California Enacts Foreclosure Legislation Codifying and Extending Provisions of the National Mortgage Settlement
(Posted September 13, 2012)
Earlier this year, the state attorneys general from California and 48 other states, the District of Columbia, and federal agencies entered into the $25 billion National Mortgage Settlement (NMS) with the five largest mortgage loan servicers (Citi, Wells Fargo, Bank of America, Chase and Ally). Mortgage loan servicers collect from the borrower and remit to the mortgage holder. If the borrower does not make timely payments, the mortgage servicer has the power to bring a foreclosure or approve a loan modification or a short sale. In addition to the monetary provisions, the NMS focused on robosigning-the practice of routinely signing foreclosure affidavits outside the presence of a notary public and without reviewing the validity or accuracy of the sworn statements-and other mortgage servicing misconduct, including deceptive practices in offering loan modifications. The NMS is applicable for 3 years to loans serviced by the settling banks. For details of the settlement, see http://nationalmortgagesettlement.com/.
On July 11, 2012, California became the first state to enact legislation (stats 2012, ch 86) to codify provisions of the NMS. The legislation is intended to change California's nonjudicial foreclosure process to ensure that borrowers have a meaningful opportunity to obtain foreclosure prevention options offered by the borrower's mortgage servicer, such as loan modifications or other alternatives to foreclosure. The legislation applies to first liens-the most senior mortgage or deed of trust-secured by the borrower's primary residence. See CC §2924.15. In general, its obligations apply to mortgage servicers that conduct more than 175 foreclosures a year. Its key provisions are as follows:
The legislation becomes effective January 1, 2013, and sunsets various provisions as of January 1, 2018. For many of its obligations, there are mirror-image provisions that become effective on the expiration of the prior provisions.
This legislation is part of the Homeowner Bill of Rights package. Among the other components are pending bills to protect tenants in foreclosed properties. AB 2610 (2012), SB 1473 (2012).
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