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Senate Bill 1137, introduced by Senate President Pro-Tem Don Perata (D-Oakland), was approved 6-3 Tuesday by the Senate Committee on Banking, Finance and Insurance.
SB 1137 would enact a comprehensive package of reforms designed to prevent unnecessary foreclosures from further worsening state and local economies and housing markets.
Specifically, the bill would require lenders to contact borrowers in a timely fashion before a Notice of Default (NOD) may be filed in order to assess the borrower's financial situation, explore options to avoid foreclosure, and to provide the borrower with a toll-free number for HUD-certified housing counseling agencies.
According to Wiggins, the goal of SB 1137 is to “reduce the number of foreclosures in California, ensure that foreclosed properties do not become a source of blight to the communities in which they are located, and provide increased protections to individuals who rent properties that ultimately go into foreclosure.”
California is suffering the effects of a severe housing crisis, which has not only negatively affected borrowers who have lost their homes to foreclosure, but has also had significant negative ripple effects on housing values, local economies, and the state economy.
Although many other states have been affected by what has colloquially become known as "the sub-prime mortgage crisis," California is suffering more than many others.
Sen. Wiggins described SB 1137 as a “response to the expectation that defaults and foreclosures will continue to grow in number in California through 2008, and out of concern over the negative impact they will have on California homeowners, California's local economies, and the state economy.”
During February 2008, the most recent month for which foreclosure data are available, RealtyTrac reported that California, Nevada, and Florida continued to document the highest foreclosure rates in the country.
California's foreclosure rate was second highest in the nation, with one in every 242 households receiving a foreclosure filing during the month. California and Florida metropolitan areas accounted for nine of the top 10 metropolitan foreclosure rates in February, with the Vallejo-Fairfield area rated number eight.
In November 2007, Gov. Arnold Schwarzenegger reached an agreement with several state-regulated financial institutions to engage in streamlined modifications of certain types of sub-prime ARMs. A month later, President George W. Bush and U.S. Secretary of the Treasury Henry Paulson announced the HOPE NOW Alliance plan, an industry-led plan intended to facilitate streamlined modifications of selected sub-prime ARMs.
The American Securitization Forum has also published guidance documents intended to facilitate loan modifications by servicers, pursuant to the contractual terms specified in pooling and servicing agreements. Despite the existence of these voluntary initiatives, defaults and foreclosures continue to rise.
Patricia Wiggins represents California’s 2nd Senate District, which includes portions or all of six counties (Humboldt, Lake, Mendocino, Napa, Solano and Sonoma). She also chairs the Legislature’s Joint Committee on Fisheries and Aquaculture. Visit her Web site at http://dist02.casen.govoffice.com/.
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