Tag Archives: loan modification

New California Law Helps Homeowners in Foreclosure

On January 1, 2013 the new California Homeowner Bill of Rights went into effect. One part of this new law protects homeowners in foreclosure from dual-tracking. This means that if you request a loan modification within a certain period of time, your lender (or mortgage servicer) must stop temporarily stop foreclosure proceedings while it considers your application.

What Is Dual-Tracking?

In the past, a lender would sometimes continue to foreclose on a homeowner’s home, even while it was simultaneously considering the homeowner’s application for a loan modification. Because of this practice, called dual-tracking, many homeowners who were in the midst of loan modifications were shocked to lose their homes to foreclosure.

What Does the New California Foreclosure Law Do?

Under the new law, lenders and servicers that receive a complete loan modification application must temporarily stop foreclosure proceedings until it makes a decision on the application.

To learn details about the new prohibition on dual-tracking in California, as well as other provisions of the Homeowner Bill of Rights, see Nolo’s article California Foreclosure Protection: The Homeowner Bill of Rights.

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California Governor Signs Homeowners’ Foreclosure Rights Law

Last week, California Governor Jerry Brown signed into law historic homeowner-rights mortgage legislation that offers some of the country’s strongest borrower protections against bank foreclosure practices. The protections, part of a Homeowner Bill of Rights sponsored by California Attorney General Kamala Harris, include the following:

  • the prohibition of “dual tracking”—banks’ practice of negotiating loan modifications while simultaneously pursuing foreclosures
  • the banning of robo-signing (as well as the creation of a private right of action if banks violate the law under certain conditions; state agencies and private citizens may recover compensation, including damages of up to $50,000, if lenders willfully, intentionally, or recklessly violate the law); and
  • the requirement that lenders assign a single representative for borrowers to work with through the loan modification process.

This overhaul of foreclosure laws doesn’t apply to strategic defaulters (those who can afford to pay their underwater mortgages but choose to walk away) and only offers protection to borrowers who own and occupy their properties of four units or less.

To read the text of the new law, go to the California Legislative Information website and search for bill number SB-900 or AB-278.