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Introduction
On August 31, 2020, California Governor Gavin Newsom signed into law Assembly Bill 3088 (AB 3088), formally titled the Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020. The legislation took effect immediately upon signing, introducing new foreclosure and forbearance requirements for residential lenders during the COVID-19 pandemic.
While AB 3088’s most restrictive provisions have since expired (2021-2022), the law represented a significant expansion of California’s Homeowner Bill of Rights (HBOR) and established precedents for crisis-era lending regulation. This guide analyzes AB 3088’s key provisions, explains which requirements remain relevant in 2025, and provides compliance guidance for private lenders.
Legislative Background and Context
Pre-AB 3088 Attempts at Foreclosure MoratoriaAB 3088 emerged after months of legislative efforts to impose foreclosure moratoria and mandatory forbearances on California lenders. Earlier bills—including AB 828, AB 2501, and AB 1436—proposed more aggressive restrictions such as: – Mandatory 12-month foreclosure moratoria – Required lender forbearances (no lender discretion to deny) – Automatic loan modifications – Prohibition on charging default interest during COVID-19
These bills failed to pass due to opposition from private lending industry associations and legal advocacy efforts demonstrating such measures would destabilize lending markets and reduce credit availability.
AB 3088: The Compromise BillAB 3088 represented a significantly scaled-back compromise, removing foreclosure moratoria and mandatory forbearances while imposing limited notice requirements and borrower protections.
AB 3088 Key Provisions: What Lenders Needed to Know (2020-2022)
Provision 1: Voluntary Forbearance Framework (NOT Mandatory)Requirement:
If a “Covered Borrower” requests a loan forbearance, lenders may deny the request, provided the lender states reasons for denial and identifies any curable defects in the request.
If denying forbearance request, lender must provide written response stating: – Reason(s) for denial – Any curable defects in borrower’s request (e.g., insufficient documentation of hardship, missing financial statements) – Statement that lender will reconsider request if borrower cures defects
> “Your forbearance request dated [date] is denied because you did not provide documentation demonstrating COVID-19-related financial hardship as required by AB 3088. Please provide the following to cure this deficiency: > – Bank statements for past 3 months > – Letter from employer confirming income reduction or termination > – Sworn declaration describing nature of hardship > > Upon receipt of these documents, we will reconsider your request.”
AB 3088 did NOT require lenders to grant forbearances. Lenders retained full discretion to approve or deny forbearance requests, subject only to providing reasons for denial.
Provision 2: Expanded Homeowner Bill of Rights (HBOR) Notification RequirementsPre-AB 3088 HBOR Requirements:
California’s Homeowner Bill of Rights (Civil Code §2923.55) required lenders to contact borrowers 30 days before recording Notice of Default to: – Assess borrower’s financial situation – Explore options to avoid foreclosure (modification, forbearance, short sale)
This requirement applied only to consumer purpose loans secured by owner-occupied 1-4 family residences.
AB 3088 extended HBOR notification requirements to: – All loans secured by 1-4 family properties (business purpose and consumer) – If property occupied by tenants unable to pay rent due to COVID-19-related income reduction
Business purpose loans secured by tenant-occupied residential property became subject to HBOR compliance, adding 30-60 days to foreclosure timelines.
Provision 3: NO Foreclosure MoratoriumCritical Point:
AB 3088 did NOT impose any foreclosure moratorium. Lenders could continue foreclosing on both business purpose and consumer loans throughout the pandemic, subject to HBOR compliance for tenant-occupied residential properties.
Many states enacted outright foreclosure moratoria (e.g., New York, New Jersey, Illinois). California chose not to impose such restrictions, preserving lender foreclosure rights.
AB 3088 Compliance Checklist (Historical – 2020-2022)
For lenders foreclosing during AB 3088’s effective period (September 2020 – early 2022):
2025 Status: What Remains of AB 3088?
Expired ProvisionsAB 3088’s COVID-19-specific provisions expired in 2021-2022, including: – Forbearance request response requirements (no longer applicable) – Expanded HBOR for tenant-occupied properties (reverted to consumer loans only)
Continuing Legal FrameworkCalifornia Homeowner Bill of Rights remains in effect for consumer purpose loans secured by owner-occupied 1-4 family residences, requiring: – 30-day pre-NOD contact with borrower – Documentation of contact attempts – Discussion of foreclosure alternatives
Lessons Learned: AB 3088’s Legacy for Private Lenders
1. Legislative Advocacy MattersAB 3088 demonstrated that industry opposition to overreaching legislation can successfully moderate regulatory outcomes. Earlier proposed bills would have devastated private lending markets; coordinated advocacy resulted in workable compromise.
2. Crisis Legislation Creates Ongoing Compliance ObligationsEven temporary crisis legislation (like AB 3088) can impose lasting compliance requirements. Lenders who established AB 3088 compliance protocols benefited when later regulations imposed similar requirements.
3. Business Purpose Lending Structure Provides ProtectionAB 3088’s “Covered Borrower” definition excluded corporate borrowers, demonstrating the value of requiring entity borrowers (LLCs, corporations) rather than individual borrowers for business purpose loans.
Current California Foreclosure Requirements (2025)
Business Purpose Loans (Commercial/Multifamily Property)No special requirements – standard trustee sale process applies: 1. Record Notice of Default (after borrower default) 2. 90-day reinstatement period 3. Record and publish Notice of Sale 4. Conduct foreclosure auction
Business Purpose Loans (1-4 Family Residential, Individual Borrower, Owner-Occupied)HBOR may apply if loan secured by borrower’s primary residence: – 30-day pre-NOD contact requirement – Documentation of contact attempts – Discussion of foreclosure alternatives
Consumer Loans (1-4 Family Residential, Owner-Occupied)Full HBOR compliance required: – 30-day pre-NOD contact – RESPA 120-day delinquency requirement (for federally related mortgages) – Notice of Default and election to sell under deed of trust – 90-day reinstatement period – Notice of Sale publication and posting
Comparing AB 3088 to SB 1079 (Post-Foreclosure Bidding Rights)
AB 3088 and SB 1079 are often confused but address entirely different issues:
| Aspect | AB 3088 (2020) | SB 1079 (2021) | |——–|—————-|—————-| | Focus | Pre-foreclosure notice and forbearance | Post-foreclosure bidding rights | | Effective Period | Sept 2020 – early 2022 (mostly expired) | January 2021 – ongoing (2025) | | Key Impact | Extended HBOR to business purpose loans (temporarily) | Allows post-auction bids for 45 days | | Current Status | Expired (reverted to pre-AB 3088 law) | Active and ongoing |
Practical Guidance for Private Lenders (2025)
Question 1: Do I need to comply with AB 3088 in 2025?Answer: No. AB 3088’s COVID-specific provisions expired. However, underlying Homeowner Bill of Rights requirements continue to apply to consumer loans.
Question 2: What if a borrower requests forbearance citing AB 3088?Answer: AB 3088’s forbearance request provisions expired in 2022. Lenders have no obligation to respond to forbearance requests under AB 3088, though voluntary forbearance remains a viable workout option.
Question 3: Does HBOR apply to my business purpose loan?Answer: Generally no, unless: – Borrower is individual (not entity) – Property is borrower’s primary residence – Loan otherwise meets HBOR criteria
For investment property loans to entity borrowers, HBOR does not apply.
Question 4: Should I still document forbearance requests and denials?Answer: Yes, as best practice. Even though AB 3088 expired, documenting forbearance requests and responses creates defensible record if borrower later claims lender failed to work with them.
Conclusion
AB 3088 represented California’s measured response to COVID-19 lending challenges, avoiding catastrophic foreclosure moratoria while imposing limited notice requirements. The law’s legacy includes heightened awareness of crisis-era legislative risk and the importance of industry advocacy in shaping regulatory outcomes.
As of 2025, AB 3088’s provisions have expired, but private lenders should remain vigilant for future crisis legislation and maintain compliance with California’s ongoing Homeowner Bill of Rights requirements for consumer loans.
Need guidance on California foreclosure compliance or legislative updates affecting private lenders? Geraci LLP’s foreclosure and regulatory compliance team provides ongoing counsel on California lending law developments.
