New Laws Modify Foreclosure Process to Protect Homeowners

As of January 1, 2013 a new set of laws went into effect that places the burden on banks to help consumers through the foreclosure process.  The Homeowner Bill of Rights was championed into law by California Attorney General Kamala Harris and was designed to correct perceived abuses by lenders while protecting homeowners from foreclosure abuses.

The Homeowner Bill of Rights applies ONLY to first deeds of trust that are secured by owner-occupied residential property located in the State of California. 

The Homeowner Bill of Rights now places the following requirements on ALL lenders:
“Dual-Tracking” Ban:  Upon receipt of an application for a loan modification, a lender must halt any foreclosure activity until it renders a decision on the application. (Cal. Civ. Code §§ 2923.6 and 2924.18)

“Robo-Signing” Ban:  Before filing or recording any foreclosure notice, the lender must review competent and reliable evidence to substantiate the borrower’s default and the right to foreclose. (Cal. Civ. Code § 2924.17)

New "Notice" Requirements - Cal Civ. Code § 2924(a)(5):
  • Within 5 days of recording a notice of default, a borrower must be sent a notice regarding foreclosure prevention alternatives (ie.- loan modification or shortsale).
  • When a trustee’s sale is postponed for at least 10 days, the borrower must receive written notice of the new sale date within 5 days of the date of the postponement.

Lenders that conducted more than 175 foreclosures in California the previous year are also subject to the following new laws:

Single Point Of Contact: For borrowers eligible for a loan modification, short sale or deed-in-lieu-of foreclosure, lenders must designate a “single point of contact” with knowledge of the borrower’s status and foreclosure prevention alternatives that has access to decision makers. This contact person is assigned to the borrower until all foreclosure alternative options have been exhausted or the loan is brought current. (Cal. Civ. Code § 2923.7)

Lender/Servicer Must Halt The Foreclosure Process Once A Modification Is Approved: A notice of default may not be filed after a loan modification is approved. Any foreclosure notices recorded prior to an executed modification agreement must also be rescinded. (Cal. Civ. Code § 2924.11)

Lender/Servicer May Not Charge Any Fees In Connection With A Loan Modification: A lender may not charge any fees in connection with the loan modification process. (Cal. Civ. Code § 2924.11)