Why regulation changes matter when applying for a mortgage
Buying a home in California comes with more than just choosing the right neighborhood or property. The state’s evolving legal and regulatory landscape has introduced changes that can directly affect your mortgage process. At LBC Mortgage, we stay ahead of these updates to guide you with clarity, confidence, and compliance. Our goal is to ensure you don’t face last-minute surprises or delays. Understanding what’s changed in California’s mortgage rules helps you apply more strategically and close more smoothly.
California continues to pass legislation aimed at increasing consumer protection, transparency, and accountability in both the mortgage and real estate industries. These updates are not just for lenders and brokers—they also affect you as a buyer. Whether it’s how you work with your real estate agent, the timelines involved in a transaction, or what disclosures you’re entitled to, the rules shape your home-buying experience.
As a buyer, you need a mortgage partner who understands both the legal framework and how it plays out in real-world transactions. At LBC Mortgage, we translate those rules into simple steps, giving you a smoother process and stronger position in the market.
Key California regulation updates impacting buyers
Several recent legislative changes in California have shifted how mortgage applications are reviewed and how real estate transactions are conducted. These are the updates every buyer should understand before applying for a home loan.
Changes to foreclosure and servicing rules for junior liens
One significant change came through Assembly Bill 130, signed in mid-2025. This bill targets mortgage servicers who handle second mortgages or other subordinate liens. Before initiating foreclosure on these loans, servicers must now submit a sworn declaration confirming they followed all required practices. These include proper notification of lien transfers and ensuring the foreclosure isn’t time-barred by statute of limitations.
For buyers, especially those looking at properties with second mortgages or home equity lines of credit, this means added scrutiny on title and lien status. Delays in closing may occur if there are unresolved junior lien issues. At LBC Mortgage, we handle lien verification early and thoroughly, so your transaction doesn’t stall unexpectedly.
New buyer-broker representation agreement requirement
Effective January 1, 2025, California requires a signed buyer-broker agreement before any purchase offer is submitted. Known as AB 2992, this law applies to all types of real estate—residential homes, mobile homes, land, and commercial properties.
The agreement must outline the services your agent will provide, how they are compensated, how to terminate the contract, and must be signed “as soon as practicable” in the homebuying process. This increases transparency between you and your real estate agent and ensures there’s a written understanding before you make an offer.
We regularly coordinate with buyer agents and brokers to ensure these agreements are completed in compliance with the new rules. This keeps your mortgage application aligned with your purchase timeline.
Expanded licensing and compliance for lenders and servicers
California enforces strict licensing under the California Residential Mortgage Lending Act (CRMLA). Any individual or company that makes or services mortgage loans in the state must be properly licensed under Division 20 of the California Financial Code.
Beyond licensing, California has stepped up enforcement for document retention, advertising standards, and fee disclosures. This means your mortgage lender must maintain accurate records and follow ethical marketing and origination practices.
At LBC Mortgage, all of our loan officers and internal processes are fully licensed and audited to meet California’s standards. This protects you from working with unqualified lenders and reduces the risk of compliance-related delays during closing.
Updates to real estate disclosure requirements
California has also strengthened disclosure laws for real estate transactions. Sellers must now provide more detailed information about fire hazard zones, water conservation features, structural work performed without permits, and safety upgrades. These disclosures are required upfront and are closely reviewed by lenders.
As a buyer, these regulations protect you from taking on unexpected risk. However, they also mean your lender will be more involved in evaluating the property’s condition and risk factors. At LBC Mortgage, we work with your real estate agent and inspectors to confirm these disclosures early, so you avoid last-minute problems with underwriting or insurance.
What buyers should do before applying for a mortgage in California
Understanding the new laws is important, but taking the right action is even more critical. Here’s how you can prepare to apply for a mortgage under California’s current legal environment.
Prepare thorough financial documentation
California’s emphasis on transparency means your lender may ask for more detailed financial records. Be ready to provide full income verification, bank statements, tax returns, employment history, and documentation for any large deposits. Unexplained financial movements can trigger delays or additional underwriting steps.
LBC Mortgage will walk you through exactly what’s needed and why. We help you avoid common mistakes and gather the right documents up front, reducing the chance of underwriter pushback later.
Work with licensed professionals only
Your real estate agent, broker, and loan officer must meet California’s licensing requirements. Choosing professionals who are not fully licensed can lead to delays, or worse, a canceled transaction. You’ll also want professionals who understand how to work within these regulations, not just those who are legally allowed to operate.
Every member of our team at LBC Mortgage is fully licensed and experienced in California’s real estate and lending laws. We coordinate with reputable, licensed partners to make sure every step of your transaction stays on track.
Understand how new disclosures impact property selection
With stronger rules on fire zones, retrofitting, water tanks, and past construction work, not every home will be mortgage-ready right away. Some properties may need additional insurance, repairs, or documentation before a loan can be approved.
We help you understand how these property factors affect your financing options. If you’re looking at homes in high-risk areas or those with complex histories, we flag those early and recommend the right steps.
Build a realistic timeline and avoid rushing
The new buyer-broker agreement law, combined with more in-depth servicing checks, can extend the time needed to close a deal. Rushing through offers or skipping due diligence can backfire.
At LBC Mortgage, we build a clear and achievable timeline based on your property, loan type, and market conditions. This ensures your purchase agreement, loan approval, and closing are synchronized from the start.
Why working with LBC Mortgage is the smart choice
California’s mortgage and real estate laws are among the most complex in the country. Choosing a lender that doesn’t understand the local landscape puts your transaction at risk. At LBC Mortgage, we specialize in California loans. We keep up with every new law, ensure full compliance, and adapt our process to protect your interests.
We don’t just process loans—we guide you through every step, from pre-approval to closing. Whether it’s confirming your agent’s agreement is compliant with AB 2992 or flagging a junior lien issue under AB 130, we’re already on it. You won’t have to worry about regulatory red tape getting in the way of your homeownership.
