The Homeowner Bill of Rights (“HBOR”) was enacted to attempt to open a dialogue between the borrower and lender and to ensure that the borrower is made aware that there is not only help available, but alternatives to foreclosure. Similar versions were enacted in both California and Nevada following the Great Recession of 2008.
Since a majority of foreclosures in California and Nevada are conducted nonjudicially homeowners had a difficult time holding lenders and loan servicers accountable for following up on forbearance and forgiveness requests. HBOR lists the responsibilities of lenders and loan servicers to provide an opportunity to obtain loss mitigation options and avoid foreclosure. It also allows homeowners to sue in court for specific violations.
As the lender or loan servicer, it is your job to comply with the civil code and any foreclosure regulations in order to complete a nonjudicial foreclosure properly. In this blog post, we discuss how this bill can affect foreclosure proceedings and how you can comply if the bill pertains to your loan.
Does HBOR affect all loans?
The Homeowners Bill of Rights does not affect every loan and every borrower. In Nevada, it only applies to consumer debt secured by trust deeds on owner-occupied, one to four unit residential properties. It does not pertain to vacant land, commercial buildings or a property that is not considered “owned-occupied”. To be owner-occupied, the property must be the principal residence of the borrower, and the borrower must be a natural person.
Prior to September 1, 2020, California’s HBOR was similar to Nevada’s in that compliance was required on consumer loans secured by a first lien on an owner-occupied (primary residence) 1-4 family property. Due to recently enacted legislation (AB 3088) in California, HBOR was expanded to include all loans (including business purpose) secured by a 1-4 family residential property that is either owner-occupied or has a tenant in the property.
Unless your defaulted loan falls outside of this criteria, then you must comply with HBOR and attempt to make live contact with the borrower and make them aware of their options to avoid foreclosure such as entering into a loan modification (if offered), refinancing, or selling the property.
A common misconception is that this law requires lenders or servicers to enter into loan modifications with borrowers that qualify. Nothing in HBOR actually requires lenders to grant modifications to homeowners, but if the lender normally offers modifications, it must consider each borrower who makes a request.
HBOR applies to my loan. How do I comply?….
First, the borrower must be sent what is called a first contact letter (“FCL”). The letter is to be mailed only by first class mail and a certificate of mailing (not certified mail) should be obtained from the post office.
Once the letter is mailed, the lender or servicer is to telephone the borrower to establish live contact. This must be done on three different days of the week at three different times of the day (e.g, Tuesday at 9:00 am, Thursday at 6:30 pm, and Friday at noon). If you reach the borrower on the first or second attempt, no further attempts are necessary.
If live contact is not made with the borrower, the first contact letter must again be sent to the borrower on or after the 14th day following the third phone call. However, this time the letter must be sent by certified mail.
A log with the dates and times of the call attempts should be maintained. Keep in mind that you must comply with the California Rosenthal Act which governs how you must conduct yourself when contacting the borrower (including limiting your contact times to between 8 a.m. and 9 p.m.).
Foreclosure can begin 30 days after the earlier occurrence of (a) live contact is made with the borrower, or (b) the FCL is sent by certified mail.
HBOR doesn’t apply to me. Now what?
If you have a loan in default, and the loan or borrower is not covered, nothing additional needs to be done.
To learn more about the key provisions of the HBOR, you can view more information at the California Attorney General’s website by going to this link here OR give us a call at 866-535-3767
Written by Brittany Lokey