OAKLAND, Calif., June 3 /PRNewswire-USNewswire/ -- Legislation that would help prevent avoidable foreclosures and deter irresponsible lender and servicer behavior passed out of the California Senate today, 21-12.
"Simple fairness dictates that no one should lose their home while they are in the middle of trying to save it," said Paul Leonard, director of the California office of the Center for Responsible Lending.
SB 1275, authored by Sen. Mark Leno (D-San Francisco) and Senate President Pro Tem Darrell Steinberg (D-Sacramento) would prevent servicers from foreclosing on homeowners who have requested modifications until a decision has been made, and the homeowner notified. It would also allow for a limited remedy for certain eligible homeowners whose homes were erroneously sold at foreclosure.
Currently, servicers are initiating the foreclosure process even when borrowers are working to reach a resolution, including when homeowners are following all the rules to seek a loan modification, or are already making payments on a trial modification. Additionally, if a homeowner's home is sold due to servicer error, there is currently no means by which to seek recourse.
SB 1275 seeks to change this by providing recourse through what is known as a private right of action. This would allow eligible homeowners to seek limited damages which are directly related to the severity of the servicer's errors, or, in some cases, would allow the homeowner to reverse the foreclosure sale and require the servicer to start over and follow the law. This provides a modest deterrent to the egregious servicer behavior that can cost Californians their homes, and faces significant opposition from banks and servicers reluctant to improve their servicer practices or pay the price for their mistakes.
During earlier committee hearings for SB 1275, servicer representatives acknowledged that confusion and errors are commonplace. Bank of America executive Jack Schackett even admitted during a conference call yesterday that they "have not handled [their] customers to the standards Bank of America is accustomed to."
Confusion and errors that cost Californians their homes, however, are not only avoidable, but they are devastating. Homeowners who have been wronged deserve the opportunity to make it right.
"One of the oldest principles of law is that a right without a remedy is no right at all," said Lisa Sitkin, staff attorney at Housing and Economic Rights Advocates in Oakland. "In order for laws to be meaningful, violations must have real consequences, and victims must have real avenues to seek redress."
CRL expects that homeowners' ability to right the wrongs of irresponsible servicers will continue to be the biggest challenge to moving SB 1275 through the Assembly. It will first be heard in the Assembly Banking Committee.
SOURCE Center for Responsible Lending