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California Legislature Wooses on Foreclosure Legislation

California’s state senate narrowly defeated a bill Wednesday that targeted the growing problem of foreclosed homes sitting vacant for months, drawing squatters and creating blight. Lenders would have been fined $1,000 a day for not maintaining vacant properties, and they would have had to give four months’ notice before mortgage payment increases of 10 percent or more. “The purpose of this bill is very simple: to keep people in their homes,” said the bill’s sponsor, Don Perata, a Democrat from Oakland and the Senate leader. Republicans in the sharply divided Senate said during debate that the bill would unfairly burden banks and mortgage companies. “This bill will make a bad situation much worse,” said Sen. Dave Cox, a Republican from the Sacramento suburb of Fair Oaks. He predicted the bill would scare lenders away from California. California has the nation’s largest volume of foreclosures and a foreclosure rate among the top five. “It’s not unheard of to see three to four houses going to seed in a neighborhood — which affects everybody else,” Perata said. Sen. George Runner, a Republican from Lancaster in Southern California, said the Legislature should focus on homeowners who lied about their income to obtain larger loans and on unscrupulous lenders who enticed borrowers into loans they couldn’t afford. The measure, which needed a two-thirds majority to pass because Perata submitted it as urgency legislation, failed with 26 votes in favor and 14 opposed. Perata acknowledged that fraud, speculation and unrealistic financial planning were partly to blame for the state’s high foreclosure rate. But he argued that homeowners affected by the ongoing subprime mortgage meltdown need more protection from balloon payments and constantly rising interest on adjustable-rate loans. The rates on about 300,000 loans are to reset in California this year, Perata said. Sen. Mike Machado, a Democrat from Linden in the hard-hit Sacramento Valley, said he hopes to rework the bill to remove legal hurdles it created for banks. But — even with cooperation with the Assembly — the reintroduced bill would not likely land on Gov. Arnold Schwarzenegger’s desk before fall. Parallel legislation introduced last week in the state Assembly would mandate that people who want to buy a home can actually afford the mortgage, property taxes and insurance. A state law passed last year tightened rules governing California mortgage brokers and real estate agents to match federal lending guidelines. Thieves have looted empty homes, stripping them of electrical appliances or valuable copper wiring and pipes that can be sold as scrap. In Sacramento last month, one household was robbed in the midst of moving out of a foreclosed property.

    • This entry was posted on Thursday, January 31st, 2008 at 8:01 amand is filed under California Home Loan Rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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