California Foreclosure Protection: The Homeowner Bill of Rights

The California Homeowner Bill of Rights protects homeowners in foreclosure.

By , Attorney

The Homeowner Bill of Rights was part of California's response to the foreclosure crisis. This set of state laws contains several key provisions, including a prohibition on dual tracking and requiring the servicer to appoint a single point of contact for borrowers. It also requires the lender or servicer to contact (or attempt to contact) the borrower to discuss foreclosure alternatives before starting a foreclosure.

In addition, homeowners get the right to sue over violations of the law.

What Is the California Homeowner Bill of Rights?

California's Homeowner Bill of Rights went into effect on January 1, 2013. It reformed some aspects of the state's foreclosure process to help mortgage borrowers.

Why Was the California Homeowner Bill of Rights Created?

The Homeowner Bill of Rights was part of California's former Attorney General Kamala D. Harris's response to the state's foreclosure crisis. It largely came about as a result of the national mortgage settlement between 49 states and individual banks.

California's Homeowner Bill of Rights Prohibits Dual Tracking

In the past, a lender or servicer could foreclose even while a loss mitigation application was pending in a process called "dual tracking." The Homeowner Bill of Rights prohibits the dual tracking of foreclosures in California. Federal law also restricts dual tracking.

Under California's Homeowner Bill of Rights, if a borrower submits a complete application for a first lien loan modification at least five business days before a scheduled foreclosure sale, a lender or servicer can't record a notice of default or notice of sale, or conduct a trustee's sale, while the application is pending.

The lender or servicer can't proceed until a written determination is made that:

  • the borrower isn't eligible for a first lien loan modification, and the appeal period has expired (you get 30 days to appeal and provide evidence that the mortgage servicer's determination was in error)
  • the borrower doesn't accept an offer for a first lien loan modification within 14 days, or
  • the borrower accepts an offer for a first lien loan modification but defaults or breaches the agreement. (Cal. Civ. Code § 2923.6.)

But the prohibition on continuing with the foreclosure doesn't apply if you have already exhausted the loan modification application process unless you've had a material change in your financial circumstances since you last applied. (Cal. Civ. Code § 2923.6.)

Servicers Must Provide Homeowners With a Single Point of Contact

During the foreclosure crisis, homeowners who called their servicer to get help with mortgage problems typically had to explain their circumstances to several different representatives repeatedly. Under the Homeowner Bill of Rights, a servicer must promptly establish a single point of contact upon a borrower's request who asks for a foreclosure prevention alternative. The servicer must also give the homeowner one or more direct means of communication with the single point of contact. (Cal. Civ. Code § 2923.7.)

The point of contact must be an individual or a team of personnel who can:

  • communicate the process by which a borrower can apply for a foreclosure prevention alternative and the deadline for any required submissions to be considered for these options
  • coordinate receipt of all documents associated with available foreclosure prevention alternatives and notify the borrower of any missing documents necessary to complete the application
  • access current information and personnel sufficient to timely, accurately, and adequately inform the borrower of the current status of the foreclosure prevention alternative
  • ensure that a borrower is considered for all foreclosure prevention alternatives offered by, or through, the servicer, if any, and
  • access individuals with the ability and authority to stop foreclosure proceedings when necessary.

The single point of contact will remain assigned to the account until all loss mitigation options are exhausted, or the account is current. (Cal. Civ. Code § 2923.7.)

Preforeclosure Help for Borrowers Under the California Homeowner Bill of Rights

The Homeowner Bill of Rights requires the lender or servicer to contact or attempt to contact the borrower to discuss foreclosure alternatives before starting a foreclosure.

Specifically, a servicer has to hold off for 30 days after contacting the borrower (or meeting the contact attempt requirements) regarding foreclosure alternatives before recording a notice of default, which is the first official step in a California foreclosure. (Cal. Civ. Code § 2923.5.)

What Must the Servicer Say?

The law requires the mortgage servicer to contact the borrower in person or by telephone to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the servicer must advise the borrower that the borrower has the right to request a subsequent meeting and, if requested, the servicer must schedule the meeting to occur within 14 days. (Cal. Civ. Code § 2923.5.)

The assessment of the borrower's financial situation and discussion of options may occur during the first contact or at the subsequent meeting scheduled for that purpose. In either case, the servicer has to provide the borrower with the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. (Cal. Civ. Code § 2923.5.)

Any meeting may occur telephonically. (Cal. Civ. Code § 2923.5.)

Can the Borrower Initiate the Contact?

While this requirement appears straightforward, some borrowers in California have sought to prevent or delay foreclosures by filing lawsuits alleging that their lender or servicer failed to comply with this requirement because contact was initiated by the borrower instead of the lender or servicer.

The borrowers argued that, under the Homeowner Bill of Rights, lenders or servicers—not borrowers—are required to initiate the contact. But various federal courts disagreed and found that the contact requirement is satisfied regardless of who initiates the contact, so long as contact is made and the parties discuss foreclosure alternatives.

Also, on November 7, 2018, the California Court of Appeal formally agreed with the federal courts' interpretation of the statute and held that borrower-initiated contact satisfies the legal requirements. (Schmidt v. Citibank, N.A., 28 Cal.App.5th 1109 (Cal. Ct. App. 2018).)

What Is the Penalty for Violating the California Homeowner Bill of Rights?

Homeowners may sue the lender or servicer for material violations of certain California Homeowner Bill of Rights sections. Potential relief includes:

  • injunctive relief (before the recording of a trustee's deed upon sale) or
  • actual economic damages if the trustee's deed upon sale has already been recorded. (Cal. Civ. Code § 2924.12.)

Also, if the court finds that the violation was intentional, reckless, or resulted from willful misconduct by a servicer or lender, the court may award the borrower the greater of treble actual damages or statutory damages of $50,000. (Cal. Civ. Code § 2924.12.)

Applicability of California's Homeowner Bill of Rights

The protections afforded to homeowners under California's Homeowner Bill of Rights generally apply to first lien mortgage loans for properties that are:

  • owner-occupied
  • residential, and
  • no more than four units. (Cal. Civ. Code § 2923.6, § 2923.7, § 2924.15.)

Smaller servicers (entities that conduct fewer than 175 foreclosure sales per year or annual reporting period) are exempt from some of the procedural requirements. (Cal. Civ. Code § 2923.6.)

Getting Help

Talk to a foreclosure lawyer to get specific information about how California's Homeowner Bill of Rights applies in your situation and whether you have any defenses to a foreclosure.

To get more information about foreclosure alternatives, like a loan modification, consider making an appointment to speak to a HUD-approved housing counselor.

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