June 27, 2012
By Key California Assembly & Senate Leaders
Homeowners From Unfair Mortgage Foreclosure Practices
SACRAMENTO, CA – A Conference Committee made up of key California Assembly and Senate members approved the California Foreclosure Reduction Act today. The bill requires all lenders to abide by a number of provisions of the national mortgage settlement negotiated by state attorneys general earlier this year to rein in foreclosure abuses. The full Assembly and Senate is expected to vote on the legislation as early as next Monday.
“Californians are still at risk of losing their homes to abusive foreclosure practices,” said Norma Garcia, manager of Consumers Union’s financial services program. “This bill is long overdue and will help curb unfair lending practices so that more Californians can avoid foreclosure and can keep their homes. Reducing foreclosures will help stabilize the state’s housing market and help limit the terrible impacts this crisis has had on families, communities and our economy.”
The California Foreclosure Act would help protect homeowners in a number of important ways, including provisions that:
Curb Dual Tracking: Many homeowners lose their homes to foreclosure while they are trying to negotiate a loan modification. The bill would extend a provision of the national mortgage settlement to ensure that borrowers who submit a complete loan modification application will get an answer from the lender with an explanation for the decision before the foreclosure process can be started. Lenders must notify borrowers who do not submit an application before a Notice of Default is issued that they still have the right to apply for a loan modification. The servicer is prohibited from recording a Notice of Sale on the property until the borrower is provided with a decision on the loan modification application.
Require Lenders to Provide Proper Documentation: Under the bill, a loan servicer must be able to produce reliable evidence to prove that the borrower has defaulted on the mortgage and that it has the right to foreclose. This provision is designed to prevent lenders from robo-signing foreclosure notices without proper documentation.
Provide Borrowers with a Single Point of Contact: Borrowers who may qualify for a loan modification must be provided with a single point of contact at the lender. The contact person must provide clear and accurate information to the borrower and help coordinate the loan modification process.
Hold Lenders Accountable: Borrowers may bring legal action against loan servicers for material violations of the law after a notice of default has been recorded. Servicers will be given the opportunity to address any violations of the law prior to a foreclosure sale. Under the bill, judges may only provide injunctive relief that requires the servicer to stop the foreclosure sale and correct any violations of the law. Judges may award damages and attorneys fees for legal actions brought after a foreclosure sale.
California has been particularly hard hit by the foreclosure crisis. Over 900,000 foreclosures occurred in California between 2007 and 2011. Last year, 38 of the top 100 ZIP codes hit hardest by foreclosures were in California. California’s foreclosure crisis has hurt property values throughout the state and resulted in less revenue for schools, public safety, and other vital public services.
Contact: Michael McCauley, mmccauley@consumer.org, 415-431-6747, ext 126