California Senate Bill SB1150 Amended / Bill

 BILL NUMBER: SB 1150AMENDED BILL TEXT AMENDED IN SENATE MARCH 28, 2016 INTRODUCED BY Senator Leno FEBRUARY 18, 2016 An act to add Section 2920.7 to the Civil Code, relating to mortgages and deeds of trust. LEGISLATIVE COUNSEL'S DIGEST SB 1150, as amended, Leno. Mortgages and deeds of trust: mortgage servicers and lenders: successors in interest. Existing law imposes various requirements to be satisfied prior to exercising a power of sale under a mortgage or deed of trust.  Existing law gives a borrower, as defined, various rights and remedies against a mortgage servicer, mortgagee, trustee, beneficiary, and authorized agent in regards to foreclosure prevention alternatives, as defined, including loan modifications, which is commonly referred to as being part of the California Homeowner Bill of Rights.  Existing law defines a mortgage servicer as a person or entity who directly services a loan, or is responsible for interacting with the borrower, and managing the loan account on a daily basis, as specified. This bill would prohibit a mortgage servicer or lender, as defined, upon notification that a borrower has died, from recording a notice of default  for at least 30 days after     until the mortgage servicer or lender does certain things, including  requesting reasonable documentation of the death of the borrower from  the successor in interest, as defined. The bill would require the mortgage servicer or lender to, among other things, contact the successor in interest in person or by telephone in order to assess the successor's financial situation and explore options for the successor to avoid foreclosure, provide the successor in interest with information about loan assumption options and foreclosure avoidance programs, and allow a successor in interest to simultaneously apply to assume the deceased borrower's loan and to apply to receive a loan modification. The bill would authorize a successor in interest or the Attorney General to bring an action to enforce these provisions, as provided.   a claimant, which is someone claiming to be a successor in interest, that is not a party to the loan or promissory note and providing a reasonable period of time for the claimant to present the requested documentation. The bill would deem a claimant a successor in interest, as defined, upon receipt by a mortgage servicer or lender of the reasonable documentation regarding the status of the claimant. The bill would require a mortgage servicer or lender, within 10 days of a claimant being deemed a successor in interest,   to provide the successor in interest with information about the loan, as specified. The bill would require a mortgage servicer or lender to allow a successor in interest to either assume the deceased borrower   's loan, except as specified, or to apply for foreclosure prevention alternatives on an assumable loan, as specified. The bill would provide that a successor in interest who assumes an assumable loan and wishes to apply for a foreclosure avoidance alternative has the same rights and remedies as a borrower under specified provisions of the California Homeowner Bill of Rights. The bill would authorize a successor in interest to bring an action for injunctive relief to enjoin a material violation of specified provisions of law and would authorize a court to award a prevailing successor in interest reasonable attorney's fees and costs for such an action. The bill would define terms for these purposes   and make various findings and declarations.  Vote: majority. Appropriation: no. Fiscal committee:  yes   no  . State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:  SECTION 1.   The Legislature hereby declares all of the following:   (a) Beginning in 2008, California faced a foreclosure crisis, with rapidly dropping home values and skyrocketing job losses. Indiscriminate foreclosure practices of major mortgage servicers compounded the problem as they created a labyrinth of red tape, lost documents, and erroneous information and then they started foreclosure proceedings while borrowers and their families were in the middle of applying for a loan modification.   (b) The California Legislature responded with a first-in-the-nation Homeowner Bill of Rights (HBOR), which requires mortgage servicers to provide borrowers a fair and transparent process, a single point of contact, and the opportunity to finish applying for a loan modification before foreclosure proceedings can start. HBOR stabilized families, neighborhoods, and local communities by slowing down indiscriminate foreclosures.   (c) Now, however, district attorneys and legal aid organizations are reporting an increasing number of cases in which mortgage servicers use a loophole in HBOR to foreclose on certain homeowners--people who survive the death of a borrower and have an ownership interest in the home but are not named on the mortgage loan. Most often, the "survivor" is the borrower's spouse and is over 65 years of age.   (d) When the surviving widow or widower, domestic partner, children, or other heirs attempt to obtain basic information about the loan from the servicer, they face the same kind of barriers and abuses--and, finally foreclosure--that convinced the Legislature to pass HBOR.   (e) Home ownership is the primary avenue for most Americans to build generational wealth. Indiscriminate foreclosures on surviving heirs destroy a family's ability to build for its financial future. Foreclosures also exacerbate the racial wealth gap--and overall wealth inequality--in society, and force seniors who want to "age in place" into the overheated rental market instead, with devastating health impacts.   (f) Surviving heirs deserve the same transparency and opportunity to save their home as HBOR gave the original borrower. This act would stem a disturbing nationwide trend and help keep widows and widowers, children, and other survivors in their homes--without requiring mortgage servicers to do anything more than they already do for other homeowners.   SECTION 1.   SEC. 2.  Section 2920.7 is added to the Civil Code, to read: 2920.7. (a) Upon notification by someone claiming to be a successor in interest  that a borrower has died, and where  a successor in interest   that claimant  is not a party to the loan or promissory note, a mortgage servicer or lender shall not record a notice of default pursuant to Section 2924 until  that   the mortgage  servicer or lender does  all   both  of the following: (1) Requests reasonable documentation of the death of the borrower from the  successor in interest,  claimant,  including, but not limited to, a death  certification   certificate  or other written evidence of the death of the borrower.  A reasonable period of time shall be provided for the claimant to present this documentation, but no less than 30 days from the date of a written request by the mortgage servicer   .  (2) Requests reasonable documentation of the status of a  successor in interest   claimant  as such, and that  successor's   claimant's  interest  relation to   in  the real property.  A reasonable period of time shall be provided for the claimant to present this documentation, but no less than 90 days from the date of a written request by the mortgage servicer.   (3) Allows at least 30 days after receiving the information in paragraph (1) before taking any further action on the loan.   (4) Allows a successor in interest to simultaneously apply to assume the deceased borrower's loan and to apply to receive a loan modification.   (5) Provides the successor in interest with a single point of contact and provides the successor one or more direct means of communication with the single point of contact.   (6) (A) Provides the successor in interest with information about loan assumption options and foreclosure avoidance programs.   (B) The information in subparagraph (A) shall be provided in Spanish, Chinese, Tagalog, Vietnamese, and Korean and shall include a list of counselors certified by the United States Department of Housing and Urban Development (HUD) that the successor may contact for assistance.   (7) (A) Contacts the successor in interest in person or by telephone in order to assess the successor's financial situation and explore options for the successor to avoid foreclosure. During the initial contact, the mortgage servicer or lender shall advise the successor that he or she has the right to request a subsequent meeting and, if requested, the mortgage servicer or lender shall schedule the meeting to occur within 14 days. The assessment of the successor's financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the successor shall be provided the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency. Any meeting may occur telephonically.   (B) A mortgage servicer's or lender's loss mitigation personnel may participate by telephone during any contact required by this section.   (C) A successor in interest may designate, with consent given in writing, a HUD-certified housing counseling agency, attorney, or other advisor to discuss with the mortgage servicer or lender, on the successor's behalf, the successor's financial situation and options for the successor to avoid foreclosure. That contact made at the direction of the successor shall satisfy the contact requirements of this paragraph. Any loan modification or workout plan offered at the meeting by the mortgage servicer or lender is subject to approval by the successor.   (8) If a mortgage servicer or lender is unable to contact a successor in interest pursuant to paragraph (7), the mortgage servicer or lender shall alternatively do all of the following:   (A) Attempt to contact a successor in interest by sending a first-class letter that includes the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.   (B) (i) After the letter has been sent, the mortgage servicer or lender shall attempt to contact the borrower by telephone at least three times at different hours and on different days. Telephone calls shall be made to the primary telephone number on file.   (ii) A mortgage servicer or lender may attempt to contact a successor in interest using an automated system to dial successors in interest, provided that, if the telephone call is answered, the call is connected to a live representative of the mortgage servicer or lender.   (iii) A mortgage servicer or lender satisfies the telephone contact requirements of this subparagraph if it determines, after attempting contact pursuant to this subparagraph, that the successor' s primary telephone number and secondary telephone number or numbers on file, if any, have been disconnected.   (C) If the successor in interest does not respond within two weeks after the telephone call requirements of subparagraph (B) have been satisfied, the mortgage servicer or lender shall then send a certified letter, with return receipt requested.   (D) Provide a means for the successor in interest to contact it in a timely manner, including a toll-free telephone number that will provide access to a live representative during business hours.   (E) Post a prominent link on the homepage of its Internet Web site, if any, to the following information:   (i) Options that may be available to a successor in interest to avoid foreclosure, and instructions to a successor advising him or her on steps to take to explore those options.   (ii) A list of financial documents successor in interest should collect and be prepared to present to the mortgage servicer or lender when discussing options for avoiding foreclosure.   (iii) A toll-free telephone number for a successor in interest who wishes to discuss options for avoiding foreclosure with a mortgage servicer or lender.   (iv) The toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency.   (b) (1) Upon receipt by the mortgage servicer of the reasonable documentation of the status of a claimant as successor in interest and that claimant's relation to the real property, that claimant shall be deemed a "successor in interest."   (2) There may be more than one successor in interest.   (3) Being a successor in interest under this section does not impose an affirmative duty on a mortgage servicer or lender or alter any obligation the mortgage servicer or lender has to provide a loan modification to the successor in interest. If a successor in interest assumes the loan, he or she may be required to otherwise qualify for available foreclosure prevention alternatives offered by the mortgage servicer or lender.   (c) Within 10 days of a claimant being deemed a successor in interest pursuant to subdivision (b), a mortgage servicer or lender shall provide the successor in interest with information in writing about the loan. Such information shall include, at a minimum, loan balance, interest rate and interest reset dates and amounts, balloon payments if any, prepayment penalties if any, default or delinquency status, the monthly payment amount, and payoff amounts.   (d) A mortgage servicer or lender shall allow a successor in interest to either:   (1) Assume the deceased borrower's loan, unless such assumption is prohibited by the terms of the loan.   (2) Where a successor in interest of an assumable loan also seeks a foreclosure prevention alternative, simultaneously apply to assume the loan and for a foreclosure prevention alternative that is offered by the loan lender or applicable loss mitigation rules. If the successor in interest qualifies for the foreclosure prevention alternative, the servicer or lender shall allow the successor in interest to assume the loan.   (e) (1) A successor in interest who is eligible to assume a deceased borrower's outstanding mortgage loan and wishes to apply for a foreclosure avoidance alternative in connection with that loan shall have all the same rights and remedies as a borrower under subdivision (a) of Section 2923.4 and under Sections 2923.5, 2923.55, 2923.6, 2923.7, 2924, 2924.6, 2924.9, 2924.10, 2924.11, 2924.12, 2924.15, 2924.17, 2924.18, 2924.19, and 2924.20. For the purposes of Section 2924.15, "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.   (2) If a trustee's deed upon sale has not been recorded, a successor in interest may bring an action for injunctive relief to enjoin a material violation of subdivision (a), (b), (c), or (d) of Section 2920.7. Any injunction shall remain in place and any trustee' s sale shall be enjoined until the court determines that the mortgage servicer or lender has corrected and remedied the violation or violations giving rise to the action for injunctive relief. An enjoined entity may move to dissolve an injunction based on a showing that the material violation has been corrected and remedied.   (3) After a trustee's deed upon sale has been recorded, a mortgage servicer or lender shall be liable to a successor in interest for actual economic damages pursuant to Section 3281 resulting from a material violation of subdivision (a), (b), (c), or (d) of Section 2920.7 by that mortgage servicer or lender where the violation was not corrected and remedied prior to the recordation of the trustee's deed upon sale. If the court finds that the material violation was intentional or reckless, or resulted from willful misconduct by a mortgage servicer or lender the court may award the successor in interest the greater of treble actual damages or statutory damages of fifty thousand dollars ($50,000).   (4) A court may award a prevailing successor in interest reasonable attorney's fees and costs in an action brought pursuant to this section. A successor in interest shall be deemed to have prevailed for purposes of this subdivision if the successor in interest obtained injunctive relief or damages pursuant to this section.   (5) A mortgage servicer or lender shall not be liable for any violation that it has corrected and remedied prior to the recordation of the trustee's deed upon sale or that has been corrected and remedied by third parties working on its behalf prior to the recordation of the trustee's deed upon sale.   (f) Consistent with their general regulatory authority, and notwithstanding subdivisions (b) and (c) of Section 2924.18, the Department of Business Oversight and the Bureau of Real Estate may adopt regulations applicable to any entity or person under their respective jurisdictions that are necessary to carry out the purposes of this section.   (g) The rights and remedies provided by this section are in addition to and independent of any other rights, remedies, or procedures under any other law. This section shall not be construed to alter, limit, or negate any other rights, remedies, or procedures provided by law.   (b)  (f)  For purposes of this section, all of the following definitions shall apply: (1) "Lender" means a finance lender or broker licensed under the California Finance Lenders Law (Division 9 (commencing with Section 22000) of the Financial Code), a residential mortgage lender licensed under the California Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial Code), a commercial or industrial bank organized under the Banking Law (Division 1 (commencing with Section 99) of the Financial Code), a savings association organized under the Savings Association Law (Division 2 (commencing with Section 5000) of the Financial Code), and a credit union organized under the California Credit Union Law (Division 5 (commencing with Section 14000) of the Financial Code). (2) "Notification of the death of the mortgagor or trustor" means provision to the mortgage servicer of a death certificate or, if a death certificate is not available, of other written evidence of the death of the mortgagor or trustor deemed sufficient by the mortgage servicer.  (2) "Mortgage servicer or lender" includes a mortgagee, trustee, beneficiary, or authorized agent.  (3) "Reasonable documentation" means copies of the following documents, as may be applicable, or, if the relevant documentation listed is not available, other written evidence of the person's status as successor in interest to the real property that secures the mortgage or deed of trust deemed sufficient by the mortgage servicer: (A) In the case of a personal representative, letters as defined in Section 52 of  the  Probate Code. (B) In the case of a surviving joint tenant, an affidavit of death of the joint tenant or a grant deed showing joint tenancy. (C) In the case of a surviving spouse where the real property was held as community property with right of survivorship, an affidavit of death of the spouse or a deed showing community property with right of survivorship. (D) In the case of a trustee of a trust, a certification of trust pursuant to Section 18100.5 of the Probate Code. (E) In the case of a beneficiary of a trust, relevant trust documents related to the beneficiary's interest. (4)  (A)    "Successor in interest" means a natural person who provides the mortgage servicer  or lender  with notification of the death of the mortgagor or trustor and reasonable documentation showing that the person is any of the following:  (i)   (   A)  The personal representative, as defined in Section 58 of  the  Probate Code, of the mortgagor's or trustor's estate.  (B) The devisee, as defined in Section 34 of the Probate Code, or the heir, as defined in Section 44 of the Probate Code, of the real property that secures the mortgage or deed of trust.   (C) The beneficiary of a Revocable Transfer on Death Deed, as defined in Section 5608 of the Probate Code.   (ii)   (D)  The surviving joint tenant of the mortgagor or trustor.  (iii)   (E)  The surviving spouse of the mortgagor or trustor if the real property that secures the mortgage or deed of trust was held as community property with right of survivorship pursuant to Section 682.1.  (iv)   (F)  The trustee of the trust that owns the real property that secures the mortgage or deed of trust or the beneficiary of that trust.  (B) Designation of a successor in interest for purposes of this subdivision does not impose an affirmative duty on a mortgage servicer or lender to offer a loan modification to, or accept an assumption of the loan by, the successor in interest and does not alter any obligation the mortgage servicer or lender may otherwise have to accept an assumption of the loan by the successor in interest. If a successor in interest assumes the loan, he or she may be required to otherwise qualify for available foreclosure prevention alternatives offered by the mortgage servicer or lender.   (c) (1) (A) If a trustee's deed upon sale has not been recorded, a successor in interest may bring an action for injunctive relief to enjoin a material violation of this section.   (B) Any injunction shall remain in place and any trustee's sale shall be enjoined until the court determines that the mortgage servicer or lender has corrected and remedied the violation or violations giving rise to the action for injunctive relief. An enjoined entity may move to dissolve an injunction based on a showing that the material violation has been corrected and remedied.   (2) After a trustee's deed upon sale has been recorded, a mortgage servicer or lender shall be liable to a successor in interest for actual economic damages pursuant to Section 3281 resulting from a material violation of this section.   (3) The Attorney General may bring a civil action in the name of the people to obtain appropriate equitable and declaratory relief whenever the Attorney General has reasonable cause to believe that a violation of this section has occurred.   SEC. 3.   The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.