What? The California Foreclosure Reduction Act (aka Homeowner’s Bill of Rights) amends California’s non-judicial foreclosure process.
When? Goes into effect Jan. 1, 2013, in effect 5 years.
Who? Affects borrowers, loan servicers, lenders and DRE licensees. “Smaller banks” are exempt. Applies to 1st position loans against residential 1-4 unit owner-occupied dwellings.
Why? Designed to solve the problems with borrowers experiencing “dual tracking,” lack of responsiveness from lenders loan modifications and the perceived problem with “robo-signing.”
How? Prohibits lenders from foreclosing if the borrower is in an trial loan mod or if the lender has not yet responded to the borrower’s application. Lenders must cancel a foreclosure sale if the short sale has been approved, and proof of funds has been given to lender. Borrowers can seek an injunction to stop the foreclosure if lenders don’t comply, and win attorney’s fees and costs and damages up to $50k.
The New Law:
- Changes Loan Modifications
- Prior state of the law was that they must consider the app. Now, they must respond within 5 days
- Borrower has 30 days to appeal denial
- No Notice of Trustee’s Sale or trustee’s sale may be held if application is pending
- Prohibits creditors from recording a notice of default when a timely-filed application for a loan modification or other loss mitigation measure is pending.
- Prohibits creditors from recording a notice of sale while a borrower is in compliance with the terms of a trial loan modification or after another loss mitigation measure has been approved.
- Require creditors to disclose why an application for a loan modification or other loss mitigation measure has been denied.
- Deals with Short Sales
- Lender must cancel a sale if the short sale has been approved by all lienholders, and proof of funds has been given to lender.
- Imposes Tougher pre-foreclosure Requirements on the Lender:
- Pre-Notice of Default (NOD) requirements – must give the borrower a notice re: right to get docs
- Requires creditors to provide documentation to a borrower that establishes the creditor’s right to foreclose on real property prior to recording a notice of default.
- Gives Borrowers a Stronger Legal Remedy
- Statute gives borrowers a private right of action, and they can seek an injunction to stop the foreclosure sale if lenders violate the provisions.
- Statute provides for attorney’s fees and costs, damages up to $50k.
- Affects DRE licensees because if a licensee violates the provisions, it is a violation of their license.
- Makes communication of the sale date mandatory.
- Requires that notices of foreclosure sales be personally served, including notices of foreclosure sale postponement (if postponement is 10 days or more).
If you or someone you know may need legal assistance regarding such matters, please contact the Law Offices of Peter N. Brewer at (650) 327-2900 or visit us on the web at www.BrewerFirm.com to schedule an appointment with one of our knowledgeable attorneys.