In January 2013, the California Homeowner Bill of Rights will take effect, providing unparalleled protection for homeowners across the state. This Bill, which is the first of its kind, will reform the foreclosure process and provide unique protection for homeowners. The Attorney General of California, Kamala Harris pioneered the Bill in an effort to find a solution to the state’s foreclosure crisis. Under this legislation, homeowners in this state will have the best protection against foreclosures and lender abuses in the nation.
The foreclosure rates in California are one of the highest in America. This law comes at a time when homeowners struggle with banks to keep their homes, a battle that banks win more often than not. Indeed, a recent audit of the foreclosures in San Francisco revealed that 99% of the underlying loans had some legal issues. In addition, 84% of those loans exhibited “clear violations of the law.” However, after California passed the Bill, homeowners should be able to take on lenders more effectively in an effort to keep their homes.
A key provision in the Bill restricts “dual-track foreclosures.” As a result, lenders will be barred from continuing foreclosure proceedings while they are in loan modification discussions with homeowners. The Bill also imposes civil liability against lenders for utilizing “robo-signing” to file foreclosure documents. Through robo-signing lenders’ employees approve foreclosures without first reviewing the underlying mortgage documents. In order to help improve communications between lenders and homeowners, the Bill will also require that lenders present a single contact person for each customer. This will ensure that homeowners are able to facilitate sufficient communications with their lenders in order to efficiently reach a solution regarding their mortgages.
This piece of legislation also allows homeowners to sue lenders directly for violations of these rights. While this will certainly increase protections for homeowners, Beth Mills, a spokesperson for the California Bankers Association, explained that it may also increase litigation costs for lenders, who will in turn increase costs for future buyers. Rodney K. Brown, the president and CEO of the California Bankers Association, has responded to the Bill stating that the Association does not support this legislation because it “promotes meritless litigation” in a system that is already flooded with cases. Brown goes on to explain that he does not believe that the opportunity to sue lenders directly will improve the homeowner’s financial conditions. Nonetheless, Mr. Brown did agree that homeowners are “entitled to an answer regarding their loan modification before” foreclosure proceedings and homeowners should have a single contact person with lenders to facilitate effective communication.
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