Loan Mods Working In California
California’s proposed Homeowner Bill of Rights, originally proposed by the state’s attorney general Kamala Harris and covered here has been modified extensively following what the Center for Responsible Lending (CRL) calls six weeks of intense negotiation with banks, legislators, the attorney general and consumer groups.
Among the changes reported by CRL is a narrowed scope for both the loans and servicers covered by the bill. The only loans to which the bill will now apply are first mortgages on owner occupied one-to-four family houses and only servicers who process more than 175 foreclosures per year will be subject to many of its requirements.
Earlier versions of the bill required the lender or servicer to record and provide evidence of all assignments as part of the chain of title to foreclose. The current version requires that only evidence of the last assignment be available to the borrower. The current bill also includes an express and comprehensive right to cure until the notice of trustee sale is filed. A servicer can avoid liability by curing a violation before the foreclosure sale.
Originally the bill provided post-sale minimum statutory damages of the greater of actual damages or $10,000; the new version allows only actual damages with triple damages or a minimum of $50,000 available only in cases of intentional reckless violations or willful misconduct.
Unlike the National Mortgage Settlement the California bill allows for multiple contact persons as long as they have the access and authority of a single point of contact. Prohibitions against dual tracking and false documents remain as in the original law, however the enforcement provisions sunset after five years.
CRL says that this Homeowner Bill of Rights remains critical for large number of borrowers, their communities, and the California housing market. It ensures that borrowers in owner-occupied homes applying for loan modifications get full and fair consideration for those modifications before the foreclosure process begins. This will allow the foreclosure process to move more quickly for those who do not qualify for home retention alternatives while preventing unnecessary foreclosures on borrowers who do.
CRL released a new study of California delinquencies with three principal findings.
First, loan modifications work well to keep borrowers in their homes. More than 80 percent of California homeowners who received modifications in 2010 stayed current and avoided re-default despite the continued recession. Only 2 percent of those modified loans ended in foreclosure.
Second, large numbers of borrowers remain at risk with nearly 700,000 California mortgages in some state of delinquency or foreclosures. This is one out of nine borrowers.
Third, middle class, African Americans, and Latinos are the hardest hit. The delinquency rates for African Americans and Latinos are 11.1 and 10.7 percent respectively while for Asians and whites the rates are 7 and 7.3 percent. Delinquencies are concentrated among middle class borrowers, those making between $42,000 and $120,000 annually.
“California policymakers will soon have the chance to extend key servicing reforms from the National Mortgage Settlement to all California borrowers, said Paul Leonard, CRL’s California Director. “Our legislators have an historic opportunity to overcome intense opposition from the big banks and ensure that all Californians get a fair shot at loan modifications.”