Laws a combination of state Senate and Assembly efforts
The new laws will affect legal procedures for mortgage servicers and other financial institutions and those occupying foreclosed homes. Governor Brown and state legislators believe these changes, when coupled with other protections that became law this summer, will prevent more foreclosures from occurring in California.
The first new law, previously known as Senate Bill 1474, will grant the state attorney general the power to organize a grand jury to investigate and indict those accused of financial crimes, including mortgage fraud. The law will make it easier for the attorney general to move forward with cases against financial institutions. Assembly Bill 1950, now law, extends the statute of limitations on pursuing mortgage-related crimes from one year to three. This gives homeowners more time to gather evidence that a crime occurred and build their cases against their lenders.
The third law does not involve legal action against financial institutions but instead extends protections to renters of homes in foreclosure. Assembly Bill 2610, now law, extends the time renters are guaranteed to be able to stay in a home that has changed owners. This means renters can stay longer in homes that have been reacquired by banks or have been sold by a bank to a new owner.
New laws join two laws passed earlier in 2012
The three new laws join two others that were enacted in the summer of 2012 as part of the Homeowner Bill of Rights. One of these laws bans banks from acting aggressively, like seizing a home, while still in negotiations with the homeowner over mortgage payments.
The other law gives homeowners and state agencies the power to sue mortgage lenders and other financial institutions in civil court. Under this law, homeowners may be able to recover economic compensation as well as additional damages if the court finds that the financial institution acted willfully, intentionally or recklessly during mortgage dealings. These additional damages could total up to $50,000.
Together, these laws expand some of the reforms of the national mortgage settlement, reached between the state governments and several big bank lenders, to all mortgage servicers in the state of California.
The national mortgage settlement was reached between participating state governments, including California, and five big banks: Wells Fargo, JPMorgan Chase, Bank of America, Ally/GMAC and Citi. The settlement requires these mortgage servicers to pay $25 billion in relief to homeowners in participating states and states and the federal government. Under the terms of the settlement, the banks must also make changes to how they service mortgages, including improving communication with borrowers and ending predatory practices like dual-track foreclosures.
Under the new laws signed by Governor Brown, Californians should enjoy stronger protections against predatory lenders and more efficient ways to hold lenders accountable through the courts. If your home has been foreclosed on and believe the lender behaved in a predatory manner, contact an experienced bankruptcy lawyer.