Schwarzenegger acts to protect struggling homebuyers
Arnold Schwarzenegger (R)
Ted Lieu (D)
MERCED, Calif. (Legal Newsline)-Hoping to protect struggling homebuyers from flimflam artists, California Gov. Arnold Schwarzenegger on Monday signed legislation aimed at bringing trust back into the mortgage market.
The Republican governor used a signing ceremony for other mortgage protections to tout legislation authored by state Assemblyman Ted Lieu, a Southern California Democrat and candidate for attorney general, that he signed last week.
Assembly Bill 260 is intended to protect borrowers from predatory lending practices that Lieu blames for causing the foreclosure crisis, and to reassure the secondary market that loans bought in California are sound.
The law, which goes into effect Jan. 1, outlaws negative-amortization loans that can have payments that climb over time. The law will also prohibit mortgage brokers from directing borrowers to higher-interest loans when they qualify for less-expensive financing.
"Fraudulent mortgage practices have not only devastated California's economy and caused record unemployment, they have also triggered a national and international financial meltdown," Lieu said in a statement. "This new law cracks down on some of the most abusive lending practices and places significant safeguards on the industry to ensure this crisis never happens again."
The bill was opposed by, among other groups, the California Mortgage Association and the California Association of Realtors.
"Look out Wall Street, California is no longer the Wild West," Lieu said last week. "Although it took two years, I am pleased to have been able to overcome the powerful interests blocking reform so that future generations won't ever experience this type of crisis."
On Monday Schwarzenegger signed legislation co-sponsored by Lieu, Senate Bill 94, that bans loan modification companies from charging upfront fees and mandates disclosure that the service could be found for free.
A second measure, Assembly Bill 1160, requires mortgage loan documents to be translated into the language the verbal negotiations were conducted.
In his statement, Lieu noted that according to foreclosure tracking service RealtyTrac, California had 92,326 foreclosure filings in August.