Amended in Assembly March 28, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1770

Introduced by Assembly Member Dababneh

February 14, 2014

An act to begin delete amend Section 1624 of the Civil Code, relating to contracts. end delete begin insert add Section 2941.8 to the Civil Code, relating to real property. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 1770, as amended, Dababneh. begin delete Contracts: statute of frauds. end delete begin insert Real property liens: request to terminate home equity line of credit. end insert

begin insert

Under existing law, within 30 days after a mortgage has been satisfied, the mortgagee or the assignee of the mortgagee is required to execute a certificate of the discharge of the mortgage, as specified, and to deliver, upon the request of the mortgagor or another authorized person, the original note and mortgage to the person making the request.

end insert begin insert

Existing law requires a creditor to make certain disclosures to a consumer applying for a home equity loan, as defined. Existing federal law relating to lending practices specifies certain circumstances under which a lender may reduce or terminate an existing home equity line of credit.

end insert begin insert

This bill would require a lender, upon receipt of a request from an authorized person, as defined, to terminate a borrower’s revolving line of credit secured by a mortgage or deed of trust, also referred to as a home equity line of credit, when the secured property is in escrow. This bill would prescribe the contents of this written request, and would require the authorized person to provide a copy of the written request to the borrower, along with a notice to the borrower relating to the effect of the termination of the home equity line of credit.

end insert begin delete

Existing law provides that certain contracts are invalid unless the contract, or some note or memorandum of the contract, is in writing and subscribed by the party to be charged.

end delete begin delete

This bill would make a technical, nonsubstantive change to this provision.

end delete

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 2941.8 is added to the end insert begin insert Civil Code end insert begin insert , to read: end insert

begin insert

begin insert 2941.8. end insert   

(a) Upon receipt of a written request from an
authorized person to terminate a revolving line of credit secured
by a mortgage or deed of trust, the lender shall do all of the
following:

(1) Terminate the borrower’s right to obtain advances under
the borrower’s revolving line of credit.

(2) Apply all sums subsequently paid by or on behalf of the
borrower in connection with the revolving line of credit to the
satisfaction of the revolving line of credit and other sums secured
by the related revolving line security instrument.

(3) When the balance of all outstanding sums secured by the
related revolving line security instrument becomes zero, satisfy
the related revolving line security instrument.

(b) No particular phrasing is required in the written request
provided to the lender to terminate an equity line of credit, but
shall contain at least the following:

(1) The name of each borrower.

(2) The account number of the equity line of credit.

(3) The street address of the property, if appropriate.

(c) For purposes of this section “authorized person” includes
a licensed title insurance company, underwritten title company,
or controlled escrow company, as defined in Sections 12340.4,
12340.5, and 12340.6, respectively, of the Insurance Code, or an
escrow company as used in the Financial Code.

(d) For purposes of this section, “receipt of a written request”
includes confirmation by fax, email, or paper copy sent by certified
mail.

(e) A written request to terminate a revolving line of credit
secured by a mortgage or deed of trust from an authorized person
shall be provided to the borrower and be accompanied by the
following language:

“NOTICE TO BORROWER”

You have a home equity line of credit with _____, secured by a
mortgage or deed of trust, and lien, on real property located at
______________.

Our company is handling the escrow for your transaction. We
are sending the attached notice to your lender, requesting that
your home equity line of credit be terminated. Our reason for
making this request is: ________________________.

When your lender receives our request, your lender will
terminate and close your home equity line of credit, and you will
no longer be able to obtain credit advances. However, termination
of your home equity line of credit does not release you from liability
for amounts owed under the account. All sums your lender
subsequently receives in connection with your home equity line of
credit, including any sums we may send to your lender, shall be
applied by your lender to the satisfaction of your account. When
the balance of your account becomes zero, your lender will be
required to cancel the mortgage or deed of trust as a matter of
public record.

If you have questions about this notice or our action, please
contact ___________ by calling us at __________________ or
writing to us at ______________.

__________________________

(Name of Company)

end insert

begin delete

SECTION 1.  

Section 1624 of the Civil Code is amended to
read:

1624.  

(a) The following contracts are invalid, unless they, or
some note or memorandum thereof, are in writing and subscribed
by the party to be charged or by the party’s agent:

(1) An agreement that by its terms is not to be performed within
a year from the making thereof.

(2) A special promise to answer for the debt, default, or
miscarriage of another, except in the cases provided for in Section
2794.

(3) An agreement for the leasing for a longer period than one
year, or for the sale of real property, or of an interest therein; such
an agreement, if made by an agent of the party sought to be
charged, is invalid, unless the authority of the agent is in writing,
subscribed by the party sought to be charged.

(4) An agreement authorizing or employing an agent, broker,
or any other person to purchase or sell real estate, or to lease real
estate for a longer period than one year, or to procure, introduce,
or find a purchaser or seller of real estate or a lessee or lessor of
real estate where the lease is for a longer period than one year, for
compensation or a commission.

(5) An agreement that by its terms is not to be performed during
the lifetime of the promisor.

(6) An agreement by a purchaser of real property to pay an
indebtedness secured by a mortgage or deed of trust upon the
property purchased, unless assumption of the indebtedness by the
purchaser is specifically provided for in the conveyance of the
property.

(7) A contract, promise, undertaking, or commitment to loan
money or to grant or extend credit, in an amount greater than one
hundred thousand dollars ($100,000), not primarily for personal,
family, or household purposes, made by a person engaged in the
business of lending or arranging for the lending of money or
extending credit. For purposes of this section, a contract, promise,
undertaking or commitment to loan money secured solely by
residential property consisting of one to four dwelling units shall
be deemed to be for personal, family, or household purposes.

(b) Notwithstanding paragraph (1) of subdivision (a):

(1) An agreement or contract that is valid in other respects and
is otherwise enforceable is not invalid for lack of a memorandum,
note, or other writing and is enforceable by way of action or
defense, provided that the agreement or contract is a qualified
financial contract as defined in paragraph (2) and (A) there is, as
provided in paragraph (3), sufficient evidence to indicate that a
contract has been made or (B) the parties thereto by means of a
prior or subsequent written contract, have agreed to be bound by
the terms of the qualified financial contract from the time they
reached agreement (by telephone, by exchange of electronic
messages, or otherwise) on those terms.

(2) For purposes of this subdivision, a “qualified financial
contract” means an agreement as to which each party thereto is
other than a natural person and that is any of the following:

(A) For the purchase and sale of foreign exchange, foreign
currency, bullion, coin or precious metals on a forward, spot,
next-day value or other basis.

(B) A contract (other than a contract for the purchase of a
commodity for future delivery on, or subject to the rules of, a
contract market or board of trade) for the purchase, sale, or transfer
of any commodity or any similar good, article, service, right, or
interest that is presently or in the future becomes the subject of a
dealing in the forward contract trade, or any product or byproduct
thereof, with a maturity date more than two days after the date the
contract is entered into.

(C) For the purchase and sale of currency, or interbank deposits
denominated in United States dollars.

(D) For a currency option, currency swap, or cross-currency
rate swap.

(E) For a commodity swap or a commodity option (other than
an option contract traded on, or subject to the rules of a contract
market or board of trade).

(F) For a rate swap, basis swap, forward rate transaction, or an
interest rate option.

(G) For a security-index swap or option, or a security or
securities price swap or option.

(H) An agreement that involves any other similar transaction
relating to a price or index (including, without limitation, any
transaction or agreement involving any combination of the
foregoing, any cap, floor, collar, or similar transaction with respect
to a rate, commodity price, commodity index, security or securities
price, security index, other price index, or loan price).

(I) An option with respect to any of the foregoing.

(3) There is sufficient evidence that a contract has been made
in any of the following circumstances:

(A) There is evidence of an electronic communication
(including, without limitation, the recording of a telephone call or
the tangible written text produced by computer retrieval),
admissible in evidence under the laws of this state, sufficient to
indicate that in the communication a contract was made between
the parties.

(B) A confirmation in writing sufficient to indicate that a
contract has been made between the parties and sufficient against
the sender is received by the party against whom enforcement is
sought no later than the fifth business day after the contract is made
(or any other period of time that the parties may agree in writing)
and the sender does not receive, on or before the third business
day after receipt (or the other period of time that the parties may
agree in writing), written objection to a material term of the
confirmation. For purposes of this subparagraph, a confirmation
or an objection thereto is received at the time there has been an
actual receipt by an individual responsible for the transaction or,
if earlier, at the time there has been constructive receipt, which is
the time actual receipt by that individual would have occurred if
the receiving party, as an organization, had exercised reasonable
diligence. For the purposes of this subparagraph, a “business day”
is a day on which both parties are open and transacting business
of the kind involved in that qualified financial contract that is the
subject of confirmation.

(C) The party against whom enforcement is sought admits in
its pleading, testimony, or otherwise in court that a contract was
made.

(D) There is a note, memorandum, or other writing sufficient
to indicate that a contract has been made, signed by the party
against whom enforcement is sought or by its authorized agent or
broker.

For purposes of this paragraph, evidence of an electronic
communication indicating the making in that communication of a
contract, or a confirmation, admission, note, memorandum, or
writing is not insufficient because it omits or incorrectly states one
or more material terms agreed upon, as long as the evidence
provides a reasonable basis for concluding that a contract was
made.

(4) For purposes of this subdivision, the tangible written text
produced by telex, telefacsimile, computer retrieval, or other
process by which electronic signals are transmitted by telephone
or otherwise shall constitute a writing, and any symbol executed
or adopted by a party with the present intention to authenticate a
writing shall constitute a signing. The confirmation and notice of
objection referred to in subparagraph (B) of paragraph (3) may be
communicated by means of telex, telefacsimile, computer, or other
similar process by which electronic signals are transmitted by
telephone or otherwise, provided that a party claiming to have
communicated in that manner shall, unless the parties have
otherwise agreed in writing, have the burden of establishing actual
or constructive receipt by the other party as set forth in
subparagraph (B) of paragraph (3).

(c) This section does not apply to leases subject to Division 10
(commencing with Section 10101) of the Commercial Code.

end delete