What’s Wrong With the California Homeowner Bill of Rights

How will the California Homeowner Bill of Rights affect short sale sellers in Sacramento? Despite all of the hoopla over it, not much. Probably the most important aspect of the Bill of Rights as it relates to short sales is the stopping of dual tracking — but that only goes into place after short sale approval, not prior to short sale approval, which is when a homeowner needs it.

Dual tracking happens when a foreclosure has been initiated. This means a Notice of Default has been filed in the public records despite a homeowner’s good faith effort to find a solution. Here’s the way it works before and after the California Homeowner Bill of Rights:

• Homeowner falls behind and stops making mortgage payments.
• Homeowner pursues a short sale.
• Lender files for foreclosure.
• Trustee’s Auction date is set.
• Despite a pending offer for a short sale, home can go to foreclosure.

I can only begin to imagine the trepidation felt by homeowners facing an impending trustee’s auction. The problem is most banks will refuse to review a request to postpone a trustee’s auction until the auction date is 3 to 7 days away. It’s not as simple as asking the bank to permanently stop foreclosure action. Certainly not a month or more in advance. Nope, the banks make homeowners chew on their fingernails wondering if the homeowners will be tossed into the street almost all the way to the 11th hour. It’s as though they get some kind of perverse pleasure out of this type of torture. Why can’t a bank postpone a trustee’s auction when it’s 30 or 60 days away? Why make homeowners wait?

One of the services I provide as a Sacramento short sale agent is requesting the postponement of a trustee’s auction. This service, far as I am concerned, falls outside of the scope of selling real estate and dangles dangerously into the realm of practicing law. Sometimes I can’t sleep at night, worrying if a sale will get postponed. A bank is not required to postpone an auction. In fact, if the investor for that loan is Fannie Mae, you can bet your bottom dollar the auction won’t get postponed. That’s why some short sale agents refuse to work on Fannie Mae short sales.

If the California legislature really wanted to pass a Homeowner Bill of Rights, they’d stop dual tracking after a short sale is initiated and verified. Not after short sale approval. Because after the short sale is approved, there is little reason for the bank to initiate a Notice of Default.