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State Legislators Reintroduce Bill to Forbid Foreclosures During Loan Mod Process

March 4, 2011

Last year, our Moreno Valley foreclosure defense lawyers wrote about a proposed California state law that would have forbidden lenders from starting the foreclosure process while the same homeowners were still under consideration for a loan modification. Unfortunately, that bill died before it could be passed, which is why we were pleased to see that sponsors Mark Leno (D-San Francisco) and Darrell Steinberg (D-Sacramento) have proposed a new version for this year's legislative session. As HousingWire reported March 3, the California Homeowner Protection Act is just one of several steps the state legislature has taken to address the foreclosure crisis, which has hit inland California especially hard.

A press release from the Center for Responsible Lending explained the bill in more detail. Its main provision is a requirement to give the borrower a clear response to a loan modification application before starting the foreclosure process. In order to enforce that rule, the bill gives borrowers a limited right to sue the servicer for breaking it, which provisions to stop what Leno calls "gotcha litigation." Under the bill, lenders would also be required to prove they own the note, a provision likely inspired by the widespread sloppy bookkeeping processes that have inspired new court rules or denied foreclosures in other states. And the servicer would also be required to send a document outlining all of the fees and payments over the life of the loan, showing where exactly the default came from.

As Pomona foreclosure defense attorneys, we wish this bill the best of luck as it makes its way through the sharply divided California legislature. Lenders will likely try to argue otherwise, but we know from talking to our clients and reading frequently about this issue that homeowners badly need a law forbidding foreclosures while a loan workout decision is pending. Currently, many lenders have their own internal policies against the practice, and it is also against the rules for the Home Affordable Modification Program. However, the lender and HAMP rules are all routinely ignored, and there's no enforcement mechanism to appeal or penalize the servicers. This bill corrects that problem by giving borrowers the right to sue, which we hope will serve as a deterrent to starting the apparently unstoppable foreclosure process without good reason.

Howard Law PC represents clients who are victims of bureaucratic mistakes and endless delays by lenders. Unfortunately, those aren't isolated incidents -- more than two years into the foreclosure crisis, we still frequently hear from clients who were wrongly denied loan modifications or had modifications taken away for reasons that aren't clear, aren't stated or aren't true. Our Santa Ana loan modification lawyers defend our clients aggressively, especially when a foreclosure is scheduled very soon. When appropriate, we file predatory lending lawsuits to ensure that our clients get a fair hearing from a judge -- often the only independent third party to ever consider the fairness of a California foreclosure.

If you've struggled for months to get your lender to consider a loan modification, only to get an arbitrary answer or no answer at all, Howard Law may be able to help. For a free, confidential evaluation of your case, send us an email or call us today at 1-800-872-5925.