The California Homeowner Bill of Rights is less than half a year old, but it is already making its presence known to banks and other lending institutions. On April 15th, 2013, Kevin Singh filed for a preliminary injunction against Bank of America (BoA) and ReconTurst, the lenders who sought to foreclose Singh’s home. The Eastern District Court of California granted Singh’s request and issued a temporary restraining order, preventing BoA from selling Singh’s home in Sacramento. A month later, the parties settled and the case closed.
Singh v. Bank of America shows that the California Homeowner Bill of Rights is capable of giving homeowners much needed legal assistance. The District Court cited the California Homeowner Bill of Rights in its decisions, specifically the section in the California Homeowner Bill of Rights in its decisions, specifically the section prohibiting “dual tracking.” Dual tracking is the practice of negotiating with homeowners in default on their loans for a loan modification while simultaneously advancing the foreclosure process.
In Singh’s case, Singh had submitted an application for a first lien loan modification. BoA, however, never responded to the application. Instead, the bank used its subsidiary, ReconTrust Co., to foreclose Singh. As a result, the District Court found that the California Homeowner Bill of Rights “prevents BoA from conducting a trustee’s sale.”
However, in order to obtain this injunction, Singh had to meet a few requirements. First, Singh had to submit a complete application for a loan modification. This requirement is easy to fulfill, but also very important, because the completed application is specifically required by the California Homeowner Bill of Rights as an aspect of dual tracking.
Second, the borrower has the burden of proving that granting preliminary injunction is a reasonable course of action for the court to take (Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers). The borrower proves this by showing that the borrower is likely to succeed on the merits, that the borrower would suffer irreparable harm without the injunction, that the balance of equities is in the borrower’s favor, and that the injunction is in the public interest (Winter v. Natural Resources Defense Council).
These factors are easier to prove than they sound. An injunction which “enforces a recently enacted law designed to protect the public,” like the California Homeowner Bill of Rights, would suffice. If a person’s family is forced to leave the home, it counts as an “irreparable harm,” so just being foreclosed is typically enough to prove that the borrower would suffer “irreparable harm.”
The third factor which must be proven, that the balance of equities be in the borrower’s favor, is fulfilled by the fact that preliminary injunctions are temporary. BoA’s ability to foreclose is “merely delay[ed],” at least until future hearings can fully resolve the case. The fourth factor in determining whether a preliminary injunction can be granted, succeeding on the merits, will depend on the facts of the case. In Singh, the facts closely matched the situation envisioned as illegal in the California Homeowner Bill of Rights – a bank “dual tracking” a borrower, so proving that Singh could prevail on the merits was not difficult.
The final hurdle to a preliminary injunction, at least in federal court, is the need for a bond payment. The bond is a safety measure in case the court made an error in issuing the injunction. The bond must be paid within a week of the injunction being issued. The amount for the bond depends on the costs the court believes the lender would suffer if the injunction was incorrectly given.
The California Homeowner Bill of Rights has taken its first test and Singh v. Bank of America proves that the new law is fulfilling its promise to help borrowers keep their homes. Although there are a few hoops that the borrower must jump through to utilize the California Homeowner Bill of Rights, the requirements are not difficult to meet.
Most important though, the case sends a strong signal to banks and other lending institutions. Although Singh has to pay a security deposit of $1,000, BoA has to pay $100,000 in legal fees for this one case. Given that Singh’s home is not worth $100,000 right now, BoA and other banks have every incentive not to foreclose unless it is absolutely necessary. In contrast with the foreclosure crisis of 2008, where foreclosure was the first response banks chose when a borrower defaulted, the law has changed dramatically.