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Monthly Archives: April 2013

Foreclosure-relief funds for California mostly unspent

A federal foreclosure-prevention effort that earmarked nearly $2 billion in taxpayer money
to help troubled California homeowners has delivered only about one-sixth of that money in three
years. But officials from the Keep Your Home California program say the pace of payouts is finally set to increase. That’s because more banks, including the largest mortgage servicers, have agreed to use the funds to slash the loan principal amounts for certain borrowers. Until now, many borrowers seeking aid from the program have been frustrated.

Borrowers have faced major hurdles in trying to access the aird. Joshua and Catherine Brewster
sought help after Josh lost his job as a legal assistant at Hilton Hotels when his division was moved out of state. They battled for a year for a modification from the servicer, Bank of America, to help with their $2,300 – a month mortgage payment. Then they got transferred to the state Housing Finance Agency.

Many additional battles over the loan terms followed, they said, before the Keep Your Home
California program approved $47,000 in principal reduction. Their interest rate also was cut to 3.75% and in January payments fell to $1,676 a month, which they say they can handle. “We had to fight,” Josh said. “People are not conditioned to challenge the banks. It was brutal.”

The Homeowners Bill of Rights

Homeowners in California have been pushed long enough around by the banks. Now there is help from the State of California. On July 11, 2012, California Governor Jerry Brown signed an overhaul to California’s foreclosure laws to come into effect on January 1, 2013. The stated purpose of the new legislation
is to ensure that as part of the non-judicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain available loss mitigation options. Nothing in the new legislation, however, requires a lender to modify a loan.

The major components to the new legislation include the

• Lenders will be prohibited from pursuing foreclosures while a loan modification application is pending (“dual tracking”)

• Lenders will be required to provide a borrower written notice of the new sale date and time after postponement of a foreclosure sale.

• Borrowers will be permitted to seek injunctions against foreclosures until violations of the statute are corrected and the statute permits the greater of treble damages or $50,000 in statutory damages if a violation of certain provisions of the statute is found to be intentional or reckless or resulted from willful misconduct.

• Upon the request of a borrower that seeks a foreclosure prevention alternative, a lender must establish a single point of contact and provide the borrower with one or more direct means of communication with that single point of contact.

The new law will apply to mortgages and deeds of trust secured by residential real property not exceeding four dwelling units that is owner occupied, and will generally only apply to lenders that conduct more than 175 foreclosure sales per year on an annual reporting period.

The legislation was backed by California’s Attorney General Kamala Harris, who earlier this year helped negotiate the Multistate/National Mortgage Settlement (“the Settlement”). Not surprisingly, the overhaul in California reflects the reforms to industry default servicing standards that were included in the Settlement, in addition to provisions from the OCC/Fed Consent Orders regarding “robo-signing” concerns and broader default servicing practices. These far-reaching requirements will also be addressed by the CFPB in anticipated proposed rules on mortgage servicing, as well as by other states that have vowed to extend the reforms from the Settlement and the Consent Orders to all mortgage servicers, not just those that were subject to the agreements. For more information, please contact us.