July 2, 2012— California’s State Legislature voted today to pass the Homeowner Bill of Rights, legislation introduced by Attorney General Kamala Harris and championed by consumer advocates and homeowners. The California Foreclosure Reduction Act— AB 278 (Eng, Feuer, Mitchell) & SB 900 (Leno, Corbett, DeSaulnier, Evans, Pavley, Steinberg)—passed 53-25 in the Assembly and 24-13 in the Senate this afternoon. The bill now awaits Governor Jerry Brown’s signature.
This law will institute sensible reforms to bank’s foreclosure practices and create a fairer foreclosure process for California’s homeowners. Most significantly, this law ends the “dual track” process, where banks foreclose on homeowners while they are negotiating for a loan modification with their bank. Now, banks are required to give homeowners a “yes” or “no” answer on a loan modification application before continuing with foreclosure, thereby giving homeowners a fair chance at preventing foreclosure. With this law in place, if a loan modification is accepted, the bank will rescind the notice of default or sale, allowing homeowners to pay their loans without the looming threat of foreclosure. And if a loan modification is denied, homeowners will not be blindsided by a sale notice, because banks are now required to send a letter to the borrower describing the reason for denial and letting the borrower know of his or her right to appeal that denial to the servicer.
In addition to ending “dual track”, this legislation requires all banks to end “robosigning” and provide a single point of contact to borrowers. Homeowners will no longer have to speak to a different person at the bank every time they call and resubmit the same mountain of paperwork to different people at the same institution.
If a bank cannot follow these simple procedural rules, California homeowners will be able to enforce their rights by taking the bank to court. This will encourage servicers to follow the law, and when they do not, it will allow victimized homeowners to get their homes back where possible, or get some financial relief.
Many of the provisions in the legislation were embodied in the National Mortgage Settlement that 49 Attorneys General signed with the five big banks earlier this year. The legislation extends the impact of the Settlement so that all homeowners in California, regardless of which bank services of their loan, have the same protections and rights. This legislation should serve as a national model for other states looking to enforce the Settlement and protect their homeowners.
*California Reinvestment Coalition