Homeowners Bill of Rights

A Law That Help Homeowners to Stop Foreclosure in California

As of January 1st of 2013, the California Homeowners Bill of Rights (SB900) is in effect. The law reformed a few aspects of California’s foreclosure process in a way that affords homeowners better protection. SB900 also gives borrowers their day in court for any foreclosure violations on the part of the lender.

There were over one million California homes foreclosed on between 2008 and 2011. In a lot of those cases, lenders gave homeowners little chance to seek out loss mitigation options for avoiding foreclosure and they also engaged in extensive mortgage service misconduct. This is why Governor Jerry Brown signed the Homeowner Bill of Rights into law in California.

The aim of SB900 is to make the non-judicial foreclosure process both fairer and more transparent. The effect of the law is to give protection to homeowners who are facing foreclosure as well as to reform several aspects of the entire process. The goals of this Bill are to ensure homeowners are looked out for, and they are assured to receive a meaningful opportunity for exploring loss mitigation solutions, like loan modifications and other avenues that will help them.

Benefits of SB900

Under California law, California foreclosure prevention is required before a lender can foreclose. Lenders can no longer foreclose on a homeowner if a loan modification application had been filed and is still pending. This process is known as ‘dual-tracking’. When the Homeowner Bill of Rights was passed, this practice of dual-tracking was banned, meaning loan servicers had to make a decision as to whether they would deny or grant first-lien loan modifications, before any foreclosure proceedings were allowed to continue. The process was more or less ‘frozen’ until that decision was made, stopping lenders from foreclosing while applications were pending.

In California, a borrower in a loan modification review can file a lawsuit if the lender simultaneously moves ahead with the foreclosure.

Lenders Are Given New Rules

In the past, a homeowner would have to call their lender to seek help on their mortgages. They would have to explain all of their circumstances over and over to several representatives. Once the Homeowner Bill of Rights was in force, lenders had be designate one single point of contact to any homeowners who may be eligible to receive loan modifications as well as other alternative prevention methods. This not only streamlined the process but saved a lot of people a lot of headaches.

The Right to Sue

Another provision of this law allows a homeowner to sue a lender for violating SB900. They can potentially get the following types of relief –

  1. Injunction relief, like stopping a foreclosure sale (providing it hasn’t happened yet).
  1. Economic damages if a foreclosure sale has already taken place.

Consequently, if the court should find that any violation had been done willfully, recklessly, or was the result of willful misconduct performed by any loan servicer or any lender, the borrower could be awarded damages by the court. This is also a good way for homeowners to recoup their attorney fees for foreclosure.

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