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Paul Kiesel
Paul Kiesel
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California's New Mortgage Rules, Schwarzenegger to Sign After a State Budget is Passed

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Below is information, provided by The OC Register, on California State Senate and Assembly bills that have been voted on within the last six weeks. Some have passed, some have not.

A reporter for the OC Register’s Mortgage Insider interviewed three consumer groups for a big story on state regulation. Along with the story a key was created to view new and potential state laws (see table below). The “Verdict from consumer groups” is what the three groups told the reporter. They are the California Reinvestment Coalition, the Greenlining Institute, and the Center for Responsible Lending. And in the “Purpose” category is whether the bill focuses on “Aid,” meaning controlling foreclosures or lender failures, or “Prevention,” meaning an attempt to stop bad practices.

California
Bill or regulation Purpose Status What it does Verdict from consumer groups
SB 1240 Prevention Will go to Governor Requires brokers to notify Department of Real Estate (DRE) that they are brokering mortgages and requires them to file annual reports. Tepid support
SB 1737 Prevention Will go to Governor Gives DRE power to ban unscrupulous mortgage brokers from real estate for up to three years. Tepid support
SB 1137 Aid Law Lender or servicer must contact a delinquent borrower 30 days before filing a notice of default and explore options to avoid foreclosure. This is true until January 1, 2013, and applies to loans made from January 1, 2003, to December 31, 2007. It also says renters of foreclosed homes can be evicted in 60 days instead of 30. And it allows cities to fine owners if they don’t maintain foreclosed homes. Strong support
AB 1830 Prevention Will go to Governor On high-cost (subprime) loans made on or after July 1, 2009, it: Limits broker fees. Limits prepayment penalties. Explicitly says the broker has a fiduciary duty to the client — something that exists already in common law. Prohibits negative amortization, or when a borrower makes a very low monthly payment but owes more to the bank as a result. Prohibits false statements to consumers. Creates a $10,000 fine for violating the new rules. Mixed: Some neutral, some support it.
AB 69 Both Will go to Governor Enables the state Department of Corporations to collect information from loan servicers. Hate it because info on individual lenders/servicers will not be made public.
AB 529 Both Will go to Governor With loans fixed for a certain period, requires lender or servicer to notify borrower between 90 and 120 days before the fixed period ends and the payment adjusts. Unqualified support
Congress and President
HR 3221 Aid Law U.S. Treasury can buy stock of or lend to Fannie Mae and Freddie Mac. FHA can insure up to $300 billion in mortgages after lenders write down balance owed by borrower. Tepid support
Federal Reserve
Regulation Z changes Prevention Law On high-cost (subprime) loans, does three key things … (A) Lenders must ensure borrowers can afford the highest potential payment in the first seven years. (B) Lenders must verify the income and assets of the borrower, so no more ’stated-income’ subprime loans, also known as ‘liars loans.” (C) No more prepayment penalties if the monthly payment can change in the initial four years. In other cases, a prepayment penalty period cannot last for more than two years. Tepid