Amended in Senate March 28, 2016

Senate BillNo. 1150


Introduced by Senator Leno

February 18, 2016


An act to add Section 2920.7 to the Civil Code, relating to mortgages and deeds of trust.

LEGISLATIVE COUNSEL’S DIGEST

SB 1150, as amended, Leno. Mortgages and deeds of trust: mortgage servicers and lenders: successors in interest.

Existing law imposes various requirements to be satisfied prior to exercising a power of sale under a mortgage or deed of trust.begin insert Existing law gives a borrower, as defined, various rights and remedies against a mortgage servicer, mortgagee, trustee, beneficiary, and authorized agent in regards to foreclosure prevention alternatives, as defined, including loan modifications, which is commonly referred to as being part of the California Homeowner Bill of Rights.end insert Existing law defines a mortgage servicer as a person or entity who directly services a loan, or is responsible for interacting with the borrower, and managing the loan account on a daily basis, as specified.

This bill would prohibit a mortgage servicer or lender, as defined, upon notification that a borrower has died, from recording a notice of defaultbegin delete for at least 30 days afterend deletebegin insert end insertbegin insertuntil the mortgage servicer or lender does certain things, includingend insert requesting reasonable documentation of the death of the borrower frombegin delete the successor in interest, as defined. The bill would require the mortgage servicer or lender to, among other things, contact the successor in interest in person or by telephone in order to assess the successor’s financial situation and explore options for the successor to avoid foreclosure, provide the successor in interest with information about loan assumption options and foreclosure avoidance programs, and allow a successor in interest to simultaneously apply to assume the deceased borrower’s loan and to apply to receive a loan modification. The bill would authorize a successor in interest or the Attorney General to bring an action to enforce these provisions, as provided.end deletebegin insert a claimant, which is someone claiming to be a successor in interest, that is not a party to the loan or promissory note and providing a reasonable period of time for the claimant to present the requested documentation. The bill would deem a claimant a successor in interest, as defined, upon receipt by a mortgage servicer or lender of the reasonable documentation regarding the status of the claimant. The bill would require a mortgage servicer or lender, within 10 days of a claimant being deemed a successor in interest, to provide the successor in interest with information about the loan, as specified. The bill would require a mortgage servicer or lender to allow a successor in interest to either assume the deceased borrowerend insertbegin insert’s loan, except as specified, or to apply for foreclosure prevention alternatives on an assumable loan, as specified. The bill would provide that a successor in interest who assumes an assumable loan and wishes to apply for a foreclosure avoidance alternative has the same rights and remedies as a borrower under specified provisions of the California Homeowner Bill of Rights. The bill would authorize a successor in interest to bring an action for injunctive relief to enjoin a material violation of specified provisions of law and would authorize a court to award a prevailing successor in interest reasonable attorney’s fees and costs for such an action. The bill would define terms for these purposes and make various findings and declarations.end insert

Vote: majority. Appropriation: no. Fiscal committee: begin deleteyes end deletebegin insertnoend insert. State-mandated local program: no.

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

P2    1begin insert

begin insertSECTION 1.end insert  

end insert
begin insert

The Legislature hereby declares all of the
2following:

end insert
begin insert

3
(a) Beginning in 2008, California faced a foreclosure crisis,
4with rapidly dropping home values and skyrocketing job losses.
5Indiscriminate foreclosure practices of major mortgage servicers
6compounded the problem as they created a labyrinth of red tape,
7lost documents, and erroneous information and then they started
P3    1foreclosure proceedings while borrowers and their families were
2in the middle of applying for a loan modification.

end insert
begin insert

3
(b) The California Legislature responded with a
4first-in-the-nation Homeowner Bill of Rights (HBOR), which
5requires mortgage servicers to provide borrowers a fair and
6transparent process, a single point of contact, and the opportunity
7to finish applying for a loan modification before foreclosure
8proceedings can start. HBOR stabilized families, neighborhoods,
9and local communities by slowing down indiscriminate
10foreclosures.

end insert
begin insert

11
(c) Now, however, district attorneys and legal aid organizations
12are reporting an increasing number of cases in which mortgage
13servicers use a loophole in HBOR to foreclose on certain
14homeowners--people who survive the death of a borrower and
15have an ownership interest in the home but are not named on the
16mortgage loan. Most often, the “survivor” is the borrower’s spouse
17and is over 65 years of age.

end insert
begin insert

18
(d) When the surviving widow or widower, domestic partner,
19children, or other heirs attempt to obtain basic information about
20the loan from the servicer, they face the same kind of barriers and
21abuses--and, finally foreclosure--that convinced the Legislature
22to pass HBOR.

end insert
begin insert

23
(e) Home ownership is the primary avenue for most Americans
24to build generational wealth. Indiscriminate foreclosures on
25surviving heirs destroy a family’s ability to build for its financial
26future. Foreclosures also exacerbate the racial wealth gap--and
27overall wealth inequality--in society, and force seniors who want
28to “age in place” into the overheated rental market instead, with
29devastating health impacts.

end insert
begin insert

30
(f) Surviving heirs deserve the same transparency and
31opportunity to save their home as HBOR gave the original
32borrower. This act would stem a disturbing nationwide trend and
33help keep widows and widowers, children, and other survivors in
34their homes--without requiring mortgage servicers to do anything
35more than they already do for other homeowners.

end insert
36

begin deleteSECTION 1.end delete
37
begin insertSEC. 2.end insert  

Section 2920.7 is added to the Civil Code, to read:

38

2920.7.  

(a) Upon notificationbegin insert by someone claiming to be a
39successor in interestend insert
that a borrower has died, and wherebegin delete a
40successor in interestend delete
begin insert that claimantend insert is not a party to the loan or
P4    1promissory note, a mortgage servicer or lender shall not record a
2notice of default pursuant to Section 2924 untilbegin delete thatend deletebegin insert the mortgageend insert
3 servicer or lender doesbegin delete allend deletebegin insert bothend insert of the following:

4(1) Requests reasonable documentation of the death of the
5borrower from thebegin delete successor in interest,end deletebegin insert claimant,end insert including, but
6not limited to, a deathbegin delete certificationend deletebegin insert certificateend insert or other written
7evidence of the death of the borrower.begin insert A reasonable period of time
8shall be provided for the claimant to present this documentation,
9but no less than 30 days from the date of a written request by the
10mortgage servicerend insert
begin insert.end insert

11(2) Requests reasonable documentation of the status of a
12begin delete successor in interestend deletebegin insert claimantend insert as such, and thatbegin delete successor’send delete
13begin insert claimant’send insert interestbegin delete relation toend deletebegin insert inend insert the real property.begin insert A reasonable
14period of time shall be provided for the claimant to present this
15documentation, but no less than 90 days from the date of a written
16request by the mortgage servicer.end insert

begin delete

17(3) Allows at least 30 days after receiving the information in
18paragraph (1) before taking any further action on the loan.

19(4) Allows a successor in interest to simultaneously apply to
20assume the deceased borrower’s loan and to apply to receive a
21loan modification.

22(5) Provides the successor in interest with a single point of
23contact and provides the successor one or more direct means of
24communication with the single point of contact.

25(6) (A) Provides the successor in interest with information
26about loan assumption options and foreclosure avoidance programs.

27(B) The information in subparagraph (A) shall be provided in
28Spanish, Chinese, Tagalog, Vietnamese, and Korean and shall
29include a list of counselors certified by the United States
30Department of Housing and Urban Development (HUD) that the
31successor may contact for assistance.

32(7) (A) Contacts the successor in interest in person or by
33telephone in order to assess the successor’s financial situation and
34explore options for the successor to avoid foreclosure. During the
35initial contact, the mortgage servicer or lender shall advise the
36successor that he or she has the right to request a subsequent
37meeting and, if requested, the mortgage servicer or lender shall
38schedule the meeting to occur within 14 days. The assessment of
39the successor’s financial situation and discussion of options may
40occur during the first contact, or at the subsequent meeting
P5    1scheduled for that purpose. In either case, the successor shall be
2provided the toll-free telephone number made available by HUD
3to find a HUD-certified housing counseling agency. Any meeting
4may occur telephonically.

5(B) A mortgage servicer’s or lender’s loss mitigation personnel
6may participate by telephone during any contact required by this
7section.

8(C) A successor in interest may designate, with consent given
9in writing, a HUD-certified housing counseling agency, attorney,
10or other advisor to discuss with the mortgage servicer or lender,
11on the successor’s behalf, the successor’s financial situation and
12options for the successor to avoid foreclosure. That contact made
13at the direction of the successor shall satisfy the contact
14requirements of this paragraph. Any loan modification or workout
15plan offered at the meeting by the mortgage servicer or lender is
16subject to approval by the successor.

17(8) If a mortgage servicer or lender is unable to contact a
18successor in interest pursuant to paragraph (7), the mortgage
19servicer or lender shall alternatively do all of the following:

20(A) Attempt to contact a successor in interest by sending a
21first-class letter that includes the toll-free telephone number made
22available by HUD to find a HUD-certified housing counseling
23agency.

24(B) (i) After the letter has been sent, the mortgage servicer or
25lender shall attempt to contact the borrower by telephone at least
26three times at different hours and on different days. Telephone
27calls shall be made to the primary telephone number on file.

28(ii) A mortgage servicer or lender may attempt to contact a
29successor in interest using an automated system to dial successors
30in interest, provided that, if the telephone call is answered, the call
31is connected to a live representative of the mortgage servicer or
32lender.

33(iii) A mortgage servicer or lender satisfies the telephone contact
34requirements of this subparagraph if it determines, after attempting
35contact pursuant to this subparagraph, that the successor’s primary
36telephone number and secondary telephone number or numbers
37on file, if any, have been disconnected.

38(C) If the successor in interest does not respond within two
39weeks after the telephone call requirements of subparagraph (B)
P6    1have been satisfied, the mortgage servicer or lender shall then send
2a certified letter, with return receipt requested.

3(D) Provide a means for the successor in interest to contact it
4in a timely manner, including a toll-free telephone number that
5will provide access to a live representative during business hours.

6(E) Post a prominent link on the homepage of its Internet Web
7site, if any, to the following information:

8(i) Options that may be available to a successor in interest to
9avoid foreclosure, and instructions to a successor advising him or
10her on steps to take to explore those options.

11(ii) A list of financial documents successor in interest should
12collect and be prepared to present to the mortgage servicer or lender
13when discussing options for avoiding foreclosure.

14(iii) A toll-free telephone number for a successor in interest who
15wishes to discuss options for avoiding foreclosure with a mortgage
16servicer or lender.

17(iv) The toll-free telephone number made available by HUD to
18find a HUD-certified housing counseling agency.

end delete
begin insert

19
(b) (1) Upon receipt by the mortgage servicer of the reasonable
20documentation of the status of a claimant as successor in interest
21and that claimant’s relation to the real property, that claimant
22shall be deemed a “successor in interest.”

end insert
begin insert

23
(2) There may be more than one successor in interest.

end insert
begin insert

24
(3) Being a successor in interest under this section does not
25impose an affirmative duty on a mortgage servicer or lender or
26alter any obligation the mortgage servicer or lender has to provide
27a loan modification to the successor in interest. If a successor in
28interest assumes the loan, he or she may be required to otherwise
29qualify for available foreclosure prevention alternatives offered
30by the mortgage servicer or lender.

end insert
begin insert

31
(c) Within 10 days of a claimant being deemed a successor in
32interest pursuant to subdivision (b), a mortgage servicer or lender
33shall provide the successor in interest with information in writing
34about the loan. Such information shall include, at a minimum, loan
35balance, interest rate and interest reset dates and amounts, balloon
36payments if any, prepayment penalties if any, default or
37delinquency status, the monthly payment amount, and payoff
38amounts.

end insert
begin insert

39
(d) A mortgage servicer or lender shall allow a successor in
40interest to either:

end insert
begin insert

P7    1
(1) Assume the deceased borrower’s loan, unless such
2assumption is prohibited by the terms of the loan.

end insert
begin insert

3
(2) Where a successor in interest of an assumable loan also
4seeks a foreclosure prevention alternative, simultaneously apply
5to assume the loan and for a foreclosure prevention alternative
6that is offered by the loan lender or applicable loss mitigation
7rules. If the successor in interest qualifies for the foreclosure
8prevention alternative, the servicer or lender shall allow the
9successor in interest to assume the loan.

end insert
begin insert

10
(e) (1) A successor in interest who is eligible to assume a
11deceased borrower’s outstanding mortgage loan and wishes to
12apply for a foreclosure avoidance alternative in connection with
13that loan shall have all the same rights and remedies as a borrower
14under subdivision (a) of Section 2923.4 and under Sections 2923.5,
152923.55, 2923.6, 2923.7, 2924, 2924.6, 2924.9, 2924.10, 2924.11,
162924.12, 2924.15, 2924.17, 2924.18, 2924.19, and 2924.20. For
17the purposes of Section 2924.15, ”owner-occupied” means that
18the property was the principal residence of the deceased borrower
19and is security for a loan made for personal, family, or household
20purposes.

end insert
begin insert

21
(2) If a trustee’s deed upon sale has not been recorded, a
22successor in interest may bring an action for injunctive relief to
23enjoin a material violation of subdivision (a), (b), (c), or (d) of
24Section 2920.7. Any injunction shall remain in place and any
25trustee’s sale shall be enjoined until the court determines that the
26mortgage servicer or lender has corrected and remedied the
27violation or violations giving rise to the action for injunctive relief.
28An enjoined entity may move to dissolve an injunction based on a
29showing that the material violation has been corrected and
30remedied.

end insert
begin insert

31
(3) After a trustee’s deed upon sale has been recorded, a
32mortgage servicer or lender shall be liable to a successor in
33interest for actual economic damages pursuant to Section 3281
34resulting from a material violation of subdivision (a), (b), (c), or
35 (d) of Section 2920.7 by that mortgage servicer or lender where
36the violation was not corrected and remedied prior to the
37recordation of the trustee’s deed upon sale. If the court finds that
38the material violation was intentional or reckless, or resulted from
39willful misconduct by a mortgage servicer or lender the court may
P8    1award the successor in interest the greater of treble actual damages
2or statutory damages of fifty thousand dollars ($50,000).

end insert
begin insert

3
(4) A court may award a prevailing successor in interest
4reasonable attorney’s fees and costs in an action brought pursuant
5to this section. A successor in interest shall be deemed to have
6prevailed for purposes of this subdivision if the successor in interest
7obtained injunctive relief or damages pursuant to this section.

end insert
begin insert

8
(5) A mortgage servicer or lender shall not be liable for any
9violation that it has corrected and remedied prior to the
10 recordation of the trustee’s deed upon sale or that has been
11corrected and remedied by third parties working on its behalf prior
12to the recordation of the trustee’s deed upon sale.

end insert
begin insert

13
(f) Consistent with their general regulatory authority, and
14notwithstanding subdivisions (b) and (c) of Section 2924.18, the
15Department of Business Oversight and the Bureau of Real Estate
16may adopt regulations applicable to any entity or person under
17their respective jurisdictions that are necessary to carry out the
18purposes of this section.

end insert
begin insert

19
(g) The rights and remedies provided by this section are in
20addition to and independent of any other rights, remedies, or
21procedures under any other law. This section shall not be construed
22to alter, limit, or negate any other rights, remedies, or procedures
23provided by law.

end insert
begin delete

24(b)

end delete

25begin insert(f)end insert For purposes of this section, all of the following definitions
26shall apply:

27(1) “Lender” means a finance lender or broker licensed under
28the California Finance Lenders Law (Division 9 (commencing
29with Section 22000) of the Financial Code), a residential mortgage
30lender licensed under the California Residential Mortgage Lending
31Act (Division 20 (commencing with Section 50000) of the
32Financial Code), a commercial or industrial bank organized under
33the Banking Law (Division 1 (commencing with Section 99) of
34the Financial Code), a savings association organized under the
35Savings Association Law (Division 2 (commencing with Section
365000) of the Financial Code), and a credit union organized under
37the California Credit Union Law (Division 5 (commencing with
38Section 14000) of the Financial Code).

39(2) “Notification of the death of the mortgagor or trustor” means
40provision to the mortgage servicer of a death certificate or, if a
P9    1death certificate is not available, of other written evidence of the
2death of the mortgagor or trustor deemed sufficient by the mortgage
3servicer.

begin insert

4
(2) “Mortgage servicer or lender” includes a mortgagee,
5trustee, beneficiary, or authorized agent.

end insert

6(3) “Reasonable documentation” means copies of the following
7documents, as may be applicable, or, if the relevant documentation
8listed is not available, other written evidence of the person’s status
9as successor in interest to the real property that secures the
10mortgage or deed of trust deemed sufficient by the mortgage
11servicer:

12(A) In the case of a personal representative, letters as defined
13in Section 52 ofbegin insert theend insert Probate Code.

14(B) In the case of a surviving joint tenant, an affidavit of death
15of the joint tenant or a grant deed showing joint tenancy.

16(C) In the case of a surviving spouse where the real property
17was held as community property with right of survivorship, an
18affidavit of death of the spouse or a deed showing community
19property with right of survivorship.

20(D) In the case of a trustee of a trust, a certification of trust
21pursuant to Section 18100.5 of the Probate Code.

22(E) In the case of a beneficiary of a trust, relevant trust
23documents related to the beneficiary’s interest.

24(4) begin delete(A)end deletebegin deleteend delete“Successor in interest” means a natural person who
25provides the mortgage servicerbegin insert or lenderend insert with notification of the
26death of the mortgagor or trustor and reasonable documentation
27showing that the person is any of the following:

begin delete

28(i)

end delete

29begin insert(end insertbegin insertA)end insert The personal representative, as defined in Section 58 ofbegin insert theend insert
30 Probate Code, of the mortgagor’s or trustor’s estate.

begin insert

31
(B) The devisee, as defined in Section 34 of the Probate Code,
32or the heir, as defined in Section 44 of the Probate Code, of the
33real property that secures the mortgage or deed of trust.

end insert
begin insert

34
(C) The beneficiary of a Revocable Transfer on Death Deed,
35as defined in Section 5608 of the Probate Code.

end insert
begin delete

36(ii)

end delete

37begin insert(D)end insert The surviving joint tenant of the mortgagor or trustor.

begin delete

38(iii)

end delete

39begin insert(E)end insert The surviving spouse of the mortgagor or trustor if the real
40property that secures the mortgage or deed of trust was held as
P10   1community property with right of survivorship pursuant to Section
2682.1.

begin delete

3(iv)

end delete

4begin insert(F)end insert The trustee of the trust that owns the real property that
5secures the mortgage or deed of trust or the beneficiary of that
6trust.

begin delete

7(B) Designation of a successor in interest for purposes of this
8 subdivision does not impose an affirmative duty on a mortgage
9servicer or lender to offer a loan modification to, or accept an
10assumption of the loan by, the successor in interest and does not
11alter any obligation the mortgage servicer or lender may otherwise
12have to accept an assumption of the loan by the successor in
13interest. If a successor in interest assumes the loan, he or she may
14be required to otherwise qualify for available foreclosure
15prevention alternatives offered by the mortgage servicer or lender.

16(c) (1) (A) If a trustee’s deed upon sale has not been recorded,
17a successor in interest may bring an action for injunctive relief to
18enjoin a material violation of this section.

19(B) Any injunction shall remain in place and any trustee’s sale
20shall be enjoined until the court determines that the mortgage
21servicer or lender has corrected and remedied the violation or
22violations giving rise to the action for injunctive relief. An enjoined
23entity may move to dissolve an injunction based on a showing that
24the material violation has been corrected and remedied.

25(2) After a trustee’s deed upon sale has been recorded, a
26mortgage servicer or lender shall be liable to a successor in interest
27for actual economic damages pursuant to Section 3281 resulting
28from a material violation of this section.

29(3) The Attorney General may bring a civil action in the name
30of the people to obtain appropriate equitable and declaratory relief
31whenever the Attorney General has reasonable cause to believe
32that a violation of this section has occurred.

end delete
33begin insert

begin insertSEC. 3.end insert  

end insert
begin insert

The provisions of this act are severable. If any
34provision of this act or its application is held invalid, that invalidity
35shall not affect other provisions or applications that can be given
36effect without the invalid provision or application.

end insert


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