Advocates have long called for better consumer protections in the mortgage industry, and now one state has addressed some of the big issues with a new measure.
California’s Homeowner Bill of Rights went into effect Jan.1, and is designed to ensure fair mortgage lending and borrowing practices within the state, according to a report from the state’s Attorney General’s office. The rules are designed to make sure there is transparency and fairness when it comes to this type of lending.
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One of the most important parts of the Homeowner Bill of Rights prevents mortgage servicers from proceeding with a foreclosure while the homeowner is trying to get a loan modification, the report said. Further, homeowners can only have a single point of contact while in the foreclosure process, so that they know exactly who they should be dealing with at any given time.
Further, lenders will also be required make sure all the documents they record and file are verified as being legitimate, the report said. If multiple unverified documents are filed, the lender faces civil penalties up to $7,500 per loan, and is also subject to licensing agencies within the state. If a consumer notices any material violations of new foreclosure processing rules, they can seek redress.
The rules also spell out tenant rights, which state that those who buy foreclosed homes must give the current renters at least 90 days notice before even beginning the eviction process, the report said. And if the tenant had a lease before the foreclosure sale, the buyer must honor its full term unless he or she can prove such a deal was reached fraudulently.
There are also now tools that allow the state to prosecute mortgage fraud, with the statute of limitations extended to three years (previously it was one year). And local governments will now have more options to remedy the issue of blight in neighborhoods.
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California was hit particularly hard by the housing downturn and is, like most of the rest of the country, only now beginning to recuperate from the blow.