TL;DR: A New Statutory Shield Against Zombie Loans

If an old second mortgage has suddenly resurfaced after years of silence, you have a powerful new legal defense. Under California Civil Code § 2924.13 (AB 130), a lender should not be able to foreclose if they—or any previous servicer—went silent for 3 years or issued a 1099-C. (This is a new law so this is my legal opinion… not a legal fact.)

California Civil Code Section 2924.13

(a) Definitions

As used in this section:

“Borrower” has the same meaning as defined in Section 2929.5.
“Mortgage servicer” includes the current mortgage servicer and any prior mortgage servicers.
“Subordinate mortgage” means a security instrument in residential real property, including a deed of trust and any security instrument that functions in the form of a mortgage, that was, at the time it was recorded, subordinate to another security interest encumbering the same residential real property.

(b) Unlawful Practices

The following conduct constitutes an unlawful practice in connection with a subordinate mortgage:

The mortgage servicer did not provide the borrower with any written communication regarding the loan secured by the mortgage for at least three years.
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, the federal Real Estate Settlement Procedures Act (12 U.S.C. Sec. 2601 et seq.).
The mortgage servicer failed to provide a transfer of loan ownership notice to the borrower when required to provide that notice by law, including, but not limited to, the federal Truth in Lending Act (15 U.S.C. 1601 et seq.).
The mortgage servicer conducted or threatened to conduct a foreclosure sale after providing a form to the borrower indicating that the debt had been written off or discharged, including, but not limited to, an Internal Revenue Service Form 1099.
The mortgage servicer conducted or threatened to conduct a foreclosure sale after the applicable statute of limitations expired.
The mortgage servicer failed to provide a periodic account statement to the borrower when required to provide that statement by law, including, but not limited to, the federal Truth in Lending Act (15 U.S.C. 1601 et seq.).

(c) Foreclosure Prerequisites

A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not conduct or threaten to conduct a nonjudicial foreclosure until they do both of the following:

Certification: Simultaneously with the recording of a notice of default, records a certification under penalty of perjury that either:
- (A) States that the mortgage servicer did not engage in an unlawful practice as described in subdivision (b); or
- (B) Lists all instances in which the mortgage servicer, and any prior mortgage servicer, committed an unlawful practice described in subdivision (b).
Notice to Borrower: Simultaneously with the service of a recorded notice of default, sends to the borrower by United States certified mail (return receipt requested) a copy of the recorded certification and a notice advising the borrower of their right to petition the court for relief.

(d) Injunctive Relief

Upon a borrower’s petition to the court for relief before the foreclosure sale, the court shall enjoin a proposed foreclosure sale pursuant to a power of sale in a subordinate mortgage until a final determination on the petition has been made.

(e) Judicial Foreclosure Defense

It shall be an affirmative defense in a judicial foreclosure proceeding if the court finds the mortgage servicer engaged in any of the unlawful practices specified in subdivision (b).

(f) Equitable Remedies

The court may provide equitable remedies that the court deems appropriate, depending on the extent and severity of the mortgage servicer’s violations. The equitable remedies may include, but are not limited to, striking all or a portion of the arrears claim, barring foreclosure, or permitting foreclosure subject to future compliance and a corrected arrearage claim.

(g) Setting Aside a Sale

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Thoughts from a California Real Estate Attorney Regarding this Zombie Defense Law

A borrower may petition the court to set a nonjudicial foreclosure sale aside when a certification required by subdivision (c) was never recorded or when a certification recorded indicates that the mortgage servicer engaged in an unlawful practice or misrepresented the compliance history of the loan.

Under California Civil Code § 2924.13, the court’s authority to permanently enjoin a foreclosure sale may not be an automatic “kill switch,” but rather an equitable remedy that depends on the severity of the lender’s documented misconduct.

Here is the argument for a permanent injunction, framed entirely within the context of the 2026 legal landscape.

The Argument for a Permanent Foreclosure Bar under § 2924.13

While Subdivision (d) of the statute provides for a mandatory temporary injunction (“the court shall enjoin… until a final determination”), the path to a permanent bar on foreclosure lies in the court’s broad equitable powers granted by Subdivision (f).

1. The Basis for Equitable Relief

The statute explicitly states that the court may provide equitable remedies “depending on the extent and severity of the mortgage servicer’s violations.” If a lender or any prior servicer in the chain of title committed an “unlawful practice” such as the 3-year silence rule (§ 2924.13(b)(1)) or the 1099-C rule (§ 2924.13(b)(4)), the court has the statutory discretion to fashion a remedy that matches the harm.

2. The Permanent Injunction as a Remedy

A permanent injunction against a foreclosure sale is one of the specific remedies listed in Subdivision (f), which notes that “equitable remedies may include… barring foreclosure.” This is a final determination that the power of sale in the deed of trust is no longer enforceable due to the lender’s failure to maintain a continuous legal connection with the borrower or their contradictory actions regarding the debt’s discharge.

3. The Distinction Between Foreclosure Bar and Lien Release

It is critical to distinguish between barring the foreclosure and releasing the lien.

The Foreclosure Bar: A permanent injunction under this statute stops the lender from ever using the “power of sale” to take the house. It effectively renders the security interest “un-foreclosable.”
The Lien Release: The statute does not explicitly mandate a “reconveyance” or a full lien release. While the court has the power to provide “equitable remedies that the court deems appropriate,” a lien that cannot be foreclosed remains a “cloud on title” until it is either settled, voluntarily reconveyed, or cleared through a separate Quiet Title action.

The Reality of the 2026 Legal Landscape

It is important to understand that while AB 130 provides a powerful new shield, we are currently in “uncharted waters.” As of early 2026, the lenders and credit unions are aggressively fighting this law in federal court, and because the statute is so new, the California courts have not yet established a definitive track record regarding the frequency or permanence of foreclosure injunctions. Furthermore, even if you successfully bar a foreclosure, a permanent injunction is not a lien release; the “zombie” lien may remain a cloud on your title that must be dealt with eventually.

For homeowners facing these resurfaced second mortgages, I currently see two main paths to a resolution:

Lien Stripping in Bankruptcy: California Bankruptcy Courts have different “Local” rules but you may wish to consider a Chapter 13 bankruptcy workout if your property is worth less than the balance of your first mortgage. If so, you may qualify to “strip” the second lien entirely or in part through a Chapter 13 bankruptcy. This process moves the debt from “secured” to “unsecured,” eventually leading to a full discharge of the remaining balance. A note to consider is that your plan might result in you having to pay some money to your zombie lender over long period of time. (This was a very general statement. If you are considering bankruptcy you may wish to give us or another California attorney a call.
The Strategic Zombie Defense: For those who do not qualify or do not desire a bankruptcy or prefer to keep their credit intact, the goal might be to deploy the AB 130 and CCP 337 defenses to negotiate a short payoff. The mission here is to leverage the lender’s lack of documentation and legal standing to settle the lien for cents on the dollar. If you were to execute a short pay strategy ( which we have done and probably documented

The Golden Rule of the Short Payoff: Throughout this negotiation, you must be extremely careful not to “reignite” the debt. Under CCP § 360, any written acknowledgment of the debt or a partial payment can reset the four-year statute of limitations, giving a dead loan a second life. A successful defense ensures that your “Short Pay” settlement is structured as a resolution of a disputed claim, protecting you from both a foreclosure sale and a surprise tax bill from the IRS.

Author Schema

John McConnin | john@listingattorney.com | San Diego, CA | Attorney Broker | DRE # 01445675 and St Bar # 154852.

The AB 130 “Zombie Loan Kill Switch”: California Civil Code § 2924.13