California Legislative Update

California Legislative Update

The California legislature recently amended its laws related to debt collection, its laws related to financial protections for reservists called to active duty, the Residential Mortgage Lending Act (“Act”), and the laws related to foreclosure fees.  All the legislation discussed in this memorandum is effective January 1, 2017.

 

CALIFORNIA ASSEMBLY BILL 1723

 

The existing law requires a debt collector, that receives a copy of a police report filed by the debtor alleging that the debtor is the victim of an identity theft crime and a written statement from debtor asserting that he is such a victim with respect to the debt being collected, to cease collection activities until completion of a review.

 

This amendment adds the following requirements on the debt collector:

  • Within 10 business days of receiving the statement and information from the consumer, if the debt collector furnished adverse information to a consumer credit reporting agency, it must notify that agency that the account is disputed, and initiate a review of the file.
  • Must send notice of its determination to the debtor no later than 10 business days after concluding the review.  The debt collector may recommence debt collection activities only upon making a good faith determination that the information does not establish that the debtor is not responsible for the specific debt in question, such determination to be consistent with federal law.
  • Must send notice to the debtor in writing of the determination and the basis for it before proceeding with any further collection activities.

 

Further, if the debt collector has furnished adverse information to a consumer credit reporting agency, it must notify the agency to delete the information no later than 10 business days after making its determination.

 

Also, the debt collector must notify the creditor no later than 10 business days after making its determination that debt collection activities have been terminated based upon the claim of identity theft.

 

California Assembly Bill 2562

 

A reservist who is called to active duty may defer payments on certain financial obligations while serving on active duty.  The law previously limited this protection to a reservist who was called to duty as a part of the Iraq and Afghanistan conflicts.  This protection is now offered to all reservists who otherwise meet the qualifications.

 

CALIFORNIA SENATE BILL 657

 

The Act amends the definitions of “Lender.”   The current law defines lender as a person who is or does all of the following:

  • The person is an approved lender for the Federal Housing Administration, Department of Veterans Affairs, Farmers Home Administration, Government National Mortgage Association, Federal National Mortgage Association, or Federal Home Loan Mortgage Corporation;
  • The person directly makes residential mortgage loans; and
  • The person makes the credit decision in the loan transactions.

 

The amendment now includes in the definition of “Lender” a person who either:

  • Is not a natural person and engages in the activities of a loan processor or underwriter for a residential mortgage loan, but does not solicit loan applicants, originate mortgage loans, or fund mortgage loans unless the person is also a lender under the definition above; or
  • Is a natural person and an independent contractor who engages in the activities of a loan processor or underwriter for a residential mortgage loan, but does not solicit loan applicants, originate mortgage loans, or fund mortgage loans unless the person is also a lender under the definition above.

 

The current law requires a licensee issued a license for the purpose of making or servicing residential mortgage loans to maintain a minimum tangible net worth of $250,000.

 

The amendment authorizes the California Commissioner of Business Oversight, in his or her discretion, to require a lender who engages in the activities described above (those activities described in the amendment definition of “Lender”) to continuously maintain a minimum tangible net worth of an amount that is greater than $250,000, but that does not exceed the net worth required of an approved lender under the Federal Housing Administration.

 

California Senate Bill 983

 

California law limits the amount a trustee or attorney may charge for connection with the enforcement of certain terms of obligation upon default in payment under a mortgage or deed of trust prior to reinstatement or until the notice of sale is deposited in the mail or otherwise at any time prior to the decree of foreclosure as well as after the notice of sale is deposited in the mail and until the property is sold by power of sale.  The base amounts for these limitations vary depending on the amount of the unpaid principal balance.  The law has been updated to increase the base amount by $50.

 

These limitations have been amended to read as follows:

  • In connection with the enforcement of certain terms of obligation upon default in payment under a mortgage or deed of trust prior to reinstatement or until the notice of sale is deposited in the mail or otherwise at any time prior to the decree of foreclosure, the base amount may not exceed $350 (previously $300) for an unpaid principal balance sum of $150,000 or less or $300 (previously $250) plus specified additional percentages of unpaid principal sums if the unpaid principal balance exceeds $150,000.
  • After the notice of sale is deposited in the mail and until the property is sold by power of sale, the base amount may not exceed $475 (previously $425) for an unpaid principal balance sum of $150,000 or less or $410 (previously $360) plus specified additional percentages of unpaid principal sums, if the unpaid principal balance exceeds $150,000.