Taking effect January 1, 2013, California Gov. Jerry Brown announced Wednesday he signed into law the California Homeowner Bill of Rights.
What is the California Homeowner Bill of Rights?
Two different components make up this piece of legislation. Sponsored by Attorney General Kamala Harris, Around the Capitol notes that AB 278 was introduced by Mike Eng (D-Monterey Park), Mike Feuer (D-Los Angeles), Holly Mitchell (D-Los Angeles) and John Pérez (D-Los Angeles). SB 900 was introduced by Mark Leno (D-San Francisco), Noreen Evans (D-Santa Rosa), Ellen Corbett (D-San Leandro), Mark DeSaulnier (D-Concord), Fran Pavley (D-Agoura Hills) and Darrell Steinberg (D-Sacramento).
How do these bills work together to form a law?
AB 278 and SB 900 change California's non-judicial foreclosure process. Loan servicers may no longer proceed with foreclosures if homeowners are also involved in a loan modification application process. Borrowers receive a concise point of contact to ask about the modification process and negotiate the terms. Lenders must show a paper trail of pre-defined contacts with the borrower -- prior to filing foreclosure paperwork. Enforcement takes place via civil penalties targeting lenders. The goal of the California Homeowner Bill of Rights is heightened transparency in the loan modification and foreclosure processes.
"Californians should not have to suffer the abusive tactics of those who would push foreclosure behind the back of an unsuspecting homeowner," the governor noted.
Why was there a need for this type of legislation?
As noted by the Ventura County Star, California Rural Legal Assistance (CRLA) has complained homeowners are under the impression that their loan modification is moving forward, only to find out that the lenders have proceeded with foreclosures at the same time. The foreclosure usually comes through before the loan modification is resolved.
Will the new law help all struggling homeowners?
No; in fact, it only pertains to first liens, which does not help homeowners with first and second mortgages. Also not covered are homeowners currently in a bankruptcy process or those who own rental real property. The homes must be owner-occupied and have fewer than four units. If homeowners already applied for loan modifications and are denied prior to the law's effective date, they are not covered by the new rules. "Nobody should do a loan modification between now and Jan. 1," a Valencia attorney told the Ventura County Star.
How will passage of the California Homeowner Bill of Rights adversely affect the state's housing market?
Opposing the law, the United Trustees Association cited "reduced home values" as a likely outcome. Real estate professionals have claimed that this law may scare away investors from putting money into the California market. Attorneys, too, worry that a new "right to sue" will lead to the creation of a significant backlog of cases in already busy courts.
Sylvia Cochran is a Los Angeles area resident with a firm finger on the pulse of California politics. Talk radio junkie, community volunteer and politically independent, she scrutinizes the good and the bad from both sides of the political aisle.
- Real Estate