Bill Text: CA SB1447 | 2019-2020 | Regular Session | Amended


Bill Title: Mortgages and deeds of trust: foreclosure.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2020-05-21 - Read second time. Ordered to third reading. [SB1447 Detail]

Download: California-2019-SB1447-Amended.html

Amended  IN  Senate  May 05, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1447


Introduced by Senator Bradford

February 21, 2020


An act to amend Section 25471 of the Public Resources Code, relating to energy. An act to amend Section 6106.3 of the Business and Professions Code, and to amend Sections 2945 and 2945.1 of, and to amend, repeal, and add Section 2924.15 of, the Civil Code, relating to mortgages.


LEGISLATIVE COUNSEL'S DIGEST


SB 1447, as amended, Bradford. Energy Efficient State Property Revolving Fund Mortgages and deeds of trust: foreclosure.
(1) Existing law, the State Bar Act, provides for the licensure and regulation of attorneys by the State Bar of California, a public corporation, which is governed by its board of trustees. If an attorney violates specified requirements relating to negotiating or arranging mortgage loan modifications or other form of mortgage loan forbearance for a fee, it is a cause for discipline under the act.
This bill would provide that other actions relating to negotiating or arranging mortgage loan modifications or other form of mortgage loan forbearance for a fee would be a violation of the State Bar Act, including charging or collecting any compensation until after the person has fully performed every service that the person contracted to perform or represented that they would perform.
(2) Existing law defines foreclosure consultants and regulates their activities. Under existing law, a foreclosure consultant, among other things, is a person who solicits, represents, or offers to perform for compensation specified acts for a property owner, as defined, including stopping or postponing a foreclosure sale. Existing law makes a statement of legislative findings and declarations regarding foreclosure consultants.
This bill would revise the list of actions that define a foreclosure consultant to also include the act stopping or postponing a delinquency on a mortgage or deed of trust. The bill would also revise the statement of legislative findings and declarations regarding foreclosure consultants.
(3) Existing law prescribes various requirements to be satisfied before the exercise of a power of sale under a mortgage or deed of trust. In this regard, existing law requires that a notice of default and a notice of sale be recorded and that specified periods of time elapse between the recording and the sale. Certain laws, commonly referred to as the California Homeowner Bill of Rights (HOBR), established a variety of requirements in connection with foreclosures on mortgages and deeds of trust, including restrictions on the actions of mortgage servicers while a borrower is attempting to secure a loan modification or has submitted a loan modification application. The foreclosure provisions of HOBR were generally limited to first lien mortgages and deeds of trust on owner-occupied residences, as specified.
This bill, until January 1, 2023, would extend protections of the HOBR to first lien mortgages or deeds of trust on properties that are secured by tenant-occupied residential real property containing no more than 4 dwelling units and that meet other specified conditions. In this regard, the bill would require that the property owner have no more than 3 residential real properties, each containing no more than 4 dwelling units, that the property is occupied by a tenant pursuant to an applicable lease, as defined, and that a tenant is unable to pay rent due to a reduction in income resulting from the novel coronavirus. The bill would require that the property remain the principal residence of a tenant for the prescribed relief to apply.

Existing law establishes the Energy Efficient State Property Revolving Fund and continuously appropriates moneys in the fund to the Department of General Services for loans for projects on state-owned buildings and facilities to achieve greater, long-term energy efficiency, energy conservation, and energy cost and use avoidance. Existing law transfers into the fund $25,000,000 from moneys received under federal American Recovery and Reinvestment Act of 2009. Existing law authorizes the State Energy Resources Conservation and Development Commission, for the 2011–12 and 2012–13 fiscal years, to transfer up to $50,000,000, in total, into the fund from moneys received by the commission under federal American Recovery and Reinvestment Act of 2009.

This bill would repeal those obsolete provisions relating to the transfer of moneys into the fund.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 6106.3 of the Business and Professions Code is amended to read:

6106.3.
  (a) It shall constitute cause for the imposition of discipline of an attorney within the meaning of this chapter for an attorney to engage in any conduct in violation of Section 2944.6 or 2944.7 of the Civil Code.

(b)This section shall become operative on January 1, 2017.

SEC. 2.

 Section 2945 of the Civil Code is amended to read:

2945.
 (a) The Legislature finds and declares that homeowners whose residences are at imminent risk of foreclosure or are in foreclosure are subject to fraud, deception, harassment, and unfair dealing by foreclosure consultants from the time an economic crisis threatens the ability of a homeowner to afford their mortgage payments, through the time a Notice of Default is recorded pursuant to Section 2924 and until the time surplus funds from any foreclosure sale are distributed to the homeowner or his or her their successor. Foreclosure consultants represent that they can assist homeowners who are at imminent risk of default or who have defaulted on obligations secured by their residences. These foreclosure consultants, however, often charge high fees, the payment of which is often secured by a deed of trust on the residence to be saved, and perform no service or essentially a worthless service. Homeowners, relying on the foreclosure consultants’ promises of help, take no other action, are diverted from lawful businesses which could render beneficial services, and often lose their homes, sometimes to the foreclosure consultants who purchase homes at a fraction of their value before the sale. Vulnerable homeowners are increasingly relying on the services of foreclosure consultants who advise the homeowner that the foreclosure consultant can obtain the remaining funds from the foreclosure sale if the homeowner executes an assignment of the surplus, a deed, or a power of attorney in favor of the foreclosure consultant. This results in the homeowner paying an exorbitant fee for a service when the homeowner could have obtained the remaining funds from the trustee’s sale from the trustee directly for minimal cost if the homeowner had consulted legal counsel or had sufficient time to receive notices from the trustee pursuant to Section 2924j regarding how and where to make a claim for excess proceeds.
(b) The Legislature further finds and declares that foreclosure consultants have a significant impact on the economy of this state and on the welfare of its citizens.
(c) The intent and purposes of this article are the following:
(1) To require that foreclosure consultant service agreements be expressed in writing; to safeguard the public against deceit and financial hardship; to permit rescission of foreclosure consultation contracts; to prohibit representations that tend to mislead; and to encourage fair dealing in the rendition of foreclosure services.
(2) The provisions of this article shall be liberally construed to effectuate this intent and to achieve these purposes.

SEC. 3.

 Section 2945.1 of the Civil Code is amended to read:

2945.1.
 The following definitions apply to this chapter:
(a) “Foreclosure consultant” means any person who makes any solicitation, representation, or offer to any owner to perform for compensation or who, for compensation, performs any service which the person in any manner represents will in any manner do any of the following:
(1) Stop or postpone the foreclosure sale. a delinquency on a mortgage or deed of trust.
(2) Stop or postpone a foreclosure sale.

(2)

(3) Obtain any forbearance from any beneficiary or mortgagee.

(3)

(4) Assist the owner to exercise the right of reinstatement provided in Section 2924c.

(4)

(5) Obtain any extension of the period within which the owner may reinstate his or her the owner’s obligation.

(5)

(6) Obtain any waiver of an acceleration clause contained in any promissory note or contract secured by a deed of trust or mortgage on a residence in foreclosure or contained that deed of trust or mortgage.

(6)

(7) Assist the owner to obtain a loan or advance of funds.

(7)

(8) Avoid or ameliorate the impairment of the owner’s credit resulting from the recording of a notice of default or the conduct of a foreclosure sale.

(8)

(9) Save the owner’s residence from foreclosure.

(9)

(10) Assist the owner in obtaining from the beneficiary, mortgagee, trustee under a power of sale, or counsel for the beneficiary, mortgagee, or trustee, the remaining proceeds from the foreclosure sale of the owner’s residence.
(b) A foreclosure consultant does not include any of the following:
(1) A person licensed to practice law in this state when the person renders service in the course of his or her the person’s practice as an attorney at law.
(2) A person licensed under Division 3 (commencing with Section 12000) of the Financial Code when the person is acting as a prorater as defined therein.
(3) A person licensed under Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code when the person is acting under the authority of that license, as described in Section 10131 or 10131.1 of the Business and Professions Code.
(4) A person licensed under Chapter 1 (commencing with Section 5000) of Division 3 of the Business and Professions Code when the person is acting in any capacity for which the person is licensed under those provisions.
(5) A person or his or her the person’s authorized agent acting under the express authority or written approval of the Department of Housing and Urban Development or other department or agency of the United States or this state to provide services.
(6) A person who holds or is owed an obligation secured by a lien on any residence in foreclosure when the person performs services in connection with this obligation or lien.
(7) Any person licensed to make loans pursuant to Division 9 (commencing with Section 22000) of the Financial Code when the person is acting under the authority of that license.
(8) Any person or entity doing business under any law of this state, or of the United States relating to banks, trust companies, savings and loan associations, industrial loan companies, pension trusts, credit unions, insurance companies, or any person or entity authorized under the laws of this state to conduct a title or escrow business, or a mortgagee which is a United States Department of Housing and Urban Development approved mortgagee and any subsidiary or affiliate of the above, and any agent or employee of the above while engaged in the business of these persons or entities.
(9) A person licensed as a residential mortgage lender or servicer pursuant to Division 20 (commencing with Section 50000) of the Financial Code, when acting under the authority of that license.
(c) Notwithstanding subdivision (b), any person who provides services pursuant to paragraph (9) of subdivision (a) is a foreclosure consultant unless he or she the person is the owner’s attorney.
(d) “Person” means any individual, partnership, corporation, limited liability company, association or other group, however organized.
(e) “Service” means and includes, but is not limited to, any of the following:
(1) Debt, budget, or financial counseling of any type.
(2) Receiving money for the purpose of distributing it to creditors in payment or partial payment of any obligation secured by a lien on a residence in foreclosure.
(3) Contacting creditors on behalf of an owner of a residence in foreclosure.
(4) Arranging or attempting to arrange for an extension of the period within which the owner of a residence in foreclosure may cure his or her the owner’s default and reinstate his or her the owner’s obligation pursuant to Section 2924c.
(5) Arranging or attempting to arrange for any delay or postponement of the time of sale of the residence in foreclosure.
(6) Advising the filing of any document or assisting in any manner in the preparation of any document for filing with any bankruptcy court.
(7) Giving any advice, explanation, or instruction to an owner of a residence in foreclosure which in any manner relates to the cure of a default in or the reinstatement of an obligation secured by a lien on the residence in foreclosure, the full satisfaction of that obligation, or the postponement or avoidance of a sale of a residence in foreclosure pursuant to a power of sale contained in any deed of trust.
(8) Arranging or attempting to arrange for the payment by the beneficiary, mortgagee, trustee under a power of sale, or counsel for the beneficiary, mortgagee, or trustee, of the remaining proceeds to which the owner is entitled from a foreclosure sale of the owner’s residence in foreclosure. Arranging or attempting to arrange for the payment shall include any arrangement where the owner transfers or assigns the right to the remaining proceeds of a foreclosure sale to the foreclosure consultant or any person designated by the foreclosure consultant, whether that transfer is effected by agreement, assignment, deed, power of attorney, or assignment of claim.
(9) Arranging or attempting to arrange an audit of any obligation secured by a lien on a residence in foreclosure.
(f) “Residence in foreclosure” means a residence in foreclosure as defined in Section 1695.1.
(g) “Owner” means a property owner as defined in Section 1695.1.
(h) “Contract” means any agreement, or any term thereof, between a foreclosure consultant and an owner for the rendition of any service as defined in subdivision (e).

SEC. 4.

 Section 2924.15 of the Civil Code is amended to read:

2924.15.
 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 first lien mortgages or deeds of trust that meet either of the following conditions:
(a) They are secured by owner-occupied residential real property containing no more than four dwelling units. For these purposes, “owner-occupied” means that the property is the principal residence of the borrower and is security for a loan made for personal, family, or household purposes.
(b) They are secured by residential real property that is occupied by a tenant and that contains no more than four dwelling units and meets all of the conditions described in paragraph (2).
(1) For the purposes of this subdivision:
(A) “Applicable lease” means a lease entered pursuant to an arm’s length transaction before, and in effect on, March 4, 2020.
(B) “Arm’s length transaction” means a lease entered into in good faith and for valuable consideration that reflects the fair market value in the open market between informed and willing parties.
(C) “Occupied by a tenant” means that the property is the principal residence of a tenant.
(2) To meet the conditions of this subdivision, a first lien mortgage or deed of trust shall have all of the following characteristics:
(A) The property is owned by an individual who owns no more than three residential real properties, each of which contains no more than four dwelling units.
(B) The property shall have been occupied by a tenant pursuant to an applicable lease.
(C) A tenant occupying the property shall have been unable to pay rent due to a reduction in income resulting from the novel coronavirus.
(3) Relief shall be available pursuant to the aforementioned sections of this code for so long as the property remains the principal residence of a tenant pursuant to a lease entered in an arm’s length transaction.
(c) This section shall remain in effect only until January 1, 2023, and as of that date is repealed, unless a later enacted statute that is enacted before January 1, 2023, deletes or extends that date.

SEC. 5.

 Section 2924.15 is added to the Civil Code, 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 first lien mortgages or deeds of trust that are secured by owner-occupied residential real property containing no more than four dwelling units. For these purposes, “owner-occupied” means that the property is the principal residence of the borrower and is security for a loan made for personal, family, or household purposes.
(b) This section shall be operative January 1, 2023.

SECTION 1.Section 25471 of the Public Resources Code is amended to read:
25471.

(a)There is hereby created in the State Treasury the Energy Efficient State Property Revolving Fund for the purpose of implementing this chapter. Notwithstanding Section 13340 of the Government Code, the money in this fund is continuously appropriated to the department, without regard to fiscal years, for loans for projects on state-owned buildings and facilities to achieve greater, long-term energy efficiency, energy conservation, and energy cost and use avoidance.

(b)The fund shall be administered by the department. The department may use other funding sources to leverage project loans.

(c)The Controller shall disburse moneys in the fund for the purposes of this chapter, as authorized by the department.

(d)Moneys in the fund, including all interest earnings, shall be clearly delineated and distinctly accounted for in accordance with the requirements of the act.

(e)Pursuant to subdivision (d) of Section 25422 and subdivision (h) of Section 25464, the commission shall transfer to the Energy Efficient State Property Revolving Fund repayments of, and all accrued interest on, loans funded by the federal American Recovery and Reinvestment Act of 2009 (Public Law 111-5).

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