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California becomes first state with Homeowner Bill of rights

Posted: August 16, 2012 2:00 a.m.
Updated: August 16, 2012 2:00 a.m.

California recently became the first state in the nation to enact a Homeowner Bill of Rights designed to halt abusive tactics of loan servicers and protect struggling homeowners who are trying, in good faith, to renegotiate their mortgages.

The measure was passed by the Legislature and signed into law by Gov. Edmund G. Brown, Jr., on July 11.

Realtors opposed elements of this well-intentioned legislation, fearing it will encourage the filing of frivolous lawsuits intended solely to delay and, as a result, further discourage lending.

The California Association of Realtors promised to continue to fight for “thoughtful, balanced reform of the foreclosure process.” CAR worked cooperatively with the state attorney general on several of the provisions in the homeowner protection measure.

The Homeowner Bill of Rights spans multiple topics, yet boils down to four key components:

n Prohibiting “dual track” foreclosures that occur when a servicer continues foreclosure while also reviewing a homeowner’s application for a loan modification

n Creating a single point of contact for homeowners who are negotiating a loan modification

n Expanding notice requirements that must be provided to a borrower before taking action on a loan modification application or pursuing foreclosure

n Allowing injunctions against foreclosure until violations are corrected, and permitting civil penalties against servicers that file multiple, inaccurate mortgage documents or commit reckless or willful violations of law

The new law makes California the first state in the nation to take provisions in the National Mortgage Settlement, which covered the nation’s five largest mortgage loan servicers, and apply those rules to all mortgage servicers.

After the law takes effect on Jan. 1, 2013, a mortgage servicer or lender cannot record a notice of default or notice of sale, or conduct a trustee’s sale, if a foreclosure prevention alternative has been approved in writing by all parties — e.g., first lien investor, junior lienholder or mortgage insurer, as applicable — and proof of funds or financing has been provided to the servicer. Smaller banks are covered by requirements taking effect in 2018.

The full text of the law, aka Assembly Bill 278 and Senate Bill 900, is available at With some exceptions, the law pertains to only first trust deeds secured by owner-occupied properties with one-to-four residential units.

Erika Kauzlarich-Bird is president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.


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