How Defaulting Homeowners may Benefit from the California Homeowner Bill of Rights.
By Nima Etemadian – Delt Law Intern – Thomas Jefferson School of Law – Class of 2015
The California Homeowner Bill of Rights was enacted on January 1, 2013 and was put into effect to ensure fair lending and borrowing practices for California homeowners. The laws are designed to guarantee basic fairness and transparency for homeowners in the foreclosure process. Below is an illustration regarding how the bill can ultimately help a family prevent foreclosure, whereas in the past, homeowners would have very little chance of keeping their home.
- Previously under the law, a bank could still foreclose on your home even as your application for a loan modification is being reviewed, a procedure known as dual tracking. The Home Owner Bill of Rights eliminates dual tracking by stalling a foreclosure until a decision is reached by the lender on your loan modification.
- Californians that were at risk of defaulting on their home loans generally did not know who to call at their bank, and often ended up having to re-explain their situation to several representatives. The Home Owner Bill of Rights requires that banks provide a single point of contact to borrowers at risk of default, meaning someone who is responsible for helping them avoid foreclosure will be the point of contact through the entire process.
- The California Homeowner Bill of Rights creates specific penalties when a lender “robo-signed,” meaning recorded a mortgage document that was never verified for accuracy before it was signed. The Home Owner Bill of Rights imposes a $7,500 civil penalty on banks that approve multiple, repeated loans in which documents are recorded that have not been verified for accuracy.
- Previously, foreclosed homes were frequently abandoned, causing blight and reducing the value of neighboring homes; on average decrease in value for homes near withering properties in California was $14,112.00. The Home Owners Bill of Rights provides local governments and receivers with additional tools to fight blight in neighborhoods, allowing homeowners more time to remedy code violations to compel the owners of foreclosed property to pay for upkeep.
- If a tenant’s house sold in a foreclosure sale, the new owner could evict them, or refuse to honor a tenant’s lease. The Home Owners Bill of Rights requires purchasers of foreclosed homes to honor existing leases, and gives them at least 90 days to find a new home.
- Previously under the law, families may not benefit from provisions in the National Mortgage Settlement because their home loans are not serviced by one of the five major banks (Ally/GMAC, Bank of America, Citibank, JPMorgan Chase, and Wells Fargo). The Home Owners Bill of Rights will ensure that many of the core provisions in the National Mortgage Settlement are extended to home loans that are not currently covered.
Utilizing the California Home Owners Bill of Rights will not guarantee a stop in the default process but does give a homeowner more options and security when going through a foreclosure process. Becoming educated about this bill is the first step a homeowner can take in protecting themselves and their most important asset, their home.