Assemblymember Ted W. Lieu's (D-Torrance) office issued the following Press Release regarding CA ABX2 7.

Governor Signs Lieu Foreclosure Prevention Act New law is first in the nation to impose a foreclosure moratorium

(SACRAMENTO) - Assemblymember Ted W. Lieu (D-Torrance) today announced Governor Schwarzenegger signed ABx2 7 (Lieu), one of the most comprehensive and important pieces of legislation in the country to stem the tide of foreclosures and get our economy back on track. The California Foreclosure Prevention Act will now impose a 90 day foreclosure moratorium unless a lender offers a comprehensive loan modification program designed to keep people in their homes.

"California's unprecedented number of foreclosures has crippled our economy," said Assemblymember Ted Lieu. "This law will help people stay in their homes by adding another incentive for lenders to modify their loan."

"More foreclosures hurt everyone, not just the struggling families losing their homes," Assembly Speaker Karen Bass said. "This bill will be an effective tool in helping stem foreclosures and avoiding the lost property values and neighborhood blight that accompany them."

The California Foreclosure Prevention Act is designed to force Wall Street to help the citizens of "Main Street." The Act:

1. Imposes a 90 day foreclosure moratorium to allow distressed homeowners time to work out loan modifications with their lenders.

2. Allows lenders to avoid the moratorium if they have a comprehensive loan modification program based, in part, on criteria set forth by the Federal Deposit Insurance Corporation. Loans may be modified several ways, including interest rate reductions, extension of the loan term, or principal reduction.

3. Provides oversight and accountability by requiring regular reports to the legislature on loan modifications and foreclosure reductions, and coordination with appropriate state regulators.

The California Foreclosure Prevention Act is the first law in the nation to impose a foreclosure moratorium and encourage quality loan modifications.

Assemblymember Ted W. Lieu is Chair of the California Assembly Rules Committee and represents the 53rd Assembly District, which includes El Segundo, Hermosa Beach, Manhattan Beach, Redondo Beach, Torrance, Lomita, Marina Del Rey, and portions of the City of Los Angeles.
 
To view the online Press Release, please click here.

Additional information is provided in the following article from the San Francisco Chronicle.

State foreclosure moratorium has wide loopholes

Gov. Arnold Schwarzenegger signed into law a 90-day moratorium on California home foreclosures on Friday, but consumer advocates argue wide loopholes will prevent the legislation from significantly slowing repossessions.

The bill, introduced by Sen. Ellen Corbett, D-San Leandro, as a trailer to the California budget package, covers owner-occupied homes where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008.

"Many people in our communities are facing the terrible specter of foreclosure," Corbett said. "I'm just trying to find a way to help."

Under the law, however, state regulators can grant loan servicers exemptions - allowing them to foreclose - if the lenders have a mortgage modification program in place that meets some combination of various criteria. Among them: a deferral of a portion of the principal, lowered interest rates for at least five years or an extension of loan terms.

"Can they defer $1,000 for 30 years and call that complying?" said Joe Ridout, spokesman for Consumer Action. "It appears that that would be following the letter of this legislation. The heart appears to be in the right place, but the teeth aren't."

In order to earn an exemption under the state law, a lender's modification program would have to include an adjustment in monthly mortgage payments "targeted" at 38 percent of a borrower's income. That's a looser standard than those already put forward in several federal programs, including the Homeowner Affordability and Stability Plan laid out by the Obama Administration last week, which sought to lower payments to 31 percent of income.

"It was a step backward from where things were going from an industry standpoint and a federal standpoint," said Kevin Stein, associate director of the California Reinvestment Coalition.

He also noted that having a modification program and actually granting loan workouts are two different things for lenders - and the law doesn't appear to speak to the latter.

Corbett said she agreed with several of the critiques of her bill, but was limited from more aggressive measures by federal banking regulations.

"I would have liked to have written a much stronger bill," she said.

Bankers, however, would have preferred she didn't write the bill at all. A letter of opposition from the California Bankers Association, California Mortgage Bankers Association and other financial trade groups said a foreclosure moratorium will create uncertainty, delay economic recovery and stifle home sales.

Beth Mills, spokeswoman for the California Bankers Association, said struggling borrowers and their lenders already have more than enough time to search for mutual solutions. A state law passed last year increased the required period from first notification to final sale by 30 days, to a total of 141. More time is not the silver bullet to every troubled loan, she said. The law will go into effect in late May.

To view a copy of the Assembly Bill, please click here.

To view a copy of the Senate Bill, please click here

To view the online article, please click here.

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