CA Lawmakers Introduce Overhaul of Mortgage Rules

There may be a massive overhaul in California as some top lawmakers have introduced a sweeping set of new rules for mortgage servicers.

Democrats filed six sets of bills last week in the State Assembly and Senate.

In legislation that was crafted in part by Attorney General Kamala Harris, who was one of the last to sign the $25 billion settlement with mortgage servicers earlier in the month, CA lawmakers aimed to overhaul much of the current system.

“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

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 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

This bill would increase fines to owners of dilapidated property from $1,000 to $5,000 per day.

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.

Tenant Protection

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.