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First Substitute S.B. 218

Senator Curtis S. Bramble proposes the following substitute bill:




Chief Sponsor: Curtis S. Bramble

House Sponsor: ____________

             7      LONG TITLE
             8      General Description:
             9          This bill modifies provisions relating to trust deeds.
             10      Highlighted Provisions:
             11          This bill:
             12          .    modifies how fair market value may be calculated for purposes of some trust
             13      property involved in a trustee's sale;
             14          .    enacts provisions relating to certain loans by member-based lenders, as defined,
             15      including:
             16              .    provisions relating to borrowers, guarantors, and sureties on those loans; and
             17              .    mediation; and
             18          .    makes technical changes.
             19      Money Appropriated in this Bill:
             20          None
             21      Other Special Clauses:
             22          None
             23      Utah Code Sections Affected:
             24      AMENDS:
             25          57-1-32, as last amended by Laws of Utah 2001, Chapter 236

             26      ENACTS:
             27          57-1-32.5, Utah Code Annotated 1953
             29      Be it enacted by the Legislature of the state of Utah:
             30          Section 1. Section 57-1-32 is amended to read:
             31           57-1-32. Sale of trust property by trustee -- Action to recover balance due upon
             32      obligation for which trust deed was given as security -- Collection of costs and attorney
             33      fees.
             34          (1) At any time within three months after any sale of property under a trust deed as
             35      provided in Sections 57-1-23 , 57-1-24 , and 57-1-27 and subject to Section 57-1-32.5 , an action
             36      may be commenced to recover the balance due upon the obligation for which the trust deed was
             37      given as security, and in that action the complaint shall set forth the entire amount of the
             38      indebtedness that was secured by the trust deed, the amount for which the property was sold,
             39      and the fair market value of the property at the date of sale.
             40          (2) (a) Before rendering judgment, the court shall find the fair market value of the
             41      property at the date of sale[.], subject to Subsection (2)(b).
             42          (b) In an action under this section to recover the balance due upon an obligation that is
             43      a member loan, as defined in Section 57-1-32.5, the court may find the fair market value of the
             44      property as of a date that is after default but earlier than the date of sale if the court finds that:
             45          (i) the plaintiff, without reasonable justification, causes a delay in the proceedings
             46      relating to the trustee's sale;
             47          (ii) without the delay, the property could have been sold at trustee's sale at the earlier
             48      date; and
             49          (iii) the property's fair market value at the earlier date is higher than the fair market
             50      value of the property at the date of sale.
             51          (3) The court may not render judgment for more than the amount by which the amount
             52      of the indebtedness with interest, costs, and expenses of sale, including [trustee's] trustee and
             53      [attorney's] attorney fees, exceeds the fair market value of the property as of the date [of the
             54      sale] determined under Subsection (2).
             55          (4) In any action brought under this section, the prevailing party shall be entitled to
             56      collect its costs and reasonable attorney fees incurred.

             57          Section 2. Section 57-1-32.5 is enacted to read:
             58          57-1-32.5. Member loans.
             59          (1) As used in this section:
             60          (a) "Foreclosure sale" means:
             61          (i) a trustee's sale under Section 57-1-28 ; or
             62          (ii) a sheriff's sale pursuant to a mortgage foreclosure action, if the beneficiary chooses
             63      under Section 57-1-23 to foreclose the trust deed in the manner provided by law for the
             64      foreclosure of a mortgage.
             65          (b) "Member-based lender":
             66          (i) means a financial institution organized in whole or in part for the benefit of its
             67      members, including:
             68          (A) a credit union subject to Title 7, Chapter 9, Utah Credit Union Act;
             69          (B) a federally chartered credit union; and
             70          (C) a cooperative or other association organized for the purpose of promoting thrift
             71      among its members; and
             72          (ii) does not include:
             73          (A) a bank, as defined in Section 7-1-103 ;
             74          (B) a federal savings bank;
             75          (C) a savings bank or savings and loan association that is subject to Title 7, Chapter 7,
             76      Savings and Loan Associations Act;
             77          (D) an industrial bank that is subject to Title 7, Chapter 8, Industrial Banks; or
             78          (E) a federal savings and loan association.
             79          (c) "Member loan" means a debt:
             80          (i) owing to a member-based lender;
             81          (ii) secured by one or more trust deeds; and
             82          (iii) partly or entirely owed or guaranteed by one or more members of the
             83      member-based lender, regardless of whether any of those members ceased to be a member
             84      during or after the term of the debt.
             85          (2) (a) Before a member-based lender may commence, join, facilitate, or continue an
             86      action against a borrower, guarantor, or surety under a member loan for amounts owing on the
             87      loan, the member-based lender shall first pursue all remedies under this chapter with respect to:

             88          (i) the foreclosure sale of the trust property; and
             89          (ii) all other security for the loan.
             90          (b) A court may not enter an order or judgment against a borrower, guarantor, or surety
             91      of a member loan before:
             92          (i) the foreclosure sale of the trust property; and
             93          (ii) all other security for the loan is exhausted.
             94          (c) Except as provided in Subsection (2)(d), a court may not enforce a modification or
             95      waiver of any of the provisions of Subsection (2)(a) or (b).
             96          (d) A court may enforce a modification or waiver of any of the provisions of
             97      Subsection (2)(a) or (b) if the court finds, upon clear and convincing evidence, that the contract
             98      containing the modification or waiver:
             99          (i) is executed on or after July 1, 2011; and
             100          (ii) conspicuously contains unambiguous modification or waiver language that is:
             101          (A) surrounded by bold black lines;
             102          (B) in highlighted or all capitalized boldface type that is at least 12 point font in size;
             103      and
             104          (C) specifically initialed or signed by each borrower, guarantor, and surety under the
             105      contract.
             106          (3) A member-based lender shall act in a commercially reasonable manner in relation
             107      to the debt and each borrower, guarantor, and surety.
             108          (4) Before a member-based lender may sue for or obtain a judgment on an obligation
             109      created by a member loan, the member-based lender shall:
             110          (a) submit the claim to mediation under Title 78B, Chapter 10, Utah Uniform
             111      Mediation Act, or as ordered by the court; and
             112          (b) participate in good faith in the mediation with each opposing party.

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