2013 – The new California Homeowner Bill of Rights

Effective January 1st, California’s new Homeowner Bill of Rights goes into effect.

In many respects, it is patterned after the national settlement between the federal government, 49 of the 50 states, and the largest lenders earlier this year.

But the new law will, in my opinion, now make the filing of a Notice of Default more significant in 2013.

Key parts of the law include:

  • Applies to 1st deeds of trust
  • Bans lender policy of “dual tracking”
  • Lender must provide single point of contact
  • Within 5 days of filing the Notice of Default, lender must give borrower notice of “foreclosure prevention alternatives” which include loan modification and short sale.

When a lender/servicer files a Notice of Default (or Notice of Trustee Sale) in 2013, it will mean:

  • The homeowner hasn’t applied yet for a loan mod, or
  • The homeowner has “busted” (failed) their trial (or permanent) loan mod, or
  • The request for a loan mod was denied, and now
  • The legal time clock for foreclosure has started.

A homeowner now has 2 choices – Plan A or Plan B:

  • Plan A – apply for a loan mod if they haven’t already done so.
  • Plan B – consider the benefits of a US Treasury HAFA short sale.

A number of factors may suggest doing a short sale (ie, loss or reduction in income, change in marital status, medical expenses, job relocation or other financial hardships) instead of losing the home through foreclosure.

The US Treasury HAFA (a “graceful exit”) short sale program is designed for these homeowners.

Timeline considerations…

Foreclosure in California ( a “non-judicial” state) is a 2 stage process:

  • Filing of the Notice of Default stage – a minimum of 3 months
  • Filing of the Notice of Trustee Sale – a minimum of 20 days

For a more detailed summary of the Bill of Rights, please see the California Association of Realtors legal summary.

Filed under article topic: Short Sales | HAFA program
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