Schwarzenegger aims to help struggling homebuyers
Arnold Schwarzenegger (R)
Jerry Brown (D)
SACRAMENTO, Calif. (Legal Newsline) - Following in the footsteps of lawsuits filed by state attorneys general across the country, California's political leaders entered the fray this week with new legislation aimed at protecting homeowners facing foreclosure.
Republican Gov. Arnold Schwarzenegger signed a bill into law designed to offer immediate help to California homeowners.
"Foreclosures not only devastate families, they hurt neighborhoods and depress our economy and our budget," Schwarzenegger said in a statement earlier this week. "So, I am proud that we are giving Californians one more tool to help them keep their homes - without government subsidies."
The sweeping legislation, outlined in Senate Bill 1137, requires lenders to contact homeowners at least 30 days prior to foreclosure and discuss all available options to restructure the loan.
The new law also doubles the amount of time to move for those living in a foreclosed property to move. In trying to limit the amount of blight in a neighborhood, the law requires those acquiring the property to provide proper maintenance.
In June, California Attorney General Jerry Brown sued Countrywide Financial Corp., alleging misconduct in the sale of loans.
Other states, including a prominent lawsuit in Florida that has opponents charging Florida Attorney General Bill McCollum with politicizing the issue, have also sued Countrywide.
But California Deputy Attorney General for Consumer Law Ben Diehl cautioned against linking the actions among different states, or linking the California Attorney General's lawsuit to Schwarzenegger's legislative action.
"They are each distinct and separate," Diehl told Legal Newsline. "We filed based on what we considered malfeasance, obsifucation and unfair practices in California. This is not tied to any other state."
Diehl called the legislative action this week something "completely different."
The bursting of the real estate bubble continues to hit California the hardest. According to data released by the governor's office, seven of the nation's ten cities with the most foreclosures are in the Golden State.
When Brown filed suit he said, "Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market."
By Dec. 31, 2007, more than 27 percent of Countrywide's non-prime mortgages were delinquent, according the lawsuit. At that time, 26 percent of the company's loans were for California real estate.
Diehl said the company's practices were not confined only to subprime loans.
"This is not a subprime case," he said. "It's a case about misconduct sale of loans, both subprime and prime."
Diehl said the lawsuit carried a specific legal purpose: "to seek redress for consumers who fell victim of the abusive practice that Countrywide engaged in," the case also could have more far-reaching benefits.
"We hope to have an impact on the mortgage lending business going forward," Diehl said. "California being the big state that it is, we think ought to have an impact."