The purpose of the California Homeowner Bill of Rights is to ensure fair lending and borrowing practices for homeowners. By doing so, this law helps protect homeowners from foreclosure.
During the state’s foreclosure crisis, lenders rarely gave homeowners loss mitigation options. However, alternatives such as loan modifications would have helped homeowners avoid foreclosure. Under the Homeowner Bill of Rights, homeowners must be provided with available loss mitigation options.
Who is Protected by the Homeowner Bill of Rights?
Homeowners with first lien mortgage loans for properties that are residential and owner-occupied. The properties cannot be bigger than four units.
Entities that have fewer than 175 foreclosure sales per year or annual reporting period are exempt from some of the procedural requirements of the Homeowner Bill of Rights.
What are the Key Reforms in the California Homeowner Bill of Rights?
The Homeowner Bill of Rights introduced many important reforms, such as:
- Providing homeowners with a single point of contact.
- Prohibiting dual-tracking.
- Establishing penalties for robo-signing.
- Giving homeowners the right to sue for violations.
- Protecting tenant rights.
1) Providing Homeowners with a Single Point of Contact:
Before the Homeowner Bill of Rights was passed into law, homeowners had to speak with a different person each time they called their lender. Consequently, homeowners had to explain their circumstances anew each time. In short, trying to resolve mortgage issues with lenders was frustrating and inefficient.
The Homeowner Bill of Rights requires mortgage services to give a single point of contact to qualifying homeowners. Qualifying homeowners include those who are eligible for loan modifications or alternative solutions. Moreover, the homeowner must be given one or more direct means of communication with this single point of contact. This point of contact has to be assigned to the account until all loss mitigation options have been tried or the account is brought current. This point of contact can be any individual or a team who has:
- Information on foreclosure prevention alternatives;
- Access to relevant decision-makers;
- Particular knowledge of the homeowner’s situation; and
- The duty to manage the flow of documents between the mortgage servicer and the homeowner.
2) Prohibition of Dual Tracking:
Prior to the Homeowner Bill of Rights being passed into law, lenders could engage in what is called “dual-tracking.” In short, the lender would foreclose on a homeowner even while a loan modification application was pending. The Homeowner Bill of Rights bans this practice. Instead, loan servicers must first either grant or deny a first lien loan modification application. Only then can the foreclosure process be started or continued.
3) Establishing Penalties for Robo-Signing:
“Robo-signing” is when a representative of a lender or servicer signs foreclosure documents without reading them or knowing anything about the accuracy of the information in them. The Homeowner Bill of Rights penalizes lenders for robo-signing with a civil penalty of up to $7,500 per loan. This civil penalty can be issued on any lender or servicer that records or files multiple, unverified documents.
4) The Homeowner’s Right to Sue for Violations
Homeowners can sue lenders or servicers for violating the Homeowner Bill of Rights. Potential relief includes:
- Injunctive relief, such as halting the foreclosure sale if the foreclosure sale has not happened yet; or
- Actual economic damages if the foreclosure sale has already happened.
A violation that is found to be intentional, reckless or a result of willful misconduct by the loan servicer or lender leads to greater damages. In fact, the court can award the borrower statutory damages of $50,000 or the greater of treble actual damages.
5) The Rights of Tenants
Purchasers of foreclosed homes must give tenants 90 days before starting eviction proceedings. Also, purchasers must honor fixed-term leases which were entered into before the transfer of title at the foreclosure sale. This is unless exceptions intended to prevent fraudulent leases apply to the circumstances.
Should I Consult a Lawyer?
As a homeowner in California, you have certain protections under the Homeowner Bill of Rights. An experienced real estate attorney can help explain the different mortgage financing options to you.