Foreclosure prevention legislation fails in Sacramento
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A proposed law that would have ended ‘dual track’ foreclosures in California failed to win a key vote in Sacramento on Wednesday.
The California bill, SB 729, would have required a lender to fully evaluate a borrower for a loan modification before filing a notice of default, the first stage in the formal repossession process.
Sen. Alex Padilla (D-Pacoima) abstained from voting following a hearing in the state Senate’s Banking and Financial Institutions Committee and the bill failed 3-3.
The California Homeowner Protection Act, authored by state Senate President Pro Tem Darrell Steinberg (D-Sacramento) and Sen. Mark Leno (D-San Francisco), was one of the furthest-reaching attempts to limit dual tracking, a common practice among financial institutions in which they pursue foreclosure even if a borrower has requested a loan modification.
The two-track process is one the lending industry has argued is necessary to protect its investments. But the practice is under fire from regulators and lawmakers in the wake of last year’s ‘robo-signing’ scandal, which revealed widespread foreclosure errors.
-- Alejandro Lazo
Photo: A foreclosure sign hangs on a fence in front of a home in Richmond (Justin Sullivan/Getty Images).