BILL NUMBER: SB 1150 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 10, 2016
AMENDED IN SENATE APRIL 26, 2016
AMENDED IN SENATE MARCH 28, 2016
INTRODUCED BY Senators Leno and Galgiani
( Coauthor: Senator
Wieckowski )
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.
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. 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, upon notification
that a borrower has died, from recording a notice of default until
the mortgage servicer does certain things, including requesting
reasonable documentation of the death of the borrower from a
claimant, who is someone claiming to be a successor in interest, who
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 of the
reasonable documentation regarding the status of the claimant. The
bill would require a mortgage servicer, 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 to allow a successor in interest to
either assume the deceased borrower'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 prevention 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 the action. The bill would define terms for these purposes
and make various findings and declarations.
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. The Legislature hereby declares all of the following:
(a) Beginning in 2008, California faced a foreclosure crisis, with
rapidly dropping home values and skyrocketing job losses.
Indiscriminate foreclosure practices of major mortgage servicers
compounded the problem as they created a labyrinth of red tape, lost
documents, and erroneous information and then they started
foreclosure proceedings while borrowers and their families were in
the middle of applying for a loan modification.
(b) The California Legislature responded with a
first-in-the-nation Homeowner Bill of Rights (HBOR), which requires
mortgage servicers to provide borrowers a fair and transparent
process, a single point of contact, and the opportunity to finish
applying for a loan modification before foreclosure proceedings can
start. HBOR stabilized families, neighborhoods, and local communities
by slowing down indiscriminate foreclosures.
(c) Now, however, district attorneys and legal aid organizations
are reporting an increasing number of cases in which mortgage
servicers use a loophole in HBOR to foreclose on certain
homeowners--people who survive the death of a borrower and have an
ownership interest in the home but are not named on the mortgage
loan. Most often, the "survivor" is the borrower's spouse and is over
65 years of age.
(d) When the surviving widow or widower, domestic partner,
children, or other heirs attempt to obtain basic information about
the loan from the servicer, they face the same kind of barriers and
abuses--and, finally foreclosure--that convinced the Legislature to
pass HBOR.
(e) Home ownership is the primary avenue for most Americans to
build generational wealth. Indiscriminate foreclosures on surviving
heirs destroy a family's ability to build for its financial future.
Foreclosures also exacerbate the racial wealth gap--and overall
wealth inequality--in society, and force seniors who want to "age in
place" into the overheated rental market instead, with devastating
health impacts.
(f) Surviving heirs deserve the same transparency and opportunity
to save their home as HBOR gave the original borrower. This act would
stem a disturbing nationwide trend and help keep widows and
widowers, children, and other survivors in their homes--without
requiring mortgage servicers to do anything more than they already do
for other homeowners.
SEC. 2. Section 2920.7 is added to the Civil Code, to read:
2920.7. (a) Upon notification by someone claiming to be a
successor in interest that a borrower has died, and where that
claimant is not a party to the loan or promissory note, a mortgage
servicer shall not record a notice of default pursuant to Section
2924 until the mortgage servicer does both of the following:
(1) Requests reasonable documentation of the death of the borrower
from the claimant, including, but not limited to, a death
certificate or other written evidence of the death of the borrower. A
reasonable period of time shall be provided for the claimant to
present this documentation, but no less than 30 days from the date of
a written request by the mortgage servicer.
(2) Requests reasonable documentation from the claimant regarding
the status of that claimant as a successor in interest in the real
property. A reasonable period of time shall be provided for the
claimant to present this documentation, but no less than 90 days from
the date of a written request by the mortgage servicer.
(b) (1) Upon receipt by the mortgage servicer of the reasonable
documentation of the status of a claimant as successor in interest
and that claimant's relation to the real property, that claimant
shall be deemed a "successor in interest."
(2) There may be more than one successor in interest. A
mortga ge servicer shall apply the provisions of this
section to multiple successors in interest in accordance with the
terms of the loan and federal and state laws and regulations.
(3) Being a successor in interest under this section does not
impose an affirmative duty on a mortgage servicer or alter any
obligation the mortgage servicer has to provide a loan modification
to the successor in interest. If a successor in interest assumes the
loan, he or she may be required to otherwise qualify for available
foreclosure prevention alternatives offered by the mortgage servicer.
(c) Within 10 days of a claimant being deemed a successor in
interest pursuant to subdivision (b), a mortgage servicer shall
provide the successor in interest with information in writing about
the loan. This information shall include, at a minimum, loan balance,
interest rate and interest reset dates and amounts, balloon payments
if any, prepayment penalties if any, default or delinquency status,
the monthly payment amount, and payoff amounts.
(d) A mortgage servicer shall allow a successor in interest to
either:
(1) Assume the deceased borrower's loan, unless such assumption is
prohibited by the terms of the loan.
(2) Where a successor in interest of an assumable loan also seeks
a foreclosure prevention alternative, simultaneously apply to assume
the loan and for a foreclosure prevention alternative that is offered
by the loan lender or applicable loss mitigation rules. If the
successor in interest qualifies for the foreclosure prevention
alternative, the servicer shall allow the successor in interest to
assume the loan.
(e) (1) A successor in interest who is eligible to assume a
deceased borrower's outstanding mortgage loan and wishes to apply for
a foreclosure prevention alternative in connection with that loan
shall have all the same rights and remedies as a borrower under
subdivision (a) of Section 2923.4 and under Sections 2923.6, 2923.7,
2924, 2924.9, 2924.10, 2924.11, 2924.12, 2924.15, 2924.17, 2924.18,
and 2924.19. For the purposes of Section 2924.15, "owner-occupied"
means that the property was the principal residence of the deceased
borrower and is security for a loan made for personal, family, or
household purposes.
(2) If a trustee's deed upon sale has not been recorded, a
successor in interest may bring an action for injunctive relief to
enjoin a material violation of subdivision (a), (b), (c), or
(d) of Section 2920.7. (d). Any injunction
shall remain in place and any trustee's sale shall be enjoined until
the court determines that the mortgage servicer has corrected and
remedied the violation or violations giving rise to the action for
injunctive relief. An enjoined entity may move to dissolve an
injunction based on a showing that the material violation has been
corrected and remedied.
(3) After a trustee's deed upon sale has been recorded, a mortgage
servicer shall be liable to a successor in interest for actual
economic damages pursuant to Section 3281 resulting from a material
violation of subdivision (a), (b), (c), or (d) of Section 2920.7 by
that mortgage servicer if the violation was not corrected and
remedied prior to the recordation of the trustee's deed upon sale. If
the court finds that the material violation was intentional or
reckless, or resulted from willful misconduct by a mortgage servicer
the court may award the successor in interest the greater of treble
actual damages or statutory damages of fifty thousand dollars
($50,000).
(4) A court may award a prevailing successor in interest
reasonable attorney's fees and costs in an action brought pursuant to
this section. A successor in interest shall be deemed to have
prevailed for purposes of this subdivision if the successor in
interest obtained injunctive relief or damages pursuant to this
section.
(5) A mortgage servicer shall not be liable for any violation that
it has corrected and remedied prior to the recordation of the
trustee's deed upon sale or that has been corrected and remedied by
third parties working on its behalf prior to the recordation of the
trustee's deed upon sale.
(f) Consistent with their general regulatory authority, and
notwithstanding subdivisions (b) and (c) of Section 2924.18, the
Department of Business Oversight and the Bureau of Real Estate may
adopt regulations applicable to any entity or person under their
respective jurisdictions that are necessary to carry out the purposes
of this section.
(g) The rights and remedies provided by this section are in
addition to and independent of any other rights, remedies, or
procedures under any other law. This section shall not be construed
to alter, limit, or negate any other rights, remedies, or procedures
provided by law.
(h) For purposes of this section, all of the following definitions
shall apply:
(1) "Notification of the death of the mortgagor or trustor" means
provision to the mortgage servicer of a death certificate or, if a
death certificate is not available, of other written evidence of the
death of the mortgagor or trustor deemed sufficient by the mortgage
servicer.
(2) "Mortgage servicer" shall have the same meaning as provided in
Section 2920.5.
(3) "Reasonable documentation" means copies of the following
documents, as may be applicable, or, if the relevant documentation
listed is not available, other written evidence of the person's
status as successor in interest to the real property that secures the
mortgage or deed of trust deemed sufficient by the mortgage
servicer:
(A) In the case of a personal representative, letters as defined
in Section 52 of the Probate Code.
(B) In the case of devisee or an heir, a copy of the relevant will
or trust document.
(C) In the case of a beneficiary of a revocable transfer on death
deed, a copy of that deed.
(D) In the case of a surviving joint tenant, an affidavit of death
of the joint tenant or a grant deed showing joint tenancy.
(E) In the case of a surviving spouse where the real property was
held as community property with right of survivorship, an affidavit
of death of the spouse or a deed showing community property with
right of survivorship.
(F) In the case of a trustee of a trust, a certification of trust
pursuant to Section 18100.5 of the Probate Code.
(G) In the case of a beneficiary of a trust, relevant trust
documents related to the beneficiary's interest.
(4) "Successor in interest" means a natural person who provides
the mortgage servicer with notification of the death of the mortgagor
or trustor and reasonable documentation showing that the person is
any of the following:
(A) The personal representative, as defined in Section 58 of the
Probate Code, of the mortgagor's or trustor's estate.
(B) The devisee, as defined in Section 34 of the Probate Code, or
the heir, as defined in Section 44 of the Probate Code, of the real
property that secures the mortgage or deed of trust.
(C) The beneficiary, as defined in Section 5608 of the Probate
Code, on a revocable transfer on death deed.
(D) The surviving joint tenant of the mortgagor or trustor.
(E) The surviving spouse of the mortgagor or trustor if the real
property that secures the mortgage or deed of trust was held as
community property with right of survivorship pursuant to Section
682.1.
(F) The trustee of the trust that owns the real property that
secures the mortgage or deed of trust or the beneficiary of that
trust.
(i) This section shall apply to first lien mortgages or deeds of
trust that are secured by owner-occupied residential real property
containing no more than four dwelling units. "Owner-occupied" means
that the property was the principal residence of the deceased
borrower.
SEC. 3. The provisions of this act are severable. If any provision
of this act or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.