Calif. Lawmaker Still Rallying Foreclosure Prevention Legislation
California Assemblyman Ted Lieu, D-Torrance, during the recent November special session introduced his proposal for a 120-day foreclosure moratorium. Lieu on Nov. 14 introduced the California Foreclosure Prevention Act, which was "designed to force Wall Street to help the citizens of 'California Street.'” In addition to the moratorium and an exception for lenders with "comprehensive" loan modification programs, the proposed act would require "regular reports" from lenders on loan modifications and foreclosure reductions. Lieu also released a press statement Thursday again urging action to prevent foreclosures and calling into question the soundness of Treasury Department secretary Henry Paulson's strategy to boost the economy and alleviate the credit crunch. The problem, Lieu said, is not borrowers' inability to buy homes but the lack of assistance given to them to stay in their homes. "In other words, ‘It’s the foreclosures, stupid,'" he said. "Home loan defaults and all its consequences are causing the credit and liquidity crisis, not the other way around. Until we solve the foreclosure problem, we will continue to have credit and liquidity issues." It's clear from the releases that Lieu has not been stymied by failed attempts to pass foreclosure relief legislation earlier in the year. His latest efforts to rally support claim the plan would give Wall Street the haircut and save taxpayer money. "There's at least another year to a year and a half of a large wave of adjustable-rate, risky subprime loans that have not reset," Lieu said, according to a local article in The Daily Breeze Friday. "Anything we do now to address this crisis will help ensure that your money is not sent to bail out AIG and other Wall Street firms." Lieu's initial version of the foreclosure prevention bill -- AB 1830 -- would have established a “fiduciary duty” for mortgage brokers to consumers, prohibited steering borrowers into higher-cost loans, banned option ARMs, and signficantly limited the use of yield spread premiums as a form of broker compensation. Despite the passage of various housing legislation measures by governor Arnold Schwarzenegger, AB 1830 was blocked in late September, leaving consumer groups dissatisfied and leading industry groups to issue press releases praising the governor's action. “California is experiencing 1,300 foreclosures every single day,” as a result of loose lending practices, said Paul Leonard, director of the California office of the Center for Responsible Lending, in September. ”We should not allow the narrow interests of the mortgage brokers who got us into this mess dictate how we get out … yet Schwarzenegger just did.” The California Association of Realtors, however, praised Schwarzenegger’s decision for blocking a bill they said would have failed to apply to conventional lenders and created a new, unnecessary right of enforcement by private parties. “AB 1830 is a feel-good measure that would have unequally burdened different sectors of the mortgage industry, but would not have addressed lender misconduct that inspired the legislation in the first place,” said CAR president William Brown, in a press statement in September. ”We don’t need more laws — we need more enforcement.” Write to Diana Golobay at email@example.com.