Foreclosure Process Reform Bill Makes It Out Of Assembly

More is needed to protect future borrowers

OAKLAND, Calif., June 30 /PRNewswire-USNewswire/ -- Legislation that
would reform the foreclosure process in California for the benefit of
homeowners trying to hold on to their homes passed the Assembly today with
bi-partisan support and the two-thirds majority required for it to pass.

"This bill is an important step toward providing relief to borrowers in
trouble right now, renters and communities facing increasing blight as a
result of foreclosures," said Paul Leonard, director of the California
office of the Center for Responsible Lending. "But the next order of
business should be to restore the Assembly legislation that would also
protect borrowers in the future."

SB 1137, sponsored by Sens. Don Perata (D-Oakland), Ellen Corbett
(D-San Leandro) and Michael Machado (D-Linden) goes beyond federal laws and
received broad support from consumer groups. The legislation requires
lenders and servicers to: 1) contact borrowers (or engage in a prescribed
process to do so) to schedule telephone or in-person meetings on
restructuring options before beginning the foreclosure process; 2) requires
a 60-day notice to be given to tenants of buildings facing foreclosure
before they can be removed from a rental housing unit; and 3) allows fines
of up to $1,000 a day for owners of foreclosed properties that fail to
adequately maintain them.

The legislation will take effect immediately if signed by Gov.
Schwarzenegger, though the provision requiring servicers to contact
borrowers before starting the foreclosure process will have a 60-day
implementation period before it goes into effect.

"This bill provides much needed assistance to suffering families across
California struggling to stay in their homes and helps tenants that are
living in properties in foreclosure who are in danger of losing a place to
live without notice," said Ronald Coleman, policy director for California
ACORN.

"Opening communication between lenders and borrowers is important, but
a truly preventative reform package is needed to keep the bad loans from
being made in the first place," added Pedro Morillas, legislative advocate
for CalPIRG.

The bill's passage comes on the heels of the California Attorney
General's lawsuit alleging unfair and deceptive practices on the part of
Countrywide Financial, a leading lender in the subprime market.

"SB1137 will help stem the foreclosure tide in California," said Kevin
Stein, associate director of California Reinvestment Coalition. "At the
same time, Attorney General Brown's lawsuit against Countrywide underscores
the need for the legislature to also put in place strong consumer
protections to ban the kinds of abusive practices engaged in by Countrywide
and other lenders, which have harmed so many families and fueled the
current crisis."

Earlier this session, the Assembly passed a number of bills that would
have reined in abuses in the subprime market, including that would have
limited prepayment penalties; required lenders to evaluate a borrower's
ability to repay; established mortgage brokers' fiduciary duty to
borrowers; regulated mortgage servicers; required lenders to provide
translated summary of loan terms to non-English speaking borrowers and
prohibited involuntary waivers of legal protections.

One week ago, the Senate Banking Committee gutted or killed all but one
of those mortgage-related bills, with only AB 529 from Assemblymember
Alberto Torrico (D-Fremont) making it out in its original form; his bill
would require lenders to provide notice to borrowers regarding interest
rate resets. AB 1830, sponsored by Assemblymember Ted Lieu (D-Torrance) and
originally named the Subprime Lending Reform Act, was completely gutted and
in its current version merely directs California legislators to enforce
weak federal laws.

"By creating sensible stop-gap protections for borrowers before they
lose their homes, SB 1137 will help preserve homeownership by preventing
unnecessary home foreclosures from occurring," said Norma P. Garcia, senior
attorney for Consumers Union, the non profit publisher of Consumer Reports.
"This is absolutely critical to help stem California's avalanche of
foreclosures, but we also need stronger laws to protect against future
mortgage meltdowns because our economy cannot afford to walk down this road
again."

About ACORN, California Reinvestment Coalition, CalPIRG, Center for
Responsible Lending and Consumers Union

ACORN, the Association of Community Organizations for Reform Now, is
the nation's largest community organization of low- and moderate-income
families, working together for social justice and stronger communities. The
California Reinvestment Coalition advocates for the right of low-income
communities and communities of color to have fair and equal access to
banking and other financial services. CALPIRG takes on powerful interests
on behalf of Californians, working to win concrete results for our health
and our well-being. The Center for Responsible Lending is a research and
advocacy organization dedicated to ending abusive financial practices.
Consumers Union, the nonprofit publisher of Consumer Reports, works for a
fair, just and safe marketplace for all consumers.

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[Via Real Estate Newswire]

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