In a flurry of end-of-session bill signings, Gov. Arnold Schwarzenegger approved seven new laws that provide a range of consumer protections to home-mortgage holders and may allow some to hold on to their houses.
Late Sunday night, the governor signed AB 260 by Assemblyman Ted Lieu (D-Torrance). The measure, which takes effect Jan. 1, tightens restrictions on mortgage brokers so they cannot steer borrowers to riskier, higher-interest loans when they qualify for less-expensive ones.
The new law also bans so-called negative-amortization loans, which offer the option of monthly payments so low that the loan amounts can actually grow over time.
The law also limits prepayment penalties to no more than 2% of the loan balance and allows state regulators to enforce federal lending laws.
The governor vetoed similar legislation last year at the urging of some groups in the mortgage and real estate industries. The California Assn. of Mortgage Brokers, the California Mortgage Assn. and the California Assn. of Realtors unsuccessfully opposed this year’s version of the bill.
Lieu, the bill’s author, successfully argued that his proposal was needed more than ever to help California homeowners avoid foreclosure. Lieu noted that, according to RealtyTrac, a real estate data service, 92,326 homeowners were hit with foreclosure notices during August.
“Look out Wall Street, California is no longer the Wild West,” Lieu said in a statement Monday. “Although it took two years, I am pleased to have been able to overcome the powerful interests blocking reform so that future generations won’t ever experience this type of crisis.”
Other mortgage-related bills signed by the governor:
* SB 36, by Sen. Ron Calderon (D-Montebello), sets licensing requirements for all residential loan originators.
* SB 239, by Sen. Fran Pavley (D-Agoura Hills), makes it a felony to commit fraud on a mortgage loan application.
* AB 329, by Assemblyman Mike Feuer (D-Los Angeles), requires lenders to give more and clearer information to those interested in reverse mortgages, which let seniors borrow against their homes’ equity.
* SB 237, by Calderon, creates a registration program for appraisal management firms.
* AB 957, by Assemblywoman Cathleen Galgiani (D-Stockton), allows buyers of foreclosed homes to choose local escrow officers, rather than being forced to use the escrow company chosen by the seller.
* AB 1160, by Assemblyman Paul Fong (D-Cupertino), requires that mortgage loan documents be written in the same language the verbal negotiations were conducted in.