Bill Text: CA SB1275 | 2009-2010 | Regular Session | Amended
Bill Title: Mortgages: foreclosures.
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Engrossed - Dead) 2010-08-30 - Reconsideration granted. (Ayes 47. Noes. 29. Page 6841.) Read third time. Refused passage. (Ayes 30. Noes 36. Page 6873.) From Assembly without further action. [SB1275 Detail]
Download: California-2009-SB1275-Amended.html
BILL NUMBER: SB 1275 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 16, 2010
AMENDED IN ASSEMBLY AUGUST 2, 2010
AMENDED IN ASSEMBLY JUNE 23, 2010
AMENDED IN ASSEMBLY JUNE 10, 2010
AMENDED IN SENATE MAY 27, 2010
AMENDED IN SENATE MAY 18, 2010
AMENDED IN SENATE APRIL 28, 2010
AMENDED IN SENATE APRIL 8, 2010
INTRODUCED BY Senators Leno and Steinberg
(Principal coauthor: Senator Cedillo)
(Principal coauthor: Assembly Member Caballero)
( Coauthors: Assembly Members
Brownley, Nava, and Skinner )
FEBRUARY 19, 2010
An act to amend Section 2923.5 of, and to add and repeal Sections
2923.4, 2923.7, 2923.73, 2923.75, and 2923.77 of, the Civil Code,
relating to mortgages.
LEGISLATIVE COUNSEL'S DIGEST
SB 1275, as amended, Leno. Mortgages: foreclosures.
Existing law, until January 1, 2013, and as applied to mortgages
and deeds of trust recorded between January 1, 2003, and December 31,
2007, that are secured by owner-occupied residential real property
containing no more than 4 dwelling units, requires a mortgagee,
trustee, beneficiary, or authorized agent to contact the borrower, as
defined, prior to filing a notice of default, in order to assess the
borrower's financial situation and explore options for the borrower
to avoid foreclosure. Existing law requires the notice of default to
include a specified declaration from the mortgagee, beneficiary, or
authorized agent regarding its contact with the borrower.
This bill would, until January 1, 2013, extend those requirements
for those types of dwellings to apply to mortgages or deeds of trust
recorded prior to January 1, 2009, if the loans are required to be
reviewed under federal Home Affordable Modification Program (HAMP)
guidelines, or between January 1, 2003, and January 1, 2009, if the
loans are not required to be reviewed under HAMP guidelines. The bill
would require a mortgagee, beneficiary, or authorized agent, within
a specified time period prior to the filing of a notice of default,
to provide the borrower with written information regarding loan
modifications and a specified notice regarding the borrower's rights
during the foreclosure process, subject to specified exceptions. The
bill would require an unspecified state entity to make that notice
available in English and specified languages. The bill would further
revise the borrower contact requirements described above by requiring
a mortgagee, beneficiary, or authorized agent to make reasonable
borrower solicitation efforts, as specified, to explore options for
the borrower to avoid foreclosure. The bill would prohibit a
mortgagee, trustee, beneficiary, or authorized agent from filing a
notice of default until the borrower has been evaluated and
determined to be ineligible for a loan modification or the borrower
has failed to submit an application prior to the passing of the
deadline. The bill would specify minimum time periods in which the
borrower may submit an application or supplemental information for a
loan modification, and would require the mortgagee, beneficiary, or
authorized agent, if it denies the application, to send a denial
explanation letter within a specified time period. These requirements
would not apply to a mortgagee, beneficiary, or authorized agent
that has no loan modification option available to the borrower or to
a grandfathered party, as defined.
This bill would further require, until January 1, 2013, with
respect to those properties described above, that a mortgagee,
beneficiary, or authorized agent, concurrently with the filing of a
notice of default, record a declaration of compliance that attests to
specified facts relating to its borrower solicitation and
foreclosure avoidance efforts, except as provided. The bill would
provide that failure to record a
declaration of compliance, or failure to materially comply with
specified provisions, would constitute grounds for
the authorize the borrower to bring an action
, within one year of the trustee sale ,
to void the foreclosure , or
request an injunction if, among other things, the mortgagee,
beneficiary, or authorized agent records a notice of default without
completing reasonable borrower solicitation efforts , or to
recover specified damages from if the
mortgagee, trustee, beneficiary, or authorized agent fails to
record a declaration of compliance or materially comply with
specified provisions , if specified conditions exist. The bill
would provide that a mortgagee, trustee, beneficiary, or authorized
agent shall have no civil liability if it satisfies specified
requirements prior to the initiation of legal action by the borrower.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares that
this bill is not intended to establish a substantive right to a loan
modification.
SECTION 1. SEC. 2. Section 2923.4 is
added to the Civil Code, to read:
2923.4. (a) A state government entity shall create the
following notice in at least 12-point type and make it available in
English a notice containing the following text in at
least 12-point type and shall make it available in electronic format
on its official Internet Web site in English and the languages
set forth in subdivision (b) of Section 1632:
"Important Notice Regarding Your Rights and Foreclosure Avoidance
Options: California law requires that you receive this notice of your
legal rights before the foreclosure process begins.
ARE YOU HAVING TROUBLE PAYING YOUR MORTGAGE?
If you are having trouble paying your mortgage, you should contact
your loan servicer as soon as possible to discuss options for
avoiding foreclosure. Your loan servicer is the company listed on
your mortgage bills that collects your mortgage payments.
You may also call 1-800-569-4287 or 1-888-995-HOPE to
find a housing counseling agency certified by the United States
Department of Housing and Urban Development (HUD) that offers free
services in your area.
POTENTIAL FORECLOSURE AVOIDANCE OPTIONS
One potential option for avoiding foreclosure is a loan
modification. Your loan servicer may be participating in the federal
loan modification program called the Home Affordable Modification
Program (HAMP), which has specific requirements and guidelines. To
see if your loan servicer is participating, or to find out more about
this program, visit
http://www.makinghomeaffordable.gov/contact_servicer.html.
Your loan servicer may, but is not required to, offer other
non-HAMP types of loan modifications instead of or in
addition to HAMP . However, not all loan servicers offer
loan modifications, and not all borrowers are eligible to apply for a
loan modification. You may also qualify
instead for other options for avoiding foreclosure,
such as loan refinancing, a temporary forbearance, a repayment plan,
short sale, or a deed in lieu of foreclosure. for other
options, such as refinancing, a repayment plan, or a short sale.
With this notice, you should have received a letter from your loan
servicer that describes any options for avoiding foreclosure
that may be available to you. That letter should describe
any types of loan modifications that you may be eligible to apply
for, and list the steps you must take to apply. that
may be available to you.
If the letter from your loan servicer indicates that you may be
eligible to apply for a loan modification and you are
interested in applying want to apply , you must
submit the required documentation to your loan servicer as soon as
possible. Your loan servicer must give you at least 45 days from the
date you received this notice to submit the required
documentation apply . Be sure to read and
carefully review any communication letters
from your loan servicer, and submit all of the documentation
and information required by the deadlines indicated in the
loan servicer's communications those letters .
If you submit all of the required documentation and information by
the specified deadlines, your loan servicer must review your
application and inform you of its decision before initiating the
foreclosure process.
If your loan servicer denies your request for a loan modification,
it must send you a detailed letter that explains the reason
for the denial and provides denial explanation letter
and provide you with contact information for the loan servicer
if you need more information or want to dispute the denial.
THE FORECLOSURE PROCESS
If your loan servicer complies with the contact and notice
requirements described in Sections 2923.5 and 2923.73 of the Civil
Code, including sending you a denial explanation letter if you are
eligible to apply for a loan modification and submit a timely loan
modification application, it may proceed with the foreclosure
If you are not eligible to apply for a loan modification, if
you do not apply by the specified deadline, or if you apply by the
deadline but your loan servicer denies your application and sends you
a denial explanation letter, the loan servicer may start the
foreclosure process. Your loan servicer may not foreclose on
your home without filing recording
official documents with the county recorder. You are entitled to
receive copies of those documents.
Notice of Default:
The first step in the foreclosure process is the filing of a
notice of default. If your loan servicer records a notice of default
on your loan, it must mail you a copy of that notice by certified
mail and
To start the foreclosure process, your loan servicer must
record a notice of default. After recording the notice, your loan
servicer has to mail you a copy of that notice by certified mail and
then must wait at least three months before taking further
steps to sell your home.
Notice of Sale:
Three months after filing recording
the notice of default, your loan servicer may file
record a notice of sale that sets out the date, time, and
place of the scheduled foreclosure sale. Your loan servicer must
post the notice of sale on your property, mail you a copy of the
notice by certified mail, and wait at least 20 days before selling
your home. Your The notice of sale will
include the contact information of the person or company to call if
you want more information about your sale date. You should make note
of that contact information and be sure to check for any changes to
the sale date.
Please seek legal help if you believe that you have been denied
your legal foreclosure rights. Keep in mind, though, that it is
illegal for any person, including a lawyer, to charge you any
up-front fees for helping you with a loan modification
or other effort to avoid foreclosure before providing the services
promised." try to get a loan modification or try to
delay or avoid foreclosure."
(b) The English and translated forms
versions of this notice shall be made available in
electronic format on the government entity's official Internet Web
site on or before January 31, 2011.
(c)This section shall remain in effect only until January 1, 2013,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2013, deletes or extends that date.
SEC. 2. SEC. 3. Section 2923.5 of
the Civil Code is amended to read:
2923.5. (a) A mortgagee, trustee, beneficiary, or authorized
agent may not file a notice of default pursuant to Section 2924 until
the applicable requirements of this section and Sections 2923.7 and
2923.73 have been satisfied.
(b) For all mortgage loans subject to this section , a
notice of default may not be filed until a borrower either applies
for a loan modification and has been evaluated and denied for a loan
modification based on the requirements and guidelines used by the
mortgagee, beneficiary, or authorized agent, or reasonable borrower
solicitation efforts have been completed and the borrower's deadline
for submitting a loan modification application has passed without the
borrower applying for a loan modification. If a mortgagee,
beneficiary, or authorized agent has no loan modification option
available to a given borrower, a notice of default may be filed 30
days after reasonable borrower solicitation efforts regarding any
other foreclosure avoidance options available to that borrower have
been completed.
(c) For purposes of this section, reasonable borrower solicitation
efforts shall consist of all of the following:
(1) After a loan becomes 16 days delinquent,
but not later than 10 days after the loan becomes 60 days delinquent,
a mortgagee, beneficiary, or authorized agent shall send the
borrower a written communication, by certified mail with return
receipt requested, containing or any other
means of delivery that includes a return receipt, that contains
both of the following:
(A) A copy of the informational notice described in Section 2923.4
in English or, if communications with the borrower have been
primarily in one of the languages set forth in subdivision (b) of
Section 1632, then in that language . A mortgagee, beneficiary,
or authorized agent shall be subject to the requirements of this
subparagraph 30 days following the availability of the English and
translated forms versions of the
notice, but in no event earlier than January 1, 2011.
(B) A letter that includes the following information, as
applicable:
(i) A clear description of the loan modification options available
to the borrower, if any, and a list of the steps the borrower must
take to apply for a loan modification, if the borrower is eligible to
be considered for a loan modification by the mortgagee, beneficiary,
or authorized agent.
(ii) A statement that no loan modification option is available to
the borrower, if the mortgagee, beneficiary, or authorized agent does
not offer any loan modification programs or if the borrower is not
eligible to be considered for a loan modification.
(i) A list of the foreclosure avoidance options available to the
borrower, if any.
(ii) If the borrower is eligible to be considered for a loan
modification by the mortgagee, beneficiary, or authorized agent, a
list of the steps the borrower is required to take to apply for a
loan modification.
(iii) If the mortgagee, beneficiary, or authorized agent does not
offer any loan modifications or if the borrower is not eligible to be
considered for a loan modification, a statement that no loan
modification option is available to the borrower.
(iii)
(iv) A toll-free telephone number that will provide
access to a live representative during business hours for borrowers
who wish to discuss options for avoiding foreclosure with their
mortgagee, beneficiary, or authorized agent.
(iv)
(v) The Internet Web site address, if any, of the
mortgagee, beneficiary, or authorized agent, where a borrower may
obtain the information described in paragraph (5).
(2) (A) A mortgagee, beneficiary, or authorized agent shall
contact the borrower in person or by telephone in order to assess the
borrower's financial situation and explore options for the borrower
to avoid foreclosure. The mortgagee, beneficiary, or authorized agent
shall attempt to make this contact, at a minimum, by calling the
borrower by telephone at the last known telephone number of record at
least three times , with each call made at different
hours and on different days. These efforts shall be completed no
later than 15 calendar days after the date that
the mortgagee, beneficiary, or authorized agent sends the
informational notice and letter required by paragraph (1)
are sent to the borrower . This in-person or
telephone communication shall be clearly identified as an attempt to
initiate discussion with the borrower about foreclosure avoidance
options, and may not include a demand for immediate payment of any
past due amounts owed by the borrower. During the initial contact,
the mortgagee, beneficiary, or authorized agent shall advise the
borrower that he or she has the right to request a subsequent meeting
and, if requested, the mortgagee, beneficiary, or authorized agent
shall schedule the meeting to occur within 14 days. The assessment of
the borrower's financial situation and discussion of options may
occur during the first contact, or at the subsequent meeting
scheduled for that purpose. In either case, the borrower shall be
provided the toll-free telephone number made available by the United
States Department of Housing and Urban Development (HUD) to find a
HUD-certified housing counseling agency. Any meeting may occur
telephonically.
(B) A mortgagee, beneficiary, or authorized agent 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 mortgagee, trustee,
beneficiary, or authorized agent.
(C) A mortgagee, beneficiary, or authorized agent satisfies the
telephone contact requirements of this paragraph if it determines,
after attempting contact pursuant to this paragraph, that the
borrower's telephone numbers on file, if any, have been disconnected.
(3) If contact has not been made with the borrower within two
weeks after the in-person or telephone contact requirements of
paragraph (2) have been satisfied, the mortgagee, beneficiary, or
authorized agent shall then send a certified letter, with return
receipt requested, that includes, at a minimum, the information set
forth in subparagraph (B) of paragraph (1) of subdivision (c).
(4) The mortgagee, beneficiary, or authorized agent 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 mortgagee, beneficiary, or authorized agent shall post a
prominent link on the homepage of its Internet Web site, if any, to
all of the following:
(A) Information about any available options for avoiding
foreclosure.
(B) A list of financial documents borrowers should collect and be
prepared to present to the mortgagee, beneficiary, or authorized
agent when discussing options for avoiding foreclosure.
(C) Contact information for borrowers who wish to discuss options
for avoiding foreclosure with their mortgagee, beneficiary, or
authorized agent.
(D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
(d) If the mortgagee, beneficiary, or authorized agent is
participating in the federal Home Affordable Modification Program
(HAMP) or is otherwise required to review the borrower's loan under
HAMP guidelines, compliance with the borrower solicitation
requirements set forth in the applicable HAMP guidelines shall
satisfy the reasonable borrower solicitation efforts requirement set
forth in this section as long as the mortgagee, beneficiary, or
authorized agent provides the borrower with the written communication
required by paragraph (1) of subdivision (c) as part of, or in
addition to, the solicitation efforts conducted pursuant to the
applicable HAMP guidelines.
(e) If the loan at issue is not required to be reviewed under HAMP
guidelines, and the mortgagee, trustee, beneficiary, or authorized
agent had already filed a notice of default prior to January 1, 2011,
and did not subsequently file a notice of rescission, then the
mortgagee, trustee, beneficiary, or authorized agent shall include as
part of the notice of sale filed pursuant to Section 2924f a
declaration that the mortgagee, beneficiary, or authorized agent sent
a denial explanation letter to the borrower that includes the
information set forth in paragraph (2) of subdivision (a) of Section
2923.73 at least 30 calendar days before filing the notice of sale,
only if both of the following conditions are met:
(1) The mortgagee, beneficiary, or authorized agent has an
existing loan modification program or a borrower is otherwise
(1) The borrower is eligible to
be considered for a loan modification by the mortgagee, beneficiary,
or authorized agent.
(2) The borrower applied for a loan modification in
accordance with the mortgagee, beneficiary, or authorized agent's
applicable procedures no later than 30 calendar days after
receiving the notice of default.
(f) A mortgagee's, beneficiary's, or authorized agent's loss
mitigation personnel may participate by telephone during any contact
required by this section.
(g) For purposes of this section, a "borrower" shall include a
mortgagor or trustor.
(h) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other advisor
to discuss with the mortgagee, beneficiary, or authorized agent, on
the borrower's 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
subdivision (c). Any loan modification or other foreclosure avoidance
option offered by the mortgagee, beneficiary, or authorized agent is
subject to approval by the borrower.
(i) (1) Subdivisions (a) and (b) shall not apply if any of the
following occurs:
(A) The borrower has surrendered the 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) The borrower 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) A case has been filed by the borrower 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. This shall not
preclude a mortgagee, trustee, beneficiary, or authorized agent from
soliciting or considering a borrower who is in bankruptcy for a loan
modification, whether under the requirements of HAMP, or under its
own proprietary loan modification program.
(2) Nothing in this subdivision shall be construed to diminish in
any way the obligations of a mortgagee, trustee, beneficiary, or
authorized agent that is participating in HAMP or is otherwise
required to review a loan under HAMP guidelines.
(j) This section shall apply only to mortgages or deeds of trust
that are secured by owner-occupied residential real property
containing no more than four dwelling units. For purposes of this
subdivision, "owner-occupied" means that the residence is the
principal residence of the borrower as indicated to the lender in
loan documents.
(1) With respect to loans required to be reviewed under HAMP
guidelines, this section shall apply only to mortgages or deeds of
trust recorded prior to January 1, 2009.
(2) With respect to loans not required to be reviewed under HAMP
guidelines, this section shall apply only to mortgages or deeds of
trust recorded between January 1, 2003, and January 1, 2009.
(k) This section shall not apply to a grandfathered party, as
defined in Section 2923.77.
(l) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 3. SEC. 4. Section 2923.7 is
added to the Civil Code, to read:
2923.7. (a) (1) In order to initiate the foreclosure process, a
mortgage servicer shall do both of the following:
(A) For purposes of completing the declaration of compliance
described in paragraph (2), compile in one place a record
demonstrating that the reasonable borrower solicitation efforts
required by Section 2923.5 have been met
completed . This record shall include the dates and times of,
and addresses and telephone numbers used for, the contact or
attempted contact required by Section 2923.5. The record shall be
made available to the borrower within 10 business days if requested
in writing after the a notice of
default has been filed.
(B) Transmit to the foreclosure trustee or authorized agent a
declaration of compliance that is signed on behalf of the mortgage
servicer. The declaration shall be signed either by an individual
having personal knowledge of the facts stated within, or by an
individual with authority to bind the mortgage servicer, who
certifies that the declaration is based upon records that were made
in the regular course of the servicer's business at or near the time
of the events recorded. The declaration of compliance shall be
included as part of, or attached to, every notice of default filed
pursuant to Section 2924. A notice of default that does not include a
declaration of compliance shall not be recorded.
(2) The declaration of compliance shall be substantially similar
to the following form:
DECLARATION OF COMPLIANCE
I. BORROWER CONTACT SOLICITATION EFFORTS
A. /-/ This loan is not subject to Cal. Civil Code Sec. 2923.5,
pursuant to (check all that apply):
( ) Cal. Civil Code Sec. 2923.5(i).
( ) Cal. Civil Code Sec. 2923.5(j).
If item (I)(A) is checked, no further information regarding borrower
solicitation efforts is required. If item (I)(A) is not checked,
complete item (I)(B).
B. /-/ This loan is subject to Cal. Civil Code Sec. 2923.5, and the
mortgagee, beneficiary, or authorized agent has complied with the
requirements of Cal. Civil Code Sec. 2923.5 by satisfying the
applicable reasonable borrower solicitation efforts described in Cal.
Civil Code Sec. 2923.5(c). If checked, insert the date that the
reasonable borrower solicitation efforts were completed here: ____
II. FORECLOSURE AVOIDANCE REVIEW
A. /-/ This loan is not subject to Cal. Civil Code Sec. 2923.73,
pursuant to (check all that apply):
( ) Cal. Civil Code Sec. 2923.73(e).
( ) Cal. Civil Code Sec. 2923.73(f).
( ) Cal. Civil Code Sec. 2923.73(g).
If item (II)(A) is checked, no further information regarding
borrower solicitation efforts is required. If item (II)(A) is not
checked, complete item (II)(B).
B. /-/ This loan is subject to Cal. Civil Code Sec. 2923.73 and
(check only one):
( ) The borrower was evaluated for a loan
modification but did not qualify, and the
mortgagee, beneficiary, or authorized agent
sent the borrower a denial explanation letter
in compliance with the requirements of Cal.
Civil Code Sec. 2923.73(a)(2).
( ) The borrower initiated an application for a
loan modification either verbally or in writing
( ) The b ut orrower did
not submit all required
written
written application materials by the applicable
deadline, and the mortgagee, beneficiary, or
authorized agent sent the borrower a denial
explanation letter in compliance with the
requirements of Cal. Civil Code Sec.
2923.73(a)(1).
( ) The borrower did not initiate an
application for a loan modification ei by
the r
verbally or in writing by the applicable
deadline.
deadline.
( ) The borrower was offered a HAMP trial
period plan, but the borrower did not accept
the trial
the trial period plan or failed to comply with
the terms of the plan.
period plan or did not complete the plan.
( ) The borrower was offered a permanent loan
modification, but the borrower did not accept
the modification offered.
( ) The borrower was offered and accepted a
permanent loan modification, but the borrower
permanent loan modification, but did not comply
failed to comply with the terms of the
modification.
modification.
( ) The borrower communicated to the mortgagee,
beneficiary, or authorized agent that he or she
is not interested in pursuing a loan
does not intend to apply for a loan
modification.
(b) This section shall apply only to mortgages or deeds of trust
recorded prior to January 1, 2009, that are
secured by owner-occupied residential real property containing no
more than four dwelling units. For purposes of this subdivision,
"owner-occupied" means that the residence is the principal residence
of the borrower as indicated to the lender in the loan documents.
(c) This section shall not apply to a grandfathered party, as
defined in Section 2923.77.
(d) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 4. SEC. 5. Section 2923.73 is
added to the Civil Code, to read:
2923.73. (a) If a borrower initiates an application for a loan
modification either verbally or in writing
according to the procedures of the mortgagee, beneficiary, or
authorized agent , and the mortgagee, beneficiary, or
authorized agent denies either a permanent loan modification or a
federal Home Affordable Modification Program (HAMP) trial period
plan, the mortgagee, beneficiary, or authorized agent shall send the
borrower by certified mail no later than 10 business days following
the denial decision a denial explanation letter that clearly
explains states the reason or reasons for the
denial.
(1) If the loan modification is denied because the borrower failed
to provide all required verification documents or information by the
applicable deadline as set forth in subdivision (b), the letter
shall indicate the date by which the borrower was directed to
provide the documents or information were to be
provided , list the documents or information that were not
provided, and state that the borrower's request for a loan
modification has been denied for this reason.
(2) If the borrower submitted all required written application
materials for a loan modification by the applicable deadline as set
forth in subdivision (b), and the application is denied, the denial
explanation letter shall include all of the following information in
English or, if communications with the borrower have been primarily
in one of the languages set forth in subdivision (b) of Section 1632,
then in that language:
(A) The date the mortgagee, beneficiary, or authorized agent
received the last of all the materials it requires in order to
review complete its review of the
borrower's application for a loan modification.
(B) The date on which a decision was made regarding the borrower's
application.
(C) The final decision made by the mortgagee, beneficiary, or
authorized agent.
(B) The date
on which the mortgagee, beneficiary, or authorized agent made the
decision to deny the borrower's loan application.
(D)
(C) If the mortgagee, beneficiary, or authorized agent
was required to consider the borrower for a loan modification under
HAMP, the information required to be provided in the borrower notice
described in the federal Home Affordable Modification Guidelines
Supplemental Directive 09-08, issued November 3, 2009, and any
amendments thereto.
(E) Information explaining the reasons the borrower did not
qualify for a loan modification, including, but not limited to, the
following:
(i) If applicable, an explanation of any investor guidelines or
(D) The reason or reasons why the borrower did not qualify for a
loan modification, including, as applicable, any of the following:
(i) A description of any investor
guidelines or restrictions on loan modifications that resulted
in the denial decision.
(ii) If the denial decision is based on the borrower's income or
expenses, or on a debt-to-income ratio or net present value
calculation, any borrower income or expense figures, including, but
not limited to, property taxes and hazard insurance premiums, used in
determining the borrower's qualification for a loan modification.
expenses, the borrower income or expense figures used
to determine the borrower's qualification for a loan modification,
including, at a minimum, the borrower's monthly income, property
taxes, and hazard insurance premiums.
(iii) If applicable, a finding that the borrower was previously
offered a loan modification and failed to successfully make payments
under the terms of the modified loan.
(F) The name and contact information of the holder of the note for
the borrower's loan.
(G) A description of other foreclosure alternatives for which the
borrower may be eligible, if any, including, but not limited to,
other loan modification programs, short sale, or deed in lieu or
forbearance, and a list of the steps the borrower must take in order
to be considered for those options. If the servicer has already
approved the borrower for another foreclosure alternative,
information necessary to participate in or complete the alternative
should be included.
(H) Instructions regarding how to contact the mortgagee,
beneficiary, or authorized agent about the denial.
(b) (1) The mortgagee, beneficiary, or authorized agent shall
communicate to the borrower in each written contact
, whether oral or written, the borrower's deadline
for submitting an initial application for a loan modification, which
shall not be less than 45 days from the borrower's receipt of the
notice required by subparagraph (A) of paragraph (1) of subdivision
(c) of Section 2923.5.
(2) If a borrower submits an initial application
initiates an application for a loan modification by
the deadline described in subdivision (c) , but does not
include all the documentation or information the mortgagee,
beneficiary, or authorized agent needs
requires in order to consider the borrower for a loan
modification, the mortgagee, beneficiary, or authorized agent
must shall provide the borrower with a
written notice that clearly describes lists
any supplemental documentation or information needed
in order to consider the borrower for a loan modification,
information the borrower is required to submit and the
deadline for providing that documentation or information, which shall
not be less than 25 calendar days from the date the borrower
receives the notice.
(3) If the mortgagee, beneficiary, or authorized agent is
participating in HAMP or is otherwise required to review the borrower'
s loan under HAMP guidelines, compliance with applicable HAMP
guidelines regarding deadlines and timeframes for the borrower to
submit and complete a loan modification application shall satisfy the
requirements of this subdivision.
(c) If a borrower's request for a loan modification is denied, and
the mortgagee, beneficiary, or authorized agent sends a denial
explanation letter in compliance with subdivision (a), the mortgagee,
trustee, beneficiary, or authorized agent may proceed to record a
notice of default and declaration of compliance pursuant to Section
2923.7 even if the borrower initiates a dispute relating to the
denial and the dispute has not yet been resolved.
(d) This section shall not require a mortgagee, beneficiary, or
authorized agent to apply any standards in determining a borrower's
eligibility or qualification for a loan modification separate from
the standards and requirements of the loan modification program or
programs utilized by the mortgagee, beneficiary, or authorized agent,
and shall not require a mortgagee, beneficiary, or authorized agent
to offer or provide a borrower with a loan modification if that
borrower does not qualify for a modification under any applicable
loan modification program.
(e) This section shall not apply if the mortgagee, beneficiary, or
authorized agent has no loan modification program
option available to the borrower, and the mortgagee,
beneficiary, or authorized agent informed the borrower of that fact
in the written communication required to be sent to the borrower
pursuant to subparagraph (B) of paragraph (1) of subdivision (c) of
Section 2923.5.
(f) (1) This section shall not apply if any of the following
occurs:
(A) The borrower has surrendered the 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) The borrower has contracted with an organization, person, or
entity whose primary business is advising people who have decided to
leave their homes about how to extend the foreclosure process and
avoid their contractual obligations to mortgagees or beneficiaries.
(C) A case has been filed by the borrower 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. This shall not
preclude a mortgagee, trustee, beneficiary, or authorized agent from
soliciting or considering a borrower who is in bankruptcy for a loan
modification, whether under the requirements of HAMP, or under its
own proprietary loan modification program.
(2) Nothing in this subdivision shall be construed to diminish in
any way the obligations of a mortgagee, trustee, beneficiary, or
authorized agent that is participating in the HAMP or is otherwise
required to review a loan under HAMP guidelines.
(g) This section shall apply only to mortgages or deeds of trust
that are secured by owner-occupied residential real property
containing no more than four dwelling units. For purposes of this
subdivision, "owner-occupied" means that the residence is the
principal residence of the borrower as indicated to the lender in
loan documents.
(1) With respect to loans required to be reviewed under HAMP
guidelines, this section shall apply only to mortgages or deeds of
trust recorded prior to January 1, 2009.
(2) With respect to loans not required to be reviewed under HAMP
guidelines, this section shall apply only to mortgages or deeds of
trust recorded between January 1, 2003, and January 1, 2009.
(h) This section shall not apply to a grandfathered party, as
defined in Section 2923.77.
(i) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 5. SEC. 6. Section 2923.75 is
added to the Civil Code, to read:
2923.75. (a) All of the options available to borrowers under this
section are available only subsequent to a trustee sale conducted in
accordance with Section 2924f. Any action brought pursuant to this
section shall be filed within one year of the date of the trustee
sale.
(b) If a borrower is eligible to apply for a loan
modification and the mortgagee, trustee, beneficiary, or
authorized agent either records a notice of default
in material violation of subdivision (b) of Section 2923.5
without completing its evaluation of the borrower's
timely completed loan modification application or without completing
the required reasonable borrower solicitation efforts and
waiting for the borrower's deadline for submitting a loan
modification application to pass , denies a loan modification
application for failure to provide required verification documents or
information after it fails to materially comply with
subdivision (b) of Section 2923.73, failing to provide
the borrower with a deadline that complies with subdivision (b) of
Section 2923.73 or failing to honor that deadline, or fails to
send a denial explanation letter that materially complies with the
requirements of subdivision (a) of Section 2923.73, a borrower may
pursue any one of the following options, as applicable, against the
mortgagee, trustee, beneficiary, or authorized agent:
(1) If the property at issue is sold to a bona fide purchaser at a
trustee sale conducted in accordance with Section 2924f, the
borrower may recover the greater of treble actual damages or
statutory damages in the amount of ten thousand dollars ($10,000).
(2) If, prior to the initiation of an action under this section,
the property at issue is sold to a bona fide purchaser by the
foreclosing party subsequent to a trustee sale conducted in
accordance with Section 2924f in which title was transferred to the
foreclosing party, the borrower may recover the greater of treble
actual damages or statutory damages in the amount of ten thousand
dollars ($10,000). If the borrower establishes that the mortgagee,
trustee, beneficiary, or authorized agent had actual notice of the
borrower's claim under this section prior to selling the property to
a bona fide purchaser, the borrower shall be entitled to recover
statutory damages in the amount of fifteen thousand dollars
($15,000), in addition to other damages recoverable under this
subparagraph.
(3) (A) If title to the property at issue is transferred to the
foreclosing party at a trustee sale conducted in accordance with
Section 2924f, the borrower may bring an action to both void the
foreclosure sale and to obtain an injunction of the type described in
subparagraph (B), except if paragraph (2) applies.
(B) Pursuant to subparagraph (A), a borrower may seek an
injunction requiring the mortgagee, trustee, beneficiary, or
authorized agent to comply, at least 30 days prior to recording a
new notice of sale, with any requirement, not previously
satisfied, of subdivision (b) of Section 2923.5 or subdivision (a) or
(b) of Section 2923.73, or any similar requirement that the court
deems appropriate in the interest of justice. The injunction shall
also require the mortgagee, trustee, beneficiary, or authorized agent
to file a declaration affirming compliance with the requirements of
the injunction together with the notice of sale.
(c) A mortgagee, trustee, beneficiary, or authorized agent shall
have no civil liability under subdivision (b) if, prior to the
initiation of a legal action by the borrower, it satisfies the
requirements of either of the following paragraphs no later than 180
days after the date of the trustee sale:
(1) The mortgagee, trustee, beneficiary, or authorized agent shall
do all of the following:
(A) Voluntarily rescind the foreclosure sale prior to filing an
unlawful detainer action against the borrower.
(B) Within three days of the rescission, send the borrower a
written communication informing the borrower of the rescission and
clearly explaining listing the steps
the mortgagee, trustee, beneficiary, or authorized agent will take
prior to filing a notice of sale.
(C) Materially comply with all the requirements of subdivision (b)
of Section 2923.5 or subdivision (a) or (b) of Section 2923.73 that
were not previously satisfied, and either offer the borrower a loan
modification if the borrower qualifies for one, or send the borrower
a written communication informing the borrower of the steps that were
taken and the outcome, including any reason for the denial of a loan
modification, if applicable, at least 30 days before recording a
notice of sale.
(2) The mortgagee, trustee, beneficiary, or authorized agent shall
refrain from filing an unlawful detainer action against the borrower
until both of the following requirements have been satisfied:
(A) Prior to taking any steps under subparagraph (B) of this
paragraph, the mortgagee, trustee, beneficiary, or authorized agent
shall send the borrower a written communication informing the
borrower that it is not proceeding with an eviction, and
clearly explain the steps the mortgagee, trustee, beneficiary, or
authorized agent will take prior to commencing the eviction process.
borrower that it will not proceed with an eviction
until it has completed certain steps, as set forth in the letter.
(B) The mortgagee, trustee, beneficiary, or authorized agent shall
materially comply with the requirements of subdivision (b) of
Section 2923.5 or subdivision (a) or (b) of Section 2923.73 that were
not previously satisfied, and send the borrower a written
communication informing the borrower of the steps that were taken and
the outcome, including any reason for the denial of a loan
modification, if applicable. The mortgagee, trustee, beneficiary, or
authorized agent shall wait 30 days after completing those
requirements before filing an unlawful detainer action against the
borrower. However, if the mortgagee, trustee, beneficiary, or
authorized agent determines that the borrower qualifies for a loan
modification, it shall rescind the sale and offer the borrower the
loan modification.
(d) (1) If the mortgagee, trustee, beneficiary, or authorized
agent fails to send the written communication required by paragraph
(1) of subdivision (c) of Section 2923.5, fails to record a completed
declaration of compliance pursuant to subparagraph (B) of paragraph
(1) of subdivision (a) of Section 2923.7, or submits a materially
false declaration of compliance, a borrower may recover statutory
damages of up to ten thousand dollars ($10,000), but not less than
one thousand five hundred dollars ($1,500), from the mortgagee,
trustee, beneficiary, or authorized agent.
(2) For purposes of this subdivision, the declaration of
compliance shall not be considered false if it lists any incorrect
dates for the date that the requirements described in the declaration
were completed, unless the mortgagee, beneficiary, or authorized
agent knowingly included the wrong date on the declaration.
(e) (1) Notwithstanding subdivisions (b) and (c), a borrower shall
not have a cause of action under this section for any failure or
error that is technical or de minimis in nature.
(2) Failure to complete any required section of the declaration of
compliance shall not be considered technical or de minimis.
(f) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 6. SEC. 7. Section 2923.77 is
added to the Civil Code, to read:
2923.77. (a) For purposes of this section, a "grandfathered party"
shall mean a mortgagee, trustee, beneficiary, or authorized agent
that is a credit union as defined in Section 14002 of the Financial
Code that has obtained from the commissioner a certificate
authorizing it to act as a credit union pursuant to Section 14154 of
the Financial Code, a credit union organized under the laws of any
state, or a federally chartered credit union.
(b) A grandfathered party is exempt from the requirements of
Sections 2923.5, 2923.7, 2923.73, and 2923.75 and is instead subject
to the requirements of this section.
(c) (1) A grandfathered party may not file a notice of default
pursuant to Section 2924 until 30 days after contact is made as
required by paragraph (2) or 30 days after satisfying the due
diligence requirements as described in subdivision (h).
(2) A grandfathered party shall contact the borrower in person or
by telephone in order to assess the borrower's financial situation
and explore options for the borrower to avoid foreclosure. During the
initial contact, the grandfathered party shall advise the borrower
that he or she has the right to request a subsequent meeting and, if
requested, the grandfathered party shall schedule the meeting to
occur within 14 days. The assessment of the borrower's financial
situation and discussion of options may occur during the first
contact, or at the subsequent meeting scheduled for that purpose. In
either case, the borrower shall be provided the toll-free telephone
number made available by the United States Department of Housing and
Urban Development (HUD) to find a HUD-certified housing counseling
agency. Any meeting may occur telephonically.
(d) A notice of default filed pursuant to Section 2924 shall
include a declaration from the grandfathered party that it has
contacted the borrower, tried with due diligence to contact the
borrower as required by this section, or the borrower has surrendered
the property to the grandfathered party.
(e) A grandfathered party's loss mitigation personnel may
participate by telephone during any contact required by this section.
(f) For purposes of this section, a "borrower" shall include a
mortgagor or trustor.
(g) A borrower may designate a HUD-certified housing counseling
agency, attorney, or other advisor to discuss with the grandfathered
party, on the borrower's behalf, 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 grandfathered party is subject to approval by the borrower.
(h) A notice of default may be filed pursuant to Section 2924 when
a grandfathered party has not contacted a borrower as required by
paragraph (2) of subdivision (c) provided that the failure to contact
the borrower occurred despite the due diligence of the grandfathered
party. For purposes of this section, "due diligence" shall require
and mean all of the following:
(1) A grandfathered party 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 grandfathered party
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 grandfathered party 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 grandfathered party.
(C) A grandfathered party satisfies the telephone contact
requirements of this paragraph if it determines, after attempting
contact pursuant to this paragraph, that the borrower's primary
telephone number and secondary telephone number or numbers on file,
if any, have been disconnected.
(3) If the borrower does not respond within two weeks after the
telephone call requirements of paragraph (2) have been satisfied, the
grandfathered party shall then send a certified letter, with return
receipt requested.
(4) The grandfathered party 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 grandfathered party 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 grandfathered party when discussing
options for avoiding foreclosure.
(C) A toll-free telephone number for borrowers who wish to discuss
options for avoiding foreclosure with the grandfathered party.
(D) The toll-free telephone number made available by HUD to find a
HUD-certified housing counseling agency.
(i) Subdivisions (c) and (h) shall not apply if any of the
following occurs:
(1) The borrower has surrendered the property as evidenced by
either a letter confirming the surrender or delivery of the keys to
the property to the grandfathered party.
(2) The borrower 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.
(3) The borrower has filed for bankruptcy, and the proceedings
have not been finalized.
(j) This section shall apply only to loans made from January 1,
2003, to December 31, 2007, inclusive, that are secured by
residential real property and are for owner-occupied residences. For
purposes of this subdivision, "owner-occupied" means that the
residence is the principal residence of the borrower.
(k) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
SEC. 7. SEC. 8. Nothing in this act
shall affect any cause of action or claim that is pending as of the
effective date of this act.
SEC. 8. SEC. 9. The requirements of
Sections 2923.4, 2923.7, and 2923.73, the amendments to Section
2923.5 made at the 2009-10 Regular Session of the Legislature, and
the remedies set forth in Section 2923.75, shall not be construed to
be retroactive.
SEC. 9. SEC. 10. 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.
