The Zombie Second Mortgage Gets a New Kill Switch: Civil Code Section 2924.13

California Assembly Bill 130 (2025–2026), Chapter 22, Statutes of 2025 — new Civil Code § 2924.13

Anyone who has litigated a foreclosure dispute involving an old junior lien knows the pattern: a homeowner took out a second mortgage or HELOC years ago, the loan went dormant, the servicer went silent for years, the homeowner reasonably assumed the debt was written off or forgotten — and then, sometimes a decade later, a mortgage servicer resurfaces and moves to foreclose on the junior lien, often for far more than the property's remaining equity would suggest is worth pursuing except as leverage. These are commonly called "zombie second mortgages," and AB 130 gives California borrowers a real procedural weapon against them for the first time.

What Counts as an "Unlawful Practice"

New Civil Code section 2924.13 defines a subordinate mortgage as any security instrument — deed of trust or otherwise — that was subordinate to another lien at the time it was recorded. The statute then lists specific servicer conduct that constitutes an "unlawful practice" in connection with such a mortgage:

• Going at least three years without sending the borrower any written communication about the loan.

• Failing to provide a required transfer-of-servicing notice (under RESPA or investor/guarantor requirements).

• Failing to provide a required transfer-of-ownership notice (under TILA or investor/guarantor requirements).

• Threatening or conducting a foreclosure sale after having provided the borrower a form — including an IRS Form 1099 — indicating the debt was written off or discharged.

• Threatening or conducting a foreclosure sale after the statute of limitations on the debt has already run.

• Failing to provide a required periodic account statement.

Any one of these, standing alone, is enough to trigger the statute's protections.

The Pre-Foreclosure Certification Requirement

Before a servicer, trustee, mortgagee, beneficiary, or authorized agent can conduct or even threaten a nonjudicial foreclosure on a subordinate mortgage, it must now do two things simultaneously with recording the notice of default:

1. Record a sworn certification stating either that it did not engage in any of the listed unlawful practices, or listing every instance in which it did.

2. Mail the borrower, by certified mail with return receipt requested, a notice explaining the right to petition the court for relief before the sale if the borrower believes the servicer engaged in an unlawful practice or misrepresented its compliance history, along with a copy of the recorded certification.

This is a meaningful departure from ordinary nonjudicial foreclosure practice, which has never required this kind of sworn, publicly recorded self-disclosure before a sale can proceed on a junior lien.

What Happens When a Borrower Petitions

If a borrower petitions the court for relief before the sale, the statute doesn't leave the injunction to the court's discretion — the court shall enjoin the proposed sale until a final determination on the petition is made. That's a mandatory stay, not a discretionary one, which is a significant procedural advantage for borrowers compared to the ordinary preliminary injunction standard.

The statute also creates an affirmative defense in any judicial foreclosure proceeding if the court finds the servicer engaged in one of the enumerated unlawful practices, and gives courts broad equitable latitude in fashioning a remedy — including striking all or part of the claimed arrears, barring foreclosure outright, or permitting foreclosure conditioned on future compliance and a corrected arrearage claim.

Setting Aside a Completed Sale

Critically, the statute isn't limited to pre-sale relief. A borrower may petition to set aside a nonjudicial foreclosure sale that has already occurred if either:

• The required certification was never recorded at all, or

• The recorded certification itself admits to an unlawful practice, or the servicer otherwise misrepresented its compliance history.

That second prong matters — a servicer that files a false or misleadingly incomplete certification doesn't just risk perjury exposure; it risks having the completed sale unwound.

What Doesn't Change

The statute includes a bona fide purchaser carve-out: failure to comply with section 2924.13 does not, by itself, affect the validity of a trustee's sale to a bona fide purchaser for value. Borrowers pursuing relief need to move before a BFP acquires the property, not after.

Practical Takeaways

• For borrowers/homeowners facing a junior lien foreclosure, this statute is now a first-line inquiry: request the recorded certification, and cross-check the servicer's communication history, transfer notices, any 1099s received, and the running of the statute of limitations before assuming the foreclosure is procedurally sound.

• For servicers and their counsel, the sworn certification requirement raises the stakes on due diligence before recording a notice of default on any subordinate lien — a careless or overly confident certification is now a discrete, independently attackable defect, separate from the underlying validity of the debt itself.

• The mandatory injunction language is the real leverage point. Unlike a typical request for preliminary injunctive relief, a properly filed petition under this section compels the court to enjoin the sale pending resolution — worth building into any pre-sale strategy where these facts are present.

• This dovetails with existing case law on limited res judicata for UD judgments (see Vella v. Hudgins) — a zombie-second fact pattern that surfaces after an unlawful detainer eviction is exactly the kind of claim Vella holds isn't necessarily foreclosed by the earlier summary proceeding, and section 2924.13 now gives that claim an independent statutory foothold going forward.

Section 2924.13 doesn't apply retroactively to sales that already closed before its effective date, so timing matters — but for any subordinate-lien foreclosure moving forward, this is now a mandatory procedural checkpoint that didn't exist before.

This post discusses new Civil Code section 2924.13, enacted by California Assembly Bill 130 (2025–2026), Chapter 22, Statutes of 2025, and is provided for general informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship.