A California bill drafted to end the practice of filing a foreclosure ahead of modification efforts failed in state committee Wednesday, but its key sponsor plans to reintroduce it.
California Senate President Pro Tem Darrell Steinberg (D-Sacramento) introduced S. 729 with Sen. Mark Leno (D-San Francisco). Recent consent orders signed between major servicers and federal regulators stipulate the banks cannot pursue a foreclosure once a loan is approved for modification. But this state bill would push requirements beyond the federal agreements.
“Struggling California homeowners can’t afford to wait for federal regulations to be drafted, and more concerning, there are currently no ramifications when servicers violate guidelines.
S. 729 gives homeowners recourse for such non-compliance,” Steinberg said in a statement sent to HousingWire.
The bill prohibits the recording of a default notice until a variety of loan modifications requirements are fulfilled. Servicers must have reviewed the application, made a decision and sent the borrower a denial explanation letter before filing the notice of default.
The bill also requires servicers to document compliance with the modification requirements, sign them and deliver them to the foreclosure trustee or authorized agent.
If the requirements were not met, the borrower would have the ability to hold up the trustee sale and gives him or her the ability to recover damages, attorney’s fees and other costs.
A spokesperson for Steinberg said the bill was granted reconsideration by the committee, and Steinberg plans to reintroduce the bill this legislative year.
“Despite yesterday’s unfortunate outcome in committee, this bill is far from dead,” Steinberg said. “We will continue to meet with lawmakers and stakeholders seeking consensus in the hopes of bringing the bill back up for a vote.”
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