California foreclosure-prevention measure nears final passage
SACRAMENTO -- A historic, first-in-the-nation foreclosure-prevention measure is one step away from final passage in the California Legislature.
A two-house conference committee Wednesday, on a partisan 4-1 vote, sent identical measures to the floors of the state Assembly and Senate. Final votes are scheduled for Monday.
The conference committee vote came at a particularly poignant time: the same day that the Central Valley city of Stockton became the largest municipality in the nation to declare bankruptcy, said Assemblyman Mike Eng (D-Monterey Park). Part of Stockton’s financial woes could be directly linked to a housing bust that made the city the foreclosure capital of America, he said.
Bankers, the state Chamber of Commerce and the securities industry oppose the bills, saying they are overly complicated, lack legal clarity and could spur many unnecessary lawsuits.
The bills would take effect on Jan. 1 if approved, as expected, by Democratic majorities in both houses. Gov. Jerry Brown has not indicated whether he would sign the measures, though sponsors have said they don’t expect a veto.
The bills, SB 900 and AB 278, are the most controversial elements of a Homeowner Bill of Rights legislative package sponsored by California Atty. Gen. Kamala D. Harris. The bills are needed, Harris argued, to extend the benefits of a national foreclosure lawsuit settlement with five large banks to all owner-occupied mortgage holders.
“The bill in its final form is truly a document that’s going to give transparency and fairness to California homeowners in a way they never had before,” Harris said.
The bills protect homeowners in two ways:
--They ban so-called dual tracking, when mortgage loan servicers allow borrowers to open an application for loan modification to lower their payments while at the same time the foreclosure process is moving forward. Servicers would be required to provide homeowners with “a single point of contact” so they won’t suffer from bureaucratic runarounds.
--They give owner-occupier, first-mortgage holders a right to sue financial institutions, under limited conditions, if the lenders have willfully, intentionally or recklessly violated the law.
The conference committee approval and likely final legislative passage next week would end four years of efforts to provide significant relief to California borrowers, who have been hard hit by the effects of the 2007-09 recession.
“Our hearts tell us that this is the right thing to do,” Eng said.