What does SB 1150 do?
SB 1150 clarifies the responsibilities of a mortgage servicer when a borrower dies and leaves a surviving homeowner who is not on the loan. The bill extends the transparency procedures of the existing Homeowners Bill of Rights to prevent unwarranted foreclosures.
Does SB 1150 require the lender to allow the surviving homeowner to assume the loan and get a modification?
No. Section 2920.7(a) (6) only requires the servicer to provide information about loan
assumption and foreclosure avoidance options. Page 5, lines 30-33, further emphasize this point, stating the bill “does not impose an affirmative duty on [a lender] to offer a loan modification to, or accept an assumption of the loan by, the successor in interest…”
How severe is this problem?
80% of California housing counselors surveyed in 2013 reported having survivor clients who were facing foreclosure. Housing and Economic Rights (HERA) alone handled 49 California cases over the last three years. These are just a fraction of the people affected. Most victims never receive legal assistance.
Where is it occurring?
Everywhere – from suburban Southern California to urban Northern California to rural Central Valley. HERA’s cases were located in Escondido, Vista, Los Alamitos, Pomona, Rancho Mirage, Riverside, Winchester, Berkeley, Concord, Daly City, Emeryville, Fairfield, Hayward, Napa, Newark, Oakland, Pacifica, Richmond, San Francisco, Vacaville, Porterville, Salinas, Soledad,and Visalia.
How does this problem impact seniors?
The survivor in these cases is most often a senior, usually a woman. (American women live an average of seven years longer than men.) Seniors forced from their home by foreclosure are likely to suffer devastating health impacts – especially if they have to choose between paying California’s skyrocketing rents and buying medicine. SB 1150 protects seniors by giving them a chance to discuss assumption and loan modification options with the servicer.
Should California wait until the federal Consumer Financial Protection Bureau regulations are updated to avoid conflict?
It’s not necessary or desirable to delay protections for vulnerable survivors. Federal law allows states to adopt stricter requirements and nothing in this bill conflicts with the proposed regulations. Plus, there is no firm timeline for their adoption. And, mortgage servicers are working hard to water them down to the point they may not even address Californians’ needs.
Even if the final federal rules are strong, there is no reason to believe they’ll include an effective enforcement mechanism. Under current practice, the bureau reviews servicers’ files annually, long after the servicer has foreclosed on the owner. Without real-time accountability, multiple surveys have shown that many servicers do not follow the law. They only begin to do so when individual homeowners can enforce the law – as SB 1150 and the existing Homeowners Bill of Rights allow.
With the Homeowners Bill of Rights, California led the nation in protecting homeowners. Governor Brown signed it into law a full year and half before the federal regulations caught up. Survivors deserve nothing less.
Under SB 1150, does the homeowner have to be related to the deceased person and live in the home?
No.California law allows a homeowner to leave his or her property to anyone s/he wishes. Indeed, this a primary form of generational wealth-building for low and moderate income families.
Why should someone who isn’t an original party to the loan be given information about the loan and its assumption and/or modification?
Because s/he owns the home and can’t formulate a plan to keep it without this information. Plus, in many cases, the survivor built equity by contributing to the original borrower’s payments or making payments since the borrower died. From a broader societal perspective, it’s in the best interest of the surrounding neighborhood and the local economy to avoid unnecessary foreclosures. The vandalism and absentee landlord situation that follows foreclosure can lower neighbors’ property values and cost the city/county upwards of $19,227. Fannie Mae and Freddie Mac, and the Consumer Financial Protection Bureau already require servicers to provide this information to survivors. What’s missing is an effective enforcement mechanism.
How many lawsuits did the Homeowners Bill of Rights generate?
Very few compared to the volume of foreclosures in the state. (No one tracks the exact number.) And that’s the goal – drive errant servicers to clean up their act before another survivor is devastated by loss of her or her home.