California lawmakers pass historic foreclosure protections

http://www.latimes.com/business/la-fi-homeowner-rights-20120703,0,5215367.story

California lawmakers have passed historic legislation that would provide homeowners with some of the nation's strongest protections from foreclosure and aggressive bank practices, such as when a lender tries to seize a home even as the resident negotiates to lower mortgage payments.

After years of housing and mortgage market distress during which lenders seized nearly a million California houses, legislators on Monday sent a pair of Assembly and Senate bills to the governor designed to help financially distressed borrowers stay in their homes.

The legislation would make California the first state to prohibit "dual tracking," when lenders pursue foreclosures and simultaneously negotiate with clients to modify their mortgages so that payments become more affordable. Homeowners complain that they often wind up being evicted even though they had been working with the bank to modify their loans in order to avoid foreclosure.

The measures outlaw so-called robo-signing, the use of false signatures on foreclosure documents, and allow state agencies and private citizens to sue financial institutions, under limited conditions, for economic damages and for additional civil damages of up to $50,000 if lenders willfully, intentionally or recklessly violate the law. No lawsuit can go forward if the bank or servicer first fixes the alleged problem with documentation or procedures, according to the bills.

The legislation also would simplify dealings between homeowners and their banks or loan servicers by requiring that clients be given a single point of contact, helping to avoid common bureaucratic snafus.