COVID-19 Homeowner, Tenant and Consumer Assistance Act 2020

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A COVID-19 relief bill could have major implications for California lenders and services, especially in the mortgage industry, if passed. The bill, entitled “COVID-19 Homeowner, Tenant, and Consumer Relief Law of 2020” (“AB 2501”) is intended to provide relief to residential and multi-family mortgage borrowers, as well as borrowers under home secured loans. mobile. or a motor vehicle, requiring loan officers to abstain from borrowers facing financial hardship during the Covid-19 emergency. It is also noteworthy that borrowers under certain payday loans, known as deferred deposit transactions, would also benefit from AB 2501, although the relief specified is not forbearance but fee restrictions. and a requirement for payment plan options in accordance with specified procedures.

Residential mortgage borrowers can apply for forbearance for up to 180 days by submitting a request to the mortgage manager. The borrower’s forbearance request would not require any document other than a written certificate, if the mortgage agent so requests. Defaulting borrowers would automatically be eligible for 180-day forbearance and could then extend the deadline if they continue to experience financial hardship. During the forbearance period, mortgagees and service agents would be prohibited from initiating or continuing legal foreclosure action, registering a notice of default, or taking action to evict a person as a result of ‘a foreclosure. The bill would not apply to vacant or abandoned housing.

AB 2501 is particularly noteworthy for residential mortgage loan managers, as they would be required to comply with a number of onerous requirements and face significant penalties for non-compliance. For example, when placing a mortgage bond for forbearance, a mortgage agent must provide the borrower with “a complete and accurate description of the loss mitigation and recovery options that will be available to the borrower at the end of the loan period.” abstention period ”. A mortgage manager who violates any of the requirements of AB 2501 not only loses their right to begin foreclosure on a borrower who is harmed by the violation, but is also subject to further legal liability if the payment options after abstention contain false or misleading statements.

Multi-family mortgage borrowers would also benefit from 180-day forbearance, subject to extension, by telling the service agent they are in financial difficulty during COVID-19 and providing documentation of the hardship financial. AB 2501 would require a multi-family borrower, during the forbearance period, to provide rent relief to tenants living in the property secured by the mortgage and prohibit eviction for non-payment of rent by a tenant or application or accumulation of fees or other penalties for tenants for non-payment of rent.

Borrowers with a vehicle secured credit obligation experiencing financial hardship due to Covid-19 would be able to request forbearance for up to 90 days by submitting a request to the agent claiming the consumer is in financial hardship and extend the forbearance period upon request, if the consumer claims they continue to have difficulties for a cumulative total of 270 forbearance days. The bill would prohibit a vehicle secured loan officer from taking steps to repossess a mobile home or motor vehicle that secures a loan during the COVID-19 emergency and for the 180-day period following. In addition, the bill would limit the interest rate that can be applied to the consumer’s account to 7% per year.

Industry opposition to AB 2501

The Assembly bill was passed by the Assembly’s Banking and Finance Committee late last month. AB 2501 has met with strong opposition from mortgage lenders, service providers, and many financial industry organizations at the federal and state levels, including groups such as the American Bankers Association.[1] and the California Mortgage Broker’s Association (“CMBA”)[2], among others, all expressing concerns that the bill could cause significant disruption in mortgage markets and limit access to affordable credit for potential borrowers. The deadline for submitting the bill to a vote in the Assembly is June 19. A revised version of the bill was released on June 4, 2020 that fails to address the main mortgage issues raised by many commentators other than the bill now limits the period during which a borrower can apply for forbearance from the duration of the Covid-19 emergency removing the 180-day period following the emergency specified in the original draft of the bill.

The current version of AB 2501, last modified on June 4, 2020, can be found here:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB2501

As you know, things change quickly and there is no clear authority or clear rules. This is not an unequivocal statement of the law, but rather represents our best interpretation of the current state of affairs.


FOOTNOTES

[1] The American Financial Services Association, Bank Policy Institute, Credit Union National Association, Housing Policy Council, Mortgage Bankers Association, and Securities Industry and Financial Markets Association all signed a May 17 letter to the author of the AB 2501, Limón, member of the Assembly. https://www.aba.com/-/media/documents/letters-to-congress-and-regulators/joint-trades-california-ab-2501-051720.pdf?rev=6276e601e2314d6d96dd92209331f15e

[2] The CMBA has assembled a coalition of 12 organizations calling for amendments to Assembly Bill 2501. https://www.mortgagemedia.com/wp-content/uploads/2020/05/AB-2501-Limon-Mortgage-Servicers-Opposition.pdf

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.Revue nationale de droit, volume X, number 161



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