Less than six months ago, the federal government and 49 states announced a $25 billion settlement with the country’s five largest loan servicers, which, among other things, involves nationwide reforms to mortgage servicing standards and foreclosure practices. This, however, appears to be only the tip of the iceberg, as servicers are still subject to regulation by individual states. Numerous states are proposing a range of new foreclosure regulations that build upon and extend reforms in the national mortgage settlement. Earlier this month, California became the first state to actually enact such legislation.
On July 11, California Governor Jerry Brown signed into law the California Foreclosure Reduction Act, which is just one component of a broader Homeowner Bill of Rights that California Attorney General Kamala Harris first proposed three years ago. The act, which takes effect Jan. 1, 2013, creates new hurdles and procedural requirements for lenders and servicers in completing non-judicial foreclosures on residential properties.