Client Alert: From the Scheer Law Group: California SB 1183 Signed Into Law: Reverse Mortgages Excluded from Successor in Interest Provisions

Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.

Client Alert:
Date:  July 18, 2018
To: All Scheer Law Group Clients and Affiliates:
Subject:  California SB 1183 Signed Into Law:  Reverse Mortgages Excluded from Successor in Interest Provisions.

Responding properly to inquiries or claims by successors or claimed successors of a deceased borrower has become time consuming and complex. There are federal and state laws which can “mix and match” successor rights and obligations. SB 1183 makes it a little bit easier for servicers to respond. The bill was passed by the Senate on Mary 10, 2018, and was signed today by the Governor.

By enacting SB 1183 (a United Trustee Association sponsored bill), California has clarified that successor in interest provisions applicable under the Homeowners Bill of Rights (Civil Code 2920.7) are not applicable to reverse mortgages.  The logic is that reverse mortgages are not assumable and the statutory notifications to successors would be inappropriate.

Practically, this means that servicers will not have to delay foreclosure rights until they send appropriate notices and determine if successor rights are applicable,  as is generally required under CA law on covered consumer loans.

Note: Federal law does is not in conflict, as reverse mortgages are not subject to the recently enacted TILA/Mortgage Servicing rules governing successor rights.

Note: There are other issues related to the claimed rights of a successor spouse that is not a borrower on the loan, to avoid having to pay off the loan upon death of the borrower. HUD has recently issued regulations on the subject).

Please call or email if you would like to discuss.

Spencer Scheer