California Adopts Several Provisions affecting Mortgage Lenders, Mortgage Servicers, and Fiduciaries
California Adopts an Additional Exemption to its Finance Lenders Law
California has passed SB 777 which amends its Financial Code to add section 22050.5. Existing law exempts from regulation a person who makes five or fewer commercial loans in a 12-month period so long as those loans are incidental to the business of that person. SB 777 provides an additional exemption for any person who makes one loan in a 12-month period. This amendment sunsets on January 1, 2022. The full text of SB 777 can be found here.
California Revised Uniform Fiduciary Access to Digital Assets Act
California has adopted AB 691 which amends the California Probate Code to authorize a decedent’s personal representative or trustee to access and manage digital assets and electronic communications.
The Act applies to a fiduciary acting under a will, a personal representative acting for a decedent, a trustee acting under a trust, or a custodian of digital assets for a user who resides or resided at the time of his or her death in the State of California. The aAct does not apply to a digital asset of an employer used by an employee in his or her ordinary course of business.
The Act allows a user to use an online tool, will, trust, power of attorney or other record to direct a custodian of digital assets to disclose some or all of the user’s digital assets to a designated recipient.
When disclosing the digital assets, the custodian may do any of the following: grant the fiduciary or recipient full access to the account, grant partial access to the account sufficient to perform the task the fiduciary or recipient has been charged, or provide the fiduciary or recipient with a copy of a record of the digital asset. The Act allows the custodian to charge a reasonable administrative charge for the cost of disclosure.
In the event a deceased user authorizes disclosure of the content of electronic communications, a custodian has 60 days from receipt of the following to make the required disclosure: a written request for disclosure, a certified copy of the death certificate, a certified copy of the letter of appointment or trust instrument; and if requested by the custodian: a number, username, address or other unique identifier assigned by the custodian to identify the account. The full text of AB 691 may be found here.
California Updates the Residential Mortgage Lending Act
California has passed SB 657 which updates the California Residential Mortgage Lenders Act to include in the definition of ‘”Lender’”, a person who “Is not a natural person and engages in the activities of a loan processor or underwriter for a residential mortgage loan but does not solicit loan applicants, originate mortgage loans, or fund mortgage loans unless the person is also a lender under paragraph (1).” It also includes a person who “Is a natural person and an independent contractor who engages in the activities of a loan processor or underwriter for a residential mortgage loan as described in subdivision (c) of Section 50003.6 but does not solicit loan applicants, originate mortgage loans, or fund mortgage loans unless the person is also a lender under paragraph (1).”
SB 657, in addition to maintaining the existing requirement that a licensee shall continuously maintain a minimum tangible net worth of $250,000, now authorizes the Commissioner, at his or her discretion, to require a lender to continuously maintain a net worth greater than $250,000 but not to exceed the net worth required of an approved FHA lender.
The provisions of SB 657 are effective January 1, 2017. The full text of the bill may be found here.
California Provides Foreclosure Protections to Successors in Interest of Deceased Borrowers
California has passed SB 1150 which amends the California Civil Code to provide foreclosure protection to a person claiming to be the successor in interest of a deceased borrower.
SB 1150 prohibits a loan servicer from recording a notice of default in the event a person, not a party to the loan or promissory note, notifies the loan servicer that the borrower has died and claims to be a successor in interest to the borrower. The loan servicer may not record the notice of default until the servicer requests reasonable documentation of death from the claimant and requests reasonable documentation demonstrating the claimant’s ownership interest in the real property and provides the claimant a reasonable amount of time to procure and provide such documentation. When a loan servicer receives reasonable documentation of the status of the claimant as a successor in interest as well as evidence of the claimants ownership interest in the real property, then the claimant is a successor in interest.
SB 1150 requires that, within 10 days of a person being deemed a successor in interest the servicer shall provide, at a minimum and in writing, to the successor in interest: the loan balance, interest rate and interest reset dates and amounts, balloon payments, prepayment penalties, default or delinquency status, the monthly payment amount and the payoff amount. Further, the servicer is required to allow the successor in interest to either apply to assume the deceased borrowers loan or to simultaneously apply to assume the loan and apply for a foreclosure prevention alternative.
SB 1150 also grants a successor in interest all the same rights and remedies as a borrower under subdivision (a) of Section 2923.4 and under Sections 2923.6, 2923.7, 2924, 2924.9, 2924.10, 2924.11, 2924.12, 2924.15, 2924.17, 2924.18, and 2924.19.
In addition, the Bill authorizes a successor in interest to bring injunctive action if a trustee’s deed has not been recorded to enjoin a material violation of subdivision (a), (b), (c), or (d). Further, should a trustee’s deed upon sale be recorded, a servicer shall be liable to a successor for actual economic damages pursuant to Section 3281 due to a violation of subdivision (a), (b), (c), or (d) by that mortgage servicer if the violation was not corrected prior to the recordation of the trustee’s deed upon sale.
The full text of SB 1150 may be found here.
Adam Faria, JD, is a regulatory compliance consultant with CLA. He is a graduate of Northeastern University and earned his juris doctor at Suffolk University Law School. He is admitted to the bar in Massachusetts and New Hampshire.
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