The issue of bank foreclosed listings in California was among issues addressed by seven mortgage-related laws signed this week by Governor Arnold Schwarzenegger.
The seven bills all provided additional protections for consumers, particularly homeowners.
One of the bills signed was AB 260, which aimed to protect mortgage borrowers from brokers or lenders who entice prospective home buyers from taking out risky home loans and buying higher-priced homes. This is to prevent a repeat of bank foreclosures that arose over the past years and months.
The bill, proposed by Assemblyman Ted Lieu, will take effect on January 1 next year. It will ban lenders from offering pay option flexible-rate mortgage loans, which allow borrowers to make very low monthly payments in the initial years and then enable lenders to increase to higher interest rates and much higher monthly payments after 3 to 5 years of low payments.
AB 260 also limits prepayment fees to a maximum of 2 percent of the loan and enables state officials to implement federal lending laws.
Last year, a similar legislation was vetoed by the governor because of pressure from the California Mortgage Association, California Association of Realtors and the California Association of Mortgage Brokers. But Assemblyman Lieu was able to campaign effectively for his cause, arguing that his bill will cut down the rising number of homes going into bank foreclosed listings.
Lieu cited foreclosure statistics from a real estate research firm which indicated that more than 92,300 California mortgage borrowers were hit with default and foreclosure notices last August.
Another bill signed was the Buyer’s Choice Act, which was proposed by Assemblywoman Cathleen Galgiani. This bill aims to enable buyers of foreclosed properties in California to choose escrow firms operating in local areas to handle their closings. Galgiani claimed that lenders have been using their affiliated escrow firms to handle closings, eliminating escrow opportunities for local escrow firms. Galgiani also said that escrow entities based in Southern California are being used for closings in Northern California, making work more difficult for brokers and real estate agents in Northern California.
The other bills signed include SB 36, a bill proposed by Senator Ron Calderon to establish licensing requirements for home loan originators, and AB 1160, a bill proposed by Assemblyman Paul Fong to require lenders to provide borrowers with mortgage documents written in the language used during verbal negotiations concerning the mortgage. This bill aims to help non-native English speakers have a thorough understanding of their mortgages and help them save their properties from bank foreclosed listings.
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