California Legislative Update

California Legislative Update

The California legislature recently amended its foreclosure laws and its laws governing deficiency judgments.  The three bills discussed in this memorandum are effective January 1, 2013.

CALIFORNIA ASSEMBLY BILL 1599

 

 

If the loan agreement for a residential real property containing no more than four dwelling units was negotiated in a language other than English, a lender, trustee, beneficiary, or authorized agent must provide to the borrower a copy of the recorded notice of default and a copy of the recorded notice of sale along with an attached separate summary document of the notice of default and an attached separate summary document of the notice of sale in English and the language in which the loan agreement was negotiated.  Such languages may include Spanish, Chinese, Tagalog, Vietnamese, or Korean.  These summaries are not required to be recorded or published.  This requirement will take effect on April 1, 2013, or 90 days following the issuance of the translations by the Department of Corporations (the “Department”), whichever is later.

 

 

The Department must provide a standard translation of the statements below, and of the summary of the notice of default and summary of the notice of sale, as set forth below in Spanish, Chinese, Tagalog, Vietnamese, or Korean, whichever in which the contract or agreement was negotiated.  The Department must make the translations described available without charge on its website.  Any lender, trustee, beneficiary, or authorized agent who provides the Department’s translations in the manner prescribed will be in compliance with this requirement.

 

 

If the loan agreement was negotiated in a language other than English, the following statement must appear in the language in which the agreement was negotiated, at the beginning of the notice of default:

 

 

“NOTE: THERE IS A SUMMARY OF THE INFORMATION IN THIS DOCUMENT ATTACHED.”

 

 

The following summary of key information must be attached to the copy of the notice of default provided to the borrower or trustor:

 

 

“SUMMARY OF KEY INFORMATION

 

The attached notice of default was sent to [name of the trustor], in relation to [description of the property that secures the mortgage or deed of trust in default].  This property may be sold to satisfy your obligation and any other obligation secured by the deed of trust or mortgage that is in default.

 

 

[Trustor] has, as described in the notice of default, breached the mortgage or deed of trust on the property described above.

 

 

IMPORTANT NOTICE: IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT ACTION, and you may have the legal right to bring your account in good standing by paying all of your past due payments plus permitted costs and expenses within the time permitted by law for reinstatement of your account, which is normally five business days prior to the date set for the sale of your property.  No sale date may be set until approximately 90 days from the date the attached notice of default may be recorded (which date of recordation appears on the notice).

 

 

This amount is __________ as of ______________            (date) and will increase until your account becomes current.

 

 

While your property is in foreclosure, you still must pay other obligations (such as insurance and taxes) required by your note and deed of trust or mortgage.  If you fail to make future payments on the loan, pay taxes on the property, provide insurance on the property, or pay other obligations as required in the note and deed of trust or mortgage, the beneficiary or mortgagee may insist that you do so in order to reinstate your account in good standing.  In addition, the beneficiary or mortgagee may require as a condition to reinstatement that you provide reliable written evidence that you paid all senior liens, property taxes, and hazard insurance premiums.

 

 

Upon your written request, the beneficiary or mortgagee will give you a written itemization of the entire amount you must pay.  You may not have to pay the entire unpaid portion of your account, even though full payment was demanded, but you must pay all amounts in default at the time payment is made.  However, you and your beneficiary or mortgagee may mutually agree in writing prior to the time the notice of sale is posted (which may not be earlier than three months after this notice of default is recorded) to, among other things, (1) provide additional time in which to cure the default by transfer of the property or otherwise; or (2) establish a schedule of payments in order to cure your default; or both (1) and (2).

 

 

Following the expiration of the time period referred to in the first paragraph of this notice, unless the obligation being foreclosed upon or a separate written agreement between you and your creditor permits a longer period, you have only the legal right to stop the sale of your property by paying the entire amount demanded by your creditor.

 

 

To find out the amount you must pay, or to arrange for payment to stop the foreclosure, or if your property is in foreclosure for any other reason, contact:

____________________________________

(Name of beneficiary or mortgagee)

____________________________________

(Mailing address)

____________________________________

(Telephone)

 

 

If you have any questions, you should contact a lawyer or the governmental agency which may have insured your loan.

 

 

Notwithstanding the fact that your property is in foreclosure, you may offer your property for sale, provided the sale is concluded prior to the conclusion of the foreclosure.

 

 

Remember, YOU MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT ACTION.

 

If you would like additional copies of this summary, you may obtain them by calling [insert telephone number].”

 

 

The following statement must appear in the languages of Spanish, Chinese, Tagalog, Vietnamese, and Korean at the beginning of the notice of sale:

 

 

“NOTE: THERE IS A SUMMARY OF THE INFORMATION IN THIS DOCUMENT ATTACHED.”

 

 

The following summary of key information must be attached to the copy of the notice of sale provided to the borrower or trustor:

 

 

“SUMMARY OF KEY INFORMATION

 

The attached notice of sale was sent to [trustor], in relation to [description of the property that secures the mortgage or deed of trust in default].

 

 

YOU ARE IN DEFAULT UNDER A (Deed of trust or mortgage) DATED ____. UNLESS YOU TAKE ACTION TO PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE.

 

 

IF YOU NEED AN EXPLANATION OF THE NATURE OF THE PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A LAWYER.

 

 

The total amount due in the notice of sale is ____.

 

 

Your property is scheduled to be sold on [insert date and time of sale] at [insert location of sale].

 

 

However, the sale date shown on the attached notice of sale may be postponed one or more times by the mortgagee, beneficiary, trustee, or a court, pursuant to Section 2924g of the California Civil Code.  The law requires that information about trustee sale postponements be made available to you and to the public, as a courtesy to those not present at the sale.  If you wish to learn whether your sale date has been postponed, and, if applicable, the rescheduled time and date for the sale of this property, you may call [telephone number for information regarding the trustee’s sale] or visit this Internet Web site [Internet Web site address for information regarding the sale of this property], using the file number assigned to this case [case file number].  Information about postponements that are very short in duration or that occur close in time to the scheduled sale may not immediately be reflected in the telephone information or on the Internet Web site.  The best way to verify postponement information is to attend the scheduled sale.

 

 

If you would like additional copies of this summary, you may obtain them by calling [insert telephone number].”

 

 

Failure to provide these summaries to the borrower or trustor will have the same effect as if the notice of default or notice of sale were incomplete or not provided.

 

 

A document that is translated will not be rejected for recordation on the ground that some part of the document is in a language other than English.

 

 

Until January 1, 2018, whenever a sale is postponed for a period of at least 10 business days, a lender, beneficiary, or authorized agent must provide written notice to a borrower regarding the new sale date and time, within five business days following the postponement.  Information provided pursuant to this paragraph will not constitute the public declaration of postponement of a sale.  Failure to comply with this requirement will not invalidate any sale that would otherwise be valid.

 

 

An entity must not record or cause a notice of default to be recorded or otherwise initiate the foreclosure process unless it is the holder of the beneficial interest under the mortgage or deed of trust, the original trustee or the substituted trustee under the deed of trust, or the designated agent of the holder of the beneficial interest.  An agent of the holder of the beneficial interest under the mortgage or deed of trust, original trustee or substituted trustee under the deed of trust may not record a notice of default or otherwise commence the foreclosure process except when acting within the scope of authority designated by the holder of the beneficial interest.

CALIFORNIA ASSEMBLY BILL 2610

 

 

Upon posting a notice of sale, a trustee or authorized agent must post the following notice, in the manner required for posting the notice of sale on the property to be sold, and a lender, trustee, beneficiary, or authorized agent, concurrently with the mailing of the notice of sale, must send by first-class mail in an envelope addressed to the “Resident of property subject to foreclosure sale” the following notice in English and, if the loan agreement was negotiated in a language other than English, in that language:

 

 

Foreclosure process has begun on this property, which may affect your right to continue to live in this property.  Twenty days or more after the date of this notice, this property may be sold at foreclosure.  If you are renting this property, the new property owner may either give you a new lease or rental agreement or provide you with a 90-day eviction notice.  You may have a right to stay in your home for longer than 90 days.  If you have a fixed-term lease, the new owner must honor the lease unless the new owner will occupy the property as a primary residence or in other limited circumstances.  Also, in some cases and in some cities with a “just cause for eviction” law, you may not have to move at all.  All rights and obligations under your lease or tenancy, including your obligation to pay rent, will continue after the foreclosure sale.  You may wish to contact a lawyer or your local legal aid office or housing counseling agency to discuss any rights you may have.

 

 

The notice as stated above will become operative on March 1, 2013, or 60 days following posting of a dated notice incorporating the changes on the Department of Consumer Affairs (the “Department”) website, whichever date is later.

 

 

In any action for unlawful detainer resulting from a foreclosure sale of a rental housing unit, the fact that an owner or his or her agent has directed and obtained service of a prejudgment claim of right to possession will not limit the right of any tenant or subtenant of the property to file a prejudgment claim of right of possession at any time before judgment, or to object to enforcement of a judgment for possession, whether or not the tenant or subtenant was served with a prejudgment claim of right to possession.

 

 

Please note as provided in the notice above, a tenant or subtenant in possession of a rental housing unit under a month-to-month lease or periodic tenancy at the time the property is sold in foreclosure must be given 90 days’ (previously 60 days) written notice to vacate the property before the tenant or subtenant may be removed from the property.

 

 

Tenants or subtenants holding possession of a rental housing unit under a fixed-term residential lease entered into before transfer of title at the foreclosure sale will have the right to possession until the end of the lease term, and all rights and obligations under the lease will survive foreclosure.  However, the tenancy may be terminated upon 90 days’ written notice to vacate the property if any of the following conditions apply:

  • The purchaser or successor in interest will occupy the housing unit as a primary residence;
  • The tenant is the borrower or the child, spouse, or parent of the borrower;
  • The lease was not the result of an arms’ length transaction; or
  • The lease requires the receipt of rent that is substantially less than fair market rent for the property, except when rent is reduced or subsidized due to a federal, California, or local subsidy or law.

 

The purchaser or successor in interest has the burden of proof in establishing that a fixed-term residential lease is not entitled to the protection described above.

 

 

The provisions above are not intended to affect any local just cause eviction ordinance.  The provisions above do not, and must not be construed to, affect the authority of a public entity that otherwise exists to regulate or monitor the basis for eviction.

CALIFORNIA SENATE BILL 1069

 

 

A deficiency judgment will not be allowed on any loan, refinance, or other credit transaction (collectively, a “credit transaction”), which is used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, except to the extent that in a credit transaction, the lender advances new principal (“new advance”), which is not applied to any obligation owed or to be owed under the purchase money loan, or to fees, costs, or related expenses of the credit transaction.  Any new credit transaction will be deemed to be a purchase money loan except as to the principal amount of any new advance.  Any payment of principal will be deemed to be applied first to the principal balance of the purchase money loan, and then to the principal balance of any new advance, and interest payments will be applied to any interest due and owing.  The provisions of this paragraph only apply to credit transactions that are executed on or after January 1, 2013.