The State of California has passed a homeowners bill of rights. The legislation known as SB 900 and AB 278 has now been forwarded to Governor Jerry Brown for his signature. Governor Brown in a press release has indicated that he will sign the legislation into law. The laws will go into effect on January 1, 2013. The new laws will prohibit the following:
- Lenders cannot engage in “dual tracking,” or pursuing a foreclosure even though the homeowner is negotiating to modify the mortgage.
- Outlaw “robo-signing,” or mortgage servicers improper or faulty processing of foreclosure documents.
- Allow homeowners and state agencies to sue financial institutions for economic and civil damages under limited circumstances.
- Require banks and loan servicers to provide a single representative to provide a single representative for a borrower to work with, to prevent bureaucratic mazes.
The protections are limited to modifications on first mortgages and owner occupied residences. This legislation really is nothing new. The U.S. Department of Treasury placed these same requirements on lenders a year ago and most lenders are already following these rules.
A borrower can only sue a lender if it can show that the lenders willfully, intentionally or recklessly violated the law. No lawsuit can go forward if the lender fixes the problem with the paperwork for the procedures. Because the burden will rest with the borrower to prove intentional, willful or reckless behavior by the bank I predict there will be very little litigation as a result of this legislation. But time will tell.