[author: Robert C. Briseño]
The State of California recently enacted the first piece of the so-called California Homeowner Bill of Rights (the CHBR). Governor Edmund G. Brown Jr. signed this legislation into law on July 11, 2012. The new statute will go into effect January 1, 2013. The key elements of the CHBR—originally introduced in February of 2012—are below.
Specifically, the ambitious legislation does the following: (i) bars lenders from filing notices of default, notices of sale, or conducting foreclosure sales while also actively engaging in the consideration of alternatives to foreclosure (such as loan modifications, short sales, and deeds in lieu of foreclosure)—a process commonly known as “dual-tracking”; (ii) requires lenders to provide a single point of contact for borrowers—a contact with knowledge of the borrower’s loan and direct access to decision makers—subject to certain restrictions; (iii) imposes civil penalties (up to $7,500) for the repeated filing of foreclosure documents without properly reviewing the foreclosure documents and verifying their accuracy—a process commonly known as “robo-signing”; and (iv) provides homeowners a clearly defined right to access state courts to protect themselves from violations of these protections.
In addition to this first law, the overall CHBR also includes four other bills not yet passed by the legislature. The companion legislation seeks, among other things, to: (i) enhance law enforcement responses to foreclosure-related violations; (ii) help communities fight blight related to foreclosure and the crime which results; and (iii) provide enhanced protections for tenants residing in foreclosed residential properties.
This legislation has been criticized and opposed by lenders, mortgage servicers, and other real estate market professionals on the grounds that it unnecessarily burdens them and delays foreclosures— rather than preventing them. In light of such criticism, prior to their passage through the California legislature, the new legislation was amended to restrict its application solely to first mortgages and only to homeowners still occupying their residences.
Due to the ongoing criticism and the potential impact of the CHBR-enacting legislation, the development of the remaining statutes warrants close attention and scrutiny from the residential lending and servicing communities.