Tag Archives: homeowner bill of rights

Banks Avoiding New California Foreclosure Protections?

FinalNoticeIStockAlmost a year and a half ago California’s Homeowner Bill of Rights went into effect. HBOR, as it’s often called, provides more protections to California homeowners in foreclosure. The goal of the law is to prevent some of the mortgage servicer abuses that plagued homeowners in previous years. But according to recent statistics from RealtyTrac, some banks are dealing with the new protections in HBOR by avoiding them altogether.

The California Homeowners’ Bill of Rights

HBOR, which became effective on January 1, 2013, requires banks and mortgage servicers to follow some new rules in nonjudicial foreclosures. (The nonjudical part is key – more on that later.)  A few highlights:

No dual tracking. If the homeowner submits a loan modification application, the servicer cannot start or continue with foreclosure until it’s made a decision on the application. Even if it denies the application, it must wait to foreclose until the appeal deadline has passed.

Single point of contact. Mortgage servicers must assign homeowners who are in foreclosure or seeking a loan modification with a single point of content – one person or team of people who have knowledge about the homeowner’s file and are responsible for the flow of information between the homeowner and servicer decision-makers.

Penalties and damages for violations . If a servicer files unverified documents (the practice of “robosigning” which was a major problem a few years ago), it may be on the hook for a $7,500 civil penalty. And if it violates HBOR, the homeowner can halt the foreclosure, or if it’s already gone through, sue for damages. These rules create more work for the mortgage servicers, slow the process down, and expose the lender to potential liability for missteps. (Learn more about the new requirements of HBOR for California foreclosures.)

Judicial v Nonjudicial Foreclosures in California

Here’s the key to the banks’ recent “workaround” when it comes to HBOR. HBOR rules only apply to nonjudicial foreclosures in California. In a nonjudicial foreclosure, the bank can foreclose on the homeowner without going through the courts. In contrast, in a judicial foreclosure, the bank must file a foreclosure lawsuit in court, follow the required litigation procedures, and get a court judgment before it can sell the home.

Judicial Foreclosures Have Spiked

In the past, most banks in California used the nonjudicial foreclosure process – it was easier and faster.  But not so in recent months.  According to RealtyTrac, in the first three months of 2013, banks filed just one nonjudicial foreclosure in California. Compare that to one year later (after HBOR had been kicking around):  in the first three months of 2014, banks filed 1,396 judicial foreclosures.  This is out of a total of 20,228 foreclosure starts during the same period. So while the majority of new foreclosure cases are still nonjudicial, the number of judicial foreclosures has certainly spiked to unprecedented numbers for California.

The judicial foreclosure process takes longer, but some mortgage lenders and servicers feel that avoiding the new HBOR requirements and eliminating the uncertainty of liability for civil penalties and economic damages is worth the extra time.

Minnesota Passes Homeowner Bill of Rights

flag of MN imageMinnesota, following in the footsteps of California, is the second state to pass a Homeowner Bill of Rights designed to protect struggling homeowners who are facing foreclosure.

The legislation provides basic protections against some of the worst practices in the mortgage servicing industry. (Learn about abuses in the mortgage servicing industry.)

Protections in the Homeowner Bill of Rights

The Minnesota Homeowner Bill of Rights requires loan servicers to do all of the following things.

  • Notify homeowners of all available loss mitigation options.
  • Assist homeowners in submitting loss mitigation documentation.
  • Offer a loan modification or another loss mitigation option to eligible borrowers.
  • Stop dual tracking (where the servicer continues to foreclose while simultaneously considering the homeowner’s application for a loan modification or other loss mitigation option).

If the loan servicer fails to comply with these requirements, the homeowner can take the servicer to court to block or reverse the foreclosure.

Properties Covered by the Homeowner Bill of Rights

The protections apply to first-lien residential mortgage loans for properties that are:

  • owner-occupied as the owner’s principal residence and
  • have no more than four units. 

Most Protections Go Into Effect August 1, 2013

The protections are effective as of August 1, 2013, except for the dual-tracking prohibition, which goes into effect on October 31, 2013.

Your State (or City) Could be Next

More and more states are embracing the idea of a Homeowner Bill of Rights to protect homeowners, reduce foreclosures, and stabilize local housing markets. Nevada recently passed its own Homeowner Bill of Rights and there are several other states considering such legislation. Some cities are even enacting a Homeowner Bill of Rights. (Get details in Nolo’s article Special Foreclosure Rules in Lynn, Lawrence, and Springfield, Massachusetts.)

To learn more about the new foreclosure protections in the Minnesota Homeowner Bill of Rights, see Nolo’s article Minnesota Homeowner Bill of Rights.

by Guest Blogger & Nolo Contributing Editor Amy Loftsgordon

Huge Drop in California Foreclosures Attributed to Homeowner Bill of Rights

FIFOCalifornia’s real estate market had good news in January — the rate of foreclosures dropped by a whopping 39.5% (as compared to December).  Although foreclosure rates were down in the nation overall, California’s drop was far greater than that of any other state.

Experts are attributing this drastic change in foreclosure rates to California’s new Homeowner Bill of Rights, which went into effect on January 1, 2013. The new law forbids dual tracking (when a mortgage servicer proceeds with foreclosure while it’s also considering a homeowner’s application for a loan modification) and requires servicers to provide homeowners with a single point of contact, among other things. (To learn more about the new law, see Nolo’s article California Foreclosure Protection: The Homeowner Bill of Rights.)

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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