BILL NUMBER: AB 1588 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Members Bass, Lieu, and Nava
SEPTEMBER 9, 2009
An act to add Article 1.7 (commencing with Section 2946) to
Chapter 2 of Title 14 of Part 4 of Division 3 of the Civil Code,
relating to mortgage defaults, and declaring the urgency thereof, to
take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1588, as introduced, Bass. Monitored Mortgage Workout Program.
(1) Upon a breach of the obligation of a mortgage or transfer of
an interest in property, existing law requires the trustee,
mortgagee, or beneficiary to record in the office of the county
recorder wherein the mortgaged or trust property is situated, a
notice of default, and to mail the notice of default to the borrower
named on the mortgage instrument. Existing law requires the notice to
contain specified statements, including, but not limited to, those
related to the borrower's legal rights, as specified.
This bill would establish the Monitored Mortgage Workout (MMW)
Program that would be offered to all borrowers to provide them with
an opportunity to explore options to avoid foreclosure. This bill
would require that any notice of default of a residential real
property, as defined, sent to a borrower include a notice of the
borrower's right to participate in the MMW Program as well as the
documents that authorize the borrower to elect to participate in the
MMW Program. This bill would authorize the California Housing Finance
Agency to administer the MMW Program.
This bill would provide that, if a borrower elects to participate
in the MMW Program, no further action to foreclose upon the property
may be instituted until the completion of the borrower's
participation in the MMW Program.
(2) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 1.7 (commencing with Section 2946) is added to
Chapter 2 of Title 14 of Part 4 of Division 3 of the Civil Code, to
read:
Article 1.7 Monitored Mortgage Workout Program
2946. This article shall apply to notices of default sent,
pursuant to Section 2924, to an owner of a residential real estate
property.
2946.1. In addition to the information required to be included in
a notice of default sent, pursuant to Section 2924, to a borrower of
residential real property subject to this chapter, the notice shall
also include all of the following:
(a) (1) A separate notice, entitled the Monitored Mortgage Workout
Program (MMW Program), advising the borrower of the right to
participate in a monitored mortgage workout program to explore
options for the borrower to avoid foreclosure. This notice and all of
the documents required to be included with the notice of default
shall be printed in large bold font and shall be printed in English,
Spanish, Chinese, Tagalog, and Korean. This separate notice shall be
sent to the borrower and to all other persons that have an ownership
interest in the residential real property.
(2) This separate notice shall explain the requirements for
participation in the MMW Program and shall advise the borrower of the
procedures that are to be followed to make an election to
participate in the program.
(3) This separate notice shall include the name, address,
telephone number, facsimile number, and e-mail address of two or more
local housing counseling agencies that are approved by the United
States Department of Housing and Urban Development. The notice shall
advise the borrower that private loan counselors are prohibited from
collecting an advance fee.
(b) Three copies of an election form upon which the borrower may
indicate his or her election to either participate in, or waive
participation in, the MMW Program.
(c) Two separate envelopes, one addressed to the trustee and one
addressed to the California Housing Finance Agency, for use by the
borrower to advise the trustee and the agency of the borrower's
election to participate in the MMW Program.
2946.2. For purposes of this article:
(a) "Agency" means the California Housing Finance Agency.
(b) "Borrower" includes a mortgagor, trustor, or owner of the
residential real estate property described in the notice of default
sent pursuant to Section 2924.
(c) "Residential real estate property" means residential real
property consisting of one- to four-family dwelling units.
(d) "Trustee" means the lender, mortgagee, trustee, beneficiary,
or authorized agent that filed the notice of default authorized by
Section 2924.
2946.3. (a) If the borrower elects to participate in the MMW
Program, the borrower shall complete the election form and mail a
copy of the election to the trustee and to the agency not later than
thirty calendar days after receipt of the notice of default. The
election form shall be sent by certified mail, return receipt
requested.
(b) Once a borrower has elected to participate in the MMW Program
no further action may be taken to exercise the power of sale until
completion of all sessions under the MMW Program.
2946.4. (a) The agency shall compile a list of qualified monitors
to facilitate the MMW Program and shall make this list available on
the agency's Internet Web site.
(b) In order to be eligible to be placed on the list of qualified
monitors, an individual shall have a minimum of four years
experience in real estate litigation, including experience as a
mediator, and shall have received formal training, or be able to
document professional experience with federal loan modification
guidelines.
(c) A monitor shall be compensated for his or her services in an
amount not to exceed seven hundred fifty dollars ($750). The
compensation shall initially be paid by the trustee and, in the event
that the mortgage loan is modified, the borrower shall reimburse the
trustee for one-half of the total compensation paid to the monitor.
(d) The agency shall encourage the State Bar of California to
allow mandatory continuing legal education program (MCLE) credits to
those qualified monitors who are members of the California State Bar
Association.
2946.5. (a) Upon receipt of a borrower's election to participate
in the MMW Program the executive director of the agency shall select
an individual from a list of qualified monitors to act as the monitor
for the borrower and the trustee. The monitor shall contact the
parties within 15 days of his or her appointment to schedule the
first session of the monitored workout program.
(b) The executive director of the agency shall notify the trustee
of the borrower's election to participate in the MMW Program within
15 days of the selection of the monitor. The trustee shall deposit a
fee of two hundred fifty dollars ($250) with the agency within 10
days of the executive director's notification of the borrower's
election. In the event that the mortgage loan is modified, as part of
the modification plan, the borrower shall be required to pay the
lender one hundred twenty-five dollars ($125) as partial
reimbursement of this fee.
2946.6. The borrower is not eligible to participate in the MMW
Program until the borrower has established a trust account with an
FDIC-insured bank or credit union in an amount equal to 60 percent of
the monthly payment established under the mortgage agreement. The
borrower shall make additional monthly deposits equal to 60 percent
of the monthly payment established under the mortgage during the
period that the borrower participates in the program. If the borrower
fails to establish and maintain this account on or before the date
of the first session of the MMW Program, the borrower's election
shall be deemed to be canceled and the MMW Program shall be deemed to
be completed for purposes of subdivision (b) of Section 2946.3.
2946.7. (a) The borrower shall bring all of the following
documents to the first scheduled session of the MMW Program:
(1) Bank statements verifying the creation and maintenance of the
trust account required by Section 2946.6.
(2) Tax returns filed for the prior tax year.
(3) Payroll verification for the previous two months from all
family members of the borrower's household.
(4) Return receipts verifying the borrower's notice of election
sent to the trustee and the agency as required by subdivision (a) of
Section 2946.3.
(b) The borrower may be represented by a person with complete
authority to bind the borrower, as evidenced by the borrower's
written authorization for that person's representation.
(c) If the monitor determines that the borrower has failed to
meaningfully participate in the MMW Program or has otherwise failed
to act in good faith, the monitor shall issue a final report to all
parties advising them that, based on the borrower's noncompliance,
the MMW Program is deemed to be completed for purposes of subdivision
(b) of Section 2946.3. If the borrower is able to demonstrate his or
her ability to continue with the program within 10 days of the
issuance of the final report, the monitor may rescind the final
report and continue with the MMW Program sessions.
2946.8. (a) The trustee may be represented by a person with
complete authority to bind the trustee, as evidenced by the trustee's
written authorization for that person's representation.
(b) If the monitor determines that the trustee has failed to
meaningfully participate in the MMW Program, has rejected a loan
modification that satisfies loan modification guidelines currently in
effect in this state, or has otherwise failed to act in good faith,
the monitor shall notify the agency of this finding and the borrower
shall be authorized to initiate legal proceedings in accordance with
Section 2946.11. If the borrower initiates legal proceedings in
accordance with Section 2946.11, the monitor shall prepare a loan
modification proposal as required by Section 2946.10.
2946.9. (a) The monitor shall use reasonable efforts to ensure
that each MMW Program is completed within 60 calendar days of the
monitor's appointment.
(b) The monitor shall be responsible for facilitating
communications between the borrower and the trustee.
(c) All reports prepared by the monitor in conjunction with the
MMW Program shall be subject to discovery under the Evidence Code.
(d) If the monitor fails to use reasonable efforts or fails to
participate in good faith, the parties shall promptly notify the
agency. If the agency determines that the monitor has failed to use
reasonable efforts or has failed to participate in good faith, the
agency shall appoint a new monitor to facilitate the MMW Program
sessions.
2946.10. (a) At the conclusion of the MMW Program sessions, the
monitor shall prepare a loan modification proposal that may include
any or all of the following features:
(1) An interest rate reduction for a fixed term of at least five
years.
(2) An extension of the mortgage term, not to exceed 40 years from
the original date of the loan.
(3) Deferral of a portion of the principal amount of the unpaid
principal balance until maturity of the loan.
(4) Reduction of the principal balance.
(5) Compliance with a federally mandated loan modification
program.
(b) A copy of the loan modification proposal shall be distributed
to the parties for agreement. If the borrower does not accept the
loan modification proposal within 15 days of receipt, the borrower's
election to participate in the program shall be deemed to be canceled
and the program shall be deemed to be completed for purposes of
subdivision (b) of Section 2946.3. If the borrower accepts the
proposal, the terms of the proposal shall have immediate effect.
2946.11. If the trustee rejects the monitor's loan modification
proposal or if the monitor has made a determination that the trustee
has failed to meaningfully participate in the MMW Program, or has
failed to act in good faith the borrower may institute an action in
superior court seeking to enforce the monitor's loan modification
proposal. The court shall enforce the terms of the loan modification
proposal in an expedited proceeding, provided that the borrower's
trust account, as required by Section 2946.6, remains current and the
borrower has verified that his or her income is substantially the
same as it was during the MMW Program sessions. The court shall award
attorney's fees and costs to the prevailing party.
2946.12. If the borrower does not accept the loan modification
proposal, the trustee may proceed with the foreclosure proceedings
authorized by this chapter.
SEC. 2. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to stabilize and protect state and local economies and
the housing market at the earliest possible time, it is necessary for
this act to take effect immediately.