When the state of California passed its Homeowner Bill of Rights (HBR), the legislation was intended to protect homeowners from bad banking behavior that politicians believed was leading to unnecessary foreclosures. One of the main issues was dual-tracking, the practice of moving forward with the foreclosure process while also considering loan modifications and short sales, but HBR also deals with lenders who do not provide single points-of-contact for homeowners and who “neglect to deliver proper notice of loss mitigation options”. There are many fans of the HBR, including some who believe a national HBR bill is in order, and many critics as well who say that the policy simply clutters up the foreclosure process and is stalling the recovery. It appears that both sides could be right at least about one thing: California’s foreclosure sales rate is way, way down. Although year-over-year many more foreclosures have been initiated in the state since the New Year, the number of actual foreclosure sales is dwindling and the volume of short sales is rising.
Barclays recently released a report on the HBR indicating that the high cost of an errant foreclosure – litigation in this area is time-consuming and expensive – in the wake of the passage of the state’s HBR is the reason for declining foreclosure sales. “Servicers have become significantly more cautious when carrying out foreclosure sales,” the report reads, speculating that one provision in particular that allows borrowers to sue servicers for “material violations” is making banks particularly cautious about actually selling off foreclosed properties. Earlier this month, a survey conducted by the California Reinvestment Coalition seemed to indicate that housing counselors do not believe that the HBR is particularly effective. The Barclays report – and the hard numbers – certainly seem to indicate otherwise.
by Carole VanSickle