January 5, 2010
New California Legislation Effective Jan 1
From the California Insolvency Law Committee:
New California Legislation Effective January 1, 2010
With the start of the New Year, several statutory amendments of interest to insolvency constituents came into effect in California:
Impound Accounts on Residential Mortgages. California Civil Code Section 2954 has been amended to add two new exceptions to the law which prohibits a lender from requiring an impound account as a condition of a loan on a single family, owner-occupied dwelling. As of January 1, 2010, a lender may, in addition to the previously-allowed situations, require an impound account:
• Where the loan is made in compliance with the requirements for higher priced mortgage loans established in Regulation Z, whether or not the loan is a higher priced mortgage loan; or
• Where the loan is refinanced or modified in connection with a lender’s home ownership preservation program or a lender’s participation in such a program sponsored by a federal, state or local government authority or a nonprofit organization.
Reverse Mortgages. California Civil Code Sections 1923.2 and 1923.5 have been amended to add restrictions on a reverse mortgage lender’s participating in certain other financial or insurance activities, and on referring the prospective borrower to anyone for the purchase of other financial or insurance products; to make certain changes in the 16-point type notice required to be given to a potential borrower; and to add requirements for the delivery of a written checklist covering issues that might impact the borrower as a consequence of the loan.
Residential Real Property Foreclosure. California Civil Code Sections 2923.5, 2923.6, 2924.8 and 2924f and 2943, and California Financial Code Section 17312, have been amended to make temporary changes to the handling of foreclosures relating to certain mortgages and deeds of trust. Changes include adding procedures for the handling of short pay agreements. The new provisions sunset January 1, 2014.
Judgment Liens. California Code of Civil Procedure section 697.510 and 697.670 have been amended to provide that, within six months prior to the expiration of a judgment lien recorded with the California Secretary of State, the judgment lien can be renewed in the same manner as a UCC financing statement.
In addition to the foregoing, a new law on mechanics liens will come into effect on January 1, 2011:
Mechanics Liens. California Civil Code Sections 3084 and 3146 have been amended, effect on January 1, 2011 to require, as a condition of the enforceability of the mechanics lien, that notice of the lien be served on the owner or reputed owner of the property, by registered, certified or first class mail, or on the construction lender or original contractor. The amended statute provides that failure to serve such a notice will render the lien unenforceable.
These materials were prepared by Molly J. Baier in the San Francisco office of Reed Smith LLP
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