California’s Foreclosure Protections Under the Homeowner Bill of Rights Extended to Small Landlords

A new law in California, AB 3088, gives foreclosure protections under the state’s Homeowner Bill of Rights to small landlords.

While California’s AB 3088, known as the “Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020,” mainly provides relief to residential tenants facing eviction, the legislation also extends certain foreclosure protections under the state's Homeowner Bill of Rights to small landlords. (“Small landlord” generally means a landlord who owns a residential property with up to four dwelling units and owns no more than three such residential properties.)

The new law also protects small landlords who request a forbearance by enacting new accountability and transparency provisions. However, AB 3088 doesn’t prohibit foreclosures or require banks to provide landlords with forbearances.

Foreclosure Protections Under California’s Homeowner Bill of Rights

An existing California law called the “Homeowner Bill of Rights” (HBOR) sets specific requirements related to foreclosures, including a restriction on dual tracking after a borrower submits a loan modification application. (Starting or continuing a foreclosure while a modification application is pending is called “dual tracking.”) (Cal. Civ. Code § 2923.6).

This prohibition on dual tracking, and many other HBOR requirements, such as a single point of contact requirement in the loss mitigation process, originally applied only to owner-occupied residential properties containing no more than four dwelling units.

AB 3088 Extends HBOR’s Foreclosure Protections to Small Landlords

AB 3088 extends many of HBOR’s foreclosure protections to small landlords until January 1, 2023. The law applies the relevant HBOR protections to first lien mortgages and deeds of trust that are:

  • secured by residential real properties that contain no more than four dwelling units and meet other criteria, and
  • are occupied by tenants who're unable to pay rent because of a reduction in income due to the coronavirus crisis. (Cal. Civ. Code § 2924.15).

Mortgage Forbearances for Small Landlords

AB 3088 also requires servicers to provide information about potential foreclosure avoidance options, like forbearance options. (Cal. Civ. Code § 3273.14, § 2923.55).

When a servicer denies a small landlord's request for a forbearance, the new law requires the servicer to provide a written explanation of the decision and let the borrower know about any curable defects in the request. These protections apply until April 1, 2021, if the borrower was current on payments as of February 1, 2020, and experienced a financial hardship preventing them from making timely payments due, directly or indirectly, because of the COVID-19 emergency. (Cal. Civ. Code § 3273.10, § 3273.1).

A lender or servicer that complies with the relevant provisions regarding forbearance under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act is considered in compliance with California law. (Cal. Civ. Code § 3273.10).

Learn More

To learn more about how AB 3088 helps renters and landlords, review the state of California's Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020 factsheet.