What Is the Difference Between California HBOR and the National Mortgage Settlement?

Learn the similarities and differences in homeowner protection between the Homeowners Bill of Rights in California and the National Mortgage Settlement.

Both the National Mortgage Settlement (NMS) and California’s Homeowner Bill of Rights (HBOR) provide protections to homeowners facing foreclosure. With the NMS, the five largest mortgage servicers in the nation agreed to follow new standards in loan servicing, particularly for loans in foreclosure. California's HBOR, which applies to all mortgage servicers when they do business in California, reforms several aspects of the California foreclosure process.

There are some areas where the National Mortgage Settlement and HBOR overlap, but also important distinctions between the two.

Which Mortgage Loans Are Subject to the NMS and HBOR?

Not all mortgage loans qualify for protection under NMS or HBOR.

National Mortgage Settlement

The National Mortgage Settlement applies to residential, owner-occupied properties across the country. However, it only affects the following mortgage servicers and their customers:

  • Ally (formerly GMAC)
  • Bank of America
  • Citi
  • JPMorgan Chase, and
  • Wells Fargo.

(Your mortgage servicer is the company you make your payments to. To find out who your mortgage servicer is, look at your mortgage payment coupon.)

California Homeowner Bill of Rights

Whereas the National Mortgage Settlement is only applicable to the five settling banks, HBOR applies to almost all California loan servicers. Smaller servicers (those that foreclose on 175 or fewer residential properties per year in California) are exempt from some of the law’s requirements.

Eligibility. HBOR’s protections only apply to first mortgages and deeds of trust. You must live in the home and it cannot have more than four units (Cal. Civ. Code § 2924.15(a)). (Learn about the difference between mortgages and deeds of trust.)

No Robo Signing

Both the National Mortgage Settlement and HBOR prohibit “robo signing.” Robo signing occurs when an employee of the bank or loan servicer signs foreclosure documents without having any knowledge about whether the information contained in the documents is correct.

Under both the settlement and HBOR, mortgage servicers must review foreclosure documents and ensure that the documents are accurate, complete, and supported by reliable evidence concerning:

Pre-Foreclosure Assistance

Under both the National Mortgage Settlement and HBOR, the servicer must contact the borrower to discuss foreclosure alternatives before starting a foreclosure.

National Mortgage Settlement

The National Mortgage Settlement requires the servicer to notify potentially eligible borrowers about foreclosure alternatives before starting a foreclosure. (Learn more about alternatives to foreclosure.)

In addition, at least 14 days before referring a case to foreclosure, the servicer must provide a notice to the homeowner with:

  • facts supporting the right to foreclose
  • account information (the amount needed to bring the account current, the interest rate, the principal amount, the date of the last full payment, etc.), and
  • a statement outlining the steps the servicer took to evaluate the homeowner for other options before starting the foreclosure and, if applicable, why the borrower was ineligible for a loan modification or other alternative to foreclosure.

California Homeowner Bill of Rights

Under HBOR, the servicer must wait 30 days after contacting the borrower regarding foreclosure alternatives before it can record a notice of default. (Cal. Civ. Code § 2923.5.) (To learn more about the foreclosure process in California and special laws governing foreclosure, visit our California Foreclosure Law Center.)

No Dual Tracking

Both the National Mortgage Settlement and HBOR prohibit dual tracking-- the practice of considering a homeowner's loan modification application while, at the same time, continuing with foreclosure.

National Mortgage Settlement

If a borrower submits a complete loan modification application within 120 days after falling behind in payments, the servicer cannot refer the loan for foreclosure while the application is pending. (“Referring” a loan to foreclosure means sending the information to the foreclosure attorney or trustee to begin the foreclosure process.)

Even if the servicer has already referred the loan for foreclosure, it must review the application before completing the foreclosure so long as the application arrives at least 15 days prior to a scheduled foreclosure sale. (Learn more in Nolo’s article National Mortgage Settlement: New Rules Help Protect Homeowners in Foreclosure.)

California Homeowner Bill of Rights

Under HBOR, if the homeowner submits a complete loan modification application, the foreclosure stops while the servicer reviews the loan modification application and makes a decision (Cal. Civ. Code §§ 2923.6(c), 2924.18(a)(1)). (HBOR's prohibition on dual tracking applies to both large and small servicers and will remain in effect until January 1, 2018.)

Exception for Multiple Applications

HBOR’s dual tracking protections, as well as those under the National Mortgage Settlement, do not apply if you resubmit an application, unless your financial circumstances have changed considerably. (Cal. Civ. Code § 2923.6(g)). This is to prevent homeowners from abusing the process by submitting repeat loan modifications with the sole purpose of delaying foreclosure.

Single Point of Contact

Under the National Mortgage Settlement and HBOR, large mortgage servicers must appoint a single person or team to assist a homeowner who wants to modify a first mortgage (or deed of trust) or find another way to avoid foreclosure (Cal. Civ. Code § 2923.7).

Written Denial Notice

Under both the National Mortgage Settlement and HBOR, the servicer must provide the borrower with a written denial notice if it rejects a mortgage modification request.

Right to Appeal a Loan Modification Denial

Under both the National Mortgage Settlement and HBOR, most borrowers have the right to appeal a loan modification denial.

How to Enforce the Terms of the Settlement and HBOR

If your servicer violates HBOR, you can bring a lawsuit. For violations of the settlement, however, you cannot bring a lawsuit. Instead, you can complaint to the Consumer Financial Protection Bureau.

National Mortgage Settlement

The Office of Mortgage Settlement Oversight is responsible for ensuring that the banks comply with the National Mortgage Settlement. State attorneys general can sue non-compliant banks and the settlement monitor may impose penalties, but individual homeowners cannot sue banks under the National Mortgage Settlement in order to force them to comply with the settlement provisions. (Learn more in Nolo’s article Making Sure Banks Comply With the National Mortgage Settlement.)

If you feel your servicer is violating the terms of the settlement, you can go to the Office of Mortgage Settlement Oversight’s webpage and click on “Report My Loan Issue” to fill out a form to make a complaint with the Consumer Financial Protection Bureau (CFPB), which may be able help you resolve your personal issue with your servicer. You can also go to the CFPB’s website at www.consumerfinance.gov or call 855-411-2372 to make your complaint.

California Homeowner Bill of Rights

Under HBOR, you can bring a lawsuit to enforce the provisions of the law yourself. If a mortgage lender or servicer violates HBOR, you may:

  • seek a court order stopping the foreclosure (called an injunction) until the servicer complies with the law, or
  • if the foreclosure sale has already taken place, sue for damages. If a court finds that the violation was intentional, reckless, or resulted from willful misconduct, in addition to damages you might also get triple damages or $50,000 (whichever is greater) and attorney’s fees and costs (Cal. Civ. Code § 2924.12).

However, if a servicer that is part of the National Mortgage Settlement complies with the terms of the settlement as to an individual borrower, it cannot be held liable for violating HBOR (Cal. Civ. Code § 2924.12(g)).

To Learn More About the National Mortgage Settlement and the California Homeowner Bill of Rights

For general information about the National Mortgage Settlement, see Nolo’s article National Mortgage Settlement: New Rules Help Protect Homeowners in Foreclosure. You can also learn more about the settlement at http://nationalmortgagesettlement.com or by contacting your mortgage servicer. (You can find contact information for the five settling banks in Nolo’s article National Mortgage Settlement: Can You Benefit?)

For more information about the California Homeowner Bill of Rights, see California Foreclosure Protection: The Homeowner Bill of Rights. You can also go to the State of California Department of Justice’s webpage and click on the link to “CA Homeowner Bill of Rights.”

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