Amended in Senate June 9, 2014

Amended in Assembly May 8, 2014

Amended in Assembly March 28, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1770

Introduced by Assembly Member Dababneh

February 14, 2014

begin delete An act to add Section 2941.8 to the Civil Code, relating to real property. end delete begin insert An act to add Section 2943.1 to the Civil Code, relating to real property. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 1770, as amended, Dababneh. begin delete Real property liens: request to terminate home equity line of credit. end delete begin insert Real property liens: revolving lines of credit: suspend and close. end insert

Under existing law, within 30 days after a mortgage has been satisfied, the mortgagee or the assignee of the mortgagee is required to execute a certificate of the discharge of the mortgage, as specified, and to deliver, upon the request of the mortgagor or another authorized person, the original note and mortgage to the person making the request.

Existing law requires a creditor to make certain disclosures to a consumer applying for a home equity loan, as defined. Existing federal law relating to lending practices specifies certain circumstances under which a lender may reduce or terminate an existing home equity line of credit.

begin delete

This bill would require a lender, upon receipt of a written request from an authorized person, as defined, to terminate a borrower’s equity line of credit, as defined, when the secured property is in escrow. This bill would prescribe the contents of this written request, and would require the authorized person to provide a copy of the written request to the borrower, along with a notice to the borrower relating to the effect of the termination of the home equity line of credit.

end delete begin insert

This bill would, on and after July 1, 2015, require a lender, upon receipt of a specified written request from a borrower and a specified payment, to close a borrower’s revolving line of credit, as defined, and to release or reconvey the property secured by the revolving line of credit, as specified. The bill would prescribe the contents of the written request.

end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

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

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 2943.1 is added to the end insert begin insert Civil Code end insert begin insert , to read: end insert

begin insert

begin insert 2943.1. end insert   

(a) For purposes of this section, the following
definitions apply:

(1) “Beneficiary” has the same meaning as defined in Section
2943.

(2) “Borrower’s Instruction to Suspend and Close” means the
instruction described in subdivision (c), signed by the borrower
or borrowers under a revolving line of credit.

(3) “Entitled person” has the same meaning as defined in
Section 2943.

(4) “Payoff demand statement” has the same meaning as defined
in Section 2943.

(5) “Revolving line of credit” means an open-end revolving
loan that is established pursuant to a written agreement between
a borrower and a lender on residential real property consisting
of one to four dwelling units in which the lender agrees to lend
the borrower money on a continuing basis for as long as the
outstanding principal amount owed by the borrower does not
exceed a specified amount, and which is secured by a mortgage
or deed of trust on real property.

(6) “Suspend” means to prohibit the borrower from drawing
on, increasing, or incurring any additional principal debt on the
revolving line of credit.

(b) Notwithstanding paragraph (5) of subdivision (a) of Section
2943, a payoff demand statement issued by a beneficiary in
connection with a revolving line of credit shall include an email
address, fax number, or mailing address designated by the
beneficiary for delivery of the Borrower’s Instruction to Suspend
and Close by the entitled person.

(c) Upon receipt from an entitled person of a Borrower’s
Instruction to Suspend and Close Revolving Line of Credit, signed
by a borrower, a beneficiary shall suspend the revolving line of
credit for a minimum of 45 days. A Borrower’s Instruction to
Suspend and Close shall be effective if made substantially in the
following form and signed by the borrower:

 

begin insert “Borrower’s Instruction to Suspend and Close Revolving Line of Credit end insert
begin insert   end insert
begin insert Lender: [Name of Lender] end insert
begin insert   end insert
begin insert Borrower(s): [Name of Borrower(s)] end insert
begin insert   end insert
begin insert Account Number of the Equity Line of Credit: [Account Number] end insert
begin insert   end insert
begin insert Encumbered Property Address: [Property Address] end insert
begin insert   end insert
begin insert Escrow or Settlement Agent: [Name of Agent]: end insert
begin insert   end insert
begin insert In connection with a sale or refinance of the above-referenced property, my Escrow or Settlement Agent has requested a payoff demand statement for the above-described revolving line of credit. I understand my ability to use this account has been suspended for at least 45 days to accommodate this pending transaction. I understand that I cannot use any credit cards, debit cards, or checks associated with this account while my account is suspended and all amounts will be due and payable upon close of escrow. I also understand that when payment is made in accordance with the payoff demand statement, my revolving line of credit will be closed. If any amounts remain due after the payment is made, I understand I will remain personally liable for those amounts even if the account has been closed and the property released. end insert
begin insert   end insert
begin insert This is my written authorization and instruction that you are to close my revolving line of credit account and cause the secured lien against this property to be released when you are in receipt of both this instruction and payment in accordance with your payoff demand statement. end insert
begin insert   end insert
begin insert (Date)   end insert	begin insert  (Signature of Each Borrower) ” end insert

 

(d) When a beneficiary is in receipt of both a Borrower’s
Instruction to Suspend and Close Revolving Line of Credit and
payment in accordance with the payoff demand statement as set
forth in Section 2943, the beneficiary shall do all of the following:

(1) Close the revolving line of credit.

(2) Release or reconvey the property securing the revolving line
of credit, as provided by this chapter.

(e) This section shall become operative on July 1, 2015.

end insert

begin delete

SECTION 1.  

Section 2941.8 is added to the Civil Code, to
read:

2941.8.  

(a) Upon receipt of a written request from an
authorized person to terminate an equity line of credit, the lender
shall do all of the following:

(1) Terminate the borrower’s right to obtain advances under the
borrower’s equity line of credit.

(2) Apply all sums subsequently paid by or on behalf of the
borrower in connection with the equity line of credit to the
satisfaction of the equity line of credit.

(3) Reconvey the mortgage or deed of trust when the home
equity line of credit has a zero balance outstanding.

(b) The written request provided to the lender to terminate an
equity line of credit shall contain at least the following:

(1) The name of each borrower.

(2) The account number of the equity line of credit.

(3) The street address of the property, if appropriate.

(c) For purposes of this section “authorized person” includes a
licensed title insurance company, underwritten title company, or
controlled escrow company, as defined in Sections 12340.4,
12340.5, and 12340.6, respectively, of the Insurance Code, or an
escrow company as used in the Financial Code, that is acting on
behalf of the borrower.

(d) For purposes of this section, “equity line of credit” means
a revolving line of credit secured by a mortgage or deed of trust.

(e) For purposes of this section, “receipt of a written request”
includes confirmation delivered by first-class mail, registered or
certified mail, express mail, overnight delivery by an express
services carrier, email, facsimile, or other electronic means.

(f) A written request to terminate an equity line of credit from
an authorized person shall be provided to the borrower and be
accompanied by the following language:

“NOTICE TO BORROWER

You have a home equity line of credit with _____, secured by
a mortgage or deed of trust, and lien, on real property located at
______________.

Our company is handling the escrow for your transaction. We
are sending the attached notice to your lender, requesting
cancellation of your home equity line of credit. Our reason for
making this request is: ________________________.

When your lender receives our request, your lender will close
your home equity line of credit, and you will no longer be able to
obtain credit advances. However, this notice to cancel your home
equity line of credit does not release you from liability for amounts
owed under the account. Any funds sent to your lender in
connection with your home equity line of credit, including any
funds we may send to your lender, will be applied by your lender
to the satisfaction of your account. When the balance of your
account becomes zero, your lender will be required to remove the
lien against the property that is connected to the home equity line
of credit.

If you have questions about this notice or our action, or believe
you have received this notice in error, please contact ___________
by calling us at __________________ or writing to us at
______________.

__________________________

(Name of Company)”

end delete