The law goes into effect immediately.
AB 3088 is an omnibus bill which incorporates many previous tenant and landlord protection bills together. American Association of Private Lenders and their General Counsel, Geraci LLP, have been at the forefront of this legislative fight on these bills for many months, first with opposition to AB 828, AB 2501, and most recently with AB 1436. All these bills failed to pass individually.
The previous legislation included foreclosure moratoriums, mandatory lender forbearances, and a litany of other attacks on the mortgage lending industry. Thankfully, our combined efforts, along with other reputable mortgage associations, resulted in a very watered-down bill that will likely have minimal impacts for many mortgage lenders.
Summary of AB 3088 – What lenders need to know
There is no mandatory forbearance requirement.
- If a Covered Borrower requests a loan forbearance, the lender/loan servicer may deny the request so long as the lender/servicer provides the reason(s) why the request was denied, along with any curable defects in the request. For example, if the denial is because the borrower failed to provide bank statements to demonstrate hardship, then the lender would need to state that the request will be reconsidered upon receipt of bank statements.
- A Covered Borrower is an individual borrower, or entity borrower (so long as the entity is not a corporation, or an entity owned by a corporation), whose loan is secured by 1-4 family property. This requirement applies to business purpose and consumer loans.
California expanded its Homeowner’s Bill of Rights.
- Previously, first position consumer mortgage loans were required to go through a notification period with the borrower prior to recording a Notice of Default. The lender had an affirmative duty to attempt to contact the borrower to notify them of their default and potential to lose the property through foreclosure.
- This legislation expands the early intervention notification requirements to all loans secured by 1-4 family properties occupied by tenants in which the tenants are unable to pay rent due to a reduction in income related to COVID-19.
- Generally, compliance with HBOR adds 30-60 additional days to the foreclosure process in California.
There are NO foreclosure moratoriums anywhere in the bill.
- Mortgage lenders may continue to foreclose in California but will need to make sure that they comply with additional notice requirements under the Homeowner Bill of Rights for 1-4 family residential property occupied by tenants.
Questions? AAPL’s general counsel, Geraci LLP, is happy to help. Contact us by filling out our contact form here.