Schwarzenegger signs three CA homeowner-protection bills

Citing California's disproportionate impact on national housing market fluctuations, Governor Arnold Schwarzenegger (R) signed three bills into law in early October intended to increase protections for Californians who own or plan to purchase homes, and designed to expand affordable-housing opportunities.

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The second bill, S.B. 385, permits state agencies involved with residential mortgage lending and brokering to adopt emergency measures and new policies to ensure that all mortgage lenders and brokers are subject to federal guidelines on nontraditional mortgages. This law impacts the Department of Financial Institutions (DFI), the Department of Corporations (DOC) and the Department of Real Estate (DRE).

The third bill, A.B. 929, increases the amount of affordable housing financing available in California by raising the total debt that the California Housing Finance Agency (CalHFA) can carry by $2 billion. CalHFA issues bonds to finance housing for low- and moderate-income families in the state.

"It is critical that we continue to take steps to protect Californians against unscrupulous lending practices, and to ensure that consumers can make informed decisions," said Schwarzenegger. "That is why I am pleased to sign these bills, which increase transparency and accountability in the lending market that will help homeowners preserve their American dream."

Schwarzenegger also announced the following additional initiatives intended to help homeowners who are facing financial distress or foreclosure as a result of nontraditional mortgages:

* California's licensing departments will adopt regulations to strengthen California's underwriting and consumer disclosures, in order to ensure that consumers have the tools to fully understand the ramifications of taking out a subprime loan. As part of this effort, licensees will use a new, multilingual consumer disclosure form to illustrate worst-case payment scenarios.

* Licensing departments will continue to work closely with law enforcement to discipline lenders and brokers who take unfair advantage of consumers. These departments are also currently training consumer counselors, nonprofits and legal-aid societies to help identify licensees who have defrauded consumers or otherwise violated state law, so enforcement actions can be taken against their licenses.

* State agencies will continue to partner with local legislators in the areas hit hardest by foreclosures to connect borrowers with nonprofit counselors who can help them negotiate with their lenders. The state has already held events in Stockton, Riverside, Sun Valley and La Quinta.

"It's absolutely crucial that Californians facing the threat of foreclosure reach out to their lenders and discuss available options to save their homes," said Schwarzenegger. "The worst thing someone can do is nothing. Most lenders would prefer not to foreclose, but 50 percent of borrowers who lose their homes never return calls from their lenders."