The California Homeowner Bill of Rights (“HOBR”), codified in Sections 2920.5 et seq. of the Civil Code, became effective January 1, 2013. The statutes impose certain pre-foreclosure loss mitigation duties on mortgage servicers as well as trustees and deed of trust beneficiaries. Certain provisions of the HOBR were repealed as of January 1, 2018. While the legislature enacted new statutes to replace repealed provisions, not all requirements survived the January 2018 enactments, and expired as of the sunset date. But not long after expiration, many repealed provisions were given new life again through SB818 passed by Senator Beall. These statutes—revived with their original terms or with amendments—went into effect on January 1, 2019. We explore some of the repealed, later-revived statutes and notable appellate court decisions over the past year.
Section 2923.55, Repealed January 1, 2018; Revived January 1, 2019
The pre-2018 Section 2923.55, which required servicers to contact or attempt to contact a borrower to discuss the borrower’s financial standing and his/her foreclosure avoidance alternatives before recordation of a notice of default, was replaced by Civil Code Section 2923.5 as of January 1, 2018. Section 2923.5 was similar to Section 2923.55 and required the same pre-foreclosure contact or attempted contact, except the servicer was no longer required to provide written notice to servicemembers of their rights under the Servicemembers Civil Relief Act. Servicers were also no longer required to provide a borrower with copies of a note, deed of trust or assignment.
The revived Section 2923.55 does away with the foregoing lax restrictions and more closely mirrors the pre-2018 version of the statute. One notable addition to the revived statute is Section 2923.55(f)(2)(C)(ii), which states that a servicer satisfies the pre-foreclosure telephone contact due diligence requirement if the borrower notifies the servicer in writing to cease communicating with the borrower about the loan.
Section 2923.6; Repealed January 1, 2018; Revived January 1, 2019.
The pre-2018 Section 2923.6, which prohibited a servicer from “dual-tracking” (recording a notice of default/notice of trustee’s sale or completing a trustee’s sale while reviewing a borrower’s completed loan modification application) was replaced with Civil Code Section 2924.11. Although Section 2924.11 also prohibited dual tracking, it prohibited dual tracking for all foreclosure prevention alternatives and not just loan modification reviews. In addition, a servicer was no longer excused from having to review multiple loan modifications from a borrower absent a showing of a material change in finances. A servicer was also no longer required to allow a borrower to appeal an adverse loss mitigation decision, but the servicer was required to advise the borrower that he or she was entitled to additional information on the reason for the denial.
The revived Section 2923.6 mirrors the pre-2018 version and resuscitates a borrower’s right to appeal. It also reinstates a servicer’s right to refuse to perform multiple loan modification reviews absent a showing of material changes to the borrower’s finances. One notable addition to the new revived statute: a servicer may refuse to review a borrower’s complete loan modification application if it is submitted less than five business days from the date of the scheduled foreclosure sale.
Because the pre-2018 version of the HOBR was renewed (albeit with slight modifications), other statutes that expired on January 1, 2018 were revived on January 1, 2019, including:
- Civil Code Section 2924(a)(5) (requiring a servicer to provide written notice to a borrower within 5 business days of each sale postponement exceeding 10 business days);
- Civil Code Section 2924.9 (requiring a servicer to mail a foreclosure avoidance solicitation letter within 5 business days after recording a notice of default);
- Civil Code Section 2924.10 (requiring a servicer to submit letters acknowledging receipt of a loan modification application and/or supplemental documents within 5 business days from receipt); and
- Civil Code Section 2924.17 (requiring a servicer to review competent and reliable evidence substantiating a borrower’s default before recording certain foreclosure instruments and authorizing regulatory agencies to impose civil penalties for a servicer’s violations).
With the quick demise and revival of statutes—the new replacing the old and the old replacing the new—questions arise about the effect of the statutory repeal doctrine. One published Fourth District case, Schmidt v. Citibank, N.A., 28 Cal. App. 5th 1109 (2018), very briefly discussed whether the statutory repeal doctrine could moot a claim for violation of a repealed HOBR. The plaintiffs in Schmidt complained that certain foreclosure instruments recorded in 2015—while the old Section 2923.55 and Section 2923.6 were in effect—violated the HOBR. They filed their complaint in 2015 and a judgment was entered in favor of the defendants in 2017. The plaintiffs appealed and during the pendency of the appeal, Sections 2923.55 and 2923.6 were replaced with Sections 2923.5 and 2924.11. The defendant argued that the plaintiff’s appeal was moot given the repeal. Although the appellate court did not rule on the merits of the statutory repeal argument, the court’s language suggested that the mootness argument was less credible given that Section 2923.5 codified much of the old Section 2923.55, and Section 2924.11 codified much of the old Section 2923.6 with slightly different provisions.
Perhaps the most significant decision hails from the Fifth District. In its February 27, 2019 decision in Hardie v. Nationstar Mortgage LLC, 32 Cal. App. 5th 714 (2019), the Fifth District ruled that attorneys’ fees are recoverable by a borrower who obtains a temporary restraining order. This opinion stretches the ruling in Monterossa v. Superior Court, 237 Cal. App. 4th 747, 751 (2015), which held that a borrower could recover fees if the borrower successfully obtained a preliminary or permanent injunction. Hardie ultimately reversed and remanded the fee award because the borrower failed to properly notice its application for a restraining order.
Although Hardie deals with the version of Section 2924.12 in effect before 2018, given the language in Schmidt, a court could well find that a borrower is entitled to recover fees for successful restraining order petitions under the newly enacted version since it is substantively similar to the old version.