(Source: Stephanie Hoops Ventura County Star, Calif. (MCT) — For the past year Jessenya Hernandez has been trying to get a home loan modification for a client who sought help from the Oxnard office of California Rural Legal Assistance.
Every time Hernandez, a CRLA staff attorney, calls for help a new person has dominion over her client’s file, and she’s back to square one.
“Finally it seems like we were getting somewhere,” she said. Then, the client received a letter stating the lender was going to start foreclosure proceedings.
It happens all the time, Hernandez said.
It’s “astonishing” that homeowners can’t get a single point of contact with their lenders, said Ilene Jacobs, another CRLA attorney who works out of Marysville and specializes in housing issues.
“People claim that government is disorganized and private businesses do a better job but this is not an indication of that,” she said.
The attorneys at CRLA, a nonprofit legal services program, work with indigent Californians daily and have grown weary of what they see as games that banks play with struggling homeowners.
“They’re led to believe that their loan modification approvals are being considered fairly and properly and then suddenly find out their house has been sold out from underneath them while they’re in the process of a loan modification,” Jacobs said.
Ongoing complaints about the loan modification process drew the attention of state lawmakers and changes may be on the horizon. Legislators have approved the Homeowner Bill of Rights, which, among other things, would require banks to provide homeowners with a single point of contact. It would also put an end to “dual-tracking,” a practice in which lenders pursue a foreclosure while a borrower simultaneously seeks a loan modification.
The first-of-its-kind bill package passed the Assembly and Senate on Monday. It will become law Jan. 1 if
Gov. Jerry Brown signs it, and he’s indicated he will.
“It’s about time,” said Michael Sment, chairman of the Ventura County Bar Association’s bankruptcy section. “It may even be a little bit too late.”
But Sment and Valencia attorney Louis Esbin said the new statute won’t help all struggling homeowners. The legislation won’t cover anyone who has an open bankruptcy case. It doesn’t apply to rental properties, only to owner-occupied properties of four or fewer units. Also, it permits foreclosure prevention alternatives for first lien mortgages only, so those with second and third mortgages won’t benefit.
“Nobody should do a loan modification between now and Jan. 1 because the statute says if you were denied before 2013 they don’t have to consider you again,” Esbin warned.
The law has a number of elements that Esbin, a bankruptcy law specialist, said will protect consumers. For example, specific reasons must be provided to anyone whose loan modification is denied, no late fees may be collected or assessed while a loan modification or appeal is pending, and lenders must acknowledge receipt of documents.
“These are very good things that we’ve been wrestling with for a couple years,” Esbin said.
There are some ambiguous clauses in the bill. Consumers can sue for “material violations” of the law, but the bill doesn’t spell out what constitutes material violations. Also, homeowners typically have eight months between the time they default and their property goes to sale. The statute spreads that out, making the timing vague.
“People want to buy as much time as they can but at the same time they want to know when it will end,” Esbin said. “Because they have kids in school, they have other commitments and they want to be able to plan their world. I think that while well-intentioned, it truly does create more uncertainty.”
That uncertainty could affect market values, Esbin said.
The United Trustees Association is also concerned about market values. The Irvine-based trade group is opposed to the legislation, arguing that it will extend the foreclosure period and result in reduced home values.
Other opponents include Realtors, banks and the California Chamber of Commerce, which argued it would discourage investment in California’s housing market, which has begun showing signs of improvement.
The number of Ventura County foreclosure filings has been steadily falling since the start of the year, when there were 1,144 total. In May there were 640 foreclosure filings, according to Irvine-based RealtyTrac.
Thousand Oaks Realtor Judy Seeger agrees that the legislation would hurt the housing market’s recovery. Seeger works for Century 21 Rolling Oaks and sells bank-owned properties. She has little sympathy for people whose homes are underwater who are unemployed and who haven’t made payments. She said she’s seen some people looking for “free rent” and squatters living in foreclosed homes.
“You can’t even get squatters out,” she said.
Seeger said banks have had so many new government programs to digest since the start of the foreclosure crisis that adding another will be burdensome to understand and implement.
“That’s the problem,” she said. “If another program is implemented as wide ranging as this one, we are going to be having nothing but lawsuits.”
Lawyers worry the bill will be a major problem for the state’s courts, which are in dire financial straights.
Esbin said it’s as if “the Legislature just dumped a huge amount of uncontrollable litigation onto their dockets. This is kind of like an unfunded mandate. Basically they’ve created a right to litigate, but there’s not funding. It’s ridiculous. When I read this, I’m like, are you kidding me?”
Sment said the bill’s objectives are good but the court system’s problems must be corrected so borrowers can get timely relief.
“These cases will just sit at the end of a backlog,” he said. “So how is that going to help these people?”
©2012 Ventura County Star (Camarillo, Calif.)
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