The California legislature passed a landmark bill Monday strongly regulating how banks handle home foreclosures. The legislation bans dual tracking, the odious practice where lenders pursue home foreclosure while negotiating with homeowners about modifying mortgage terms. Robo-signing– falsifying signatures– on mortgage documents is now illegal. The state and private citizens can now sue financial institutions for violating the law. Finally, loan servicers and banks must provide a single point of contact for clients.
These are badly needed regulations. Dual tracking too often was just a pretext. The loan servicer would pretend to be negotiating with the homeowner while instead focusing on foreclosure. That deceptive maneuver is now prohibited. Robo-signing, the deliberate use of fraudulent signatures in thousands of documents should have been and probably always was illegal. But the new California law makes it bluntly clear and mandates criminal penalties. That such a law needed to be spelled out so clearly simply shows how evasive, uncooperative, and sometimes criminal our financial institutions have been in the home foreclosure crisis.