Can California Borrowers Demand a Payoff and a Beneficiary Statement?

California Civil Code § 2943 requires that a beneficiary of a deed of trust (normally the lender), after receiving a written demand from an "entitled person" (the borrower a.k.a. trustor or mortgagor), prepare and deliver a "payoff demand statement" to the person requesting it within 21 days of the receipt of the demand. 

The foreclosure process may excuse compliance depending upon when the written demand is presented.   

Delivery means by mail, or transmitted by facsimile machine.

"Payoff demand statement" means a written statement setting forth the amounts required as of the date of its preparation necessary to fully satisfy all obligations secured by the loan that is the subject of the payoff demand statement. 

The written statement must include information reasonably necessary to calculate the payoff amount on a per diem basis for the period of time, not to exceed 30 days, during which the per diem amount is not changed by the terms of the note.

An entitled person may also make a written demand for a "beneficiary statement" that the beneficiary must satisfy by preparing and delivering to the person demanding it a true, correct, and complete copy of the note or other evidence of indebtedness with any modifications thereto, and a beneficiary statement. 

The "beneficiary statement" is a written statement showing:

            a.         the amount of the unpaid balance of the obligation secured by the mortgage or deed of trust, and the interest rate, together with the total amounts, if any, of all overdue installments of either principal or interest, or both;

            b.         the amounts of periodic payments, if any;

            c.         the date on which the obligation is due in whole or in part;

            d.         the date to which real estate taxes and special assessments have been paid to the extent the information is known to the beneficiary;

            e.         the amount of hazard insurance in effect, and the term and premium of that insurance to the extent the information is known to the beneficiary;

            f.          the amount in an account, if any, maintained for the accumulation of funds with which to pay taxes and insurance premiums;

            g.         the nature and, if know, the amount of any additional charges, costs, or expenses paid or incurred by the beneficiary that have become a lien on the real property involved; and

            h.         whether the obligation secured by the mortgage or deed of trust can or may be transferred to a new borrower, such as by an assignment.

A beneficiary must provide a "short-pay demand statement" (for a short sale attempt) within 21 days of a request. 

If a beneficiary elects not to proceed with the transaction that is the subject of the short-pay request, it may refuse to provide a short-pay demand statement, but it must provide written notice of that decision within 21 days of the receipt of the short-pay request.

The entitled person may rely on the beneficiary statement, payoff demand statement, or short-pay demand statement, and any amendment thereof. 

If a statement is demanded that does not specify one of the three options, the beneficiary must treat the request as a request for a payoff demand statement. 

The beneficiary may charge up to $30 for furnishing each required statement, except for mortgages or deeds of trust insured by the FHA or guaranteed by the Administrator of Veterans Affairs.

If a beneficiary for a period of 21 days after receipt of the written demand willfully fails to prepare and deliver the statement, the beneficiary is liable to the entitled person for all damages that the entitled person sustains by reason of the refusal, and even if actual damages are not sustained, the beneficiary shall forfeit to the entitled person the sum of $300. 

Each failure to provide and deliver that statement constitutes a separate cause of action.  The term "willfully" means an intentional failure to comply with the requirements of statute without just cause or excuse.

            LESSONS: 

1.         If a beneficiary does not comply with the statute, the entitled person should consider filing a civil lawsuit for violation of Civil Code § 2943, and include causes of action for breach of the promissory note and deed of trust based upon the beneficiary's breach of the implied covenant of good faith and fair dealing in both documents. 

2.         A breach of contract cause of action may enable the recovery of attorney's fees in addition to costs, depending upon the terms of the note and deed of trust. 

3.         The legal action may also support a request for an injunction against a foreclosure based upon the beneficiary's failure to comply with the statute.