Bill Text: CA AB407 | 2011-2012 | Regular Session | Introduced

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

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Bill Title: Mortgages: recording certificates of discharge:

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2012-02-01 - Died pursuant to Art. IV, Sec. 10(c) of the Constitution. From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB407 Detail]

Download: California-2011-AB407-Introduced.html

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BILL NUMBER: AB 407	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Davis

                        FEBRUARY 14, 2011

   An act to amend Section 10242.6 of the Business and Professions
Code, and to amend Section 2954.9 of the Civil Code, relating to
mortgages.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 407, as introduced, Davis. Mortgages: prepayment penalties.
   Existing law limits the circumstances under which a prepayment
charge can be imposed with respect to loans secured by a mortgage or
deed of trust on real property improved with one to 4 dwelling units.

   This bill would, instead, prohibit the imposition of prepayment
charges for these loans.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


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

  SECTION 1.  Section 10242.6 of the Business and Professions Code is
amended to read:
   10242.6.  (a) The principal and accrued interest on any loan
secured by a mortgage or deed of trust on real property containing
only a single-family, owner-occupied dwelling may be prepaid in whole
or in part at any time  but only a prepayment made within
seven years of the date of execution of such mortgage or deed of
trust may be subject to a prepayment charge and then solely as herein
set forth. An amount not exceeding 20 percent of the unpaid balance
may be prepaid in any 12-month period. A prepayment charge may be
imposed on any amount prepaid in any 12-month period in excess of 20
percent of the unpaid balance which charge shall not exceed an amount
equal to the payment of six months' advance interest on the amount
prepaid in excess of 20 percent of the unpaid balance  
without a prepayment charge  . 
   (b) Notwithstanding subdivision (a), there shall be no prepayment
penalty charged to a borrower under a loan subject to this section if
the dwelling securing the loan has been damaged to such an extent by
a natural disaster for which a state of emergency is declared by the
Governor, pursuant to Chapter 7 (commencing with Section 8550) of
Division 1 of Title 2 of the Government Code, that the dwelling
cannot be occupied and the prepayment is causally related thereto.
 
   (c) 
    (b)  As used in this section, "owner-occupied dwelling"
means a dwelling which will be owned and occupied by a signatory to
the mortgage or deed of trust secured by the dwelling within 90 days
of the execution of the mortgage or deed of trust.
  SEC. 2.  Section 2954.9 of the Civil Code is amended to read:
   2954.9.   (a)     (1)
    Except as otherwise provided by
statute, where   Where  the original principal
obligation is a loan for residential property of four units or less,
the borrower under any note or evidence of indebtedness secured by a
deed of trust or mortgage or any other lien on real property shall be
entitled to prepay the whole or any part of the balance due,
together with accrued interest, at any time  without a prepayment
charge  . 
   (2) Nothing in this subdivision shall prevent a borrower from
obligating himself, by an agreement in writing, to pay a prepayment
charge.  
   (3) This subdivision does not apply during any calendar year to a
bona fide loan secured by a deed of trust or mortgage given back
during such calendar year to the seller by the purchaser on account
of the purchase price if the seller does not take back four or more
such deeds of trust or mortgages during such calendar year. Nothing
in this subdivision shall be construed to prohibit a borrower from
making a prepayment by an agreement in writing with the lender.
 
   (b) Except as otherwise provided in Section 10242.6 of the
Business and Professions Code, the principal and accrued interest on
any loan secured by a mortgage or deed of trust on owner-occupied
residential real property containing only four units or less may be
prepaid in whole or in part at any time but only a prepayment made
within five years of the date of execution of such mortgage or deed
of trust may be subject to a prepayment charge and then solely as
herein set forth. An amount not exceeding 20 percent of the original
principal amount may be prepaid in any 12-month period without
penalty. A prepayment charge may be imposed on any amount prepaid in
any 12-month period in excess of 20 percent of the original principal
amount of the loan which charge shall not exceed an amount equal to
the payment of six months' advance interest on the amount prepaid in
excess of 20 percent of the original principal amount. 

   (c) Notwithstanding subdivisions (a) and (b), there shall be no
prepayment penalty charged to a borrower under a loan subject to this
section if the residential structure securing the loan has been
damaged to such an extent by a natural disaster for which a state of
emergency is declared by the Governor, pursuant to Chapter 7
(commencing with Section 8550) of Division 1 of Title 2 of the
Government Code, that the residential structure cannot be occupied
and the prepayment is causally related thereto.