After numerous amendments, readings, and committee hearings, California Assembly Bill 2501 narrowly failed to pass in Sacramento on June 15, with a vote total of 28 Ayes, 25 Noes, and 26 abstentions. The bill would have offered major payment relief to homeowners and certain renters, as well as owners of mobile homes. It might see new life if the Assembly elects to hold additional hearings, but the chances of that outcome are unclear at this time.
Titled “COVID-19: Homeowner, Tenant, and Consumer Relief,” AB-2501 begins with a preamble noting the dire effects of the coronavirus (“COVID-19”) pandemic. For instance, 20% of the state’s workforce filed claims for unemployment benefits as of May 1, and thousands of state businesses shuttered either temporarily or permanently. Given these effects, the bill puts forth measures for temporary loan forbearance for certain Californians who “are likely to have difficulty remaining current on monthly debt obligations through no fault of their own.”
The proposed reforms would have been sweeping. For residential and multifamily mortgages, the bill would have prohibited mortgage servicers, mortgagees, trustees, and beneficiaries from commencing or continuing foreclosure actions, recording notices of default, or taking any actions to evict homeowners during the year after the bill became active. Additionally, homeowners would have been afforded an initial forbearance period of up to six months, where they could have foregone making mortgage payments and avoided accruing interest and other fees, as well as a renewed forbearance period of an additional six months under the same conditions. As a condition of forbearance, both homeowners and multifamily borrowers would have been required to provide rent relief to any of their tenants—forbidding the borrowers from evicting or penalizing those tenants for nonpayment of rent. The bill also would have created similar relief for owners of mobile homes.
The bill would have imposed penalties on lending institutions that ran afoul its provisions. The conduct prohibited by the bill not only would be considered a violation of the law pursuant to which a mortgage servicer is licensed in California, but also would have opened a major new front in consumer litigation by subjecting mortgage servicers, beneficiaries, trustees, and/or mortgagees to legal recourse from borrowers themselves. Section 3273.18 of the bill would have allowed for a borrower harmed by a violation to bring a legal action for damages and other remedies. If the borrower prevailed, they would have been entitled to attorneys’ fees and costs.
Following the bill’s initial defeat, its author, Assembly Member Monique Limón (D-Santa Barbara), has moved for reconsideration. The likely outcome of her motion is unclear. Under Joint Rule 62(a), reconsideration can be granted within the earlier of either 15 legislative days, or the interim study joint recess. However, the Assembly might simply elect not to hear the motion or might not do so within the specified timeframe. Stay tuned.