California foreclosure overhaul signed into law
A major overhaul of foreclosure laws in the Golden State has been signed into law by Gov. Jerry Brown.
Last week, California lawmakers passed the legislation that would provide homeowners with some of the nation’s strongest protections from foreclosure and aggressive bank practices. For instance, seizing a home while the owner is negotiating to lower mortgage payments will be restricted.
At a boisterous signing ceremony in downtown Los Angeles, Brown said that the measures were an important step for an economy still suffering the fallout of the subprime mortgage crisis and housing bust.
“This is a very important day, to sign a very important bill, to clean up at least part of the mess that has been created by all sorts of people in the mortgage, the banking and servicing business that caused untold suffering to millions of people,” Brown said. “People have lost their homes, they have lost their jobs. Families have broken down because of the insensitivity, the greed and the blindness of very powerful people who made millions of dollars personally, and billions of dollars for their respective entities.”
The legislation was backed by Atty. Gen. Kamala D. Harris, who earlier this year helped negotiate a national mortgage settlement with the nation’s largest banks. Many of the reforms that were part of that settlement were incorporated into California law with the bill signed into law Wednesday morning.
“California homeowners will take back a system in a way that gives them due process, gives them transparency, gives them dignity through a fair process,” Harris said. “This is about saying that we have had a series of unnecessary foreclosures in a state full of responsible homeowners.”
When the measures go into effect next year, California will be the first state to prohibit lenders from “dual tracking,” the practice of negotiating with clients to modify a mortgage so that payments become more affordable while simultaneously pursuing foreclosure. In such cases, homeowners can wind up being evicted even though they had been working with the bank to modify their loans.
The new laws also ban so-called robo-signing — the improper or faulty processing of foreclosure documents — and would allow state agencies and private citizens to sue financial institutions, under limited conditions, for economic compensation and for additional civil damages of up to $50,000 if lenders willfully, intentionally or recklessly violate the law. No lawsuit could go forward if the bank or servicer first fixes the problem with documentation or procedures, according to the bills.
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