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Homeowner Bill of Rights: Protecting families from life’s financial storms

CHARLENE CROWELL | 10/11/2018, 8:33 a.m.
In recent weeks, multiple news sources have reported on the 10-year anniversary since the onset of the nation’s foreclosure crisis. ...
Charlene Crowell

Center for Responsible Lending

In recent weeks, multiple news sources have reported on the 10-year anniversary since the onset of the nation’s foreclosure crisis. Between 2007 and 2011, 10.9 million homes went into foreclosure, with 8 million completing that process. Additionally, $1.95 trillion in lost property value affected both families who lost their homes to foreclosure, as well as nearby neighbors who remained in their homes.

Less prominently revisited in these retrospectives were the disproportionate losses suffered by Black and Latinx communities. Together, these two ethnicities absorbed $1 trillion wealth losses.

None of us can change the past, but we can and should learn from it and take steps to ensure that the harms caused are acknowledged and never repeated.

The creation of the Consumer Financial Protection Bureau was authorized at the federal level. But across the country, states also took initiative.

For example, California became the first state in 2012 to create a Homeowner Bill of Rights.

A state legislative package was enacted to end many mortgage ills, like banning mortgage broker kickbacks for unfairly placing borrowers into more expensive loans than necessary.

Another harmful practice included mortgage servicers assuring borrowers that a refinance was in progress, while at the same time, beginning the formal foreclosure process.

HOBR was an important part of a legislative package that broadly addressed a wide range of mortgage woes.

It took years of advocacy before the California State Assembly passed the initiative. At the urging of consumer advocates and former state attorney general Kamala Harris, the HOBR gained support from civil rights organizations, banks, credit unions, labor unions and consumer groups. Borrowers, lenders, workers and advocates all agreed that the legislation was fair and responsible to improve the foreclosure tsunami.

For consumers, however, the most heralded legal provision included the right to have their own day in court. If mortgage servicers did not comply with the law, borrowers could sue and seek financial redress. Borrowers were also assured of timely notification on the status of their loan modifications and gained the right to appeal modification denials.

Unfortunately, legislation “sunsets”– dates by which specific legal requirements expire – have taken the real teeth out of HOBR since 2017.

Such times are also the moments when leadership can emerge and replace what was lost.

San Jose’s state senator, Jim Beall, who also chairs the state’s Senate Transportation and Housing Committee, sponsored a 2018 HOBR that restored the previously lost provisions. California Gov. Jerry Brown signed the new bill into law on Sept. 14. Beyond restoring the right to appeal a loan modification denial, the updated bill also resurrects:

• Requirements that loan servicers provide homeowners with written notices to confirm receipt of their loan modifications applications and whether any necessary application items are missing.

• Requirements that servicers send written denial notices with sufficient information and sufficient time to appeal a questionable denial.

“Californians can once again count on the protections that helped thousands of homeowners hold on to their houses during the 2008 financial crisis,” noted Beall. “Lenders will have to provide timely notifications on the status of a loan modification application and homeowners will have the right to appeal denials.”