By Ryan C. Wood
Everyone is aware of the foreclosure and mortgage crisis that has plagued California and many other states for the last few years. In response, many states have passed new laws to help homeowners keep their homes and avoid foreclosure. Unfortunately, our state legislature in California recently did not believe additional protections for homeowners in California were necessary.
For the steps necessary to complete a non-judicial foreclosure in California, see our California Foreclosure Timeline.
Senate Bill 1275 proposed to add a few additional steps to this process and require lenders to provide homeowners facing foreclosure the following information prior to recording the Notice of Default.
- Mail borrowers a notice informing them of their foreclosure-related rights and foreclosure avoidance options that may be available to them.
- Mail borrowers an application for a loan modification or other alternative to foreclosure.
- Evaluate borrowers who submit a written request for a loan modification or other alternative to foreclosure for that modification or other alternative.
- Mail borrowers who have been denied a loan modification or other alternative to foreclosure a detailed denial explanation letter explaining the reasons for their denial.
Great! What is wrong with a little information and education? If a homeowner does qualify for a loan modification, then banks and society as a whole would benefit from the homeowner keeping their home. Giving homeowner’s information would have been invaluable and California bankruptcy attorneys would have more information to work with to help clients save their homes from foreclosure and make the loan modification process more transparent. Any Bankruptcy Lawyer would agree that providing homeowners with more options before they receive a notice of default in the mail would reduce California foreclosures.
Critics of SB 1275 believe giving homeowners more information and creating more requirements for mortgage companies before they can foreclose on a home is only delaying the inevitable. Another criticism is that parts of SB1275 would conflict with provisions of the Obama administrations Home Affordable Modification Program (HAMP). Conflicts between California state law and Federal law would just lead to more litigation. From most bankruptcy attorney’s perspective, giving homeowners more information about what there available options are outweigh the potential negative effects.
Critics have also alleged that SB 1275 and continue to drain local coffers due to decreased property tax revenue. The only problem with that argument is that whoever is on the recorded title is responsible for paying the property taxes. Local cities and counties will eventually receive payment of the back property taxes.