California foreclosure relief bills take an unusual route

April 27, 2012|By Marc Lifsher
  • A foreclosed house in Glendale, shown last September.
A foreclosed house in Glendale, shown last September. (Kevok Djansezian / Getty…)

SACRAMENTO -- Democrats in the state Legislature are trying to do an end run around opponents of controversial mortgage foreclosure relief bills.

They sent the bills, which would beef up homeowners' legal rights during foreclosure proceedings, to a two-house conference committee rather than risk not getting enough votes to pass the Senate and Assembly banking committees. It's an unusual move this early in the session.

The bills are opposed by mortgage bankers and the business community in general. A number of business-friendly, so-called moderate Democrats voted against similar proposals during the last two legislative sessions, despite record numbers of foreclosures in California.

The California Chamber of Commerce says passage of the legislation would further depress property values and "dry up credit for consumers by forestalling legitimate foreclosure proceedings against delinquent borrowers."

The conference committee, made up of three members from each of the two houses, is expected to start the hearing as early as next week. Such a committee can be convened only with the approval of the Senate president pro tem and Assembly speaker.

The bills were scheduled to be heard in the Assembly last Monday but were pulled from the committee file at the last minute. A similar hearing in he Senate also was canceled later in the week.

Two of the bills, AB 1602 by Assemblyman Mike Eng (D-Monterey Park) and SB 1470 by Sen. Mark Leno (D-San Francisco), would prohibit a lender from declaring a default at the same time that the borrower is pursing a modification to make the loan easier to pay down.

Another pair of bills, AB 2425 by Assemblywoman Holly Mitchell (D-Los Angeles) and Sen. Mark DeSaulnier (D-Concord), would require lenders to provide borrowers with a single contact person during foreclosure proceedings and would allow homeowners to sue for damages from an unlawful foreclosure process.

According to Senate President Pro Tem Darrell Steinberg (D-Sacramento), the conference committee is the best way to "expeditiously" negotiate reforms that could win passage from a majority of lawmakers, possibly over the next few weeks.

By going the conference committee route, Steinberg and Assembly Speaker John Perez (D-Los Angeles) can bypass routine committee hearings, where the bills could be killed, and send them directly to the floors of the Assembly and Senate for final votes.

The four bills are the most contentious elements of a legislative package called the Homeowner Bill of Rights, which is being sponsored by California Atty. Gen. Kamala D. Harris.

The bill of rights, Harris said, is meant to write into California law and broaden the effect of a nationwide foreclosure legal settlement that is projected to provide up to $18 billion in financial assistance to California homeowners.

"There are more than 500,000 California homeowners in the foreclosure pipeline, and securing them the protections of the Homeowner Bill of Rights is my central concern," Harris said. "I am sure these reforms will receive thoughtful attention and discussion in the legislative conference committee."


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