BILL NUMBER: ABX2 7	CHAPTERED
	BILL TEXT

	CHAPTER  5
	FILED WITH SECRETARY OF STATE  FEBRUARY 20, 2009
	APPROVED BY GOVERNOR  FEBRUARY 20, 2009
	PASSED THE SENATE  FEBRUARY 19, 2009
	PASSED THE ASSEMBLY  FEBRUARY 19, 2009
	AMENDED IN ASSEMBLY  FEBRUARY 14, 2009

INTRODUCED BY   Assembly Member Lieu
   (Principal coauthors: Assembly Members Carter and Price)
   (Principal coauthor: Senator Corbett)
   (Coauthors: Assembly Members Block, Brownley, Coto, De Leon,
Feuer, Galgiani, Hall, Hayashi, Huffman, V. Manuel Perez, Portantino,
Ruskin, Saldana, Skinner, Swanson, Torlakson, Torres, and Yamada)
   (Coauthors: Senators DeSaulnier and Wiggins)

                        FEBRUARY 11, 2009

   An act to amend, repeal, and add Section 2924 of, and to add and
repeal Sections 2923.52, 2923.53, 2923.54, and 2923.55 of, the Civil
Code, relating to residential mortgage loans.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 7, Lieu. Residential mortgage loans: foreclosure.
   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.
   This bill, until January 1, 2011, and only with respect to
specified loans that were recorded between January 1, 2003, to
January 1, 2008, would prohibit a mortgagee, trustee, or other person
authorized to take sale from giving a notice of sale for an
additional 90 days if the loan at issue is the first mortgage or deed
of trust that the property secures, the borrower occupied the
property as his or her principal residence at the time the loan
became delinquent, and the notice of default has been filed. The bill
would exempt certain loans from this prohibition, including, upon
order of the Commissioner of Corporations, the Commissioner of
Financial Institutions, or the Real Estate Commissioner, as
applicable, the loans of a mortgage loan servicer, as defined, if the
mortgage loan servicer applies to the commissioner for an exemption
indicating that it has implemented a loan modification program with
specified features and the commissioner concludes that the program
meets specified requirements. The bill would permit a mortgage loan
servicer to submit a revised application if its application is
denied, and would permit the commissioner to revoke an exemption
under certain circumstances. The bill would require the commissioners
to adopt regulations in this regard, as specified. The bill would
require the Secretary of Business, Transportation and Housing to
report to the Legislature 3 months after the first exemption is
granted regarding the details of the actions on exemption of loans
serviced by a mortgage loan servicer under a loan modification
program and to submit subsequent reports every 6 months thereafter.
The bill would require the secretary to post specified information on
the exemption program on the agency's Internet Web site.
   The bill would provide that a person who violates these provisions
is deemed to have violated his or her license law. The bill would
provide that the failure to comply with the provisions described
above does not invalidate a sale that is otherwise valid under
specified provisions. The bill would require that a notice of sale
include a declaration from the mortgage loan servicer regarding the
issuance of a temporary or final order of exemption from the
commissioner pursuant to these provisions and the timeframe
applicable to the notice of sale. The bill would make a statement of
legislative findings.


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

  SECTION 1.  This act shall be known as the California Foreclosure
Prevention Act.
  SEC. 2.  The Legislature finds and declares all of the following:
   (a) California is facing an unprecedented threat to its state and
local economies due to skyrocketing residential property foreclosure
rates in California. Those high foreclosure rates have adversely
affected property values in California, and will have even greater
adverse consequences as foreclosure rates continue to rise.
   (b) It is essential to the economic health of California for the
state to ameliorate the deleterious effects that will result from the
continued high rate of foreclosure of residential properties by
modifying the foreclosure process to provide additional time for
borrowers to work out loan modifications while providing an exemption
for mortgage loan servicers that have implemented a comprehensive
loan modification program. This change in accessing the state's
foreclosure process is essential to ensure that the process does not
exacerbate the current crisis by adding more foreclosures to the glut
of foreclosed properties already on the market if the foreclosure
may be avoided through a loan modification. Those additional
foreclosures could further destabilize the housing market with
significant, corresponding deleterious effects on the state and local
economies.
  SEC. 3.  Section 2923.52 is added to the Civil Code, to read:
   2923.52.  (a) Notwithstanding paragraph (3) of subdivision (a) of
Section 2924, a mortgagee, trustee, or other person authorized to
take sale shall not give notice of sale until at least 90 days after
the lapse of three months as set forth in paragraph (2) of
subdivision (a) of Section 2924, in order to allow the parties to
pursue a loan modification to prevent foreclosure, if all of the
following conditions exist:
   (1) The loan was recorded during the period of January 1, 2003, to
January 1, 2008, inclusive, and is secured by residential real
property.
   (2) The loan at issue is the first mortgage or deed of trust that
the property secures.
   (3) The borrower occupied the property as the borrower's principal
residence at the time the loan became delinquent.
   (4) The notice of default has been recorded on the property.
   (b) This section does not apply to loans serviced by a mortgage
loan servicer if that mortgage loan servicer has obtained a temporary
or final order of exemption pursuant to Section 2923.53 that is
current and valid at the time the notice of sale is given.
   (c) This section does not apply to loans made, purchased, or
serviced by:
   (1) A California state or local public housing agency or
authority, including state or local housing finance agencies
established under Division 31 (commencing with Section 50000) of the
Health and Safety Code and Chapter 6 (commencing with Section 980) of
Division 4 of the Military and Veterans Code.
   (2) Loans that are collateral for securities purchased by an
agency or authority described in paragraph (1).
   (d) This section shall become operative 14 days after the issuance
of regulations, which shall include the form of the application for
mortgage loan servicers, by the commissioner pursuant to subdivision
(d) of Section 2923.53.
   (e) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
  SEC. 4.  Section 2923.53 is added to the Civil Code, to read:
   2923.53.  (a) A mortgage loan servicer that has implemented a
comprehensive loan modification program that meets the requirements
of this section shall have the loans that it services exempted from
the provisions of Section 2923.52, upon order of the commissioner. A
comprehensive loan modification program shall include all of the
following features:
   (1) The loan modification program is intended to keep borrowers
whose principal residences are homes located in California in those
homes when the anticipated recovery under the loan modification or
workout plan exceeds the anticipated recovery through foreclosure on
a net present value basis.
   (2) The loan modification program targets a ratio of the borrower'
s housing-related debt to the borrower's gross income of 38 percent
or less, on an aggregate basis in the program.
   (3) The loan modification program includes some combination of the
following features:
   (A) An interest rate reduction, as needed, for a fixed term of at
least five years.
   (B) An extension of the amortization period for the loan term, to
no more than 40 years from the original date of the loan.
   (C) Deferral of some portion of the principal amount of the unpaid
principal balance until maturity of the loan.
   (D) Reduction of principal.
   (E) Compliance with a federally mandated loan modification
program.
   (F) Other factors that the commissioner determines are
appropriate. In determining those factors, the commissioner may
consider efforts implemented in other jurisdictions that have
resulted in a reduction in foreclosures.
   (4) When determining a loan modification solution for a borrower
under the loan modification program, the servicer seeks to achieve
long-term sustainability for the borrower.
   (b) (1) A mortgage loan servicer may apply to the commissioner for
an order exempting loans that it services from Section 2923.52. If
the mortgage loan servicer elects to apply for an order, the
application shall be in the form and manner determined by the
commissioner.
   (2) Upon receipt of an initial application for exemption under
this section, the commissioner shall immediately notify the applicant
of the date of receipt of the application and shall issue a
temporary order, effective from that date of receipt, exempting the
mortgage loan servicer from the provisions of subdivision (a) of
Section 2923.52. The temporary order shall remain in effect until a
final order has been issued by the commissioner pursuant to paragraph
(3). If the initial application for exemption is denied pursuant to
paragraph (3), the temporary order shall remain in effect for 30 days
after the date of denial.
   (3) Within 30 days of receipt of an initial or revised
application, the commissioner shall make a final determination on
whether the application meets the criteria of subdivision (a). If,
after review of the application, the commissioner concludes that the
mortgage loan servicer has a comprehensive loan modification program
that meets the requirements of subdivision (a), the commissioner
shall issue a final order exempting the mortgage loan servicer from
the requirements of Section 2923.52. If the commissioner concludes
that the loan modification program does not meet the requirements of
subdivision (a), the application for exemption shall be denied and a
final order shall not be issued.
   (4) A mortgage loan servicer may submit a revised application if
its application for exemption is denied.
   (c) The commissioner may revoke a final order, upon reasonable
notice and an opportunity to be heard, if the mortgage loan servicer
has submitted a materially false or misleading application or if the
approved loan modification program has been materially altered from
the loan modification program on which the exemption was based. A
revocation by the commissioner shall not be retroactive.
   (d) The commissioner shall adopt, no later than 10 days after the
date this section takes effect, emergency and final regulations to
clarify the application of this section and Section 2923.52,
including the creation of the application for mortgage loan servicers
and requirements regarding the reporting of loan modification data
by mortgage loan servicers.
   (e) Three months after the first exemption is issued pursuant to
subdivision (b) by order of any commissioner specified in paragraph
(1) of subdivision (j), the Secretary of Business, Transportation and
Housing shall submit a report to the Legislature regarding the
details of the actions taken to implement this section and the
numbers of applications received and orders issued. The secretary
shall submit an additional report six months from the date of the
submission of the first report and every six months thereafter.
Within existing resources, the commissioners shall collect, from some
or all mortgage loan servicers, data regarding loan modifications
accomplished pursuant to this section and shall make the data
available on an Internet Web site at least quarterly.
   (f) The Secretary of Business, Transportation and Housing shall
maintain on an Internet Web site a publicly available list disclosing
the final orders granting exemptions, the date of each order, and a
link to Internet Web sites describing the loan modification programs.

   (g) Until January 1, 2010, the commissioner is authorized to
contract for goods and services necessary to implement the provisions
of this section and Section 2923.52, and any such contract shall be
exempt from Chapter 2 (commencing with Section 10290) of Part 2 of
Division 2 of the Public Contract Code. Not less than 30 days prior
to awarding any contract under this section, the commissioner shall
provide the pending contract documents to the Joint Legislative
Budget Committee.
   (h) Any person who violates any provision of this section or
Section 2923.52 shall be deemed to have violated his or her license
law as it relates to these provisions.
   (i) Nothing in this section or Section 2923.52 shall require a
servicer to violate contractual agreements for investor-owned loans
or provide a modification to a borrower who is not willing or able to
pay under the modification.
   (j) The submission of an application for an exemption under this
section, the reliance upon such an exemption, or the provision to the
commissioner of data related to the loan modification program shall
not confer on the commissioner visitorial authority over a federally
chartered financial institution. Nothing in this subdivision is
intended to affect the authority of the commissioner over a federally
chartered financial institution pursuant to federal law or
regulation.
   (k) For purposes of this section and Sections 2923.52 and 2923.54:

   (1) "Commissioner" means any of the following:
   (A) The Commissioner of Corporations for licensed residential
mortgage lenders and servicers and licensed finance lenders and
brokers servicing mortgage loans and any other entities servicing
mortgage loans that are not described in subparagraph (B) or (C).
   (B) The Commissioner of Financial Institutions for commercial and
industrial banks and savings associations and credit unions organized
in this state servicing mortgage loans.
   (C) The Real Estate Commissioner for licensed real estate brokers
servicing mortgage loans.
   (2) "Housing-related debt" means debt that includes loan
principal, interest, property taxes, hazard insurance, flood
insurance, mortgage insurance, and homeowner association fees.
   (3) "Mortgage loan servicer" means a person or entity that
receives or has the right to receive installment payments of
principal, interest, or other amounts placed in escrow, pursuant to
the terms of a mortgage loan or deed of trust, and performs services
relating to that receipt or enforcement as the holder of the note or
on behalf of the holder of the note evidencing that loan.
   (l) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
  SEC. 5.  Section 2923.54 is added to the Civil Code, to read:
   2923.54.  (a) A notice of sale filed pursuant to Section 2924f
shall include a declaration from the mortgage loan servicer stating
both of the following:
   (1) Whether or not the mortgage loan servicer has obtained from
the commissioner a final or temporary order of exemption pursuant to
Section 2923.53 that is current and valid on the date the notice of
sale is filed.
   (2) Whether the timeframe for giving notice of sale specified in
subdivision (a) of Section 2923.52 does not apply pursuant to Section
2923.52 or 2923.55.
   (b) Failure to comply with Section 2923.52 or 2923.53 shall not
invalidate any sale that would otherwise be valid under Section
2924f.
   (c) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
  SEC. 6.  Section 2923.55 is added to the Civil Code, to read:
   2923.55.  Section 2923.52 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 regarding 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.
   (d) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
  SEC. 7.  Section 2924 of the Civil Code 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 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 Section 2923.52, 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.
   (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:
   (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.
   (f) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
  SEC. 8.  Section 2924 is added to the Civil Code, 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 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) 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.
   (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:
   (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.
   (f) This section shall become operative on January 1, 2011.
  SEC. 9.  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.