California’s SB 1275, What’s Not to Like?
California Senate Bill 1275 (“SB 1275”) has passed the Senate Banking Committee and is now headed to the Assembly Banking Committee. It would require servicers to take the actions listed below in items 1-4, before recording a Notice of Default (NOD), and record a new document, called a Declaration of Compliance, which is to be attached to every NOD. It would also establish penalties to be assessed against servicers that fail to comply with the provisions of the bill.
Prior to recording an NOD, servicers would be required to:
1. Mail borrowers a notice informing them of their foreclosure-related rights and foreclosure avoidance options that may be available to them.
2. Mail borrowers an application for a loan modification or other alternative to foreclosure.
3. Evaluate borrowers who submit a written request for a loan modification or other alternative to foreclosure for that modification or other alternative.
4. Mail borrowers who have been denied a loan modification or other alternative to foreclosure a detailed denial explanation letter explaining the reasons for their denial.
Okay, let’s summarize those real quick so we’ve got our arms around what we’re talking about here.
Before recording a Notice of Default, mail the homeowner a notice of foreclosure rights and options… check. Mail the homeowner an application for a loan modification or other alternative to foreclosure… check. See if a homeowner qualifies for a loan modification or other alternative to foreclosure… check. Mail a homeowner who has been denied a loan modification or other alternative a letter detailing the reason for their denial… check.
So, basically, under this bill servicers would be required to mail three things: one notice of rights, one application, and one reasons-for-denial letter… and check to see if a homeowner qualifies for something besides foreclosure. Oh, and one more thing, servicers would also be required to record a Declaration of Compliance saying that they complied with the requirements of the bill.
We all agree that we want to do whatever we can to stop unnecessary foreclosures in California, right? I mean, there’s no one that doesn’t agree with that, right? I wouldn’t think so.
So, mail the notice of rights… so homeowners know their rights. Seems like that would be a good thing. Mail the homeowner an application for some alternative to foreclosure, such as a loan modification. Yes, that doesn’t sound like it could hurt anything. Actually check to see if the homeowner qualifies for a loan modification or some alternative to foreclosure. How can that be a bad thing? And when a homeowner is denied a loan modification, mail out a letter telling that homeowner why they were denied. Seems like the only decent thing to do, doesn’t it?
And again, we do all agree that it’s in every Californian’s best interest that foreclosures that can be prevented, are prevented. So, we’re good, right? This seems like an issue with only one side. Why is there a debate going on over this bill? Because it passed 21 – 12. Twelve California State Senators voted against this bill.
The Center for Responsible Lending issued the following statement:
“The confusion and errors that cost Californians their homes, are devastating to the state’s housing market, but are avoidable and we need this measure to stop further deterioration of the California housing market.”
If someone’s home is lost to foreclosure because the servicer screws up, there is currently no means by which that home’s owner can seek recourse. This bill, which was authored by Sen. Mark Leno (D-San Francisco) and Senate President Pro Tem Darrell Steinberg (D-Sacramento), is designed to change this by providing for what is called “a private right of action”. This means that eligible homeowners could seek damages directly related to the severity of the servicer’s errors, or would allow the homeowner to reverse the foreclosure sale all together in certain cases.
Staffers at Housing and Economic Rights Advocates (HERA), which is described as “a statewide, not-for-profit legal service and advocacy organization”, developed the language found in SB 1275. HERA drafted the proposal that became the basis for SB 1275, “in response to its frustrations over the treatment received by borrowers from their servicers, and their belief that many borrowers who are eligible for loan modifications are failing to be offered those modifications, before being foreclosed on by their lenders.”
Oh, my. HERA is sounding dangerously close to being competent and knowledgeable. What are they doing in Sacramento? Run, HERA… run! Get out of there before your critical thinking skills and common sense have been destroyed.
In the draft of legislation, HERA, and many other persons and organizations who advocate for homeowners, say that they have seen all of the following:
- Borrowers told that they cannot be helped until they become delinquent, then told they cannot be helped because they are delinquent.
- Borrowers put on hold by their servicers for lengthy periods of time.
- Borrowers disconnected after long waits on hold.
- Servicers losing or misplacing borrowers’ loan modification paperwork, sometimes repeatedly.
- Servicers giving borrowers conflicting answers regarding the status of their loan modification application.
- Servicers willing to provide borrowers verbal denials regarding eligibility for a loan modification, but unwilling to provide a written denial letter.
- Servicers unwilling to explain to borrowers the reasons they were denied a loan modification.
- Servicers foreclosing on homes, while borrowers are under consideration for a loan modification.
- Servicers unwilling to consider options other than foreclosure, after a borrower is denied a loan modification.
Alright, so I could make a list of such things that wouldn’t end before next Christmas, but so what. Considering it’s found in a piece of legislation, that’s a more than good enough listing for me. But wait… there’s more.
Both homeowners and housing counselors throughout California continue to report that they face “seemingly insurmountable obstacles when they contact loan servicers for assistance”. Including:
- Delays of many months to over a year in processing applications.
- Financial and other documentation lost by the servicer.
- Repeated requests from the servicer for the borrower to send in additional documentation or to send in the same documentation over and over again.
- Miscalculations or misreading of income leading to mistaken denials.
- Misapplication and misrepresentation of investor guidelines and restrictions leading to mistaken denials. Inconsistent, inaccurate and contradictory information provided to borrowers about their rights and obligations.
- Foreclosures conducted while a modification application is pending (or while a trial plan is in effect) because the servicer failed to instruct the foreclosure trustee to postpone the sale.
- Unnecessary foreclosures conducted after an erroneous denial.
Here’s another HERA quote…
“In the vast majority of cases, borrowers and their advocates are confronted with an overwhelming lack of information and communication from the servicer – about the status of their applications, the documentation they need to provide, and, in the event a borrower is notified that an application has been denied, about the reasons for the denial. This lack of transparency makes it nearly impossible for borrowers to figure out where they are in the review process or assess whether a denial is erroneous.”
Alright already… you’re right. I agree. It sucks out there, when it comes to dealing with your bank. How anyone could not know this and more by now is quite beyond me. So, who in the world opposes this bill?
Well, proving beyond any doubt that it’s an organization that has been effectively purchased by the banking industry, the clowns at the California Chamber of Commerce opposes SB 1275. How do you like them apples? Here’s what the California Chamber says about the bill on its Website:
“Hinders the recovery in the residential construction industry by reducing the availability of credit due to delays in resolving delinquent loans by requiring lenders to determine a borrower’s eligibility for a loan modification prior to the filing of a notice of default.”
Are these guys for real? SB 1275 is going to “Hinder the recovery in residential construction?” And then it’s going to “reduce the availability of credit?” After which, it will cause “delays in resolving delinquent loans?” Why? Because it will “require a lender to determine a borrower’s eligibility for a loan modification before filing an NOD?”
Allan Zaremberg is the President and CEO of the California Chamber of Commerce, and if you’ll excuse me for just a moment, I need to have a little chat with Allan… it’ll only take a minute or so… so, good time to refill your coffee, or use the rest room… if you don’t like this sort of thing.
Listen to me Allan… you are a consummate jackass. Are you aware of anything that’s happening around you, here in the State of California these last few years? We’re trying to reduce the number of foreclosures, Al baby. Are you seriously trying to make the case that servicers mailing out a notice of rights, and application, and a denial letter in the event someone is denied… those things are somehow going to “hinder the recovery in the residential construction industry?”
And then those mailings are going to “reduce the availability of credit?” What credit would you be referring to, Allan, you spineless sycophant… you malignant toady for the banking industry? The insolvent banking industry. You mean the banking industry that’s not required to follow accounting rules on writing down assets? Allan, if your IQ were two points higher, you’d be a rock.
And, Allan… why don’t you stop being a nauseating spinner of the facts and abuser of the English language and say what you mean? When you claim that the mailings and the like will cause “delays in resolving delinquent loans,” what you really mean to say is that you actually WANT faster foreclosures, because in your warped little mind, you think that will HELP the state’s economy.
Oh, dear God. I don’t know what your problem is Allan, but whatever it is… I’d bet it’s difficult to pronounce.
Allan actually included SB 1275 in this year’s CalChamber ‘job killer’ list. And here’s what Allan said on the Chamber’s Website:
This year’s CalChamber ‘job killer’ list includes 37 proposals that would make it even more difficult for California companies to remain viable in this difficult economy,” said Allan Zaremberg, President and CEO of the California Chamber of Commerce. “Our businesses need to have certainty that they can be competitive before they will begin to reinvest in our economy. Not only do these bills send the wrong signal and create an uncertain environment for investment but, if passed, they would create new costs that would harm our ability to recover and add new jobs.”
“The only way out of these economic hard times is a rebound of the private sector. Our policy makers must focus on job creation, reducing regulatory burdens and holding the line on new costs. If enacted, these ‘job killer’ bills would make it even more difficult for us to solve the huge, gaping budget hole that Governor Schwarzenegger announced on Friday.”
Allan, what you know about economics we could put in a thimble. The only way out of these “economic hard times,” is through a “rebound of the private sector?” And, “reducing regulatory burdens?”
Shut up, Allan… just sit down and shut up.
So, I had to find out who else was opposed to SB 1275, so I read the entire legislative proposal, and sure enough there they were, the associations that lobby on behalf of our country’s oligarchs… listed clearly for everyone to see:
- California Bankers Association
- California Building Industry Association
- California Chamber of Commerce
- California Financial Services Association
- California Independent Bankers
- California Land Title Association
- California Mortgage Association
- California Mortgage Bankers Association
- Civil Justice Association of California
- Securities Industry and Financial Markets Association
Well, surprise surprise! You know, I can’t be certain, but I’m starting to think that these bank people may have their own agenda, and that perhaps they cannot be trusted.
And who’s for SB 1275? That’s an easy one… Everyone who is not on the list of supporters above.