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CLICK TO FAXThe Homeowner Bill of Rights
While the housing market is slowly improving, many are still faced with the tough decision to foreclose on their homes. Out of the top 100 U.S. zip codes hit the hardest with foreclosure sales, 38 were in California alone, cutting property values and tax valuations for the state. In order to remedy our foreclosure crisis, the Homeowner Bill of Rights was passed. This new legislation has been introduced to help stabilize the market by giving homeowners a better chance to apply for loan modifications and workouts before homeowners lose their properties to foreclosure and setting guidelines to prevent lender abuses.
To cut through the confusion many homeowners experience when faced with the possibility of foreclosure, the new law requires enhanced notification to borrowers, letting them know what options they have for financial relief and what is required of them to obtain loan modifications. The new law promotes improved communication between lenders and buyers by:
- Requiring lenders to maintain a consistent point of contact and clear and accurate information to guide the homeowner through the loan modification process.
- Requiring lenders to inform borrowers that they may still apply for a loan modification even if they have not submitted an application before a notice of default has been issued.
- Requiring lenders to document reliable evidence that the borrower defaulted on the mortgage and that there is a right to foreclose on the property.
- Prohibiting lenders from recording a notice of sale on properties in foreclosure until the lender has submitted a completed loan modification application and received a decision.
To prevent lender abuse, the law extends the statute of limitations from one to three years when prosecuting complex crimes related to mortgages, grants the right to conduct a statewide grand jury to probe financial crimes across multiple counties, and allows borrowers to pursue legal action against lenders who have violated the law after a notice of default has been recorded. If a lender's actions are found by a judge to have materially violated the law, the judge may force a stop on the foreclosure proceedings, require the lender to correct violations, and allow the borrower to seek compensation for damages and attorney fees after a foreclosure sale.
The new law will help improve transparency between lenders and borrowers, giving borrowers a chance to make a bona fide effort to keep their homes by applying for loan modifications. It also provides lenders a concrete set of guidelines to prevent misunderstandings and further complications with borrowers and foreclosed properties. Finally, this bill combined with the Bankruptcy Code will provide homeowners will new tools to avoid foreclosures altogether. If you would like to learn more about how the new Homeowner Bill of Rights can affect you, call our office to speak with one of our real estate attorneys.
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