BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1150|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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UNFINISHED BUSINESS
Bill No: SB 1150
Author: Leno (D) and Galgiani (D), et al.
Amended: 8/19/16
Vote: 21
SENATE BANKING & F.I. COMMITTEE: 4-3, 4/20/16
AYES: Galgiani, Hall, Hueso, Lara
NOES: Glazer, Vidak, Morrell
SENATE JUDICIARY COMMITTEE: 4-1, 5/3/16
AYES: Jackson, Leno, Monning, Wieckowski
NOES: Anderson
NO VOTE RECORDED: Moorlach, Hertzberg
SENATE FLOOR: 18-18, 5/31/16 (FAIL)
AYES: Allen, Beall, Block, De León, Galgiani, Hall, Hancock,
Hueso, Jackson, Lara, Leno, Liu, McGuire, Mitchell, Monning,
Pavley, Wieckowski, Wolk
NOES: Anderson, Bates, Berryhill, Cannella, Fuller, Gaines,
Glazer, Hernandez, Hill, Huff, Leyva, Mendoza, Moorlach,
Morrell, Nguyen, Nielsen, Stone, Vidak
NO VOTE RECORDED: Hertzberg, Pan, Roth, Runner
SENATE FLOOR: 21-14, 6/1/16
AYES: Allen, Beall, Block, De León, Galgiani, Hall, Hancock,
Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire,
Mitchell, Monning, Pan, Pavley, Wieckowski, Wolk
NOES: Anderson, Bates, Cannella, Fuller, Gaines, Glazer,
Hernandez, Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone,
Vidak
NO VOTE RECORDED: Berryhill, Hertzberg, Mendoza, Roth, Runner
ASSEMBLY FLOOR: 49-26, 8/22/16 - See last page for vote
SUBJECT: Mortgages and deeds of trust: mortgage servicers:
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successors in interest
SOURCE: California Alliance for Retired Americans
California Reinvestment Coalition
Housing and Economic Rights Advocates
DIGEST: This bill, until January 1, 2020, requires mortgage
servicers to provide successors in interest to deceased
borrowers, as defined, with key information about outstanding
mortgages previously held by the deceased borrowers; requires
servicers to allow successors in interest to apply to assume
those mortgages, as specified, and to apply and be considered
for foreclosure prevention alternatives in connection with those
mortgages, as specified; and provides judicial enforcement
mechanisms for use by successors in interest to compel servicers
to comply with the bill's provisions.
Assembly Amendments limit the persons who are eligible to
receive Homeowner Bill of Rights (HBOR) protections, add a safe
harbor for servicers that is based on compliance with federal
servicing rules, exempt servicers with 175 or fewer residential
foreclosures per year, and add a sunset date.
ANALYSIS:
Existing law:
1) Provides for HBOR, which contains provisions intended to
facilitate communication between mortgage servicers and
borrowers regarding options for borrowers to avoid
foreclosure; requirements prohibiting mortgage servicers from
moving forward in the foreclosure process while a complete
loan modification application from a borrower is pending,
while a borrower is in compliance with an approved
foreclosure prevention alternative, or while a borrower is
appealing the denial of a foreclosure prevention alternative;
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and rules intended to ensure that all foreclosure-related
documents recorded by servicers are accurate and complete
(Civil Code Sections 2920.5, 2923.4, 2923.5, 2923.55, 2923.6,
2923.7, 2924, 2924.9, 2924.10, 2924.11, 2924.15, 2924.17, and
2924.18)
2) Authorizes borrowers to bring judicial actions against
servicers to enforce HBOR. If a trustee's deed upon sale has
not been recorded (i.e., if a foreclosure has not been
completed), a borrower may bring an action for injunctive
relief to enjoin an uncorrected, material violation of HBOR;
this injunction remains in place, and any trustee's sale is
enjoined, until the court determines that the servicer has
corrected and remedied the violation or violations giving
rise to the action for injunctive relief. After a
foreclosure is completed, a former borrower may bring an
action for actual economic damages resulting from an
uncorrected, material violation of HBOR. Courts are
authorized to award a prevailing plaintiff reasonable
attorney's fees and costs for actions brought to enforce
HBOR; a plaintiff is deemed to have prevailed for purposes of
HBOR if that plaintiff obtains injunctive relief or is
awarded damages (Civil Code Sections 2924.12 and 2924.19).
This bill:
1) Contains findings and declarations regarding passage of
HBOR, the inability of surviving heirs to use HBOR to help
avoid foreclosure following the death of a borrower named on
a mortgage loan, and the importance of providing surviving
heirs the same transparency and opportunity to save their
homes that HBOR gave the original borrower.
2) Provides that, upon notification of a borrower's death by
someone who is not named on the borrower's mortgage loan, but
who claims to be a successor in interest to that borrower, a
mortgage servicer may not record a notice of default until
that servicer does both of the following:
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a) Requests reasonable documentation of the death of the
borrower from the claimant, and provides that claimant at
least 30 days to provide this documentation following
written request by the servicer.
b) Requests reasonable documentation from the claimant
demonstrating the ownership interest of that claimant in
the real property, and provides that claimant at least 90
days to provide this information.
3) Defines a "successor in interest" as a natural person who
notifies a mortgage servicer regarding the death of a
borrower and provides reasonable documentation, as defined,
showing that he or she meets one of the criteria listed in
the bill.
4) Clarifies that there may be more than one successor in
interest, and provides that a mortgage servicer must apply
the provisions of the bill in accordance with the terms of
the loan and federal and state laws and regulations. Further
provides that when there are multiple successors in interest
who do not wish to proceed as coborrowers or coapplicants, a
mortgage servicer may require any nonapplicant successor in
interest to consent in writing to the application for loan
assumption.
5) Provides that, within 10 days of a claimant being deemed a
successor in interest, a mortgage servicer must provide that
successor in interest with the following information in
writing about the loan, at a minimum: the loan balance;
interest rate and interest rate reset dates and amounts;
balloon payments, if any; prepayment penalties, if any;
default or delinquency status; monthly payment amount; and
payoff amount.
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6) Requires a mortgage servicer to allow a successor in
interest to apply to assume the deceased borrower's loan. A
mortgage servicer may evaluate the creditworthiness of the
successor in interest, subject to applicable investor
requirements and guidelines.
7) Provides that if a successor in interest of an assumable
loan also seeks a foreclosure prevention alternative, the
servicer must allow the successor in interest to
simultaneously apply to assume the loan and for the
foreclosure prevention alternative. The mortgage servicer
may evaluate the creditworthiness of the successor in
interest, subject to applicable investor requirements and
guidelines.
8) Provides that a successor in interest who meets specified
criteria shall have all of the rights and remedies of a
borrower under HBOR, as specified. For purposes of those
rights and remedies, "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. To be eligible for HBOR rights and remedies under
this bill, a successor in interest must be the spouse,
domestic partner, joint tenant as evidenced by grant deed,
parent, grandparent, adult child, adult grandchild, or adult
sibling of the deceased borrowers, who occupied the property
as his or her principal residence within the last six
continuous months prior to the deceased borrower's death and
who currently resides in the property.
9) Provides that the bill does not apply to a successor in
interest who is engaged in a legal dispute over the property
that is security for the borrower's outstanding mortgage loan
and has filed a claim raising this dispute in a legal
proceeding.
10)Provides that any entity subject to the bill's provisions,
who, with respect to the successor in interest or person
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claiming to be a successor in interest, complies with
specified federal regulations, is deemed to be in compliance
with this bill. This safe harbor becomes operative on the
effective date of the specified federal regulations. These
regulations, in turn, become effective 18 months after being
published in the Federal Register.
11)Provides a private right of action with which to enforce its
provisions, as specified. This private right of action
mirrors the private right of action available with which to
enforce HBOR.
12)Provides that the bill does not apply to a servicer that,
during its immediately preceding annual reporting period,
foreclosed on 175 or fewer residential real properties
located in California, containing no more than four dwelling
units.
13)Clarifies that the Department of Business Oversight and
Bureau of Real Estate may adopt regulations applicable to any
entity or person under their respective jurisdictions, which
are necessary to carry out the bill.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified8/22/16)
California Alliance for Retired Americans (co-source)
California Reinvestment Coalition (co-source)
Housing and Economic Rights Advocates (co-source)
AARP California
AIDS Legal Referral Panel
Alameda County Board of Supervisors
Bay Area Legal Aid
Burbank Housing Development Corporation
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California Attorney General Kamala D. Harris
California District Attorneys Association
California Impact Partners
California Nurses Association
California Professional Firefighters
California Rural Legal Assistance Foundation
California State Council of Hotel Employees and Restaurant
Employees
CALPIRG
Center for California Homeowner Association Law
Center for Responsible Lending
Central Valley Realist Board
Community Legal Services in East Palo Alto
Consumer Attorneys of California
Consumer Federation of California
Consumers Union
County of Alameda
Courage Campaign
Fair Housing Council of the San Fernando Valley
Fair Housing of Marin
Family Caregiver Alliance
Housing California
Inland Fair Housing and Mediation Board
Institute on Aging Elder Abuse Prevention Program
Justice in Aging
Law Foundation of Silicon Valley
Legal Aid Foundation of Los Angeles
Legal Services of Northern California
Los Angeles County Consumer & Business Affairs
Los Angeles County Democratic Party
Montebello Housing Development Corporation
NAACP California
National Center for Lesbian Rights
National Council of La Raza
National Housing Law Project
Nehemiah Corporation of America
Neighborhood Housing Services of Los Angeles County
NeighborWorks HomeOwnership Center Sacramento
Non-Profit Housing Association of Northern CA
Peoples' Self-Help Housing Corp.
Project Sentinel
Public Counsel
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Public Law Center
Renaissance Entrepreneurship Center
Retired Public Employees Association
Rural Community Assistance Corporation
SEIU California
Shalom Center for T.R.E.E. of Life
Tenants Together
The Arc of California
UDW/AFSCME Local 3930
Unite Here!
United Cerebral Palsy California Collaboration
United Domestic Workers of America - AFSCME Local 3930
Valley Economic Development Center, Inc. --Van Nuys
Valley Industry and Commerce Association
Western Center on Law and Poverty
OPPOSITION: (Verified8/22/16)
American Securitization Forum
California Bankers Association
California Building Industry Association
California Business Roundtable
California Chamber of Commerce
California Citizens Against Lawsuit Abuse
California Financial Services Association
California Land Title Association
California Mortgage Association
California Mortgage Bankers Association
Civil Justice Association of California
Consumer Mortgage Coalition
Securities Industry and Financial Markets Association
United Trustees Association
ASSEMBLY FLOOR: 49-26, 8/22/16
AYES: Achadjian, Alejo, Arambula, Atkins, Bloom, Bonilla,
Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu,
Cooley, Cooper, Dababneh, Dodd, Eggman, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Hadley, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine,
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Lopez, Low, McCarty, Mullin, Nazarian, O'Donnell, Quirk,
Ridley-Thomas, Santiago, Mark Stone, Thurmond, Ting, Weber,
Williams, Wood, Rendon
NOES: Travis Allen, Baker, Bigelow, Brough, Chang, Chávez,
Dahle, Beth Gaines, Gallagher, Grove, Harper, Jones, Kim,
Lackey, Linder, Maienschein, Mathis, Mayes, Obernolte, Olsen,
Patterson, Salas, Steinorth, Wagner, Waldron, Wilk
NO VOTE RECORDED: Daly, Frazier, Medina, Melendez, Rodriguez
Prepared by:Eileen Newhall / B. & F.I. / (916) 651-4102
8/22/16 22:49:39
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