How the New California Homeowner’s Bill of Rights Affects the Mortgage Service Industry
On September 14, 2018, California Governor Jerry Brown signed Senate Bill 818, permanently reinstating most of the provisions in the original “Homeowner’s Bill of Rights” (HBOR) and amending still others. The new bill is designed to address changes to the HBOR that went into effect on January 1, 2018, when certain key provisions of the bill expired.
Here’s what servicers and lenders need to know.
When Governor Brown signed the original HBOR in July, 2012, California was slowly emerging from the housing crisis. Lenders foreclosed on more than one million homes in the state between 2008 and 2011, and not only were homeowners given few opportunities to obtain loss mitigation; state agencies found evidence of sweeping misconduct.
As a result, California’s HBOR was considerably more strict than national regulations put in place by the Obama administration. Rather than targeting just a handful of the nation’s biggest lenders, it addressed almost every servicer and lender who did business in California.
On January 1, 2018, some parts of the bill expired and were replaced with new provisions. On the one hand, this legislation expanded the range of prevention methods that a homeowner could use to stop foreclosure proceedings.
At the same time, servicers were not longer required to provide delinquent homeowners with written notification of an impending action, and there was no clarity about whether banks had to accept last-minute loan modification applications. The January 1, 2018 modifications also removed the homeowner’s right to an appeal following the written denial of a first-lien loan modification application.
What’s New in SB 818?
The new HBOR redresses the perceived bias toward servicers, instituting a number of provisions designed to provide assistance to delinquent homeowners. These provisions apply to servicers who process more than 175 foreclosures annually and apply to first-lien, owner-occupied residential mortgages on properties with no more than four units.
The bill effectively puts an end to dual-tracking, forcing servicers to stop proceedings if the homeowner submits a completed first lien loan modification application at least five business days before the scheduled foreclosure sale. The servicer must then wait for a written denial of the loan modification, which it must send to the borrower, and the expiration of an appeal process.
Single Point of Contact
If the borrower calls to request help with delinquent mortgage loan payments, the new HBOR requires the servicer to establish a single point of contact — either an individual or a dedicated team — to communicate foreclosure prevention alternatives, coordinate the receipt of associated documents, and make sure that the borrower has access to all the foreclosure prevention alternatives the lender offers.
Right to Sue
The homeowner now has the right to file action against servicers who engage in material violations of certain sections of the HBOR. They may be eligible for injunctive relief, actual economic damages or, in the case of intentional or reckless violation, treble damages.
Servicers must also tread more carefully in the pre-foreclosure stage. The new HBOR requires them to wait 30 days after contacting the borrower before they can record an initial notice of default.
Implications of SB 818
The new HBOR closes some of the loop holes servicers may potentially have taken advantage of in order to expedite foreclosure proceedings. It also all-but-guarantees a backlog of proceedings as many delinquent homeowners postpone the inevitable, translating into bureaucratic paper trails and regulatory oversight of epic proportions for servicers across the state.
Peak Foreclosure Services, Inc. offers clients a wide range of default servicing solutions to meet the needs of banks, private investors, servicers, and sub-servicers nationwide. Detail-oriented, quality service translates into a high industry standard, which is why our clients rely on Peak Foreclosure to navigate the complex, ever-changing regulatory demands of this industry.