A bill that would grant California widows and widowers greater protections against foreclosure heads to Gov. Jerry Brown's desk after passing the state Senate on Wednesday.
The proposal is geared at giving surviving spouses who own their home but are not on its mortgage note a better shot at obtaining a loan modification.
Consumer groups say survivors — including those who inherit property after a death — face considerable resistance from loan servicers when trying to obtain modifications.
Servicers will generally accept a surviving spouse's loan payments, but red tape involved in proving ownership can stall a modification while foreclosures proceed, according to advocates.
The bill, by Sen. Mark Leno (D-San Francisco) and Sen. Cathleen Galgiani (D-Stockton), passed the state Senate in June and earlier this week the Assembly, where it was amended.
On Wednesday, the Senate passed that amended version, which includes a three-year sunset provision and exempts small banks from the additional regulations.
Despite those changes, consumer groups praised the passage.
"We hope and expect that when the bill becomes law, that servicers will improve their systems, policies and procedures to be in compliance, and we would hope they would not revert back to harmful practices in a few years time," said Kevin Stein of the California Reinvestment Coalition.
If the governor signs Senate Bill 1150, survivors would gain many of the rights borrowers already have under the California Homeowner Bill of Rights. Among those is a ban on dual tracking — the practice of negotiating with clients to modify a mortgage while simultaneously pursuing foreclosure.
The Consumer Financial Protection Bureau recently imposed similar federal rules on servicers nationwide, leading the banking industry to call the California bill unnecessary.
Consumer groups, however, noted that the federal rules won't take effect for roughly 18 months and they argued that the national regulations are more difficult to enforce. Advocates say the state bill also includes a more expansive right to sue to stop a foreclosure or for economic damages if one proceeds.
Industry groups, including the California Bankers Assn., have expressed concerns those rights will expose their members to frivolous lawsuits.