New Proposed Law: CA Homeowner Bill of Rights – Part 1

This is a heads up to prepare you for a wave of new articles, posts, videos, and TV segments about the next step in dealing with California’s foreclosure and financial institution mess.  It is called California Homeower Bill of Rights.  If passed, the Bills could result in fewer or delayed Notices of Default, which will either eliminate or postpone REO listings and sales in your area.  There will be arguments for both sides.  I will share my opinion when I have researched this a bit more.  For now, I simply want you to be aware of this.

This is important for buyers and sellers wherever you are in California because the Notice of Default (NOD) begins the foreclosure process and the successful 1) loan modification, 2) short sale, or 3) REO sale marks the end of the process.

Without a short sale, the next step is foreclosure.  Then the bank lists the property, called an REO listing.  While the lenders hope for a market value sale, distressed properties bring down market values in a given area.  So the longer the property is on the market, the lower the values will go.  Meaning, market value in one month may mean a lower value the following month if the property is still on the market.  This is what keeps the overall values suppressed because appraisers use nearby and recent comparables, including distressed sales.  One house in the neighborhood like this can affect overall values.  Also, this affects all price points, not just entry level.  So this Bill of Rights will either keep homeowners in their homes and their properties off the market, or it will delay the current situation.

Until we all understand more about this proposal, here is a brief summary…

The bills are described by Attorney General Harris as the legislative follow-up to the $25 billion foreclosure settlement between 49 states and the country’s largest banks, recently passed. That settlement is only good for three years.  These bills, if passed, could be made permanent.

Some key points in the proposed Bills:

1.    Creditors must provide proof of creditor’s right to foreclose on the real property prior to recording a Notice of Default (NOD) and the Notice of Trustee Sale must be personally served.

2.    End of “dual track” processing prohibiting creditors from starting the foreclosure process (the filing of a Notice of Default) while a loan modification application or other loss mitigation application is pending.

3.    Bank fines  for neglecting the homes they have taken over in foreclosure; Blight prevention.

4.   Owners of foreclosed properties will be required to honor existing leases and not evict rent-paying tenants for at least 90 days (now 60 days) before beginning eviction.

5.    $10,000 penalty for use of “robo signed” documents; require single point of contact and dedicated email/fax/mail address for borrower documents.

6.    $25 fee to servicers recording per Notice of Default.

7.    Implementation of a special grand jury to handle multi-jurisdictional financial crimes against the State of California.

Nevada has already passed Assembly Bill 284.

Part 2:  What this could mean for the Half Moon Bay Coastside Market (to come).