Impact of the California Homeowner Bill of Rights on Foreclosures

By Esther Cho, DSNews.com

The California Homeowner Bill of Rights (HBR) is the main driving force behind the recent slowdown in foreclosure sales and short sales in the Golden State, according to a research report from Barclays. In addition to stalling the foreclosure process, provisions in the new bill, which took effect January 1, 2013, have also led to an increase in litigation risk for servicers, analyst at Barclays found.

According the report, short sale activity and foreclosure sales have been dwindling over the past few months, as indicated by foreclosure-to-REO and foreclosure-to-liquidation roll rates. At the same time, roll rates in other states appear to be steady.

As a result of the HBR, Barclays believes “servicers have become significantly more cautious when carrying out foreclosure sales” in the state. While the bill offers several protections to homeowners, one particular provision that allows borrowers to sue servicers for “material violations” of HBR could result in additional costs for servicers.

Violations of the HBR include dual-tracking, failing to provide a single point-of-contact, and neglecting to deliver proper notice of loss mitigation options.

The report explained that prior to a foreclosure sale, homeowners can seek injunctive relief to halt the foreclosure process. If a homeowner secures an injunction, the borrower can pass all legal costs to the servicer through the HBR, even if no material violation of the HBR is proven later, the report explained.

“Our understanding is that securing an injunction may require only a declaration from the borrower that a material violation of the HBR has occurred and some reasonable justification for further investigation into the alleged breach. It is possible that multiple consumer rights attorneys will offer their services on a contingent basis to borrowers facing foreclosure, effectively providing the homeowner with a zero-cost option to pursue litigation,” the report stated.

If the request for an injunction is granted, legal costs could easily rise to the thousands as the court looks into the allegations. The process could also add another 6-12 months to the foreclosure process, according to the report.

“Furthermore, borrowers are much more incentivized to demand a copy of the promissory note, the chain of mortgage assignments, and the borrower’s payment history to collect evidence that a breach of HBR occurred, further stalling the foreclosure process,” the report explained.

Even though California is not a judicial state, analysts suspect the increase in litigation risks and the extended foreclosure timelines might cause servicers to pursue more judicial foreclosures, which are exempt from the HBR’s provisions.



California Anti-blight Bill Signed into Law

By: Tory Barringer, DSNews.com

California governor Edmund G. Brown signed into law a bill to help combat neighborhood blight, state attorney general Kamala Harris announced Monday.

The bill—AB 2314—gives new homeowners additional time to fix any code violations in a home before local agencies move in to enforce the codes. It also extends indefinitely an existing provision that requires the owner of a foreclosed property to maintain the property.

“We need solutions to the problem of blight which threatens the health and safety of California communities hit hardest by the mortgage crisis,” said Wilmer Carter (D-Rialto), assemblymember and the bill’s author. “AB 2314 will ensure that local jurisdictions continue to have the tools to prevent and fight neighborhood blight due to foreclosures.”

The new law is part of Harris’ California Homeowners Bill of Rights, a series of bills designed to extend reforms first negotiated in the national mortgage settlement. Two previous bills were signed into law in July.

Other components of the Homeowners Bill of Rights are pending in the legislature. They include provisions that would enhance law enforcement responses to mortgage and foreclosure fraud and grant Harris the ability to convene a special multi-jurisdictional grand jury when necessary.

Another bill that would grant protections to tenants in foreclosed homes is currently awaiting action by the governor.

 

Assembly Committee Passes California Homeowner Bill

California Attorney General Kamala Harris announced Tuesday that the Assembly Public Safety Committee passed a piece of the California Homeowner Bill of Rights designed to protect the state’s homeowners from scams.

SB 1474, authored by Sen. Loni Hancock (D-Berkeley), would allow Harris to convene a special grand jury to investigate and indict perpetrators of financial crimes involving victims in more than one county, as well as crimes committed by a single defendant or multiple defendants who worked together. Under current law, fraud involving victims in different counties requires separate grand juries, and charges must be filed in every county where the crime was committed. SB 1474 would provide for the option of a special grand jury that can produce indictments for financial crimes beyond the scope of single-county grand juries.

The bill passed unanimously with bipartisan support. It had previously passed out of the California Senate May 31, also with unanimous and bipartisan support. It will next be heard in the Assembly Appropriations Committee.

“Scammers continue to prey on vulnerable Californians who simply want to stay in their homes,” said Attorney General Harris. “This legislation will create a more cohesive legal process to prosecute those who prey on Californians across county lines.”

By: Tory Barringer