Under the New California Homeowners Bill of Rights, the State of California has found that it is essential to modify the foreclosure process to ensure that borrowers have a meaningful opportunity to obtain available loss mitigation options.

The California Homeowners Bill of Rights which goes into effect January 1, 2013, has five major components:

• Prohibiting “dual track” foreclosures that occur when a Bank continues foreclosure while also reviewing a homeowner’s application for a loan modification.
• Creating a single point of contact for homeowners who are negotiating a loan modification.
• Expanding notice requirements that must be provided to a borrower before taking action on a loan modification application or pursuing foreclosure; and
• Allowing injunctions to stop all activiity until violations are corrected
• Permitting civil penalties against Banks that file multiple, inaccurate mortgage documents or commit reckless or willful violations of law.

By prohibiting dual-tracking (refi and sale at the same time) this legislation provides borrowers with certainty that their loan application will receive full review and consideration before any foreclosure occurs. These requirements also provide the borrower with a legal remedy to challenge the actions of Banks that engage in dual-track or other material violations of law.

The Homeowner Bill of Rights also requires a single point of contact for borrowers seeking loan modification. This requirement will make loan Banks more accountable and prevent them from repeatedly transferring applications and phone calls to various departments and employees.

Under the new law, Banks must notify borrowers when a modification application is due, if foreclosure has been postponed and if a modification has been denied. Each of these new rules increases transparency and helps to ensure that borrowers are properly informed of the actions taken by a Bank before foreclosure activities begin.

Borrowers have a right to file private lawsuits under this new law to block foreclosure until the lender corrects any material violation. Borrowers can also receive treble damages up to $50,000 if Banks act intentionally or recklessly in violating the law. These provisions protect the rights of consumers, while allowing Banks to correct unintentional violations.

The new Bill of Rights also gives the homeowner the right to designate a lawyer or other representative to help in the loan modification and the foreclosure prevention process. Finally, the court can award a prevailing borrower reasonable attorney’s fees and costs in an action brought pursuant to this section

By David DiJulio:

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