Lenders face pressure in California to stop foreclosures
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Lenders are coming under increasing pressure in California to halt foreclosures.
Two advocacy groups -- the Los Angeles-based Alliance of Californians for Community Empowerment and the Greenlining Institute of Berkeley -- this week called for a California foreclosure moratorium.
The L.A. group said it was forming a separate organization to help homeowners fight foreclosures called the Home Defenders League.
Both groups also called on Atty. Gen. Jerry Brown to support a moratorium.
Brown is in discussions with three banks -- J.P. Morgan Chase, Ally Financial Inc. and Bank of America Corp.–- following written orders to both Chase and Ally that the two companies suspend California foreclosures until they prove to his office that they are complying with state law.
“We are talking to them,” Jim Finefrock, a Brown spokesman, said. “It’s been cooperative so far.”
Brown issued the demands after Ally and Chase said they were halting foreclosures in 23 other states where courts had jurisdiction over the foreclosure process. (A link to the Ally letter is here, while the Chase letter can be found here.) Bank of America has put evictions on hold in the 23 judicial foreclosure states, citing concerns over whether paperwork was handled properly, but Brown has not issued a specific demand to that company.
California doesn’t require court approval of foreclosure actions as long as lenders follow state rules in seizing properties. But the admission by the lenders that their handling of paperwork in other states may have been flawed has raised concern about California practices.
In his letters to the two companies, Brown cited a California law that said lenders, before initiating foreclosure proceedings, must diligently try to contact borrowers to determine eligibility for modifications of home loans written from 2003 through 2007.
California Assemblyman Ted Lieu, a Torrance Democrat and author of several mortgage-related bills, also cited that law this week when he called on two state agencies -- the Department of Financial Institutions and the Department of Corporations -- to impose a 60-day foreclosure moratorium.
Another California law requires that big lenders have a loan-modification program in place. Lieu called on the two agencies to suspend foreclosures and investigate whether banks were complying with these two laws.
But representatives for both agencies expressed concern that they may not have the authority to regulate the larger banks as these companies were chartered nationally and regulated by federal authorities. Lieu insisted that the state agencies could impose moratoriums on the big banks.
Other Golden State politicians have ratcheted up pressure on lenders in recent days. California’s Democratic congressional delegation wrote a letter to federal regulators, including U.S. Atty. Gen. Eric Holder and Federal Reserve Chairman Ben S. Bernanke, asking them to investigate delays and possible irregularities in loan modification and foreclosure processes.
The letter was signed by House Speaker Nancy Pelosi (D-San Francisco), Rep. Henry A. Waxman (D-Beverly Hills) and Rep. Loretta Sanchez (D-Garden Grove), among others.
-- Alejandro Lazo