Senate Bill No. 900

Passed the Senate July 2, 2012

Secretary of the Senate

Passed the Assembly July 2, 2012

Chief Clerk of the Assembly


This bill was signed by the Governor on July 11, 2012

 

CHAPTER

An act to amend and add Sections 2923.5 and 2923.6 of, to

amend and repeal Section 2924 of, to add Sections 2920.5, 2923.4,

2923.7, 2924.17, and 2924.20 to, to add and repeal Sections

2923.55, 2924.9, 2924.10, 2924.18, and 2924.19 of, and to add,

repeal, and add Sections 2924.11, 2924.12, and 2924.15 of, the

Civil Code, relating to mortgages.


legislative counsels digest

 

SB 900, Leno. Mortgages and deeds of trust: foreclosure.

(1) Existing law, until January 1, 2013, requires a mortgagee,

 

trustee, beneficiary, or authorized agent to contact the borrower


prior to filing a notice of default to explore options for the borrower


to avoid foreclosure, as specified. Existing law requires a notice

 

of default or, in certain circumstances, a notice of sale, to include

 

a declaration stating that the mortgagee, trustee, beneficiary, or

 

authorized agent has contacted the borrower, has tried with due

diligence to contact the borrower, or that no contact was required

 

for a specified reason.


This bill would add mortgage servicers, as defined, to these

 

provisions and would extend the operation of these provisions

 

indefinitely, except that it would delete the requirement with

 

respect to a notice of sale. The bill would, until January 1, 2018,

 

additionally require the borrower, as defined, to be provided with


specified information in writing prior to recordation of a notice of

 

default and, in certain circumstances, within 5 business days after

recordation. The bill would prohibit a mortgage servicer,

 

mortgagee, trustee, beneficiary, or authorized agent from recording

 

a notice of default or, until January 1, 2018, recording a notice of

 

sale or conducting a trustees sale while a complete first lien loan


modification application is pending, under specified conditions.

 

The bill would, until January 1, 2018, establish additional

 

procedures to be followed regarding a first lien loan modification


application, the denial of an application, and a borrowers right to

 

appeal a denial.

(2) Existing law imposes various requirements that must be

 

satisfied prior to exercising a power of sale under a mortgage or

 

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SB 900 2

deed of trust, including, among other things, recording a notice of

default and a notice of sale.

The bill would, until January 1, 2018, require a written notice

to the borrower after the postponement of a foreclosure sale in

order to advise the borrower of any new sale date and time, as

 

specified. The bill would provide that an entity shall not record a

 

notice of default or otherwise initiate the foreclosure process unless

 

it is the holder of the beneficial interest under the deed of trust,

 

the original or substituted trustee, or the designated agent of the

 

holder of the beneficial interest, as specified.

 

The bill would prohibit recordation of a notice of default or a

 

notice of sale or the conduct of a trustees sale if a foreclosure

 

prevention alternative has been approved and certain conditions

exist and would, until January 1, 2018, require recordation of a

rescission of those notices upon execution of a permanent

foreclosure prevention alternative. The bill would until January 1,

2018, prohibit the collection of application fees and the collection

of late fees while a foreclosure prevention alternative is being

considered, if certain criteria are met, and would require a

subsequent mortgage servicer to honor any previously approved

foreclosure prevention alternative.

The bill would authorize a borrower to seek an injunction and

damages for violations of certain of the provisions described above,

 

except as specified. The bill would authorize the greater of treble

 

actual damages or $50,000 in statutory damages if a violation of

certain provisions is found to be intentional or reckless or resulted

 

from willful misconduct, as specified. The bill would authorize


the awarding of attorneysfees for prevailing borrowers, as


specified. Violations of these provisions by licensees of the

 

Department of Corporations, the Department of Financial

Institutions, and the Department of Real Estate would also be

violations of those respective licensing laws. Because a violation

of certain of those licensing laws is a crime, the bill would impose

a state-mandated local program.

The bill would provide that the requirements imposed on

 

mortgage servicers, and mortgagees, trustees, beneficiaries, and

 

authorized agents, described above are applicable only to mortgages

or deeds of trust secured by residential real property not exceeding

 

4 dwelling units that is owner-occupied, as defined, and, until

 

January 1, 2018, only to those entities who conduct more than 175

 

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3 SB 900

foreclosure sales per year or annual reporting period, except as

 

specified.

 

The bill would require, upon request from a borrower who

requests a foreclosure prevention alternative, a mortgage servicer

who conducts more than 175 foreclosure sales per year or annual

reporting period to establish a single point of contact and provide

the borrower with one or more direct means of communication

with the single point of contact. The bill would specify various

 

responsibilities of the single point of contact. The bill would define

 

single point of contact for these purposes.

(3) Existing law prescribes documents that may be recorded or


filed in court.


This bill would require that a specified declaration, notice of

 

default, notice of sale, deed of trust, assignment of a deed of trust,

 

substitution of trustee, or declaration or affidavit filed in any court

 

relative to a foreclosure proceeding or recorded by or on behalf of

a mortgage servicer shall be accurate and complete and supported

by competent and reliable evidence. The bill would require that,

 

before recording or filing any of those documents, a mortgage

 

servicer shall ensure that it has reviewed competent and reliable

 

evidence to substantiate the borrowers default and the right to


foreclose, including the borrowers loan status and loan

 

information. The bill would, until January 1, 2018, provide that

any mortgage servicer that engages in multiple and repeated

violations of these requirements shall be liable for a civil penalty

of up to $7,500 per mortgage or deed of trust, in an action brought

 

by specified state and local government entities, and would also

 

authorize administrative enforcement against licensees of the

Department of Corporations, the Department of Financial

Institutions, and the Department of Real Estate.

The bill would authorize the Department of Corporations, the

Department of Financial Institutions, and the Department of Real

Estate to adopt regulations applicable to persons and entities under

their respective jurisdictions for purposes of the provisions

described above. The bill would provide that a violation of those

regulations would be enforceable only by the regulating agency.

 

(4) The bill would state findings and declarations of the

 

Legislature in relation to foreclosures in the state generally, and

would state the purposes of the bill.

 

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SB 900 4

(5) The California Constitution requires the state to reimburse

local agencies and school districts for certain costs mandated by

the state. Statutory provisions establish procedures for making that

reimbursement.

This bill would provide that no reimbursement is required by

 

this act for a specified reason.

 

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


SECTION 1. The Legislature finds and declares all of the

 

following:

(a) California is still reeling from the economic impacts of a

wave of residential property foreclosures that began in 2007. From

2007 to 2011 alone, there were over 900,000 completed foreclosure

sales. In 2011, 38 of the top 100 hardest hit ZIP Codes in the nation

were in California, and the current wave of foreclosures continues

apace. All of this foreclosure activity has adversely affected

property values and resulted in less money for schools, public

safety, and other public services. In addition, according to the

 

Urban Institute, every foreclosure imposes significant costs on

 

local governments, including an estimated nineteen thousand two

hundred twenty-nine dollars ($19,229) in local government costs.

And the foreclosure crisis is not over; there remain more than two

 

million underwatermortgages in California.

 

(b) It is essential to the economic health of this state to mitigate

the negative effects on the state and local economies and the

housing market that are the result of continued foreclosures by

modifying the foreclosure process to ensure that borrowers who

may qualify for a foreclosure alternative are considered for, and

have a meaningful opportunity to obtain, available loss mitigation

 

options. These changes to the states foreclosure process are

 

essential to ensure that the current crisis is not worsened by

unnecessarily adding foreclosed properties to the market when an

alternative to foreclosure may be available. Avoiding foreclosure,

 

where possible, will help stabilize the states housing market and

 

avoid the substantial, corresponding negative effects of foreclosures

on families, communities, and the state and local economy.

 

(c) This act is necessary to provide stability to Californias

 

statewide and regional economies and housing market by

 

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facilitating opportunities for borrowers to pursue loss mitigation

options.

SEC. 2. Section 2920.5 is added to the Civil Code, to read:

 

2920.5. For purposes of this article, the following definitions

 

apply:

 

(a) Mortgage servicermeans a person or entity who directly

 

services a loan, or who is responsible for interacting with the

borrower, managing the loan account on a daily basis including

collecting and crediting periodic loan payments, managing any

escrow account, or enforcing the note and security instrument,

either as the current owner of the promissory note or as the current

 

owners authorized agent. Mortgage serviceralso means a


subservicing agent to a master servicer by contract. Mortgage


servicershall not include a trustee, or a trustees authorized agent,

 

acting under a power of sale pursuant to a deed of trust.

 

(b) Foreclosure prevention alternativemeans a first lien loan


modification or another available loss mitigation option.

 

(c) (1) Unless otherwise provided and for purposes of Sections

2923.4, 2923.5, 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11,

 

2924.18, and 2924.19, borrowermeans any natural person who

 

is a mortgagor or trustor and who is potentially eligible for any

federal, state, or proprietary foreclosure prevention alternative

program offered by, or through, his or her mortgage servicer.

(2) For purposes of the sections listed in paragraph (1),


borrowershall not include any of the following:

 

(A) An individual who has surrendered the secured property as

 

evidenced by either a letter confirming the surrender or delivery


of the keys to the property to the mortgagee, trustee, beneficiary,

 

or authorized agent.

(B) An individual who has contracted with an organization,

person, or entity whose primary business is advising people who

have decided to leave their homes on how to extend the foreclosure

process and avoid their contractual obligations to mortgagees or

 

beneficiaries.


(C) An individual who has filed a case under Chapter 7, 11, 12,

 

or 13 of Title 11 of the United States Code and the bankruptcy

court has not entered an order closing or dismissing the bankruptcy

case, or granting relief from a stay of foreclosure.

 

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SB 900 6

 


(d) First lienmeans the most senior mortgage or deed of trust

 

on the property that is the subject of the notice of default or notice

of sale.

SEC. 3. Section 2923.4 is added to the Civil Code, to read:

2923.4. (a) The purpose of the act that added this section is to

ensure that, as part of the nonjudicial foreclosure process,

borrowers are considered for, and have a meaningful opportunity

to obtain, available loss mitigation options, if any, offered by or

 

through the borrowers mortgage servicer, such as loan


modifications or other alternatives to foreclosure. Nothing in the

 

act that added this section, however, shall be interpreted to require

a particular result of that process.

(b) Nothing in this article obviates or supersedes the obligations

of the signatories to the consent judgment entered in the case

entitled United States of America et al. v. Bank of America

 

Corporation et al., filed in the United States District Court for the

 

District of Columbia, case number 1:12-cv-00361 RMC.

SEC. 4. Section 2923.5 of the Civil Code is amended to read:

2923.5. (a) (1) A mortgage servicer, mortgagee, trustee,

 

beneficiary, or authorized agent may not record a notice of default

 

pursuant to Section 2924 until both of the following:

(A) Either 30 days after initial contact is made as required by

paragraph (2) or 30 days after satisfying the due diligence

requirements as described in subdivision (e).

(B) The mortgage servicer complies with paragraph (1) of

subdivision (a) of Section 2924.18, if the borrower has provided

 

a complete application as defined in subdivision (d) of Section

 

2924.18.

(2) A mortgage servicer shall contact the borrower in person or

 

by telephone in order to assess the borrowers financial situation

 

and explore options for the borrower to avoid foreclosure. During

the initial contact, the mortgage servicer shall advise the borrower

that he or she has 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 borrowers 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

 

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Housing and Urban Development (HUD) to find a HUD-certified

 

housing counseling agency. Any meeting may occur telephonically.

(b) 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 borrowerpursuant

 

to subdivision (c) of Section 2920.5.

 

(c) A mortgage servicers loss mitigation personnel may

 

participate by telephone during any contact required by this section.

(d) A borrower may designate, with consent given in writing,

 

a HUD-certified housing counseling agency, attorney, or other


advisor to discuss with the mortgage servicer, on the borrowers


behalf, the borrowers 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 (a). Any loan modification or workout plan

 

offered at the meeting by the mortgage servicer is subject to

approval by the borrower.

(e) 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 (a) provided that the

failure to contact the borrower occurred despite the due diligence

 

of the mortgage servicer. For purposes of this section, due


diligenceshall 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 if it determines, after attempting

 

contact pursuant to this paragraph, that the borrowers primary

 

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SB 900 8

telephone number and secondary telephone number or numbers

 

on file, if any, have been disconnected.

 

(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.

(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 Web site, 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.

 

(f) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(g) This section shall apply only to entities described in

subdivision (b) of Section 2924.18.

(h) This section shall remain in effect only until January 1, 2018,

and as of that date is repealed, unless a later enacted statute, that

is enacted before January 1, 2018, deletes or extends that date.

SEC. 5. Section 2923.5 is added to the Civil Code, to read:

2923.5. (a) (1) A mortgage servicer, mortgagee, trustee,

 

beneficiary, or authorized agent may not record a notice of default

 

pursuant to Section 2924 until both of the following:

(A) Either 30 days after initial contact is made as required by

paragraph (2) or 30 days after satisfying the due diligence

requirements as described in subdivision (e).

 

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9 SB 900

(B) The mortgage servicer complies with subdivision (a) of

Section 2924.11, if the borrower has provided a complete

 

application as defined in subdivision (f) of Section 2924.11.

 

(2) A mortgage servicer shall contact the borrower in person or

 

by telephone in order to assess the borrowers financial situation

 

and explore options for the borrower to avoid foreclosure. During

the initial contact, the mortgage servicer shall advise the borrower

that he or she has 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 borrowers 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.

(b) 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 borrowerpursuant

 

to subdivision (c) of Section 2920.5.

 

(c) A mortgage servicers loss mitigation personnel may

 

participate by telephone during any contact required by this section.

(d) A borrower may designate, with consent given in writing,

 

a HUD-certified housing counseling agency, attorney, or other


advisor to discuss with the mortgage servicer, on the borrowers


behalf, the borrowers 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 (a). Any loan modification or workout plan

 

offered at the meeting by the mortgage servicer is subject to

approval by the borrower.

(e) 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 (a) provided that the

failure to contact the borrower occurred despite the due diligence

 

of the mortgage servicer. For purposes of this section, due


diligenceshall require and mean all of the following:

 

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SB 900 10

 


(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 if it determines, after attempting

 

contact pursuant to this paragraph, that the borrowers primary

 

telephone number and secondary telephone number or numbers

 

on file, if any, have been disconnected.

 

(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.

(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 Web site, 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.

 

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11 SB 900

(f) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(g) This section shall become operative on January 1, 2018.

SEC. 6. Section 2923.55 is added to the Civil Code, to read:

2923.55. (a) A mortgage servicer, mortgagee, trustee,

 

beneficiary, or authorized agent may 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, he or she may be entitled to certain

protections under the federal Servicemembers Civil Relief Act (50

 

U.S.C. Sec. 501 et seq.) regarding the servicemembers 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 borrowers promissory note or other evidence

 

of indebtedness.

 

(ii) A copy of the borrowers deed of trust or mortgage.


(iii) A copy of any assignment, if applicable, of the borrowers

 

mortgage or deed of trust required to demonstrate the right of the

mortgage servicer to foreclose.

 

(iv) A copy of the borrowers 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 borrowers financial situation

 

and explore options for the borrower to avoid foreclosure. During

the initial contact, the mortgage servicer shall advise the borrower

that he or she has 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 borrowers financial

 

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SB 900 12

 


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 borrowerpursuant

 

to subdivision (c) of Section 2920.5.

 

(d) A mortgage servicers 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


advisor to discuss with the mortgage servicer, on the borrowers


behalf, the borrowers 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

 

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13 SB 900

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 if it determines, after attempting

 

contact pursuant to this paragraph, that the borrowers primary

 

telephone number and secondary telephone number or numbers

 

on file, if any, have been disconnected.

 

(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 Web site, 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 entities described in

subdivision (b) of Section 2924.18.

(h) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(i) This section shall remain in effect only until January 1, 2018,

and as of that date is repealed, unless a later enacted statute, that

is enacted before January 1, 2018, deletes or extends that date.

SEC. 7. Section 2923.6 of the Civil Code is amended to read:

 

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SB 900 14

 


2923.6. (a) The Legislature finds and declares that any duty

 

that 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 borrowers mortgage


servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or

 

authorized agent shall not record a notice of default or notice of

 

sale, or conduct a trustees 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 trustees 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 borrowers obligations


under, the first lien loan modification.


(d) If the borrowers 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 servicers determination was in error.

 

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15 SB 900

 


(e) If the borrowers 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 trustees 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

 

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SB 900 16

purpose of delay, the mortgage servicer shall not be obligated to

evaluate applications from borrowers who have already been

 

evaluated or afforded a fair opportunity to be evaluated for a first


lien loan modification prior to January 1, 2013, or 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 borrowers financial circumstances since


the date of the borrowers 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


completewhen 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) Subdivisions (c) to (h), inclusive, shall not apply to entities

described in subdivision (b) of Section 2924.18.

(j) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(k) This section shall remain in effect only until January 1,

2018, and as of that date is repealed, unless a later enacted statute,

that is enacted before January 1, 2018, deletes or extends that date.

SEC. 8. Section 2923.6 is added to the Civil Code, to read:

 

2923.6. (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

 

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17 SB 900

 


modification or plan is consistent with its contractual or other

 

authority.

(c) This section shall become operative on January 1, 2018.

SEC. 9. Section 2923.7 is added to the Civil Code, to read:

2923.7. (a) Upon request from a borrower who 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) The single point of contact shall be responsible for doing

all of the following:

(1) Communicating the process by which a borrower may apply

for an available foreclosure prevention alternative and the deadline

for any required submissions to be considered for these options.

(2) Coordinating receipt of all documents associated with

available foreclosure prevention alternatives and notifying the

borrower of any missing documents necessary to complete the

application.

 

(3) Having access to current information and personnel sufficient

 

to timely, accurately, and adequately inform the borrower of the

current status of the foreclosure prevention alternative.

(4) Ensuring that a borrower is considered for all foreclosure

prevention alternatives offered by, or through, the mortgage

servicer, if any.

(5) Having access to individuals with the ability and authority

to stop foreclosure proceedings when necessary.

(c) The single point of contact shall remain assigned to the

 

borrowers account until the mortgage servicer determines that all

 

loss mitigation options offered by, or through, the mortgage

 

servicer have been exhausted or the borrowers account becomes

 

current.

(d) The mortgage servicer shall ensure that a single point of

contact refers and transfers a borrower to an appropriate supervisor

upon request of the borrower, if the single point of contact has a

supervisor.

 

(e) For purposes of this section, single point of contactmeans

 

an individual or team of personnel each of whom has the ability

and authority to perform the responsibilities described in

subdivisions (b) to (d), inclusive. The mortgage servicer shall

ensure that each member of the team is knowledgeable about the

 

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SB 900 18

 


borrowers situation and current status in the alternatives to

 

foreclosure process.

(f) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(g) (1) This section shall not apply to a depository institution

chartered under state or federal law, a person licensed pursuant to

Division 9 (commencing with Section 22000) or Division 20

(commencing with Section 50000) of the Financial Code, or a

person licensed pursuant to Part 1 (commencing with Section

10000) of Division 4 of the Business and Professions Code, that,

during its immediately preceding annual reporting period, as

established with its primary regulator, foreclosed on 175 or fewer

residential real properties, containing no more than four dwelling

units, that are located in California.

(2) Within three months after the close of any calendar year or

annual reporting period as established with its primary regulator

during which an entity or person described in paragraph (1) exceeds

 

the threshold of 175 specified in paragraph (1), that entity shall

 

notify its primary regulator, in a manner acceptable to its primary

regulator, and any mortgagor or trustor who is delinquent on a

residential mortgage loan serviced by that entity of the date on

which that entity will be subject to this section, which date shall

 

be the first day of the first month that is six months after the close

 

of the calendar year or annual reporting period during which that

entity exceeded the threshold.

SEC. 10. Section 2924 of the Civil Code, as amended by

Section 1 of Chapter 180 of the Statutes of 2010, is amended to

read:

2924. (a) Every transfer of an interest in property, other than

in trust, made only as a security for the performance of another

act, is to be deemed a mortgage, except when in the case of

personal property it is accompanied by actual change of possession,

in which case it is to be deemed a pledge. Where, by a mortgage

created after July 27, 1917, of any estate in real property, other

than an estate at will or for years, less than two, or in any transfer

in trust made after July 27, 1917, of a like estate to secure the

performance of an obligation, a power of sale is conferred upon

the mortgagee, trustee, or any other person, to be exercised after

a breach of the obligation for which that mortgage or transfer is a

security, the power shall not be exercised except where the

 

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19 SB 900

mortgage or transfer is made pursuant to an order, judgment, or

decree of a court of record, or to secure the payment of bonds or

other evidences of indebtedness authorized or permitted to be

issued by the Commissioner of Corporations, or is made by a public

utility subject to the provisions of the Public Utilities Act, until

all of the following apply:

 

(1) The trustee, mortgagee, or beneficiary, or any of their


authorized agents shall first file for record, in the office of the

 

recorder of each county wherein the mortgaged or trust property

or some part or parcel thereof is situated, a notice of default. That

notice of default shall include all of the following:

(A) A statement identifying the mortgage or deed of trust by

stating the name or names of the trustor or trustors and giving the

book and page, or instrument number, if applicable, where the

mortgage or deed of trust is recorded or a description of the

mortgaged or trust property.

(B) A statement that a breach of the obligation for which the

mortgage or transfer in trust is security has occurred.

(C) A statement setting forth the nature of each breach actually

 

known to the beneficiary and of his or her election to sell or cause

 

to be sold the property to satisfy that obligation and any other

obligation secured by the deed of trust or mortgage that is in

default.

(D) If the default is curable pursuant to Section 2924c, the

 

statement specified in paragraph (1) of subdivision (b) of Section

 

2924c.

 

(2) Not less than three months shall elapse from the filing of

 

the notice of default.

(3) Except as provided in paragraph (4), after the lapse of the

three months described in paragraph (2), the mortgagee, trustee,

or other person authorized to take the sale shall give notice of sale,

stating the time and place thereof, in the manner and for a time

not less than that set forth in Section 2924f.

(4) Notwithstanding paragraph (3), the mortgagee, trustee, or

other person authorized to take sale may record a notice of sale

 

pursuant to Section 2924f up to five days before the lapse of the

 

three-month period described in paragraph (2), provided that the

date of sale is no earlier than three months and 20 days after the

recording of the notice of default.

 

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SB 900 20

(5) Until January 1, 2018, whenever a sale is postponed for a

period of at least 10 business days pursuant to Section 2924g, a

 

mortgagee, beneficiary, or authorized agent shall provide written

 

notice to a borrower regarding the new sale date and time, within


five business days following the postponement. Information

 

provided pursuant to this paragraph shall not constitute the public

declaration required by subdivision (d) of Section 2924g. Failure

to comply with this paragraph shall not invalidate any sale that

would otherwise be valid under Section 2924f. This paragraph

shall be inoperative on January 1, 2018.

(6) No entity shall record or cause a notice of default to be

recorded or otherwise initiate the foreclosure process unless it is

 

the holder of the beneficial interest under the mortgage or deed of

 

trust, the original trustee or the substituted trustee under the deed

 

of trust, or the designated agent of the holder of the beneficial


interest. No agent of the holder of the beneficial interest under the

 

mortgage or deed of trust, original trustee or substituted trustee

under the deed of trust may record a notice of default or otherwise

commence the foreclosure process except when acting within the

 

scope of authority designated by the holder of the beneficial

 

interest.

(b) In performing acts required by this article, the trustee shall

incur no liability for any good faith error resulting from reliance

 

on information provided in good faith by the beneficiary regarding

 

the nature and the amount of the default under the secured

obligation, deed of trust, or mortgage. In performing the acts

required by this article, a trustee shall not be subject to Title 1.6c

(commencing with Section 1788) of Part 4.

(c) A recital in the deed executed pursuant to the power of sale

of compliance with all requirements of law regarding the mailing

of copies of notices or the publication of a copy of the notice of

default or the personal delivery of the copy of the notice of default

or the posting of copies of the notice of sale or the publication of

a copy thereof shall constitute prima facie evidence of compliance

with these requirements and conclusive evidence thereof in favor

 

of bona fide purchasers and encumbrancers for value and without

 

notice.

(d) All of the following shall constitute privileged

communications pursuant to Section 47:

 

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21 SB 900

(1) The mailing, publication, and delivery of notices as required

by this section.

(2) Performance of the procedures set forth in this article.

(3) Performance of the functions and procedures set forth in

this article if those functions and procedures are necessary to carry

out the duties described in Sections 729.040, 729.050, and 729.080

of the Code of Civil Procedure.

 

(e) There is a rebuttable presumption that the beneficiary

 

actually knew of all unpaid loan payments on the obligation owed

 

to the beneficiary and secured by the deed of trust or mortgage

 

subject to the notice of default. However, the failure to include an

actually known default shall not invalidate the notice of sale and

 

the beneficiary shall not be precluded from asserting a claim to

 

this omitted default or defaults in a separate notice of default.

SEC. 11. Section 2924 of the Civil Code, as amended by

Section 2 of Chapter 180 of the Statutes of 2010, is repealed.

SEC. 12. Section 2924.9 is added to the Civil Code, to read:

2924.9. (a) Unless a borrower has previously exhausted the


first lien loan modification process offered by, or through, his or


her 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 entities described in

subdivision (b) of Section 2924.18.

(c) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(d) This section shall remain in effect only until January 1,

2018, and as of that date is repealed, unless a later enacted statute,

that is enacted before January 1, 2018, deletes or extends that date.

SEC. 13. Section 2924.10 is added to the Civil Code, to read:

 

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SB 900 22

 


2924.10. (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 borrowers first lien loan modification

 

application.

 

(b) For purposes of this section, a borrowers first lien loan


modification application shall be deemed to be completewhen

 

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 entities described in

subdivision (b) of Section 2924.18.

(d) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(e) This section shall remain in effect only until January 1,

2018, and as of that date is repealed, unless a later enacted statute,

that is enacted before January 1, 2018, deletes or extends that date.

SEC. 14. Section 2924.11 is added to the Civil Code, to read:

2924.11. (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.

 

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23 SB 900

(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 trustees 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 trustees

 

sale, if applicable, upon the borrower executing a permanent

foreclosure prevention alternative. In the case of a short sale, the

 

rescission or cancellation of the pending trustees 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

 

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SB 900 24

 


the servicing of that borrowers 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 entities described in

subdivision (b) of Section 2924.18.

(j) This section shall remain in effect only until January 1, 2018,

and as of that date is repealed, unless a later enacted statute, that

is enacted before January 1, 2018, deletes or extends that date.

SEC. 15. Section 2924.11 is added to the Civil Code, to read:

2924.11. (a) If a borrower submits a complete application for

a foreclosure prevention alternative offered by, or through, the

 

borrowers mortgage servicer, a mortgage servicer, trustee,


mortgagee, beneficiary, or authorized agent shall not record a


notice of sale or conduct a trustees sale while the complete

 

foreclosure prevention alternative application is pending, and until

the borrower has been provided with a written determination by

 

the mortgage servicer regarding that borrowers eligibility for the

 

requested foreclosure prevention alternative.

 

(b) Following the denial of a first lien loan modification

 

application, the mortgage servicer shall send a written notice to

 

the borrower identifying with specificity the reasons for the denial

 

and shall include a statement that the borrower may obtain

additional documentation supporting the denial decision upon

written request to the mortgage servicer.

(c) 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.

 

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25 SB 900

(d) 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 trustees 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.

 

(e) This section applies only to mortgages or deeds of trust as

described in Section 2924.15.

(f) For purposes of this section, an application shall be deemed


completewhen a borrower has supplied the mortgage servicer

 

with all documents required by the mortgage servicer within the

 

reasonable timeframes specified by the mortgage servicer.

 

(g) This section shall become operative on January 1, 2018.

SEC. 16. Section 2924.12 is added to the Civil Code, to read:

 

2924.12. (a) (1) If a trustees 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 trustees 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 trustees 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 trustees deed upon sale.


If the court finds that the material violation was intentional or

 

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SB 900 26

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 a trustees deed

 

upon sale, or that has been corrected and remedied by third parties

 

working on its behalf prior to the recordation of a trustees 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 Corporations, Department of Financial Institutions,

or Department of Real Estate shall be deemed to be a violation of

 

that persons 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) A signatory to a consent judgment entered in the case entitled

United States of America et al. v. Bank of America Corporation

 

et al., filed in the United States District Court for the District of

 

Columbia, case number 1:12-cv-00361 RMC, that is in compliance

with the relevant terms of the Settlement Term Sheet of that

consent judgment with respect to the borrower who brought an

action pursuant to this section while the consent judgment is in

effect shall have no liability for a violation of Section 2923.55,

2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17.

(h) 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.

(i) A court may award a prevailing borrower reasonable

 

attorneys fees and costs in an action brought pursuant to this

 

section. A borrower shall be deemed to have prevailed for purposes

 

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27 SB 900

of this subdivision if the borrower obtained injunctive relief or

was awarded damages pursuant to this section.

(j) This section shall not apply to entities described in

subdivision (b) of Section 2924.18.

(k) This section shall remain in effect only until January 1,

2018, and as of that date is repealed, unless a later enacted statute,

that is enacted before January 1, 2018, deletes or extends that date.

SEC. 17. Section 2924.12 is added to the Civil Code, to read:

 

2924.12. (a) (1) If a trustees deed upon sale has not been

 

recorded, a borrower may bring an action for injunctive relief to

enjoin a material violation of Section 2923.5, 2923.7, 2924.11, or

2924.17.

 

(2) Any injunction shall remain in place and any trustees 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 trustees 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 2923.5, 2923.7, 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 trustees 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 trustees

 

deed upon sale, or that has been corrected and remedied by third

 

parties working on its behalf prior to the recordation of the trustees

 

deed upon sale.

(d) A violation of Section 2923.5, 2923.7, 2924.11, or 2924.17

by a person licensed by the Department of Corporations,

 

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SB 900 28

Department of Financial Institutions, or Department of Real Estate

 

shall be deemed to be a violation of that persons 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 2923.5, 2923.7, 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

 

attorneys 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 become operative on January 1, 2018.

SEC. 18. 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-occupiedmeans

 

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 remain in effect only until January 1,

2018, and as of that date is repealed, unless a later enacted statute,

that is enacted before January 1, 2018, deletes or extends that date.

SEC. 19. Section 2924.15 is added to the Civil Code, to read:

2924.15. (a) Unless otherwise provided, Sections 2923.5,

 

2923.7, and 2924.11 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-occupiedmeans that the property is the principal

 

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29 SB 900

residence of the borrower and is security for a loan made for

personal, family, or household purposes.

(b) This section shall become operative on January 1, 2018.

SEC. 20. Section 2924.17 is added to the Civil Code, to read:

2924.17. (a) A declaration recorded pursuant to Section 2923.5

or, until January 1, 2018, pursuant to Section 2923.55, a notice of

default, notice of sale, assignment of a deed of trust, or substitution

of trustee recorded by or on behalf of a mortgage servicer in

connection with a foreclosure subject to the requirements of Section

 

2924, or a declaration or affidavit filed in any court relative to a

 

foreclosure proceeding shall be accurate and complete and

supported by competent and reliable evidence.

 

(b) Before recording or filing any of the documents described

 

in subdivision (a), a mortgage servicer shall ensure that it has

reviewed competent and reliable evidence to substantiate the

 

borrowers default and the right to foreclose, including the


borrowers loan status and loan information.

 

(c) Until January 1, 2018, any mortgage servicer that engages

in multiple and repeated uncorrected violations of subdivision (b)

 

in recording documents or filing documents in any court relative

 

to a foreclosure proceeding shall be liable for a civil penalty of up

 

to seven thousand five hundred dollars ($7,500) per mortgage or


deed of trust in an action brought by a government entity identified

 

in Section 17204 of the Business and Professions Code, or in an

administrative proceeding brought by the Department of

Corporations, the Department of Real Estate, or the Department

of Financial Institutions against a respective licensee, in addition

to any other remedies available to these entities. This subdivision

shall be inoperative on January 1, 2018.

SEC. 21. Section 2924.18 is added to the Civil Code, to read:

2924.18. (a) (1) If a borrower submits a complete application

 

for a first lien loan modification offered by, or through, the


borrowers mortgage servicer, a mortgage servicer, trustee,


mortgagee, beneficiary, or authorized agent shall not record a


notice of default, notice of sale, or conduct a trustees 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 borrowers


eligibility for the requested loan modification.

 

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SB 900 30

(2) If a foreclosure prevention alternative has been 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:

(A) The borrower is in compliance with the terms of a written

 

trial or permanent loan modification, forbearance, or repayment

 

plan.

(B) 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.

 

(3) 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 trustees sale under either of the

 

following circumstances:

(A) The borrower is in compliance with the terms of a written

 

trial or permanent loan modification, forbearance, or repayment

 

plan.

(B) 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) This section shall apply only to a depository institution

chartered under state or federal law, a person licensed pursuant to

Division 9 (commencing with Section 22000) or Division 20

(commencing with Section 50000) of the Financial Code, or a

person licensed pursuant to Part 1 (commencing with Section

10000) of Division 4 of the Business and Professions Code, that,

during its immediately preceding annual reporting period, as

established with its primary regulator, foreclosed on 175 or fewer

residential real properties, containing no more than four dwelling

units, that are located in California.

(c) Within three months after the close of any calendar year or

annual reporting period as established with its primary regulator

during which an entity or person described in subdivision (b)

 

exceeds the threshold of 175 specified in subdivision (b), that entity

 

shall notify its primary regulator, in a manner acceptable to its

primary regulator, and any mortgagor or trustor who is delinquent

 

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31 SB 900

on a residential mortgage loan serviced by that entity of the date

on which that entity will be subject to Sections 2923.55, 2923.6,

2923.7, 2924.9, 2924.10, 2924.11, and 2924.12, which date shall

 

be the first day of the first month that is six months after the close

 

of the calendar year or annual reporting period during which that

entity exceeded the threshold.

(d) For purposes of this section, an application shall be deemed


completewhen a borrower has supplied the mortgage servicer

 

with all documents required by the mortgage servicer within the

 

reasonable timeframes specified by the mortgage servicer.


(e) If a borrower has been approved in writing for a first lien


loan modification or other foreclosure prevention alternative, and


the servicing of the borrowers 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.

(f) This section shall apply only to mortgages or deeds of trust

described in Section 2924.15.

(g) This section shall remain in effect only until January 1,

2018, and as of that date is repealed, unless a later enacted statute,

that is enacted before January 1, 2018, deletes or extends that date.

SEC. 22. Section 2924.19 is added to the Civil Code, to read:

 

2924.19. (a) (1) If a trustees deed upon sale has not been

 

recorded, a borrower may bring an action for injunctive relief to

enjoin a material violation of Section 2923.5, 2924.17, or 2924.18.

 

(2) Any injunction shall remain in place and any trustees sale

 

shall be enjoined until the court determines that the mortgage

 

servicer, mortgagee, 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 trustees deed upon sale has been recorded, a


mortgage servicer, mortgagee, 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

2923.5, 2924.17, or 2924.18 by that mortgage servicer, mortgagee,

 

beneficiary, or authorized agent where the violation was not


corrected and remedied prior to the recordation of the trustees

 

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SB 900 32

 


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, 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, beneficiary, or authorized

 

agent shall not be liable for any violation that it has corrected and

 

remedied prior to the recordation of the trustees deed upon sale,

 

or that has been corrected and remedied by third parties working

 

on its behalf prior to the recordation of the trustees deed upon

 

sale.

(d) A violation of Section 2923.5, 2924.17, or 2917.18 by a

person licensed by the Department of Corporations, the Department

of Financial Institutions, or the Department of Real Estate shall

 

be deemed to be a violation of that persons 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 2923.5, 2924.17 or 2924.18,

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

 

attorneys 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

damages pursuant to this section.

(i) This section shall apply only to entities described in

subdivision (b) of Section 2924.18.

(j) This section shall remain in effect only until January 1, 2018,

and as of that date is repealed, unless a later enacted statute, that

is enacted before January 1, 2018, deletes or extends that date.

SEC. 23. Section 2924.20 is added to the Civil Code, to read:

2924.20. Consistent with their general regulatory authority,

and notwithstanding subdivisions (b) and (c) of Section 2924.18,

 

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33 SB 900

the Department of Corporations, the Department of Financial

Institutions, and the Department of Real Estate may adopt

regulations applicable to any entity or person under their respective

jurisdictions that are necessary to carry out the purposes of the act

that added this section. A violation of the regulations adopted

pursuant to this section shall only be enforceable by the regulatory

agency.

SEC. 24. The provisions of this act are severable. If any

provision of this act or its application is held invalid, that invalidity

shall not affect other provisions or applications that can be given

effect without the invalid provision or application.

SEC. 25. No reimbursement is required by this act pursuant to

Section 6 of Article XIIIB of the California Constitution because

the only costs that may be incurred by a local agency or school

district will be incurred because this act creates a new crime or

infraction, eliminates a crime or infraction, or changes the penalty

for a crime or infraction, within the meaning of Section 17556 of

 

the Government Code, or changes the definition of a crime within

 

the meaning of Section 6 of Article XIII B of the California

Constitution.

 

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SB 900 34

 

 

 

 

 

 

 

 

 

 

 

 

 

Approved , 2012

 

Governor

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