California recently passed Assembly Bill 2424 (“AB 2424”), which amends certain sections of the CA Civil Code related to real property and adds new Section 2932.2. AB 2424, which is also called the “Protecting Homeowners During Foreclosure” bill, adds new notice requirements at specified times in the loan and foreclosure process. The bill states that the updates are intended to allow a third party to assist the borrower in avoiding a foreclosure sale.
Section 2323.5 has been amended to add a new requirement for mortgage servicers. During the initial contact with a defaulting borrower, mortgage servicers are required to notify borrowers that a third party, such as a family member, HUD-certified housing counselor, or attorney, may record a request to receive copies of any notice of default and notice of sale, to potentially assist the borrower in avoiding foreclosure.
With respect to a foreclosure sale, the bill provides that a trustee must wait until the expiration of 45 days if the trustee receives from the mortgagor or trustor, at least 5 business days before the scheduled date of sale, a listing agreement for the sale of the property subject to the power of sale. The listing agreement must be with a California licensed real estate broker and be placed in a publicly available marketing platform for the sale of property. If a scheduled sale is postponed based on the listing agreement, the timeline for a borrower to request reinstatement of the mortgage is extended based on the new scheduled date of sale.
If a scheduled date of sale is postponed pursuant to receipt of a listing agreement, and the trustee receives from the mortgagor or trustor, at least five business days before the scheduled date of sale, a copy of a purchase agreement for the sale of the property, the trustee shall postpone the scheduled date of sale to a date that is at least 45 days after the date on which the purchase agreement was received by the trustee. The purchase price must be equal to or greater than the amount of the unpaid balance of all obligations on the property and must include the name of the buyer, the sales price, closing date, and acceptance by a designated escrow agent. A foreclosure sale may be postponed under this procedure only once.
Additionally, AB 2424 provides that a mortgagee, beneficiary, or authorized agent must provide to the trustee the fair market value of the property at least 10 days prior to the initially scheduled date of sale. The trustee is prohibited from selling the property at the initial trustee’s sale for less than 67% of the amount of that fair market value of the property. If the property remains unsold after the initial trustee’s sale, the bill requires the trustee to postpone the sale for at least 7 days and authorizes the property to be sold thereafter to the highest bidder, as specified.
New Section 2932.2 requires that a mortgagee, beneficiary, or authorized agent must provide a borrower a written disclosure, before signing of the mortgage or deed of trust, advising that a third party, such as a family member, HUD-certified housing counselor, or attorney, may record a request to receive copies of any notice of default and notice of sale. To meet this requirement, DocMagic will be releasing the new California Third-Party Request for Notice Disclosure (Form ID: CATPRND.MSC) as of the January 1, 2025, effective date. For loans with a subject property in California, the form will be provided in closing packages, ahead of the security instrument in the stacking order.
