Laura N. Coughlin, Esq

By Laura N. Coughlin, Esq, Wright Finlay & Zak, LLP

HB 1108 – Revisions to the Deed of Trust Act’s Non-Judicial Foreclosure Process (“DTA”) and Foreclosure Fairness Act (“FFA”). Except where noted below, all changes became effective on May 3, 2021 as an emergency proclamation due to Covid-19.

•  This bill modifies the way servicers and beneficiaries are required to perform pre-foreclosure contact, foreclosure noticing, and reporting to the Department of Commerce, with respect to residential real property.

•   The restriction that the property be “owner-occupied” in order to require pre-foreclosure due diligence, meet and confer, and engage in mediation was removed.

– Any loan identified as “not owner-occupied” and in foreclosure should be reviewed for the possibility of having to re-start notice requirements.

– Previously, the pre-foreclosure due diligence requirements, meet and confer, NOD notice regarding FFA mediations, FFA mediation standing, and the requirement to provide a copy of the beneficiary note declaration was only required for “owner-occupied” property. Now, it is required for all residential real property up to four units.

•  The definition of residential property was expanded to include any property “up to four units”.

•  While the FFA mediations are now possible for non-owner-occupied properties, they are not available for any property where the DOT grantor or the current ownership vesting is a “partnership, corporation, or LLC at the time the NOD was issued”.

•  During the 2021 calendar year – the FFA mediation program does not apply to FDIC insured institutions that have provided documentation that they were not the beneficiary of more than 250 owner-occupied trustee sales in the state during 2019. Said beneficiary must obtain this certification within 30 days of the effective date of the provision (6/2/2021).

•  During the 2022 calendar year – the same provision as above applies (applying the 2019 numbers), but the certification must occur by 1/31/2022.

•  The FFA fee for each NOTS recorded increases from $250 to $325 for each NOTS on residential real property, unless exempt.

•  The following are not effective until the dates noted below:

– Effective 1/1/2022, the payment of the increased $325 for each NOTS applies only with respect to any new NOTS’s for which remittance and reporting on a NOD for that same residential real property was NOT made already.  In other words, if the NOD was already issued prior to 1/1/2022, the beneficiary will have to keep paying $325 for each NOTS unless a new NOD is issued, reported, and the $250 fee is paid.

– Effective 1/1/2022 – It will be a Consumer Protection Act violation for a beneficiary to fail to report and remit payment for each NOD issued on residential real property.

– Effective 1/1/2023 – The payment requirement toward the FFA fund will not be required from any FDIC insured beneficiary or FDIC insured servicer who issued fewer than 250 NODs in the prior year.  In other words, the exemption threshold will return to a prior-year evaluation as of 2023, instead of the evaluation with respect to 2019 numbers for 2021 and 2022.

Ms. Coughlin focuses primarily on real estate litigation, including lender and servicer liability defense, wrongful foreclosure defense, fair debt collection practices defense, and title disputes. She can be reached at lcoughlin@wrightlegal.net.