Signed by Governor Jerry Brown, Jr.

Vote Smart's Synopsis:

Vote to adopt a conference report that establishes regulations for foreclosure procedures on home loans.

Highlights:

• Authorizes borrowers to obtain loss mitigation options, such as loan modifications, through the borrower's mortgage service as an alternative to foreclosure (Sec. 3).

• Prohibits a mortgage servicer from recording a notice of sale or conducting a trustee's sale if the borrower has submitted a complete application for a foreclosure prevention alternative while that application is still pending, and until the borrower has been notified with a determination regarding that borrower's eligibility for the foreclosure prevention alternative (Sec. 15). 

• Prohibits a mortgage servicer from recording a notice of default if the foreclosure prevention alternative is approved in writing prior to or after the prevention alternative approval under either of the following circumstances (Sec. 15):
• The borrower is in compliance with the terms of a written trial or permanent loan modification or repayment plan; or
• A foreclosure prevention alternative has been approved in writing by all parties.

• Requires a mortgage servicer to contact the individual in person or over the telephone to discuss the borrower’s financial situation and explore options to avoid foreclosure (Sec. 4). 

• Requires a notice of default to include that the mortgage servicer has done the following (Sec. 4):
• Has contacted the borrower;
• Has tried with “due diligence" to contact the borrower; or
• That no contact was required because the individual did not meet the definition of “borrower”.

• Defines “due diligence” as taking the following steps (Sec. 4):
• Sending a first-class letter to the borrower; and
• Telephoning the borrower at least 3 different hours on different days at the borrower's primary phone number.

• Authorizes a mortgage servicer or a variant thereof to record a notice of default or notice of sale, or conduct a trustee's sale, when one of the following occurs (Sec. 7):
• The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification and the appeal period has expired;
• The borrower does not accept the offered first lien loan modification within 14 days; or
• The borrower accepts a first lien loan modification but defaults on it.

• Specifies that borrowers have at least 30 days after a first lien loan modification is denied to appeal the denial and provide evidence of error in the mortgage servicer's decision (Sec. 7).

• Prohibits the mortgage servicer from recording a notice of default, recording a notice of sale or conducting a trustee's sale until the later of the following dates (Sec. 7):
• 31 days after the borrower is notified in writing of the denial;
• 15 days after the denial of the appeal was issued;
• 14 days after the borrower declines a first lien loan modification offer after appeal is granted; or
• When the borrower fails to submit the first payment after a first lien loan modification is offered and accepted.

• Requires a mortgage servicer to explain the denial of a first lien loan in a written notice (Sec. 7).

• Requires the mortgage servicer to provide the borrower with 1 or more direct means of communication with a single point of contact, when a borrower requests a foreclosure prevention alternative (Sec. 9).

• Authorizes a borrower to bring an action for injunctive relief against the mortgage servicer to refrain from recording a notice of foreclosure if a trustee's deed of sale has not been recorded (Secs. 16-17).

• Requires any mortgage servicer engaged in multiple and repeated violations relative to a foreclosure proceeding to be held liable for a civil penalty of up to $7,500 per mortgage or deed of trust (Sec. 20).

Full Bill Text