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Homeowner’s Bill of Rights in California

The Homeowner’s Bill of Rights in California is the topic of this blog post.   The statutes that govern the Homeowner’s Bill of Rights in California (HBOR) are to some degree a codification of the National Mortgage Servicing Settlement that was entered into between the attorneys generals’ of the various states and the five largest mortgage servicers in February 2012. The HBOR became effective on January 1, 2013 and includes sunset provisions for January 1, 2018 although many of the obligations imposed on mortgage servicers will continue beyond that date.

The HBOR has resulted in some major changes in the non-judicial process in California in that it provides important protections to California homeowners by imposing new requirements on mortgage servicers. The changes in the foreclosure process in California required by the HBOR statutes are listed below.

The first major change is that the HBOR requires new notices to borrowers under Civil Code section 2923.55, which both expands the existing pre-foreclosure notice requirements and prohibits a servicer from recording a notice of default until it has informed the borrower of their right to request copies of documents proving the mortgage servicer’s right to foreclose and that the borrower may be entitled to protections under the Servicemembers’ Civil Relief Act. In addition Civil Code § 2924(a)(5) requires a written notice to the borrower after the postponement of a foreclosure sale for more than 10 business days although a failure to comply is not grounds to invalidate an otherwise valid sale.

The HBOR also imposes a ban on the practice known as “dual tracking” as a mortgage servicer in California must now place a pending foreclosure on hold and not proceed any further while a “complete” first lien loan modification application is pending, on appeal, or while the borrower is in compliance with an approved loan modification agreement. A loan modification application is “complete” when the borrower has submitted all required documents “within the reasonable timeframes” set by the servicer. See Civil Code §§ 2923.6, 2924.11, 2924.18.

Mortgage servicers in California that conduct more than 175 foreclosures per year in California are required to provide a single point of contact by assigning a single individual or team of individuals with knowledge of the loan and status of the possible loan modification and must be available to the borrower as to such things as the loan status, foreclosure prevention options available and the coordination of documentation. A decision maker must also be available to a borrower.   These provisions are found in Civil Code § 2923.7.

The HBOR allows a homeowner to require any mortgage servicer to document their right to foreclose. The Act also clearly states that an entity cannot record a notice of default or otherwise initiate the foreclosure process unless it the holder of the beneficial interest under the deed of trust, the original or substituted trustee, or the designated agent of the holder of the beneficial interest. See Civil Code § 2924(a)(6).

The widespread practice known as “robo-signing” is now banned as representatives of a financial institution or servicer may not process foreclosure documents without verifying them for accuracy. See Civil Code § 2925.17.

Mortgage servicers are now required to have loss mitigation procedures under the HBOR as it states that unless a borrower has previously exhausted the first lien loan modification process, within five business days of recording a notice of default, servicers that conduct more than 175 foreclosures per year in California must send a written notice advising the borrower regarding foreclosure prevention alternatives pursuant to Civil Code § 2924.9. Receipt of an application for loan modification or any other documents must be acknowledged within five business days pursuant to Civil Code § 2924.10. If a loan modification is denied, the servicer must provide information regarding the time to in which to appeal the denial and any reason(s) for the denial pursuant to Civil Code § 2923.6.

Homeowners in California that are either in foreclosure proceedings or are seriously delinquent on their mortgage payments will find the HBOR provides at least some welcome relief from an otherwise confusing and frustrating non-judicial foreclosure process.

The author of this blog post, Stan Burman, is a freelance paralegal that has worked in California and Federal litigation since 1995.

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DISCLAIMER:

Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.

The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.

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