The Homeowner Bill of Rights (SB900 AB278) - What Does it Mean to You? Part 1

Before interviewing State Senator Joel Anderson on my radio show recently (see podcast 1/19/13 at www.TheRealEstateDr.com), I determined to download and read the bill in its entirety. I wanted to be prepared with questions for him. In reading it, I can see how the lawmakers endeavored to make it user friendly for the homeowner.  The paragraph that clarifies their intent is very inspiring and provides us with statistics that perhaps many were not aware of prior to reading it in the bill.  It’s reassuring to know that our lawmakers are coming to terms with the horrible situation we have been living with since 2006. This preamble, of sorts, also enlightens us as to where California stands within the realm of the entire Country as to financial individual, municipal, and Statewide hardship.  I quote from the bill (with emphasis):

SECTION 1.  The Legislature finds and declares all of the
following:
   (a) California is still reeling from the economic impacts of awave of residential property foreclosures that began in 2007. From 2007 to 2011 alone, there were over 900,000 completed foreclosure sales. In 2011, 38 of the top 100 hardest hit ZIP Codes in the nation were in California, and the current wave of foreclosures continues apace. All of this foreclosure activity has adversely affected property values and resulted in less money for schools, public safety, and other public services. In addition, according to the Urban Institute, every foreclosure imposes significant costs on local
governments, including an estimated nineteen thousand two hundred twenty-nine dollars ($19,229) in local government costs. And the foreclosure crisis is not over; there remain more than two million "underwater" mortgages in California.
   (b) It is essential to the economic health of this state to mitigate the negative effects on the state and local economies and the housing market that are the result of continued foreclosures by modifying the foreclosure process to ensure that borrowers who may
qualify for a foreclosure alternative are considered for, and have a meaningful opportunity to obtain, available loss mitigation options. These changes to the state's foreclosure process are essential to ensure that the current crisis is not worsened by unnecessarily
adding foreclosed properties to the market when an alternative to foreclosure may be available. Avoiding foreclosure, where possible, will help stabilize the state's housing market and avoid the substantial, corresponding negative effects of foreclosures on
families, communities, and the state and local economy.
   (c) This act is necessary to provide stability to California's statewide and regional economies and housing market by facilitating opportunities for borrowers to pursue loss mitigation options.

You can read the bill in its entirety from the link on my website and here are the highlights of the bill as I understand it:

1. The terms of the bill apply only to owner-occupied properties 1-4 units, though I believe we will see the lenders using these rules on every residential property, just to be safe.
2. NO DOUBLE-TRACKING. Once a lender has a completed application from a homeowner or their representative for a foreclosure alternative program such as loan modification or short sale, the lender cannot initiate or continue with the foreclosure process until a determination is made as to eligibility of the homeowner for the alternative they are requesting.
3. TIMELINES: The lender must acknowledge their receipt of a complete package (the lender determines what that is) within 10 days of receipt. The lender must have a call with the borrower or their representative within 14 days of receiving a request for a foreclosure alternative/loan modification. Upon declaring the package complete, the lender must give an answer to the request within 30 days. 
4. If a lender sells or assigns the loan which has been approved, IN WRITING, for a short sale or loan modification, the new lender must abide by the terms of that approval. THIS IS HUGE! 
5. Lenders must assign a “single point of contact” live person to the homeowner or their representative. 
6. If the lender is robo-dialing homeowners in an attempt to contact the homeowner to comply with the anti-foreclosure alternative offer, there must be a live person to handle the homeowner’s return call.
7. If a trustee sale is postponed, the lender must send a new sale date to the homeowner in writing.
8. A short sale or loan modification, with full written approval from all parties, cannot be foreclosed upon, as long as the homeowner is in compliance with that approval.
9. If a trustee sale has not been recorded, a homeowner may bring “injunctive relief” if they determine there has been a violation of this statute, which shall stop the recording or the sale until the lender has proved they are in compliance with the law.
10. There is recourse, not for the homeowner if the lender violates the rules of the bill, but to the regulatory agency having jurisdiction over the lender, of up to $7500. The rules are surprising specific and lay out within the verbiage of the bill.
11. There is recourse to the homeowner if the lender forecloses fraudulently (Can you spell robo-signing?) up to $50,000. (Also pretty specific verbiage.)

There are several ambiguities that should concern those of us involved in this process. Tomorrow I will talk about those.