AB 729

Under current law, if a mortgagee brings an action for foreclosure of a mortgage

on a residential property, the homeowner (mortgagor or borrower) is served with a

summons and complaint and the normal civil procedural rules of pleadings,

discovery of evidence, pretrial, and trial apply. If the court finds that the mortgagee

has the right to the foreclosure, the court issues a judgment for foreclosure of the

mortgage, which entitles the mortgagee to force a sale of the property after a

redemption period has ended.

This bill creates a process to allow a borrower who is in default on a first

mortgage loan on a residential property (a one-family to four-family dwelling) to

pursue a loan modification during a mortgage foreclosure action. Under the bill,

before a first lien residential mortgage holder or its servicing agent (mortgagee) may

commence an action to foreclose the mortgage, the mortgagee must provide a written

notice (default-foreclosure notice) to the borrower that contains all of the following

information: 1) that the mortgage is in default and a mortgage foreclosure action

may be commenced, the reason that the mortgage is in default, and the action

required of the borrower to cure the default; 2) the name, address, and telephone

number of a mortgagee negotiator with authority to enter into negotiations

regarding modifications to the residential mortgage loan; 3) the names and

addresses of credit counseling services for homeowners; 4) that the borrower may

request loan modifications by sending the request to the mortgagee negotiator

within ten working days after receiving the notice; 5) the calculations and eligibility

criteria used to determine if the borrower is eligible for any loan modifications; 6) the

documents needed to determine the borrower's gross income; 7) that if the borrower

makes a timely request for loan modifications and provides the documents needed

to determine the borrower's gross income, the borrower may meet with the

mortgagee negotiator to discuss the modifications accompanied by an attorney or

other person; 8) that if the borrower does not make a timely request for loan

modifications or provide the documents needed to determine the borrower's gross

income, the mortgage foreclosure action may proceed; 9) that if the parties reach an

agreement to modify the residential mortgage loan, the mortgage may not be

foreclosed if the borrower complies with the terms of the modified agreement; and

10) that the mortgagee and borrower may agree to a method other than loan

modifications to resolve the loan default.

A borrower, within ten working days of receiving this notice, may request loan

modifications by sending the request to the mortgagee negotiator. If a timely request

is made and if the documents are provided that are needed to determine the

borrower's gross income, the mortgagee negotiator and borrower must meet in

person in the county where the residential property is located or by telephone or

other communication to negotiate, in good faith, modifications to the residential

mortgage loan. Based on available information, the mortgagee negotiator must