BILL ANALYSIS
AB 2740
Page 1
Date of Hearing: April 14, 2008
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Pedro Nava, Chair
AB 2740 (Brownley) - As Amended: March 28, 2008
SUBJECT : Residential Mortgage Loans: servicing.
SUMMARY : Provides that a residential mortgage loan servicer, a
bank, credit union, or finance lender that services loans
secured by residential real property, owes a duty of good faith
and fair dealing to a borrower. Specifically, this bill :
1)Regulates the fees and charges that may be imposed by banks,
credit unions, finance lenders, or mortgage loan servicers.
2)Requires banks, credit unions, finance lenders, and mortgage
loan servicers to respond within 10 days to a borrower's
request for information and for dispute resolution.
3)Applies to mortgage loan servicing contracts entered into on
and after January 1, 2009.
EXISTING STATE LAW :
1)Defines a "mortgage servicer" or "residential mortgage loan
servicer" means a person that is an approved servicer for the
Federal Housing Administration, Veterans Administration,
Farmers Home Administration, Government National Mortgage
Association, Federal National Mortgage Association, or Federal
Home Loan Mortgage Corporation, and directly services or
offers to service mortgage loans. [Financial Code, Section
50003]
2)Provides that a mortgage servicer may apply for licensure by
doing all of the following: filing with the commissioner an
application containing the information required, and any
additional information the commissioner may require by rule,
paying the investigation and application fees, submitting the
statements, complying with the applicable provisions.
[Financial Code, Section 50130]
3)Explains that any person transferring the servicing of
indebtedness to a different servicing agent and any person
assuming from another responsibility for servicing the
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instrument evidencing indebtedness, shall give written notice
to the borrower or subsequent obligor before the borrower or
subsequent obligor becomes obligated to make payments to a new
servicing agent. [Civil Code, Section 2937]
EXISTING FEDERAL LAW :
1)Authorizes federally-chartered financial institutions to
engage in the business of mortgage lending, brokering, and
servicing and governs the rules under which such activities
may be conducted under a wide variety of laws, including, but
not limited to, the Home Ownership and Equity Protection Act
(HOEPA), Real Estate Settlement Procedures Act (RESPA), Truth
in Lending Act (TILA), Home Mortgage Disclosure Act (HMDA),
and regulations that interpret those acts (most notably
Regulation C, which interprets the Home Mortgage Disclosure
Act and Regulation Z, which interprets the Truth in Lending
Act)
2)Provides that under Section 6 of RESPA, borrowers who have a
problem with the servicing of their loan (including escrow
account questions), should contact their loan servicer in
writing, outlining the nature of their complaint. The servicer
must acknowledge the complaint in writing within 20 business
days of receipt of the complaint. Within 60 business days the
servicer must resolve the complaint by correcting the account
or giving a statement of the reasons for its position. Until
the complaint is resolved, borrowers should continue to make
the servicer's required payment.
A borrower may bring a private law suit, or a group of
borrowers may bring a class action suit, within three years,
against a servicer who fails to comply with Section 6's
provisions. Borrowers may obtain actual damages, as well as
additional damages if there is a pattern of noncompliance.
3)Specifies that under Section 10 of RESPA there is sets limits
on the amounts that a lender may require a borrower to put
into an escrow account for purposes of paying taxes, hazard
insurance and other charges related to the property.
During the course of the loan, RESPA prohibits a lender from
charging excessive amounts for the escrow account. Each month
the lender may require a borrower to pay into the escrow
account no more than 1/12 of the total of all disbursements
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payable during the year, plus an amount necessary to pay for
any shortage in the account. In addition, the lender may
require a cushion, not to exceed an amount equal to 1/6 of the
total disbursements for the year.
The lender must perform an escrow account analysis once during
the year and notify borrowers of any shortage. Any excess of
$50 or more must be returned to the borrower.
FISCAL EFFECT : Unknown.
COMMENTS :
NEED FOR THE BILL : The Center For Responsible Lending, the
sponsor of this measure wrote, "Servicing abuses are pervasive
in the industry, often wreaking havoc on borrowers, as the
improper application of even a single mortgage payment can have
a snowball effect, resulting in erroneous defaults and/or
foreclosures, as well as other negative consequences (such as
unlawful/excessive fees and/or improper negative credit
reports.) AB 2740 provides common-sense corrections to the gaps
in regulatory oversight and existing misplaced market
incentives."
GOOD FAITH AND FAIR DEALING : According to the People's Law
Dictionary (Hill, 2008) a duty of "good faith and fair dealing"
is a general assumption of the law of contracts, that people
will act in good faith and deal fairly without breaking their
word, using shifty means to avoid obligations or denying what
the other party obviously understood. A lawsuit (or one of the
causes of action in a lawsuit) based on the breach of this
covenant is often brought when the other party has been claiming
technical excuses for breaching the contract or using the
specific words of the contract to refuse to perform when the
surrounding circumstances or apparent understanding of the
parties were to the contrary.
In law the statement of "good faith and fair dealing'" can have
a number of interpretations. The misinterpretation of its
meaning could cause unintentional consequences.
MORTGAGE SERVICER : At closing, your lender must inform the
borrower of any plans to turn over the rights to administer a
loan to a mortgage servicer. The new servicer could be another
lender, a banker, an investor or a third-party processing
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company that specializes in servicing mortgages. Over the term
of a loan a borrower could have several mortgage services.
A number of the responsibilities of a mortgage servicer
includes: collect and process your monthly mortgage payments,
forward your payments to the investor who owns the loan (if
other than the servicer. The servicer acts on the investor's
behalf, should problems arise with the loans, pay your property
tax and homeowners insurance from your escrow account, send you
an annual mortgage statement that details which portions of your
mortgage payments were applied to principal, interest, taxes and
insurance, and any adjustments in payments to cover taxes and
insurance in the coming year, and counsel and assist you to
overcome delinquencies if you miss loan payments. For instance,
a forbearance, or deferral of principal and interest payments,
may be extended to help a borrower out of financial
difficulties. If the loan becomes seriously in default,
foreclosure might be necessary to protect the investor's
interest in the property and salvage the borrower's equity, if
any.
Should the home loan change to another mortgage servicers, that
mortgage servicer must notify the borrower in writing of the
change by both the original servicer and the new one, noting the
date of transfer and contact information of the new servicer.
The new servicer must honor the terms and conditions of your
original mortgage agreement, with the exception of those
directly related to servicing the loan. The borrower must be
notified of any changes to term of their homeowners insurance.
During the transfer, the borrower has a 60-day grace period
during which they cannot be charged a late fee if they
mistakenly send a mortgage payment to your old servicer.
The National Consumer Law Center reports that misconduct in the
servicing industry includes misapplying mortgage payments,
charging bogus late fees, prematurely initiating foreclosure
proceedings and imposing high-cost homeowner insurance on
borrowers, despite evidence the borrower's having their own
insurance. Further, the Federal Trade Commission (FTC) in a
consumer alert describes examples of deceptive loan servicing as
not providing the borrower with accurate or complete account
statements and payoff figures, making it almost impossible to
determine how much the borrower has paid and how much they still
owe. Thus, the borrower may end up paying more than they owe.
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The Department of Housing and Urban Development (HUD) reports
that two of every five complaints they receive from borrowers
involve servicing issues. J.D. Powers and Associates, which
measures consumer satisfaction with business services of many
kinds, reports that only 10% of borrowers are happy with their
home mortgage servicer.
Servicers can employ a scheme called "pyramiding," by which they
hold a payment until it is late, use a portion of the payment to
cover the late fee, thereby causing the remaining payment to be
insufficient. When the next month's payment is made, it is
insufficient to cover the previous shortfall and the new
payment, generating another penalty fee.
Currently, some servicers claim that the borrower does not have
insurance on the property and "force-places" such insurance on
the loan. Sometimes, that insurance is purchased from an
affiliate; oftentimes the servicer is given a significant
commission for doing so. Many times, as was the case with the
Fairbanks Capital case settled by the FTC in 2003, the borrowers
already had insurance, but were charged for the additional
insurance in any case. As with the pyramiding problems, these
extra charges could often result in the borrower being put into
default.
Even in the dire circumstances existing in the mortgage market
today, and despite the nearly universal calls for action from
regulators, government officials, and consumer advocates,
mortgage servicers have been extremely slow to offer meaningful
alternatives to foreclosure for most borrowers. According to
Moody's, only 1 percent of subprime ARM borrowers have received
any loan modifications during the current crisis. Furthermore,
a new study shows how servicers use the foreclosure process to
make additional fees from the troubled borrowers, even borrowers
in bankruptcy. These conclusions are consistent with practices
uncovered by the FTC in its 2003 investigation of mortgage
servicing practices of Fairbanks Capital, one of the largest
subprime mortgage servicers at the time.
DUTY OF MORTGAGE SERVICERS : While much of the popular press has
been devoted to predatory lending, borrowers should be aware
that deceptive practices do occur in the mortgage servicing area
and an effort is being made to clamp down on these practices.
For example, one of largest servicers of sub-prime loans,
Fairbanks Capital Corporation, in late 2003 agreed to a $40
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million settlement to resolve a complaint by FTC relating to
Fairbanks' unfair, deceptive and illegal practices in the
servicing of sub-prime mortgage loans, including failing to post
consumers' mortgage payments in a timely manner and charging
borrowers illegal late fees and other unauthorized fees. On July
1, 2004, Fairbanks changed its name to Select Portfolio
Servicing, Inc. Later, in 2005, The PMI Group, Inc. sold Select
Portfolio (i.e., Fairbanks) to Credit Suisse First Boston (USA).
FEES: A report titled, Limited Abuse and Opportunism by
Mortgage Servicers, stated, "Claiming that borrowers are in
default when they are actually current allows servicers to
charge unwarranted fee, either late fees or fees related to
default and foreclosure. Servicers receive as a conventional
fee a percentage of the total value of the loans they service,
typically 25 basis points for prim loans and 50 basis points for
subprime loans (Office of the Comptroller of the Currency 2003).
In addition contracts typically provide that the servicer, not
the trustee or investors, has the right to keep any and all late
fees or fees associated with defaults. Such fees are a crucial
part of servicers' income. For example, one servicer's CEO
reportedly stated that extra fee, such as late fees, appeared to
be paying for all of the operating costs of the company's entire
servicing department, leaving the conventional fee almost
completely profit (Cornwell 2004b)"
The complexity of the terms of many loans makes it difficult for
borrowers to discover whether they are being overcharged.
COLLATERAL PROTECTION INSURANCE : This type of insurance also
known as force-placed insurance is insurance coverage for
financial institutions, providing physical damage coverage on
collateral held by the lender in support of a loan. Force
placed insurance is designed by nature to be an insurance of
last resort for the lender or servicer. It protects the property
with insurance coverage(s) as required by the mortgage loan
documents or the security agreement. The insurance coverage
could range from property, business income and building
ordinance to liability insurance coverage. Since force placed
insurance is written to protect the interest of the lender, a
common misconception of borrowers is that force placed insurance
covers their interest in the property. As part of any force
placement process, it is suggested that the lender or servicer
notify the borrower that they are not afforded any coverage
through the force placed policy. Specifically, borrowers should
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be advised that they are not entitled to any proceeds under a
force placed policy if there were a loss at the property.
Additionally, if coverage is force placed for liability, no
proceeds are disbursed until a legal court determines who is
liable. This does not preclude the servicer from collecting
their legal defense costs if they are named in the lawsuit. The
decision to obtain a force placed insurance policy is a
corporate decision. For companies that do participate in force
placed insurance coverage, force placed insurance is a critical
part of the lender's or servicer's insurance portfolio. It
provides a backstop for the collateral securing mortgages in
their portfolio in cases where the appropriate insurance
coverage is not provided by the borrower.
To determine whether or not collateral insurance is necessary
the lender or servicer work with the borrower and its insurance
agent to either obtain proof of adequate insurance coverage
and/or clarify insurance coverage requirements, endorsements,
etc. Therefore, this due diligence process often goes beyond
the expiration date. The insurance market recognizes this issue
and most force placed carriers offer an automatic coverage
period. Typical automatic coverage periods range from 30 to 90
days. To the extent that the lender or servicer does not have
proof from the borrower of viable insurance for a particular
property on the insurance expiration date, coverage is
automatically bound through the force placement insurance
carrier according to their insurance contract. During the due
diligence period, there is no earned premium charged so long as
the borrower can provide proof of no lapse in insurance
coverage. If after the automatic coverage period, the borrower
still does not provide adequate insurance coverage, the lender
or servicer will instruct the force placed agent to issue the
appropriate insurance coverage(s) and charge the premiums
accordingly, retro-active back to the date of the original
expiration date and/or lapse in insurance coverage. Should the
lender or servicer become aware of a cancellation or non-renewal
of an insurance policy via notification from the insurance
carrier, force placement insurance coverage should be issued
immediately as of the effective date of cancellation. All costs
associated with a force placed insurance policy are typically at
the borrower's expense. The lender or servicer should check the
borrower's loan documents. The costs associated with force
placed insurance policies are usually above other insurance
market rates and are therefore a more expensive alternative for
insurance.
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FEDERAL LEGISLATION : As written, the language of this measure
closely mirrors a portion of S. 2452 by Senator Chris Dodd.
This measure would, to name a few things, require that mortgage
servicers owe a duty of good faith and fair dealing to
borrowers, prompt crediting of payments, all fees must be
reasonable and for services actually provided, and only allowed
if by the mortgage contract, in addition, an adequate notice and
statement is required and allow actual and statutory damages (up
to $5,000). This bill is pending in the Senate Banking, Housing
and Urban Affairs.
The amendments to Regulation Z under the Truth in Lending Act
(TILA) would prohibit certain servicing practices such as
failing to credit a payment to a consumer's account when the
servicer receives it, failing to provide a payoff statement
within a reasonable period f time and "pyramiding" late fee.
H.R. 3915 (Rep. Bradley Miller) creates many protections dealing
with mortgage servicing including mandating swifter response
times to borrower inquiries. This practice would help
homeowners to receive expedited assistance from their mortgage
servicers when difficulties arise. The bill would also increase
penalties for mortgage servicers who do not abide by these terms
in order to prevent more abuses. This measure is pending before
the Senate Banking, Housing and Urban Affairs Committee.
Proposed RESPA amendments would update the current RESPA
regulations concerning the provision of the mortgage servicing
disclosure statement within 3 days of an application for a
mortgage loan, to ensure consistency with current statutory
requirements. In addition, the proposed rule would update the
current escrow regulations, by removing outdated provisions.
OTHER STATES : North Carolina enacted on April 1, 2008, HB 1374,
the Mortgage Debt Collection and Servicing Act. The measure
will require that any fee incurred by a servicer must be
assessed within 45 days (or in the case of foreclosure attorney
or trustee fees, 45 days from when actually charged) and
explained "clearly and conspicuously" in a statement that the
servicer must mail to the borrower at least 30 days after
assessing the fee. If these procedures are not followed, the
servicer is not entitled to the fee, all payments to the
servicer must be credited within 1 business day, provided that
the borrower has made full contractual payment and provided
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sufficient information regarding the account, all fees charged
by a servicer must be permitted by law or set forth in the loan
documents, borrower rights to submit a "request for information"
and also dispute his or her account, requiring the servicer to
respond within 10 business days, An additional qualified written
request procedure, enabling the borrower to allege error in his
or her account and obtain an explanation from the servicer,
which must include a copy of the underlying promissory note.
The servicer must provide the information to the borrower in 25
business days. The Act contains a unique and unprecedented
remedies provision, permitting limited cure in the event the
borrower desires to bring a civil action against the servicer.
OPPOSITION : A coalition letter submitted states, "AB 2740
(Brownley) creates a new regiment of restrictions and
requirements for mortgage servicing that applies only to state
licensed mortgage lenders even though mortgage lending and
servicing occurs under a multitude of state and federal
licenses/charters. In face by creating extensive new
requirements only for state licensed lenders the bill will most
likely hasten the current migration of mortgage lenders and
servicers from state licenses to federal charters."
The opposition goes on to state, "The primary issues covered by
AB 2740 are already covered by the pending amendments to federal
Regulation Z. These amendments are expected to be in place by
July, 2008."
The Civil Justice Association of California (CJAC) states, "The
bill imposes a duty of "good faith" and "fair dealing" on the
mortgage servicer. These duties are not defined in the bill but
will likely lead to additional lawsuits by homeowners who may
claim that these duties were breached. Commentators and courts
have differed in their interpretations of what good faith
means."
RELATED LEGISLATION :
AB 69 (Lieu) requires loan servicers to report data regarding
their loan modification efforts.
AB 180 (Bass) revises the law related to foreclosure consultants
to ensure that those facing foreclosure do not become further
victimized by scams or outrageous fees. Provide for a
registration process for persons acting as foreclosure
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consultants.
AB 529 (Torrico) requires lenders to notify borrowers of an
impending interest rate reset of an adjustable rate mortgage.
AB 1830 (Lieu) of 2008, enacts the subprime lending reform act.
This bill provides for increased mortgage lending standards and
prohibitions concerning high cost, subprime and non-traditional
loans.
AB 1837 (Garcia) bans payment of compensation for originating a
subprime loan or
nontraditional loan with an interest rate above the wholesale
par rate for which the consumer qualifies.
AB 2161 (Swanson), enacts a mortgage lender complaint processing
system. Furthermore, it requires lenders to have a dedicated
complaint processing system to handle borrower complaints and
assist borrowers with workout opportunities. Also requires
lenders to document complaints and submit complaint logs to
their regulator.
AB 2359 (Jones) holds investors liable for buying loans in
violation of state lending laws.
AB 2187 (Caballero) requires each notice of default and
foreclosure to include a homeowner bill of rights that provides
a list of their legal rights and responsibilities in the
foreclosure process.
AB 2880 (Wolk) specifies, among other things, that that mortgage
brokers have a fiduciary
responsibility to their clients, and requires licensees to
maintain a surety bond with their regulator.
SB 1053 (Machado) requires every real estate broker licensed by
DRE who makes, brokers, or services mortgages to notify DRE
about those activities on an annual basis; Requires supervising
real estate brokers (those in charge of mortgage brokerage
businesses) to submit detailed compliance reviews of their books
and records to DRE annually, along with business activity
reports detailing the loans their businesses brokered, made, and
serviced during the prior year.
SB 1054 (Machado): In relevant part, gives the Department of
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Real Estate (DRE) the ability to ban individuals who have been
found guilty of violating the Real Estate Law from real
estate-related employment for up to three years.
SB 1604 (Machado): Under finance lenders law, requires that
applicants show a minimum tangible
net worth of $25,000 for "brokers," $50,000 for "a broker
engaged in the business of negotiating or performing acts in
connecting with residential mortgage loans," and $250,000 for
finance lenders (of residential mortgage loans), and require
that licensees maintain the applicable net worth at all times;
Maintains surety bond generally at $25,000, but increases to
$50,000 for finance lenders (of residential mortgage loans);
Requires any person seeking employment with a finance lender or
broker to complete a specified employment.
SUGGESTED AMENDMENTS :
As written, the bill may go too far which could have
unintentional impacts on the mortgage industry. The proposed
amendments maintain the general intention of the bill while
making if more feasible to work with. The provision regarding
"good faith" and "fair dealing" is proposed to be deleted, as
well as, the section related to the specific fees a mortgage
servicer could collect. The bill limits the fees to only
interest, late fees and NSF fees, therefore, mortgage servicers
could no longer collect other fees such as appraisal fees, title
insurance fees, payoff demand fees and reconveyance fees. A
number of other amendments are suggested which will delete the
over reaching strength of the measure but the amendments
continue to maintain the overall goal of the author. The
amendments will closely reflect a law already enacted in North
Carolina.
1)Delete the current provisions of the measure and insert:
Assessment of fees; processing of payments; publication of
statements .
(a) A servicer must comply as to every home loan,
regardless of whether the loan is considered in default or the
borrower is in bankruptcy or the borrower has been in
bankruptcy, with the following requirements:
(1) Any fee that is incurred by a servicer shall be
both:
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a. Assessed within 45 days of the date on
which the fee was incurred. Provided, however,
that attorney or trustee fees and costs
incurred as a result of a foreclosure action
shall be assessed within 45 days of the date
they are charged by either the attorney or
trustee to the servicer.
b. Explained clearly and conspicuously in a
statement mailed to the borrower at the
borrower's last known address at least 30 days
after assessing the fee, provided the servicer
shall not be required to take any action in
violation of the provisions of the federal
bankruptcy code.
(2) All amounts received by a servicer on a home
loan at the address where the borrower has been
instructed to make payments shall be accepted and
credited, or treated as credited, within one
business day of the date received, provided that the
borrower has made the full contractual payment and
has provided sufficient information to credit the
account. If a servicer uses the scheduled method of
accounting, any regularly scheduled payment made
prior to the scheduled due date shall be credited no
later than the due date. Provided, however, that if
any payment is received and not credited, or treated
as credited, the borrower shall be notified within
10 business days by mail at the borrower's last
known address of the disposition of the payment, the
reason the payment was not credited, or treated as
credited to the account, and any actions necessary
by the borrower to make the loan current.
(3) Failure to charge the fee or provide the
information within the allowable time and in the
manner required under subdivision (1) of subsection
(a) of this section constitutes a waiver of such
fee.
(4) All fees charged by a servicer must be
otherwise permitted under applicable law and the
contracts between the parties. Nothing herein is
intended to permit the application of payments or
method of charging interest which is less protective
of the borrower than the contracts between the
parties and other applicable law.
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Obligation of servicer to handle escrow funds.
Any servicer that exercises the authority to collect escrow
amounts on a home loan held or to be held for the borrower for
insurance, taxes, and other charges with respect to the property
shall collect and make all payments from the escrow account, so
as to ensure that no late penalties are assessed or other
negative consequences result. The provisions of this section
shall apply regardless of whether the loan is delinquent or in
default unless the servicer has a reasonable basis to believe
that recovery of these funds will not be possible or the loan is
more than 90 days in default.
Borrower requests for information.
The servicer shall make reasonable attempts to comply with a
borrower's request for information about the home loan account
and to respond to any dispute initiated by the borrower about
the loan account, as provided in this section. The servicer
shall maintain, until the home loan is paid in full, otherwise
satisfied, or sold, written or electronic records of each
written request for information regarding a dispute or error
involving the borrower's account. Specifically, the servicer is
required to do all of the following:
(1) Provide a written statement to the borrower
within 10 business days of receipt of a written
request from the borrower that includes or otherwise
enables the servicer to identify the name and
account of the borrower and includes a statement
that the account is or may be in error or otherwise
provides sufficient detail to the servicer regarding
information sought by the borrower. The borrower is
entitled to one such statement in any six-month
period free of charge, and additional statements
shall be provided if the borrower pays the servicer
a reasonable charge for preparing and furnishing the
statement not to exceed twenty-five dollars ($25.00)
The statement shall include the following
information if requested:
a. Whether the account is current or, if the
account is not current, an explanation of the
default and the date the account went into
default.
b. The current balance due on the loan,
including the principal due, the amount of
funds (if any) held in a suspense account, the
amount of the escrow balance (if any) known to
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the servicer, and whether there are any escrow
deficiencies or shortages known to the
servicer.
c. The telephone number and mailing address
of the Department of Corporations Enforcement
Division.
(2) Provide the following information and/or
documents within 25 business days of receipt of a
written request from the borrower that includes or
otherwise enables the servicer to identify the name
and account of the borrower and includes a statement
that the account is or may be in error or otherwise
provides sufficient detail to the servicer regarding
information sought by the borrower:
a. A copy of the original note, or if
unavailable, an affidavit of lost note.
b. A statement that identifies and itemizes
all fees and charges assessed under the loan
transaction and provides a full payment
history identifying in a clear and conspicuous
manner all of the debits, credits, application
of and disbursement of all payments received
from or for the benefit of the borrower, and
other activity on the home loan including
escrow account activity and suspense account
activity, if any. The period of the account
history shall cover at a minimum the two-year
period prior to the date of the receipt of the
request for information. If the servicer has
not serviced the home loan for the entire
two-year time period the servicer shall provide
the information going back to the date on which
the servicer began servicing the home loan. For
purposes of this subsection, the date of the
request for the information shall be presumed
to be no later than 30 days from the date of
the receipt of the request. If the servicer
claims that any delinquent or outstanding sums
are owed on the home loan prior to the two-year
period or the period during which the servicer
has serviced the loan, the servicer shall
provide an account history beginning with the
month that the servicer claims any outstanding
sums are owed on the loan up to the date of the
request for the information. The borrower is
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entitled to one such statement in any six-month
period free of charge. Additional statements
shall be provided if the borrower pays the
servicer a reasonable charge for preparing and
furnishing the statement not to exceed fifty
dollars ($50.00).
(3) Promptly correct errors relating to the
allocation of payments, the statement of account, or
the payoff balance identified in any notice from the
borrower provided in accordance with subdivision (2)
of this section, or discovered through the due
diligence of the servicer or other means.
Remedies.
In addition to any equitable remedies and any other remedies
at law, any borrower injured by any violation of this Article
may bring an action for recovery of actual damages, including
reasonable attorneys' fees. The Commissioner of The Department
of Corporations, the Attorney General, or any party to a home
loan may enforce the provisions of this section. With the
exception of an action by the Commissioner of the Department of
Corporations or the Attorney General, at least 30 days before a
borrower or a borrower's representative institutes a civil
action for damages against a servicer for a violation of this
Article, the borrower or a borrower's representative shall
notify the servicer in writing of any claimed errors or disputes
regarding the borrower's home loan that forms the basis of the
civil action. The notice must be sent to the address as
designated on any of the servicer's bills, statements, invoices,
or other written communication, and must enable the servicer to
identify the name and loan account of the borrower. For
purposes of this section, notice shall not include a complaint
or summons. Nothing in this section shall limit the rights of a
borrower to enjoin a civil action, or make a counterclaim,
cross-claim, or plead a defense in a civil action. A servicer
will not be in violation of this Article if the servicer shows
by a preponderance of evidence that:
(1) The violation was not intentional or the result
of bad faith; and
(2) Within 30 days after discovering or being
notified of an error, and prior to the institution
of any legal action by the borrower against the
servicer under this section, the servicer corrected
the error and compensated the borrower for any fees
or charges incurred by the borrower as a result of
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the violation.
Severability.
The provisions of this Article shall be severable, and if any
phrase, clause, sentence, or provision is declared to be invalid
or is preempted by federal law or regulation, the validity of
the remainder of this section shall not be affected thereby. If
any provision of this Article is declared to be inapplicable to
any specific category, type, or kind of points and fees, the
provisions of this Article shall nonetheless continue to apply
with respect to all other points and fees.
REGISTERED SUPPORT / OPPOSITION :
Support
AARP
Affordable Housing Services
Amador-Tuolumne Community Action Agency
Asset Policy Initiative of California (APIC)
California Alliance for Retired Americans
California Coalition for Rural Housing
California Labor Federation
California Reinvestment Coalition
California Resources and Training (CARAT)
Center for California Homeowner Association Law
Center for Responsible Lending
CHARO Community Development Corp
Christi Baker, Chrysalis Consulting Group, LLC
Civic Center Barrio Housing Corporation
Community Housing Development Corporation of North Richmond
Community Legal Services in East Palo Alto
Consumer Action
Consumer Federation of California
EARN
East Bay Asian Local Development Corp.
East L.A. Community Corporation (ELACC)
East Oakland CDC
Fair Housing Council of Orange County
Fair Housing Council of San Diego
Fair Housing Council of the San Fernando Valley
Fair Housing Law Project
Gray Panthers California
Housing and Economic Rights Advocates
Housing Rights Center Los Angeles
AB 2740
Page 17
La Raza Centro Legal
Los Angeles Coalition to End Hunger & Homelessness
MAAC Project
Matthew Edling
Mission Economic Development Agency
Neighborhood Partnership Housing Services, Inc.
Orange County Community Housing Corporation
People Helping People
Project Sentinel
Public Interest Law Firm
S.F. Consortium for Elder Abuse Prevention
San Diego Home Loan Counseling & Education Center
San Francisco Assessor-Recorder Phil Ting
Sierra Planning & Housing Alliance, Inc.
STAND Affordable Housing
Vermont Slauson Economic Development Corp.
Watsonville Law Center
West Company
Opposition
California Credit Union League
California Financial Services Association
California Independent Bankers
California Mortgage Association (CMA)
California Mortgage Bankers Association
Civil Justice Association of California
Analysis Prepared by : Kathleen OMalley / B. & F. / (916)
319-3081