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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 34 February 2025 F E A T U R E S T O R Y CHANGES TO CALIFORNIA'S HOME OWNER BILL OF RIGHTS Rule was intended to put loan servicers into two buckets—the "Big Guys" who annually handle 175 or more annual qualifying foreclosures and the "Little Guys" who do not meet the 175 threshold. B y T. R O B E R T F I N L A Y E S Q . D uring the height of the finan- cial crisis, California passed landmark legislation intended to help homeowners facing foreclosure—the Home Owner Bill of Rights (HOBR). In short, HOBR required loan servicers to follow certain procedures when putting defaulted borrowers on notice of foreclosure prevention alterna- tives and prevented servicers from "dual tracking," i.e., simultaneously proceeding with foreclosure while the homeowner is being reviewed for a loan modification. The law was limited to owner-occupied consumer loans in first position. HOBR intended to put loan ser- vicers into two buckets for compliance purposes—the "Big Guys" who annually handle 175 or more annual qualifying foreclosures and certain "Little Guys" who do not meet the 175 threshold. While servicers in both buckets are prohibited from dual tracking; the more detailed and onerous HOBR provisions only applied to the Big Guys, including, but, not limited to: • Civil Code § 2923.7, requiring a Sin- gle Point of Contact; and • Civil Code § 2923.6, mandating cer- tain notices and procedures when the borrower submits a complete loan modification. The Little Guys "exception" to the more detailed requirements was limited in Civil Code § 2924.15 to: (A) A depository institution char- tered under state or federal line law, a person licensed pursuant to Division 9 (commencing with 3 Section 22000) or Division 20 (commencing with Section 50000) of the Financial Code, or a person licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business 6 and Professions Code, that, during its immediately preceding annual reporting period, as established with its primary regulator, foreclosed on 175 or fewer residential real properties, contain- ing no more than four dwelling units, that are located in California. But, what if you are a retired couple who occasionally invests in Trust Deeds, but are not a "depository institution" or someone "licensed" by the Financial or Business and Professions Codes? The answer—small investors must comply with the more detailed and onerous HOBR provisions intended by the Leg- islature to only apply to the Big Guys do- ing more than 175 annual foreclosures! Hard to believe, but an investor who buys one loan a year, must comply with the same HOBR provisions as the largest loan servicers in the country. Since HOBR's enactment in 2013, the private lending industry has looked for a solution to this obvious unintended oversight by the California Legislature. Unfortunately, for years, there was no appetite in Sacramento to re-open the heated discussions over HOBR. Fortu- nately, enough time has finally passed, which allowed the California Mortgage Association (CMA) to sponsor Senate Bill 1146 (SB 1146), which, among other things, puts a small investor "that makes and services seven or fewer loans" a year in the same compliance bucket as loan servicers who conduct less than 175 annual foreclosures. SB 1146 recently passed both houses and is waiting for Gov. Newsom's signa- ture. If signed, the "Really Little Guys" will still have to comply with HOBR; but, starting on January 1, 2025, only its less detailed provisions. Note that the anticipated changes to HOBR do not exempt investors who make and service seven or fewer loans a year. These investors must still comply with HOBR. The new law just reduces the HOBR provisions that need to be complied with. If you have any ques- tions about what provisions must be complied with or need help complying with HOBR, please feel free to reach out to me at rfinlay@wrightlegal.net. Disclaimer: The above information is intended for information purposes alone and is not intended as legal advice. Please consult with counsel before taking any steps in reliance on any of the information contained herein. T . R O B E R T F I N L A Y , E S Q . is a Founding Partner of Wright, Finlay & Zak. LLP. He can dbe reached by email at rfinlay@wrightlegal.net.