California Legislation Tightens Restrictions On Lenders

October 17, 2009

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Governor Arnold Schwarzenegger has approved new legislation that will provide a wide range of protection to the borrowing consumer.  The Governor signed seven new laws that will take effect at the beginning of next year starting with AB 260 which was authored by Assemblyman Ted Lieu (D-Torrance).

AB 260 tightens restrictions on mortgage brokers which inhibits them from steering borrowers into riskier, higher interest loans when they actually qualify for the less expensive loans.  This will prevent brokers from receiving kick-backs for risky high interest loans that will profit the lender but will penalize the borrower with a loan they can not afford.

AB 260 bans negative amortization loans that offer the option of such low monthly payments the loan amount actually grows over time.  Repayment penalties will also be limited to no more than 2% of the loan balance, while allowing state regulators to enforce federal lending laws.

This bill was opposed by The California Association of Mortgage Brokers,  the California Mortgage Association and the California Association of Realtors.  This new legislation will force Agents and Lenders to work with borrowers in a fair and honest way making it harder for Agents and lenders to take advantage of the borrowing consumer.

According to RealtyTrac, 92,326 home mortgage holders were issued foreclosure notices during the month of August.

In a statement, Assemblyman Ted Leiu said, “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”.

Six laws also signed by Governor Schwarzennegger:

  • SB 237 – Creates a registration program for appraisal management firms.
  • SB 36 – Sets licensing requirements for all residential loan originators.
  • SB 239 – Makes it a felony to commit fraud on a mortgage application.
  • AB 329 – Requires lenders to give clear defined information regarding reverse mortgages.
  • AB 957 – Allows buyers of foreclosure property to choose a local escrow officer instead of the escrow company chosen by the seller.
  • AB 1160 – Mortgage loan documents must be in the same language the verbal negotiations were conducted in.

Related posts:

  1. California Housing Woes To Continue
  2. First Time Home Buyer Tax Credit Deadline Looms
  3. FHA Announces Tighter Restrictions On Lending
  4. Lenders Want More Credit Information

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