The California Homeowner Bill of Rights
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What Is the California Homeowner Bill of Rights?
The California Homeowner Bill of Rights (CHBR) is a law that protects California homeowners by ensuring that banks and other creditors follow fair lending practices. The purpose of the new law is to prevent illegal foreclosures and evictions in California. The CHBR became law in 2013.
The CHBR bans dual tracking, requires verification of documents, compels the lender to have a contact person that the homeowner can speak with, and enforces tenant rights. The CHBR also establishes a more rigorous process for mortgage holders to follow before they can foreclose the homeowner.
What Due Process Does a Homeowner Have Under the CHBR?
Under the California Homeowner Bill of Rights, the mortgage holder is required to notify the homeowner that he or she is in default and that foreclosure is a possibility. The mortgage holder must send the homeowner a first-class letter describing the situation and must call the homeowner at least three times. The homeowner cannot be charged any processing, application, or servicing fees for foreclosure prevention.
The mortgage holder must also provide a toll-free number that the homeowner can use to contact the mortgage holder and/or the mortgage holder’s agents. The mortgage holder is also required to specify which documents the homeowner should possess in order to negotiate a loan modification. The mortgage holder must also explain in writing how the homeowner can apply for a loan modification. These documents might include, but are not limited to, a copy of their promissory note, a copy of their deed of trust/mortgage, and a copy of the borrower’s payment history.
After notice has been given to the borrower, the borrower must send the mortgage holder a complete and accurate application for loan modification. Upon receiving the application for a loan modification, the mortgage holder is forbidden from taking any foreclosure action. The mortgage holder has 30 days to decide whether to accept or reject the homeowner’s request.
If the mortgage holder accepts, the homeowner is entitled to face to face meetings to resolve the dispute. If the mortgage holder denies the request, the homeowner has 31 days to appeal the decision.
If the mortgage holder wishes to complete the foreclosure, the mortgage holder is required to record a public notice of default 120 days before foreclosure. A notice of sale must be posted 20 days before an actual sale.
Although the foreclosure process in California is still non-judicial, the CHBR provides homeowners a number of new opportunities to bring their case before a court.
What is Dual Tracking?
Dual tracking is the lending practice of offering loan modification to a homeowner in debt, while foreclosing the homeowner at the same time. Duel tracking is considered unethical because it is very misleading to the homeowner.
Under the California Homeowner Bill of Rights, dual tracking is illegal. If a borrower submits a loan modification application, the lender must choose to either modify the loan or foreclose the property. The lender cannot do both.
What Does Verification of Documents Mean?
During the foreclosure crisis, lenders often submitted foreclosure documents which were fraudulent. The documents would have missing or fake names, incorrect addresses, or false signatures. The foreclosure documents would often be created after a foreclosure had been completed. Indeed, false signatures became so prevalent in foreclosures that lenders were accused using "robo-signers," low-level employees who fraudulently signed documents using the CEO or President’s name without actually reading the documents.
The California Homeowner Bill of Rights corrects this massive fraud issue by requiring that lenders actually read and verify the documents they produce when foreclosing a homeowner. Any lender found in violation of this will be charged a $7,500 fine per loan.
What Does the Law Mean By a "Contact Person"?
One of the worst problems a homeowner can face during the foreclosure process is an army of bureaucrats, none of whom know anything about the homeowner’s case. The CHBR addresses this by requiring that the mortgage holder maintain a "contact person" for the homeowner. This contact person should be familiar with the facts of the case and that the contact person is able to keep the homeowner up to date about the status of the homeowner’s application for a loan modification.
It is important to note that the "contact person" can be a team of persons, as long as the team is available to the homeowner and familiar with the homeowner’s case.
What Is a Private Right of Action?
A "private right of action" is a fancy way of saying that the homeowner has the right to bring the case to court if the lender has broken a law. This means that homeowners can turn a non-judicial foreclosure into a judicial foreclosure.
The CHBR also allows homeowners to collect legal fees if the homeowner wins the case against the lender, including court fees. The CHBR also penalizes lenders up to $50,000 for reckless, intentional or willful violation of the law.
What Rights Do Tenants Have Under the CHBR?
The California Homeowner Bill of Rights protects tenants of foreclosed homeowners by requiring that new property owners give the tenants 90 day notice before trying to evict the tenants. If the tenants have a fixed term lease (i.e. the lease is fixed to one year), the new property owners must respect the lease unless the new owners can prove that the lease should not apply.
The CHBR only covers tenants of foreclosed homeowners. Tenants living in a residential hotel or other non-private housing are not covered, even if the owners of those buildings are being foreclosed.
Should I Consult a Lawyer?
Buying and financing a piece of real estate can be one of the most important experiences in your life. An experienced real estate attorney can advise you of the different mortgage financing options for this financial endeavor. An attorney can also review any financial documents and advise you about your obligations and the best way to proceed.
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Last Modified: 07-24-2013 12:21 PM PDT
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