NOV 2012
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California Homeowner Bill of Rights
Now, California has passed a new law that is scheduled to take effect in January 2013 called the California Homeowner Bill of Rights. The law actually consists of two other laws (SB900) and (AB278). This law is welcomed in the foreclosure defense world, and we certainly hope this will make significant advances in helping homeowners facing foreclosure. But just what does this law do? Let’s take a closer look at what I see as the main bullet points: (1) W hich types of loans servicers have to comply? The term mortgage servicer is broadly defined and will apply to any servicer that routinely forecloses on over
By Steven C. Vondran, Esq.

Contact Us: (877) 276-5084
175 loans per year. There are also provisions for smaller servicers who do less than 175 foreclosures per year. Your basic “big five” will all need to comply with the new law (Wells Fargo, Bank of America, Chase, Citigroup, and ALLY Financial). These are the same entities that agreed to upgrade their servicing standards pursuant to the National Mortgage Settlement. (2) What types of properties/ borrowers are protected by the act? This Act is limited and covers only first mortgages for a owner occupied single family residence and servicers who service these types of loans. [Continued Next page]

It seems the banks have enjoyed having their way at it dealing with distressed property owners in California for the past few years. If you recall, California passed a law (SB94) that prohibited charging or collecting advance fees for loan modifications. This law put most legitimate real estate lawyers and real estate brokers out of the business for fear of violating the law while trying to help property owners. As a result, the banks have basically been able to deal with more unrepresented, (as opposed to represented) borrowers while dealing with the foreclosure related issues, including loan modifications, shorts sales, and deed-in-lieu of foreclosure for example.


2012 Copyright the Law Offices of Steven C. Vondran, P.C. All RIghts Reserved


“DUAL TRACKING” IS PROHIBITED Lenders and Services have new rules
Second mortgages, HELOCS, and non-owner occupied investment properties are not covered. (3) What does that Act require of loan servicers? There are several main things that a loan servicer must do when dealing with a distressed borrower facing foreclosure and that seeks foreclosure avoidance alternatives. For example: (i) The servicer must maintain a single point of contact for borrowers who are facing foreclosure and are seeking foreclosure alternatives such as a loan modification. The single point of contact can also be a “team” as long as the team is knowledge about the borrower and meets other minimum requirements set forth in Cal. Civil Code §2923.7 (a). They must also acknowledge the receipt of your documents and application for foreclosure alternatives such as a loan modification. (ii) The act prohibits “dual tracking” which has been a huge problem with loan servicers who on one hand are reviewing a borrower for foreclosure, and on the other hand, they are filing notices of default and notices of sale and moving toward a foreclosure trustee sale. Many borrowers and property owners call our office with just a week to the sale date under this scenario. Under the new law, this type of dual tracking is prohibited, and once a borrower applies for a loan modification by submitting a complete application there can be no filing of a notice of default or notice of sale until the loan modification review process is complete. (iii) The mortgage servicer mortgage servicer must provide the borrower with a written acknowledgement of receipt of loan modification documents within five days of receiving either the document(s) or the completed application.! (See Cal. Civil Code §2924.10(a). In addition, the loan servicer cannot charge fees for the loan modification or for other foreclosure alternatives and cannot impose late fees while timely payments are being made on the loan modification trial plan, or while the application is under consideration or on appeal following the denial of a loan modification. (iv) The California Homeowner Bill of Rights imposes civil penalties (ex. $7,500 for repeated violations) for servicers who engage in the dubious acts constituting “robosigning” which in many cases involved the false and fraudulent use of notary services. The new law requires that all declarations, notices of default, notices of sale, assignments of deeds of trust, and/or substitutions of trustee must be accurate and reliable and supported by substantial evidence accurate and complete and supported by reliable evidence.! (Civil Code §2924.17(a)). (v) There are also certain requirements that a loan servicer must comply with within five days after recording a notice of default with the County Recorder’s Office. One of these is notifying the borrower of a right to seek a loan modification or other foreclosure alternative. (See Civil Code §2924.9(a). (vi) Where a loan servicer postpones a trustees sale (which happens quite frequently in my experience), for more than 10 days, the borrower must be given notice of any new proposed sale date. (Cal. Civil Code §2924(a)(5)). As you can see, there are some nice new requirements to help make the loan modification review process a bit more fair. We will see how the lenders and servicers who service loans on behalf of the securitized loan trusts (often found in MERS loans) handle these new requirements. Keep in mind, under the 25 Billion Dollar national mortgage settlement, the big five loan servicers (Wells Fargo, Citi, Bank of America, Chase and Ally) are supposed to be complying with the provisions of that settlement. It is a defense under the California Homeowners Bill of Rights to show they are complying with the national settlement. It is also a defense if the loan service cures the defect under certain circumstances. One of the more interesting provision is your right to obtain a “copy of the promissory note or other evidence of indebtedness.” See Cal. Civil Code §2923.55(b)(1). As we know from handling many other cases, to the lenders and loan servicers a copy of the note you signed in 2003, for example, is “evidence of indebtedness,” so it is not clear what types of evidence will satisfy this requirement or if any new proof will be required. Nevertheless, it is interesting to see a requirement such as this and we will see how the courts interpret this. Some questions I have regarding the bill are the following: 1. Will the loan servicers take this law serious? 2. Will the Courts demand more stringent proof of loan ownership besides a copy of the original note signed, usually several years ago? 3. Will the Courts enforce the right to impose a $7,500 civil penalty? How serious will they be in this role, and what types of mortgage servicing abuses will actually trigger such fines. 4. How will the Court’s interpret what constitutes a significant material violation of the acts sufficient for injunction? 5. Will the defenses swallow the rule? [Continued Next page]


2012 Copyright the Law Offices of Steven C. Vondran, P.C. All RIghts Reserved

You have a right to seek an injunction for materials violations of the law.
(3) Does the California Homeowners Bill of Rights provide the right for a distressed property owner to seek an injunction to stop the foreclosure sale?

right to file for an injunction for “material” violations of the new law. The question that will need to be decided is what is a “material” violation? For example, will any of the following violations constitute a material violation?:

“The major loan servicers have rules they must follow, if they can’t treat people fairly in the loan modification process, you may have a legal right to take them to court and seek attorney This is the big question. The act calls for the fees and actual damages.”
- Steve Vondran, Esq. -

CONTACT US (877) 276-5048

tracking of foreclosure and foreclosure rescue 1. Failure to provide an endorsed copy of the services? These are some of the basic questions borrower’s promissory note upon request? that come to mind. Keep in mind, there is a one2. The old trick of losing documents faxed into sided attorney fees provision if you are successful the loss mitigation department? obtaining an injunction or damages. If you are 3. Failing to provide notice of a new sale date facing foreclosure and feel the lender or loan after a sale date has been postponed for more servicer is not acting properly, call us to investigate than 10 days? your legal rights. We offer initial paid hourly 4. Failure to provide loan modifications where a consultations and additional comprehensive borrower clearly qualifies for HAMP and has foreclosure reviews. submitted all the proper documentation? 5. Submitting robosigned documents or RELATED RESOURCES documents with false notaries to county recorder’s (1) California Attorney General Announcement offices or in bankruptcy lift-stay litigation or adversary proceedings, and proof of claims in california-homeowner-bill-rights-signed-law. Chapter 13 cases. 6. Will the Court’s demand fairness for the (2) Foreclosure Warrior - sample foreclosure and distressed homeowners who are not provided a injunction documents for lawyers. http:// single point of contact or who are subject to dual

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This newsletter is not legal advice or a substitute for legal advice.The information contained herein is general legal information only and may not be accurate or up to date. Please do not rely on this information. We are licensed to practice law in California (#232337) and Arizona (#025911). This is an advertisement and communication.

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2012 Copyright the Law Offices of Steven C. Vondran, P.C. All RIghts Reserved

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