Those who frequent this blog know one of our goals is to educate policyholders about their rights, in particular, by identifying the bad conduct of insurance companies that frustrate the claims process and unfair practices which deny policyholders the benefits of the policy they are due.
As we usher in 2013, a new and important piece of legislation will be taking effect in California. It is the California Homeowner Bill of Rights. Although the laws do not touch on insurance directly, they are designed to give homeowners stronger protections against predatory, aggressive bank lending practices.
Most homeowners purchase insurance to protect their investment and losing a home through foreclosure is devastating. None of us want to be placed in the position of losing a home. So, just as it is important to be informed about our rights in seeking insurance benefits when suffering property damage, it is important to know what banks and lenders can or cannot do in the foreclosure process. The following are some of the key provisions in the California Homeowner Bill of Rights (available on the California Attorney General’s website at oag.ca.gov/hbor):
- Restriction on dual track foreclosure: Mortgage servicers are restricted from advancing the foreclosure process if the homeowner is working on securing a loan modification. When a homeowner completes an application for a loan modification, the foreclosure process is essentially paused until the complete application has been fully reviewed.
- Guaranteed single point of contact: Homeowners are guaranteed a single point of contact as they navigate the system and try to keep their homes – a person or team at the bank who knows the facts of their case has their paperwork and can get them a decision about their application for a loan modification.
- Verification of documents: Lenders that record and file multiple unverified documents will be subject to a civil penalty of up to $7,500 per loan in an action brought by a civil prosecutor. Lenders who are in violation are also subject to enforcement by licensing agencies, including the Department of Corporations, the Department of Real Estate and the Department of Financial Institutions. [This practice of “robo-signing” is now banned.]
- Enforceability: Borrowers will have authority to seek redress of “material” violations of the new foreclosure process protections. Injunctive relief will be available prior to a foreclosure sale and recovery of damages will be available following a sale. [Homeowners will now have the right to sue banks for material violations of the new laws.]
- Tenant rights: Purchasers of foreclosed homes are required to give tenants at least 90 days before starting eviction proceedings. If the tenant has a fixed-term lease entered into before transfer of title at the foreclosure sale, the owner must honor the lease unless the owner can prove exceptions intended to prevent fraudulent leases apply.
- Tools to prosecute mortgage fraud: The statute of limitations to prosecute mortgage-related crimes is extended from one to three years, allowing the Attorney General’s office to investigate and prosecute complex mortgage fraud crimes. In addition, the Attorney General’s office can use a statewide grand jury to investigate and indict the perpetrators of financial crimes involving victims in multiple counties.
I have enjoyed contributing to this blog this past year and appreciate the insightful comments.
Happy New Year!