The California Homeowner Bill of Rights

The California Homeowner Bill of Rights Civil Code refers to a set of laws that are meant to provide certain protections and rights to California homeowners. This may include protection from various foreclosure issues, such as improper or unfair lending and borrowing practices, and the right to receive notice at least 30 days prior to initiating the foreclosure process. 

The state’s Homeowner Bill of Rights was originally enacted back in 2013 to reform specific aspects of California’s foreclosure process in a way that would benefit mortgage borrowers. The law has undergone many changes since then, but ultimately still contains provisions intended to protect the interests of California homeowners.

In addition, due to the pandemic and its effects on the economy, these laws and rights were recently extended to cover small landlords as well (i.e., from 2020 until 2023).

Finally, if you have any questions or are involved in a dispute that relates to the California Homeowner Bill of Rights, you should contact a local real estate lawyer immediately for further advice. 

Who is Protected by the Homeowner Bill of Rights?

Generally speaking, the California Homeowner Bill of Rights applies to first lien mortgages and deeds of trust on residential homes that are occupied and contain no more than four units. The law also applies to persons whose service or lending provider foreclosed on more than 175 homes within the last year.

As previously mentioned, this criteria now applies to small landlords who can satisfy these same conditions. The Bill defines “small landlords” as a landlord who owns no more than three residential real properties and whose units contain no more than four units per property. 

These protections will also extend to small landlords who own residential properties that are occupied by tenants who can no longer afford to pay rent due to a reduction in income that was caused by the pandemic.

What are the Key Reforms in the California Homeowner Bill of Rights?

Some of the most recent and significant changes brought about by the California Homeowner Bill of Rights include the following points:

1. Providing homeowners with a guaranteed single point of contact: Prior to the passing of the Bill, California homeowners were forced to speak to a different representative every time they had to call their service provider or lender. 

This resulted in a homeowner wasting copious amounts of time due to the fact that they would have to explain their circumstances to a new representative each time they called. In other words, the process to resolve a mortgage issue with a given provider was an extremely frustrating and inefficient experience for homeowners.

After the passing of this Bill, however, mortgage lenders are now required to assign a guaranteed single point of contact to qualifying homeowners. Qualifying homeowners are defined as individuals who are eligible for loan modifications or other foreclosure prevention options. 

The representative who is assigned to the individual must walk them through the various application requirements and respective deadlines, know all the relevant facts and the status of a borrower’s application, inform them of any documents still missing from an application, and must have access to decision-makers that they can contact on behalf of a borrower to obtain news about a final decision.

2. Prohibition of dual tracking: Another important change that the Bill created was placing restrictions on dual tracking. Before the bill, lenders could engage in a process called, “dual tracking”. This enabled a provider to continue initiating a foreclosure, despite the fact that a loan modification application may have still been pending. 

Under the Bill, providers are now required to pause the foreclosure process until a decision is made on a completed loan modification application. A provider must also give borrowers a certain amount of time to appeal the decision. In other words, providers cannot foreclose on a home while a borrower is still waiting for an answer on their loan request or other foreclosure preventative option, or while they are in compliance with forbearance or their repayment plan.

2. Homeowners’ right to sue for violations: A California homeowner has a right to sue lenders or service providers for violation of the Homeowner Bill of Rights. Remedies for such lawsuits may include an injunction to stop the home from being sold through a foreclosure action and/or actual or economic damages if the foreclosure sale has already occurred.
3. Penalties for robo-signing: Robo-signing refers to when a representative of a lender or service provider automatically signs foreclosure documents without reading them or determining whether the information contained in them is accurate or not. The Bill allows for a civil penalty of up to $7,500 per loan to be issued against a lender or service provider who is in violation of its conditions.
5. Miscellaneous homeowner and/or tenant rights: A homeowner has a right to receive notice from a provider at least 30 days in advance of foreclosure proceedings. The provider must also inform them of any options that the homeowner can potentially use to prevent foreclosure. If a homeowner applies for a loan modification to avoid foreclosure, the provider must notify them within five business days about any errors or information missing from their application.  

In regard to tenant rights, purchasers of foreclosed homes must give tenants occupying that home at least 90 days prior to starting the eviction process. Additionally, those who purchase a foreclosed home must honor the terms of the current lease if the tenants had previously entered into a fixed-term lease before title of the home was transferred to the new owner at the foreclosure sale.

4. Denial and/or transfer rights: If a borrower’s loan modification application is denied, the lender must provide reasons as to why it was denied and offer potential foreclosure prevention solutions in writing. Also, if a borrower’s loan modification application or other foreclosure preventative option is approved and their lender transfers or sells that loan or option to a different lender, then the new lender must honor the terms of the original deal.
5. Fee restrictions: One other important right afforded by the Bill is that a homeowner cannot be charged a fee when applying for a loan modification and also cannot be charged a late fee while a decision is still pending, being appealed, or the homeowner is still making timely payments in accordance with the terms of an approved application.

What if I Have a Dispute? 

In general, a person who is involved in a dispute related to the California Homeowner Bill of Rights will have three primary ways in which they may go about solving the dispute. The first is by contacting a local real estate lawyer who will be able to determine if they can file a private lawsuit or take some other form of legal recourse against their lender or service provider.

This first option is the best and only way that a private individual will be able to seek relief for a dispute. Depending on the facts of a specific case, remedies for a dispute may include an injunction to refrain from illegal practices, monetary damages, and/or having certain homeowner rights reinstated. 

In extreme cases, if the court finds that a service provider or lender intentionally violated the Bill, then it may award a borrower actual damages or statutory damages of $50,000 (whichever of the two is greater). 

The second way is to report a violation to the state Attorney General’s Office. Although this option will not result in obtaining legal advice or filing a lawsuit, submitting a complaint will alert them to any potential issues and may prompt them to open an investigation against a provider. 

A third way to settle a dispute is by submitting a complaint to California’s Consumer Financial Protection Bureau or to the Department of Business Oversight. While the resolution that stems from these options are similar to reporting a lender or service provider to the state Attorney General’s Office, separate government agencies use different methods to punish a provider on behalf of California homeowners (e.g., fines, injunctions, shutting a provider down, etc.). 

Should I Consult a Lawyer?

If you are involved in a dispute and/or would like to report your lender or service provider for violating the California Homeowner Bill of Rights, you should consult a local mortgage lawyer in California immediately for further guidance. An experienced mortgage lawyer will be able to discuss your options for legal recourse and can walk you through the proper steps that are necessary for whichever option you choose. 

Your lawyer can also discuss the different types of mortgages that might be available to you and can explain which ones would offer you the greatest amount of benefits based on the facts of your situation. Additionally, your lawyer can inform you of your rights under the law and can make sure that those rights are adequately protected.