AB 3088 & SB 1079: Fundamentally Modified Foreclosures in CA – What Lenders Need to Know

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In 2013, California passed the Homeowner Bill of Rights (“HBOR”) requiring lenders and servicers to notify borrowers about loss mitigation options prior to initiating a foreclosure. Until recently, HBOR only applied to consumer purpose loans. The California legislature recently enacted AB 3088, extending HBOR’s consumer protections to most loans secured by residential property, even if they are for business purposes. Additionally, California recently passed SB 1079 which creates a quasi right of first refusal for third parties to buy a foreclosed property up to 45 days after the foreclosure auction.

In this webinar, you will learn:

  • The specific loans AB 3088 and SB 1079 apply to and which loans are exempt from the new foreclosure restrictions.
  • Specific steps to comply with California’s Homeowner Bill of Rights if your loan is covered.
  • A step-by-step guide and timeline to foreclose in California now that AB 3088 and SB 1079 have been signed into law.

This webinar is co-hosted with American Association of Private Lenders.


Nema Daghbandan:

Welcome everybody. One, two. Thank you for joining us here today. Kind of click back over real fast here. My name is Nema Daghbandan. I'm a partner here with Geraci LLP. I've also got Melissa Martorella here as well, the department head and runs our banking and finance practice here at Geraci LLP. For those who are not aware of who we are as an organization we are a law firm which is hyper-specialized in the representation of what we call non-conventional lenders, which basically means we don't generally represent consumer-based lenders. We represent primarily business purpose lenders and we represent them in a wide capacity of ways. So for example, drafting up their private placement memorandums getting their licensing put together over on the banking and finance side. We also handle the preparation of loan documents, forbearance modifications. We also do foreclosures here at the firm, which is kind of why we put together this webinar as this webinar is really going to address how foreclosures have now been fundamentally modified here in the state California.

And we also have a litigation practice. So oftentimes when we file a foreclosure here in California what ends up happening is the borrower either files bankruptcy or they sue the lender. And we've got a team of experts here that can manage that process as well. So really kind of a soup to nuts approach to the representation of commercial business purpose lenders on a nationwide basis. So for today, the topic at hand is the discussion of AB 3088 and SB 1079. Initially we were going to do this presentation really just focused on 3088, then SB 1079 pass as well. So we figured we could kind of dovetail and discuss both. Melissa will kind of explain in a little bit more detail about how each bill is going to impact the different parts of the process. A few housekeeping items, so at the, I believe bottom of your screen, but who knows with what your computer orientation is there should be a few different options for you.

One is a chat box. Please don't use that because it's very hard to track a chat box. There is a separate box that says q and a that is very helpful. So please do use your q and a box in the q and a box. Every question you put in there, we will see meaning Melissa and I will see those questions. We will answer as many of those questions as we can get to in the time allotted today. But that's a great way to ask questions. Feel free to ask them at any time. So if we're going through something and a question comes to mind, feel free to dump it in the question box. You can ask the question anonymously, you can put your name up there, whatever you prefer. So that's the best way to get ahold of us is to use that q and a box and we will go through and answer questions at the end of this presentation.

Other housekeeping items is that this presentation is recorded, so we will have a recording available for those that have to drop off or otherwise I'm not able to watch the whole thing. This is going to be recorded and it will be distributed after the fact. We always distribute the slides also after the fact. And we also try to send some helpful content to you. So we'll send for example some YouTube videos we've done on the subject matter, some articles we've written, those sorts of things that all kind of dovetail into this presentation. Hopefully that adds a little bit of value to you. And last thing before we start kicking off into this is this webinar today is co-hosted with our friends over at AAPL. American Association of Private Lenders is the key national resource as it relates to all things private lending. They've been on the forefront of every legislative fight.

A lot of these bills and their impacts were a direct result of AAPL involvement. So a big thank you to them for mobilizing phone call and email and all sorts of campaigns related to legislation. Even though this legislation's significant, it could have been 10 times worse had it not been for extensive involvement for people trying to impact this legislation as it is ultimately very watered down from what it could have been and AAPL will have their upcoming national conference in Las Vegas. For those of you who have not attended, it is fantastic and it is the largest private lending event in the country by far. We have a slide at the end about more info on that, but just a precursor. So a big thank you to our friends at AAPL. We also have Kat with us from AAPL who's kind of lurking around and hiding in the background here. So if you've got any questions for her specifically or the conference or AAPL, feel free to ping in the q and a and we will happily get Kat to opine on that as well. So without further ado we can go ahead and start for you here today.

Melissa Martorella:

Awesome, thank you. So as Nema discussed, this webinar's really going to be about two different bills that recently passed here in California, the first being AB 3088, and I'll be talking to you about that. And then Nema will take over the second half and talk about SB 1079. These two bills are really important. The reason why we put them together in this webinar is because they both deal with foreclosure and they will fundamentally change the foreclosure proceedings here in California and how you would approach a foreclosure. So to kick it off with AB 3088, this is really all of the stuff that changes pre foreclosure. What you might have to do depending on the type of loan that you've made and 1079 really deals with after a foreclosure, what happens there. So just keep in mind that it really changes the landscape with regards to how to foreclose here in California.

So to kick it off here big picture AB 3088 is already the law in California, meaning you must comply with this law now. The other bill doesn't go into effect until January 1st. So I think there's been a little bit of confusion based on which one applies right now whether they do both do or don't. But AB 3088, this is the law right now in California. So we are already applying the impacts of AB 3088 to the foreclosures that we're seeing right now. So there are two primary impacts of AB 3088. The first is that it extends the California Homeowner's Bill of Rights requirements to business purpose loans and only certain kinds of business purpose loans. And we'll really dive deep into seeing which loans exactly this would apply to. The second thing that it does is it creates some forbearance request communication requirements with borrowers and again, very specific kinds of borrowers specifically related to covid and specifically dealing with issues and ability to repay because of covid hardship. So there's a little bit going on there but the bigger impact I think of this one is going to be the extension of the homeowner bill of rights to some of our business purpose loans.

So the forbearance request communication requirements this one's definitely a little bit less involved, but it can seem a little bit complicated because there's a lot of if this, then this to see whether it applies to you. So it applies to any loan originated prior to August 31st of this year. So any loan originated prior to August 31st, 2020. The lender on that loan is a CFL licensed lender, an RML DRE licensed broker or a bank. The loan is secured by a one to four family property. The borrower is current on your loan as of February 1st of this year. The borrower requests a forbearance agreement because they are having a covid related hardship towards paying your loan and it applies to both individual and entity borrowers except if that entity is a corporation or an LLC with that is owned by a corporation. It's a lot going on there.

You could create a flow chart about this, about whether this forbearance request communication would apply to you, apply to the borrowers on certain loans and not others. But generally our recommendation here is if a borrower reaches out for you out to you requesting a forbearance and they say it's covid related, generally you should work with that borrower, respond to them. Even if you are going to ultimately deny that at the end of the day, that's okay, but we would still recommend not just ignoring that borrower be reasonable, use good practices, work with that borrower a little bit if they're having some issues with the ability to repay their loan because of a covid hardship. Also, if it is a qualified borrower above or really any borrower and they're requesting that forbearance and you're going to deny it, you can deny them all if you'd like to, but you have to provide the reasons why it was denied.

And you have to provide whether any of those reasons are curable. So for example, if the only reason this current loan is in default is because the borrower failed to provide bank statements, let them know that, that's a curable defect. They could definitely provide you that and their loan would be current. So let them know if there's curable defects. At the end of the day, the big picture on this one is be reasonable with your borrowers. If somebody's reaching out for you for help, work with them to see if you can help. And if it's something little like providing bank statements that they need to get their loan current, be a reasonable lender and work with them on it. Even if otherwise this requirement doesn't apply to those types of loans or that type of borrower, you're not a licensed lender that this would apply to.

So that's the forbearance side of AB 3088. Basically be reasonable also at the end of this, if the borrower does cure whatever the denied reason was within 21 days, then you have to revisit the forbearance and work with them again. Again, just work with your borrowers and be reasonable on those requests. The bigger effect of AB 3088 is the homeowner bill of rights and how this now applies to some business purpose loans. So big picture on the homeowner, big Bill of Rights when it was originally passed in 2013, this was a consumer protection law and only applied to consumer loans. So loans primarily for personal family or household use secured by one of four family property and a first position lien. So basically all of our business purpose lenders out here today that we work with, this didn't apply to you back in 2013 when it passed. And what it does is it requires a lender or the loan servicer to contact the borrower prior to starting foreclosure to be like, Hey, your loans in default. Here are some loss mitigation options, if any, and work with them prior to starting foreclosures. Again, it was a consumer protection law to try to help people before getting into a foreclosure.

3088 changed that. It added an additional definition of the types of loans which are now covered by the homeowner Bill of rights, meaning you now need to pay attention to this if you're a business purpose lender because some of your business purpose loans will be covered under AB 3088 and must comply with it with the homeowner bill of rights prior to proceeding with foreclosure. So right here, we'll dig into this a lot. There's a lot of if this and this, but basically all of these things must be true in order for the homeowner bill of rights to apply to your loan. So if any one of these things you can definitively state with your knowledge that hey, this doesn't apply here, then you don't have to worry about this. But if all of these things are true about the loan, then you must comply with the requirements of the homeowner bill of rights.

So two things that aren't on here but we're on the previous slide. First it has to be a one to four family property that the loan is secured by and it has to be a first position lien. So if you're doing it, if it's a junior lien, if it's secured by commercial property, don't need to worry about that. It's only one to fours and it's only first position lien. In addition, the borrower on that property, it has to be owned by an individual. So if it's an in entity borrower, and this is where it's distinct from the other portion of AB 3088, it only deals with individual borrowers. So if you're lending to an LLC or a corporation, doesn't matter here, you can ignore this but if your borrower's an individual, the loan is secured by one of four family property and a first position lien, we still have to comply with this.

That individual owner can also, they have to own more than four one to four family properties for not to apply to them. So if they have three or less one to four family properties you have then the requirements here are going to apply and you would have to comply with the pre-contact requirements under the homeowner bill of rights. Next the property is occupied by a tenant that is subject to an arm's length market lease. So this is one that you may or may not know. You may not be aware of it, you might know that it's a rental property. You might think it's a fix and flip property, but you might not know whether a tenant is in place if you don't have evidence of there being a lease in place. We strongly recommend looking into that. And if you can't figure that out I would probably comply with this if all of the other factors are also true for you here because then the item four that's up here is where it's going to be very difficult for some of you.

Lenders is figuring out if the tenant is unable to pay rent due to a reduction in income related to covid is another requirement here. How would you know this as a lender? Unless the borrower's really communicative with you and telling you these things it's going to be very difficult for you to find out. So that's why items three and four here, whether it's occupied by a tenant with an arms length market lease and whether that tenant can pay rent or not, and if not, it's related to covid, that's going to be very difficult for you to find out. And unless you have something written evidencing that there isn't a tenant in place or that they are paying rent, something like that it's going to be difficult to say that you don't have to comply with these new requirements. And then finally the last one is the lender on the loan has to be one of the following.

So they have to be a California finance lender, A D R E licensed broker, an R M L or a state or federal bank. So if you're not a private beneficiary, if you just made a loan in your name, even if that loan was originated by a broker, but you are not a broker yourself, you could don't need to deal with this at all. So hopefully you are not a licensed slender of one of these types and you're private beneficiary, then you don't have to deal with this. But unfortunately if you are, I know a lot of you are will need to comply with the requirements here. And the last little tip here is this is in effect now and it it's going to apply at least until December 31st, 2022. If decide to extend that or not, we'll find out but that's quite a bit of time.

So just be aware that this is going to be ongoing for some time and that's a lot of information definitely on these ones I would make sure that you have some sort of below chart in place to check off, Hey, is it a wonderful family property? Is it a first position lien? Is it owned by an individual? Does that individual own more than at least four rental properties? And just going down the line here to make sure that whether you need to comply and if you're unsure at all that our guidance would be to comply to make sure that you don't misstep here because at the end of the day you could record your OD record, your nos, get all the way up to sale and then all of a sudden you have that lawsuit on your hands because the borrower is claiming you didn't comply with the requirements here and you should have.

So we definitely recommend being a little cautious here. So a little flow chart for you to kind of reiterate because I know that this is going to be the most difficult part is to figuring out whether you have to deal with this. If you made a loan to an individual, it's secured by a wonderful family residential property, it's a first position lien and the lender is licensed, somehow you should comply with the homeowner bill of rights requirements unless you have an affirmative written statement from the borrower that they don't otherwise qualify, qualify because they have four or more rental properties because there is no tenant with an arm's length, it's because the tenant is paying the rent, something like that. But otherwise, if these four factors are in place, we strongly recommend you comply with this unless you have written evidence otherwise that you would not need to because it would be exempt from complying.

So now to determine, so say we've figured out, hey unfortunately we have to deal with the homeowner bill of rights pre-contact requirements here, what do we do? So there are several different rules and requirements in place. There are rules for parties that service or complete more than 175 foreclosures in a year. So big large trustees, we're not going to talk about these in this webinar. We're going to talk about the rules that apply to the lenders self servicing small servicers that are doing 175 or fewer foreclosures in a year. So if you are doing more than 175, know that there are additional requirements for you and if you want to discuss those, please reach out and we would be happy to walk you through those. So here the big thing that you need to do is borrower contacts prior to starting foreclosure. And there are two routes this can go who's either you never make contact with the borrower, you you're trying and you're never able to reach them. What do you do there and what are the steps you must comply with in order to then start the foreclosure down the line? And then alternatively is you make contact with the borrower. Okay, now what do you have to do? And then to wrap it up is also managing modification requests. There's some requirements under the homeowner bill of rights that you'll need to pay attention to if that pops up during the time of the loan.

So borrower con contacts again, this is a lot of information. We definitely have checklists that we can help you with. We do this for you if needed. We can answer any questions you have as you're walking through this if you've determined that the loan is subject to this. But basically the first thing that you need to do is try to talk to the borrower, give them a call. If that borrower answers the call first, provide them HUD's contact number. That's a requirement under the homeowner bill of rights. Second on that call, tell them that they have a right to a follow up call within 14 days to discuss the default. They can waive that follow up call if they do talk about the default on this call. Hey, your two, you've missed two monthly payments your insurance has lapsed, whatever it is, talk to them about why their loan is in default.

If they want to discuss options for modification, forbearance, if they want to pay, cool work that out with them. But all you have to do is discuss why the loan is in default on this call and give them HUD's contact number. After that call happens. Wait 30 days if you don't hear from the borrower, they don't bring the loan current, anything like that, cool. File your OD at that time. If alternatively they're like, actually I'd like that 14 day follow-up call to talk about the default I'm at work right now, can't deal with it, cool, wait for that follow-up call. If they answer the phone at that follow-up call, discuss the default, what's going on, miss payments, whatever it is, talk to them about the default, then wait 30 days after that call. If nothing happens, if they don't bring the loan current, if they don't cure the default file your N od, if the borrower either does not answer that initial call or the 14 day follow up call, here's your first letter that you have to send under the requirements here.

So now you have to send a first class letter to your borrower saying Hey, your loan's in default. Basically a demand letter. We also tried to contact you under the homeowner bill of rights and we were unable to contact you and provide HUD's contact number and give them a number to call you back to discuss the default. That's the first letter that you have to do. So this is our first attempt to contact the borrower and what you would have to do, borrower, you didn't get in touch with them, you sent that first letter. Now what you have to do is you have to try to call the borrower three different times on different days of the week and at different times of the day if the borrower answers any one of those calls, you have to provide HUD's contact number. You discuss the default with the borrower and then wait the 30 days and then you can file the N O D.

If the borrower doesn't answer any of these calls two weeks after that third attempted call, you have to send a certified letter with a return receipt requested. Again, similar to the first letter, what's this default about? It's basically a demand letter. List out all the dates and times you tried contacting them, the various methods you tried contacting them, provide hugs, contact number, wait 30 days after that letter is delivered and then file the N O d. So there's a lot of steps here, a lot going on. The biggest thing that I can recommend to you is putting together some sort of spreadsheet or checklist to very clearly write out when did you contact the person? What day, what time? Making sure that the three different times is there. Who at your office was the one doing it in case this came up and you needed to, there's litigation, you need to provide evidence that you actually made the contacts. It's a very, very checklist form based kind of requirements that we have to deal with. But if any of these steps are missed, it will throw off the entire foreclosure. So I strongly recommend that you create either an internal process to deal with this or find somebody. A lot of trustees I know are going to be completing this work. We can assist you with this to make sure that you have everything organized.

The last thing here is the modification requirements under the homeowner bill of rights. So say you've done your the we've recorded the notice of default, you've rec recorded the notice of sale. If the borrower reaches out any time during that process prior to five days to the scheduled sale date and they request a modification or forbearance, you must hal the foreclosure and review their application for forbearance. You can deny all of the applications, but you have to respond to the borrower. So that means if the borrower reaches out and it's two weeks before the sale's supposed to take place, respond to that borrower. Deny the request, don't deny it work, whatever it is. But don't just proceed with the sale without responding to them first. Make sure you reply and let them know, Hey, we're rejecting your offer for forbearance. We're not interested. We'll be proceeding with the sale that way.

You comply with the hobar requirements here. That was a lot of information, <laugh>, very step based, very form based. However, if you have any questions, we can definitely help to advise you whether or not you have to comply with the requirements, how to comply. We can help with that whole process. We're here for you in case you know, run into this and need anything. So that's AB 3088 basically in some extends, some typically consumer requirements to a specific set of business purpose loans. And again, if you need any help with that, please let us know and we would be happy to help walk you through the requirements here.

Nema Daghbandan:

Great, thank you Melissa. And so as Melissa discussed there earlier AB 3088 and SB 1079 worked as bookends to the process. So 80, 30, 88, it has these pre-contact that are required prior to recording a notice of default SB 1079 deals with what happens after a foreclosure sale is completed. So when the option is done, it now adds additional rules and requirements there. So that's what 1079 does. Before I do a deep dive into 1079, wanted just do a cue, few wrap up notes. So one is just on the legislative process because this is I think really interesting. 3088 is actually, if you look at the legislative history behind 3088, it was not a bill at all being looked at initially. It is an amalgamation of probably four different bills that were making its way through the legislature and all the preceding bills were much, much worse.

So a good example is most of the proceeding bills included some form of the foreclosure moratorium, meaning you could not proceed with a notice of sale notice of default or even an option of preexisting foreclosures prior when those bills if were going to pass. So when you look at 3088, it might, and some of you I'm sure are going, oh geez, just another thing I got to now go do. It was so much worse with the proceeding bills which almost always had this foreclosure moratorium concept built into them. And in addition, what was really scary and dangerous was they also had mandatory forbearance requirements and all sorts of crazy rules related to forbearance. The worst one I remember I think was either 25 0 1 or 1436. I get the numbers mixed up in my own head sometimes, but one of the bills literally required that you have to provide 'em in forbearance and then you gave them multiple options.

They could spend years repaying it, you know, had basically to effectively offer them a modification and there was some really crazy legislation that was in the works in the pipeline. And so when you look at AB 3088, while it's not great that you have these additional requirements, we dodged the craziest of bullets in the situation and it could have been much, much worse. So the fact that all it was was a extension of hobar to some loans and hobar really just adds 30 to 60 days from a timing perspective is about as good of a deck of cards as you can get given the political climate, particularly here in the state of California. But even nationwide, we really have a interesting intervention from a government perspective related to mortgage lending rights. And that's just where we're at as a society right now. So that was the first point.

The second point to reiterate something Melissa said earlier was if that information may have been somewhat daunting. So just know that we've already created internal checklists here and if you don't want to do this, we can also do this here at the firm. A lot of our clients are just asking us to do those pre initial contacts. They just want to make sure that they're done. So that's something we can definitely do for you. And then lastly, we're also a foreclosure trustee here at sis. So just this morning actually we were talking to a few of our clients and they were like, Hey, does this apply to me? Does it not? Right? So when we're asking at the foreclosure trustee, we're going through the same flow chart with our clients saying, look, okay it looks like, and you've got these really interesting fact patterns. What if I gave five loans to the same borrower?

Does that now negate the whole fact that they technically have to have owned more than three? So you're getting these really interesting fact patterns that are coming out and you really do need to look at each loan on its individual basis to determine should I apply Hobart to these facts? So something that we obviously do as part of when we're acting as a foreclosure trustee on behalf of our clients. So let's talking about SB 1079. So unlike 3088 this was not an emergency measure. So what that means in a typical California legislative process is that when a bill is passed, it goes into effect January 1st the following year. So SB 1079 is not considered an emergency measure and therefore it goes into effect on January 1st, 2021. So what is the supply case? So all one to four families secured loans, it doesn't matter whether it's consumer purpose, does not matter whether it's business purpose, it's going to apply if the collateral is a one to four family property.

It applies from January 1st, 2021 through January 1st, 2026. That's a five year period. So also a much longer period than 3088 in terms of when this law will apply through. So be cognizant. There are a lot of dates in these legislation and I know that can be very confusing. I was very confused by reading it myself and had to reread this many, many times to even just get this all squared away up here and the big picture. So what does SB 1079 does? It gives certain parties the right to purchase a property after a foreclosure sale has already occurred. So for those of you that don't know, I'll give you a 32nd primer on foreclosure in California. In California, you record a notice of default 90 days later you record a notice of sale 21 to 30 days later you have the actual foreclosure auction prior to 1079 occurring.

When that foreclosure option occurred, there was a new property owner, it either went back to the lender or some third party came to the auction and purchased the property. That was the end of the legal process for foreclosure. And it also changed how when title would transfer right and it was final. So foreclosure sale occurred. Auction occurred as soon as that trustee's deed upon sale recorded, you had an effective transfer of legal title to the property. This bill changes that dynamic and that's why we're going to dig into what happens now after a foreclosure auction occurs. What happens in that 45 day window. And I'm going to give you a few different examples of that. So the first thing that you need to understand about this bill is that it created effectively two unique classes of parties who can continue to bid on this property after the foreclosure sale has concluded.

So they have this concept called an eligible bidder. So the first person who we're going to consider an eligible bidder is this concept of a prospective owner occupant, someone who intends to occupy this property as their primary residence and the factors that go into that from the statute state that they have to provide an affidavit stating that they intend on occupying the property within 60 days of purchase. They will occupy this property for at least one year and that they are not related to the borrower. So that's the content of this affidavit that must be provided. And also this party has to be a natural person, it has to be an individual. It can't be an LLC or a corporation or some form of entity. So that's one class of what is considered an eligible bidder. Another class of eligible bidder is a tenant and specifically the tenant at this property.

So if foreclosing a property, there's a tenant in the property, that tenant can also bid on this property after the foreclosure sale and they will in fact get even better treatment than these prospective owners will dive into how the process works for each of them. But they are also considered an eligible bidder, meaning they could also buy this property after the foreclosure sale occurs. They also must be a natural person. They must occupy the property as their primary residence. Have an arms length lease that was entered into prior to you recording your notes of default and similarly sign an affidavit saying they have no relationship with the borrower. It's like the magical language affidavit. So if you look at the statute, it'll tell you exactly what the affidavit needs to have. Regardless, the trustees will be providing the content over to the either tenant or the perspective owner.

So I'm going to give you five different examples because I think in stories. And so I will give you five different examples of how this could theoretically play out for you. So the first one here is that there was an eligible bidder bidding at the foreclosure auction. Remember I just talked about that prospective tenant or that prospective owner occupant. If those people actually show up to your auction and they bid at your auction and they are the final bidders or winners at auction, there are specific rules that apply to them. In the second scenario is that tenant who occupies the property currently reaches out after the foreclosure sale. What happens there? The third option here is a prospective owner tries to bid on the property after the foreclosure sale. The fourth is the foreclosure sale happens neither a prospective tenant nor a prospective owner occupant ends up submitting an initial bid.

So what happens then And last is either a tenant purchaser or prospective owner occupant purchaser, it submits an intent to bid but never actually complete that process. Cause these are kind of the five. There may be other ones I don't know, but these seems to be the five possible ways to play out every foreclosure here. So let's start talking about each one of these examples. Example one. So reminder here you have a situation where you're having a foreclosure auction and either a prospective O owner occupant shows up at this auction. So somebody who's a natural person who intends to occupy the property submits an affidavit saying, I'm going to occupy this property as my primary residence and I'll do it for within 60 days and for at least one year. If they show up to the auction and they are the highest bidder at auction, then what happens is as soon as that trustees deed upon sale records and goes to this eligible bidder that trustees de upon sale is final, there's no 45 additional day process.

There's no additional process. That sale is just done because an eligible bidder showed up to the auction and is also the highest bid at the foreclosure auction. They get the property that as soon as the trustees get upon sale reports they do have to provide the affidavit to the trustee, but they could have provided the day of or next day or whatever. But the sale is conclusive that day. It's auctioned if this fact pattern occurs. Scenario two, so neither the prospective occupant or the tenant was there at the auction, right? Either the property went back to the lender at the foreclosure auction. So they're the highest bidder or a third party comes in and they're the highest bidder. So one of those two situations is a foreclosure option has occurred and either went back to the lender, went to a prospective third party. And what happens here is that within 15 days of that foreclosure, complete auction being completed, the tenant at the property reaches out to the trustee and says, I intend on purchasing this property trustee.

All they have to do here, the tenant has extraordinary rights. They can say is whatever dollar amount it went for an auction, it doesn't matter whether it was less than the total loan amount or whatever that dollar amount is, but whatever it's sold for an auction, as long as this tenant can match that, right, they now have up to 45 days after the foreclosure auction completed to complete this process by sending a cashier's check to the trustee and they will become the owner of the property. So instead of it being property of the beneficiary, instead of it being the property for that third party purchaser, foreclosure auction there is instead the trustee now gets recorded for the benefit of this tenant, the tenant now owns the property and they bid whatever that final bid was. That auction, that's the rules related to this tenant purchaser. So remember as long as they submit a bid within 15 days saying I intend on buying this property and they complete and send in the money to complete that bid within 45 days, then this is how this scenario plays out and it goes to your tenant instead of the original parties who are at auction.

Scenario three. Scenario three is prospective owner occupant. Similar rules, any party in the outside rule can come out as long as our natural person reaches out and saying, Hey, I intend on occupying this property. They can submit a bid to the foreclosure trustee saying, foreclosure trustee, I see that this went for sale and I saw that the final foreclosure price was $300,000. I am willing to submit a bid in for $350,000. And as long as they send that letter into the trustee within 15 days of the initial foreclosure sale, they can submit any bid amount they can save. I want to bid $300,000 and one penny for example, as long as it's greater than whatever a foreclosed app. They also have 45 days. And what's interesting about this is there's effectively a blind bidding process occurring in the background because there could be multiple people reaching out to the foreclosure trustee.

And so you've effectively had a second auction that's secretly happening in the background because these prospective owner occupants are all bidding on the property in the background, none of them knowing what the others are bidding at. So you have basically a blind auction occurring in the background. And so as long as they get their money in within 15 days and they bring the cashiers check to the trustee within 45 days, the highest bidder who completes that process, the highest bidder who actually bids and sends the funds wins and the remainder. So all the losers of that auction, anyone who the lowest bidders or people who didn't complete would not get the property. The highest bidder who submitted a bid and who completed the bid gets the property and gets titled to the property. You're probably thinking and probably wondering what happens if two and three play out? What if there's a tenant and an owner occupant bidding the tenant who only had to submit a bid at the final bid amount trumps this perspective owner occupant. So as long as they submit a equal bid and they complete the paying the full proceeds at time of auction, the tenant would win over this perspective owner occupant.

So let's talk about scenario four. So in this scenario, what happens is some form of eligible bidder who could have bid did not bid so foreclosure. So what happens is there's a foreclosure auction and it goes back to the beneficiary or some third party comes in and bids and it goes to them at the initial foreclosure sale. 15 days goes by after that foreclosure sale occur and no one sends any communication to the trustee, there is no bidding that was done right now that initial auction is conclusive. So whoever won the initial auction wins and and the trustee now needs to record the trustees upon sale by the 18th the date. And that is conclusive title to whoever won at the initial auction. So if no one bids in this 15 day window, what happens if someone bids in that 15 day window but they never bring the money?

Cause remember within 15 days they don't have to bring in any money, they just have to say, excuse me, and they don't have to sit, they have to even make a deposit or show proof of funds, nothing. As long as they stay within 15 days, I intend on buying this property. And if they're a prospective owner, they tell you whatever bid they're going to bid at to as long as that happens within the 15 day window, you now must wait the 45 day window to see whether these people perform. If they don't perform no harm, no foul, there's nothing you can do about it can't, there's no recourse. Which there's a whole other webinar we could do just on the insurance ramifications of what this all means because basically if you have this super weird 45 day window in which you have what is probably going to be the ownership of this property which is either the initial beneficiary or the third party purchasing an auction, and then you've got this weird circumstance where someone else is saying they're going to buy the property but they actually don't have any vested interest in this property.

So what if the place burns down and there's a whole parade of horribles we could go through about all the awful things that can happen in this 45 day window. And there will probably be lots of fun, interesting legal fact patterns that will keep Melissa and I fully employed for many, many years to come. So thank you California legislature for that gift to attorneys nationwide or in the state here in California. So regardless, that's the nuts. And of this one is that if no one, if they don't complete this process in 45 days, then by the 48th state that initial trustee upon sale gets recorded. And here's an important fact for you is the way that works in California related to ownership is that trustees upon sale relates back to the initial auction date. So even though this doesn't record till the 48th day or the 18th day in my previous example, it technically reverts title and ownership of the property back to the initial auction date.

So if you are a foreclosing lender, you really need to make sure that this property is insured. So let's say it reverts back to you at the initial auction auction date, you need to make sure that you get the property immediately insured because even if someone comes and buys us out and you have no recourse against them, and then technically you just paid for 45 days of insurance that has no value to you and you have no recourse in this situation, you still need to be insured because this 45 day window will revert back for your ownership purposes. So make sure that and same thing too, if you're a prospective tenant or a protective owner and you make the bidding, you may have these weird circumstances where you have multiple parties who actually don't own this property ensuring the exact same property because you have this uncertain result of what's happening in this 15 or 45 day window. So that's the weirdness about this law.

And then before I even kind of delve into, there's other things that this bill does as well, 1079, I think I want to kind of take a second to decompress from what all this information means. One is, it probably doesn't matter. I think for most people we'll see how this law plays itself out because people have to come up with cash in that 45 day window. It's not a promise of financing, it's cash. You have to have a cashier's check that and that's the only way that you can get the ownership of the property. It appears unlikely that this law will actually be used a lot. The legislature's intent behind this was they want to bring affordable housing. They thought this was a great way to bring affordable housing because you could probably bullying below market purchase prices for people, give them an opportunity to home ownership.

But the practical issue is that they have 45 days to perform. And I don't know what bank's going to finance this transaction. You can't access the property. You have no possession. You have, there's a million things blocking you from getting traditional financing. So the only people who could theoretically afford this are people who have huge amounts of cash laying around the background who's really probably not your intended audience. And on top of that, the only other thing that really probably happens here is you probably have companies in the background who just are reading up on this and some of you who are actually probably entrepreneurial going, you know what, I can just create a straw by our market in the background, right? Because as long as an individual out in the world is willing to state that they're going to occupy this property, the trustee cannot ask them.

They cannot verify that they actually are going to occupy the property. The there's no affirmations or verifications occurring. And in fact, the law state specifically, the trustee cannot in actually verify the contents of this affidavit are true. So the only thing that really makes sense in my mind is that you probably have straw buyers that show up 15 days later, they're financed by someone who's got cash. And it's just a play on people trying to find lenders who didn't understand the rules well enough and end up foreclosing at properties that are below the auction price or below their loan amounts and then up getting basically burned by. This is probably the only people who really get benefited. So unfortunately you have this weird situation where a law with good heart and intent just comes and backfires in everybody. So that's how this probably plays out.

But that's my political editorial comment on this issue. What else does this law do? So before going to q and a and other stuff, that was the primary thrust of this law but there are other things. So the notice of sale after January one, if you record a new notice of sale after that date, there's additional language related to this whole tenant right issue. We talked about what the tenant's rights are, but there's language that has to be notice of sale that kind of identifies those rights for a tenant. So that's one aspect of the law that change. The law states that it does not modify other tenant's rights. So for example, even if the tenant doesn't bid or do an inten bid, you still have to evict them or do whatever you need to under California law related to the current rights of tenants.

And the law was very explicit that this law does nothing to modify a tenant's right to a property. There's additional requirements for trustees. So we're a foreclosure trustee and now we have to update our website because if you think about it now you have to publish these bid amounts, right? So previously you'd have to put the amounts on a trustee's deed upon sale and they would get recorded. But now we have to actually put it up on a website saying, hey, the final bid was this dollar amount notifying to the outside world. So these prospective owners and these prospective tenants now know what the final bid amount was and we have to have websites that publish this information. And then the last component of this is that there are large fines for the failure of a lender to maintain a vacant property post foreclosure. So this is actually preexisting law.

They just really increased the amount of the fines. It's also a really unique rank wrinkle, which is what happens if you actually end up foreclosing on a property. You don't have legal title, but then you're also effectively supposed to make sure that there's no vagrancy or other nuisances happening at the property or for a property you don't actually own yet and may not actually ever get legal title two. But by the way, we can comment and give you huge daily fines for failing to maintain this exact same property. So that's another weird aspect of what's going on. It's probably worthwhile, we have bigger, deeper conversation offline about how to navigate this particular issue. And so I think that's the last one. Yes, that is the last slide for the presentation. One more thing that's not on here and it's worthwhile as well. Cause also a deeper discussion is they prohibit this practice called bulk sailing.

So what happens in California is that if you have a single deed of trust that has multiple properties on it, historically what a trustee would normally do is they would sell these, let's say you had five properties on a single data trust. We would normally historically sell all fried properties at the exact same time. So if you owed a million bucks, you had five properties secured under that single data trust, we would normally go to the foreclosure sale and we'd sell all five and whatever dollar amount you'd cut in. So when either went back to you and you're the beneficiary got all five properties back or some third party came in and was bidding on five properties at once and they had to bid your loan amount, that's changed. The law now requires that if you have multiple properties on a single deed of trust you are required to conduct individual sales of those properties now.

So you record the notice of sale and you're technically going to conduct multiple actual sales. And that's a really interesting wrinkle for these cross collateralized loans. That's where I feel like you really need to speak to an attorney and I hate using that term cause I'm an attorney. It seems pretty conflict of interest and self-interested. But really though, if you have multiple properties, talk to an attorney about this, you have to have a strategy in place about how to foreclose because there's a lot of different ways that you will shoot yourself in the foot by not understanding the ramifications of the bidding process and how it takes down your balance with each foreclosure sale. It is a very strategic game that you must play and understand how to play well when it comes to these cross-collateralized loans. There is an exception to that rule related to this bundling of sales if the deed of trust mandates it.

But it's convoluted complex, again probably for a bigger, longer discussion if you have a cross collateralized loan. Again, my advice is talk to an attorney, me, Melissa, some other attorney, I don't care. Talk to an attorney. It's an important enough issue that you should get consulted on about how to approach that. Alright, so before we get into our q and a I got a couple fun announcements. One is AAPL is coming up. We're super excited about it. We will be there. Geraci Law from have a large presence. It is going to be a live event That's very exciting. I know I miss all of you. You may or may not miss me, that's okay. But for those of you that are there we cannot wait to see you. It will also have a virtual component, which is going to be fantastic. So it's going to be both a virtual and a live.

It will be a hybrid event. AAPL is a sister company to a company called Think Realty. They've actually been running these hybrid events and they've had great success. So they know they've got a really good process for running a hybrid event. Very exciting stuff. We're very excited to partner with them on this one and are very excited for their event. It's coming up again, live in Las Vegas at Caesars Palace. They are, for those of you that are nervous as we were as well they are taking safety extremely seriously. You will not be allowed on the floor of this conference board without a mask. There will be hand sanitizer everywhere. They're enforcing social distancing rules. It is a very strict protocol that will be follow there to just make sure that we're all safe in this crazy time. And so they have all sorts protocols.

You can reach out to APL and they will also let you know that. And then next week I think, right? So 27th. So yes, next week on Tuesday the 27th, we have the very handsome Dean Kimba <laugh> over at Armino, our good friends and clients, Kurt Al dig over at Builders Capital and Kevin who finally had to get his covid haircut recently all presenting together next week with private lenders, insight into the marketplace. Really a state of the market. I know there's a lot of disjointedness in the marketplace. You're going to have a really awesome perspective from a practitioner on the accounting side as well, also as legal. Basically what the heck's happening in the world and just a real quick market update should be awesome. That will be next Tuesday. We will send out a registration link after this webinar for those that would like to attend this webinar with our usual wrap up email.

All right, and so I have been somewhat terrified in the background if I have seen the question and answer popups light up in the background more than I've ever seen on any webinar. So we will now spend some time answering those questions there. Just by way of example, there are 43 questions currently in the pipeline. It is already 1154, so we will likely not answer all of them. Melissa and I are both available for you. Our emails are on the bottom of the screen. We love talking to you or happy to answer any questions that we are not able to get to today. But we will start going through some Q and as now. And then Melissa, do, can you see the q and as or should I? Do I now need to minimize my screen?

Melissa Martorella:

Sorry, I was muted. Yes, I can see them <laugh>.

Nema Daghbandan:

Perfect. All right, so we will start going through these and then we also have a chat too. I'm kind of, let's see if we open up Pandora's box of both a chat and a q and a.

All right, so I'm going to actually go to q and a first cause it's easier to manage that side. If you were using the chat box, please do use the q and a. It's a better way to answer it. So the first question that I see in here is, a third party has the right to buy the property from us after it becomes a real estate owned property. Can we have an affiliate buy it as soon as it becomes an r o? Yes, I think so. Let me rephrase this question. Cause I think I understand the, and I'm sorry if I'm not correctly understanding your question, but this is what I would understand the question to mean. So what happens is the foreclosure auction occurs, and oftentimes previous to SB 1079, is that oftentimes when you're at a foreclosure sale, there's usually the trustee is usually writing down all the potential bidders that the property, right?

So you are oftentimes in a situation where you reach out to whoever. So even if there wasn't a successful bidder, you oftentimes are reaching out to those people saying, Hey, I saw the interested in the property. Do you want to buy it? Or alternatively, you have your own borrower base. So a lot of you do fix and flip loans at the half complete a project. And so you reach out to your other borrowers and say, Hey, by the way, I got a new property. This one would be good for you. I think you do a great job at it, right? So oftentimes you wanted to trade this asset immediately after yourself. What's unique about SB 1079 is you don't have title to this property. That's the problem, right? So at a minimum, you don't get title for 18 days and you may not get titled for 48 days.

You can do nothing because you don't own this thing. So it doesn't matter whether you've tried, you can try to lock up a deal, you could try to get option agreements, you can do whatever you want in the background. You can promise, Hey, if I get title to this thing, I'm going to sell it to you. But you don't own the thing and you may not ever own the thing. So you may actually end up being the technical owner on day of sale, but you actually never get that trustees deed upon sale in your name. So there is a likely scenario that HAP plays out here in which you can try to negotiate a deal in the background but never actually end up owning the property and therefore never being able to sell it even though you got it at the initial foreclosure sale. Alright I will go to the next question here. Melissa. Do you see Matt?

Melissa Martorella:

Yep, I see it. So the next question here is what if the loan was originated by a CFL lender but was assigned to an entity that is not subject to those licensing requirements? So you've assigned the loan to a private beneficiary who is unlicensed in the state of California. That's fine. That lender could proceed without dealing with the homeowner bill of rights requirements under AB 3088. So that would not apply to them. But if the current letter is a cfl, a DRE, or is a servicer that is performing those actions then they will need to comply with the requirements. The next question as well from Jaret here are private lenders doing business purpose loans required to have a cfl, RML, D E, or any other license? You have a lot of questions going on here. Generally, yes, in California, a lender must be licensed to make a loan, a business purpose loan unless you use a licensed D R E broker to arrange that loan transaction. So if I think this is probably a bigger discussion about your personal business practices, I'd love to talk to you and we can make sure that you're on the right page as far as licensing in California.

Nema Daghbandan:

All right, next question here is an anonymous question is how does this affect a loan that is secured by a portfolio of one to four family residential properties? Do you have to foreclose on each property individually and sell each of these alone? So there's multiple bills and there's different definitions. So I believe the question here is really addressing the SB 1079 side of it. So the prohibition on bulk sales. So if there are multiple pieces of property secured by the same loan, generally speaking, you must sell each of those properties individually Now where before you could have theoretically sold them together in what's known as a bulk sale. So SB 10 29 does generally prohibit the practice of bulk sailing with very limited exceptions to that rule.

Melissa Martorella:

The next question here from lc does AB 10 3088 apply to business purpose loans made prior to covid to an individual borrower? Yes, it does. So if you're about to start foreclosure right now you would need to deal with the pre-contact if you know all the other requirements applied. But lc, I know you have your foreclosure sale that's going on today since the law wasn't in enact, wasn't enacted when you did the initial notice of default, you're okay on that. You don't have to stop your foreclosure right now and do the pre-contact and restart. So you're okay on that.

Nema Daghbandan:

And that's a really good lead up to a general lot of questions we're getting in fielding right now at the law firm is, Hey I didn't do this initially or I'm about to just like, where am I on the state of process? Obviously the answer's going to vary on what your facts are, but ultimately the law cannot be retroactive in nature. So for example is if you look at AB 3088, it generally has before you file a notice of default, you have to take these operative steps. But if you've already filed a notice of default before the law passed, you can't comply with the flaw if you think about it factually speaking. So right, so you don't have to rerecord notices of false, you don't have to redo your processes if that part of the process occurred prior to the either of these bills being passed or enacted. So similarly give you a different fact pattern. You record a notice of sale on December 31st, that notice of sale doesn't have to have the magic language that it needs on January one, as long as the notice of sale gets recorded prior to the effectiveness of 10 SB 1079, you don't have to now notice every notice of sale you have out there. It's only for a new notice of sale that get recorded under 1079.

All right, next one here are dear friend Matt Gunk over at rcn. What about mixed use property? The statute says containing no more than four dwelling units, couldn't it be a building that has a commercial space plus four dwelling units and still apply? Unfortunately, when you deal with legislation, I mean there's a lot of these holes. I mean, that's why Melissa and I, oftentimes we try to throw in what I would say is our practical advice and try not to stay hyper-focused on the legal always. Because as a general rule, we see the crazy, we see all the crazy lawsuits and Matt over at RCN clearly sees all the crazy lawsuits too. And so the problem is, even if you don't legally have to do something, sometimes it just makes sense to do it. And I think oftentimes when we're thinking of California hobar requirements, we often think you just should do it right?

Because a good example is, well, what if I made a fix and flip loan? It wasn't a loan, it wasn't a rental loan, but you don't know when you're foreclosing whether they're going to say it's a rental loan. You don't know whether that the likelihood the borrower comes up to you after the fact and sues you and said, oh, by the way, I had a tenant. That's the challenge here. So I don't, statutorily speaking, I think he probably makes the argument it doesn't apply. But I don't know if you want to, I mean, think you're better off simply applying the Hobart requirements because it's 30 to 60 days and then you have certainty. So that's my practical on top of the legal.

Melissa Martorella:

Next question here from Jess Preet again is, would these the homeowner bill requirement rules apply to seller finance deals in California? Unfortunately, there's no carve out for something like that. So if the lender is one of those license parties and you have all of the other facts about who the borrower is, property type, that kind of thing, unfortunately you would have to deal with this.

Nema Daghbandan:

All right, next question from our good friend Greg Brunk. So this question here is what if a borrower bought an S four, an SFR one to four family as an individual and initially lived outside the property, you did your traditional investment purpose loan after that, that fact they moved into the property or claim they've moved into the property, right? Cause I'll even expand his question. Let's say they just claim they moved into the property and you don't actually have evidence. They do. Unfortunately, the law doesn't care about what happened in origination, right? The law just says it. It's really a pre-notification at time of foreclosure. So if a borrower claimed they are living into the property it's sufficient enough for application here as well. It doesn't matter how it was handled at origination.

Melissa Martorella:

Similar kind of question here. So does do these requirements. So there was the requirement that the borrower has to own three or fewer one to four families rental properties if this is going to apply. And the question here is asking whether those properties need to be rentals or do vacant fix and flips count. Kind of what Nema is saying here is, you know, really don't know at the end of the day and they could claim that the other rental, the other properties are now occupied by tenants, that kind of thing. So if you know that your borrower owns two, three, whatever one to four family properties, I would probably err on the side of caution. If they own four or more, then you do not need to deal with this. But if they own one or two other ones, you're going to have to comply with this regardless.

Nema Daghbandan:

Next question. Similar Bain, does AB 3088 apply to property that's used for short term rentals? And so it's an interesting question. I think there's probably a technical statutory out because one of these conditions probably doesn't get met under this for practical purposes, I still comply because I keep going back to the same thing is I, we see so many terrible borrower lawsuits and they're just, and you've all seen 'em too, we're not the anomaly here. And at the end of the day, you're all getting sued for, oh, it's a consumer loan. You're getting your qw, QWS, all this nonsense sent over to you, even though it's clearly a business purpose loan. You're already getting sued for this stuff. Don't give them something else to sue you for because this is not going to be easy to dismiss out of. You're now into a factual intensive analysis. Was it a short-term rental? Were they suffering a covid hardship? All of this nonsense. And it's hard to prove it one way or another from a judicial perspective. So rather than trying to get into a technical, did I have to comply? Just comply because it's 30 to 60 days, that's what you're really adding to this process. It's not an expensive thing to do, and it gives you certainty if you do these steps, you now have a safe harbor and prevent this argument from happening in the first place,

Melissa Martorella:

Right? Because like NEMO is saying technically in the requirements is that tenant at the property has to have an arms length market lease. Well, what is that? Does technically the air Airbnb, Airbnb listing? Does that qualify there? Then you're getting into a whole argument there as far as what does that mean? What is the market lease? And that's just something that you probably don't want to go down. The next question here was if the loan has been assigned to a private beneficiary but was funded by a dairy broker, is the loan excluded from the requirements since it's currently owned by a private beneficiary? Our read of this is that the current lender of the loan is a private beneficiary that is unlicensed and therefore the rules do not apply. It doesn't matter what happened at origination, it's the current status of the loan. So if the current lender is a private beneficiary and they want to foreclose, they do not have to deal with the requirements here.

Nema Daghbandan:

All right? What would a written hobar exemption from the borrower look like and or contained? So it's interesting. So the statute says you cannot waive these rights. So all the things we've actually just discussed, both 1079 and 38, 8 cannot technically be waived. But I will give you a flip on a question you didn't ask, which I probably think is worth answering, which is let's use an example of it's a fixed and flip property. You're like, Hey, look, it's a picture flip. It's not occupied by a tenant unless you know that to be true. And when I say no, that to be true, meaning the borrower has stated something to you in writing to that effect, you don't actually know that you think that you believe that, but from a judicial standpoint, you don't know that you don't evidence of this. So while they cannot waive their rights, they can make affirmative statements to you that would effectively make them unqualified for these protections.

And so a good example of this, let's say for example, instead of foreclosing, you've chosen to offer a modification or forbearance prior to all of this. You can get affirmative statements, not forbearance or modification related to the occupancy of the property, related to the number of properties they own related to all these things that may disqualify them from these protections. And therefore you now have an affirmative statement that verifies how this property is being used. Sure. Then you don't need to worry about cobar to the way that they violate that forbearance or that modification. You now have an affirmative statement from them stating that they are disqualified from these protections, right? That's fine, but just because isn't good enough to not comply with because you're just going to get sued for what?

Melissa Martorella:

Another similar question here is at origination the lenders license sales to private, do the rules here still apply? No. If that new beneficiary is not, a licensed lender will not apply.

Nema Daghbandan:

And I'm going to just answer this question affirmatively and it's good. And also these came rolling in, so I want to make sure we are listed the presentation, and so I can see why the same question. So to be very, very clear and unequivocal the requirements for hobar application and similarly for the forbearance rules or the forbearance communication rules, one of the requirements, one of the, and it also has to be this, is that the lender is a California finance lender, is a department of real estate broker, is a bank, is a RML licensee, right? Effectively a licensed lender. That is a requirement for the homeowner's bill of rights to apply. If that fact is not true when you are starting the foreclosure process, that condition's not being met and therefore you do not have to apply with hobar. So that is how the law works here. So yes, you do if you are a private beneficiary, if it was sold to private industry, whoever's foreclosing at that time, if they are not licensed when you read the statute, it is a technical requirement that party must be a licensed party at time of foreclosure, even if it was originated by a licensed party initially.

Melissa Martorella:

The next one is, so as a private lender, if I'm only lending to entities never individuals and the property involved is to be sold, it's a business purpose loan then none of 3088 has anything to do with me, not quite. So the first or the part about the foreclosure pre-contact, if you do not lend to an individual, if the borrower on that loan, the person that owns that property is an entity. Correct? You don't have to worry about the foreclosure homeowner bill of rights requirements for the pre-contact contacts prior to starting your foreclosure. However, there's that second part of AB 3088 about the forbearance requirements and forbearance request communications that applies to both individual borrowers and entity borrowers, unless that borrower entity is a corporation or is an LLC fully owned by other corporations. So half of it you get out of, I'd say probably the more onerous part of it. You do get out of the AB 3888 requirements. However, there's still that forbearance portion that you would have to deal with.

Nema Daghbandan:

All right, next question here, which we've answered but want to make sure we're really clear on as well is for AB 3088, if you had already recorded a notice of default and or a notice of sale, which were recorded prior to August 31st, 2020, which is when the law was enacted, do you need to comply with the homeowner bill of rights requirements? And the answer is no. So you don't have to recreate the process, right, because it prevents you from recording a notice of default. So long as you have recorded a notice of default you and that notice of default was required prior to August 31st, then you would not have to do the pre-contact and have to recreate the foreclosure process. However, you may have to comply with the forbearance request side of this. If the borrower requests after you've recorded the notice of default and they then make a request to you for a forbearance after you file the notice of default. So that aspect of the law may still apply to you.

Melissa Martorella:

Will the lenders servicer, oh, go ahead.

Nema Daghbandan:

No, no, you're good. You're good. Go ahead.

Melissa Martorella:

Will the lenders servicer or sub-servicer play a primary role in compliance with the HOBAR compliance steps? Typically, yes. So if your servicer is servicing your loan, collecting payments, et cetera, if they normally would have started your foreclosure for you they're going to be obligated Now to deal with these requirements. Doesn't hurt to double check with them, make sure that they're performing. That is that they will do that for you, but they should be complying with these requirements for you.

Nema Daghbandan:

All right, and next question here is for AB 3088, who is the borrower for more than one to four family unit loans? Is it the LLC or the owner of the lc? Good question. So the way the law is written related to these pre-contact notification requirements is that the loaner must have been made to an individual or a group of individuals, Nema and Melissas, not Nema LLCs and Melissa S. So even though your LLC corporation is made of many, many individuals that does not matter. It has to have been a loan made to an individual.

Melissa Martorella:

Next question here. So this is related to the request for modification or forbearance related to the HOBAR requirements. So if the borrower reaches out at least five days prior to the foreclosure sale, do you have to halt the foreclosure and reschedule it in order to respond to the request? Or can you respond and deny and keep the foreclosure sale date on the calendar? You can definitely keep that foreclosure sale date in place. You just absolutely need to respond to it prior to proceeding with the sale. As long as you do that, deny it, whatever that's totally fine. You do not have to postpone it while the borrower, even if you're saying, Hey may, I might entertain that, but you have two days, you could respond with that but you just have to provide something to the borrower before you actually proceed with that sale.

Nema Daghbandan:

Next question here is for AB 3088, does the lender or the servicer or the trustee follow these reporting and notification requirements? It's a great question. So if you were to ask this question pre AB 3088, I think 99% of trustees would've said, absolutely not. I don't want the liability of this and it's all of the requirements. I think that probably changes the tunes for most trustees. So the short answer is you can't record a notice of default until this act is done. It can be done by the lender, it can be done by the servicer, it can be done by the trustee. This act must be performed before the trustee records a notice of default when you record the notice of default, you are also recording an affidavit that this act has been performed or that you were exempt from the sac. So there's a separate document that is recorded with the notice of default saying this does not apply, meaning these pre-contact apply for one of these following reasons, or I complied with these pre-contact, so it doesn't really matter who does the doing, someone needs to do it. Even at the law firm, we are generally reticent to do it. When we saw IB 3088 come around the corner, we knew immediately that we needed to have the systems and process in place to do these pre-contact notification requirements because we just knew our clients were going to be uncomfortable doing it and we had to figure out our own way to do it. So we created our own internal checklists and processes and procedures so that we could do, I mean, it needs to be done. Again, who does the doing? It is up to you.

Melissa Martorella:

The next question here is from Jonathan Vasquez who's saying, I'd like to get some more information about the lenders or that are foreclosing on more than 175 foreclosures in a year. Would be happy to talk to you about it. Feel free, my email is here, NE's email is here. We'd be happy to discuss that with you. So feel free to reach out.

Nema Daghbandan:

Next question here is, can the registered mail slash notices be sent to a registered agent in the event the borrower does not want to be found? So when you think about loan documents as a common question we get is, who is your borrower or how do I perform? These asks set up to send notice. I think oftentimes we live in a world of email communication. As a lawyer, email communication doesn't work right? It it's a written communication, but it's not a good enough communication for purposes of these formalities. Your deed of trust in it should state what is the notice address? Where does mail get sent to on behalf of the lender or the borrower and when is it affected? So if a letters drop in the mail, oftentimes they have what we call mailbox rules, which means if I drop it in the mail and it's sent usps, it's considered received within three to five days or whatever, if I sent by FedEx, it's reconsidered, received the next day, all sorts of rules that apply as when is noticed, technically received and what method of delivery.

You may change those rules to summary review. So for example, you may have notice address as one address, but then the borrower reaches out to the loan service and says, oh, by the way, I moved, please send it here. You now have two notice addresses. You have your original notice address and you also have the new notice address that the borrower gave to you. So effectively as you have to follow the formalities of your documents, and B, if you have actual notice, otherwise you would also send it there as well. So it's a very formal, where does mail get sent is a technical formal answer and should be followed by your loan documents or the actual notice you've been provided by your borrower.

Melissa Martorella:

Another question that is coming up that we've discussed, but again want to make sure it's clear, is does AB 3088 apply to loans that I know where the notice of default was recorded prior to August 31st? No. So again, like Nema said, you know can't comply with something after you've already done the thing and it is enacted after you've done the action. So AB 3088 and the homeowner bill of rights requirements deal with the pre-contact prior to recording an N od. If you already recorded an N OD and then a law is passed, you can't go back and have to deal with that. So if you've already initiated a foreclosure prior to the passing of this law, you are, okay.

Nema Daghbandan:

Next question here. Do attorney fees and costs get added to the minimum post foreclosure bid to buy back? Great question. So here's where I think the law is very unique and why I think this is a fundamental thing we didn't really talk about in the webinar and it's probably worth the mention is this probably changes the bidding strategy that you should now employ it foreclosure options. And what I mean by that is traditionally when we are advising our clients who are foreclosing and they had an entity borrower with a personal guarantee, we would usually recommend to our clients, Hey, start at something less than the total amount due under your loan, right? So let's say giving you an example, if the loan amount was $400,000 I'd say start the bidding at $200,000 if no one else visit the auction, then you get the property back at $200,000 and you now have a deficiency available against your guarantor for $200,000.

That's how California law works. So now that a theoretical third party can come and buy it after foreclosure sale, you should now more likely than not in 95% of circumstances start the foreclosure auction at your maximum bid amount. So whatever you're owed, which is your attorney's fees, your late charges, your whatever, whatever you're owed, you should probably bid at. Because if you don't, what's going to happen is someone can come and buy the property for a penny more and you can't do anything about it. They just have to provide you a penny more or if there's a tenant there, they don't even need to provide you that penny more so because of all that, you have to be very disciplined and careful about how you bid at auction. And the other one, and why I keep hammering that little hammer about multiple properties is when this becomes 10 times more relevant in a cross collateralized loan.

Because remember, each property is its own sale, meaning that any the prospective owner and prospective tenant can come by each property after sale. So now you can't start at your opening bid amount. Let's say you're owed a million dollars over five properties. You can't do that because if you started that first property at a million dollars, you've now lost the other four properties. You've effectively been payment full at your first auction. So it really doesn't require a lot of strategy about how to bid and the bidding strategy you're going to want to employ on a cross collateralized property loan.

Melissa Martorella:

Another one on SC 1079, does this, do these requirements apply if the dwelling is uninhabitable? So the first part of this is remember there are penalties. So for example, if you're a lender that takes back of property that's vacant or otherwise uninhabitable and you don't maintain that property, property and upkeep it, there are penalties there as far as whether somebody wants to come and be like, I'm going to live in this property. I actually don't know nema. Do you know whether that would apply?

Nema Daghbandan:

Yeah, it's interesting. Someone else asked me this question before the webinar, and it's one of those really interesting backgrounds. The law doesn't really say, right, they don't actually get into enough clarity about habitability. And so what, for example, they said, what if I got a good question about what if it's land, if it, it's things that could or land that's going to be built for 1 0 4. This is where I would say is you tend to probably have to just use caution and apply the rule even though it may not technically apply, right? Because maybe you win in litigation, maybe you lose, but you're not getting attorney's fees on this thing and you're going to fight this out with that prospective purchaser to figure out. And so whether you want to be the person who establishes case law here in California, <laugh> let us know. We'll take the case. But I don't know the answer and I don't think that the law will give you absolute clarity on this answer.

Melissa Martorella:

I don't actually understand this question. If qualified bidder buys who pays obligations due after sale is done, I'm not quite sure I understand the question being asked here. Yeah, I think I understand. This is from David now. Oh, okay, good.

Nema Daghbandan:

Yeah, I think I get it. So I think it effectively is if the qualifier, so let's say for example, you have a bid who comes in after the foreclosure sale and they let's say the foreclosing party, right? Let's say, let me give you an example. You've foreclosing the loan, you have a 300,000 loan, you foreclose a $300,000, it goes back to the beneficiary at time of sale to foreclose, your option prospective buyer comes in and bids $300,000 and one penny, they give the $300,000 and one penny. What's that 45 day window? So the legal title should be passing to that qualified bidder. But what happens if the foreclosing lender in the circumstance, the one who initially was going to get it back at $300,000, pays for hazard insurance, tries to keep up the property, puts up a fence to keep fakes out, all these sorts of issues may crop up.

Can they get that money back from this person who just bid $300,000 in one penny, right? Because effectively they're not going to get the property anymore and at least the way the law is written, there's nothing that gives them this, right? So effectively you could be the winning person at auction, spend good money after the auction to protect this property, to ensure it all these other things and all that money's just thrown down the drain because some qualified bidder comes out of the woodwork and ends up buying this property out. If I think the question's being asked

Melissa Martorella:

The next question from Sharon is, can the lender set a minimum at the auction? So technically, yes. So when in order to start the bidding process, the foreclosing lender puts the opening bid the advice that we're generally giving is if you want to make sure that you're not out of luck, especially if you don't have a guarantee on this loan, and so say you're owed $500,000 generally what we would do is you know, would start a little lower and bid up to the amount that you're either willing to let the property go, or hopefully somebody outbids the amount that you're owed. In this case, if you open the bidding at 300,000 and somebody comes in and bids 300,000 in a penny, you lose the property. So typically you would've had the ability once you take that property back, you can sell it, whatever, and recoup the rest of your losses that way. In this case, that's not available. So we are recommending generally on these kinds of things is that you start the bidding at a higher amount to kind of avoid this situation where you might either lose because you don't have a guarantee or pursuing a guarantor is unlikely or difficult anyways. And also to make sure that you don't underbid or put a low opening bid so that you actually, if this does happen, you know, get the actual proceeds after the fact.

Nema Daghbandan:

Next question here is in the event the property goes back to the lender, when do the laws regarding maintaining the property go into effect? So this is an interesting question. When you look at the way that the law is written, it's once the sale is final, I don't have to take a double check into the statute about whether they will consider it a 40. Is it the 48th day or the 18th day that when the city or county can start leaving these fines? The fines technically don't go into place until a cure. Basically, a deficiency notice is sent out and a demand to cure it, right? So if you fail to meet the demand by the time the cure, my hope is that the municipalities effectively, I don't suspect that they're that good in which the foreclosure auction occurs. The city's coming out the next day and sending a demand letter. So likely this is a moot point. The actual title owner will own the property at that time of which the demand letter is sent out. But I will have to double check on the statute of the one I don't recall when the finality occurs. For purposes of this

Melissa Martorella:

The next one from Ryan, what if there are multiple properties being foreclosed on under the same sale? Again, I strongly recommend you reach out to some sort of council because it's going to depend on the facts. We'll have to analyze whether they were different sale dates were listed on the nos whether we need to provide specific instructions to the auctioneer. There's going to be a lot that goes into that. So I strongly recommend, and it's really factual based. So I strongly recommend if you're in that situation that you reach out and again, after January one when this takes effect I strongly recommend that you reach out so that we can walk through the facts with you and make sure that we give appropriate advice. Based on your situation,

Nema Daghbandan:

Do you expect investors will stop buying at the trustee sales? The questions from Noah Fury and Noah, good to see you here. I don't think so. I don't think that if I were to use my crystal ball in this information, I don't think it's going to change much of anything because they have to, because the only way that this works is they've got to bring a cashiers checks within 45 days. My crystal ball tells me that less than 1% of auctions actually have this, but this is basically a law passed with a lot of beautiful legislation that never gets enact, that's never useful, never utilized, or it's a awesome fraud market. One of two things will happen here in which they just create fantastic fraud businesses in which straw buyers come up all the time and completely wreck our foreclosure processs one of two things. So let me know the comments. Which one do you think will happen? We shall find out.

Melissa Martorella:

Hopefully not that <laugh>. Another question here. The nos was recorded in 2020, the sale has been postponed to 2021. Do we need a new notice of sale? Because remember there are additional requirements that need to go into that new notice of sale starting in January. No. So again very similar to the questions that we were dealing with with AB 3088 is you can't do something after the fact if it didn't relevant when you were able to do the thing. It doesn't mean that you have to then go back once the law is enacted to fix it, however, so your notice of sale is going to be valid for one year. So say you keep postponing it out and one year expire goes by from the original sale date and you keep postponing your nos is going to expire at that time when you re-record the NOS to re-notice the sale at that time, that new nos should have the additional information that you would need to include to comply with 1079.

Nema Daghbandan:

All right, next question here is what if two eligible bidders submit the same bid? Great question. So here's how I would understand the fact pattern is that the first person to perform, so they both submit an eligible bid or an intent to bid within 15 days. The first person to send in that cashier's check and assuming they are the highest bidder would technically have won the auction.

Melissa Martorella:

The next question under 1079, does this effectively eliminate the usefulness of any guarantee not by the borrower, but by a principal of a borrower entity or a different party? There would likely not be any deficiency to sue for because lender will likely always bid full credit unless the lender is willing to take some serious risk of loss. And that's unfortunately that's true. The breach of guarantee suits are already very difficult to enforce as it is. So at the end of the day, what we are recommending because there is such a high risk of loss that you lose the property through this process is that you actually bid up to either a full credit fit or very close to it and then yes, you would lose the ability to go through a breach of guarantee suit.

Nema Daghbandan:

All right, next question is under 1079, if the property is sold to a third party investor, it becomes their problem and not mine is a lender any longer. Is that correct? So the question here is your proposed auction and a third party is at the auction and they are the highest bidder. Effectively the lender is no longer relevant in this picture, right? Because your highest bid was surpassed you may have to wait 30, 45 days or whatever it looks like to get your funds from the trustee because it is unlikely the trustee is willing to cut you a check because they're going to likely want to wait out the conclusion of the process. So you might have to wait a little bit of time to get your money in the door, but yeah, that's correct. Effectively, and it's also not really even the third party's investor issue to deal with because the trustee's going to manage this process, this whole process in terms of determining who is the eligible bidder, who is the highest bidder, all of that's actually done to the trustee level.

So basically it's you have a foreclosure sale that occurs and you have this whole process that unwinds in the background of which basically is outside of the purview of the lender or the third party purchaser at foreclosure auction all of which is managed by the trustee. But yeah, it's probably a pretty nice position to be the lender and a third party buy the foreclosure sale because then you're going to for sure get your money out of this even though there might be this mess of transfer of title in this whole thing that happens in the background related to the third party and some perspective third party.

Melissa Martorella:

The next question nema, if you can jump in on this one. I was reading it and I'm not entirely sure I understand the

Nema Daghbandan:

Question. Yeah, I can take it. So when drafting loan docs, can we add some sort of arbitrary fee to the loan amount to offset this whole 45 day cat and mouse game that that's going to occur? The problem you have is, and this is a whole different longer conversation related to basic, the enforceability of fees period. So whether you can charge for, and let me give you a different example to answer this question is that let's say you, if a borrower oftentimes we're asked if a borrower default, can I have a 5% fee on the entire loan balance when the borrower defaults basically, right? So a late charge, but due on the entire loan amount there are a statutory prohibition on this for one to four family loans in the first place. But let's assume there isn't a statutory prohibition. California courts time and time have struck down these sorts of penalties. So I just don't know whether a 2% penalty is enforceable period in the state of California based on our current state of affairs. So it is unlikely that you can try to write in terms of your loan documents to basically give you the this advantage. So unfortunately, you just basically kind of have a 30 to 45 day. Think about this as a foreclosures in California used to take three to four months and now they take, especially if you add hobar to it, they take eight to nine months. Thank you California legislature.

Melissa Martorella:

The next question from lc, does SB 1079 applied to business purpose loans made by individuals? Nema, correct me if I'm wrong, but there is no lender requirement or exemption on SB 1079. There is with AB 3088. So any lender making a loan here in, they're foreclosing on it. They're subject to it, assuming it's the facts about property type tenants and all of that. But Elsie, also, as a reminder, I know you got your sale today this doesn't matter until January. So also good to go if your property sells today, <laugh>.

Nema Daghbandan:

All right, next question on here is do trustees get paid for the extra work and time that it takes to handle this following the sale? Oh, that's the best part. Cause you probably know the answer and no <laugh>, we don't get an extra dollar. This is just a labor of love for trustees. So California is notorious for adding responsibility to trustees and simultaneously not compensating trustees to do this work. So no, unfortunately this is just a pro bono service offered by trustees under California law.

Melissa Martorella:

Next question from Thomas. Should lenders always get the full payoff amount at auction going forward? It's definitely a strong consideration. Again, it's going to be really factual based on the loan, based on the collateral. Do you have other collateral? All of that. But generally our recommendation is before this passed was especially if you had a guarantee start under the total amount owed just in case you preserve any rights for a breach to guarantee suit, et cetera. Now because of such a high risk that you know could actually lose this property after the sale is completed, we are leaning towards recommending that you do either do a full credit bid as your opening bid or make sure that it goes up to that amount at sale.

Nema Daghbandan:

And the next two questions are actually really good. And I did forget to mention earlier because I wanted to try to make this as hyper relevant as possible to the audience base, but there is actually technically a third definition of who is ineligible bidder and there is a group of nonprofits. So a specified nonprofits can also be an eligible bidder. It's also tried to push forward the momentum related to making affordable housing or creating an affordable housing system for this. So yes, there is a whole class of nonprofit entities which also qualify here. We've been obviously focused on the individual or the tenant, which we think is the more likely cause of this, but nonetheless, yes, there are a class of nonprofits who can similarly bid on this. The good news is that when we send out our summary on this one we're going to send out a bunch of fact sheets after this and we'll get much more granular than anything you could do on a webinar

Melissa Martorella:

Under SB 1079. Would you recommend lenders make their credit to equal to the full amount owed impacts deficiency judgements under guarantees? Yes, this is all true and as you said, we are generally recommending that just in case but again, it's going to be also very factual based on your loan and the foreclosure, your foreclosure. So feel free to reach out to us and we can recommend the best practice for you.

Nema Daghbandan:

So this question is, so the previous lender and new owner who bought the property at the trustee still has to buy insurance on the property, even if they may or may not own it, will they get a refund on the insurance they bought? Yeah. The sad news here is that you could have a situation where you are paying for insurance that you never utilized whether you can get a refund, I highly doubt, but it's really a question for your insurance broker related to this, which is what if I never get title? I suspect the insurance company doesn't really care because they insured you for a risk and that risk was covered during that time period. Yeah, no, you do need insurance because while it might not get purchased out from under you it very well could, or while it might get purchased out from under you, it might not get purchased out from you and you in fact do need insurance for that time period.

Melissa Martorella:

This is another question back to AB 3088 can you mandate that no tenant B in the property during the life of the loan? Also, can you make it a requirement that borrow borrower must provide proof that the tenant can't pay? So unfortunately, you're not going to be able to mandate that no tenant is in the property during the life of the loan. So say it's a fix and flip, whatever you could obviously strongly recommend to your borrower, Hey, no tenant in the property during the duration of this loan. However, they could have a tenant that comes in halfway through and you just don't know about that. And unfortunately it doesn't matter that you said outright that that was not allowed. The fact is there's a tenant there now, you can't waive the hobar requirements and so you'd have to requi comply with them. And then as far as a requirement, that borrower has to provide proof that the tenant can't pay. So say you're a rental loan and you might want updated rent roles or information about payments and that kind of thing going forward. Now, I would probably include in there is also if tenants aren't paying an understanding of why those tenants aren't paying, because then if it's unrelated to covid, you have a clear information there that, hey, the reason the tenant's not paying is unrelated to covid or is, and therefore this may or may not apply for you.

Nema Daghbandan:

All right, next question here is how is the sale handled if there's a qualifying offer during that 45 day period? So if a prospective owner or tenant submits a bid in that 15 day window they have 45 days to bring a cashier's check to the trustee. That's what the law requires here. So that's why we don't think that this court will have a huge impact because it's unlikely that second component, which is requiring the cashier's check sent to the trustee within 45 days, probably it makes this somewhat irrelevant. We'll find out what the actual implication is, but that is the process. There's no escrow, there's no title, there's nothing like that. I mean you literally have to send a cashier's check to the trustee to complete the process.

Melissa Martorella:

The next question if a borrower requests a postponement of their sale and they reference COVID related issues, can this be considered a forbearance request? If yes, how should the lender and the trustee handle? It's a great question. So back when covid first hit the world Nima and I did a presentation on forbearances and how you should approach those with, especially in relation to borrowers that are claiming a hardship due to covid, strongly recommend going online and reviewing those materials. Generally here though, if you have a borrower saying, Hey, I know you're foreclosing on me, COVID has ruined my life. I need some help here. Can you please work with me? If it seems legitimate, it doesn't necessarily hurt you to postpone for a week or two while you say, Hey, here's all of the information I would need to evaluate your forbearance request. We have a form online that you can access for free that outlines what what the borrower would need to provide in order to qualify for a forbearance request.

Have them submit it into you. You can evaluate that, and then you can either decide to offer that forbearance or say, I'm sorry, now I'm going to decline and proceed with the sale. So there's a lot of materials that we have available to you. We'll make sure that there's a link to that information as well in the follow ups to this webinar. But generally it's really up to the lender's discretion here, whether they want to offer that forbearance. But if it does seem like a legitimate request, we recommend that you do a little due diligence into it rather than just outright denying. Although you could outright deny if that is your policy.

Nema Daghbandan:

All right, so you're at a foreclosure sale, there's multiple people bidding on a property and there is technically an overage or a surplus. So you're a loan amount with $300,000, but in fact there's $350,000 that is the final bid. What happens to that surplus? There is a process under California law that deals with surplus proceeds. The general role is that any junior lenders in and in order of priority would get those funds. And if there's any money past that point, it would go back to the borrower. The trustee administers that process and they do it for free.

Melissa Martorella:

The next question, so if you're not a licensed lender in California 3088 and the hobar rules don't apply yet a lender must be licensed to be a lender in California. This doesn't make sense. Happy to clear this up for you. So in California, to make a business purposes loan, you must be licensed as a lender in the state. There is an exemption to that. So you could be an unlicensed lender if a California department of real estate licensed broker arranges that loan transaction for you. In that case, the lender is unlicensed. That is fine because that DRE broker is facilitating the loan between the lender and the borrower. Similarly, say a California finance lender made a loan and then they sold it to an unlicensed party. That unlicensed party does not need a license to purchase a loan. So that party right there could is now the lender on this loan. They are unlicensed and therefore this law would not apply. So it's a little bit complicated. Happy to go through it with you if you have any questions about licensing requirements in California in different scenarios there as well.

Nema Daghbandan:

All right, and I think we're going to make this one our last question to answer only because it is now 12:43. I am very hungry. You all likely are as well. I really thank the 64 people who have continue to stick around for this. Hopefully you're adding value to you. Our emails are below this, so feel free to do it. But this will be our 52nd question we have answered. So this is a record for us. So thank you out there. The last question we'll answer here is how is the final sale price published? Where will these be found for prospective bidders? So one of the requirements of 1079 is that the trustee must have a website. They must publish the website in the notices of sale. The website must contain accurate and current information, which will include the final sales price. So what will likely happen, my biggest fear in the situation is that you will have companies set up to try to scam their way through this system.

That'll basically just scour trustee websites figure out which properties were sold at auction for that appear to be ripe to purchase under market. And therefore where a lender would've previously sold to someone else for a higher price they will not be able to do it anymore because prospective purchaser will come out and sweep it up after auction because they're just going to be aggregating and there's probably a company currently aggregating all of this data in the background anyways to start selling this information so that the final sales price will be published and people will find the information and try to purchase it after the fact because they saw that the market, that the price at foreclosure was low enough to make it make sense because it also gives 'em a little bit of due diligence window to now investigate the value of this property themselves or whatever it looks like.

So yeah, the short answer without the rent is that it will be on the trustees website and available online. Alright, well thank you everybody. We hope you have a wonderful rest of the day, week, month. Hopefully Covid will be gone sooner than later. We can't wait for the election to also be over because that's just miserable to be a part of as well. But we hope that the world changes all for the better. We hope you all have a great day out there and we appreciate you joining us for today's webinar. Thank you everybody. Thank you everybody.

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Leverage: A Tactical Guide to Lender Finance

Leverage: A Tactical Guide to Lender Finance

Geraci’s industry experts will discuss the ins and outs associated with leverage, lender finance, warehouse lines of credit, and credit facilities. We’ll talk about how