Bill Text: CA SB1275 | 2009-2010 | Regular Session | Introduced

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

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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-Introduced.html

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BILL NUMBER: SB 1275	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Leno and Steinberg

                        FEBRUARY 19, 2010

   An act to amend Section 2923.5 of, and to add and repeal Sections
2923.4, 2923.7, 2923.73, and 2923.75 of, the Civil Code, relating to
mortgages.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1275, as introduced, Leno. Mortgages: foreclosures.
   Existing law requires that, upon a breach of the obligation of a
mortgage or transfer of an interest in property, the trustee,
mortgagee, or beneficiary record a notice of default in the office of
the county recorder where the mortgaged or trust property is
situated and mail the notice of default to the mortgagor or trustor.
Existing law provides that, after not less than 3 months after the
filing of the notice of default, the parties described above may give
notice of sale, stating the time and place of the sale, as
specified.
   Existing law requires, until January 1, 2013, 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, require a mortgagee,
trustee, beneficiary, or authorized agent, prior to the filing of a
notice of default, to provide the borrower with an application for a
loan modification and other foreclosure avoidance options 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.
   This bill would prohibit the mortgagee, beneficiary, or authorized
agent from combining collections activity with communication with
the borrower about foreclosure avoidance options. The bill would
delete the requirement that the notice of default contain a specified
declaration, and would instead require the mortgagee, beneficiary,
or authorized agent to, concurrently with the filing of a notice of
default, record a declaration of compliance that attests to specified
facts, and mail the borrower a notice stating that these
requirements have been met. The bill would provide that failure to
record a declaration of compliance, or recordation of a declaration
of compliance that fails to meet the specified requirements, would
constitute grounds for the borrower to bring an action to void the
foreclosure, or to recover either treble damages or statutory damages
in the amount of $10,000, whichever is greater, from the mortgagee,
trustee, beneficiary, or authorized agent, if specified conditions
exist.
   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.  Section 2923.4 is added to the Civil Code, to read:
   2923.4.  (a) A mortgagee, trustee, beneficiary, or authorized
agent shall provide a borrower with a copy of the notice described in
subdivision (b) and an application for a loan modification and other
foreclosure avoidance options prior to filing a notice of default
pursuant to Section 2924.
   (b) A state government entity shall create the following notice in
at least 12-point type and make it available 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 as the party to which your mortgage payment
should be sent. You are also entitled to receive a telephone call and
a letter from your loan servicer inviting you to discuss foreclosure
avoidance options.
   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, which has specific requirements and guidelines. To see if
your servicer is participating, or to find out more about this
program, visit
http://www.makinghomeaffordable.gov/contact_servicer.html. Your
servicer may also offer other loan modification programs. You may
also qualify for other options for avoiding foreclosure, including
loan refinancing, forbearance, short sale, or a deed in lieu of
foreclosure.
   With this notice, you should have received an application from
your servicer for a loan modification and other foreclosure relief.
If you request that your loan servicer consider you for a loan
modification or other alternative to foreclosure, your servicer is
required to inform you of its decision before filing a document
called a Notice of Default, which is the first step in the
foreclosure process. If your servicer denies your application, it
must send you a detailed letter describing the reasons for the
denial.
   THE FORECLOSURE PROCESS
   If your servicer has complied with these requirements, but has
denied your application and complied with the contact requirements
described in Section 2923.5 of the Civil Code, it may proceed with
the foreclosure process.
   Notice of Default: Your loan servicer may not foreclose on your
home without filing official documents with the county recorder. You
are entitled to receive copies of those documents. 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 and must wait at least 90 days before
taking further steps to sell your home.
   Notice of Sale: Once 90 days have passed from the filing of the
notice of default, your servicer may file a notice of sale. Your
servicer must post that notice of sale on your property, mail you a
copy of that notice, and wait at least 20 days before selling your
home. Your notice of sale will include the contact information of the
person or company to call if you want more information about your
sale date.
   Please seek legal help if you believe that you have been denied
your legal foreclosure rights. It is illegal for any person,
including a lawyer, to charge you for helping you with a loan
modification or other effort to avoid foreclosure before providing
the services promised."

   (c) This section 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 mortgagee, trustee, beneficiary, or authorized
agent.
   (2) 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.
   (3) 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.
   (d) This section shall apply only to mortgages or deeds of trust
recorded prior to December 31, 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 loan documents.


   (e) 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.  Section 2923.5 of the Civil Code, as amended by Section 1
of Chapter 43 of the Statutes of 2009, is amended to read:
   2923.5.  (a) (1) A mortgagee, trustee, beneficiary, or authorized
agent may not file a notice of default pursuant to Section 2924 until
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 (g).
   (2) 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.  This communication and attempted
communication shall be clearly identified as attempts to initiate
discussion with the borrower about foreclosure avoidance options, and
  may not be combined with collections activity. 
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 notice of default filed pursuant to Section 2924 shall
include a declaration that the mortgagee, beneficiary, or authorized
agent has contacted the borrower, has tried with due diligence to
contact the borrower as required by this section, or that no contact
was required pursuant to subdivision (h).  
   (b) The mortgagee, beneficiary, or authorized agent, concurrently
with the filing of a notice of default, shall do both of the
following:  
   (1) Record a declaration of compliance pursuant to Section 2923.7.
 
   (2) Mail the borrower a notice stating that the requirements of
this section have been met. That notice shall be sent by certified
mail and shall include the dates and times of, and addresses and
telephone numbers used for, the contact or attempted contact required
by paragraph (2) of subdivision (a) and subdivision (g). 
   (c) If a mortgagee, trustee, beneficiary, or authorized agent had
already filed the notice of default prior to the enactment of this
section and did not subsequently file a notice of rescission, then
the mortgagee, trustee, beneficiary, or authorized agent shall, as
part of the notice of sale filed pursuant to Section 2924f, include a
declaration that either:
   (1) States that the borrower was contacted to assess the borrower'
s financial situation and to explore options for the borrower to
avoid foreclosure.
   (2) Lists the efforts made, if any, to contact the borrower in the
event no contact was made.
   (d) A mortgagee's, beneficiary's, or authorized agent's loss
mitigation personnel may participate by telephone during any contact
required by this section.
   (e) For purposes of this section, a "borrower" shall include a
mortgagor or trustor.
   (f) 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
paragraph (2) of subdivision (a). Any loan modification or workout
plan offered at the meeting by the mortgagee, beneficiary, or
authorized agent is subject to approval by the borrower.
   (g) A notice of default may be filed pursuant to Section 2924 when
a mortgagee, beneficiary, or authorized agent 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 mortgagee, beneficiary, or authorized agent. For
purposes of this section, "due diligence" shall require and mean all
of the following:
   (1) A mortgagee, beneficiary, or authorized agent 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 mortgagee,
beneficiary, or authorized agent 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 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, 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 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
mortgagee, beneficiary, or authorized agent shall then send a
certified letter, with return receipt requested.
   (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 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 mortgagee, beneficiary, or authorized
agent when discussing options for avoiding foreclosure.
   (C) A toll-free telephone number 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.
   (h) Subdivisions (a), (c), and (g) 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 mortgagee, trustee, beneficiary, or authorized
agent.
   (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) 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.
   (i) This section shall apply only to mortgages or deeds of trust
recorded  from January 1, 2003, to December 31, 2007,
inclusive   prior to December 31, 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 loan documents.
   (j) 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.  Section 2923.7 is added to the Civil Code, to read:
   2923.7.  (a) A declaration of compliance shall be attached to
every notice of default filed pursuant to Section 2924. That
declaration shall be signed by an individual having personal
knowledge of the facts stated within and be substantially similar to
the following form:


   DECLARATION OF COMPLIANCE


   BORROWER CONTACT

   /-/ This loan is not subject to Cal. Civil Code Sec.  2923.5,
pursuant to the following provisions (check all that apply):
( ) Cal. Civil Code a7 2923.5(h).
( ) Cal. Civil Code a7 2923.5(i).


   /-/ 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 doing the following
(check one):
( ) Making contact with the borrower pursuant
to Cal. Civil Code a7 2923.5(a)(2) and sending
the letter required by Cal. Civil Code a7
2923.5(b).
( ) Satisfying the due diligence requirements
described in Cal. Civil Code a7 2923.5(g) and
sending the letter required by Cal. Civil Code
a7 2923.5(b).



   FORECLOSURE AVOIDANCE REVIEW

   /-/ This loan is not subject to Cal. Civil Code Sec.  2923.73.
   /-/ This loan is subject to Cal. Civil Code Sec.  2923.73 and
(check one):
( ) The borrower did not submit a written
request to modify the loan that is the subject
of the accompanying notice of default or
otherwise apply for a loan modification
according to the mortgagee, beneficiary, or
authorized agent's applicable procedures.
( ) The borrower submitted a written request to
modify the loan that is the subject of the
accompanying notice of default or otherwise
applied for a loan modification according to
the mortgagee, beneficiary, or authorized
agent's applicable procedures, the request was
denied, and the mortgagee, beneficiary, or
authorized agent sent the borrower a denial
explanation letter in compliance with the
requirements of Cal. Civil Code a7
2923.73(a).
( ) The borrower's request to modify the loan
that is the subject of the accompanying notice
of default was approved, but the borrower did
not accept the modification offered or did not
comply with the terms of the modification.



   (b) 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.  Section 2923.73 is added to the Civil Code, to read:
   2923.73.  (a) If a borrower submits a written request for a loan
modification and that request is denied, the declaration of
compliance shall attest to the fact that the mortgagee, trustee, or
other person authorized to take sale sent the borrower a denial
explanation letter by certified mail, at least 15 days prior to
recording the declaration of compliance, which included all of the
following:
   (1) The date a completed application for a loan modification was
received from the borrower.
   (2) The date on which a decision was made regarding the borrower's
application.
   (3) The final decision made by the mortgagee or beneficiary, which
shall indicate what alternatives to foreclosure were considered,
such as forbearance, short sale, deed in lieu of foreclosure, or
modification, and the decision made on each option.
   (4) If the borrower was considered for a federal Home Affordable
Modification, 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.
   (5) If the borrower was considered for another type of
modification or for an option other than a modification, information
detailing the reasons the borrower did not qualify for each of those
alternatives, including quantitative data supporting the decision.
This documentation may include a finding that the borrower was
previously offered a loan modification and failed to successfully
make payments under the terms of the modified loan.
   (6) The name and contact information of the holder of the note.
   (7) Instructions regarding how to dispute the written decisions
described in the denial explanation letter.
   (b) This section 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 mortgagee, trustee, beneficiary, or authorized
agent.
   (2) 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.
   (3) 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.
   (c) This section shall apply only to mortgages or deeds of trust
recorded prior to December 31, 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 loan documents.
   (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. 5.  Section 2923.75 is added to the Civil Code, to read:
   2923.75.  (a) Failure to record a declaration of compliance in
accordance with Section 2923.7, or recordation of a declaration of
compliance that does not comply with the requirements of Sections
2923.7 and 2923.73, shall constitute grounds for a borrower to pursue
either of the following options:
   (1) If the property that is the subject of the declaration of
compliance 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 damages or statutory damages in the amount of
ten thousand dollars ($10,000) from the mortgagee, trustee,
beneficiary, or authorized agent that failed to comply with Section
2923.7 or 2923.73.
   (2) If the property that is the subject of the declaration of
compliance is sold to the foreclosing party at a trustee sale
conducted in accordance with Section 2924f, the borrower may bring an
action to void the foreclosure sale.
   (b) 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.  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.