California’s Homeowner Bill of Rights (HBOR) is a set of laws that provides special protections to homeowners who are struggling to make their mortgage payments.
HBOR’s goals are to give more rights to California homeowners when it comes to foreclosure and make sure they get a fair opportunity to explore loan modifications, as well as other ways to avoid foreclosure in the process. (To learn what to do—and what not to do—in a foreclosure, see Foreclosure Do's and Don'ts.)
The protections under HBOR, which went into effect on January 1, 2013, generally apply to first mortgages and deeds of trust on homes that are owner-occupied and don’t have more than four units. Almost all mortgage servicers—companies that manage loan accounts—have to comply with the HBOR laws.
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 servicer has made contact, or has satisfied contact attempt requirements, with a delinquent borrower to discuss foreclosure alternatives.
Contact must be in person or by telephone. Under HBOR, the servicer must try to contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the servicer has to advise the borrower that he or she has the right to request a subsequent meeting, which may be over the telephone, and, if requested, the servicer has to schedule the meeting to occur within 14 days.
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. (Read about using a HUD-approved housing counselor.)
Contact attempt requirements. The servicer has to first 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 has to attempt 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 has to send a certified letter, with return receipt requested.
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.
A few of the other key provisions of HBOR, which also apply to most servicers, include:
Prohibition on dual-tracking. 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 forward with a foreclosure on the property.
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:
But the prohibition on continuing with the foreclosure doesn't apply if you already exhausted the loan modification application process—unless you've had a material change in your financial circumstances since you last applied. (Get an overview of the various federal and state laws that protect borrowers from dual tracking.)
Single point of contact requirement. Servicers must provide a single point of contact to a borrower who applies for a foreclosure prevention alternative.
Subsequent loss mitigation applications. The servicer has to review a borrower's subsequent foreclosure alternative application if there has been a material change in the borrower's financial condition.
No robo-signing. HBOR prohibits “robo-signing.” Robo-signing is when an employee of a bank or servicer signs a foreclosure document, like an affidavit or assignment of mortgage, without having any knowledge about whether the information in the document is correct. Under HBOR, servicers have to review foreclosure documents and make sure that those documents are accurate, complete, and supported by reliable evidence about the borrower’s loan, the loan’s status, and the servicer’s right to foreclose.
Written denial notice requirement. HBOR also requires the servicer to give the borrower a denial notice if the servicer rejects the borrower’s request for a first lien loan modification. The notice must specifically give the reasons for the denial and, if applicable, a description of other foreclosure prevention alternatives for which the borrower might be eligible, and a list of the steps the borrower must take in order to be considered for those options. If the servicer has already approved the borrower for another foreclosure prevention alternative, the notice must include information necessary to complete the foreclosure prevention alternative.
Fees. The servicer can't charge fees to apply for a loan modification, or late fees, while a loan modification application is pending.
If you think your servicer has violated HBOR, consider talking to a foreclosure attorney. You might be able to stop the foreclosure until the servicer complies with the law or sue for damages.
To read more about the foreclosure process in California, see California Foreclosure Laws and Procedures.