Foreclosure Delay: Public Entities
October 25, 2010
A bill, AB 2347, has been enacted for the purpose of mitigating the impact of the foreclosure crisis on the availability of affordable housing in California. Public entities in California sometimes provide financial assistance to multifamily properties in exchange for securing some percentage of affordable housing units.
Their interests usually come in the form of a regulatory agreement or a recorded deed restriction on the property. These agreements and restrictions are often subordinated to mortgages or similar interests held by lenders, and thus are at risk of being wiped out if the owner defaults and the property is subject to foreclosure.
Under AB 2347, which adds subsections (d)-(g) to Civil Code Section 2924f, if the property contains five or more multifamily units, such a public entity  may, by furnishing to the trustee written notice, postpone the sale date by no more than 60 days. The notice must be provided at least 72 hours before the scheduled sale date by certified or registered mail, guaranteed or overnight delivery service, or personal delivery. The delay is intended to give the entity an opportunity to intervene so that it could, for example, purchase the property or find a purchaser that will preserve the affordable units.
A “recorded deed restriction” is defined as a deed recorded as an encumbrance against title to the property that specifies that all or a portion of the property’s usage is restricted to rental to lower income households and identifies the number of units restricted to use as low-income housing.
A “regulatory agreement” means a recorded “enforceable and verifiable” agreement with a public entity that has provided government financing for the acquisition, rehabilitation, construction, development, or operation of a low-income housing property that restricts all or a portion of the property’s usage for rental to lower income households.
The sale may be postponed only once, and if multiple public entities are parties to a regulatory agreement or recorded deed restriction on a property, only one entity may postpone the sale date. Regardless of when the entity’s notice is furnished, any postponement expires 180 days after the notice of default is filed, and no postponement is allowed after that time. The bill specifically states that it does not require a mortgagee, beneficiary, trustee, or authorized agent to file a notice of sale more than 180 days after the notice of default is filed. It also provides that the trustor or mortgagor’s filing for bankruptcy will not toll the 180-day limitation.
AB 2347 becomes effective on January 1, 2011 and sunsets after January 1, 2013. Kevin Gould is CBA’s lead lobbyist on the bill.
- “Public entity” includes a city, county, city and county, redevelopment agency, or any political subdivision thereof. Civil Code Section 2924f(e)(1).
The information contained in this CBA Regulatory Compliance Bulletin is not intended to constitute, and should not be received as, legal advice. Please consult with your counsel for more detailed information applicable to your institution.
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