New California Law Targets Junior Liens: Are You Ready for Civil Code § 2924.13?
Private Money Lenders: You’re Not Exempt
A new California law—Civil Code § 2924.13, effective July 1, 2025—now adds major compliance hurdles for any lender trying to foreclose on a junior lien secured by residential property.
Yes, this includes private lenders making business purpose loans.
The law applies to any property containing residential housing—not just 1-to-4 units. That means it could apply to apartment buildings and mixed-use properties.
Before you can start or threaten foreclosure under a subordinate mortgage, you must certify under penalty of perjury that you either:
Did not engage in any of six newly defined “unlawful practices,” or
List and admit any violations you did commit.
This certification and special notice must be recorded with your Notice of Default and mailed to the borrower by certified mail.
So what counts as an unlawful practice? There are six:
No written communication with the borrower for 3+ years
No servicing transfer notice (as required by RESPA or investor rules)
No loan ownership transfer notice (as required by TILA or investor rules)
Threatening or conducting foreclosure after sending a 1099-C or discharge notice
Foreclosing after the statute of limitations has expired
Failing to send periodic statements when required by law
If you skip these steps—or misrepresent compliance—the borrower can petition the court to stop your foreclosure, or raise these issues as affirmative defenses in a judicial action.
Bottom line: If you’re a private junior lender in California, don’t ignore this. You need to review your practices and stay compliant—now.
Follow for more as we break down each part of this new statute in upcoming posts.