SB 701

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

loan on a residential property, the mortgagor (homeowner) 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. Under federal law, local financial institutions may participate in a federal

mortgage modification program by agreeing to do so with the Federal National

Mortgage Association (Fannie Mae). If a mortgage loan is owned, securitized, or

guaranteed by the Federal Home Loan Mortgage Corporation (Freddie Mac), the

Government National Mortgage Association (Ginnie Mae), or Fannie Mae, and the

mortgagee is a participant in the federal mortgage modification program, the

borrower has the right to have the mortgagee determine if a mortgage modification

is possible considering the borrower's situation.

Under this bill, before a mortgagee who is a participant in the federal mortgage

modification program may commence a mortgage foreclosure action on

owner-occupied residential property, the mortgagee must mail to the homeowner a

written notice telling the homeowner that the mortgage loan is in default, that a

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

the action the homeowner must take to cure the default. The notice must include the

name, address, and telephone number of the mortgagee or mortgage servicer who

has the authority to enter into negotiations regarding modifications to the mortgage

loan, and that the homeowner may request modifications to the mortgage loan. The

notice must also provide the homeowner with the names and addresses of

state-licensed or federally-approved organizations that offer credit counseling

services to homeowners.

The bill requires a mortgagee, when commencing a foreclosure action involving

owner-occupied residential property, to file an affidavit with the court stating

whether the mortgage loan is owned, securitized, or guaranteed by Fannie Mae,

Freddie Mac, or Ginnie Mae and whether the mortgagee is a participant in the

federal mortgage modification program. If the affidavit states that the mortgage

loan is owned, securitized, or guaranteed by one of those federally-sponsored

organizations and that the mortgagee is a participant in the federal mortgage

modification program, the affidavit must also include a statement about the results

of the modification program. The statement must show either that the mortgage

modification process has been completed without resulting in a modification of the

mortgage loan and that written notice of that result has been sent to the homeowner,

or that the mortgage loan was not eligible for a modification under that program and

the reason for that determination. Under the bill, a court may not enter a judgment

for foreclosure involving owner-occupied residential property until the court has