California’s proposed Homeowner Bill
of Rights, originally proposed by the state’s attorney general Kamala Harris
and covered here
has been modified extensively following what the Center for Responsible Lending
(CRL) calls six weeks of intense negotiation with banks, legislators, the
attorney general and consumer groups.
Among the changes reported by CRL is
a narrowed scope for both the loans and servicers covered by the bill. The only loans to which the bill will now
apply are first mortgages on owner occupied one-to-four family houses and only
servicers who process more than 175 foreclosures per year will be subject to
many of its requirements.
Earlier versions of the bill
required the lender or servicer to record and provide evidence of all
assignments as part of the chain of title to foreclose. The current version requires that only
evidence of the last assignment be available to the borrower. The current bill also includes an express and
comprehensive right to cure until the notice of trustee sale is filed. A servicer can avoid liability by curing a
violation before the foreclosure sale.
Originally the bill provided
post-sale minimum statutory damages of the greater of actual damages or
$10,000; the new version allows only actual damages with triple damages or a
minimum of $50,000 available only in cases of intentional reckless violations
or willful misconduct.
Unlike the National Mortgage
Settlement the California bill allows for multiple contact persons as long as
they have the access and authority of a single point of contact. Prohibitions against dual tracking and false
documents remain as in the original law, however the enforcement provisions
sunset after five years.
CRL says that this Homeowner Bill of
Rights remains critical for large number of borrowers, their communities, and
the California housing market. It
ensures that borrowers in owner-occupied homes applying for loan modifications
get full and fair consideration for those modifications before the foreclosure
process begins. This will allow the
foreclosure process to move more quickly for those who do not qualify for home
retention alternatives while preventing unnecessary foreclosures on borrowers
CRL released a new study of
California delinquencies with three principal findings. First, loan modifications work well to keep
borrowers in their homes. More than 80 percent
of California homeowners who received modifications in 2010 stayed current and
avoided re-default despite the continued recession. Only 2 percent of those modified loans ended
Second, large numbers of borrowers
remain at risk with nearly 700,000 California mortgages in some state of delinquency
or foreclosures. This is one out of nine
Third, middle class, African
Americans, and Latinos are the hardest hit.
The delinquency rates for African Americans and Latinos are 11.1 and
10.7 percent respectively while for Asians and whites the rates are 7 and 7.3
percent. Delinquencies are concentrated
among middle class borrowers, those making between $42,000 and $120,000
“California policymakers will soon have the
chance to extend key servicing reforms from the National Mortgage Settlement to
all California borrowers, said Paul Leonard, CRL’s California Director.
“Our legislators have an historic opportunity to overcome intense opposition
from the big banks and ensure that all Californians get a fair shot at loan