SACRAMENTO – Homeowners facing foreclosure now are protected from confusing and often-unethical bank practices, thanks to a new package of laws known as the “Homeowners’ Bill of Rights.” The package of nine bills passed the Legislature in July and was signed into law by Gov. Jerry Brown. It goes into effect on the first of next year.
“Come January 1, there will be more laws of protection for the homeowner,” said Vincent Howard, an Orange County attorney who represents homeowners in foreclosure cases, including in East Los Angeles.
One of those protections now will be a more forceful tool in the hands of owners – they will be able to sue most banks that violate the new law. “It creates additional situations for the lenders and servicers under which they could be sued,” said Howard. “It gives me additional things to look for when a client comes in and asks to sue a bank.”
Lea esta nota EN ESPAÑOL: Propietarios de Casa Son Protegidos por Nueva Carta de Derechos 
“If the top five banks already agreed to something, then why wouldn’t we want [to include] the rest of the banks and the rest of the homeowners not included in that settlement?” said Assemblyman Mike Eng (D-Monterey Park), who introduced part of the legislative package that became the Bill of Rights.
Among the bank practices singled out in the national settlement and now made illegal in California are “dual tracking” and “robo-signing.”
“Dual tracking” refers to the practice whereby one unit at a bank works with a homeowner to modify terms of a mortgage while, simultaneously, another unit at the same bank initiates foreclosure proceedings against the same owner. As a result, a homeowner often is forced to deal with several bank representatives who deliver confusing and contradictory information and demands. Although it covers a multitude of sins, “robo-signing” usually refers to bank officials signing foreclosure documents without first having verified the accuracy of information contained in those documents. In some cases, the term also refers to unauthorized bank personnel forging the signatures of legal bank representatives.
The new laws end “dual tracking” by requiring that homeowners have only one point of contact with a bank. They also place an outright ban on “robo-signing.”
“The law makes the rules very clear,” said Eng, whose bill targeted robo-signing.
One of the final sticking points as the bills neared a legislative vote centered on the right of homeowners to sue banks that violate the new laws. Banks feared a plethora of “frivolous lawsuits” that could slow down or halt legitimate foreclosures and proposed limiting or eliminating the ability to sue. According to the Los Angeles Times, a compromise limited the provisions to owners who actually live in a property to be foreclosed, and that property can have no more than four units. In addition, speculators who buy investment property and owners who voluntarily opt for foreclosure are not covered by the new law. Finally, the law exempts banks with fewer than 175 foreclosures a year. According to Eng, the bills were targeted at banks that process many foreclosures. Smaller banks and credit unions almost had no foreclosures, according to Eng, and so were exempt.
The law also places responsibilities and restrictions on homeowners. As mentioned, they must live in the foreclosed property and cannot withhold mortgage payments. They also are given a finite amount of time to request a loan modification.
Not everyone was enamored with the final product, however. Bankers continue to see it as too broad. “It does increase the liability exposure for banks,” said Beth Mills, the vice president of communications for the California Bankers Association.
So, what happens to homeowners who lose their homes between now and the time the Homeowner Bill of Rights takes effect in January?
“The law is not retroactive,” said Vince Howard, adding that until January 1, “people can only use law that is currently on the books.” Under current law, “dual tracking” and “robo-signing” are not illegal. But, Howard said, homeowners still can sue if they believe a bank employed these practices to foreclose a home.
Homeowners who feel they have a case against a bank first should seek help from a foreclosure counselor certified by the U.S. Department of Housing and Urban Development. A list of counselors for California is available on the HUD website at http://www.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm. Included on the list are organizations such as the Montebello Housing Development Corp., Clearpoint Financial Solutions of Commerce, East Los Angeles Community Corporation, and Operation HOPE of South Gate. A counselor can help a homeowner find an appropriate attorney. The counseling is free and, according to Harris’ office, the use of a counselor will greatly increase the chance that a homeowner will save his or her home from foreclosure.
The foreclosure process can be rough water for a homeowner, but “the Homeowner Bills of Rights is the lifeboat to get people to the shore safely,” said Eng.