Weakened Foreclosure Legislations Leaves California in the Dark
Californians almost were able to find out how much Countrywide, HomeEq, GMAC and other major subprime lenders help families threatened with foreclosure keep their homes. The California Assembly passed a bill, AB69, which would have helped troubled borrowers. But bending to industry pressure the Senate banking committee is poised to pass a “business as usual” version of the bill that does little.AB69, introduced by Assemblyman Ted Lieu, was originally designed to reveal which loan servicing companies are helping troubled borrowers, and which ones are not. But the bill has been weakened and no longer requires the Department of Corporations to issue a report on how many loan modifications are being made by each loan servicer in California.
Reporting on the loan modification made by each loan servicer in the state would result in better practices. Loan servicers would modify more loans because they would have to show they are helping people.
Senator Michael Machado, chair of the banking committee, represents Stockton – a city with the highest foreclosure rate in the country.Consumer groups are calling on Senator Machado as chair of the committee, and Assemblyman Lieu as author of the bill, to restore AB69’s deleted language.
In January, AB69 (AB 69 - Jan. 18, 2008) came with a list of reporting requirements that would have shown Californians which companies are keeping their promises and modifying loans. The latest version of the bill issued May 27, 2008 (AB 69 - May 27, 2008), is stripped of these reporting requirements, and merely allows the commissioner for the Department of Corporations to release an aggregated report as he sees fit. The commissioner has already released an aggregated report on industry-wide loan modifications made in the first quarter of 2008 (Dept. of Corp. Report on Loan Modifications), which failed to provide Californians with a comprehensive look at the practices of each loan servicer.
Borrowers and their mortgage counselors continue to report that loan servicers do not respond to their requests for loan modifications. Thousands of borrowers who could have avoided foreclosure have lost their homes because their servicers were unwilling to work with them. In a survey conducted by the California Reinvestment Coalition, mortgage counselors reported that foreclosure is the most common outcome for borrowers struggling to make their monthly mortgage payments.
Borrowers shared with the California Reinvestment Coalition their difficulties in attempting to attain a loan modification from their loan servicer. Their stories, which can be heard in this short video, demonstrate the need for a stronger AB69 and other legislation that will help slow the tide of foreclosures flooding our neighborhoods and economy.
The Banking, Finance and Insurance Committee of the California Senate will hold a hearing on AB 69 Wednesday, June 4, 2008 at 1:30 p.m. in the State Capitol Room 112.
For more information please contact Kevin Stein at the California Reinvestment Coalition at (415) 864-3980 or kstein@calreinvest.org.
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