New California Law Addresses Various Foreclosure Problems
During the recent California legislative session a number of bills have been introduced that attempted to deal with various problems associated with the enormous amount of foreclosures taking place in the state. Not all of those bills have passed, of course, and some that did were vetoed by the Governor. One that did survive and was signed into law is Senate Bill 1137 (Perata). It addressed problems experienced by three different groups: homeowners in default, renters of homes that have gone into foreclosure, and communities in which foreclosed properties are located.
The new law requires that foreclosing lenders take certain steps to help, or attempt to help, homeowners who are in default on mortgages that were originated between January 1, 2003 and December 31, 2007. At least thirty days prior to filing a notice of default (NOD – the first step in the California foreclosure process) the lender or its agent must attempt to contact the borrower by phone ‘in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure.’ The borrower must be provided with ‘the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency.’
An NOD may be filed if the lender is unable to contact the borrower despite its due diligence in attempting to do so. Due diligence here means sending a first-class letter that includes the toll-free HUD number and attempting telephone contact at least three different times on different days and at different times. If there is no response in two weeks a certified letter is to be sent, return receipt requested, that provides ‘a means for the borrower to contact it in a timely manner, including a toll-free telephone number that will provide access to a live representative during business hours.’
These requirements do not apply if the borrower has already surrendered the property, has filed bankruptcy, or has contacted with any entity ‘whose primary business is advising people who have decided to leave their homes on how to extend the foreclosure process – .’
In the event that the borrower’s billing or contact address is different from that of the property, the lender is obliged to notify any residents (such as renters) when a notice of sale is posted. The notice shall be posted on the property and also sent by mail. It must be in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean (California’s major spoken languages). It advises residents that the property is in the foreclosure process and may be transferred as soon as within twenty days. It also tells them that the new owner may give them a notice to vacate. The notice, however – and this is a result of SB 1137 – must be for at least 60 days, not the usual 30.
Finally, SB 1137 provides that the new owner of the foreclosed property (whether it be the foreclosing lender or a successful bidder at the auction) must maintain vacant residential property. Failure to maintain means ‘failure to care for the exterior of the property, including, but not limited to, permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action to prevent trespassers or squatters from remaining on the property, or failing to take action to prevent mosquito larvae from growing in standing water or other conditions that create a public nuisance.’
This law authorizes local jurisdictions to fine the new owner up to $1,000 per day – given proper notice and time to respond – for failure to maintain property as specified.
SB 1137 was passed as an urgency statute and is in effect now. There is not the typical wait until the beginning of the next year. It remains in effect until January 1, 2013.
SB 1137 won’t cure all the ills brought on by California’s rash of foreclosures, but it should be helpful to a lot of people.
Written by Bob Hunt for www.RealtyTimescom. Copyright