SACRAMENTO, Calif. (CN) – Gov. Jerry Brown signed the California Homeowner Bill of Right into law Wednesday, bolstering efforts to help homeowners renegotiate tough mortgages.
The new law and its four main components make California the first state in the nation to take provisions from the National Mortgage Settlement – which covered the country’s five largest mortgage loan servicers – and apply those rules to all loan servicers, according to a statement from the governor’s office.
Dual-track foreclosures are prohibited under the law. Loan applications will receive full review and consideration before foreclosure proceedings occur, and borrowers will have a legal remedy to challenge servicers that engage in dual-track foreclosures, Brown said.
Homeowners who apply for loan modifications will now receive a single point of contact at banks and loan servicers. The new law also requires financial institutions to give borrowers an expanded set of notices before taking action on loan-modification requests or pursuing foreclosure.
Brown said the law also instructs judges to grant injunctions against foreclosures that violate the new rules. Servicers that file multiple inaccurate mortgage documents or commit “reckless or willful violations of the law” will face up to $50,000 in civil penalties.
“Californians should not have to suffer the abusive tactics of those who would push foreclosure behind the back of an unsuspecting homeowner,” Brown said in a statement. “These new rules make the foreclosure process more transparent so that loan servicers cannot promise one thing while doing the exact opposite.”
California Attorney General Kamala Harris, who sponsored the law, agreed.
“The California Homeowner Bill of Rights will give struggling homeowners a fighting shot to keep their home,” Harris said. “This legislation will make the mortgage and foreclosure process more fair and transparent, which will benefit homeowners, their community, and the housing market as a whole.”
Unfortunately for many struggling homeowners, the new law will not take effect until Jan. 1, 2013.