Q: I’ve read with interest that there is a new law slated to go into effect in California titled The California Homeowner Bill of Rights. I’m struggling under a very expensive mortgage and I’m wondering if this new law, or set of laws, would be of any help to me.
A: Well, my short answer ranges from “probably not” to “no.”
I’m afraid that the new Homeowner Bill of Rights has more to do with election year politics than it does with providing real help for homeowners.
The public face of the bill is Attorney General Kamala Harris, a Democrat, and the bill ultimately passed both houses with the votes split right down party lines before the November election.
Remember as we go through the bill that this is a California law, not a federal law. In other words, if the law affects anyone, it only affects Californians and, perhaps businesses that do business in California.
The banner provisions of the law address four distinct issues.
The first is a prohibition on banks from engaging in what has become known as “dual tracking.”
Dual tracking occurs when the homeowner is in the process of applying for a loan modification. During the application process, the homeowner often assumes the foreclosure process is on hold.
As a general rule, the bank has often already handed your file to their foreclosure department, where it has been put on the “intake” end of the conveyor belt. When it gets to the other end the home is lost, regardless of where the homeowner is in the loan modification process.
To make matters worse, lenders will tell homeowners who are trying to stay current on their payments that they must stop making payments before the bank will talk with them. That puts the homeowner on the road to a foreclosure despite the fact they were willing to pay their mortgage.
The new law is designed to stop lenders from dual tracking.
In theory, if the homeowner applies for a modification, the foreclosure process must stop while the lender considers the modification.
For reasons I’ll explain in a moment, I’m skeptical of how valuable this provision of the law really will be.
Next is the requirement that homeowners seeking a modification be assigned a “single point of contact” within the bank.
The law seeks to mandate that the bank give the homeowner the name and contact information of a person who will be required to remain current on the progress of the individual homeowner’s application.
The last two flagship provisions prohibit the infamous “robo-signing” of foreclosure documents and give the homeowner the right to sue in court for fraudulent foreclosure.
While consumers may find these sections exciting, the truth is that robo-signing has never been much of a problem here in California since we do our foreclosures very differently than the rest of the country.
Likewise, homeowners have always had the right to sue for fraudulent anything! That includes a fraudulent attempt to foreclose on a property.
The remainder of the law just extends a number of existing laws that were set to expire at the end of this year.
Laws that have been in place for several years – such as the amount of notice a new owner must give to an existing tenant following a foreclosure and the right of a city to fine new owners for blight prevention – are now extended another year.
The major problem I see with the dual tracking and single-contact provisions is that we have a state law trying to change the way nationally regulated banks do business.
Yes, if a bank dual tracks and the homeowner is on the verge of foreclosure, the homeowner may be able to go into their local state court and get an order stopping the sale.
But as a practicing attorney, I have trouble believing that a vast majority of people would pay the money to hire an attorney to file the necessary paperwork and appear in court on this issue. That’s especially true when you figure the house is likely way underwater regardless and the one thing the homeowner probably doesn’t have an extra amount of is cash.
That applies even more strongly to the single contact provision.
So you’re applying for a modification and they keep giving you the runaround, are you really going to pony up $10,000 or more to pursue some remedy in court, only to have the bank deny your modification at the end anyway?
These laws don’t make the banks’ conduct criminal. The laws are strictly a civil issue which only really helps people who are willing and able to press their rights in court.
Almost two years ago, we saw California enact new laws dealing with banks and short sales.
They are great consumer protection laws, but we’ve seen banks flaunting many of their obligations under the laws ever since.
Again, laws are only as good as the willingness and ability of people to use them. It remains to be seen what, if any, affect the new laws will have on California’s distressed homeowners.
Tim Jones is a real estate attorney in Fairfield. If you have any real estate questions you would like to have answered in this column you can contact him at [email protected]