A California Homeowner Bill of Rights was filed in late February by political lawmakers in the State Assembly and Senate in order to protect homeowners from unfair practices by banks and mortgage companies.
Attorney general Kamala Harris signed off on the six proposed laws that could help consumers and communities cope with the state’s current foreclosure crisis. According to Harris, the six proposed bills would guarantee basic fairness and transparency for homeowners and improve the mortgage process for everyone.
“California communities and families are being devastated by the mortgage and foreclosure crisis. We must ensure the deceptive practices that caused it never happen again,” Harris said.
The first bill, called the Foreclosure Reduction Act of 2012, would require servicers to provide documentation to a borrower that shows they have the right to foreclose on a property before filing a notice of default. Other information that servicers would have to present a borrower when performing the first step of the foreclosure process is evidence of ownership and chain of title.
The Foreclosure Reduction Act, introduced by assemblymen Mike Eng and Mike Feuer and Sens. Mark Leno, Fran Pavley and Senate president pro Tem Darrell Steinberg, would end dual-track foreclosures in which homeowners who are paying down mortgages modified by the banks are still foreclosed on due to conflicting information coming from the banks.
This bill would prohibit servicers from recording a notice of default when a loan modification is pending and stop them from recording a notice of sale while a borrower is in compliance with the terms of a loan modification. Servicers would be forced to disclose why an application for a loan modification or other loss mitigation measure has been denied.
A final part of the Foreclosure Reduction Act is that notices of foreclosure sales need to be personally served to the borrower, including notices of foreclosure sale postponement.
Sens. Mark DeSaulnier and Pavley along with assemblywoman Holly Mitchell formed the due process reform legislation that would require servicers to provide borrowers involved in the foreclosure process a single point of contact. Servicers would be required to provide an email address, facsimile number and mailing address for borrowers to submit information that is requested for a loan modification, short sale or other loss mitigation option.
Any servicer that files “robosigned” documents—information that was not verified for accuracy by the person notarizing the statement—would also be imposed with a $10,000 penalty as part of the due process reform legislation. Through this bill, certain documents would have to be filed in a county recorder’s office.
The Blight Prevention Legislation, created by assemblywoman Wilmer Carter and Pavley, will stop enforcement action from being taken against buyers of blighted properties for 60 days as long as repairs are being made to the home.
This legislation would increase fines against owners of blighted properties from $1,000 to $5,000 per day. Additionally, banks would be required to inform local code enforcement agencies of any liens placed on foreclosed properties, therefore facilitating the demotion process.
A fourth bill called the Tenant Protection Legislation, formed by assemblywoman Nancy Skinner and Sen. Loni Hancock, would provide tenants at least 90 days of notice before any eviction proceedings happen. The bill also would require purchasers of foreclosed homes to honor the terms of existing leases.
Another part of this proposed legislation is the enhancement of attorney general enforcement. Assemblyman Mike Davis authored this bill, which would impose against servicers a $25 fee every time they record a notice of default. This fee would go towards supporting a trust fund that helps the AG’s office stop, investigate and prosecute real estate fraud crimes.
A second part of this enforcement bill extends the statute of limitations from one year to four years from the date of discovery for violations of law commonly occurring in connection with foreclosure-related scams, including acting as a real-estate agent without a license and charging up-front fees for loan modification services.
Lastly, Davis and Hancock introduced the Attorney General Special Grand Jury Bill, which would authorize the AG to impanel a special grand jury to investigate and indict financial crimes against the state in multiple jurisdictions.
Harris said these legislation bills build off of the $25 billion national settlement that was reached in early February between 49 state AGs, including herself, and the nation’s five largest servicers ending abusive foreclosure practices that occurred during the housing crisis. According to Harris, the proposed bills, if enacted, would apply permanently to all state mortgages and is expected to generate $18 billion in benefits for California homeowners.
“Our state has suffered greatly as the result of bad actors in the banking and financial industries, and this settlement holds them accountable as we continue the difficult work of recovering the housing market and stemming the tide of foreclosures, evictions and auctions,” said John Perez, state assembly speaker.
