California Senate Foreclosure Bill 1137 Q & A’s

TEN REALITY QUESTIONS & ANSWERS ON CALIFORNIA SENATE BILL 1137
Ronald D. Roup, Esq.Legislative Chairperson UNITED TRUSTEES ASSOCIATION

Q1. – When does this bill take effect and become law?

A1.- SB 1137 passed the California Senate and Assembly as urgency legislation to take effectupon execution by Governor Schwarzenegger. The Governor signed the bill on July 8,2008 and the statute took effect immediately. However, the new requirements in Section2 for Notices of Default and Notice of Sale and Section 4 for Notices of Sale becomeoperative 60 days after the effective date, or September 8, 2008.

Q2.- If I already have a Notice of Default recorded, do I have to start over?

A2.- No. You can proceed as before the enactment of SB 1137 as long as your Notice of Saleis not posted and published after September 8, 2008. Beware of documents prepared inadvance.

Q3.- What if I have an existing Notice of Default and the Notice of Sale will be afterSeptember 8, 2008?

A3- If your security is (1) residential owner occupied property on a loan made from January1, 2003 to December 31, 2007, and the Notice of Sale will be after September 8, 2008,you will need to comply with the Section 2 requirements adding CC §2923.5 for a Noticeof Sale declaration of contact or list the efforts made at contact, or (2) if your security isresidential property and if the billing address “for the note” is different from the propertyaddress, you will need to comply with the Section 4 requirements adding CC §2824.8 forthe posting and mailing of the Notice to Residents, regardless if the loan was madebetween January 1, 2003 and December 31, 2007.

Q4.- If on September 8, 2009 I already have a Notice of Sale posted and published, can Iproceed. with my sale?

A4.- Yes. Although not specifically addressed in the bill, we are advised that there will be aletter lodged in the Senate Journal stating that the provisions of the bill do not affect a foreclosure subject to an existing Notice of Sale when Section 2 and Section 4 becomeeffective on September 8, 2008. UTA plans to obtain a copy of the exact language of theSenate Journal when available.Q5.- If the billing address is different from the property address, where does the trustee getthe Spanish, Chinese, Tagalog, Vietnamese and Korean language translations of the

Q5. Notice to Residents required to be posted and mailed to the resident of the property withthe Notice of Sale if the billing address is different from the property addresss?

A5.- The State of California is to provide these translations. The UTA will advise it’smembership upon the state making these translations available.

Q6.- Is there any harm in treating all residential loans assigned for foreclosure as being anowner occupied loan made from January 1, 2003 to December 31, 2007 and complyingwith the Section 2 requirements adding CC §2923.5, rather than making thatdetermination for each residential loan going into foreclosure?

A6.- Probably not, however the Section 2 requirements are only for owner-occupiedresidential properties. You would still have to comply with the new Section 4requirements of posting and mailing the Notice to Residents in all six languages for loanswhere the “note address” is different from the mailing address, and the Section 4 notice isregardless of the date when the loan was made.

Q7.- Is there any harm in treating all foreclosures of loans secured by residential properties ashaving a “note address” different from the mailing address and complying with theSection 4 Notice to Residences requirement to avoid differentiating between loans?

A7.Again, probably not. The statute places different foreclosure requirements in Section 2 on owner occupied residential properties with loans made within a certain period than inSection 4 on a residential property with a different billing address regardless of when theloan was made, which can be problematic. It would seem understandable to want astandardized process.

Q8.- Who is to sign the declaration re Contact, Due Diligence, or Surrender to be included ina Notice of Default filed after September 8, 2008?

A8.- The beneficiary or their authorized agent. Since all the requirements are to be made atleast 30 days prior to initiating foreclosure, the beneficiary or servicer will usually beperforming these requirements as part of their pre-foreclosure loss mitigation program.However, this is a complicated question that may require that the trustee consult withexperienced legal counsel to integrate this new declaration procedure into its policies,practices and forms. Different trustee’s and beneficiaries have different systems relatingto who actually signs notices of default, etc and passage of SB 1137 should trigger areview of those policies, practices and forms prior to the September 8, 2008 effectivedate.

Q9.- If the trustee-to-be is requested to execute the Section 2 Notice of Default declaration reContact, Due Diligence, or Surrender as the authorized agent, similar to the execution ofmany current Notices of Default, will it affect the trustee’s ability to claim the protectionsof Civil Code §2924l to file a Declaration of Nonmonetary Status in a subsequent civilaction?

A9.- Not by merely executing the declaration. Civil Code §294l protects the trustee and theacts of an authorized agent performing duties within CC §2924, et. seq. and named in a civil action. However, the authorized agent would be relying upon the beneficiary ortheir servicer as to the validity of the declaration and any authorized agent should reviewtheir power of attorney or agency documents and may wish to consult their legal counselregarding indemnification.

Q10. – Can the Section 2 declaration required re Contact, Due Diligence, or Surrender to beincluded in the Notice of Default be added to the language of the Notice of Default ordoes it have to be a separate declaration?

A10. There is no requirement in SB 3711 that the Notice of Default declaration re Contact, DueDiligence, or Surrender be a separate document, or that it be notarized.

DISCLAIMER – The above Questions and Answers are intended as guidelines for the UTAmembership regarding the implementation of the new statute and are not to be construed or reliedupon as the offering of legal advise by the author or the United Trustees Association. Eachtrustee should consult with its own legal counsel to determine how to implement the changesmandated by the passage of SB 1137.


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