BILL NUMBER: SB 708 AMENDED
BILL TEXT
AMENDED IN SENATE JANUARY 4, 2012
AMENDED IN SENATE MAY 31, 2011
AMENDED IN SENATE MAY 10, 2011
AMENDED IN SENATE APRIL 12, 2011
INTRODUCED BY Senator Corbett
FEBRUARY 18, 2011
An act to add Division 3.5 (commencing with Section
12500) to, and to repeal Chapter 3.5 (commencing with Section
12520.5) of Division 3.5 of, the Financial Code, relating to debt
settlement amend Sections 2923.5, 2923.6,
2924.8, and 2929.3 of the Civil Code, and to amend Section
1161b of the Code of Civil Procedure, relating to mortgages .
LEGISLATIVE COUNSEL'S DIGEST
SB 708, as amended, Corbett. Debt Settlement Consumer
Protection Act. Residential mortgage loans: foreclosure
procedures.
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 comply with certain procedures, including recording
a notice of default, and mailing the notice of default to the
mortgagor or trustor. Existing law, until January 1, 2013, imposes
additional requirements on mortgagees, trustees, beneficiaries, and
authorized agents for residential mortgage loans made from January 1,
2003, to December 31, 2007, inclusive, including prohibiting the
filing of a notice of default on a mortgage or deed of trust secured
by owner-occupied real property until 30 days after the borrower is
contacted or 30 days after satisfying due diligence requirements to
contact the borrower, as specified. Existing law, until January 1,
2013, gives a tenant or subtenant in possession of a rental housing
unit, at the time the property is sold in foreclosure, 60 days to
remove himself or herself from the property. Existing law requires a
trustee or authorized representative to post a notice on the property
to be sold that contains specified information relating to the
rights of the resident of the property, and makes it a crime to tear
down the notice within 72 hours of the time the notice is posted.
This bill would extend the operation of all of the provisions
specified above to January 1, 2018.
By extending the operative period of a crime, the bill would
impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Existing law, the Check Sellers, Bill Payers and Proraters Law,
provides for licensure and regulation by the Commissioner of
Corporations of persons engaged in, among other activities, the
business of receiving money as an agent of an obligor for the purpose
of paying bills, invoices, or accounts for the obligor.
This bill would enact the Debt Settlement Consumer Protection Act
and provide for the registration, licensure, and regulation by the
commissioner of debt settlement providers, defined as persons or
entities engaging in, or holding themselves out as engaging in, the
business of providing debt settlement services, as defined, to
California consumers in exchange for any fee or compensation. The
bill would provide for the registration of these persons by the
commissioner until January 1, 2014, and thereafter would require
these persons to obtain a license from the commissioner. The bill
would establish criteria for the registration of a person by the
commissioner to, or for the issuance by the commissioner of a license
to, engage in debt settlement services, would require an application
for registration or licensure to contain specified information and
include evidence of a surety bond, and would require specified fees
to be paid for registration or a license. The bill would require a
license to be renewed biennially and would make a person who
knowingly provides false information in an application for licensure
subject to a civil penalty in a specified amount. The bill would
prohibit a debt settlement provider from entering into an agreement
with a consumer for debt settlement services unless the provider
retains on file specified written determinations, and provides a copy
to the consumer, that includes an analysis indicating that the debt
settlement program is suitable for the consumer and that the consumer
can reasonably expect to receive a tangible net benefit from the
program. The bill would require specified disclosures from a provider
to the consumer before entering into an agreement for debt
settlement services. The bill would require a consumer entering into
a debt settlement services agreement to sign and date a specified
consumer notice and rights form. The bill would specify required
contents of debt settlement services agreements and would provide
that a consumer has the right to terminate an agreement at any time
through oral, written, or electronic notice to a provider. The bill
would prohibit a provider from engaging in specified practices and
would regulate the fees and charges imposed by a provider. The bill
would authorize an injured consumer to recover specified damages from
a provider that violates the bill's provisions and would make a
violation of the bill's provisions a crime and subject to specified
civil penalties. The bill would make a provider liable for any
conduct of a person to whom the provider has delegated any of its
duties or obligations if the person's conduct violates the bill's
provisions. Because this bill would create a new crime, it would
impose a state-mandated local program. The bill would authorize the
commissioner to enforce these provisions.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 2923.5 of the Civil
Code 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. 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).
(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 borrower'
s 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, 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 2018 , and as of that date is
repealed, unless a later enacted statute, that is enacted before
January 1, 2013 2018 , deletes or
extends that date.
SEC. 2. Section 2923.6 of the Civil
Code is amended to read:
2923.6. (a) The Legislature finds and declares that any duty
servicers may have to maximize net present value under their pooling
and servicing agreements is owed to all parties in a loan pool, or to
all investors under a pooling and servicing agreement, not to any
particular party in the loan pool or investor under a polling and
servicing agreement, and that a servicer acts in the best interests
of all parties to the loan pool or investors in the pooling and
servicing agreement if it agrees to or implements a loan modification
or workout plan for which both of the following apply:
(1) The loan is in payment default, or payment default is
reasonably foreseeable.
(2) Anticipated recovery under the loan modification or workout
plan exceeds the anticipated recovery through foreclosure on a net
present value basis.
(b) It is the intent of the Legislature that the mortgagee,
beneficiary, or authorized agent offer the borrower a loan
modification or workout plan if such a modification or plan is
consistent with its contractual or other authority.
(c) This section shall remain in effect only until January 1,
2013 2018 , and as of that date is
repealed, unless a later enacted statute, that is enacted before
January 1, 2013 2018 , deletes or
extends that date.
SEC. 3. Section 2924.8 of the Civil
Code is amended to read:
2924.8. (a) Upon posting a notice of sale pursuant to Section
2924f, a trustee or authorized agent shall also post the following
notice, in the manner required for posting the notice of sale on the
property to be sold, and a mortgagee, trustee, beneficiary, or
authorized agent, concurrently with the mailing of the notice of sale
pursuant to Section 2924b, shall send by first-class mail in an
envelope addressed to the "Resident of property subject to
foreclosure sale" the following notice in English and the languages
described in Section 1632: "Foreclosure process has begun on this
property, which may affect your right to continue to live in this
property. Twenty days or more after the date of this notice, this
property may be sold at foreclosure. If you are renting this
property, the new property owner may either give you a new lease or
rental agreement or provide you with a 60-day eviction notice.
However, other laws may prohibit an eviction in this circumstance or
provide you with a longer notice before eviction. You may wish to
contact a lawyer or your local legal aid or housing counseling agency
to discuss any rights you may have."
(b) It shall be an infraction to tear down the notice described in
subdivision (a) within 72 hours of posting. Violators shall be
subject to a fine of one hundred dollars ($100).
(c) A state government entity shall make available translations of
the notice described in subdivision (a) which may be used by a
mortgagee, trustee, beneficiary, or authorized agent to satisfy the
requirements of this section.
(d) This section shall only apply to loans secured by residential
real property, and if the billing address for the mortgage note is
different than the property address.
(e) This section shall remain in effect only until January 1,
2013 2018 , and as of that date is
repealed, unless a later enacted statute, that is enacted before
January 1, 2013 2018 , deletes or
extends that date.
SEC. 4. Section 2929.3 of the Civil
Code is amended to read:
2929.3. (a) (1) A legal owner shall maintain vacant residential
property purchased by that owner at a foreclosure sale, or acquired
by that owner through foreclosure under a mortgage or deed of trust.
A governmental entity may impose a civil fine of up to one thousand
dollars ($1,000) per day for a violation. If the governmental entity
chooses to impose a fine pursuant to this section, it shall give
notice of the alleged violation, including a description of the
conditions that gave rise to the allegation, and notice of the entity'
s intent to assess a civil fine if action to correct the violation is
not commenced within a period of not less than 14 days and completed
within a period of not less than 30 days. The notice shall be mailed
to the address provided in the deed or other instrument as specified
in subdivision (a) of Section 27321.5 of the Government Code, or, if
none, to the return address provided on the deed or other
instrument.
(2) The governmental entity shall provide a period of not less
than 30 days for the legal owner to remedy the violation prior to
imposing a civil fine and shall allow for a hearing and opportunity
to contest any fine imposed. In determining the amount of the fine,
the governmental entity shall take into consideration any timely and
good faith efforts by the legal owner to remedy the violation. The
maximum civil fine authorized by this section is one thousand dollars
($1,000) for each day that the owner fails to maintain the property,
commencing on the day following the expiration of the period to
remedy the violation established by the governmental entity.
(3) Subject to the provisions of this section, a governmental
entity may establish different compliance periods for different
conditions on the same property in the notice of alleged violation
mailed to the legal owner.
(b) For purposes of this section, "failure to maintain" means
failure to care for the exterior of the property, including, but not
limited to, permitting excessive foliage growth that diminishes the
value of surrounding properties, failing to take action to prevent
trespassers or squatters from remaining on the property, or failing
to take action to prevent mosquito larvae from growing in standing
water or other conditions that create a public nuisance.
(c) Notwithstanding subdivisions (a) and (b), a governmental
entity may provide less than 30 days' notice to remedy a condition
before imposing a civil fine if the entity determines that a specific
condition of the property threatens public health or safety and
provided that notice of that determination and time for compliance is
given.
(d) Fines and penalties collected pursuant to this section shall
be directed to local nuisance abatement programs.
(e) A governmental entity may not impose fines on a legal owner
under both this section and a local ordinance.
(f) These provisions shall not preempt any local ordinance.
(g) This section shall only apply to residential real property.
(h) The rights and remedies provided in this section are
cumulative and in addition to any other rights and remedies provided
by law.
(i) This section shall remain in effect only until January 1,
2013 2018 , and as of that date is
repealed, unless a later enacted statute, that is enacted before
January 1, 2013 2018 , deletes or
extends that date.
SEC. 5 . Section 1161b of
the Code of Civil Procedure is
amended to read:
1161b. (a) Notwithstanding Section 1161a, a tenant or subtenant
in possession of a rental housing unit at the time the property is
sold in foreclosure shall be given 60 days' written notice to quit
pursuant to Section 1162 before the tenant or subtenant may be
removed from the property as prescribed in this chapter.
(b) This section shall not apply if any party to the note remains
in the property as a tenant, subtenant, or occupant.
(c) This section shall remain in effect only until January 1,
2013 2018 , and as of that date is
repealed, unless a later enacted statute, that is enacted before
January 1, 2013 2018 , deletes or
extends that date.
SEC. 6. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution. All matter omitted in this version of
the bill appears in the bill as amended in the Senate, May 31, 2011.
(JR11)