Legislature Approves the Homeowners Bill of Rights

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AB 278 and SB 900, legislation to rein in some of the worst practices of the bank servicing industry passed both houses of the legislature today


Sacramento, CA—Today legislation was approved by both the California State Senate and Assembly aimed at addressing problems contributing to the persistent foreclosure crisis in California. The legislation is modeled after the national mortgage settlement between five of the nation’s largest banks and forty nine state attorneys general.

The two bills, AB 270 and SB 900, most notably address the problem of “dual tracking”, or foreclosing on a homeowner while they are simultaneously working to modify their loan. 

“This is incredibly significant legislation for California’s struggling homeowners and ultimately our economy,” according to Pedro Morillas CALPIRG legislative director. “This legislation will add the missing element of accountability by forcing banks to do what they have been unwilling or unable to do on their own—stop unnecessary foreclosures.”

Here is a brief summary of provisions that ended up in the legislation which are a priority for CALPIRG:

1.    Strong Substantive Protections to Provide Borrowers with Fair Consideration of Alternatives to Foreclosure.

At their core, these two bills are designed to provide borrowers with a fair process to be considered for alternatives to foreclosure. In order to accomplish that goal, the conference report should include substantial restrictions on dual track, including requirements that:

–    Borrowers who apply for a loan modification get a “yes” or “no” determination before the foreclosure process commences; and
–    Borrowers who apply for a loan modification after the foreclosure process begins have their applications considered before the foreclosure process continues;
–    Prohibition of robo-signing;
–    Requirement that servicers provide borrowers with a streamlined point of contact.

2.    Effective Enforcement: A clear and meaningful “private right of action” to hold banks accountable, which should include the following provisions:
Targeted coverage: provide borrowers redress when major provisions of the law are violated.
Accountability Under the Law: Homeowners whose rights are violated should have the opportunity to remain in or get back their homes if the servicer is found to have acted improperly.
Financial Relief for Harm: Where it is not possible for homeowners to get their homes back, they must be able to get some financial relief to compensate for the harm caused and to give them a decent chance of transitioning to a stable housing situation.
No Exceptions: Maintaining provisions that provide for a private right of action is paramount, without exception. All banks and servicers should be covered by the law and bound to give due process and fair treatment to all California homeowners.