BILL NUMBER: AB 407	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JANUARY 4, 2012

INTRODUCED BY   Assembly Member Davis

                        FEBRUARY 14, 2011

   An act to amend Section  10242.6 of the Business and
Professions Code, and to amend Section 2954.9   2941
 of the Civil Code, relating to mortgages.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 407, as amended, Davis. Mortgages:  prepayment
  recording certificates of discharge:  penalties.

   Existing law requires a mortgagee or the assignee of the
mortgagee, within 30 days after any mortgage has been satisfied, to
execute a certificate of discharge and to record or cause to be
recorded that certificate in the office of the county recorded, as
specified. Existing law requires the beneficiary or the assignee of
the beneficiary, within 30 calendar days after the obligation secured
by any deed of trust has been satisfied, to execute and deliver to
the trustee the original note, deed of trust, request for a full
reconveyance, and other documents as may be necessary to reconvey, or
cause to be reconveyed, the deed of trust. Existing law requires the
trustee to execute the full reconveyance and to record or cause it
to be recorded in the office of the county recorder in which the deed
of trust is recorded within 21 calendar days after receipt by the
trustee of the original note, deed of trust, request for a full
reconveyance, and imposes additional requirements on the trustee in
connection with delivery of the reconveyance instrument, original
note, and deed of trust. Existing law provides that a violation of
these provisions shall make the violator liable to the person
affected by the violation for all damages which that person may
sustain by reason of the violation, and shall require that the
violator forfeit to that person the sum of $500.  
   This bill would increase the penalty that the violator is liable
to forfeit to $1,000.  
   Existing law limits the circumstances under which a prepayment
charge can be imposed with respect to loans secured by a mortgage or
deed of trust on real property improved with one to 4 dwelling units.
 
   This bill would, instead, prohibit the imposition of prepayment
charges for these loans. 
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


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

   SECTION 1.    Section 2941 of the   Civil
Code   is amended to read: 
   2941.  (a) Within 30 days after any mortgage has been satisfied,
the mortgagee or the assignee of the mortgagee shall execute a
certificate of the discharge thereof, as provided in Section 2939,
and shall record or cause to be recorded in the office of the county
recorder in which the mortgage is recorded. The mortgagee shall then
deliver, upon the written request of the mortgagor or the mortgagor's
heirs, successors, or assignees, as the case may be, the original
note and mortgage to the person making the request.
   (b) (1) Within 30 calendar days after the obligation secured by
any deed of trust has been satisfied, the beneficiary or the assignee
of the beneficiary shall execute and deliver to the trustee the
original note, deed of trust, request for a full reconveyance, and
other documents as may be necessary to reconvey, or cause to be
reconveyed, the deed of trust.
   (A) The trustee shall execute the full reconveyance and shall
record or cause it to be recorded in the office of the county
recorder in which the deed of trust is recorded within 21 calendar
days after receipt by the trustee of the original note, deed of
trust, request for a full reconveyance, the fee that may be charged
pursuant to subdivision (e), recorder's fees, and other documents as
may be necessary to reconvey, or cause to be reconveyed, the deed of
trust.
   (B) The trustee shall deliver a copy of the reconveyance to the
beneficiary, its successor in interest, or its servicing agent, if
known. The reconveyance instrument shall specify one of the following
options for delivery of the instrument, the addresses of which the
recorder has no duty to validate:
   (i) The trustor or successor in interest, and that person's last
known address, as the person to whom the recorder will deliver the
recorded instrument pursuant to Section 27321 of the Government Code.

   (ii) That the recorder shall deliver the recorded instrument to
the trustee's address. If the trustee's address is specified for
delivery, the trustee shall mail the recorded instrument to the
trustor or the successor in interest to the last known address for
that party.
   (C) Following execution and recordation of the full reconveyance,
upon receipt of a written request by the trustor or the trustor's
heirs, successors, or assignees, the trustee shall then deliver, or
caused to be delivered, the original note and deed of trust to the
person making that request.
   (D) If the note or deed of trust, or any copy of the note or deed
of trust, is electronic, upon satisfaction of an obligation secured
by a deed of trust, any electronic original, or electronic copy which
has not been previously marked solely for use as a copy, of the note
and deed of trust, shall be altered to indicate that the obligation
is paid in full.
   (2) If the trustee has failed to execute and record, or cause to
be recorded, the full reconveyance within 60 calendar days of
satisfaction of the obligation, the beneficiary, upon receipt of a
written request by the trustor or trustor's heirs, successor in
interest, agent, or assignee, shall execute and acknowledge a
document pursuant to Section 2934a substituting itself or another as
trustee and issue a full reconveyance.
   (3) If a full reconveyance has not been executed and recorded
pursuant to either paragraph (1) or paragraph (2) within 75 calendar
days of satisfaction of the obligation, then a title insurance
company may prepare and record a release of the obligation. However,
at least 10 days prior to the issuance and recording of a full
release pursuant to this paragraph, the title insurance company shall
mail by first-class mail with postage prepaid, the intention to
release the obligation to the trustee, trustor, and beneficiary of
record, or their successor in interest of record, at the last known
address.
   (A) The release shall set forth:
   (i) The name of the beneficiary.
   (ii) The name of the trustor.
   (iii) The recording reference to the deed of trust.
   (iv) A recital that the obligation secured by the deed of trust
has been paid in full.
   (v) The date and amount of payment.
   (B) The release issued pursuant to this subdivision shall be
entitled to recordation and, when recorded, shall be deemed to be the
equivalent of a reconveyance of a deed of trust.
   (4) Where an obligation secured by a deed of trust was paid in
full prior to July 1, 1989, and no reconveyance has been issued and
recorded by October 1, 1989, then a release of obligation as provided
for in paragraph (3) may be issued.
   (5) Paragraphs (2) and (3) do not excuse the beneficiary or the
trustee from compliance with paragraph (1). Paragraph (3) does not
excuse the beneficiary from compliance with paragraph (2).
   (6) In addition to any other remedy provided by law, a title
insurance company preparing or recording the release of the
obligation shall be liable to any party for damages, including
attorney's fees, which any person may sustain by reason of the
issuance and recording of the release, pursuant to paragraphs (3) and
(4).
   (7) A beneficiary may, at its discretion, in accordance with the
requirements and procedures of Section 2934a, substitute the title
company conducting the escrow through which the obligation is
satisfied for the trustee of record, in which case the title company
assumes the obligation of a trustee under this subdivision, and may
collect the fee authorized by subdivision (e).
   (8) In lieu of delivering the original note and deed of trust to
the trustee within 30 days of loan satisfaction, as required by
paragraph (1) of subdivision (b), a beneficiary who executes and
delivers to the trustee a request for a full reconveyance within 30
days of loan satisfaction may, within 120 days of loan satisfaction,
deliver the original note and deed of trust to either the trustee or
trustor. If the note and deed of trust are delivered as provided in
this paragraph, upon satisfaction of the note and deed of trust, the
note and deed of trust shall be altered to indicate that the
obligation is paid in full. Nothing in this paragraph alters the
requirements and obligations set forth in paragraphs (2) and (3).
   (c) For the purposes of this section, the phrases "cause to be
recorded" and "cause it to be recorded" include, but are not limited
to, sending by certified mail with the United States Postal Service
or by an independent courier service using its tracking service that
provides documentation of receipt and delivery, including the
signature of the recipient, the full reconveyance or certificate of
discharge in a recordable form, together with payment for all
required fees, in an envelope addressed to the county recorder's
office of the county in which the deed of trust or mortgage is
recorded. Within two business days from the day of receipt, if
received in recordable form together with all required fees, the
county recorder shall stamp and record the full reconveyance or
certificate of discharge. Compliance with this subdivision shall
entitle the trustee to the benefit of the presumption found in
Section 641 of the Evidence Code.
   (d) The violation of this section shall make the violator liable
to the person affected by the violation for all damages which that
person may sustain by reason of the violation, and shall require that
the violator forfeit to that person the sum of  five hundred
dollars ($500)   one thousand dollars ($1,000)  .
   (e) (1) The trustee, beneficiary, or mortgagee may charge a
reasonable fee to the trustor or mortgagor, or the owner of the land,
as the case may be, for all services involved in the preparation,
execution, and recordation of the full reconveyance, including, but
not limited to, document preparation and forwarding services rendered
to effect the full reconveyance, and, in addition, may collect
official fees. This fee may be made payable no earlier than the
opening of a bona fide escrow or no more than 60 days prior to the
full satisfaction of the obligation secured by the deed of trust or
mortgage.
   (2) If the fee charged pursuant to this subdivision does not
exceed forty-five dollars ($45), the fee is conclusively presumed to
be reasonable.
   (3) The fee described in paragraph (1) may not be charged unless
demand for the fee was included in the payoff demand statement
described in Section 2943.
   (f) For purposes of this section, "original" may include an
optically imaged reproduction when the following requirements are
met:
   (1) The trustee receiving the request for reconveyance and
executing the reconveyance as provided in subdivision (b) is an
affiliate or subsidiary of the beneficiary or an affiliate or
subsidiary of the assignee of the beneficiary, respectively.
   (2) The optical image storage media used to store the document
shall be nonerasable write once, read many (WORM) optical image media
that does not allow changes to the stored document.
   (3) The optical image reproduction shall be made consistent with
the minimum standards of quality approved by either the National
Institute of Standards and Technology or the Association for
Information and Image Management.
   (4) Written authentication identifying the optical image
reproduction as an unaltered copy of the note, deed of trust, or
mortgage shall be stamped or printed on the optical image
reproduction.
   (g) No fee or charge may be imposed on the trustor in connection
with, or relating to, any act described in this section except as
expressly authorized by this section.
   (h) The amendments to this section enacted at the 1999-2000
Regular Session shall apply only to a mortgage or an obligation
secured by a deed of trust that is satisfied on or after January 1,
2001.
   (i) (1) In any action filed before January 1, 2002, that is
dismissed as a result of the amendments to this section enacted at
the 2001-02 Regular Session, the plaintiff shall not be required to
pay the defendant's costs.
   (2) Any claimant, including a claimant in a class action lawsuit,
whose claim is dismissed or barred as a result of the amendments to
this section enacted at the 2001-02 Regular Session, may, within 6
months of the dismissal or barring of the action or claim, file or
refile a claim for actual damages occurring before January 1, 2002,
that were proximately caused by a time lapse between loan
satisfaction and the completion of the beneficiary's obligations as
required under paragraph (1) of subdivision (b). In any action
brought under this section, the defendant may be found liable for
actual damages, but may not be found liable for any civil penalty
authorized by  Section 2941   this section 
.
   (j) Notwithstanding any other penalties, if a beneficiary collects
a fee for reconveyance and thereafter has knowledge, or should have
knowledge, that no reconveyance has been recorded, the beneficiary
shall cause to be recorded the reconveyance, or in the event a
release of obligation is earlier and timely recorded, the beneficiary
shall refund to the trustor the fee charged to perform the
reconveyance. Evidence of knowledge includes, but is not limited to,
notice of a release of obligation pursuant to paragraph (3) of
subdivision (b). 
  SECTION 1.    Section 10242.6 of the Business and
Professions Code is amended to read:
   10242.6.  (a) The principal and accrued interest on any loan
secured by a mortgage or deed of trust on real property containing
only a single-family, owner-occupied dwelling may be prepaid in whole
or in part at any time without a prepayment charge.
   (b) As used in this section, "owner-occupied dwelling" means a
dwelling which will be owned and occupied by a signatory to the
mortgage or deed of trust secured by the dwelling within 90 days of
the execution of the mortgage or deed of trust.  
  SEC. 2.    Section 2954.9 of the Civil Code is
amended to read:
   2954.9.  Where the original principal obligation is a loan for
residential property of four units or less, the borrower under any
note or evidence of indebtedness secured by a deed of trust or
mortgage or any other lien on real property shall be entitled to
prepay the whole or any part of the balance due, together with
accrued interest, at any time without a prepayment charge.