Bill > AB1603

This bill establishes new regulations for mortgage servicers, which are entities that manage mortgage loans for lenders, particularly those backed by government agencies like the Federal Housing Administration (FHA) or Fannie Mae. The core of the bill addresses "force-placed insurance," a type of hazard, flood, or homeowner's insurance that a mortgage servicer obtains for a borrower when they believe the borrower has failed to maintain their own required insurance. The bill clarifies that a mortgage servicer cannot obtain force-placed insurance unless they have a reasonable belief the borrower is non-compliant with their insurance obligations and has followed specific notification procedures. These procedures include sending the borrower at least two written notices, at least 30 days apart, informing them of their insurance obligation, the servicer's lack of evidence of coverage, how to prove they have insurance, and that force-placed insurance may be significantly more expensive. If the borrower provides proof of existing insurance, the servicer must terminate the force-placed insurance and refund any premiums paid by the borrower for the period when both policies were active. The bill also prohibits servicers from obtaining force-placed insurance from affiliated companies or entities they have an ownership interest in, and from splitting or accepting referral fees related to this insurance. Furthermore, it sets limits on the coverage amount of force-placed insurance and allows borrowers to sue servicers for violations, potentially recovering damages and attorney fees, with the Attorney General and district attorneys also empowered to seek civil penalties.