There were fewer foreclosure filings in January than there have been in any month since April 2007, as foreclosures dropped 28 percent from the same month a year ago, according to data from RealtyTrac. And while the drop was significant across the country, no state contributed more to the decline than California, where legislators last year passed a law that grants homeowners new rights in the foreclosure process.
The “Homeowners’ Bill of Rights,” signed by Gov. Jerry Brown (D) in July, took effect at the turn of the year. California has led the nation in foreclosures every month since 2007, but foreclosure filings dropped 62 percent in January, moving three states ahead of the Golden State. The decline is at least partially attributable to the homeowner protections contained in the new law, CNNMoney reports:
Regulations that took effect in California contributed to the dramatic decline. The state had long been recording the highest number of foreclosure filings of any state. But on January 1, a Homeowner Bill of Rights became law, offering more protections for California borrowers in default. As a result, new foreclosure filings in California fell 62% in January.
Under the new rules, mortgage servicers must halt all foreclosure proceedings once a borrower applies for a mortgage modification. Servicers will also face fines of up to $7,500 per loan if they record and file multiple unverified documents in foreclosure proceedings.
The Homeowner Bill of Rights makes foreclosure harder for banks by banning practices like dual-tracking, in which banks foreclose on homeowners even as they are seeking a loan modification, and robo-signing, the fraudulent approval of foreclosure documents widely utilized by banks immediately after the housing crash. The law also makes it easier for homeowners to deal with their banks and gives them legal recourse against lenders.
The new regulations, and fears that it would make foreclosing harder and more stringent for banks, led to a “bum rush” of foreclosures before the deadline, CNNMoney reported. But after it went went into affect, foreclosures dropped precipitously.
Other states, however, are trying to take the opposite approach, speeding up the foreclosure process instead of slowing it down and protecting homeowners. Lawmakers in Florida, which now leads the nation in foreclosures, introduced a bill to reduce the amount of time banks had to process foreclosure documents, a plan consumer advocates fear will make it more likely that banks will resort to the shoddy and sometimes fraudulent practices California banned.