On July 11, 2012, Governor Jerry Brown signed the Home Owner’s Bill of Rights into state law.
Spurred by the loss of over 1 million California homes to foreclosure from 2008-2011, this bill will bring balance to the often capricious bank foreclosure practices experienced by distressed home owners.
The high points of this bill are…
- Bans “dual tracking” by stopping the bank’s foreclosure process while a modification is being worked out
- Requires a single point of contact between the borrower and the lender representative(s). No more phone tree hell.
- Authorizes the borrower to redress in the case of a bank’s “material” violation of this bill.
- Requires verification of documents and fines lenders for recording and filing multiple unverified documents.
- Obligates lenders to care for the exterior of homes they have foreclosured on.
Perhaps the most effective measure this bill brings is to say “No” to the banks’ practice of what is called “Dual Tracking”. Dual Tracking is what happens when the banks do not pause the foreclosure process even though the home owner is currently working with the bank on a loan modification.
The Home Owner’s Bill of Rights ends the horse race between loan modification and foreclosure by requiring the bank to pause the foreclosure during the loan modification process.
There are some conditions and exemptions to the bill. First, the home must be owner occupied and the bill applies to only the fist deed of trust, which in most cases is the first mortgage. Small lenders doing less than 175 home loans per year are exempt, as are hard money lenders. Additionally, a bankruptcy may make a homeowner ineligible for coverage under this bill.
Another important point: This bill changes how banks relate to their borrowers, but it does not obligate any lender to approve or even consider a loan modification.
There are still over 700,000 homes in California in the foreclosure pipeline and more than 3 months before this law takes effect on January 1, 2013. If you are experiencing financial distress now, and especially if you have already received a notice of default, please act immediately to do what is best for your future by educating yourself.
Emotionally it is a difficult time to make some of these decisions, but the choices you make will have a significant impact on your life in the coming years.
See the full “Home Owner’s Bill of Rights”.