In a bold yet calculated move, California Governor Jerry
Brown pulled the trigger on the long-discussed California Homeowner Bill of
Rights, officially signing the bill into law last Wednesday, July the 11th.
Designed to reinforce the existing infrastructure for loss mitigation review
processes, the California Homeowner Bill of Rights is hoped to help families
and homeowners better avoid foreclosure whenever possible so that the negative
consequences of such foreclosures can be subdued. As a short sale
specialist for the past 4 years, it is far too common a story to hear of
pre-qualified homeowners being unsuccessful in their loss mitigation
efforts. Even with their packages falling in line with the program
criteria, homeowners are coming up empty-handed on their modification and / or
short sale campaigns, only to have their lender foreclose and repossess the
property. Much like applying pressure to an open wound to stop the
bleeding, the Homeowner Bill of Rights is being called into action to push down
these foreclosure horror stories one at a time so the market and overall
economy can heal at a faster rate.
Set to come into effect on January
1, 2013, the law will only pertain to first trust deeds secured by
owner-occupied properties. Below itemizes the primary components of the
law. For full text, I encourage all my California readers to visit www.leginfo.ca.gov In my next blog
to follow this week, I will share my own analyses and forecast the
effectiveness of the law’s various components in reducing foreclosure rates
across California.
The California Homeowner Bill of Rights, A.K.A. Assembly Bill 278 and Senate Bill 900, consists
of the following primary components:
1. Imposes Limitations on Dual Tracking à Dual Tracking is a practice in which a
mortgage servicer / lender continues to advance a property through the
foreclosure filing process concurrently to reviewing a defaulted
borrower for a workout program. Under this provision, while a homeowner
is currently requesting modification or short sale consideration from their
bank, the borrower’s bank will no longer be able to freely push the property
further into foreclosure, whether it be recording a new notice of default or
notice of sale, or even conduct a trustee’s sale. Depending on workout review
status, certain foreclosure filing restrictions will now apply. As
Governor Brown stated, “Californians should not
have to suffer the abusive tactics of those who would push foreclosure behind
the back of an unsuspecting homeowner. These new rules make the
foreclosure process more transparent so that loan servicers cannot promise one
thing while doing the exact opposite.”
2. Requires Provision of Single Point of Contact à For a borrower requesting a foreclosure
prevention
alternative, the mortgage servicer [or bank] will be required to
promptly establish and provide a direct means of communication with a single
point of contact. This provision is aimed to make it a bit easier for
homeowners to acquire workout and foreclosure status updates, which
theoretically will create more efficiency in review timelines.
3. Additional Written Notice Requirements à
Mortgage Servicers/ lenders will be required to provide borrowers written
correspondences pertaining to both workout and foreclosure status
changes. The element of surprise may be suitable for a birthday party,
but certainly does not have much of a place in loss mitigation.
4. Mortgage Servicers / Lenders are Subject to Penalties
for Violations of this Law à In
an effort to prevent reckless behavior, mortgage servicers / lenders are now
more susceptible to penalties for violating any of the above parameters of the
law. Borrowers will now have an opportunity to bring action against their
banks for violations of this provision. Monetary awards and suspension of
foreclosure activity are both available for homeowners found to be victims of
lender misconduct.
