Legislature OKs California Foreclosure Reduction Act

The California state legislature has passed A.B.278, the California Foreclosure Reduction Act, by a 53-25 vote in the assembly and a 24-13 vote in the state senate. This so-called Homeowner Bill of Rights now goes to Gov. Jerry Brown for a signature.

The California Reinvestment Coalition says the legislation will bring ‘sensible reforms to banks' foreclosure practices and create a fairer foreclosure process for California's homeowners.’

Notably, the law will prohibit the ‘dual track,’ whereby lenders foreclose on loans while also negotiating loan modifications. Lenders will be required to give homeowners a ‘yes’ or ‘no’ answer on a loan modification application before continuing with foreclosure, thereby giving homeowners a fair chance at preventing foreclosure.

With the law in place, if a loan modification is accepted, the bank will rescind the notice of default or sale, allowing homeowners to pay their loans without the threat of foreclosure. If a loan modification is denied, banks are required to send a letter to the borrower describing the reason for denial and letting the borrower know of his or her right to appeal.

In addition to ending the dual-track process, the legislation requires all lenders to end ‘robosigning’ and provide a single point of contact to borrowers.


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