Senate Bill 1137              
 
In a prepared statement by Governor Schwarzenegger, he said that “Foreclosures not only devastate families, they hurt neighborhoods and depress our economy and our budget.” With this, the governor signed Senate Bill 1137 which was sponsored by Senate President Pro Tem Don Perata. With the current mortgage crisis in California, the Senate deemed it important to enact a statute to address the threats to the state economy hence, the creation of this bill.
 
This bill was enacted for three main reasons. First, its goal is to significantly reduce the number of foreclosures in California; secondly, the bill wants to ensure that foreclosed properties do not become a source of blight to the communities and thirdly, it aims to provide increased protection to individuals who rent properties that eventually end up into foreclosures.
 
The bill enumerates requirements which any lender must engage in before they can foreclose on the defaulted property. The new law requires that lenders communicate with the borrower to assess his financial situation and explore the options available to avoid foreclosures. The bill provides that a mortgagee, trustee, beneficiary may not file a notice of default (NOD) until thirty (30) days after contact is made with the borrower. Written notice via certified mail is also required to be sent to the borrower at his last known address. It also requires that the lender provide a toll free number for borrowers who wish their options to avoid foreclosures.
 
Are there exceptions from these mandatory requirements? Yes, these requirements are no longer applicable if the borrower has surrendered the property as manifested either by a written letter of communication to the lender or by the delivery of the key to the lender or if the borrower has contracted an organization whose primary business is advising individuals how to extend the foreclosure process. This shall also not be required if the borrower has filed for bankruptcy and the bankruptcy proceeding is active.
 
It is important to note as well, that even though the bill is focused on alleviating the increased number of foreclosures, the provisions of the bill applies only to residential real property meaning it applies only to those loans for owner-occupied residences. It does not apply to investment properties. Moreover, the bill applies to residential real properties that were purchased between January 1, 2003 and December 31, 2007.
 
Another important aspect of the bill is the requirement that is given to new owners who have acquired property through a foreclosure sale. The law requires the legal owner to maintain vacant, residential real property. The law uses the words “maintain and care” and goes further by stating that care means preventing any excessive foliage growth that diminishes the value of surrounding properties; failing to take action to prevent trespassers or squatters from remaining on the property and lastly failing to take action to prevent mosquito larva from growing in standing water. Failure to observe these mandatory provisions of the bill will result fines and penalties to the new owner up to $1,000.00 per day per violation.
 
The bill is another measure that aims to address the crisis that is besetting not only our respective communities but that of the entire nation. The devastation caused by this financial disaster has grown to such a great magnitude that the very pillars of our economic foundation is threatened and if a workable plan is not attained, its collapse will necessarily be forthcoming. Hopefully, this bill will serve a great purpose in ending this mortgage dilemma.