Known as the Homeowners’ Bill of Rights, the legislation, when it is signed into law will:
• Provide the right to borrowers to sue their banks.
• Ban the mass production of foreclosure documents in an effort to speed up the foreclosure process, a practice known as “Robo-signing.”
• Prohibit banks from initiating a foreclosure while a borrower is pursuing a loan modification, a practice known as “dual-tracking.”
• Require banks to provide a single point of contact when they need to discuss their loan.
• Require banks to provide documents upon borrower request.
With such a heavy-handed law on the horizon to ward off unscrupulous banking practices, many Americans in other states are wondering if their state will pass it’s own Homeowners’ Bill of Rights.
This bill is first of its kind in totality, but some states already offer similar foreclosure protections. For example, in Louisiana a borrower can sue his bank for predatory and aggressive bank lending practices.
Wells Fargo Pays $3.1 Million in Damages
According to ThinkProgressive.org, a Louisiana Judge ordered Wells Fargo to pay a homeowner $3.1 million in damages for overcharging the borrower tens of thousands of dollars and then attempting to tie the case up in court.
During her judgment, the judge stated:
“… more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods.”
This past March, a federal investigation conducted by the U.S. Department of Housing and Urban Development concluded that Wells Fargo, Bank of America, and several other companies were signing foreclosure documents without always verifying the documents for accuracy, a process known as robo signing.
The investigation led to about $25 billion in fines and a series of mandated procedure changes as part of a 49-state settlement.
However, one first of its kind aspect of California’s Homeowners’ Bill of Rights is the ban on dual-tracking. This will make it illegal for banks to proceed with the foreclosure process while a borrower’s loan modification is pending.
In a February 2011 press release, Richard G. Fonfrias, J.D. of Fonfrias Law Group LLC stated:
“Banks are employing a loan-modification/foreclosure ‘dual track’ system which is confusing and misleading. You could argue that banks are punishing homeowners who are doing their best to save their homes from foreclosure.”
Currently banking institutions use the loan modification process to buy themselves more time and ultimately foreclose on the borrower.
Misleading Banking Practices
The misleading nature of the banking business is another aspect the Homeowners’ Bill of Rights hopes to curb.
Currently, most states do not require banks to be straightforward in their practices; however, the California legislation will require banks to provide a borrower with a single point of contact to discuss their loan and to also provide a borrower with documentation upon request.
Even though these two aspects will not force banks to become fully transparent, it is a definite step in the right direction.
“It’s astonishing that homeowners can’t get a single point of contact with their lenders”, said Ilene Jacobs, an attorney with CRLA, a nonprofit legal services program. She goes on to state:
“They’re led to believe that their loan modification approvals are being considered fairly and properly and then suddenly find out their house has been sold out from underneath them while they’re in the process of a loan modification.”
Many legislatures and California homeowners hope that the Homeowners’ Bill of Rights will put a stop to such practices.
Many homeowners not living in California also hope that the legislation is not only successful, but is also adopted in their state. Will other states follow California lead and protect homeowners from banks?
It is too early to say; however, now would be the time to begin writing your lawmakers to write a Homeowners’ Bill of Rights for your state.