John Avalos, a member of the San Francisco Board of Supervisors, wants to put a freeze on home foreclosures in the Bay City, the latest in a swell of support surrounding California Attorney General Kamala D. Harris’s Homeowners Bill of Rights Initiative.
“We have already lost so much due to the unconscionable predatory lending practices and foreclosure fast-tracking of the banks and mortgage industry,” Avalos said at a March 20 press conference, according to the Huffington Post.
In late February, Attorney General Harris forwarded the California Homeowner Bill of Rights, six bills designed to protect homeowners from unfair and illegal practices by banks, mortgage lenders, and modification consultants and help consumers and communities cope with the state’s urgent mortgage and foreclosure crisis.
California’s is experiencing a real estate crisis, with foreclosure rates exceeding 1 in 10 homes in three of its worst hit counties, with over 1 million California homes foreclosed from 2008–2010 according to RealtyTrac.
The state’s Homeowner Bill of Rights proposal contains rules and regulations based on stipulations in the National Mortgage Settlement Act to ensure that homeowner foreclosures occur more fairly in the future.
Joined by Senate President pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez, Attorney General Harris announced her sponsorship of six bills designed to guarantee that basic standards of fairness in the mortgage process will occur, including an end to dual-track foreclosures.
According to a blog posting on the Howard Law, PC lawyers log, “Borrowers who are accepted for a loan modification, make payments on time, and have no major financial changes, can find themselves foreclosed anyway under a dual-track system, sometimes without notice, in ‘dual-track’ foreclosures.”
Other areas of new regulation include greater transparency in the mortgage process, including a single point of contact for homeowners.
Supporters of the bills have also said that foreclosed homes—especially entire neighborhoods—were creating dangerous environments for a community. As part of the proposal, community tools to prevent blight after banks foreclose upon homes will help prevent this occurrence.
Homeowners or loan servicers frequently rent vacant homes to tenants to help prevent damage, fire, or vandalism common to a vacant property. However, these tenants had no protection from arbitrary eviction by the bank or other controlling parties. Tenant protections after foreclosures will prevent this arbitrary action from disrupting the tenant.
Enhanced law enforcement to defend homeowner rights will be paid for by fees imposed on banks.
Because of the debilitating effect of mass foreclosures and the number of abuses taking place in the real estate lending/servicing industry, a special grand jury to investigate financial and foreclosure crime will be established.
Together, Assembly Bill 1602 and Senate Bill 1470 will be known as The Foreclosure Reduction Act of 2012.
National Mortgage Settlement Act
An updated 2010 report to Congress by the National Foreclosure Mitigation Counseling program reported, “Fifty-eight percent of homeowners receiving foreclosure counseling listed unemployment as the main reason for default.”
California will receive $18 billion of the $25 billion settlement to be dispensed under the National Mortgage Settlement Act, which will fund payments to victims of unfair foreclosure practices and provide support for housing counseling and state-level foreclosure prevention programs.
In a statement regarding this act, Philip A. Lehman, assistant attorney general for the Consumer Protection Division for the North Carolina Department of Justice wrote the following summary:
“The settlement follows 10 months of intensive negotiations between the five banks and a coalition of [eight] state attorneys general and federal agencies, including the Departments of Justice, Treasury, and Housing and Urban Development.
“The investigation began in October 2010 following revelations of widespread use of ‘robo-signed’ affidavits in foreclosure proceedings across the country,” the executive summary continues. “State attorneys general formed a working group to investigate the problem and to confront the banks about the allegations. The major mortgage servicing banks soon acknowledged that individuals had been signing thousands of foreclosure affidavits without reviewing the validity or accuracy of the sworn statements. Several national banks then agreed to stop their foreclosure filings and sales until corrective action could be taken.”
According to the FBI, fraud in the mortgage industry is difficult to uncover and thus prevent. The scope of abuse includes not only the mortgage industry, but also other players in the current real estate and finance market.