Amended in Senate June 19, 2014

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

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

LEGISLATIVE COUNSEL’S DIGEST

AB 1770, as amended, Dababneh. Real property liens: revolving lines of credit: suspend and close.

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.

This bill would, on and after July 1, 2015, begin insert and until July 1, 2019, end insert require a lender, upon receipt of a specified written request from a borrower and a specified payment, to close a borrower’s begin delete revolving end delete begin insert equity end insert line of credit, as defined, and to release or reconvey the property secured by the begin delete revolving end delete begin insert equity end insert line of credit, as specified. The bill would prescribe the contents of the written request.

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.  

Section 2943.1 is added to the Civil Code, to
read:

2943.1.  

(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 begin delete Close” end delete begin insert Close Equity
Line of Credit end insert begin insert ” end insert means the instruction described in subdivision (c),
signed by the borrower or borrowers under begin delete a revolving end delete begin insert an equity end insert
line of credit.

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

begin insert

(4) “Equity line of Credit” means a revolving line of credit used
for consumer purposes, which is secured by a mortgage or deed
of trust encumbering residential real property consisting of one
to four dwelling units, at least one of which is occupied by the
borrower.

end insert begin delete

(4)

end delete

begin insert (5) end insert  “Payoff demand statement” has the same meaning as defined
in Section 2943.

begin delete

(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.

end delete

(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 begin delete a revolving end delete begin insert an equity end insert 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 begin insert Equity Line of Credit end insert by the entitled person.

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

 

“Borrower’s Instruction to Suspend and Close begin delete Revolving end delete begin insert Equity end insert Line of Credit
Lender: [Name of Lender]
Borrower(s): [Name of Borrower(s)]
Account Number of the Equity Line of Credit: [Account Number]
Encumbered Property Address: [Property Address]
Escrow or Settlement Agent: [Name of Agent]:
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 begin delete revolving end delete begin insert equity end insert line of credit. I understand my ability to use this account has been suspended for at least begin delete 45 end delete begin insert 30 end insert days to accommodate this pending transaction. I understand that I cannot use any credit cards, debit cards, or checks associated with this begin delete account while my account end delete begin insert equity line of credit while it end insert 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 begin delete revolving end delete begin insert equity end insert 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 begin delete account end delete begin insert equity line of credit end insert has been closed and the property released.
This is my written authorization and instruction that you are to close my begin delete revolving end delete begin insert equity end insert line of credit begin delete account end delete 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.
(Date)	(Signature of Each Borrower) begin insert ” end insert   begin delete ” end delete

 

(d) When a beneficiary is in receipt of both a Borrower’s
Instruction to Suspend and Close begin delete Revolving end delete begin insert Equity end insert 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 begin delete revolving end delete begin insert equity end insert line of credit.

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

begin insert

(e) The beneficiary may conclusively rely on the Borrower’s
Instruction to Suspend and Close Equity Line of Credit provided
by the entitled person as coming from the borrower.

end insert begin delete

(e)

end delete

begin insert (f) end insert   begin insert (1) end insert begin insert   end insert This section shall become operative on July 1, 2015.

begin insert

(2) This section shall remain in effect only until July 1, 2019,
and as of that date is repealed.

end insert