More than 1 million families lost their homes in California between 2008 and 2011. Another half a million are in foreclosure. Data from the Attorney General’s Office shows that Latino families are 22% more likely to face imminent foreclosure.
The majority of the banks have not responded at the level of the minimum they should be doing: facilitating the process to negotiate a mortgage modification for homeowners at risk of losing their homes. A package of measures that is advancing in the California Legislature provides some common-sense remedies to prevent and punish abuses and improve the service that banking institutions offer homeowners in trouble.
This is not about guaranteeing a modification, but treating homeowners fairly. For example, banks would be prevented from starting foreclosure while negotiating a possible deal with the borrower, which is now a common practice. Also, banks would have to offer a single point of contact for the customer when processing the application, as well as provide a clear explanation of why a modification was rejected. In addition, banks would be fined for approving multiple loans without document verification (a common practice during the mortgage bubble); tenants of homes in foreclosure would be protected; and consumer protections would be extended to all banks in California, not just the five largest included in the National Mortgage Settlement.
This week, both chambers of the state Legislature are scheduled to vote on two bills known as the Homeowner Bill of Rights, SB 900 and AB 278. The big banks are intensely lobbying to prevent their approval. But interestingly, the California Independent Bankers and the California Credit Union League have remained neutral.
These protections are needed to bring a measure of order and justice to the process. We hope the Legislature does the right thing to protect homeowners and California’s economy, which won’t take off while the decline in the real estate market continues.