The 7’s Expire: Impact of Sunset of California Foreclosure Prevention Act
(Civil Code §§ 2923.52 et seq.)

Phil Adleson, Esq.

UTA Corporate Counsel, Phil Adleson, Esq., Adleson, Hess & Kelly, explains the impact of pending foreclosures relative to California Prevention act sunset date of January 1st:

“The California Foreclosure Protection Act (“CFPA”) found in Civil Code §§ 2923.52-2923.55 sunsets on January 1, 2011. This raises the question of: how should a servicer, trustee or beneficiary handle pending foreclosures that will not be concluded until after the sunset date of 1-1-11?

Based upon a clarification requested from the regulators (DFI, DOC and DRE), it is our understanding that all three regulators will publish on their websites the following interpretation of what will occur in when the CFPA (Section 2923.52 et seq.) sunsets on 1-1-11:

“The Departments' reading of Civil Code 2923.52 is that it prohibits a Notice of Sale for an additional 90 days, unless an exemption is obtained.  Therefore, when the provision sunsets on 1/1/11, the prohibition on the Notice of Sale is no longer present and the notice of sale is only subject to the requirements of the law as the law reads at that time (i.e., notice of sale permitted 3 months after the NOD without the additional 90 days). 

Therefore, on or after 1/1/2011, the Departments would not find a servicer in violation of any of the Departments' licensing laws for providing a notice of sale only 3 months after a NOD (regardless of whether the NOD was given before 1/1/2011), assuming that no misrepresentations were made to the borrower.  However, each department only administers and enforces the licensing laws subject to its jurisdiction and therefore we cannot opine on any other liability related to the interpretation of that section.”

As of today, this language or similar language has not been posted on any of the regulators’ websites.  I agree with the regulators’ interpretation of the impact of the sunsetting of Civil Code §§ 2923.52 et seq. and believe that the analysis should apply to both administrative and civil liability.  Part of the rationale for this position is that there was no repeal, savings clause in the original legislation making any portion of the CFPA carry over after the sunset date.

Each beneficiary, loan servicer and trustee should discuss with its counsel the best policy on phasing out the California Foreclosure Prevention Act.”