This past weekend Governor Schwarzenegger just signed several new bills that provide home loan protection for borrowers that may allow some to hold on to their homes.
Gov. Schwarzenegger also signed into law AB 260 written by Assemblyman Ted Lieu (D-Torrance). Mr. Lieu's measure puts added restrictions on mortgage brokers to prevent them from influencing borrowers to take riskier and higher-interest loans when they only qualify for a less-expensive loan. This law will take effect on January 1st 2010.
Mr. Lieu's measure also prevents negative-amortization loans, which means that a borrower can opt for monthly payments so low that the loan amount can eventually get larger as time passes.
Furthermore, the new law will limit prepayment penalties of no more than 2% of the total loan balance and will help state regulators to enforce this law.
What's really interesting is that the governor last year vetoed similar legislation because groups in the mortgage and real estate industries were actively pushing the governor to do so.
Assemblyman Ted Lieu had argued that his bill was sorely needed to help California homeowners avoid foreclosure and to stay in their homes.
Mr. Lieu said in a statement on Monday, "Look out Wall Street, California is no longer the Wild West. Although it took two years, I am pleased to have been able to overcome the powerful interests blocking reform so that future generations won't ever experience this type of crisis."
Below is a list of similar mortgage-related bills that were signed by Gov. Schwarzenegger:
- SB 36, by Sen. Ron Calderon (D-Montebello), sets licensing requirements for all residential loan originators.
- SB 239, by Sen. Fran Pavley (D-Agoura Hills), makes it a felony to commit fraud on a mortgage loan application.
- AB 329, by Assemblyman Mike Feuer (D-Los Angeles), requires lenders to give more and clearer information to those interested in reverse mortgages, which let seniors borrow against their homes' equity.
- SB 237, by Calderon, creates a registration program for appraisal management firms.
- AB 957, by Assemblywoman Cathleen Galgiani (D-Stockton), allows buyers of foreclosed homes to choose local escrow officers, rather than being forced to use the escrow company chosen by the seller.
- AB 1160, by Assemblyman Paul Fong (D-Cupertino), requires that mortgage loan documents be written in the same language the verbal negotiations were conducted in.