Provisions of the California Homeowner Bill of Rights

The California Homeowner Bill of Rights (HBOR) helps homeowners who are facing a foreclosure sale. It was passed to make sure homeowners know they have alternatives to a forced sale of their home and what those alternatives are. HBOR describes what information lenders must provide regarding your alternatives, the lender’s role in considering your request for alternatives, and your rights if the lender fails to comply. It was recently amended to aid tenants who were affected by the coronavirus and were in danger of losing their residence. 

A forced sale of your home can be extremely difficult for you and your family, and it pays to understand the laws that can save your home.   

What Is the California Homeowner Bill of Rights?

HBOR is a law in California Civil Code that protects California homeowners who are facing foreclosure by making sure they know what their foreclosure alternatives are. It governs nonjudicial foreclosures on residential real property in California. This generally involves a bank that has a security interest in the real estate. The security interest is outlined in either a deed of trust or mortgage. This document will contain language that allows the bank to collect against the borrower’s home if the borrower defaults on their loan payments. Deeds of trust are more common than mortgages in California, so the sale is often referred to as a trustee’s sale.   

Who Does HBOR Protect?

California’s HBOR applies to first-lien mortgages or deeds of trust on owner-occupied homes or residential real property with no more than four units. A first lien is the most senior mortgage or deed of trust on the property. The law only applies if the entity holding the first lien is the entity initiating the sale. Owner-occupied means that the property is the borrower’s principal residence. 

Recent Changes to the Law

HBOR became effective January 1, 2013, and it’s been modified many times since. Before 2018, the law was limited to banks that foreclosed on more than 175 homes a year. Currently, the law doesn’t distinguish between small and large banks, with an exception noted below (the point of contact provision). It was also amended in 2020 to offer some protection for tenants who meet certain criteria. To be protected under this law, tenants must have entered into their lease before March 4, 2020, and their inability to pay rent has to be due to the coronavirus. This provision expires on January 1, 2023.  

For detailed information on HBOR and how it may apply to your situation, or if you have questions about possible defenses and protections, seek legal advice from an experienced local attorney.  

Key Provisions of the Law

The key provisions of the law focus on foreclosure prevention alternatives offered by the mortgage or loan servicer. A servicer is an entity that services your loan, usually the bank or someone working for the bank. Foreclosure alternatives include a loan modification or other loss mitigation options. These are ways you can avoid a foreclosure sale. 

Single Point of Contact

If you request information about foreclosure alternatives, the servicer must provide you with a single point of contact meaning you have one contact person or a contact team to communicate with. So you won’t have to waste time dealing with a lot of people. The contact person must provide you with information, explain how to apply for alternatives, help you submit documents, make sure you submit a complete loan modification application, and keep you up to date on the status of your application. 

This provision doesn’t apply to banks that foreclosed on 175 or fewer residential properties (containing no more than four dwelling units) in the prior year.         

Notification and Acknowledgement Requirements

The law also helps keep you informed. Your servicer must contact you 30 days before they start the foreclosure process to discuss your financial situation and your options to avoid the foreclosure. The foreclosure process will begin with the servicer filing a notice of default with the county clerk. If the servicer files this notice, they have to contact you within five days to notify you that you may have foreclosure alternatives and explain how you can apply.  

If you submit a loss mitigation application, your servicer must provide a written acknowledgment or notice within five days of receipt. If there are any problems with your application, including missing information or errors, the lender must indicate them on this notice. They’ll also have to provide an estimated time frame for a decision.   

Fee Restrictions

The law restricts what fees loan servicers can charge. The servicer can’t charge you fees to apply for a foreclosure alternative. The servicer also can’t charge you late fees while your application is being considered, a denial is being appealed, or while you’re making timely loan modification payments.  

No Dual Tracking

Before the enactment of HBOR, banks could continue with a foreclosure process while a borrower’s loss mitigation application was pending. This is called dual tracking, and it’s since been restricted. If your application is submitted at least five business days before a scheduled sale, the bank can’t record a notice of default or conduct a sale while your application is pending.  

If your application is approved, the bank can’t move forward with a foreclosure sale as long as you’re following the terms of the loan modification. If your application is denied, you have 30 days to appeal the decision. During this time, the bank can’t take any action on foreclosure.  

Application Denial or Transfer Rights

If your servicer denies your application for a foreclosure alternative, it must send you a notice that tells you: 

• The reasons for the denial. 

• How much time you have to appeal the decision.

• How to appeal the decision.

• Any other applicable foreclosure alternatives you have. 

You can also submit a new application if your financial circumstances have changed. If the servicer approves your application and then sells or transfers your loan, the new servicer must honor the terms.  

Document Verification

Bank verification of documents and information is required. Before initiating certain foreclosure proceedings, a bank is required to review reliable evidence relating to the borrower’s loan, the loan’s status, the borrower’s default, and their right to foreclose. The foreclosure documents must be accurate and complete. 

Tenants’ Rights

Tenants of foreclosed properties also have rights. The buyer who purchased the foreclosed home must give any tenants living there at least 90 days’ notice to vacate before they can begin eviction proceedings. If the tenant has a fixed-term lease and there is a foreclosure sale, the tenant has the right to stay until the end of the lease term. That is unless the new owner is going to live in the home as a primary residence or if the rent is below the market rate. In these situations, the lease may be terminated with 90 days’ notice.  

Right To Sue for Violations

You can file a lawsuit if your servicer violates certain provisions of HBOR. Prior to the foreclosure sale, you may be able to get injunctive relief to stop the sale. To do this, you’d file paperwork with the court for an injunction proceeding. After the sale, you may be able to recover actual damages for any economic or monetary loss.  

Let’s Summarize…

HBOR is a law that protects California homeowners who are faced with foreclosure. The law ensures homeowners are considered for alternatives to a forced sale of their home through loss mitigation like a loan modification. The idea is to help homeowners avoid losing their homes. 

It does this by providing you with a contact person, requiring the servicer to notify you in advance of any foreclosure proceedings, making sure you’re provided with information on how to request foreclosure alternatives, and preventing the servicer from proceeding with a forced sale while your application is pending. There are also provisions explaining your rights if your application is denied and if the servicer violates certain provisions. Understanding the rules will help you assert your rights and, more importantly, might just save your home.