(July 11, 2012) Bet Tzedek is pleased to pass along the news of the signing into law of the California Homeowners Bill of Rights. Members staff worked hard and their efforts contributed to the enactment of these new laws.
The 2012 California Homeowner Bill of Rights is a legislative package designed to bring fairness, accountability and transparency to the state’s mortgage and foreclosure process.
More than one million California homes were lost to foreclosure between 2008 and 2011—with an additional 500,000 currently in the foreclosure pipeline. Seven of the nation’s 10 hardest-hit cities by foreclosure rate in 2011 were in California.
The California Homeowner Bill of Rights marks the third step in Attorney General Harris’ response to the state’s foreclosure and mortgage crisis. The first step was to create the Mortgage Fraud Strike Force, which has been investigating and prosecuting misconduct at all stages of the mortgage process. The second step was to extract a commitment from the nation’s five largest banks of an estimated $18 billion for California borrowers. The settlement contained thoughtful reforms but are only applicable for three years, and only to loans serviced by the settling banks.
Two key bills contain significant mortgage and foreclosure reforms. AB 278 (Eng/Feuer/Mitchell/Pérez) and SB 900 (Leno/Evans/Corbett/DeSaulnier/Pavley/Steinberg) have been thoroughly considered by a legislative conference committee. The major provisions of the bills include:
- Dual track foreclosure ban – The legislation would require a mortgage servicer to render a decision on a loan modification application before advancing the foreclosure process by filing a notice of default or notice of sale, or by conducting a trustee’s sale. The foreclosure process is essentially paused upon the completion of a loan modification application for the duration of the lender’s review of that application.
- Single point of contact – The legislation would require a mortgage servicer to designate a “single point of contact” for borrowers who are potentially eligible for a federal or proprietary loan modification application. The single point of contact is an individual or team which must have knowledge of the borrower’s status and foreclosure prevention alternatives, access to decision makers, and the responsibility to coordinate the flow of documentation between borrower and mortgage servicer.
- Enforceability – Includes authority for borrowers to seek redress of “material” violations of the legislation. Injunctive relief would be available prior to a foreclosure sale and recovery of damages would be available following a sale.
- Verification of documents – The legislation would subject the recording and filing of multiple unverified documents to a civil penalty of up to $7,500 per loan in an action brought by a civil prosecutor. It would also allow enforcement under a violator’s licensing statute by the Department of Corporations, Department of Real Estate or Department of Financial Institutions.