Changes to California’s Homeowner Bill of Rights for 2018
On January 1, 2018, changes to the California Homeowner’s Bill of Rights (HOBR) are bound to affect loan servicers throughout the state, presenting new challenges and in some cases lightening the administrative load. Here’s what you need to know about the new provisions so that you can proceed with due diligence.
1. Low and High-Volume Foreclosure Servicers May Be Treated the Same.
“HOBR II” proposes to no longer distinguish between loan servicers who handle large numbers of annual foreclosures (over 175) and those servicing fewer delinquent accounts.
2. Civil Code Section 2293.55 Becomes (Somewhat Streamlined) Section 2923.5.
Requirements for contacting a delinquent homeowner prior to the notice of default (NOD) are contained in this section of the civil code. They remain substantially the same as they were in the original HOBR, with two exceptions: items mandating written notice regarding service members and the borrower’s ability to request a copy of the note, assignment, deed of trust, or payment history have been dropped.
Even without these two requirements, there are still a number of hoops loan servicers must jump before they can legally file the NOD, so it remains critical that pre-NOD contact with delinquent lenders be well documented in case the homeowner decides to file suit. You should also make sure that your company’s compliance declarations have been updated to reflect these changes to the code.
3. “HOBR II” Lowers the Bar for Staying a Foreclosure Sale.
In the original Homeowner’s Bill of Rights (Section 2923.6) homeowners could only prevent the foreclosure sale by completing a loan modification application. The new provision (Section 2924.11) broadens their chance of staying the foreclosure sale process by prohibiting the loan servicer from dual tracking if the homeowner submits “a complete application for a foreclosure prevention alternative.”
On the other hand, Section 2924.11 does not require an appeal period following a written denial but simply mandates that “the mortgage servicer shall send a written notice to the borrower identifying. . . the reasons for the denial” and “a statement that the borrower may obtain additional documentation supporting the denial decision upon written request.”
4. Section 2923.6(g) Vanishes, Leaving Loan Officers in Suspense
This section of the civil code excused loan officers from reviewing multiple loan modification applications provided there was no “material change in financial circumstances.” The section is now gone, and there is no replacement, leaving servicers unclear as to whether they now must review multiple applications even when there is no change to the homeowner’s financial status.
5. Borrowers May Only Create a Private Right of Action for Specific Code Violations
Borrowers may still create a private right of action to enforce HOBR; however, they are now restricted from doing so except in the case of a material violation of Sections 2923.5, 2923.7, 2924.11, and 2924.17. As in the original HOBR, the homeowner is only entitled to injunctive relief prior to the Trustee’s Deed Upon Sale recording.
The servicer may be liable for actual economic damages after the deed records. If the court finds that the material code violation was intentional, reckless, or the result of misconduct, the greater of treble damages or $50,000 may be awarded to the borrower, in addition to attorney’s fees.
These changes to the California Homeowner’s Bill of Rights are not, for the most part, substantial. Sometimes they simply remove regulations already covered by the Consumer Financial Protection Bureau. Other times, they excuse loan servicers from the burden of redundant paperwork.
Unfortunately, the code modifications still leave broad gray areas. What happens when a servicer receives a complete loan modification application just minutes before a foreclosure sale? Will servicers now need to review multiple modification applications regardless of unchanged circumstances on the part of delinquent homeowners? Extending the dual tracking restriction to all “foreclosure prevention alternatives” is another troubling change that could have a substantial impact on foreclosure sale process.
What most mortgage loan servicers want to know, of course, is whether the changes will lead to more or less litigation down the road. For now, most lawsuits will stem from violations to the original HOBR. One thing is clear, though — servicers need to adapt and become familiar with the changes now, or the potential for litigation is bound to increase in the future.
Still Have Questions about HOBR?
Peak Foreclosure Services, Inc. specializes in a wide range of default servicing solutions to support and meet the needs of banks, private investors, servicers, and sub-servicers. We offer in-house judicial foreclosures services, reconveyance, post foreclosure services, and loss mitigation in Arizona, California, Idaho, Montana, Nevada, North Carolina, and Washington. Our technological and detail-oriented approach to service has set the standard for the industry.