What Problems Does SB 1150 Address?

Virginia Chestnut, an 80-year old widow, has been the sole owner of her Richmond, California, home since her husband passed away in 2011. Though only her husband’s name was on the Countrywide mortgage, she continued to make payments after he died. When she was unable to keep up with the payments (her income was reduced after his death), she requested a loan modification. However, the mortgage servicer (Saxon) refused to talk to her, sent collections letters addressed to her dead husband, and told her she would have to get her dead husband to sign a power of attorney before they would speak with her. Saxon later transferred the loan to a new servicer, Ocwen, which refused to give Ms. Chestnut a point of contact at the company and took two months to process her loan assumption application, and only did so after an attorney from Housing and Economic Rights (HERA) got involved in the case.    

Most survivors are not so lucky. Other survivors who do not get legal help end up losing their loved one and their home.

Why is this happening?  The Homeowners Bill of Rights is working, but not for survivors.  California’s legislature led the nation in 2012 with its Homeowner Bill of Rights (HBOR), requiring mortgage servicers to provide borrowers a fair and transparent process, a single point of contact, and a fighting chance to secure a loan modification to keep the family home. HBOR stabilized families, neighborhoods, and local communities by slowing down indiscriminate foreclosures and creating a better process for the homeowner. Servicers were forced to either follow California’s new rules or face a potential lawsuit.

Mortgage Servicers Are Using a Loophole in the Homeowner Bill of Rights: Unfortunately, most servicers are not following its consumer protection rules when they are contacted by widows and widowers, domestic partners, surviving children, and other heirs who have an ownership interest in the home but are not named on the mortgage loan. In CRC’s 2013 survey of California nonprofit housing counselors and legal service lawyers, over 80% of respondents reported having survivor clients who faced foreclosure and difficulty communicating with servicers. Attorneys at HERA have worked with 49 homeowners caught in this predicament in the past three years.

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Survivors report multiple runarounds, lost paperwork, mixed messages, and lengthy delays when they attempt to contact their mortgage servicers. The end result can be an unnecessary foreclosure.

Mortgage Servicers Are Causing Unnecessary Foreclosures Virginia Chestnut’s experience reflects a common scenario. After a loved one passes away, the survivor tries to contact their servicer to get information about the loan, to apply for a loan assumption and/or to get information on loan modification options – just as her husband could have under HBOR.  If the servicer will even speak with her, she will face the same kind of abuses that convinced the legislature to pass HBOR, including servicer red tape and run-arounds, lengthy delays, repeatedly lost documents, and multiple employees and departments giving mixed message and inaccurate information. These practices can lead to a foreclosure without the servicer having ever considered her for a loan modification

As California’s Senior Population Grows, So Does This Problem: According to Pew Research, 10,000 baby boomers are turning 65 every day, and this trend will continue until 2029. In California, approximately 4.6 million (or 12%) of California’s total population is age 65 and over and 73% of these seniors own and live in their own home.  However, about a third of US seniors also have a mortgage, and US women live an average of seven years longer than their spouses (79 vs. 72). Because women live longer, they are more likely to be impacted by this issue. These population, housing, and mortgage trends confirm that without legislative action, unnecessary foreclosures will not only continue, but will likely increase in the coming years, with seniors facing displacement as a result. California legislators should step in now to protect widows, children, and other survivors from losing their homes – just as they did with HBOR for borrowers.

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Nearly 90% of seniors report they want to “age in place” in their homes.

Addressing Public Policy Concerns: Aging in Place, the Racial Wealth Gap, Frustration of Estate Planning Laws, and Homelessness. Homeownership is the primary avenue for most Americans to build wealth for their family and their offspring. Conversely, unnecessary foreclosures devastate a family’s ability to build for their financial future. Worse, these foreclosures exacerbate the racial wealth gap – and overall wealth inequality – in society. Foreclosures on survivors also ignore the intent of property, and wills, and estates laws. And, unnecessary foreclosures are secret, silent killers. The overwhelming majority of seniors want to “age in place” in their own homes. But seniors who are forced from their home are more likely to suffer devastating health impacts – and, with skyrocketing rents across California, homelessness.

Servicers not Following Federal Rules Servicers should be following federal rules to assist survivors, but 87% of California housing counselors in a 2014 survey believed the rules had not solved the problem. Counselors and attorneys also questioned if the rules would be enforced and if servicers have faced any consequences for violating them.

SB 1150 Closes Existing Loopholes in HBOR Senate Bill 1150 levels the playing field by closing a loophole and extending HBOR’s common-sense protections to surviving spouses, children, and others. It would give them the same right to a fair process, single point of contact, and consideration for a loan assumption/modification as HBOR does for other homeowners. Ensuring survivors can use these legal protections will once again make California the leader in protecting its most vulnerable residents. Without requiring mortgage servicers to do anything more than they already do for borrowers, SB 1150 would stem a disturbing nationwide trend and help keep widows, children, and other survivors in their homes.

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