California signs disaster forbearance law for mortgage servicers
The definition of “uninhabitable” is broad. For multiunit properties secured by a residential mortgage loan, if any single unit qualifies, the entire property does.
Servicers must respond in writing within 10 business days, stating whether the request is approved, denied, or deficient. Denials are permitted only where compliance would conflict with existing investor guidelines, and the servicer must cite the specific contractual provision. Deficient applications get a 21-day cure window, with a five-business-day turnaround on resubmissions.
During forbearance, servicers cannot assess late fees, charge default interest, or initiate any foreclosure process – judicial or nonjudicial. That includes foreclosure judgments, orders of sale, and foreclosure-related evictions.
The credit reporting mandate may be the provision servicers feel most. Accounts in disaster forbearance must be reported as current under the federal Fair Credit Reporting Act. Servicers are barred from furnishing any information indicating payments are in forbearance.
When forbearance ends, servicers must offer at least one repayment option that does not demand a lump-sum payoff. Monthly principal and interest cannot increase beyond what an adjustable-rate reset would produce under the original loan terms.
