Effective January 1, 2013 California adopted what is known as the California Homeowner Bill of Rights. The stated purpose of the new law is to ensure fair lending and borrowing practices for California homeowners. Some of the provisions of the new law are the following;
Prohibition against dual track foreclosure: Since the bubble burst homeowners have often experienced a situation where the lender filed a foreclosure and at the same time were negotiating for, say, a loan modification. The lender’s negotiator would orally promise not to proceed with the foreclosure. The homeowner felt safe in continuing to negotiate with the lender only to find out that the subject property had been sold at foreclosure. Under this new law, the lender is required to “pause” the foreclosure process if the homeowner is working on securing a loan modification.
Single point of contact: We have all, too often, heard stories that when dealing with lenders ‘The right hand does not know what the left hand is doing’. We also heard so many stories about each time one would call the lender the homeowner would be stuck dealing with a new person who knew nothing about the history of the homeowner’s prior dealings with the lender. So the homeowner would have to start from scratch (de je vu, all over again!). This California law requires lenders have a single point of contact during their negotiations where the homeowner is attempting to retain their home. The contact, either a person or team, for the lender, has to be one who can get the homeowner a final decision about their application for a loan modification.
Verification of documents: Lenders who record or file multiple unverified documents can be subject to a civil penalty of up to $7,500 per loan and subject to enforcement by the appropriate licensing agency.
Enforceability: Borrowers have the authority to seek redress of “material” violations of the new law including injunctive relief prior to foreclosure and damaged following a sale.
Tools to prosecute mortgage fraud: The new law extends the statute of limitations to prosecute mortgage-related crimes is extended from one to three years to allow authorities to adequately investigate complex fraud schemes.
Tools to curb blight: Owners of properties are provided more time to facilitate code violations and also to permit and compel owners of foreclosed property to pay for upkeep to reduce neighborhoods from becoming blighted.
A separate law, the Mortgage Fraud Strike Force was created to investigate and prosecute misconduct at all stages of the mortgage process.
California has been in the forefront attempting to minimize the hardships on homeowners dealing with the abuses that have been prevalent in the lending industry especially following the bursting of the housing bubble. Will Arizona afford some additional protection? Time will be the judge of that. The best guess is “no” since the worst of the epidemic of foreclosures appears to be history. However, property owners in Arizona who still have to deal with major lenders will most likely still encounter serious problems and frustrations.
Most recently this firm has dealt with large lenders on behalf of persons wishing to do deeds in lieu of foreclosure. It is a frustrating experience. Just recently, we wrote the forth letter to the lender indicating all the requirements have been met and information sent to the lender to facilitate a deed in lieu of foreclosure. Each time the response from the lender is to send paperwork for a loan modification. It does absolutely no good to continue to point out that a loan modification is of no value to the client since he cannot afford even a modified loan payment. The owner had to move due to health reasons, bought a new home, and cannot afford the home in question. The bank continues to respond indicating how they will “help” our client with a loan modification. The frustration goes on!!!
In another matter I have written my third letter requesting that the lender, after two years of no action, file a foreclosure to get it over with so my client can begin to rebuild his credit. My client moved to a new location and has a new residence. The client is not interested in a loan modification. So onward we go – writing request after request. The lender does nothing. In the meantime, the house, after two years of being unoccupied and unattended, has suffered substantial diminution in value due to lack of attention and deferred maintenance. And the frustration continues for many homeowners!!