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Prompted by a seemingly never-ending litany of foreclosure abuses by banks, the California Legislature on July 2, 2012 passed a series of bills collectively referred to as the Homeowner’s Bill of Rights (HBR). The legislation has been signed by Governor Brown and takes effect on January 1, 2013. However, even though the law does not technically go into effect until next year, its effects should be felt immediately by distressed homeowners, especially since the new California laws are basically a mirror image of the universal settlement reach earlier this year by the major lenders and the United States Department of Justice. Key elements of the HBR should have a major impact on curing the most common bank abuses. 1. DUAL TRACKING Perhaps the most dangerous and insidious act soon to be outlawed is “Dual Tracking” where the lender proceeds with foreclosure proceedings WHILE AT THE SAME TIME evaluating the borrower for a loan modification. This has resulted in countless instances where a homeowner thinks he is being considered for a loan modification, only to answer the door one day and find a person claiming to have just purchased the home at a foreclosure sale. Such practices will no longer be allowed. Banks will now be required to “freeze” the foreclosure in place as soon as the homeowner has submitted a complete loan modification package. Additionally, the foreclosure must remain on hold until the application is fully processed, a decision is rendered AND the homeowner has exhausted his rights to challenge the modification denial. While we expect litigation over the issue of determining EXACTLY when a modification is deemed to be “complete” and the foreclosure deemed “frozen” the Dual Tracking ban is a huge step forward for distressed borrowers. 2. SINGLE POINT OF CONTACT The second biggest nightmare for homeowners has been the complete inability to get coherent status updates on a pending loan modification. Thousands of homeowners have complained that when they call the bank, they “never talk to the same person twice” and “one bank department has no know idea what another department is doing.” While our experience since the mortgage crisis began causes us to wonder whether that has been an accidental or intentional result, the important thing is that this should no longer be a problem. The Homeowner’s Bill of Rights requires that each borrower have a single contact person within the bank with “knowledge of the borrower’s status.” That contact person must also have access to higher up decision makers. The “single contact” rule should also help alleviate another of the major problems borrowers have experienced: Lost or Missing Documents. Homeowners have told us time and time again how they submitted extensive modification documents to the lender, only to have the lender tell them the documents weren’t received or are missing. Even worse, is the situation where the borrower isn’t even told about the missing documents before the Bank closes out the modification application and proceeds to foreclose. The borrower’s contact person will now have the responsibility for coordinating the flow of documents which should greatly reduce the “lost or missing” problems. 3. PRIVATE RIGHT OF ACTION For you, the homeowner, the most powerful part of the HBR is that the law gives YOU the right to sue for violations. If the lender violates the HRB,YOU can bring legal action to stop the foreclosure proceedings. Even if a foreclosure has already occurred, YOU still have the right to seek damages if that foreclosure violated these rules. WARNING: DON’T RELY ON THE HRB ALONE TO PROTECT YOU! The Homeowner’s Bill of Rights is an important step forward for homeowners, but it is not a guarantee of protection. YOUyourself have to take action to protect YOU. The first thing you have to do when you are trying to modify a loan is: DOCUMENT EVERYTHING FROM STEP ONE TO THE FINISH! The bank has absolutely no qualms about recording YOU but they will end the conversation immediately and abruptly if you try to record them! What to do? Simple, keep track of every telephone call, every email and every letter you receive from the lender. Write down the dates of each and every contact, the name and/or ID number of every person you talk to and the substance of what was said. Don’t fail to record a single event, because the one conversation you miss may be the one that gets your house back if the modification goes wrong and the foreclosure takes place. If you fax or scan/email documents to the bank, make sure you keep the fax transmittal or the email. Similarly, if you send documents by mail request - keep the delivery confirmation. If you are trying to modify your mortgage loan, we wish you nothing but complete success! The process can be long, tedious and difficult, but you CAN do it. Just remember to protect yourself at all times..... one missed deadline can cost you your home.
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