Foreclosure in their homes

California Foreclosure Relief Bill Passed and Governor Indicates He Will Sign It
Many Provisions Take Effect Immediately—More Action on Predatory Lending Needed as Loan Modifications Increase in State
By Frank D. Russo
Yesterday was a busy news day for homeowners with failing subprime mortgages. The legislature, the Department of Corporations, and consumer groups were all out in front with newsworthy items.
The California Senate sent Senator Don Perata's foreclosure legislation (SB 1137), coauthored by Assembly Speaker Karen Bass and other Democrats, to Governor Schwarzenegger on a 32-8 vote with all Democrats in support, joined by 7 Senate Republicans. All eight votes in the Senate against it were cast by Republicans.
On Tuesday, it passed the California State Assembly on a 55 to 18 vote, just one vote above the two-thirds majority it required. Ten Republican Assemblymembers joined 45 of the 48 Democrats in voting for the bill, while all 18 votes against it came from Republican Assemblymembers. All the no votes were cast despite the fact that the bill has enjoyed broad support and has no known opposition.
The bill would reform the foreclosure process in California, requiring servicers to 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, giving tenants living in foreclosed properties additional time before eviction and requires foreclosed properties to be properly maintained. The legislation will take effect immediately upon the governor’s signature, though provisions requiring servicers to contact borrowers before starting the foreclosure process will have a 60-day implementation period before it goes into effect.
SB 1137 also mandates maintenance of foreclosed properties to diminish the impact on the value of neighboring homes. The legislation is an urgency measure, meaning it will become law once the Governor signs it, and that is why a two-thirds vote was needed in each house.
This is an important and much needed step to helping borrowers, renters and communities.
Governor Arnold Schwarzenegger immediately issued the following statement, reflecting that he is going to sign SB 1137:
“We need many tools to help Californians through this housing crisis, and this bipartisan legislation provides one more tool by giving borrowers the critical time needed before a foreclosure begins to work with their lenders and stay in their homes. We all benefit when families are able to remain in their homes, so I continue to encourage both borrowers and lenders to communicate and work together because it allows Californians to hold on to the American Dream of owning a home.”
Assembly Speaker Bass said: “Too many people were asleep at the switch or looking the other way as the subprime lending crisis unfolded – we’re not about to add the California Legislature to the list of those who could have mitigated this crisis and didn’t. This bill provides real world relief to responsible homeowners caught up in the foreclosure cycle.”Perata, President pro Tem of the Senate, implied that this bill is only part of the solution, saying: “SB 1137 will make a difference right away. This legislation is an important piece of the puzzle of how to best protect California homeowners and communities from the fallout from the nation’s mortgage crisis.”
As we reported on Tuesday: "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.
“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, a research and advocacy organization dedicated to ending abusive financial practices, "but the next order of business should to be to restore the Assembly legislation that would also protect borrowers in the future."
Our article lists many of these bills that are needed.
The state Department of Corporations (DOC) also announced yesterday that the number of loan modifications in California increased dramatically in the months of April and May over January, meaning state action to work with lenders is helping Californians find more workable loans and keep their homes.
And the California Reinvestment Coalition (CRC) released its third survey of housing counseling agencies statewide in Stockton yestersay. CRC's survey underscores the DOC's data: foreclosures are all too common, reductions in loan principal are not happening and loan modifications are not made for the long-term. CRC's report also reminds us of quite possibly the most compelling victims of all: renters of foreclosed properties. This summary of the bill, described as the “Perata/Bass Mortgage Bill,” and information on home foreclosures in California was provided by Senator Perata’s office: SB 1137 – Perata/Bass Mortgage Relief BillThis bill was passed is an urgency measure that provides immediate relief to homeowners and tenants whose properties are in foreclosure. The law takes effect once it is signed by the Governor. Lenders will be required to have contact with homeowners to explore options to avoid foreclosure. This provision takes effect 60 days after the measure becomes law. Tenants will get notice (in 6 different languages) once a notice of sale has been posted on a property. This provision takes effect 60 days after the measure becomes law. The bill increases the current notice required to be given to residential tenants of foreclosed properties to from 30 days to 60 days prior to eviction. Locals can impose $1,000-per-day fine on financial institutions who don't maintain vacant properties if problems are not fixed within 30 days. “Failure to maintain” includes failure to adequately care for the exterior of the property including but not limited to, permitting excessive foliage growth that diminishes the value of surrounding properties, failure to take action to prevent trespassers or squatters from remaining on the property, or failing to prevent mosquito larva from growing in standing water. The bill limits the scope of the contact requirement so it only applies to loans made between January 1, 2003 and December 31, 2007, when most of the loans that are causing the problems we face today were made. As a result of negotiations, all opposition has been eliminated, including from the California Bankers Association and the California Mortgage Bankers Association, who are now neutral on the bill Supporters of the measure include ACORN, Consumers Union, Center for Responsible Lending, California Reinvestment Society, California Labor Federation AFL-CIO and the Western Center on Law and Poverty.Foreclosures continue to grow across California. In May, the most recent month available for statistics, California lead the nation with 71,930 foreclosure filings. Of the nation’s 10 worst cities for foreclosure filings, seven are in California, with Stockton at the top of the list. One in every 75 homes received a foreclosure filing in Stockton in the month of May. The other California cities in the nation’s top 10 for foreclosures in May were Merced, Modesto, Riverside-San Bernardino, Vallejo-Fairfield, Bakersfield and Sacramento. Governor Schwarzenegger released this laundry list of actions he has taken to help Californians in the mortgage crisis:
• Led efforts urging Congress and the Bush Administration to raise federal loan limits. Last fall, the Governor sent a letter calling on Congress to increase those limits and sent a similar letter again earlier this year. After Congress and the President approved a temporary increase, the Governor asked them to make the increase permanent. In February, the Governor met with the U.S. Department of Housing and Urban Development Secretary in Washington D.C. to reiterate the importance of a permanent loan limit increase.• Announced $69.5 million in permanent low-interest loans from the Proposition 1C housing bonds to jumpstart 14 affordable multi-family projects up and down the state, helping more than 1,000 California families and individuals realize the dream of an affordable rental home.
• Announced more than $72 million in federal HOME Investment Partnerships Program funds to provide assistance to first-time homebuyers, reduce the number of bank owned homes and increase the number of rental properties.
• Joined the OneCalifornia Foundation to announce a bridge loan fund for homeowners facing foreclosure in Oakland.
• Launched a $1.2 million public awareness campaign to help educate homeowners about options that can help them avoid losing their homes to foreclosures.• Announced an agreement with major loan servicers to streamline the loan modification process for subprime borrowers living in their homes.• Signed legislation to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities.
• Issued new regulations to protect borrowers, which requires lenders to consider a borrower’s ability to repay at the higher reset interest rate and mandates closer scrutiny of risk features such as interest only payments, reduced documentation and simultaneous second liens.
• Established the Interdepartmental Task Force on Non-traditional Mortgages to ensure a comprehensive and coordinated approach to the issues raised by subprime loans.
For an indication of additional action that needs to be taken and the devastating impact the subprime mortgage mess has had on California, its people, communities, and the state budget, check out our articles on Responsible Lending. Posted on July 03, 2008