This landmark law builds upon and extends reforms negotiated in the recent national mortgage settlement between 49 states and the nation's 5 largest loan servicers, a case brought over the practice of "robosigning" documents: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. But unlike that settlement, this new legislation applies to all banks, although those that process fewer than 175 foreclosures a year would be exempt from some procedural requirements.
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The Homeowner Bill of Rights takes effect Jan. 1, 2013, and imposes the following requirements on lenders and loan servicers:
Consumer advocate critics of the bill have charged that:
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While most smaller banks and credit unions remained neutral, opposition to the Homeowner Bill of Rights was mounted by the large banks, the California Chamber of Commerce, title companies, real estate agents, trustees and securities industry representatives.
Rodney K. Brown, president and CEO of the California Bankers Association, stated in a response to a recent Sacramento Bee editorial: "Our industry cannot support legislation that promotes meritless litigation, particularly in an environment where our court system is already overburdened, that will ultimately have no impact on the underlying financial condition of the borrower who cannot afford to stay in their home." However, Brown agreed with some of the bill's provisions, such as borrowers being entitled to an answer regarding their loan modification before being foreclosed upon and eligible loan modification applicants having a consistent point-of-contact.
Will other states follow California's lead by enacting similar homeowner protection legislation? While perhaps a little too early to tell, if this victory for troubled California homeowners last week is any indication, the odds are looking better and better that some relief is on the horizon.
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Image: Robert Conrad Photography, via Flickr