Using the California Homeowner Bill of Rights to Fight Foreclosure

As I’ve been saying for several years now, the answer to the foreclosure crisis for homeowners does not and will not be found in the courtroom.  Foreclosure law is state law and there’s just no way that individual homeowners will ever be able to cause the kind of change needed to make this crisis measurably better.  It hasn’t worked for five years and there are no substantive signs that it will work going forward.

Now, that doesn’t mean that I don’t think homeowners should not try everything they can to save their homes from foreclosure, including turning to the courts… if that’s what they want to do, knowing the facts of the situation.  As I’ve said countless times, I am only committed to homeowners knowing the facts… accurately… after that, they should do whatever they deem is best for them.  What I don’t want is for homeowners to be misled… lied to… and then base their actions on those lies.

Everyone has a unique set of facts related to themselves and their situation.  Not everyone wants to fight it out in court forever… some people are suffering through this tug-of-war and would be better off to win by letting go of the rope.  As long as people are told the truth about things… I’m fine with whatever they choose to do.

The answer to this crisis lies in our state legislatures.  That’s where we have power and can affect real change.  Evidence of this can be seen today in various states, California being just one example… Nevada being another… New York being a third… and there are more.  States where its become very difficult… and therefore time consuming to foreclose.

But, such delays can also be a false sense of security.  And they can cause delays that don’t actually benefit  the homeowners involved.  That’s why it’s so important that homeowners get the facts and make the best decisions for them as to how to proceed.

For many, the best answer is to get their loan modified, and depending on the servicer and the investor, doing that today involves a much better process than years or even a year ago.  But for others… they have no choice but to fight using other means because the fact is that the loan modification process is still abhorrently unfair in MOST instances.

And that should at this point be intolerable… to every American homeowner.

At this point, every American homeowner should be demanding fair treatment in the loan modification process… for all homeowners.  No one should be okay with homeowners being lied to… ever… when their home is on the line.

So… for California homeowners facing foreclosure… who know the facts and have been unable to get a resolution to their situation… there’s the California Homeowner Bill of Rights.  Other states are considering adopting the same sort of legislation and until we have a fair loan modification process, we should all support legislation that helps to level the playing field.

So… here’s how California homeowners can use the Homeowner Bill of Rights to fight the foreclosure process… and… your welcome.

 The California Homeowner Bill of Rights (CAHBR”)… for Homeowners.

If the borrower and/or their attorneys stick to the rules outlined in the California Homeowner Bill of Rights, servicers will perhaps never be able to complete a foreclosure sale… simply by the borrower starting the process of a simple modification request.  The borrower may request a modification of their loan in any manner such as by phone, in person or by written request at any time during the foreclosure process.

Step 1:  Borrower may request a modification on their loan prior to the Trustees Sale.

Step 2:  Upon notification to servicer, the servicer will send a written acknowledgement to the borrower and request certain financial information from the borrower.

The CAHBR says the borrower shall be given reasonable time to submit the information to the servicer.  However, the CAHBR does not define how much time is reasonable for the borrower to submit the information back to the servicer.  So, this may be two to three weeks or longer as the servicer waits for the information.

Step 3:  Financial information is obtained from the borrower, which may be complete or incomplete.  The servicer/lender is under certain requirements for determining if the borrower is qualified for a modification on their loan.  What is most important is that decisions are consistent with investor guidelines… and that takes time for the servicer to establish.

The servicer/lender has three choices:  1) Accept the modification request; 2) Modify the modification request 3) Or deny the modification request.  In any of the three decisions, the borrower must be notified in writing regarding the decision.  If the decision is to accept the modification, the foreclosure must be canceled.

If the decision is to modify the terms of the modification request, a proposal must be sent to the borrower, in writing, and reasonable time must be given to the borrower to respond.

Step 4:  If the decision is to deny the borrower’s modification request, a written statement must be sent to the borrower stating the reason for the denial.

If the servicer/lender sends a denial letter to the borrower, the CAHBR gives the borrower a 30 day period to appeal the servicer/lender’s denial for their modification.  The servicer/lender MAY NOT continue with any foreclosure action until after this 30 day period has passed. And if the borrower feels that something was not taken into consideration, they are allowed to appeal the denial.

Step 5:  If no appeal is received from the borrower, and after reasonable time has passed, the servicer/lender may proceed with the foreclosure action.  BUT…

Step 6:  Upon servicer/lender’s receipt of the appeal, the servicer/lender must send a written request for additional information from borrower to support their appeal.  Once this information is obtained in a reasonable time (two to three weeks?), the servicer/lender will review the information and will either approve the modification or deny it once again by sending a letter to the borrower stating the reason for the denial.  Once the denial letter is sent out again, the borrower now has an additional 30 days to appeal the new denial.

This pattern can keep repeating itself under the current CAHBR.  Please note that while this appeal and denial period is in process, I believe it is ILLEGAL to continue with the foreclosure process or charge any late fees on any payments during the modification request period.

Step 7:  If no appeal is received in the due course of 30+ days, the HBR allows the foreclosure process to continue under certain conditions.

The bottom line… 

The CAHBR allows the borrower one opportunity to request a modification on their loan, thus stopping the foreclosure sale on their property, EXCEPT if the borrower’s financial condition has changed.

When the borrower invokes this exception, and again requests a modification, the foreclosure sale is stopped again, and the modification cycle begins as if it was the first time that such a request was made, starting all the above steps over again.  And the CAHBR does not limit the number of times that a borrow may request a modification IF a financial change has occurred, resulting in the fact that the servicer may never be able to go to sale on their property.

Now… one last thing.  DO NOT accept this as legal advice.  I am NOT a lawyer and you should contact an attorney licensed to practice in California for all legal advice.  I list TRUSTED ATTORNEYS… lawyers that I trust… and I cannot over emphasize the importance of getting rock solid legal advice before proceeding on any course of action related to your home and the prospect of losing it to foreclosure.

Also… delaying the inevitable is painful, stressful and not in the best interests for many homeowners.  Getting your loan modified or refinanced should always be a homeowners first choice when seeking to avoid foreclosure.  And like it or not… that’s just a fact.

Yours truly…

Mandelman out.

P.S. There’s something else you should know about what’s coming over the next couple of years as far as the foreclosure crisis is concerned… it’s going to get worse.  Forecasts for the sales of non-performing loans this year are between $20-$30 billion and next year at least the same.

That means that the large banks and hedge funds are going to be selling off their non-performing loans to investors at deep discounts in order to liquify their balance sheets.  These investors are not likely to be at all interested in stringing things along or modifying loans… they are buying the non-performing loans in order to get whatever cash they can by flipping them with as little investment as possible… which means as quickly as possible.

And that means it will get HARDER to get these loans modified going forward… in many cases much harder, if not impossible.  So, if you can get your loan modified or otherwise resolved today by your servicer, it is highly likely that you are very much better off to do so then to wait until your loan ends up being sold off to a company that has no interest in modifying or delaying foreclosure.

Look for my Mandelman Matters Podcast this week with Impac Mortgage president, William Ashmore for more on this emerging and disturbing trend.

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