Since Assembly Bill 130’s “zombie mortgage” provision was enacted and signed into law in July by the California State Legislature and Gov. Gavin Newsom, California’s Credit Unions has been exploring every avenue to counter this problematic legislation. The bill places an untenable burden on credit unions involved in mortgage lending.

The specific provision was rushed into law as part of a budget trailer bill, bypassing the standard legislative process and limiting opportunities for stakeholder input. As industry leaders across the state may have seen, the California league has continually updated them about its efforts to oppose this language and the serious operational and risk management implications for credit unions.

On Monday, the league announced a major development. After a period of legal research, drafting the complaint and confirming plaintiffs, California’s Credit Unions is taking action by filing a lawsuit with several co-plaintiffs.

You can view the press release from California’s Credit Unions, the California Mortgage Association, United Trustees Association, and several impacted individuals, financial institutions and small business owners.

The league is committed to protecting the interests of credit unions in California, and it is confident this lawsuit is the most effective way to challenge this section of the bill and defend credit unions’ ability to manage and service subordinate mortgages.

The league will keep credit union leaders across California informed as the legal process moves forward. Thank you for your support and trust as California’s Credit Unions fights for a fair operating environment for credit unions across the state.