Private Lenders: Is It Unlawful to Skip a Servicing Transfer Notice?
Understanding the second compliance trigger in Civil Code § 2924.13
With over 23 years in real estate litigation and foreclosure, one pattern shows up again and again: many private lenders keep things simple. If a loan performs, there’s little need to communicate—and if the loan was transferred, the borrower may have only been informed by phone. But under California Civil Code § 2924.13, failing to send a servicing transfer notice in connection with a junior lien secured by residential property can now trigger a claim of “unlawful practice.”
The second listed violation reads:
“The mortgage servicer failed to provide a transfer of loan servicing notice to the borrower when required to provide that notice by law, including, but not limited to, [RESPA] and investor or guarantor requirements.”
At first glance, it seems that failing to comply with any of those listed items could trigger liability. But a closer—and grammatically sound—reading shows something else:
The statute says "by law... and investor or guarantor requirements." That “and” is important.
The better reading is that both conditions must be met:
The notice must be required by law, and
Also required by investor or guarantor agreements
If only one applies, it arguably doesn’t trigger a violation under this provision.
So for self-funded private lenders with no investor or guarantor obligations, even if a statute like RESPA or Civil Code § 2937 requires notice, the absence of a corresponding investor requirement may mean this rule does not apply—and the foreclosure is not unlawful under § 2924.13(b)(2).
Of course, this statute is brand new and has never been tested in court. This interpretation is based on grammar, statutory reading, and legal experience—but there’s no guarantee courts will interpret it the same way. Still, this reading is structurally sound and arguably more consistent with legislative drafting norms.
More to come as we continue examining each compliance trigger in § 2924.13.