I live in California and submitted an application to my lender, Bank of America, to modify the first mortgage on my home. I have never applied for a mortgage modification or another type of foreclosure alternative. Bank of America denied my application. Can I appeal?
Yes. In California, a law called the Homeowner Bill of Rights (HBOR), which became effective January 1, 2013, gives you the right to appeal the denial.
Under HBOR, if your loan servicer (the company you make your payments to) denies your application to modify the loan on your first mortgage or deed of trust, you can appeal. You must submit the appeal within 30 days from the date of the written denial. In your appeal, you’ll need to provide evidence that the mortgage servicer's determination was in error.
Under HBOR, if your loan servicer denies your mortgage modification application, the servicer must:
The servicer is not allowed to continue foreclosing (for example, by recording a notice of default or notice of sale or holding the foreclosure sale) until:
(Learn more about general foreclosure laws and procedures in California.)
If the servicer offers you a loan modification after your appeal, you must accept it quickly (within 14 days), make the first payment on time, and live up to the loan modification terms. (Cal. Civ. Code § 2923.6(e)(2)). Otherwise, the servicer can continue to foreclose.
You can appeal a loan modification denial only if:
This means you don’t get a right to appeal a denial if you applied to modify a second mortgage or a HELOC, or if you don’t live at the property.
The right to appeal under HBOR only applies to loan modification denials, not denials of other foreclosure prevention alternatives, such as short sales and deeds in lieu of foreclosure. See Ware v. Bayview Loan Servicing, LLC, 2013 WL 4446804. (Learn more about short sales, deeds in lieu of foreclosure, and other alternatives to foreclosure.)
Under HBOR, large servicers (such as Bank of America) must have an appeal process in place. However, smaller servicers (those that foreclosed on 175 or fewer residential real properties in California per year) are exempt from this provision of the law. They do not have to provide an appeal period for denied modification requests.
The statute giving homeowners the right to appeal a loan modification denial is scheduled to remain in effect until January 1, 2018. After that date, it will sunset (end) unless the legislature extends the date.
In the past, many homeowners found themselves faced with a loan modification denial and no way to appeal the decision. Both the federal government and the national mortgage settlement have tried to address this problem as well.
If you believe that your lender denied your loan modification in error, did not provide you with the proper opportunity to appeal the denial, or continued a foreclosure during the appeals period, you should consult with an attorney immediately who can advise you what to do in your particular circumstances.