California Homeowners Bill of Rights - New Law for 2013

By
Real Estate Agent with 1st Action Real Estate

The new California Homeowner Bill of Rights becomes law today. If you're not familiar with this measure, it was a bill carried on behalf of California Attorney General Kamala Harris last year that sought to codify some of the measures set forth in the national mortgage settlement deal struck in early 2012. 

Initially opposed by the California Association of Realtors as well as the California Bankers Association and the California Mortgage Bankers Association, the bill was pushed through the legislature by a closed joint committee  of both houses so when the bill eventually reached the floor, it was voted on immediately and passed to the Governor. Total time in committee, floor and signature was measured in hours rather than days, months or years, as is typical for most bills. 

Due to the secretive nature of the committee structure, there was little opportunity for interest groups to provide input and there was great concern that what emerged would be a very flawed effort reflecting an over reaction to purported lender wrongdoing. However, CAR did have an opportunity to work with the committee to effect some modifications to the final version that removed our opposition to the bill. CAR was not supportive of the bill in its final version but adopted a neutral position, although banking groups remained steadfast in their opposition due to to concerns about meritless litigation that the bill opens up for aggreaved homeowners. 

Here's what the bill does:

  • Stops dual tracking. Once the process has started for either a loan modification or short sale by the lender, the foreclosure process must be stopped. This is in response to cases where the property proceeds along multiple courses at the same time only to have the foreclosure process conclude days ahead of a short sale approval by another arm of the bank. As pointed out, this frequently resulted in the bank taking the property back and ultimately receiving thousands less in the foreclosure sale than they would have in a short sale. Of course we know the banks are covered either way and really don't care but ultimately this should result in more short sales and fewer foreclosures, which is better for the recovering market.
  • Under the dual tracking provisions, banks must give an applicant a response to their loan modification before they can start the foreclosure process. If a homeowner has not applied for a loan modification, the bank must inform them of their right to do so before starting the foreclosure process.
  • No more robo signing.
  • Banks must provide a single point of contact to borrowers trying for a loan modification or short sale. Homeowners and Realtors are often frustrated by multiple points of contact and the handoff from one agent to  another within a bank frequently resulting in the loss of paperwork sending the process back to square one while the foreclosure process continues apace in another department.
  • Allows the borrower to sue loan servicers if the borrower thinks they have violated any foreclosure laws. This is one of the most worrisome components of the bill in that it may open the door to frivolous lawsuits resulting in increased costs and unnecessary delays in an already costly and time consuming process. 

With nearly 1 million foreclosures recorded in the state since 2007, California remains one of the hardest hit areas of the country. However, foreclosures are down in most areas by 30% or more in the past year and with prices starting to climb across the state, the hope is that fewer and fewer people will be pushed into foreclosure anyway. Some 30% of state homeowners remain underwater in their loans but the combination of improving employment statistics and home price increases has decreased that by more than 5% in the past year.

The Homeowners Bill of Rights may well provide some relief for harried homeowners and produce further delays to the process, but it will do little to change the underlying ability of a homeowner to ultimately afford their home and will, in most cases, only delay the inevitable. If Sacramento and DC don't screw it up, an improving economy will do more to aid homeowners than the HBR will ever accomplish - and ultimately that's the best news for everybody. 

Read the Attorney General's summary of the measure here: California Homeowner Bill of Rights. 

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Deborah "Dee Dee" Garvin 01/02/2013 01:00 PM
  2. Sidney Kutchuk 01/02/2013 03:16 PM
  3. Virginia Dean 01/03/2013 05:07 AM
  4. Jana Holmstrup 01/03/2013 08:14 AM
  5. M.C. Dwyer 01/03/2013 09:33 AM
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Rainer
54,455
Rob Renk
McKinney, TX
Easy Hard Money Lender | DFW | minimum $60K+

Very informative post from California.  They really are trying to help the homeowners. Loan mods should be a little easy for homeowners to get seeing where rates are and where they were.

January 03, 2013 06:59 AM #10
Rainer
10,985
Cindy Jones
RealEstateAuctions.com - Rancho Mirage, CA
Cindy Jones
The ultimate goal is if we can get on our way to recovery. This may not be ideal as it is still postponing the inevitable in most cases. If the loan mod process does not make it easier by extending amortization or being more creative with the payment itself then we have not gained any momentum in correcting the problem. I do want to see homeowners have a streamline process to being approved ANd denied. If the lenders do exhaust all their efforts to expedite the process it could be good for all of us. We should see less people that are staying in their homes mortgage free for 3-4 yrs. I see so much of this and feel it is unjust to the rest of us.
January 03, 2013 07:24 AM #11
Rainmaker
358,970
Donald Hester
NCW Home Inspections, LLC - Wenatchee, WA
NCW Home Inspections, LLC

Gene, Interesting post and thank you for the information. This maybe something we see in other states so good to know.

January 03, 2013 07:40 AM #12
Rainmaker
629,704
Stephanie/Bob The Ruiz/Miller Team
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Gene, sounds like a great program that should be expanded nationally!

January 03, 2013 07:56 AM #13
Rainmaker
671,897
Elite Home Sales Team
Keller Williams Realty - San Clemente, CA
A Tenacious and Skilled Real Estate Team

Our governments now use backroom deals and secret meetings to make public law. We are in a very bad place when our government does not wish us to know what is going to be voted on.

January 03, 2013 08:20 AM #14
Rainer
130,286
Monica Atherton
Coldwell Banker~Residential Brokerage - Temecula, CA
Your Temecula Real Estate Gal

Thanks for the recap!   :)

January 03, 2013 08:38 AM #15
Rainer
116,540
Ann Wilkins
East Bay Sotheby's International Realty - Oakland, CA
Oakland, Berkeley, Piedmont CA

Thanks for a nice overview.  Just stopping the dual tracking is a MAJOR victory for any of us involved in short sales.  Nothing like spending your Christmas holiday attempting to make sure a foreclosure was halted because you have short sale approval and a buyer who has invested in appraisal and inspections but...a foreclosure/trustee sale is still scheduled.  Or you have a trustee sale that has been postponed the night before the auction, but you have investors knocking on the door asking to come in since they still think that the house is being sold at auction in a few hours. Talk about freaking out clients as they sip their morning coffee.  I must say - knock on wood - that some of the major banks, Wells Fargo and Chase come to mind, are doing an excellent job of communicating and processing the short sales in a timely manner here in California.

January 03, 2013 09:12 AM #16
Rainer
162,897
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

Thanks for the overview and reminder that Dual Tracking is now against the law here.   That will provide relief to our short sellers, who in the past could be foreclosed upon despite solid offers submitted to their lenders.    And less rediculous work for us, following up with lenders and trying to get them to postpone a foreclosure because we've brought them an offer that will result in more money for them.    Reblogged!

January 03, 2013 09:31 AM #17
Rainmaker
568,097
Hella Mitschke Rothwell
(808) 226-1095 or (831) 626-4000
Hawaii & California Real Estate Broker
On the face of it, it looks great for homeowners. Also boilers of short sales if they know the foreclosure won't happen during their contract period.
January 03, 2013 09:31 AM #18
Rainer
275,327
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Kimo's Lifestyle Solutions

Great post and illustration about this very important step to assist homeowners with severe circumstances and definitely a tremendous improvement in assuring that a direct line of communication in the process isn't corrupted.

Banks and lenders shouldn't oppose any law that requires them to be compliant and we all know how unresponsive they have been in the past, haven't we? No frivolous lawsuits would begin if the banks comply with the law. Furthermore, had the banks worked their mitigating process seamlessly, the government wouldn't have to create a law to force them to do the right thing, right? Lesson learned, the hard way and good for consumers too. 

January 03, 2013 09:39 AM #19
Rainmaker
224,401
Michael Blue
Home Smart Realty West - Encinitas, CA
REALTOR - 760-889-8877, Encinitas/Carlsbad
Gene, I'm wondering why you did not mention there will be no deficiency judgments issued as part of the bill. I see parts of this Bill of Rights as a duel edge sword. I too have had no problems with Chase or Wells Fargo. But let's face it short sales The lenders realize are better for business then to take in the property back or selling it at auction. However with these new strict and stringent rules in California perhaps the lender will turn the cheek before the deal even gets rolling And process the foreclosure. That would be bad news for the homeowner.
January 03, 2013 09:50 AM #20
Rainmaker
224,401
Michael Blue
Home Smart Realty West - Encinitas, CA
REALTOR - 760-889-8877, Encinitas/Carlsbad
Gene one more comment, What we see on the water's surface is not always what lies beneath.
January 03, 2013 09:53 AM #21
Rainmaker
225,023
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

The primary concern for us has always been the impact of the provision allowing homeowners to seek redress if they believe any part of this or other laws concerning their foreclosure process has been abrogated. Have you ever met anyone in the process who doesn't believe their rights have been abridged, that their bank has taken advantage of them, or that more shouldn't be done to extend their time in the home as long as possible? Now couple this with the normally litigious nature of Californians and you see the potential to absolutely bog down the system with frivolous lawsuits. Most of the rest of the bill is OK. Modifications made to timelines and other specifics have sought a balance between homeowner rights and the rights and duties of lenders. Had lenders operated with more integrity in the early stages of this process, there would not have been this backlash and the necessity to overcompensate for their errors. 

January 03, 2013 09:54 AM #22
Rainmaker
225,023
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Michael - that was another concern that results not from the HBR but another bill that CAR sponsored last year dealing with deficiency judgments derived from both 1st and 2nd mortgages. The concern was that if banks were forced to process a short sale with defined returns and no deficiency judgments (especially on 2nds), then it would just be easier for them to bypass the process and go for the foreclosure. While we have heard some anecdotal incidence of this happening, it doesn't seem to be widespread and in fact appears to be having the positive effect the authors intended. Being a non-judicial foreclosure state, it's easier in CA to process than in other areas of the country but we're continuing to see a decline in NOD's and foreclosures.

We're still not sure how all these elements are going to interact since we're only 3 days into it but, as someone famously said - let's get this sucker passed so we can figure out what it does. Keep your fingers crossed. 

January 03, 2013 10:04 AM #23
Rainmaker
797,174
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

In reading the summary, I can only find reference to an end to dual-tracking for foreclosures. Do you have the bill number or other official reference to verify that this also covers short sales?

January 03, 2013 03:25 PM #24
Rainmaker
267,176
Paddy Deighan JD PhD
Aston McLaren Inc - Vail, CO
Paddy Deighan J.D. Ph.D

the early results are interesting because the banks do not seem to be aware of their obligations under this new law!!!

January 03, 2013 09:40 PM #25
Rainmaker
699,063
Sharon Parisi
Keller Williams Dallas Premier Realty - Dallas, TX
Dallas Homes

Gene, this appears to offer those homeowner's in need, some much needed protection.  Thanks for providing us with this information.

January 04, 2013 05:36 AM #26
Rainer
11,468
Rebecca Bulkeley
Exit Realty Professionals - Alexandria, VA

Kudos to you and the State of California for action resulting in what might just help homeowners and those working within the real estate community.  While the below the radar means for passing such legislation remains to be addressed, we can at least appreciate the intent of the legislation and hopefully the teeth of the new law! 

January 04, 2013 09:06 AM #27
Rainmaker
225,023
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Marte - this link will take you to the AG website where they link to the actual bills that comprise the Homeowner Bill of Rights. 

Paddy, I'm hearing that from Realtors every day. It will take some education on our part and from the AG and from the banks themselves to get up to speed on what's in this and how to apply and enforce. If you find a bank that you believe is not in compliance, send them a link to the AG website and if they're still not cooperative, report them to the AG. If we all work together we can make this work, othertwise...

http://oag.ca.gov/hbor

January 04, 2013 09:58 AM #28
Rainmaker
1,239,339
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Over all I think those are decent and fair changes.  Now not sure about the law suit part.  As I understand it you can see anyone for anything anyway, so did the law make it easier to sue or something?  

January 15, 2013 12:43 PM #29
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Rainmaker
225,023

Gene Wunderlich

Realtor & Legislative Liaison
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