Q.  I hear there is a new law which protects widows from losing their homes in foreclosure when a spouse dies. Do you know anything about that?

A.   Yes. I believe you refer to the new California law referred to as the “Survivor Bill Of Rights” (SB 1150), effective January 1, 2017.  SB 1150 now imposes certain responsibilities upon a mortgage lender when the borrower dies and leaves a surviving homeowner who is not on the loan. This situation could easily occur, for example, where a borrower remarries after taking out the loan. The survivor in these cases is most often a senior, and usually a woman who must now struggle to make the mortgage payment without the income of her deceased spouse.

Under prior law, mortgage lenders often took the position that a non-borrowing spouse or child had no right to even receive information about the decedent’s loan, and no right to apply for a loan modification to enable them to keep the home. As a result, many homes were lost through foreclosure.

Under SB 1150, the law now extends to the surviving, non-borrowing home-owner the same rights that the borrower had under pre-existing law, known as the “Homeowner’s Bill Of Rights”, which protects the borrower’s own right to secure loan information and to apply for a loan modification where necessary.

Previously, some lenders took the Catch-22 position with non-borrower survivors that they would not even consider a loan modification until the loan was first brought current, which itself was often impossible without the corresponding opportunity to arrange a loan modification. Some lenders even proceeded with foreclosure proceedings while the non-borrowing family member was attempting a rescue of the home loan.

SB 1150 now requires mortgage lenders to provide relevant loan information about the status of the loan to the deceased borrower’s “successors in interest”, to afford the successors a reasonable opportunity to apply to assume the loan and/or for a loan modification, and to delay foreclosure proceedings while this process is underway.

A “successor in interest” is defined as a surviving spouse, domestic partner, joint tenant, parent, grandparent, adult child, adult grandchild, or adult sibling who occupied the property as his/her principal residence within the six months prior to the borrower’s death, and who can demonstrate that he or she has an ownership interest in the home. The successor may acquire his/her ownership  interest by reason of the death of the borrower, e.g. pursuant to a Will or Trust, or by reason of being an heir-at-law if the borrower died without a Will.

Significantly, the new law does not impose upon the lender an affirmative obligation to actually grant the requested loan modification. It only requires that the lender provide relevant information about the loan and afford the decedent’s successor(s) a reasonable opportunity to qualify for foreclosure prevention alternatives offered by the lender, subject to its credit guidelines. It also prevents the lender from proceeding with a foreclosure while the application is pending.

SB 1150 only applies to first deeds of trust secured by owner-occupied residential real property containing up to four (4) dwelling units, and does not apply to Reverse Mortgages. Even though so limited, the new law can be a lifesaver for surviving family members who would otherwise be unable to even secure loan information necessary to enable them to apply for a loan modification to save their home.

For more information on this new California law, go to https://SurvivorBillofRights.org/. For advocacy assistance visit Housing and Economic Rights Advocates at www.heraca.org or call the organization at 510-271-8443.

References:  Text of New Law: SB 1150; also see Survivor Bill of Rights.Org;  and see Frequently Asked Questions.  For attorneys assisting clients with foreclosure problems, visit California Homeowners Bill of Rights; For more information on the predecessor Homeowner Bill of Rights, click HBOR.   

Update:  A new federal law affording protections to surviving spouses and heirs became effective on April 19, 2018. It is a new Consumer Financial Protections Bureau (CFPB) mortgage servicing rule which affords protections to “successors in interest”.  12 Code of Federal Regulations § 1024.31. See Article by National Center on Law & Elder Rights.