BILL NUMBER: AB 1160	CHAPTERED
	BILL TEXT

	CHAPTER   62
	FILED WITH SECRETARY OF STATE   JULY 14, 1997
	APPROVED BY GOVERNOR   JULY 14, 1997
	PASSED THE ASSEMBLY   JUNE 30, 1997
	PASSED THE SENATE   JUNE 26, 1997
	AMENDED IN SENATE   JUNE 19, 1997
	AMENDED IN SENATE   JUNE 11, 1997
	AMENDED IN ASSEMBLY   APRIL 24, 1997

INTRODUCED BY  Assembly Member Shelley
   (Principal coauthor:  Senator Johnston)
   (Coauthors:  Assembly Members Cardoza, Lempert, Leonard, Machado,
Washington, and Wayne)

                        FEBRUARY 28, 1997

   An act to add Section 2954.12 to the Civil Code, relating to deeds
of trust.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1160, Shelley.  Deeds of trust.
   Existing law authorizes a borrower under any note or evidence of
indebtedness secured by a deed of trust or mortgage on specified real
property to terminate future payments for specified private mortgage
insurance or mortgage guaranty insurance, as defined, if several
conditions are satisfied, except as otherwise provided.
   This bill would, notwithstanding the above described provisions
and except as specified, provide that the lender or servicer of the
loan may not charge or collect future payments from a borrower for
private mortgage insurance or mortgage guaranty insurance if
specified conditions are met.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 2954.12 is added to the Civil Code, to read:
   2954.12.  (a) Notwithstanding Section 2954.7, and except when a
statute, regulation, rule, or written guideline promulgated by an
institutional third party applicable to notes or evidence of
indebtedness secured by a deed of trust or mortgage purchased in
whole or in part by an institutional third party specifically
prohibits cancellation during the term of the indebtedness, the
lender or servicer of a loan evidenced by a note or other evidence of
indebtedness that is secured by a deed of trust or mortgage on the
subject property may not charge or collect future payments from a
borrower for private mortgage insurance or mortgage guaranty
insurance as defined in subdivision (a) of Section 12640.02 of the
Insurance Code, if all of the following conditions are satisfied:
   (1) The loan is for personal, family, household, or purchase money
purposes, the subject property is owner-occupied, one-to-four unit
residential real property, and the outstanding principal balance of
the note or evidence of indebtedness secured by the senior deed of
trust or mortgage on the subject property is equal to or less than 75
percent of the lesser of (A) if the loan was made for purchase of
the property, the sales price of the property under such purchase; or
(B) the appraised value of the property, as determined by the
appraisal conducted in connection with the making of the loan.
   (2) The borrower's scheduled payment of monthly installments of
principal, interest, and escrow obligations is current at the time
the right to cancellation of mortgage insurance accrues.
   (3) During the 12 months prior to the date upon which the right to
cancellation accrues, the borrower has not been assessed more than
one late penalty for any scheduled payment and has not made any
scheduled payment more than 30 days late.
   (4) The loan evidenced by a note or evidence of indebtedness was
made or executed on or after January 1, 1998.
   (5) No notice of default has been recorded against the real
property pursuant to Section 2924, as a result of a nonmonetary
default on the extension of credit by the borrower during the last 12
months prior to the accrual of the borrower's right to cancellation.

   (b) This section does not apply to any of the following:
   (1) A note or evidence of indebtedness secured by a deed of trust
or mortgage, or mortgage insurance, executed under the authority of
Part 3 (commencing with Section 50900) or Part 4 (commencing with
Section 51600) of Division 31 of the Health and Safety Code.
   (2) Any note or evidence of indebtedness secured by a deed of
trust or mortgage that is funded in whole or in part pursuant to
authority granted by statute, regulation, or rule that, as a
condition of that funding, prohibits or limits termination of
payments for private mortgage insurance or mortgage guaranty
insurance during the term of the indebtedness.
   (c) If the note secured by the deed of trust or mortgage will be
or has been sold in whole or in part to an institutional third party,
adherence to the institutional third party's standards for
termination of future payments for private mortgage insurance or
mortgage guaranty insurance shall be deemed in compliance with the
requirements of this section.
   (d) For the purposes of this section, "institutional third party"
means the Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation, the Government National Mortgage
Association and other substantially similar institutions, whether
public or private, provided the institutions establish and adhere to
rules applicable to the right of cancellation of private mortgage
insurance or mortgage guaranty insurance, which are the same or
substantially the same as those utilized by the above-named
institutions.