Abandoned Mortgage Bill Prohibiting Foreclosure Amended

Senate Bill 681 (Wahab) was recently amended to change the provisions that deemed abandoned all or a portion of a mortgage debt secured by a subordinate mortgage, based on certain actions by the mortgage servicer, and prohibiting the foreclosure of the abandoned debt.

Instead, the bill would now make certain mortgage servicing practices unlawful with regard to subordinate mortgages, and prohibit the foreclosure of the debt. The practices SB 681 would make unlawful include:

1. The mortgage servicer did not provide the borrower with any communication regarding the loan secured by the mortgage for at least three years.
   
   
2. The mortgage servicer failed to provide a transfer of loan servicing notice to the borrower when required to provide that notice by law.
   
   
3. The mortgage servicer failed to provide a transfer of loan ownership notice to the borrower when required by law.
   
   
4. The mortgage servicer provided a form to the borrower indicating that the debt had been written off or discharged.
   
   
5. The mortgage servicer failed to provide a periodic account statement to the borrower when required by law.
   
   

The bill would also prohibit a mortgage servicer from conducting or threatening to conduct a nonjudicial foreclosure until the mortgage servicer (A) records or causes to be recorded a certification that either the mortgage servicer did not engage in an unlawful practice or the mortgage servicer lists all instances when it committed an unlawful practice and (B) the mortgage servicer sends the recorded certification and a notice to the borrower.

Under the bill as amended, a borrower would also be allowed to petition the court to set a nonjudicial foreclosure sale aside when a mortgage servicer’s recorded certification of compliance was false or incomplete.

CLTA is opposed to the legislation on the basis that it would create significant uncertainty within the real property record, undermining the ability of purchasers, lenders, and title insurers to rely on public records when evaluating encumbrances.