BY REBECCA KHEEL Californian staff writer firstname.lastname@example.org
Rosa Colindres was in danger of losing her home.
She couldn't work because of a back injury, and her live-in boyfriend was laid off from his job in the oil fields. She couldn't pay her $1,500 a month mortgage and was trying to work with the bank to avoid foreclosure. But to her, the bank seemed more interested in getting the house foreclosed.
What is the "Homeowner's Bill of Rights?"
The California State Legislature passed, and Gov. Jerry Brown signed, a law aimed at protecting homeowner's rights when facing foreclosure. The law, which takes effect in January, has been called the "Homeowner's Bill of Rights." An estimated 700,000 Californians are going through the foreclosure process. The three main protections are:
Ban dual tracking, which is when banks start or continue the foreclosure process while a homeowner tries to avoid foreclosure through a loan modification or short sale.
Prohibit robo-signed documents that speed up the foreclosure process.
Require large institutions to have one department or group of employees to deal with someone's lending issues.
"The mortgage company had to have the last word and didn't want to hear anything out," said Colindres, 38. "They were sarcastic and rude and not giving me much options."
Colindres is one Bakersfield resident who might have been helped if the recently passed California legislation dubbed the "Homeowner's Bill of Rights" had already been in place.
The law, signed by Gov. Jerry Brown last week, is meant to strengthen homeowners' rights in the face of foreclosure. The law bans "dual tracking," starting or continuing foreclosure proceedings while the homeowner pursues a short sale or loan modification; outlaws robo-signed documents used to speed up the foreclosure process; and requires large institutions to provide borrowers with a single department or group of employees to deal with their lending issues. It takes effect in January.
Local homeowners who have recently faced foreclosure say it most likely would have saved them much stress and heartache. Local experts are more wary of how the law will help foreclosures they've dealt with.
Will it help?
Harry Clay, a local real estate broker, said many people he's helped with short sales have faced the issues the law seeks to address. One client he's working with right now has nearly completed a short sale, or selling a property for less than what is owed. It's set to close Friday. But the bank has been dual tracking and had threatened to foreclose on Thursday, Clay said. The bank ended up extending the foreclosure date by two weeks to see if the short sale goes through.
"We've got a situation that is grievously wrong, and now there's a law against it, but the banks still flagrantly do it and will continue to do it until their dying breath," Clay said.
Another issue Clay said is ongoing is that of banks stalling foreclosure until a federal law that exempts taxes on forgiven debts expires at the end of the year. To stall, Clay said, the banks say they've lost paperwork and make homeowners call in for a personal interview to phone numbers that nobody answers or are disconnected.
"The banks are stalling people out until there are financial repercussions," he said.
Despite the issues Clay's clients have faced, Clay said he is not convinced the new law will fix anything. Instead, it could lead to frivolous lawsuits by people who never had any intention of paying their mortgages.
"There are legitimate hardships," Clay said. "But confusion over the law opens the door to freeloaders."
Denise Wigley, a local real estate agent with Keller Williams Realty, also said she was not sure the law would actually help. Every time she hears about something that is supposed to help homeowners, she said, it never lives up to expectations.
But, Wigley added, she has seen many of the issues the law seeks to fix. For example, often times she and others in her office have to go through multiple channels when dealing with lenders. Even when she does have one asset manager she is in contact with, she said sometimes they disappear and she is put through the ringer to try to find her clients' paperwork.
"Everything that is totally logical and reasonable to you and me is not to the banks," Wigley said. "The banks are on the opposite page in terms of logic and reason."
Katy Hudson, president of Consumer Credit Counseling Service of Kern and Tulare Counties, said the law could also cause more problems than it fixes. First, she said she believes the argument that the law will slow down the housing market and make loans harder to get than they already are. Second, she said scam artists tend to come out of the woodwork to take advantage of people who do not understand the law and charge them for services that should be free.
Hudson said she hopes the law will prompt more people to seek Consumer Credit Counseling's free help.
Dustin Hobbs, communications director at California Mortgage Bankers Association, said the law does not get to the heart of the problem: homeowners who simply cannot pay their mortgages because of a weak economy. It simply lengthens the foreclosure process by creating an elaborate set of procedures lenders must follow, he said.
"A lengthy foreclosure process doesn't help the borrow," he said. "They're not going to get a new job or higher salaries in that time. The problem is the economy."
Clashes with lenders
After three years of struggling to get a loan modification, Bakersfield homeowner Maria Gutierrez, 57, said she thinks she would have been helped by the law.
Gutierrez said she was fired from her job on a farm. She collected unemployment, but was struggling to meet her $946 a month mortgage payment.
She tried to work with the bank to avoid foreclosure, but found them unhelpful. As the bank pursued foreclosure, Gutierrez worked with a real estate agent on getting a loan modification. In March, just before the house was due to be foreclosed, the loan modification deal went through.
"It's common sense that the bank wants its money back," she said. "But the bank should find a way to work with customers to make any payment that you can."
Gutierrez holds her mortgage with Homeward Residential. Philippa Brown, a spokeswoman for Homeward, said foreclosure is always the last option when clients have trouble paying their mortgages. Other options like a loan modification have to already have failed for a home to be foreclosed. Brown said the company does not do dual tracking.
"Foreclosure is never our goal," Brown said. "It is to our benefit to keep people in their homes. There's a huge cost that we absorb when a home is foreclosed."
Colindres, the woman who could not pay her mortgage because of a back injury and unemployed boyfriend, also holds her mortgage with Homeward. She was also eventually given a stay of foreclosure with a loan modification.
But she said she imagines the process would have been a lot less frightening had the new law been in place when she faced foreclosure. The entire process made her sure she would have a heart attack, she said.
Before securing the loan modification a couple of weeks ago, Colindres had three months until her house was due to be foreclosed on Oct. 12. Throughout the whole loan modification process, Colindres said the bank constantly threatened that foreclosure could come sooner.
"I don't understand how banks let foreclosure happen," she said, "and not work with people to pay what little they have."