California Approves Landmark Foreclosure Protections

California has passed landmark foreclosure protections to help keep homeowners in the state from being wrongly evicted, including the nation’s first law against “dual tracking,” the practice by lenders of foreclosing while negotiating loan modifications.
The state has seen nearly a million homes seized by banks during the housing crisis, but the practice of dual tracking has especially infuriated homeowners, lawmakers and consumer advocates.
Legislators Monday sent a pair of Assembly and Senate bills to Gov. Jerry Brown designed to help financially distressed borrowers stay in their homes.
The legislation would prohibit lenders from pursuing a foreclosure while negotiating with clients to modify a mortgage. Modifications are typically designed to lower monthly mortgage payments to help keep homeowners from falling into foreclosure.
In such cases, homeowners can end up being evicted, despite having faithfully worked with the bank to modify their loan.
The measures would also prohibit so-called “robo-signing” — the improper or faulty processing of foreclosure documents that led to the national $25 billion settlement between government officials and the nation’s top lenders.
Another provision would allow state agencies and private citizens to sue financial institution for compensation and for additional civil damages of up to $50,000 if lenders “willfully, intentionally or recklessly” violate the law.
Banks or services can avoid the lawsuit by fixing the problem with documentation or procedures, according to the California bills.
The legislation, SB 900 and AB 278, also would simplify negotiations between homeowners and their banks or loan servicers by requiring that borrowers be assigned a single representative, helping streamline bureaucracy.
“This has been an incredibly long and tortuous process to get the kinds of basic protections that borrowers have long needed throughout this six-year crisis,” Paul Leonard, California director of the Center for Responsible Lending in Oakland, told the Los Angeles Times.
The banking and real estate industries opposed the foreclosure-prevention bills, calling them well intentioned but too complicated and legally ambiguous. They said the laws would create a wave of frivolous lawsuits.

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