Bulletin: CA2009003

Dear Associates:

This bill, effective June 15, 2009, seeks to stem the rising tide of residential mortgage foreclosures. It adds Section 2923.52 to the Civil Code, requiring an additional 90 day period before a foreclosing beneficiary or trustee can give Notice of Sale under qualifying Deeds of Trust, and provides for exemptions from this requirement for loan servicers adopting an approved loan modification program under new Section 2923.53. It also calls for a declaration concerning compliance to be included on the Notice of Sale. A violation of these laws will constitute a violation of applicable licensing laws; however, failure to comply will not invalidate an otherwise valid sale.

What is affected
First mortgages on residential property made between January 1, 2003, and January 1, 2008, are affected if, at the time the loan became delinquent, the property was the borrower's principal residence and the Notice of Default has been recorded. The section does not apply if the borrower has surrendered the property, declared bankruptcy, or contracted with certain aid organizations.

Additionally, a mortgage loan servicer may apply for an exemption upon proof it has instituted a qualifying loan modification program. If approved, the servicer will receive an order from the appropriate Commissioner. The Commissioner may be the Commissioner of Corporations, the Commissioner of Financial Institutions or the Real Estate Commissioner, depending on the status of the applicant servicer.

What is compliance?
From the perspective of title examination, compliance means that the Notice of Sale contains two recitals: 1) whether the loan servicer is exempt by current and valid order of the Commissioner, and 2) whether the additional 90 day period per 2923.52 applies.

Unless the servicer is exempt or the new sections do not apply, the Notice of Sale must not be given until 90 more days have elapsed, in addition to the three months already required after recording of the Notice of Default.

When it matters
For a Notice of Sale on an affected Deed of Trust recording after the effective date:

• If you act as trustee under the foreclosing Deed of Trust, you must comply.
  
• If you are asked to record a Notice of Sale without the required recital or before the specified time period has elapsed, consult advisory staff. You may record a Notice of Sale containing a recital stating that a valid exemption exists. In this case the additional 90 day period does not apply. If you are asked to rely on another exemption consult advisory staff.
  
• You may rely on a Notice of Sale already of record without determination of compliance.
  
• You do not need to determine compliance in the context of an ordinary refinance or sale, when an affected Deed of Trust is to be paid off.

If you have questions relating to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

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