On January 1, 2013, a group of laws became effective supporting a “California Homeowner Bill of Rights.” The laws were designed to give homeowners stronger protections against predatory, aggressive bank lending practices.
One of the practices triggering these laws was to run dual tracks with owners with regard to loan modifications and foreclosures, leaving owners stymied when the loan modifications were either stalled or denied and the foreclosure processes went forward. Another was the inability to find a reliable point of contact with the deed of trust holder to work with, someone who was available and could give owners an accurate status on their loan modification or foreclosure process. Other offensive practices included a process called “robo-signing” and knowingly filing inaccurate documents. It took these laws to force lenders to revamp and tighten their processes, and avoid the dual track process. The laws gave homeowners the right to file lawsuits to block foreclosure and seek monetary damages for up to $50,000 if their loan servicer violates the terms of the bill.
The Homeowner Bill of Rights was tied to a grant of approximately $1 million given to assist in the implementation of the laws sponsored by the Attorney General Kamala Harris and the California State Bar was chosen to work with the Attorney General’s office to administer the grant.
The key provisions in the Bill of Rights ban the dual track foreclosures, guarantee a single point of contact, require verification of documents, and require additional notices to owners that have fallen into the foreclosure processes. One notice requirement is that the lender must “send the borrower within five days of recording a notice of default, a notice regarding foreclosure prevention alternatives (such as loan modification or short-sale), whether an application is required, and how to obtain an application.” Also, when a trustee’s sale is postponed for a period of at least 10 business days, the borrower must receive “written notice of the new sale date and time within five business days of the date of the postponement.” These provisions are found in Cal Civ. Code § 2924(a)(5).
Wouldn’t it be great if every homeowners association got five days’ notice within the time the trustee’s sale of an owner’s property is postponed for property of owners in the association? It is a real struggle for homeowners associations to collect delinquencies when lender practices and delays add to complications. And while this Bill of Rights creates better practices for delinquent owners, it could exacerbate problems homeowners associations face because of lender delays in foreclosure. Trying to make choices as to how to proceed with a collection matter, when a board cannot get cohesive information about the status of a delinquent property or has to wait additional months for satisfaction of assessment debt, is quite difficult.
I believe it is safe to say that the majority of lenders don’t voluntarily let associations know when they take back property in the association so the delinquencies continue and costs continue to accrue. Perhaps it was dysfunction within the lender community, but it appeared that many preferred to wait until the property they were holding was in a short sale situation or sold to a buyer before any assessments would to be paid. So CAI-CLAC got on the horse in a laudable effort to help the struggling homeowners associations in California get some relief. CAI-CLAC has worked hard to effect law that would force title companies and lenders to give notice within a short time to an association when a property in the association is sold or taken back by the lender at a foreclosure sale. Without the notice, the only way associations are able to determine if a HOA property had been foreclosed upon is to send someone to the courthouse steps to see what happens at a scheduled sale, and sometimes that would take multiple trips because of postponements. And who has the time or resources (especially with the shortfalls suffered due to widespread failure to pay assessments) to do this?
Over the past two years, CAI-CLAC worked hard to get a bill introduced, co-sponsoring with the Conference of County Bar Associations to get accountability in notices practices. AB 2273 was met with very significant opposition throughout the process, but through negotiations and letters from CAI-CLAC followers, it was eventually signed into law.
Foreclosing parties must now record a sale within 30 days of the sale. This will give associations in California notice as to who owns the property and where they may be contacted and will enable the associations to bill the foreclosing party for assessments that occur while they are holding the property. In addition, it tightens up the time for giving notice to associations when the HOA has a “Request for Notification” on file with the County Clerk. Notice must be given within 15 days after the sale; prior law required such notification after the property was recorded, which, in many cases, took more than a year.
Already, according to RealtyTrac, the new law has resulted in a 39.5 percent decrease in California foreclosure filings from December 2012 to January 2013, making it the first time since January 2007 that California did not have the largest number of filings in the country. This sharp decline has also had a significant impact on national foreclosure activity, which dropped 7 percent in a single month.
Collecting assessments from parties that are responsible to pay remains a continuing challenge, but CAI-CLAC plans to remain a viable player in Sacramento, fighting for the benefit of all homeowners associations in California and the homeowners who live in them who otherwise have to pay increased assessments to cover the shortfalls.
Beth Grimm is an Attorney in Pleasant Hill, California, a long-time member of CAI-CLAC and past Public Relations Chair for tenure of several years. To learn more about Beth, visit californiacondoguru.com.
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