A California man has filed papers with Secretary of State seeking an amendment to the California constitution making homeownership a fundamental right and banning foreclosures.
David Benson of Sacramento is seeking to gather the 807,615 signatures required to qualify the proposal for a ballot to be considered by voters. In the filing, called the Foreclosure Modification Act, Benson accuses lenders of failing to modify loans and using foreclosure as a method to improve their bottom line through the resale of repossessed homes.
Under the proposal, lenders would be required to assist borrowers unable to pay for their homes due to financial distress and illness. It would also require lenders to reduce principal amount of a loan when property declines exceed 10%. It would also require assistance for homeowners who are unable to pay their property taxes.
Additionally, the plan would require lenders and servicers to allow a loan that has been maintained for at least 3 years to be refinanced at minimum cost without credit review or penalty within 45 days of being requested.
An attorney at Patton Boggs interview by HousingWire suggested that this concept would only serve to diminish homeownership in California, "While homeownership may be part of what many consider to be the American Dream, I have a hard time conceiving it as a constitutional right. Should this proposed amendment make it on the ballot and ultimately pass, it would only serve to discourage lenders from making mortgage loans in California."
Although it is unclear at this point if Benson has access to the necessary resources to fund such a signature gathering effort, it would be interesting to see if such an idea could gain any momentum. Of course, if such a law became a constitutional amendment, mortgage lending in the state would come to an immediate stop, thereby crushing the economy in the state. This doesn't take into account the myriad of legal challenges on the constitutionality of an amendment that would be immediately filed, nor the amount of money the mortgage industry would spend to defeat such a measure.
However, given the current climate and with the general public fed up with just about everyone, it is conceivable that if the measure made it to the ballot, it could pass, if for nothing else but a protest vote by voters. The constant attention to delinquent mortgages, failure of lenders and servicers to make good faith efforts to resolve loans and the weight of distressed properties on housing recovery could fuel support behind any measure aimed as those involved.
The moral question would be, assuming a person could get a mortgage loan under such an environment, would there be sufficient motivation to pay that mortgage if there were no consequences or threats for not paying it?