Thankfully, FHFA & Banks Killed Homeowner Bill of Rights

I am officially proclaiming the Homeowner’s Bill of Rights in California to be DOA – Dead on Arrival.  And… good.  I’m glad it didn’t take until June.

In fact, if it wouldn’t be too much to ask, banking lobby… just hang out in Sacramento another week or so and dispatch whatever other bills remain in the California legislature as early as possible… start the recess early this year!

The Big Banks and the FHFA’s Ed DeMarco brought their considerable political muscle to the job of killing the Homeowner Bill of Rights in California, and although technically there’s still some voting to do… trust me… that’s all she wrote.

This makes the third year in a row that the banking lobby has said a resounding no to any sort of change that’s supposed to protect homeowners from abusive foreclosure practices.  Why do we keep doing this?  Haven’t we learned anything by now?

So, I’m glad it’s over… early.  I’ve had a tough year, and I didn’t need to spend any more time on this pipe dream of a proposal.

Okay, sure… our politicians running for office and elected officials did essentially nothing… BUT NEITHER DID WE… so I’m not blaming them.  The simple fact is that we don’t deserve to have such laws on the books.

The Homeowner Bill of Rights is the name that’s been given to a collection of six legislative proposals.  I’ll give you an overview of each and you decide for yourself how important it would have been to get the bill passed.

1.     SB 1470The Anti-Dual Tracking Bill

Dual tracking is when the servicer invites a borrower to apply for a loan modification, but proceeds with foreclosure proceedings anyway.

Now, I realize that some people are going to see nothing wrong with that practice, saying that a loan modification is an accommodation granted at the discretion of the bank, and therefore the denial of a modification should not delay a foreclosure.  The problem is that as a practical matter, dual tracking violates California’s foreclosure statutes because it deprives the homeowner of the intended time to reinstate the loan.

In California, the law says a homeowner is to receive a Notice of Default, which gives the homeowner 90 days, and then after that they are to get a Notice of Sale, which provides an additional 20 days… and then up until five days before the sale, the borrower has the right to reinstate the loan.

But, if you’re told that you are under consideration for a loan modification, and then you’re told that you’ve been denied… let’s say 10 days before the scheduled sale date… then you can find yourself with a handful of days to reinstate your loan… and that, at the very least, violates the intent of the law.

That’s what happened to Norman Rousseau, who took his own life last week, and that I wrote about HERE.  By the time Wells Fargo Bank told Norm that he was being denied for a loan modification, he only had six days to reinstate the loan, and Wells refused to delay the sale.  He had the money in his IRA, but by the time it arrived, his home was sold.

SB 1470 would prevent banks from starting the foreclosure process while homeowners are still being considered for a loan modification. The bill would also require servicers to render decisions on loan-modification applications in a more timely manner.

Assembly companion bill is AB 1602.

2.     SB 1471 – Single Point of Contact & Fines for Document Fraud

This requires servicers to streamline the foreclosure process by assigning a single point of contact for each borrower. It also imposes a $10,000 fine for any incidence of document fraud.

Assigning a single point of contact shouldn’t be much of an issue, after all the banks have already agreed to do that as part of the OCC’s consent orders, which were issued last April.

And as far as fines for committing fraud or forgery… well, there’s an easy strategy to get out of paying those, right.  Just don’t commit fraud or forgery.  And I happen to know the strategy works because I’ve been employing it for years and I have yet to pay a single fraud or forgery related fine.

Assembly companion bill is AB 2425.

3.     SB 1472 – Fight Neighborhood Blight

Neighborhood blight happens when foreclosed properties are not properly maintained.  Among other things, this bill would allow cities to fine purchasers of foreclosed properties that fail to remedy code violations within 60 days. (I believe the Senate committee unanimously approved this bill last Thursday.)

The companion bill is AB 2314.

4.     SB 1473 – Renter Protection

This bill simply ensures that renters of foreclosed properties are given at least 90 days before an eviction process is started. Seems pretty reasonable to me.

The companion bill is AB 2610.

5.     AB 1950 – File an NOD, Pay $25

This bill would requires servicers to pay a $25 fee for each Notice of Default recorded, which kicks off the formal foreclosure process. The money collected would pay for state-run fraud investigations into the fraudulent practices of servicers.

6.     SB 1464 – Special Financial Crimes

This bill would allow the state Attorney General to create a special grand jury to look into special financial crimes that involve multiple victims and I simply cannot believe that this bill isn’t already a law.

The companion bill is AB 1763.



In a letter to California legislators, written by the FHFA’s General Counsel, Alfred Pollard, the FHFA said that these laws could “restrict mortgage credit and hamper necessary home seizures.”

The letter also said that the proposed legislation would loosely define robo-signing so that it may include any incomplete mortgage document.

“Such a strict liability approach is punitive, will have a chilling effect on the processing of lawful foreclosures and may lead to reduced credit availability or higher interest rates,” Pollard said.

Pollard didn’t even like the idea that renters should get 90 days before being evicted, saying that the legislation “did not include a ‘bona fide’ lease requirement and could result in property owners gaming the system.”

The FHFA also claimed the new laws could possibly pose “significant risks for the housing markets.”

Good Lord… those would be terrible things to have happen.  I’m sure glad he pointed it out before it was too late.  Doesn’t anyone check these things out with the bankers before they become legislative proposals?  Why do we go to all the trouble to write them and get them into legislative committee, just to have a few bankers show up and make us look like fools for having done so.

I think we should ask the bankers if they wouldn’t mind reviewing all draft pieces of legislation before they are final written and and proposed… I’d bet collectively we’d save a lot of time.  I know I would.

Next up were the banking representatives, and I hear they were beautifully dressed by the way.

One of the bankers testifying was Ms. Stephanie Mudick, Executive Vice President, Head of Consumer and Regulatory Affairs, Mortgage Banking, J.P. Morgan Chase.  For the most part, she lied her ass off about how wonderful Chase has been when handling loan modifications.

But the one thing that she said I think I’ll remember above all…

“We’re also concerned that the private right of action included in draft legislation will likely impair the housing recovery of California.”

 A  private right of action means that if someone broke a law, a homeowner would be allowed to go to court and sue whoever it was that broke the law… you know… get a day in court.
But, if homeowners could do THAT, apparently it would IMPAIR the housing recovery in California.  Well, I’m sure glad to have learned that… let’s definitely NOT do that.  We don’t need anything to impair the recovery of our housing market.
Thanks Steph… for pointing that out and saving us from ourselves.
Mandelman out.

You can read her testimony here:
Mudick, Stephanie VP Chase Testimony 15may2012 PDF FILE



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