The West Coast Radio Show with Charles Marshall: California's revised Homeowner Bill of Rights still offers Homeowner Protections

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The West Coast Foreclosure Show with Charles Marshall

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Attorney Charles Marshall will discuss California’s Homeowner Bill of Rights today on the West Coast Foreclosure Show.

Loan servicers and banks have tried to convince Californians that California’s Homeowner Bill of Rights has been repealed effective on Jan. 1, 2018.   However, this is not completely true.  Only parts of the HOBR will be repealed and the Consumer Financial Protection Bureau’s Loss Mitigation Rules still apply.

Sections of the HOBR are being replaced by new rules that go into effect on January 1^st, 2018.  Some of the new rules can actually cause compliance issues for loan servicers.

The new rules referred to as “HOBR II” remove no longer distinguishes between servicers conducting more or less than 175 annual servicers.   Civil Code Section 2923.55 will no longer be applicable in 2018, and is replaced with Section 2923.5 that defines all pre-Notice of Default (pre-NOD) contact requirements for Servicers of all sizes.

Although these two statutes are similar, the differences are for the written notice regarding service-members and the statement that borrowers can request a copy of the note, deed of trust, assignment, or payment history starting in 2018 will no longer be required.

The provisions in Section 2923.6 that prohibited dual tracking is replaced by Section 2924.11, which prohibits recording a notice of sale or conducting a foreclosure sale upon receipt of a “complete application for a foreclosure prevention alternative.” In the past, loan servicers were required to stay foreclosure proceedings upon receipt of a completed loan modification application.  Beginning in 2018, the dual tracking prohibition is expanded and now applies to all applications for all foreclosure prevention options.

Section 2924.11 currently does not require an appeal period following a written denial. Instead, the denial of a first lien loan modification application will state “with specificity” the reasons for the denial of the modification and will include a statement that the borrower may obtain additional information regarding the denial decision upon written request to the mortgage servicer. Interestingly, Section 2924.11 does not prohibit recording a Notice of Default when there is a pending complete foreclosure prevention alternative but the CFPB rules do.

Old Section 2923.6(g) allowed servicers to refuse to review multiple loan modification applications that did not involve a “material change in financial circumstances.” That provision was very vague, but was useful to loan servicers who could reject an application by denying that there was a material change in the homeowner’s financial circumstances.   Fortunately, that provision is gone at the end of the year and there is no replacement.

Servicers must now review multiple applications from the homeowner, regardless of whether there is a “material change in financial circumstances”.   However, this provision allows a servicer who finds itself in trouble with an issue of multiple applications an alternative.

Section 2923.7 remains the same as before, and requires that the servicer provide a single point of contact,  to communicate with the homeowner about the loss mitigation options and the application process, obtain documents, notify the borrower of any missing documents, and to provide access to information that accurately informs the homeowner of the current modification status.  This section applies to servicers who conduct more than 175 foreclosures annually.

Section 2924.10 expires, meaning servicers are no longer required to provide a written acknowledgment within five business days of receiving loan modification documents.  However, the CFPB rules still require an acknowledgement letter within five business days.

Under Section 2924(a)(5) Servicers and foreclosure trustees will no longer have to provide notice to the homeowner when a sale is postponed more than 10 business days.

Section 2924.12 allows a private right of action for homeowners to enforce HOBR, but it will now only apply to material violations of “sections 2923.5, 2923.7, 2924.11, 2924.17.”  The homeowner is only allowed injunctive relief prior to the Trustee’s Deed Upon Sale recording.

After the servicer records the Trustee’s deed, it is potentially liable for actual economic damages resulting from a material violation of the covered sections and, if those material violations are considered “intentional or reckless, or resulted from willful misconduct by a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent,” the greater of treble actual damages or $50,000. This section allows for attorney’s fees for the homeowner if they prevail.

Section 2924.17 remains in effect, and states that all servicers, regardless of size, prior to recording or filing a declaration pursuant to section 2923.5, including a notice of default, notice of sale, assignment of deed of trust, substitution of trustee, or a declaration or affidavit in court relative to a foreclosure proceeding, must declare that it has reviewed reliable and credible evidence that substantiates the homeowner’s default and the right to foreclose.  This provision includes the borrower’s loan status and loan information, but some government enforcement provisions also expire at the end of 2017.

Servicers will be challenged to handle completed modification packages that are received shortly before a foreclosure sale, but must comply with the new HOBR sections that require that all foreclosure actions must stop when a complete foreclosure application is received.  However, the new HOBR sections do not directly address what happens when a servicer receives a complete loan modification application minutes or hours before a foreclosure sale occurs.

Because the new HOBR extends the dual-tracking restriction on all preventative foreclosure alternatives, not only to loan modifications, the homeowner is afforded options they didn’t have previously.  Homeowners should keep detailed notes regarding the actions of their loan servicers, and document every transaction and conversation when applying for a loan modification.

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Tags: CALIFORNIA, california foreclosure, charles marshall, HOBR
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