If you own or service second mortgages in California, there’s a new law you need to be aware of, AB 130. It went into effect on June 30, 2025, and it fundamentally changes how you’re allowed to initiate foreclosure on second loans.
Under this law you’re required to submit and send a written Certification of Compliance. That’s a formal statement confirming that you, or any previous servicer, followed all applicable laws throughout the life of the loan. If anything wasn’t done correctly, you must disclose every single issue. That could mean you hadn’t made contact with the borrower in over three years, or that you missed sending a legally required notice. It could also mean you previously told the borrower the loan was forgiven when it actually wasn’t.
The borrower now has the legal right to challenge the foreclosure in court if they believe there’s been any mistake or misconduct. This isn’t just about loans made recently. It applies to any second mortgage, including older ones, those issued for business purposes, and even loans tied to multi-unit properties.
If your records are incomplete or if there’s been little to no communication with the borrower over the years, you might find yourself blocked from foreclosing or tied up in costly legal proceedings. This is why it’s critical to ensure your loan servicing records are thorough and accurate. If you’re unsure, now’s the time to do a full review before a borrower or court forces your hand.
You can read the full law here:
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260AB130
The AB 130 section is here:
https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=2924.13
If you’re not certain whether this law affects any of your loans, reach out and we’ll help you sort it out.
