California, which has been called the “epicenter” of the foreclosure and mortgage crisis by Attorney General Kamala Harris, was one of the states hardest hit by the economic meltdown and real estate crash brought on by the latest financial crisis. According to a recent report, in 2011, seven of the nation’s ten cities hardest hit by foreclosure were in California.
All told, in the last three years with California suffering from a prolonged real estate slump, more than one million California homes were lost to foreclosure. Not just in the foreclosure pipeline, but lost. Moreover, while parts of the California real estate market are recovering, statewide there are an additional 700,000 properties currently in various stages of the foreclosure process.
To help stem the wave of foreclosures, on July 11, 2012, California enacted into law a “Homeowner Bill of Rights” for the purpose of aiding embattled homeowners and bring fairness, accountability and transparency to the state’s foreclosure process.
Some of its key provisions include the ban on “dual tracking,” a practice whereby a lender on one hand gives the illusion of working with the borrower to secure a modification, and at the same time is foreclosing. Needless to say, many homeowners are lulled into a false sense of security by such a practice, thinking they will get a modification, when in reality the bank wants to do nothing more than foreclose and take the home.
The dual tracking ban set forth in the statute would prohibit a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent from recording a notice of default or notice of sale or conducting a trustee's sale while a complete loan modification application is pending on a first lien mortgage or deed of trust secured by residential real property not exceeding four dwelling units that is owner-occupied.
In addition, mortgage servicers will be required to designate a “single point of contact” for borrowers who are potentially eligible for a loan modification. The new law requires the single point of contact to be responsible for coordinating the flow of documentation between borrower and mortgage servicer, and be knowledgeable about the borrower’s status and foreclosure prevention alternatives.
The new law also establishes procedures to be followed in connection with a modification application on a loan secured by a first lien. There are also procedures that must be followed in connection with the denial of an application, and most importantly they provide for a borrower's right to appeal a denial.
The enforcement provisions of the Bill of Rights authorize a borrower who is forced to litigate with his/her lender to seek an injunction and damages for violations of certain of the provisions described above. Under its provisions, for the first time in the state of California, a homeowner will be able to secure injunctive relief without having to cure arrears or post expensive bonds.
In addition to injunctive relief, California’s Homeowner Bill of Rights authorizes the greater of treble actual damages or $50,000 in statutory damages if a violation of certain provisions of the law is found to be intentional, reckless or resulting from willful misconduct. Prevailing borrowers may also receive attorneys' fees.
Other changes include revisions to the notice provisions of Trustee’s Sales. Formerly, a Trustee’s Sale could be continued for as much as a year without providing written notice of the continued date to the borrower. Under the new law, once foreclosure begins, if a Trustee’s Sale date is postponed, the new law requires that written notice be given to the borrower after the postponement in order to advise the borrower of any new sale date and time.
California’s Homeowners Bill of Rights legislation is effective January 1, 2013, and can be found in the recent amendments and additions to the California Civil Code Sections relating to mortgages. (See: Civil Code 2920.5, 2923.4, 2923.5, 2924, 2923.6, 2923.7, 2923.55, 2924.9, 2924.10, 2924.11, 2924.12, 2924.15, 2924.17, 2924.18, 2924.19 and 2924.20)
This is an article by attorney Mitchell Reed Sussman. Mitchell is a California real estate attorney specializing in real estate, foreclosure and bankruptcy. His website is http://www.losangelesrealestateattorney.com/.