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S.B. 900 Inclusive
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image S.B. 900 Inclusive

I. California Homeowner Bill of Rights - SB 900

  • Procedural History
    • Enacted by CA Senate and Assembly on July 2, 2012
    • Signed into law by Governor on July 12, 2012
    • Effective Date: January 1, 2013
    • Expires: January 1, 2018
  • Goals of the California Homeowner Bill of Rights
    • Stabilize CA housing economy
    • Stop foreclosure abuse by lenders and servicers
    • Ensure meaningfol foreclosure alternatives for borrowers
  • Meeting the Goals
    • Expand existing foreclosure protections and add new protections to apply to broadly defined "mortgage servicers"
    • Prevent mortgage servicers from proceeding with a foreclosure until certain contact with or notice to the borrower
    • Prevent the recordation of a notice of default or notice of sale while a foreclosure prevention alternative is in process
    • Require a single point of contact for the borrower once they have requested a foreclosure prevention alternative; and
    • Give borrowers the right to sue the mortgage servicer for injunctive relief, actual damages and treble damages, for violation of the Act and the right to recover their attorney's fees and costs if they prevail

II Application of the Law

  • Eligibility
    • First lien Mortgages and Deeds of Trust
    • Secured by owner-occupied residential property
    • Containing no more than four dwelling units
  • Large Lenders
    • Most of the provisions of the Act only apply to lenders that foreclose on more than 175 residential properties per year.
    • Some provisions, including dual tracking, apply to smaller lenders, as well
  • Exclusions
    • Entity Borrowers
    • Investment Property
    • Borrowers in default who are already in bankruptcy
    • Borrowers who have already surrendered their property to lender
    • Borrowers who have contracted with someone or an entity whose primary business is advising people on how to extend their foreclosure and avoid their contractual obligations under the loan

III. Relevant Provisions

  • Mortgage Servicer Defined
    • A person or entity who directly services a loan, or who is responsible for interacting with the borrower, managing the loan account on a daily basis either as the current owner of the promissory note or as the current owner's authorized agent, or subservicing agent to a master servicer by contract.
    • "Mortgage Servicer" does not include the trustee or the trustee's authorized agent acting under a power of sale in a deed of trust
    • Prevent lenders from contracting with separate entities to manage and service the loans to avoid application of the current laws
  • Dual Tracking
    • The Act seeks to prevent a lender from proceeding with a foreclosure, while at the same time negotiating with a delinquent residential borrower on a loan modification
    • If Borrower submits a complete application for modification, the Mortgage Servicer may not record Notice of Default or Notice of Sale until loan modification process has been completed and the time for an appeal of any adverse decision has passed
    • NOD can be recorded:
      • If borrower doesn't accept offer within 14 days
      • If borrower doesn't appeal denial within 30 days
      • If borrower accepts the offer but defaults
  • Changes to Loan Modification Process
    • Mortgage servicer must provide a written acknowledgement of receipt within five days of the receipt of the document(s) or completed application
    • Written acknowledgment of receipt to the borrower must include a description of the loan modification process, its timeframes and any deadlines, any expiration dates for documents submitted, and specify any deficiencies in the application
    • Written response if the lender denies the application. This written notice must include the specific reasons for the denial and the deadline for the borrower to appeal the denial (30 days).
    • Mortgage servicer is not obligated to evaluate applications from borrowers who have already been evaluated or afforded a fair opportunity to be evaluated for a first lien loan modification prior to January 1, 2013, unless there has been a material change in the borrower's financial circumstances
  • Single Point of Contact Established
    • Single point of contact throughout the loan modification process and with at least one direct method to reach the point of contact.
      The mortgage servicer must ensure that the single point of contact has the knowledge, responsibility and authority to:
      • Communicate to the borrower the process by which the borrower may apply for available foreclosure prevention alternatives;
      • Coordinate receipt of all necessary documents and notifying the borrower of any missing documents;
      • Timely, adequately and accurately inform the borrower of the current status of the foreclosure prevention alternative;
      • Ensure the borrower is considered for all of the foreclosure prevention options offered by the mortgage servicer; and
      • Have access to persons with the power to stop foreclosure proceedings
      • Single point of contact can be a team of personnel, each of whom is knowledgeable about borrower's current situation
      • Does not apply to small lenders
  • Robo-Signing Eliminated
    • Recorded Documents
      • Any declaration, notice of default, notice of sale, assignment of a deed of trust, or substitution of trustee recorded in a foreclosure or filed in a court must be accurate and complete and supported by reliable evidence.
      • Before filing or recording, the mortgage servicer shall have reviewed competent and reliable evidence that substantiates the borrower's default and the mortgage servicer's right to foreclose
      • Civil penalties of $7,500 for repeated violations
    • Beneficiaries
      • No entity shall initiate the foreclosure process or record a notice of default unless and until it is the holder of the beneficial interest under the mortgage or deed of trust, the original or substituted trustee under the deed of trust, or the designated agent of the holder of the beneficial interest.
      • No liability for good faith error by trustees resolting from information provided by beneficiary regarding nature and amount of default
  • New Notice Requirements
    • After Notice of Default Recorded
      • Within 5 days of the recording of a notice of default, the mortgage servicer that offers foreclosure prevention alternatives must send a written notice to the borrower informing the borrower of foreclosure prevention alternative
      • Does not apply to any borrowers who have already exhausted the loan modification process described above in Civil Code section 2924.6.
    • Postponed Trustee Sale Date
      • Postponement of at least 10 business days require written notice to the borrower of the new sale date and time within five business days of the date of the postponement.
      • Failure to comply does not invalidate an otherwise valid trustee's sale
  • No Application Fees or Late Fees
    • Prohibits mortgage servicers from charging borrowers application fees for a first lien loan modification or other foreclosure prevention alternative.
    • Forbids a mortgage servicer from charging borrowers late fees under the loan for the period during which the loan modification is under consideration, while a borrower has filed an appeal of the denial of a loan modification, or the borrower is making timely modification payments.
  • Right to Sue Mortgage Servicers
    • Borrowers can sue mortgage servicers for injunctive relief before the trustee's deed upon sale has recorded, or if it has already recorded, to sue for actual economic damages, if the mortgage servicer has not corrected any "material" violation before the trustee's deed upon sale recorded.
    • If a court finds that the violation was intentional, reckless or willful, the court can award the borrower the greater of treble (triple) damages or $50,000.
    • A violation of the Act is also deemed to be a violation of the licensing laws if committed by a person licensed as a consumer or commercial finance lender or broker, a residential mortgage lender or servicer, or a licensed real estate broker or salesman.
    • Court may award reasonable attorney's fees and costs to borrower as the prevailing party.
    • Lenders defense: Compliance
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