California Passes Legislation To Protect Homeowners Facing Foreclosure

A bill in California has just been passed that proposes protections for homeowners against some of the questionable lender practices that have come to national attention in recent years.

The legislation would make California the first state to prohibit lenders from "dual tracking," the practice of negotiating with clients to modify a mortgage so that payments become more affordable while simultaneously pursuing foreclosure. In such cases, homeowners can wind up being evicted even though they had been working with the bank to modify their loans.

The measures would outlaw so-called robo-signing — the improper or faulty processing of foreclosure documents— and would allow state agencies and private citizens to sue financial institutions, under limited conditions, for economic compensation and for additional civil damages of up to $50,000 if lenders willfully, intentionally or recklessly violate the law. No lawsuit could go forward if the bank or servicer first fixes the problem with documentation or procedures, according to the bills.

Critics of the legislation claim that the new laws are complex, ambiguous, and will slow the tenuous recovery of the housing market.

via The Los Angeles Times