CLTA News Express
An Express Article from the California Land Title Association
Foreclosure Legislation Passes
Bulletin 12/13-3 - July 2, 2012
The CLTA, along with a number of financial trade organizations, including the California Bankers Association, California Association of Realtors, and California Mortgage Bankers Association, opposed legislation to change the foreclosure process in California. The entire matter was sent before a Legislative Conference Committee, bypassing the normal committee process. Two identical bills have now passed the Legislature and are on their way to the Governor.
Under Assembly Bill 278 and Senate Bill 900 lenders would be barred from foreclosing while loan modifications are pending and required to provide a single point of contact for borrowers. A private cause of action is created for a violation of the law. Both pre-foreclosure injunctions and post foreclosure lawsuits for damages are permitted. Lenders foreclosing on less than 175 loans per year would be exempt from the provisions.
Recording a notice of default and a notice of sale may violate the law if loan modification requests are being reviewed or while an appeal of a denial of a modification request is pending. Originally many of these and other restrictions applied to mortgage servicers, trustees, authorized agents and entities. The scope of the act has been narrowed but not as much as requested by the CLTA.
Due diligence requirements are imposed on loan servicers. These include sending a statement to the borrower that the borrower may request several items. These items include a copy of the promissory note, the deed of trust, and a copy of any assignments, if applicable, of the borrower’s mortgage of deed of trust required to demonstrate the right of the mortgage servicer to foreclose. This language is an improvement over the initial draft opposed by the CLTA, which required that all assignments be recorded before a foreclosure could begin.
Lawsuits are authorized to remedy a material violation of the new requirements, although materiality is not defined. An intentional or reckless violation, or one resulting from willful misconduct, can result in an award of treble actual damages or statutory damages of $50,000, plus an award of costs and attorney’s fees.
In addition to eliminating the requirement for recording all assignments, the CLTA was also successful in having bona fide purchaser protection added to the legislation. Under the legislation, violation of the act will not affect the validity of a sale in favor of a bona fide purchaser and any of its encumbrancers for value without notice.
