Existing law, until January 1, 2013, requires the holder of a mortgage or deed of trust (or authorized agent) to contact the borrower prior to filing a notice of default to explore options for the borrower to avoid foreclosure, as specified. Existing law requires a notice of default or, in certain circumstances, a notice of sale, to include a declaration stating that the holder of the mortgage (or authorized agent) has contacted the borrower, has tried with due diligence to contact the borrower, or that no contact was required for a specified reason.
This legislation adds mortgage servicers (as defined) to these provisions, and extends the operation of these provisions indefinitely, except that it deletes the requirement with respect to a notice of sale. The bill, until January 1, 2018, additionally requires the borrower to be provided with specified information in writing prior to recordation of a notice of default. The bill also prohibits the holder of a mortgage (or authorized agent) from recording a notice of default or, until January 1, 2018, recording a notice of sale or conducting a trustee’s sale, while a loan modification application is pending with respect to a first lien, under specified conditions.
The new statute prohibits recordation of a notice of default or a notice of sale or the conduct of a trustee’s sale if a foreclosure prevention alternative has been approved and certain conditions exist and, until January 1, 2018, requires recordation of a rescission of those notices upon execution of a permanent foreclosure prevention alternative. The legislation also, until January 1, 2018, prohibits the collection of application fees and the collection of late fees while a foreclosure prevention alternative is being considered, if certain criteria are met, and requires a subsequent mortgage servicer to honor any previously approved foreclosure prevention alternative.
Further, this law authorizes a borrower to seek an injunction and damages for violations of certain of the provisions, with statutory damages up to the greater of treble actual damages or $50,000 for violation of certain provisions that is found to be intentional or reckless or resulted from willful misconduct. The bill also authorizes the awarding of attorneys’ fees for prevailing borrowers, as specified.
This legislation only applies to mortgages or deeds of trust secured by residential real property not exceeding 4 dwelling units that is owner-occupied, and, until January 1, 2018, only to those entities who conduct more than 175 foreclosure sales per year or annual reporting period (except as specified).
In addition, the bill requires, upon request from a borrower who requests a foreclosure prevention alternative, a mortgage servicer who conducts more than 175 foreclosure sales per year or annual reporting period to establish a single point of contact and provide the borrower with one or more direct means of communication with the single point of contact. The legislation specifies certain responsibilities of the single point of contact.
Moreover, the legislation requires that, before recording or filing foreclosure related documents (e.g., notice of default, notice of sale, related affidavit) the mortgage servicer ensure they are accurate and complete and supported by competent and reliable evidence to substantiate the borrower’s default and the right to foreclose, including the borrower’s loan status and loan information.
Finally, the bill, until January 1, 2018, provides that any mortgage servicer that engages in multiple and repeated violations of these requirements is liable for a civil penalty of up to $7,500 per mortgage or deed of trust, in an action brought by specified state and local government entities.
Enacted July 2012. Link to bill: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0251-0300/ab_278_bill_20120711_chaptered.pdf