shall advise the
borrower that they have the right to request a subsequent meeting and, if requested, the mortgage servicer shall schedule the meeting to occur within 14 days. The assessment of the borrower’s financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically.
(c)A notice of default recorded pursuant to Section 2924 shall include a declaration that the mortgage servicer has contacted the borrower, has tried with due diligence to contact the borrower as required by this section, or that no contact was required because the
individual did not meet the definition of “borrower” pursuant to subdivision (c) of Section 2920.5.
(d)A mortgage servicer’s loss mitigation personnel may participate by telephone during any contact required by this section.
(e)A borrower may designate, with consent given in writing, a HUD-certified housing counseling agency, attorney, or other adviser to discuss with the mortgage servicer, on the borrower’s behalf, the borrower’s financial situation and options for the borrower to avoid foreclosure. That contact made at the direction of the borrower shall satisfy the contact requirements of paragraph (2) of subdivision (b). Any foreclosure prevention alternative offered at the meeting by the mortgage servicer is subject to approval by the borrower.
(f)A notice of default may be recorded pursuant to Section 2924 when a mortgage servicer has not contacted a borrower as required by paragraph (2) of subdivision (b), provided that the failure to contact the borrower occurred despite the due diligence of the mortgage servicer. For purposes of this section, “due diligence” shall require and mean all of the following:
(1)A mortgage servicer shall first attempt to contact a borrower by sending a first-class letter that includes the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.
(2)(A)After the letter has been sent, the mortgage servicer shall attempt to contact the borrower by telephone at least
three times at different hours and on different days. Telephone calls shall be made to the primary telephone number on file.
(B)A mortgage servicer may attempt to contact a borrower using an automated system to dial borrowers, provided that, if the telephone call is answered, the call is connected to a live representative of the mortgage servicer.
(C)A mortgage servicer satisfies the telephone contact requirements of this paragraph:
(i)If it determines, after attempting contact pursuant to this paragraph, that the borrower’s primary telephone number and secondary telephone number or numbers on file, if any, have been disconnected.
(ii)If the borrower
or their authorized agent notifies the mortgage servicer in writing to cease further communication with the borrower. The cease communication notification shall explicitly pertain to the mortgage loan account to be effective. The cease communication notification shall be effective until the borrower or their authorized agent rescinds it in writing.
(3)If the borrower does not respond within two weeks after the telephone call requirements of paragraph (2) have been satisfied, the mortgage servicer shall then send a certified letter, with return receipt requested, that includes the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.
(4)The mortgage servicer shall provide a means for the borrower to contact it in a timely manner,
including a toll-free telephone number that will provide access to a live representative during business hours.
(5)The mortgage servicer has posted a prominent link on the homepage of its internet website, if any, to the following information:
(A)Options that may be available to borrowers who are unable to afford their mortgage payments and who wish to avoid foreclosure, and instructions to borrowers advising them on steps to take to explore those options.
(B)A list of financial documents borrowers should collect and be prepared to present to the mortgage servicer when discussing options for avoiding foreclosure.
(C)A toll-free telephone number
for borrowers who wish to discuss options for avoiding foreclosure with their mortgage servicer.
(D)The toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.
(g)This section shall not apply to any of the following:
(1)Entities described in subdivision (b) of Section 2924.18.
(2)Persons exempt from being licensed pursuant to Division 9 (commencing with Section 22000) of the Financial Code.
(3)Persons exempt from being licensed pursuant to Division 20 (commencing with Section 50000) of the Financial Code.
(4)Persons exempt from being licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
(h)This section shall apply only to mortgages or deeds of trust described in Section 2924.15.
(a)The Legislature finds and declares that any duty mortgage servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, or to all investors under a pooling and servicing agreement, not to any particular party in the loan pool or investor under a pooling and servicing agreement, and that a mortgage servicer acts in the best interests of all parties to the loan pool or investors in the pooling and servicing agreement if it agrees to or implements a loan modification or workout plan for which both of the following apply:
(1)The loan is in payment default, or payment default is reasonably foreseeable.
(2)Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.
(b)It is the intent of the Legislature that the mortgage servicer offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.
(c)If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer at least five business days before a scheduled foreclosure sale, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale,
while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee’s sale until any of the following occurs:
(1)The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.
(2)The borrower does not accept an offered first lien loan modification within 14 days of the offer.
(3)The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under, the first lien loan modification.
(d)If the borrower’s application for a first lien loan modification is denied, the borrower shall have at least 30 days from the date of the written denial to appeal the denial and to provide evidence that the mortgage servicer’s determination was in error.
(e)If the borrower’s application for a first lien loan modification is denied, the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or, if a notice of default has already been recorded, record a notice of sale or conduct a trustee’s sale until the later of:
(1)Thirty-one days after the borrower is notified in writing of the denial.
(2)If the
borrower appeals the denial pursuant to subdivision (d), the later of 15 days after the denial of the appeal or 14 days after a first lien loan modification is offered after appeal but declined by the borrower, or, if a first lien loan modification is offered and accepted after appeal, the date on which the borrower fails to timely submit the first payment or otherwise breaches the terms of the offer.
(f)Following the denial of a first lien loan modification application, the mortgage servicer shall send a written notice to the borrower identifying the reasons for denial, including the following:
(1)The amount of time from the date of the denial letter in which the borrower may request an appeal of the denial of the first lien loan modification and instructions regarding
how to appeal the denial.
(2)If the denial was based on investor disallowance, the specific reasons for the investor disallowance.
(3)If the denial is the result of a net present value calculation, the monthly gross income and property value used to calculate the net present value and a statement that the borrower may obtain all of the inputs used in the net present value calculation upon written request to the mortgage servicer.
(4)If applicable, a finding that the borrower was previously offered a first lien loan modification and failed to successfully make payments under the terms of the modified loan.
(5)If applicable, a description of other foreclosure
prevention alternatives for which the borrower may be eligible, and a list of the steps the borrower must take in order to be considered for those options. If the mortgage servicer has already approved the borrower for another foreclosure prevention alternative, information necessary to complete the foreclosure prevention alternative.
(g)In order to minimize the risk of borrowers submitting multiple applications for first lien loan modifications for the purpose of delay, the mortgage servicer shall not be obligated to evaluate applications from borrowers who have been evaluated or afforded a fair opportunity to be evaluated consistent with the requirements of this section, unless there has been a material change in the borrower’s financial circumstances since the date of the borrower’s previous application and that change is documented by
the borrower and submitted to the mortgage servicer.
(h)For purposes of this section, an application shall be deemed “complete” when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer.
(i)(1)Subdivisions (c) to (h), inclusive, shall not apply to entities described in subdivision (b) of Section 2924.18.
(2)This section shall not apply to persons exempt from being licensed pursuant to any of the following:
(A)Division 9 (commencing with Section 22000) of the Financial Code.
(B)Division 20 (commencing with Section 50000) of the Financial Code.
(C)Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
(j)This section shall apply only to mortgages or deeds of trust described in Section 2924.15.
SEC. 3.SECTION 1.
Section 2923.7 of the Civil Code is amended to read:2923.7.
(a) When a borrower requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact and provide to the borrower one or more direct means of communication with the single point of contact.(B)Persons exempt from being licensed pursuant to Division 9 (commencing with Section 22000) of the Financial Code.
(C)Persons exempt from being licensed pursuant to Division 20 (commencing with Section 50000) of the Financial Code.
(D)Persons exempt from being licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
(a)Unless a borrower has previously exhausted the first lien loan modification process offered by, or through, their mortgage servicer described in Section 2923.6, within five business days after recording a notice of default pursuant to Section 2924, a mortgage servicer that offers one or more foreclosure prevention alternatives shall send a written communication to the borrower that includes all of the following information:
(1)That the borrower may be evaluated for a foreclosure prevention alternative or, if applicable, foreclosure prevention alternatives.
(2)Whether an application is required to be submitted by the borrower in order to be considered for a foreclosure prevention alternative.
(3)The means and process by which a borrower may obtain an application for a foreclosure prevention alternative.
(b)This section shall not apply to any of the following:
(1)Entities described in subdivision (b) of Section 2924.18.
(2)Persons exempt from being licensed pursuant to Division 9 (commencing with Section 22000) of the Financial Code.
(3)Persons exempt from being licensed pursuant to Division 20 (commencing with Section 50000) of the Financial Code.
(4)Persons exempt from being licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
(c)This section shall apply only to mortgages or deeds of trust described in Section 2924.15.
(a)When a borrower submits a complete first lien modification application or any document in connection with a first lien modification application, the mortgage servicer shall provide written acknowledgment of the receipt of the documentation within five business days of receipt. In its initial acknowledgment of receipt of the loan modification application, the mortgage servicer shall include the following information:
(1)A description of the loan modification process, including an estimate of when a decision on the loan modification will be made after a complete application has been submitted by the borrower and the length of time the borrower will have to consider an offer of a loan modification or other foreclosure prevention alternative.
(2)Any deadlines, including deadlines to submit missing documentation, that would affect the processing of a first lien loan modification application.
(3)Any expiration dates for submitted documents.
(4)Any deficiency in the borrower’s first lien loan modification application.
(b)For purposes of this section, a borrower’s first lien loan modification application shall be deemed to be “complete” when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer.
(c)This section shall not apply to any of the following:
(1)Entities described in subdivision (b) of Section 2924.18.
(2)Persons exempt from being licensed pursuant to Division 9 (commencing with Section 22000) of the Financial Code.
(3)Persons exempt from being licensed pursuant to Division 20 (commencing with Section 50000) of the Financial Code.
(4)Persons exempt from being licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
(d)This section shall apply only to mortgages or deeds of
trust described in Section 2924.15.
(a)If a foreclosure prevention alternative is approved in writing prior to the recordation of a notice of default, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default under either of the following circumstances:
(1)The borrower is in compliance with the terms of a written trial or permanent loan modification, forbearance, or repayment plan.
(2)A foreclosure prevention alternative has been approved in writing by all parties, including, for example, the first lien investor, junior lienholder, and mortgage insurer, as applicable, and proof of funds or financing has been provided to the servicer.
(b)If a foreclosure prevention alternative is approved in writing after the recordation of a notice of default, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of sale or conduct a trustee’s sale under either of the following circumstances:
(1)The borrower is in compliance with the terms of a written trial or permanent loan modification, forbearance, or repayment plan.
(2)A foreclosure prevention alternative has been approved in writing by all parties, including, for example, the first lien investor, junior lienholder, and mortgage insurer, as applicable, and proof of funds or financing has been provided to the servicer.
(c)When a borrower accepts an offered first lien loan modification or other foreclosure prevention alternative, the mortgage servicer shall provide the borrower with a copy of the fully executed loan modification agreement or agreement evidencing the foreclosure prevention alternative following receipt of the executed copy from the borrower.
(d)A mortgagee, beneficiary, or authorized agent shall record a rescission of a notice of default or cancel a pending trustee’s sale, if applicable, upon the borrower executing a permanent foreclosure prevention alternative. In the case of a short sale, the cancellation of the pending trustee’s sale shall occur when the short sale has been approved by all parties and proof of funds or financing has been provided to the mortgagee,
beneficiary, or authorized agent.
(e)The mortgage servicer shall not charge any application, processing, or other fee for a first lien loan modification or other foreclosure prevention alternative.
(f)The mortgage servicer shall not collect any late fees for periods during which a complete first lien loan modification application is under consideration or a denial is being appealed, the borrower is making timely modification payments, or a foreclosure prevention alternative is being evaluated or exercised.
(g)If a borrower has been approved in writing for a first lien loan modification or other foreclosure prevention alternative, and the servicing of that borrower’s loan is transferred or sold to another
mortgage servicer, the subsequent mortgage servicer shall continue to honor any previously approved first lien loan modification or other foreclosure prevention alternative, in accordance with the provisions of the act that added this section.
(h)This section shall apply only to mortgages or deeds of trust described in Section 2924.15.
(i)This section shall not apply to any of the following:
(1)Entities described in subdivision (b) of Section 2924.18.
(2)Persons exempt from being licensed pursuant to Division 9 (commencing with Section 22000) of the Financial Code.
(3)Persons exempt from being licensed pursuant to Division 20 (commencing with Section 50000) of the Financial Code.
(4)Persons exempt from being licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
(a)(1)If a trustee’s deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17.
(2)Any injunction shall remain in place and any trustee’s sale shall be enjoined until the court determines that the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent has corrected and remedied the violation or violations giving rise to the action for injunctive relief. An enjoined entity may move to dissolve an injunction based on a showing that the material violation has been corrected and remedied.
(b)After a trustee’s deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages pursuant to Section 3281, resulting from a material violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by that mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent where the violation was not corrected and remedied prior to the recordation of the trustee’s deed upon sale. If the court finds that the material violation was intentional or reckless, or resulted from willful misconduct by a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent, the court may award the borrower the greater of treble actual damages or statutory damages of fifty thousand dollars ($50,000).
(c)A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not be liable for any violation that it has corrected and remedied prior to the recordation of the trustee’s deed upon sale, or that has been corrected and remedied by third parties working on its behalf prior to the recordation of the trustee’s deed upon sale.
(d)A violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by a person licensed by the Department of Financial Protection and Innovation or the Department of Real Estate shall be deemed to be a violation of that person’s licensing law.
(e)No violation of this article shall affect the validity of a sale in favor of a bona fide purchaser and any
of its encumbrancers for value without notice.
(f)A third-party encumbrancer shall not be relieved of liability resulting from violations of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 committed by that third-party encumbrancer, that occurred prior to the sale of the subject property to the bona fide purchaser.
(g)The rights, remedies, and procedures provided by this section are in addition to and independent of any other rights, remedies, or procedures under any other law. Nothing in this section shall be construed to alter, limit, or negate any other rights, remedies, or procedures provided by law.
(h)A court may award a prevailing borrower reasonable attorney’s fees and costs in an action
brought pursuant to this section. A borrower shall be deemed to have prevailed for purposes of this subdivision if the borrower obtained injunctive relief or was awarded damages pursuant to this section.
(i)This section shall not apply to any of the following:
(1)Entities described in subdivision (b) of Section 2924.18.
(2)Persons exempt from being licensed pursuant to Division 9 (commencing with Section 22000) of the Financial Code.
(3)Persons exempt from being licensed pursuant to Division 20 (commencing with Section 50000) of the Financial Code.
(4)Persons exempt from being licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
SEC. 8.SEC. 2.
Section 2924.15 of the Civil Code is amended to read:2924.15.
(a) Unless otherwise provided, paragraph (5) of subdivision (a) of Section 2924 and Sections 2923.5, 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, and 2924.18 shall apply only to a first lien mortgage or deed of trust that is secured by owner-occupied residential real property containing no more than four dwelling units.SEC. 9.SEC. 3.
Section 2924.18 of the Civil Code is amended to read:2924.18.
(a) (1) If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer at least five business days before a scheduled foreclosure sale, a mortgage servicer, trustee, mortgagee, beneficiary, or authorized agent shall not record a notice of default, notice of sale, or conduct a trustee’s sale while the complete first lien loan modification application is pending, and until the borrower has been provided with a written determination by the mortgage servicer regarding that borrower’s eligibility for the requested loan modification.(2)This section shall not apply to persons exempt from being licensed pursuant to any of the following:
(A)Division 9 (commencing with Section 22000) of the Financial Code.
(B)Division 20 (commencing with Section 50000) of the Financial Code.
(C)Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
SEC. 10.SEC. 4.
Section 2924c of the Civil Code is amended to read:2924c.
(a) (1) Whenever all or a portion of the principal sum of any obligation secured by deed of trust or mortgage on real property or an estate for years therein hereafter executed has, prior to the maturity date fixed in that obligation, become due or been declared due by reason of default in payment of interest or of any installment of principal, or by reason of failure of trustor or mortgagor to pay, in accordance with the terms of that obligation or of the deed of trust or mortgage, taxes, assessments, premiums for insurance, or advances made by beneficiary or mortgagee in accordance with the terms of that obligation or of the deed of trust or mortgage, the trustor or mortgagor or their successor in interest in the mortgaged or trust property or any part thereof, or any beneficiary under a subordinate deed of trust or any other person having a subordinate lien or encumbrance of record thereon, at any time within the period specified in subdivision (e), if the power of sale therein is to be exercised, or, otherwise at any time prior to entry of the decree of foreclosure, may pay to the beneficiary or the mortgagee or their successors in interest, respectively, the entire amount due, at the time payment is tendered, with respect to (A) all amounts of principal, interest, taxes, assessments, insurance premiums, or advances actually known by the beneficiary to be, and that are, in default and shown in the notice of default, under the terms of the deed of trust or mortgage and the obligation secured thereby, (B) all amounts in default on recurring obligations not shown in the notice of default, and (C) all reasonable costs and expenses, subject to subdivision (c), that are actually incurred in enforcing the terms of the obligation, deed of trust, or mortgage, and trustee’s or attorney’s fees, subject to subdivision (d), other than the portion of principal as would not then be due had no default occurred, and thereby cure the default theretofore existing, and thereupon, all proceedings theretofore had or instituted shall be dismissed or discontinued and the obligation and deed of trust or mortgage shall be reinstated and shall be and remain in force and effect, the same as if the acceleration had not occurred. This section does not apply to bonds or other evidences of indebtedness authorized or permitted to be issued by the Department of Financial Protection and Innovation or made by a public utility subject to the Public Utilities Code. For the purposes of this subdivision, the term “recurring obligation” means all amounts of principal and interest on the loan, or rents, subject to the deed of trust or mortgage in default due after the notice of default is recorded; all amounts of principal and interest or rents advanced on senior liens or leaseholds that are advanced after the recordation of the notice of default; and payments of taxes, assessments, and hazard insurance advanced after recordation of the notice of default. If the beneficiary or mortgagee has made no advances on defaults that would constitute recurring obligations, the beneficiary or mortgagee may require the trustor or mortgagor to provide reliable written evidence that the amounts have been paid prior to reinstatement.“IMPORTANT NOTICE [14-point boldface type if printed or in capital letters if typed]
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