By Stuart R. Simone, Esq.
In 2012, when the California Homeowner’s Bill Of Rights was enacted, much fanfare was made about the “Ban on Lender Dual-Tracking,” codified in Civil Code sections 2923.6 and 2924.11. And the fanfare was indeed justified. Once the law became effective on January 1, 2013, it was a primary legal weapon used by foreclosure defense law firms such as Gomez & Simone to stop foreclosure sales, and it forced mortgage lenders to act much more cautiously when trying to force homeowners and their families from their homes via nonjudicial foreclosure.
Here’s how California’s Dual-Tracking Ban has worked from 2013 to 2018: If a homeowner in default submitted a complete loan modification application to their lender (more than 7-14 days before the scheduled foreclosure auction of their home), the lender was required to stop the foreclosure process and review the homeowner’s application; if the application was denied, the homeowner had 30 days to appeal, and even if the appeal was denied, lenders still could not foreclose for another 14 days. When homeowner’s facing foreclosure came to Gomez & Simone, we would go into court to seek a “TRO” (a court-ordered injunction) to stop the foreclosure immediately. After winning the TRO from the judge (and also winning the Preliminary Injunction a few weeks later), the sale dates would stop. Often attorney s for the banks would agree to withhold any foreclosure activity for the duration of the case. During this time period, we would negotiate with the band, and the client would usually submit a truly “complete” loan modification application and make the law work for them. Since we only go to court with cases that violated the law, our success rate has been every high, with most borrowers being granted loan modifications with low monthly payments and interest rates low enough to make them the envy of homeowners everywhere.
WHAT DOES THE FUTURE HOLD? Many of the provisions of the original Homeowner Bill Of Rights, passed in 2013, expired on January 1, 2018. But all is not lost. While the breadth of the law has been cut back, the most important provision, the “Ban on Dual Tracking,” survives. In some ways, it is even stronger. Borrowers are not required to prove a documented change in financial circumstances to submit subsequent loan modification applications. For example, the old law allowed homes in the midst of short sale negotiations – which can take many months – to be auctioned off at foreclosure sale unless the bank “approved” the entire transaction, which only happens near the very end of the process. On the other hand, it’s weaker in some respects, as the appeal period is gone. In case your situation involves something that the California law doesn’t cover, Gomez & Simone have already researched the FEDERAL Foreclosure Laws and have come up with a legal foreclosure defense strategy using Federal Law. However, the sad fact is that the Federal laws (enacted from the TILA and RESPA bills, Dodd-Frank) codified in the CFR (mainly “Regulation X” and “Regulation Z”) offer less protection for delinquent homeowners than the California law. For example, if you wait to submit your loan modification application until 35 days before the auction date – that’s five weeks – you are out of luck. Federal law states that less than 37 days before a scheduled sale date, there is NO requirement that servicer review the application or delay or suspend foreclosure activity (though other rules or laws may require review and/or suspension of foreclosure activity). Also, Lenders are not required to review a loan modification application more than one time per mortgage loan. That means, if you were already given a loan modification, you are out of luck (unless your lender is feeling nice that day). Fear not, for there is still another set of Federal Laws for those not covered by these regulations: Bankruptcy Law.
Bottom Line, the Foreclosure Defense Analysis is changing, but you can count on Gomez & Simone Law to always be on top of these changes to offer you state-of-the-art legal protection. Our first bit of free advice: Submit a loan modification application today!
Gomez & Simone is a full service real estate law firm representing families and business people, homeowners, landlords and tenants, with offices throughout Southern California. This article is informational only and should not be used as legal advice. Please note that laws may have changed since this article was published. Before taking action, we recommend that you consult with one of our attorneys about your specific matter. Please contact your local Gomez & Simone office or call us at 1-855-219-3333. Attorney advertising.