Special Foreclosure Protections in California: The Homeowner Bill of Rights

Learn about foreclosure protections for homeowners in California under the state's Homeowner Bill of Rights.

By , Attorney · University of Denver Sturm College of Law

California's Homeowner Bill of Rights (HBOR) is a set of laws that provides special protections to homeowners struggling to make their mortgage payments. HBOR gives California homeowners rights regarding foreclosure and ensures they get a fair opportunity to explore getting a loan modification or another way to avoid foreclosure.

This law, among other things, requires servicers to provide preforeclosure help to borrowers, prohibits dual tracking, and requires servicers to appoint a single point of contact to assist borrowers in their loss mitigation efforts. (Federal laws also protect homeowners facing foreclosure in California.)

HBOR's protections generally apply to first mortgages and deeds of trust on owner-occupied homes and don't have more than four units. Almost all loan servicers must comply with HBOR.

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

On January 1, 2018, many HBOR provisions were replaced with new ones, a change widely considered to benefit lenders and servicers, not homeowners. Then, on September 14, 2018, Governor Jerry Brown signed Senate Bill No. 818, which permanently reinstated the Homeowner Bill of Rights' expired provisions that protect homeowners' interests.

Preforeclosure Help for Borrowers Under HBOR

HBOR prevents a servicer or lender from recording a notice of default, the first official step in a typical California foreclosure, until 30 days after the servicer has made contact, or has satisfied contact attempt requirements, with a delinquent borrower to discuss foreclosure alternatives. (Cal. Civ. Code § 2923.5).

Contact Must Be in Person or by Telephone

Under HBOR, the servicer must try to contact the borrower in person or by telephone to assess the borrower's financial situation and explore options to avoid foreclosure.

During the initial contact, the servicer has to advise the borrower of the right to request a subsequent meeting. If requested, the servicer has to schedule the meeting to occur within 14 days. Any meeting may occur telephonically. (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 give the borrower 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).

A HUD-approved housing counselor can provide information (for free) about different ways to avoid foreclosure.

Contact Attempt Requirements

A notice of default may be recorded when a mortgage servicer hasn't contacted a borrower if the failure to make contact occurred despite the due diligence of the mortgage servicer.

"Due diligence" means the servicer must attempt to contact the borrower by sending a first-class letter that includes the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency. After sending the letter, the servicer must try to contact the borrower by telephone at least three times at different hours and on different days. If the borrower doesn't respond within two weeks after the servicer meets the telephone call requirements, the servicer must send a certified letter with return receipt requested. (Cal. Civ. Code § 2923.5).

The servicer must provide a way for the borrower to contact it in a timely manner, including a toll-free telephone number that provides access to a live representative during business hours. (Cal. Civ. Code § 2923.5).

Cease and Desist Letters

If the borrower notifies the servicer in writing to cease further communication regarding the mortgage loan account, the servicer doesn't have to continue to try to contact the borrower. (Cal. Civ. Code § 2923.5).

Prohibition on Dual-Tracking Under HBOR

Dual tracking happens when a servicer simultaneously reviews a borrower for a loan modification or other foreclosure avoidance alternatives while at the same time going ahead with a foreclosure. In the past, a lender or servicer could foreclose even while a loss mitigation application was pending. The California Homeowner Bill of Rights prohibits the dual tracking of foreclosures in California. Federal law also restricts dual tracking.

Under HBOR, if a borrower sends the servicer a complete application for a first lien loan modification at least five business days before a scheduled foreclosure sale, the servicer can't record a notice of default, notice of sale, or conduct a trustee's sale while the application is pending, and until:

  • the servicer makes a written determination that the borrower isn't eligible for a first lien loan modification, and any appeal period has expired
  • the borrower doesn't accept an offered first lien loan modification within 14 days of the offer, or
  • the borrower accepts a written first lien loan modification but defaults on or otherwise breaches the borrower's obligations under the first lien loan modification. (Cal. Civ. Code § 2923.6).

Subsequent Loss Mitigation Applications

To minimize the risk of borrowers submitting multiple applications for first lien loan modifications for the purpose of delay, the servicer only has to review a subsequent loss mitigation from a borrower if a material change in the borrower's financial condition has happened. (Cal. Civ. Code § 2923.6).

Borrower's Right to Appeal a Loan Modification Denial

Under HBOR, in most cases, if a borrower's application for a first lien loan modification is denied, the borrower gets at least 30 days from the date of the written denial to appeal and to provide evidence that the mortgage servicer's determination was in error. However, some smaller loan servicers don't have to give you the opportunity to appeal the decision. (Cal. Civ. Code § 2923.6).

Under HBOR, if your servicer denies your modification application, the servicer must:

  • explain your right to appeal, including the amount of time you have to appeal
  • if the investor (the owner of your loan) is the one who denied your request, give you the specific reason for the denial
  • provide the monthly gross income and property value the servicer used to calculate the net present value (NPV) if it denied your application because of an NPV calculation
  • if applicable, say that you were previously offered a first lien loan modification and failed to successfully make payments under the terms of the modified loan, and
  • if applicable, describe any foreclosure alternatives that are still available to you and a list of the steps you must take to be considered for those options. If the mortgage servicer has already approved you for another foreclosure prevention alternative, it needs to also give you the information necessary to complete the foreclosure prevention alternative. (Cal. Civ. Code § 2923.6(f)).

What Is a Net Present Value Test?

A net present value (NPV) assessment evaluates whether it is more cost-effective for the investor to provide a borrower with a loan modification or foreclose. As part of the NPV assessment, the servicer usually takes into account the following:

  • the property's fair market value
  • the cost to foreclose, maintain the property, and complete any needed repairs
  • the costs to market and sell the property if no one buys it at the foreclosure sale, and
  • net sales proceeds.

The expected cash flow from a loan modification is also typically part of the NPV calculation. The servicer generally looks at a borrower's income, credit score, and mortgage debt information, including the unpaid principal balance, the original loan amount, the remaining term, and monthly payment information.

The NPV test is pass/fail. You usually either pass or fail an NPV test when it comes to loan modifications. If the test results reveal that a loan modification is NPV positive, then you generally get a loan modification, subject to investor restrictions. That's because the investor would get a greater return from modifying the mortgage rather than foreclosing. But if the test results are NPV negative, a foreclosure is more financially beneficial to the investor.

But how can a foreclosure be more financially beneficial for the investor than a loan modification? After all, once a loan is modified, the borrower resumes making payments and paying interest on the loan. However, in many cases, borrowers who get a loan modification default again in the future and end up in foreclosure anyway. The NPV test takes this possibility into account and estimates the likelihood that the borrower will eventually fall behind in payments again, even if a loan modification is granted. If a borrower is likely to default again, the investor will let the foreclosure proceed because it makes more financial sense to foreclose sooner rather than later.

Foreclosure Can't Continue During the Appeal Period

The servicer isn't allowed to continue foreclosing, like by recording a notice of default or notice of sale or holding the foreclosure sale, until:

  • 31 days after notifying you in writing about the denial (if you don't appeal)
  • 15 days after denying your appeal
  • 14 days after a first lien loan modification is offered after appeal, but you decline it, or
  • if a first lien loan modification is offered and accepted after appeal, the date on which you fail to timely submit the first payment or otherwise breach the terms of the offer. (Cal. Civ. Code § 2923.6(e)(1)-(2)).

Right to Appeal: Only for a First Mortgage on a Home You Live In

You can appeal a loan modification denial only if:

  • you're trying to modify your first mortgage or deed of trust
  • you live in the property (that is, the home is owner-occupied), and
  • the property has no more than four units. (Cal. Civ. Code § 2924.15).


The servicer can't charge fees to apply for a loan modification or late fees while a loan modification application or appeal is pending. (Cal. Civ. Code § 2924.11(e),(f)).

Single Point of Contact Requirement Under HBOR

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 HBOR, 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.

This provision doesn't apply to banks that foreclosed on 175 or fewer residential properties with no more than four dwelling units in the prior year. (Cal. Civ. Code § 2923.7).

No Robosigning Under HBOR

HBOR prohibits robosigning. Under HBOR, servicers must review foreclosure documents and ensure they're accurate, complete, and supported by reliable evidence about the borrower's loan, the loan's status, and the servicer's right to foreclose. (Cal. Civ. Code § 2924.17).

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

Homeowners may sue the lender or servicer for material violations of certain HBOR 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 attorney if you think your servicer has violated HBOR. You might be able to stop the foreclosure until the servicer complies with the law or sue for damages.

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