The California Governor Makes the Homeowner Bill of Rights Official

     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 11^th.  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.