California Homeowner Bill of Rights
Governor Jerry Brown Signs California Homeowner Bill of Rights
On July 11, 2012, Governor Jerry Brown signed the California Homeowner Bill of Rights into law to bring fairness, accountability and transparency to the state’s mortgage and foreclosure process.
The Homeowner Bill of Rights goes into effect on January 1, 2013.
More than one million California homes were lost to foreclosure between 2008 and 2011—with an additional 700,000 currently in the foreclosure pipeline. Seven of the nation’s 10 hardest-hit cities by foreclosure rate in 2011 were in California.
The California Homeowner Bill of Rights marks the third step in Attorney General Harris’ response to the state’s foreclosure and mortgage crisis. The first step was to create the Mortgage Fraud Strike Force, which has been investigating and prosecuting misconduct at all stages of the mortgage process. The second step was to extract a commitment from the nation’s five largest banks of an estimated $18 billion for California borrowers. The settlement contained thoughtful reforms but are only applicable for three years, and only to loans serviced by the settling banks.
Two key bills of the Homeowner Bill of Rights contain significant mortgage and foreclosure reforms. The major provisions of AB 278 (Eng/Feuer/Mitchell) and SB 900 (Leno/Corbett/DeSaulnier/Evans) include:
Dual track foreclosure ban
Mortgage servicers will be required to render a decision on a loan modification application before advancing the foreclosure process by filing a notice of default or notice of sale, or by conducting a trustee’s sale. The foreclosure process is essentially paused upon the completion of a loan modification application for the duration of the lender’s review of that application.
Single point of contact
Mortgage servicers will be required to designate a “single point of contact” for borrowers who are potentially eligible for a federal or proprietary loan modification application. The single point of contact is an individual or team with knowledge of the borrower’s status and foreclosure prevention alternatives, access to decision makers, and the responsibility to coordinate the flow of documentation between borrower and mortgage servicer.
Borrowers will have authority to seek redress of “material” violations of the California Homeowner Bill of Rights. Injunctive relief will be available prior to a foreclosure sale and recovery of damages will be available following a sale.
Verification of documents
The recording and filing of multiple unverified documents will be subject to a civil penalty of up to $7,500 per loan in an action brought by a civil prosecutor. Enforcement will also be allowed under a violator’s licensing statute by the Department of Corporations, Department of Real Estate or Department of Financial Institution.
The other bills in the California Homeowner Bill of Rights are:
BLIGHT PREVENTION LEGISLATION: AB 2314 (Carter) & SB 1472 (Pavley and DeSaulnier) to help combat the blight and crime associated with foreclosed properties.
- AB 2314: Passed out of Assembly (71-0) and is pending in the Senate.
- SB 1472: Passed out of Senate (36-0) and is pending in the Assembly.
TENANT PROTECTION LEGISLATION: AB 2610 (Skinner) and SB 1473 (Hancock) to help protect tenants in foreclosed properties.
- AB 2610: Passed out of Assembly (56-14) and is pending in the Senate.
- SB 1473: Passed out of Senate (25-13) and is pending in the Assembly.
ENHANCEMENT OF ATTORNEY GENERAL ENFORCEMENT ACT: AB 1950 (Davis) to strengthen the law enforcement response to mortgage and foreclosure fraud.
- AB 1950: Passed out of Assembly (56-22) and is pending in the Senate.
ATTORNEY GENERAL SPECIAL GRAND JURY ACT: AB 1763 (Davis) and SB 1474 (Hancock) to strengthen prosecutions of complex, multi-jurisdictional fraud and crimes.
- SB 1474: Passed out of Senate (38-0) and is pending in the Assembly.
- AB 1763: Passed out of Assembly (78-0) and is pending in the Senate.