On September 20th, Gov. Newsom signed Assembly Bill 2424, a bill that will expand upon California’s Homeowner Bill of Rights statutory regime and add even further restrictions on nonjudicial foreclosure proceedings in the state. The bill contains three critical revisions to existing nonjudicial foreclosure statutes.
First, Civil Code section 2923.5 will be modified to include additional disclosures in loss mitigation outreach correspondence. In addition to the previously required disclosures notifying borrowers of the ability to apply for loss mitigation options and obtain a HUD-certified counseling agency, such correspondence must also state that a third party (such as a family member, HUD-certified housing counselor, or attorney) may record a request to receive copies of recorded notices of default and trustee’s sale. These notices also must state that providing copies of these foreclosure notices to these third parties may help them to avoid foreclosure.
Second, the bill adds a provision to Civil Code section 2924f requiring postponement of trustee’s sale upon receipt of listing and sales agreements for the subject property. Under this new provision, if a servicer/trustee receives a sales listing agreement for the property “with a California licensed real estate broker to be placed in a publicly available marketing platform” at least 5 days before a scheduled trustee’s sale, servicers will be required to postpone the trustee’s sale for at least 45 days. Notably, the new statute does not contain any requirements that the listing price be reasonable. Next, if the borrower provides the servicer/trustee with a purchase agreement for the property at least 5 days prior to the postponed sale date, the servicer/trustee will be required to postpone the scheduled sale date an additional 45 days. The statute defines a “purchase agreement” as:
“a bona fide and fully executed contract for the sale of the property that is subject to a power of sale with a purchase price amount equal to or greater than the amount of the unpaid balance of all obligations of record secured by the property that includes the name of the buyer, the sales price, the agreed closing date, and acceptance by the designated escrow agent.”
The new statute provision regrettably does not include anything preventing savvy borrowers from obtaining these delays by entering into purchase agreements with “straw men” buyers, with no intention of actually completing the transaction.
Third, Section 2924f will include another provision requiring servicers to provide borrowers with the “fair market value of the property” at least 10 days before the initially scheduled trustee’s sale. Trustees will then be prohibited from selling the property at the initial trustee’s sale for less than 67% of the amount of that fair market value of the property. If the property remains unsold after the initial trustee’s sale, the trustee will be required to postpone the sale for at least 7 days. Only after the conclusion of this 7 day delay can the property can be sold to the highest bidder, regardless of whether it is above the 67% fair market value amount. The statute defines “fair market value of the property” as:
“an estimate of the fair market value of the property made within six months of the initially scheduled date of sale and determined by an opinion of a licensed real estate broker, an appraisal from a licensed appraiser, a value from a commercially utilized automated valuation model, or a value from a computerized property valuation system that is used to derive a real property value.”
These new statutes will take effect on January 1, 2025.
The bill is AB 2424: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB2424