California SB 681 was intended to deal with problems surrounding zombie mortgages. It was poorly written and, if passed, would make all junior liens unenforceable in the state.

While a number of industry groups were working with the sponsor to rewrite the bill, the author instead pulled a fast one and buried three pages from it into AB 130, a 215-page budget trailer bill which has nothing to do with real estate.

These three pages, which must be removed, are an attack on lending in CA and will effectively make all junior liens unenforceable. This bill will cause damages for all borrowers in California including those who cannot refinance their low 1st mortgage and need to get a 2nd mortgage from the equity in their homes, HELOC, and many other borrowers in general. Likewise, this bill will send shockwaves of harm through the entire mortgage industry in California. We all have a dog in this fight and must deliver immediate opposition to all our corresponding representatives.

The California Mortgage Association (CMA) outlined key points to include in a message to your representatives:

1. If the provisions of AB 130 involving subordinate liens are passed, it will make enforcing a junior lien completely impossible.
   
   
2. If subordinate liens cannot be foreclosed upon in California, lenders will stop making junior liens and extending second-position lines of credit. In today’s housing market, with many people locked into 3% loans, this will make tapping into one’s home equity virtually impossible.
   
   
3. Private trust deed investors, many on a fixed income, will find the 2nd liens that they invested in, unenforceable virtually overnight.
   
   
4. Bill allows for retroactive setting aside of foreclosures sales from years ago, which is destabilizing to the real estate market.

You can watch Mr. Mike Belote, a lobbyist for the CMA and the United Trustees Association on June 25, 2025 zealously advocating for us here.

Conventional and private lenders alike have much to lose here, as well as our borrowers. Please take a few minutes to write your representative to add some sanity to AB 130.