California Mortgage Relief Act., the official text

An act to add Title 19.2 (commencing with Section 3273.31) to Part 4 of Division 3 of the Civil Code, relating to emergency relief.

LEGISLATIVE COUNSEL'S DIGEST

Existing law authorizes a borrower who is experiencing financial hardship that prevents the borrower from making timely payments on a specified residential mortgage loan due directly to a specified state of emergency proclaimed by the Governor, or a specified federally declared disaster, to request forbearance on their residential mortgage loan, as prescribed. Existing law requires a mortgage servicer, except as specified, to offer mortgage payment forbearance for an initial 90-day period that may be extended up to a maximum forbearance period of 12 months and prohibits a mortgage servicer from assessing any late fees to the borrower’s account or charging a default rate of interest during the forbearance period.
This bill would, among other things, similarly authorize a borrower to request forbearance on a residential mortgage loan, as defined, secured by residential real property that has become uninhabitable as a direct result of a disaster, which the bill would define to mean the conditions described in a declaration of a disaster issued by the federal government. The bill would require the borrower to affirm that as a direct result of a disaster, a residential unit is uninhabitable. Because the bill would expand the crime of perjury, the bill would impose a state-mandated local program.
This bill would, except as specified, require a mortgage servicer to offer mortgage payment forbearance of a period of up to an initial 180 days, to be extended at the request of the borrower in 90-day increments, up to a maximum forbearance period of 12 months. The bill would provide that the forbearance period includes any period of forbearance related to the disaster that a mortgage servicer has provided to a borrower before the date upon which a declaration of a disaster was issued. The bill would also prohibit a mortgage servicer from assessing any late fees to the borrower’s account or charging a default rate of interest during the forbearance period.
This bill would require a mortgage servicer to report the credit obligations of borrowers under a disaster-related forbearance plan in compliance with the federal Fair Credit Reporting Act. For an account granted disaster-related mortgage payment relief, the bill would prohibit a mortgage servicer from furnishing information during the forbearance period indicating that the payments are in forbearance and would require the mortgage servicer to report the credit obligation or account as current or delinquent, as specified.
This bill would authorize a civil action to enforce these provisions to be brought by the Attorney General, a district attorney, or a county counsel.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

The people of the State of California do enact as follows:

SECTION 1.
Title 19.2 (commencing with Section 3273.31) is added to Part 4 of Division 3 of the Civil Code, to read:
19.2.
California Disaster-related Mortgage Relief Act3273.31.
This title shall be known as the “California Disaster-related Mortgage Relief Act.”

3273.32.
For purposes of this title:
(a) (1) “Borrower” means a natural person who is a mortgagor or trustor or a person who holds a power of attorney for a mortgagor or trustor.
(2) “Borrower” does not include any of the following:
(A) An individual who has surrendered the secured property as evidenced by either a letter confirming the surrender or delivery of the keys to the property to the mortgagee, trustee, beneficiary, or authorized agent.
(B) An individual who has a recorded notice of default recorded against the real property that is secured by the residential mortgage loan before issuance of a declaration of a disaster unless the notice of default was rescinded.
(C) An individual who was delinquent in satisfying a credit obligation or account for a period of more than 90 days immediately before a declaration of a disaster.
(D) An individual against whom an unrescinded notice of default was recorded within 90 days of a declaration of a disaster.
(b) “Disaster” means the conditions described in a declaration of a disaster issued by the federal government.
(c) “Disaster-related forbearance relief” means the relief described in servicing guidelines for federally backed loans.
(d) “Federally backed loan” means a residential mortgage loan that is insured, guaranteed, purchased, or secured by a federal agency or government-sponsored entity.
(e) (1) “Mortgage servicer” means a person or entity who directly services a loan or who is responsible for interacting with the borrower, managing the loan account on a daily basis, including collecting and crediting periodic loan payments, managing any escrow account, or enforcing the note and security instrument, either as the current owner of the promissory note or as the current owner’s authorized agent.
(2) “Mortgage servicer” also means a subservicing agent to a master servicer by contract.
(3) “Mortgage servicer” does not include a trustee, or a trustee’s authorized agent, acting under a power of sale pursuant to a deed of trust.
(f) “Residential mortgage loan” means a loan that is secured by residential real property improved by four or fewer residential units.

3273.33.
This title applies to a depository institution chartered under federal or state law, a person covered by the licensing requirements of Division 9 (commencing with Section 22000) or Division 20 (commencing with Section 50000) of the Financial Code, or a person licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.

3273.34.
(a) A borrower may request forbearance on a residential mortgage loan secured by residential real property upon which a residential unit that has become uninhabitable as a direct result of a disaster is or was located by doing both of the following:
(1) Submitting a request to the borrower’s mortgage loan servicer before the conclusion of six months after the date upon which a declaration of a disaster was issued.
(2) Affirming that a residential unit is uninhabitable as a direct result of a disaster.
(b) Upon a request by an eligible borrower for forbearance under subdivision (a), a mortgage servicer shall offer mortgage payment forbearance for an initial period of 180 days, which shall be extended at the request of the borrower in 90-day increments, up to a maximum forbearance period of 12 months.
(c) The mortgage servicer shall notify the borrower in writing within 10 business days whether the borrower’s request for forbearance has been approved. With any notice of approval, the mortgage servicer shall provide to the borrower information about potential repayment plans that may be used pursuant to subdivision (c) of Section 3273.35.
(d) If the mortgage servicer, acting under delegated authority to make forbearance determinations on behalf of the investor, denies a forbearance request within the maximum allowable forbearance period of 12 months pursuant to subdivision (b), the mortgage servicer shall not be in violation of this section if the mortgage servicer provides written notice to the borrower stating the specific reason for denial. The notice shall include both of the following:
(1) A clear and concise explanation of the specific investor provision that is the basis for the denial.
(2) The text of the specific investor guideline or contractual provision that is the basis for the denial of the borrower’s forbearance request.
(e) If the written notice in subdivision (c) cites any defect in the borrower’s request, including an incomplete application or missing information, that is curable, the mortgage servicer shall do all of the following:
(1) Specifically identify any curable defect in the written notice.
(2) Provide 21 calendar days from the mailing date of the written notice for the borrower to cure any identified defect.
(3) Accept the borrower’s revised request for forbearance received before the 21-day period described in paragraph (2) lapses.
(4) Respond to the borrower’s revised request within five business days of receipt of the revised request.
(f) The forbearance period required by subdivision (b) shall include any period of forbearance related to the disaster that a mortgage servicer has provided to a borrower before the date upon which a declaration of a disaster was issued.
(g) During the period of forbearance required by this section, a late fee shall not be assessed to the borrower’s account, and the borrower shall not be charged a default rate of interest.
(h) No later than 30 calendar days before the end of an initial forbearance period, a mortgage servicer shall provide written notice to the borrower disclosing both of the following:
(1) Any documentation or forms that the mortgage servicer requires the borrower to furnish or complete to be considered for an additional period of forbearance.
(2) A description of the deadlines and timelines associated with considering the borrower for an additional period of forbearance.
(i) A mortgage servicer shall report the credit obligations of a borrower under a disaster-related forbearance plan in compliance with the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.). For an account granted disaster-related mortgage payment relief pursuant to this title, a mortgage servicer shall not furnish information during the forbearance period indicating that the payments are in forbearance and shall do either of the following:
(1) Report the credit obligation or account as current.
(2) If a borrower was delinquent before the disaster-related forbearance plan, the mortgage servicer shall:
(A) Maintain the delinquent status during the period in which the plan is in effect.
(B) If the consumer brings the account current during the forbearance period, report the account as current.

3273.35.
(a) A mortgage servicer shall disclose to a borrower to whom a forbearance has been granted pursuant to Section 3273.34 that the forborne mortgage payments are required to be repaid.
(b) The disclosure required by subdivision (a) is required to be furnished to the borrower only once at the beginning of the forbearance period.
(c) To the extent consistent with a mortgage servicer’s contractual authority, at the end of a borrower’s forbearance period, the mortgage servicer shall offer the borrower at least one postforbearance home retention option that does not, before satisfaction of the mortgage loan, do either of the following:
(1) Require the borrower to repay the arrearages resulting from the forbearance all at once in a lump sum.
(2) Increase in any month the borrower’s preforbearance monthly principal and interest payment other than as the result of an adjustment of the applicable index pursuant to the terms of an adjustable rate mortgage.
(d) A mortgage servicer shall apply any payment received from the borrower after the forbearance period ends in compliance with the terms of the loan and any postforbearance agreement between the borrower and the mortgage servicer.

3273.36.
During the time of forbearance granted pursuant to this title, a mortgage servicer shall not initiate any judicial or nonjudicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale if the borrower is performing pursuant to the terms of the forbearance.

3273.37.
Failure to comply with this title shall not affect the validity of a trustee’s sale or a sale to a bona fide purchaser for value.

3273.38.
(a) (1) With respect to a federally backed loan, a person shall not be held liable for a violation of this title if compliance with this title conflicts with the servicing guidelines applicable to the federally backed loan.
(2) Servicing guidelines applicable to a federally backed loan includes servicing guidelines like those issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), the Single Family Housing Policy Handbook issued by the Federal Housing Administration of the United States Department of Housing and Urban Development, the VA Servicer Handbook issued by the United States Department of Veterans Affairs, or a servicing handbook issued by the Rural Development division of the United States Department of Agriculture, as those guidelines existed on the date that the declaration of a disaster was issued that is the basis of the borrower’s eligibility pursuant to this title.
(b) With respect to a residential mortgage loan that is not a federally backed loan, a person shall not be held liable for a violation of this title if compliance with this title conflicts with the servicing guidelines issued by Fannie Mae or Freddie Mac.
(c) For purposes of this section, “conflicts with” means that it is impossible to comply with this title and the person’s obligation under the applicable servicing guidelines.

3273.40.
A civil action for a violation of this title may be brought by the Attorney General, a district attorney, or a county counsel.

3273.41.
The Department of Financial Protection and Innovation shall post all of the following on its internet website:
(a) Links to the provisions of servicing guidelines pertaining to disaster-related forbearance relief for federally backed loans.
(b) A summary of Fannie Mae and Freddie Mac guidance to assist borrowers in understanding their forbearance programs.
(c) A dedicated telephone number for borrowers seeking assistance.

3273.42.
(a) It is the intent of the Legislature that a mortgage servicer offer a borrower forbearance that is consistent with the mortgage servicer’s contractual or other authority.
(b) It is the intent of the Legislature that this title not apply to servicing guidelines that are unrelated to disaster-related forbearance relief.
(c) This title does not require a mortgage servicer to take any action that would require the mortgage servicer to breach the terms of an existing contract with the investor that owns or insures the residential mortgage loan.

3273.43.
The provisions of this title are severable. If any provision of this title or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 2.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.