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:
The Legislature hereby declares all of the
2following:
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
8foreclosure proceedings while borrowers and their families were
9in the middle of applying for a loan modification.
10(b) The California Legislature responded with a
11first-in-the-nation Homeowner Bill of Rights (HBOR),
which
12 requires mortgage servicers to provide borrowers a fair and
13transparent process, a single point of contact, and the opportunity
14to finish applying for a loan modification before foreclosure
P3 1proceedings can start. HBOR stabilized families, neighborhoods,
2and local communities by slowing down indiscriminate
3foreclosures.
4(c) Now, however, district attorneys and legal aid organizations
5are reporting an increasing number of cases in which mortgage
6servicers use a loophole in HBOR to foreclose on certain
7homeowners--people who survive the death of a borrower and
8have an ownership interest in the home but are not named on the
9mortgage loan. Most often, the “survivor” is the borrower’s spouse
10and is over 65 years of age.
11(d) When the surviving widow or widower, domestic
partner,
12children, or other heirs attempt to obtain basic information about
13the loan from the servicer, they face the same kind of barriers and
14abuses--and, finally foreclosure--that convinced the Legislature
15to pass HBOR.
16(e) Home ownership is the primary avenue for most Americans
17to build generational wealth. Indiscriminate foreclosures on
18surviving heirs destroy a family’s ability to build for its financial
19future. Foreclosures also exacerbate the racial wealth gap--and
20overall wealth inequality--in society, and force seniors who want
21to “age in place” into the overheated rental market instead, with
22devastating health impacts.
23(f) Surviving heirs deserve the same transparency and
24opportunity to save their home as HBOR gave the original
25borrower. This act would stem a
disturbing nationwide trend and
26help keep widows and widowers, children, and other survivors in
27their homes--without requiring mortgage servicers to do anything
28more than they already do for other homeowners.
29
(g) It is the intent of the Legislature that this act work in
30conjunction with federal Consumer Financial Protection Bureau
31servicing guidelines.
Section 2920.7 is added to the Civil Code, to read:
(a) Upon notification by someone claiming to be a
34successor in interest that a borrower has died, and where that
35claimant is not a party to the loan or promissory note, a mortgage
36servicer shall not record a notice of default pursuant to Section
372924 until the mortgage servicer does both of the following:
38(1) Requests reasonable documentation of the death of the
39borrower from the claimant, including, but not limited to, a death
40certificate or other written evidence of the death of the borrower.
P4 1A reasonable period of time shall be provided for the claimant to
2
present this documentation, but no less than 30 days from the date
3of a written request by the mortgage servicer.
4(2) Requests reasonable documentation from the claimant
5regarding the status of that claimant as a successor in interest in
6the real property. A reasonable period of time shall be provided
7for the claimant to present this documentation, but no less than 90
8days from the date of a written request by the mortgage servicer.
9(b) (1) Upon receipt by the mortgage servicer of the reasonable
10documentation of the status of a claimant as successor in interest
11and that claimant’s relation to the real property, that claimant shall
12be deemed a “successor in interest.”
13(2) There may be more than
one successor in interest. A
14mortgage servicer shall apply the provisions of this section to
15multiple successors in interest in accordance with the terms of the
16loan and federal and state laws and regulations.
17(3) Being a successor in interest under this section does not
18impose an affirmative duty on a mortgage servicer or alter any
19obligation the mortgage servicer has to provide a loan modification
20to the successor in interest. If a successor in interest assumes the
21loan, he or she may be required to otherwise qualify for available
22foreclosure prevention alternatives offered by the mortgage
23servicer.
24(c) Within 10 days of a claimant being deemed a successor in
25interest pursuant to subdivision (b), a mortgage servicer shall
26provide the successor in interest with information in
writing about
27the loan. This information shall include, at a minimum, loan
28balance, interest rate and interest reset dates and amounts, balloon
29payments if any, prepayment penalties if any, default or
30delinquency status, the monthly payment amount, and payoff
31amounts.
32(d) A mortgage servicer shall allow a successor in interest to
33either:
34(1) Assume the deceased borrower’s loan, unless such
35assumption is prohibited by the terms of the loan.
36(2) Where a successor in interest of an assumable loan also
37seeks a foreclosure prevention alternative, simultaneously apply
38to assume the loan and for a foreclosure prevention alternative that
39is offered by the loan lender or applicable loss mitigation rules. If
40the
successor in interest qualifies for the foreclosure prevention
P5 1alternative, the servicer shall allow the successor in interest to
2assume the loan.
3(e) (1) A successor in interest who is eligible to assume a
4deceased borrower’s outstanding mortgage loan and wishes to
5apply for a foreclosure prevention alternative in connection with
6that loan shall have all the same rights and remedies as a borrower
7under subdivision (a) of Section 2923.4 and under Sections 2923.6,
82923.7, 2924, 2924.9, 2924.10, 2924.11, 2924.12, 2924.15,
92924.17, 2924.18, and 2924.19. For the purposes of Section
102924.15, “owner-occupied” means that the property was the
11principal residence of the deceased borrower and is security for a
12loan made for personal, family, or household purposes.
13(2) If a trustee’s deed upon sale has not been recorded, a
14successor in interest may bring an action for injunctive relief to
15enjoin a material violation of subdivision (a), (b), (c), or (d). Any
16injunction shall remain in place and any trustee’s sale shall be
17enjoined until the court determines that the mortgage servicer has
18corrected and remedied the violation or violations giving rise to
19the action for injunctive relief. An enjoined entity may move to
20dissolve an injunction based on a showing that the material
21violation has been corrected and remedied.
22(3) After a trustee’s deed upon sale has been recorded, a
23mortgage servicer shall be liable to a successor in interest for actual
24economic damages pursuant to Section 3281 resulting from a
25material violation of subdivision (a), (b), (c), or (d) of Section
262920.7 by that mortgage
servicer if the violation was not corrected
27and remedied prior to the recordation of the trustee’s deed upon
28sale. If the court finds that the material violation was intentional
29or reckless, or resulted from willful misconduct by a mortgage
30servicer the court may award the successor in interest the greater
31of treble actual damages or statutory damages of fifty thousand
32dollars ($50,000).
33(4) A court may award a prevailing successor in interest
34reasonable attorney’s fees and costs in an action brought pursuant
35to this section. A successor in interest shall be deemed to have
36prevailed for purposes of this subdivision if the successor in interest
37obtained injunctive relief or damages pursuant to this section.
38(5) A mortgage servicer shall not be liable for any violation that
39it has
corrected and remedied prior to the recordation of the
40trustee’s deed upon sale or that has been corrected and remedied
P6 1by third parties working on its behalf prior to the recordation of
2the trustee’s deed upon sale.
3(f) Consistent with their general regulatory authority, and
4notwithstanding subdivisions (b) and (c) of Section 2924.18, the
5Department of Business Oversight and the Bureau of Real Estate
6may adopt regulations applicable to any entity or person under
7their respective jurisdictions that are necessary to carry out the
8purposes of this section.
9(g) The rights and remedies provided by this section are in
10addition to and independent of any other rights, remedies, or
11procedures under any other law. This section shall not be construed
12to alter, limit, or negate any other
rights, remedies, or procedures
13provided by law.
14
(h) Except as otherwise provided, this act does not affect the
15obligations arising from a mortgage or deed of trust.
16(h)
end delete
17begin insert(i)end insert For purposes of this section, all of the following definitions
18shall apply:
19(1) “Notification of the death of the mortgagor or trustor” means
20provision to the mortgage servicer of a death certificate or, if a
21death
certificate is not available, of other written evidence of the
22death of the mortgagor or trustor deemed sufficient by the mortgage
23servicer.
24(2) “Mortgage servicer” shall have the same meaning as
25provided in Section 2920.5.
26(3) “Reasonable documentation” means copies of the following
27documents, as may be applicable, or, if the relevant documentation
28listed is not available, other written evidence of the person’s status
29as successor in interest to the real property that secures the
30mortgage or deed of trust deemed sufficient by the mortgage
31servicer:
32(A) In the case of a personal representative, letters as defined
33in Section 52 of the Probate Code.
34(B) In the case of devisee or an heir, a copy of the relevant will
35or trust document.
36(C) In the case of a beneficiary of a revocable transfer on death
37deed, a copy of that deed.
38(D) In the case of a surviving joint tenant, an affidavit of death
39of the joint tenant or a grant deed showing joint tenancy.
P7 1(E) In the case of a surviving spouse where the real property
2was held as community property with right of survivorship, an
3affidavit of death of the spouse or a deed showing community
4property with right of survivorship.
5(F) In the case of a trustee of a trust, a certification of trust
6pursuant to
Section 18100.5 of the Probate Code.
7(G) In the case of a beneficiary of a trust, relevant trust
8documents related to the beneficiary’s interest.
9(4) “Successor in interest” means a natural person who provides
10the mortgage servicer with notification of the death of the
11mortgagor or trustor and reasonable documentation showing that
12the person is any of the following:
13(A) The personal representative, as defined in Section 58 of the
14Probate Code, of the mortgagor’s or trustor’s estate.
15(B) The devisee, as defined in Section 34 of the Probate Code,
16or the heir, as defined in Section 44 of the Probate Code, of the
17real property
that secures the mortgage or deed of trust.
18(C) The beneficiary, as defined in Section 5608 of the Probate
19Code, on a revocable transfer on death deed.
20(D) The surviving joint tenant of the mortgagor or trustor.
21(E) The surviving spouse of the mortgagor or trustor if the real
22property that secures the mortgage or deed of trust was held as
23community property with right of survivorship pursuant to Section
24682.1.
25(F) The trustee of the trust that owns the real property that
26secures the mortgage or deed of trust or the beneficiary of that
27trust.
28(i)
end delete
29begin insert(j)end insert This section shall apply to first lien mortgages or deeds of
30trust that are secured by owner-occupied residential real property
31containing no more than four dwelling units. “Owner-occupied”
32means that the property was the principal residence of the deceased
33borrower.
The provisions of this act are severable. If any
35provision of this act or its application is held invalid, that invalidity
36shall not affect other provisions or applications that can be given
37effect without the invalid provision or application.
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