California lawmakers introduce new foreclosure rules
Top California lawmakers introduced a sweeping set of new rules for mortgage servicers.
Democrats filed six sets of bills Wednesday in the State Assembly and Senate.
Attorney General Kamala Harris helped craft the legislation. She was one of the last to sign the $25 billion settlement with mortgage servicers earlier in the month, which included a set of new standards as well. The legislation package provides another glimpse at the specifics of that settlement, which have yet to be released.
Many of the requirements also came under consent orders signed with federal regulators last year, but enforcement would add extra consequences for any violation. Some of the bills were meant to directly help fund investigations by the national foreclosure fraud task force Harris joined in January.
"California communities and families are being devastated by the mortgage and foreclosure crisis. We must ensure the deceptive practices that caused it never happen again," Harris said Wednesday.
The Foreclosure Reduction Act
This bill was introduced by Assemblymen Mike Eng and Mike Feuer; Sens. Mark Leno, Fran Pavley and Senate President Pro Tem Darrell Steinberg.
Under this bill, servicers would be required to provide documentation to the borrower establishing its right to foreclose before the filing first step in the process — the default notice. Evidence of ownership and chain of title must also be shown to the borrower.
The bill prohibits servicers from dual-track foreclosures, or completing the process if the borrower is being considered for a modification. Notices of foreclosure sales must also be personally served.
Enhancement of AG Enforcement
The bill from Assemblyman Mike Davis imposes a $25 fee to a servicer when a default notice is recorded. The fees would fund investigations from the California AG and the national task force led by New York Attorney General Eric Schneiderman.
Servicers filed more than 67,000 default notices in the fourth quarter, according to RealtyTrac.
Attorney General Special Grand Jury
Another bill from Davis and Sen. Lori Hancock would authorize the AG to form a special grand jury to investigate and indict financial crimes against the state in different jurisdictions.
Due Process Reform Legislation
Assemblywoman Holly Mitchell and Sens. Mark DeSaulnier and Fran Pavley introduced the bill, which would increase fines to owners of dilapidated property to $5,000 per day from $1,000.
Enforcement actions would not be taken for the first 60 days against someone who acquired the distressed property. The investor or purchaser must show he or she is making repairs to the property.
The bill also requires banks to inform local code enforcement agencies when liens are released on foreclosures. This would clear the way for demolition to proceed.
The bill, written by Assemblywoman Nancy Skinner and Sen. Loni Hancock, would require buyers of foreclosed homes to honor the terms of existing leases for any tenants and give at least 90 days notice before eviction.