Wednesday, July 9, 2008

Foreclosure relief law gives homeowners a voice

OAKLAND — Gov. Arnold Schwarzenegger signed a bill into law Tuesday that he and lawmakers say will force mortgage lenders to talk with homeowners before foreclosing, give tenants more time to vacate foreclosed property and help prevent neighborhood blight.

It's mainly intended to delay foreclosure, as it doesn't force lenders to restructure loans. But the governor and state Senate President Pro Tem Don Perata, D-Oakland, the bill's author, say it's one more tool to fight a multifaceted crisis.

"Losing a home to foreclosure is a financial and emotional crash that often takes years to overcome," the governor said at a signing ceremony in the Fruitvale District offices of the Unity Council, which has been counseling local homeowners in crisis. "These people need help."

California led the nation with 71,930 foreclosure filings in May, the most recent month for which statistics are available. Stockton tops the list of the nation's 10 cities hit hardest, with one in every 75 of that city's homes having received a foreclosure notice in May; also in the national top 10 for May were Merced, Modesto, Riverside-San Bernardino, Vallejo-Fairfield, Bakersfield and Sacramento.

The new law requires lenders to contact borrowers to explore options to avoid foreclosure. Schwarzenegger said this puts some responsibility on homeowners: "Don't run away when someone reaches out to you. This is a great opportunity — take advantage of this Advertisementopportunity."

Said Perata: "This allows for a conversation, requires a conversation between the two parties in interest in hopes they can work something out."

The new law's contact requirement applies only to loans made from 2003 through 2007, the period in which most of today's problematic mortgage loans were made.

The new law also requires that tenants in foreclosed properties be notified once a notice of sale has been posted on a property, and that they have 60 days — rather than the old 30-day period — before eviction.

And the new law lets cities impose a $1,000-per-day fine on lenders that don't maintain their vacant, foreclosed properties if problems aren't fixed within 30 days, including excessive foliage growth, failure to keep trespassers and squatters out or failure to prevent mosquito breeding. This effort to prevent blight, which drags down neighbors' property values, could be hard to enforce because mortgages often are sold from one lender to another several times, making it hard to track properties' owners.

Perata said state lawmakers can only do so much to mitigate the crisis because other areas are pre-empted by federal law.

Oakland Mayor Ron Dellums said the federal government should pony up money so hard-hit cities such as Oakland can offer bridge loans to help homeowners through critical times. But, he said, "let's not detract from what is in this particular piece of legislation."

California Labor Federation executive secretary-treasurer Art Pulaski praised the new law. "Working people are the ones suffering from these subprime loans," he said, and this law gives people "a handhold to grab" in trying to renegotiate mortgages.

The governor signed three copies of SB 1137, giving one to Perata, one to Dellums and one to a beaming Dorothy Hicks, an east Oakland resident and Association of Community Organizations for Reform Now (ACORN) activist.

Hicks almost lost her home of 39 years due to what she described as predatory lending that left her with mortgage bills she couldn't pay. Aid from family and more scrupulous lenders helped her keep her home, she said in December as Perata and other lawmakers announced this bill on her front lawn.

Also present Tuesday were Assemblyman Sandre Swanson, D-Oakland, and Assemblyman Guy Houston, R-Livermore. The Assembly passed this bill on a 55-18 vote, and the state Senate passed it 32-8.

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