California will now have the toughest regulations in the country against foreclosing on homeowners who are in the midst of renegotiating their mortgage.
All this legislation makes the mortgage business less profitable for lenders so that they will have less incentive to extend mortgages to anyone but those with the best credit ratings.
The measures would outlaw so-called robo-signing — the improper or faulty processing of foreclosure documents— and would allow state agencies and private citizens to sue financial institutions, under limited conditions, for economic compensation and for additional civil damages of up to $50,000 if lenders willfully, intentionally or recklessly violate the law. No lawsuit could go forward if the bank or servicer first fixes the problem with documentation or procedures, according to the bills.
The legislation, SB 900 and AB 278, also would simplify dealings between homeowners and their banks or loan servicers by requiring that clients be given a single representative to work with, helping to prevent bureaucratic runarounds.