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California Legislature Pushes Important Foreclosure Bill Forward

In a 7-1 vote on Wednesday, the ""California Senate Banking, Finance, and Insurance Committee"":http://www.sen.ca.gov/ftp/sen/committee/standing/BANKING/_HOME/ approved a measure that would better protect homeowners in the Golden State who are at risk of foreclosure.


""SB 1275: Homeowners Bill of Rights"":http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0001-0050/sbx8_38_bill_20100208_introduced.pdf was authored by Sens. Mark Leno (D-San Francisco) and Darrell Steinberg (D-Sacramento) and contains two major provisions.

Under the administration's recently-announced changes to the Home Affordable Modification Program (HAMP), loan servicers must complete an evaluation of a borrower's eligibility for a loan modification before they begin the foreclosure process â€" but it only applies to participants eligible for HAMP. SB 1275 would apply that same principle to all servicers doing business in California, whether they are HAMP participants or not. If borrowers are denied a loan modification, loan servicers must provide a detailed denial explanation letter.

The bill would also provide remedies to homeowners whose rights are violated under this act. If a loan servicer fails to evaluate a homeowner's eligibility for a loan modification or does not provide a detailed explanation as to why a loan modification was denied, the homeowner would have the right to bring an action to either void the foreclosure or


recover treble damages or statutory damages in the amount of $10,000, whichever is greater, from the mortgagee.

""We will get a lot of bang for our buck out of this bill,"" said Paul Leonard, director of the California office of the ""Center for Responsible Lending."":http://www.responsiblelending.org/ ""It's a modest proposal, but it could do a world of good for Californians who are faced with losing their homes.""

The Senate Banking Committee will hear the bill again after it is heard in the Senate Judiciary Committee on April 20.

According to a recent ""article on Sfgate.com"":http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/04/07/MNGH1CR1KJ.DTL, California lawmakers are also working on two other foreclosure relief/foreclosure avoidance bills.

SB401 aims to bring various California tax codes in line with federal law, including a provision that excludes ""forgiven debt"" on a principal residence from being considered taxable income, the article said. Many borrowers have sold back their homes to the bank for less their mortgage balance, but the difference between what they owe and the sales prices of the home is being counted as income. As a result, these borrowers are faced with huge tax bills, but SB401 is aiming to change that. According to the article, the new bill would apply to short sales, foreclosures, deeds-in-lieu of foreclosure, and loan modifications that reduce the principal due. The bill is expected to be passed this week, sources say.

Another foreclosure-related bill being considered by California lawmakers is AB1588, which aims to create a monitored mortgage workout program. The program, similar to those in more than a dozen other states, would allow borrowers at risk of losing their homes to request mediation with the lender, who would be legally bound to participate in talks to work out a home loan modification, the Sfgate.com article said. This bill is expected to go through a hearing within a couple of months.

About Author: Brittany Dunn


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