AB 407

Under current law, with exceptions, a mortgage banker is a person that

originates certain mortgage loans for itself or others, sells such mortgage loans to

others, or services such mortgage loans. Among the exceptions, a mortgage banker

generally does not include a financial institution.

Under this bill, if a borrower has failed to make full scheduled payments on a

residential first mortgage loan for two consecutive payment periods and the failure

to make these payments renders the borrower in default, a mortgage banker holding

or servicing the loan must provide the borrower with notice of the default within 45

days after the due date for the second payment period. The notice must inform the

borrower of any action required of the borrower to cure the default and of the names

and addresses of adjustment service companies licensed with the Department of

Financial Institutions that offer credit counseling services to homeowners.

Under this bill, if an action is brought in circuit court for the foreclosure of a

mortgage on real estate, the contents of the legal pleadings that make the claim for

foreclosure must include a statement that either party to the action may request that

the court order the parties to select an alternative method of settling the claim.

Current law allows a circuit court to order parties to an action to use an alternative

settlement method, such as binding arbitration, mediation, nonbinding arbitration,

or direct negotiations. Under the bill, if the court orders the parties to select an

alternative method to settle the claim and the court determines that a party is not

participating in good faith, the court must terminate the settlement alternative and

may order that party to pay the other party's costs, including attorney fees, incurred

while participating in the settlement alternative.