California Eyes Statewide Mortgage Reform
Wracked by distressed home sales in the wake of massive foreclosure volumes across the state, California may become the first state to implement a state-wide piece of mortgage reform legislation The California State Assembly passed AB 260, a bill reforming mortgage lending and specifically banning predatory lending practices, according to a report filed at the California Chronicle today. "We must enact landmark reforms to address the systemic failures in California's subprime mortgage industry," said California Assembly member Ted Lieu, according to the Chronicle. "These failures have not only devastated California's economy, they have contributed to a national and international financial meltdown." The legislation, if enacted, will create a fiduciary duty standard for mortgage brokers, eliminate compensation incentives that encourage the steering of borrower into risky loans, and establish regulations on prepayment penalties. The overall goal is to eliminate subprime lending, a leading cause of the state's foreclosure woes. California saw one in 138 housing units receive a new foreclosure filing in April, the third-highest state ranking, according to RealtyTrac. The state experienced its 10th consecutive month of pick up in home sales during April, with foreclosures accounting for 53.6% of all southern California's resales in the month. California's foreclosure notices--the first step in the foreclosure process--dropped 18% in the month, indicating foreclosure sales may be on their way to slowing, despite the continued high volume of foreclosures in the state. Write to Diana Golobay.