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First Substitute H.B. 326

Representative LaVar Christensen proposes the following substitute bill:


             1     
TRUST DEED FORECLOSURE CHANGES

             2     
2011 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: LaVar Christensen

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies provisions relating to the foreclosure of trust deeds.
             10      Highlighted Provisions:
             11          This bill:
             12          .    modifies a provision relating to the filing of a substitution of trustee;
             13          .    modifies notice of default provisions;
             14          .    establishes a procedure for deferring a trustee's sale following a notice of default
             15      and allowing a lender and borrower to negotiate the terms of the loan if a trustor
             16      meets certain requirements, including paying a regular payment each month; and
             17          .    makes technical changes.
             18      Money Appropriated in this Bill:
             19          None
             20      Other Special Clauses:
             21          None
             22      Utah Code Sections Affected:
             23      AMENDS:
             24          57-1-22, as last amended by Laws of Utah 2002, Chapter 209
             25          57-1-24, as last amended by Laws of Utah 2001, Chapter 236

             26          63I-1-257, as enacted by Laws of Utah 2010, Chapter 66
             27      ENACTS:
             28          57-1-24.5, Utah Code Annotated 1953
             29     
             30      Be it enacted by the Legislature of the state of Utah:
             31          Section 1. Section 57-1-22 is amended to read:
             32           57-1-22. Successor trustees -- Appointment by beneficiary -- Effect -- Substitution
             33      of trustee -- Recording -- Form.
             34          (1) (a) The beneficiary may appoint a successor trustee at any time by filing for record
             35      in the office of the county recorder of each county in which the trust property or some part of
             36      the trust property is situated, a substitution of trustee.
             37          (b) The new trustee shall succeed to all the power, duties, authority, and title of the
             38      trustee named in the deed of trust and of any successor trustee.
             39          (c) The beneficiary may, by express provision in the substitution of trustee, ratify and
             40      confirm action taken on the beneficiary's behalf by the new trustee prior to the recording of the
             41      substitution of trustee.
             42          (2) The substitution shall:
             43          (a) identify the trust deed by stating:
             44          (i) the names of the original parties to the trust deed;
             45          (ii) the date of recordation; and
             46          (iii) (A) the book and page where the trust deed is recorded; or
             47          (B) the entry number;
             48          (b) include the legal description of the trust property;
             49          (c) state the name and address of the new trustee; and
             50          (d) be executed and acknowledged by all of the beneficiaries under the trust deed or
             51      their successors in interest.
             52          (3) (a) If not previously recorded[,] at the time of recording a notice of default, the
             53      successor trustee shall file for record, in the office of the county recorder of each county in
             54      which the trust property or some part of it is situated, the substitution of trustee.
             55          (b) A copy of the substitution of trustee shall be sent in the manner provided in
             56      Subsection 57-1-26 (2) to any:

             57          (i) person who requests a copy of any notice of default or notice of sale under
             58      Subsection 57-1-26 (1)(a); and
             59          (ii) person who is a party to the trust deed to whom a copy of a notice of default would
             60      be required to be mailed by Subsection 57-1-26 (3).
             61          (4) A substitution of trustee shall be in substantially the following form:
             62     
Substitution of Trustee

             63     
(insert name and address of new trustee)

             64              is hereby appointed successor trustee under the trust deed executed by ____ as
             65      trustor, in which ____ is named beneficiary and ____ as trustee, and filed for record
             66      __________(month\day\year), and recorded in Book ____, Page ____, Records of ____
             67      County, (or filed for record __________(month\day\year), with recorder's entry No. ____, ____
             68      County), Utah.
             69     
(Insert legal description)

             70      Signature_____________________________
             71     
(Certificate of Acknowledgment)

             72          Section 2. Section 57-1-24 is amended to read:
             73           57-1-24. Sale of trust property by trustee -- Notice of default.
             74          [The power of sale conferred upon the] A trustee who is qualified under Subsection
             75      57-1-21 (1)(a)(i) or (iv) may not [be exercised] exercise the power of sale conferred as provided
             76      in Section 57-1-23 until after:
             77          (1) the trustee [first] files for record, in the office of the recorder of each county where
             78      the trust property or some part or parcel of the trust property is situated, a notice of default[,
             79      identifying] that:
             80          (a) identifies the trust deed by stating the name of the trustor named in the trust deed
             81      and giving the book and page, or the recorder's entry number, where the trust deed is recorded
             82      and a legal description of the trust property[, and containing];
             83          (b) contains a statement that a breach of an obligation for which the trust property was
             84      conveyed as security has occurred, and setting forth the nature of that breach [and of];
             85          (c) states the trustee's election to sell the property or cause [to be sold] the property to
             86      be sold to satisfy the obligation; and
             87          [(2) not less than three months has elapsed from the time the trustee filed for record

             88      under Subsection (1); and]
             89          (d) complies with the requirements of Section 57-1-24.5 , if the trust property is
             90      owner-occupied property, as defined in Section 57-1-24.5 ; and
             91          [(3)] (2) [after the lapse of at least three months] the trustee [shall give] gives notice of
             92      sale, as provided in Sections 57-1-25 and 57-1-26 , following the lapse of at least three months
             93      from the time the trustee files a notice of default for record under Subsection (1)(a), subject to
             94      Section 57-1-24.5 .
             95          Section 3. Section 57-1-24.5 is enacted to read:
             96          57-1-24.5. Notice to default trustor -- Right to negotiate alternative to foreclosure
             97      -- Requirements -- Deferment.
             98          (1) As used in this section:
             99          (a) "Default trustor" means a trustor under a trust deed secured by owner-occupied
             100      property that is the subject of a notice of default under Section 57-1-24 .
             101          (b) "Deferment period" means the period of tolling under Subsection (4)(a).
             102          (c) "Lender" means a person who is:
             103          (i) a beneficiary under a trust deed secured by owner-occupied property that is the
             104      subject of a notice of default under Section 57-1-24 ; and
             105          (ii) entitled to direct the trustee to sell the property following a default under the loan.
             106          (d) "Loan" means the obligation for which a trust deed is given as security.
             107          (e) "Owner-occupied property" means real property that is occupied by its owner as the
             108      owner's primary residence.
             109          (2) (a) No later than 15 days after a trustee files for recording a notice of default under
             110      Section 57-1-24 , the trustee shall send a notice to the default trustor by certified mail.
             111          (b) A notice under Subsection (2)(a) shall include:
             112          (i) the name, address, telephone number, and email address of an individual with
             113      authority to:
             114          (A) negotiate on behalf of the lender with respect to all aspects of the loan, including
             115      regarding foreclosure relief, a loan modification or forebearance, or any other reasonable
             116      alternative to foreclosure; and
             117          (B) bind the lender to an agreement with the default trustor under terms that differ from
             118      the terms of the loan;

             119          (ii) the name, address, telephone number, and email address of an individual
             120      representing the lender whom the default trustor is required to contact under Subsection (3)(a)
             121      to request to negotiate with the lender as provided in this section;
             122          (iii) a description of the deferment opportunity under this section and the requirements
             123      and procedure for obtaining a deferment;
             124          (iv) the date by which the default trustor is required to contact the lender to request to
             125      enter into negotiations as provided in this section;
             126          (v) the Internet address of the United States Department of Housing and Urban
             127      Development web site identifying approved housing counseling agencies in the state; and
             128          (vi) provide information regarding the availability of the federal government's Making
             129      Home Affordable program and the rights and benefits available to the default trustor under the
             130      program.
             131          (3) (a) Subject to Subsections (3)(d) and (e), a lender shall make itself available for and
             132      cooperate in negotiations with a default trustor regarding the terms of the loan, including
             133      regarding foreclosure relief, a loan modification or forebearance, or any other mutually
             134      acceptable reasonable alternative to foreclosure, if:
             135          (i) within 20 days after the trustee sends notice under Subsection (2), the default trustor
             136      contacts the lender to request negotiations regarding the loan;
             137          (ii) the default trustor:
             138          (A) occupied the trust property as the trustor's primary residence at the time the notice
             139      of default was recorded and during the 90-day period immediately before the notice of default
             140      was recorded;
             141          (B) intends to continue to reside at the trust property; and
             142          (C) is personally obligated on the loan; and
             143          (iii) the loan:
             144          (A) was incurred for primarily personal, family, or household purposes; and
             145          (B) is secured by a trust deed on the trust property that is the subject of the notice of
             146      default.
             147          (b) A default trustor may contact a lender under Subsection (3)(a) by telephone, mail,
             148      electronically, or in person.
             149          (c) A default trustor is ineligible to request the lender to negotiate regarding the loan or

             150      to a deferment as provided in this section if the default trustor:
             151          (i) abandons the trust property;
             152          (ii) has been discharged within the preceding 12 months in a Chapter 7 bankruptcy in
             153      which the trust property was property of the bankruptcy estate;
             154          (iii) has been discharged within the preceding 12 months in a Chapter 13 bankruptcy
             155      with a modified loan agreement for which the trust property is security; or
             156          (iv) previously received a foreclosure deferment under this section with respect to the
             157      same loan, including any modification of the loan.
             158          (d) In negotiating with the default trustor under this section and determining whether to
             159      agree to an alternative to foreclosure, a lender shall:
             160          (i) consider the default trustor's household expenses and gross monthly income, the
             161      nature of the loan, any written loan modification agreement between the default trustor and the
             162      lender that was executed during the preceding 12 months, and any other relevant factors;
             163          (ii) apply an analysis that is consistent with the net present value test set out in the
             164      Federal Deposit Insurance Corporation Loan Modification Program guidelines, effective
             165      October 2008, designed to indicate:
             166          (A) what the default trustor is able to pay on a sustainable basis for monthly housing
             167      expenses, including principal, interest, taxes, insurance, and any applicable homeowner
             168      association dues; and
             169          (B) whether the lender would be likely to be paid more from the modification
             170      necessary to achieve a monthly payment that the default trustor is able to pay, as determined
             171      under Subsection (3)(d)(ii)(A), than the lender would be likely to be paid from a completed
             172      foreclosure;
             173          (iii) make available to the default trustor the full rights and benefits of the federal
             174      government's Making Home Affordable program, to the extent the program applies; and
             175          (iv) give reasonable consideration to how long the default trustor has lived at the trust
             176      property, the default trustor's payment history over the life of the loan before the default, the
             177      circumstances, including any hardship, that led to the default trustor's inability to meet the
             178      obligations of the loan, the reasonable likelihood that those circumstances would be
             179      substantially improved if the default trustor were given foreclosure relief or a loan
             180      modification, and any other equitable factors relevant to the default trustor's circumstances.

             181          (e) A lender and default trustor shall participate in and conduct negotiations under this
             182      section consistent with the implied covenant of good faith and fair dealing that applies under
             183      the loan.
             184          (4) (a) The three-month period required to lapse under Section 57-1-24 before a trustee
             185      may give notice of sale is tolled from the date that a default trustor contacts the lender under
             186      Subsection (3)(a)(i) until 90 days after that date, unless earlier terminated under Subsection
             187      (4)(b), if:
             188          (i) the default trustor contacts the lender as provided in Subsection (3)(a)(i);
             189          (ii) the default trustor meets the criteria of Subsection (3)(a)(ii);
             190          (iii) the loan meets the criteria of Subsection (3)(a)(iii);
             191          (iv) the default trustor is not ineligible under Subsection (3)(c);
             192          (v) within 10 days after contacting the lender as provided in Subsection (3)(a)(i), the
             193      default trustor pays to the lender the amount of a regular monthly payment under the loan; and
             194          (vi) the default trustor pays to the lender the amount of a regular monthly payment
             195      under the loan within each 30-day period following a payment under Subsection (4)(a)(v).
             196          (b) A default trustor may make a payment under Subsection (4)(a)(v) or (vi)
             197      electronically or by certified funds delivered by a method that provides evidence of the date of
             198      payment.
             199          (c) A deferment period under Subsection (4)(a) terminates if:
             200          (i) the default trustor abandons the trust property;
             201          (ii) the default trustor fails to comply with the conditions of foreclosure deferment,
             202      including a failure to make a payment as required under Subsection (4)(a)(v) or (vi);
             203          (iii) the default trustor conveys, transfers, or further encumbers the trust property in
             204      violation of the trust deed;
             205          (iv) a person holding another lien on the trust property has initiated foreclosure;
             206          (v) the default trustor files for bankruptcy during the deferment period; or
             207          (vi) the negotiations between the lender and the default trustor are concluded.
             208          (d) A lender's acceptance of a payment under Subsection (4)(a)(v) or (vi) does not
             209      constitute a waiver of default or a modification of any amount due on the loan or of any other
             210      right the lender has under the loan.
             211          Section 4. Section 63I-1-257 is amended to read:

             212           63I-1-257. Repeal dates, Title 57.
             213          (1) Section 57-1-24.5 is repealed December 31, 2013.
             214          (2) Subsections 57-1-25 (1)(c), (3)(b), and (4) are repealed December 31, 2012.

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