California Attorney General Kamala Harris' office is lobbying state lawmakers to advance a package of mortgage-protection bills and thus expand a recent nationwide bank settlement over home foreclosures.
Harris has made fighting mortgage fraud and protecting homeowners a centerpiece of her 16 months in office. She helped negotiate a settlement with the nation's top five banks in February that will bring $18 billion in relief to California.
Harris, a Democrat, is scheduled to testify before legislative banking committees today and Wednesday, promoting what the California Homeowner Bill of Rights. The 11-bill package would ban some of the worst practices that led to the housing crisis, according to her office.
It would write the terms of the national agreement into state law and apply them to every lender. The proposals would provide new safeguards for homeowners while giving her office more freedom to investigate financial crimes. More than 500,000 Californians have lost their homes to foreclosure since 2008, more than in any other state.
The industry objects to letting individual borrowers go to court if they feel they have been wronged. Allowing that would "result in a de facto moratorium on foreclosures," the California Bankers Association said in a statement last week. Letting borrowers sue to halt foreclosures could "unduly delay the inevitable" and result in some homeowners being awarded monetary damages when they suffered no real financial harm.
The 11 bills in the package address six separate proposals. Five are contained in duplicate Assembly and Senate bills. The package includes:
AB1602 and SB1470, which would extend to all California homeowners many of the protections contained in the national banking settlement. They would address the practice known as a "dual-track foreclosure" by prohibiting lenders from filing notices of default while they are also considering alternatives to foreclosures.
The bills also would require lenders to prove to homeowners that they have a right to foreclose on the property and would create a new Office of Homeowner Protection to aid borrowers. Banking associations are opposed.
AB2425 and SB1471, which would increase borrowers' due process rights. They would require lenders to provide a single point of contact starting on July 1, 2013, for borrowers who want to discuss foreclosures or refinancing. The bills would increase penalties for banks that sign off on foreclosures without properly reviewing the documentation, a process known as robo-signing. Also, borrowers could act on their own to challenge foreclosure proceedings in court. Banking associations are opposed.
AB2314 and SB1472, which would give cities more ability to fight neighborhood blight from vacant houses. The measures increase penalties against the owners of the blighted properties and let local governments charge the owners for the cost of cleaning up the properties. Banking and mortgage groups oppose the penalty increases.
AB2610 and SB1473, which would give renters more notice before they have to vacate a foreclosed home. Banking and mortgage associations want more limits on which renters would qualify and how long the restrictions would be in effect.
AB1763 and SB1474, which would allow the attorney general to convene a special grand jury to investigate financial crimes that cross county lines and involve multiple victims. Banking organizations have taken no position.
AB1950, which would give prosecutors four years to bring charges in foreclosure-related crimes, up from the current one year. The bill also would impose a $25 fee on each notice of default filed by a lender, with the money going to the attorney general's office for investigation of mortgage-related crimes. Banking and mortgage associations oppose what they say would be a new $25 tax.
Although she has the support of Democratic leaders who control the Senate and Assembly, previous efforts to reform the mortgage industry have failed in the state legislature.