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More real estate legislation

Attempts to solve current problems, avert future losses

Senator Mike Machado also announced SB 1053 and SB 1054 on January 7 (Machado, Linden; Correa, Santa Ana). These two bills, along with SB 926 (Perata, East Bay) and Assembly Bill 69 (Lieu, Torrance) are aimed at remedying some of the questionable practices that contributed to the current real estate turmoil.

  • SB 1053 sets up reporting requirements for Department of Real Estate (DRE) licensees. Licensees who make, broker, or service mortgages must annually notify DRE of those activities. Also annually, real estate brokers in charge of mortgage brokering, lending, or servicing businesses must send DRE detailed compliance reviews of their books and records, and business activity reports that detail loans made during the prior year.

  • SB 1054 closes two loopholes in current law:

    • The first provision of this law would give DRE the ability to ban individuals found guilty of violating the Real Estate Law from taking a real estate-related job with a company that has a different regulator.

    • The second provision prohibits a real estate professional who gives an opinion of a property’s value to a mortgage lender from acting as the listing agent on that property for a period of one year.

  • SB 926 (Perata, East Bay) would require face-to-face meetings between mortgage servicers and borrowers that are in default, to review the situation and talk about options. If passed, this bill would also require mortgage servicers to give at-risk homeowners several warnings before their adjustable rate mortgages were about to reset to higher interest rates. SB 926 would require lenders to notify borrowers three times that their mortgage interest rates were about to go up, and send notices to borrowers at four months, three months, and 45 days before the reset interest rate takes effect. It would also require lenders to give borrowers estimates of what their new payments would be under the increased interest rate.

  • Assembly Bill 69 (Lieu, Torrance) was amended to require lenders and related businesses regulated by the state to make monthly reports on the types of loans they are servicing or making. The monthly reports must include whether loans are past due, in foreclosure, or modified to avoid a loan default. State departments that regulate lenders and brokers would post this monthly report information on their public Websites.

This proposed legislation follows on the heels of earlier efforts by California’s legislators and Governor Schwarzenegger to contain damage caused by mortgage foreclosures. In November 2007, the Governor announced an agreement with the loan servicers that constitute 25 percent of issued subprime mortgage loans (Countrywide, GMAC, Litton, and HomeEq) to freeze interest rates for certain affected homeowners.

Impact on California

Recent statistics reported by RealtyTrac emphasize the depth of the mortgage default problem in California. Third-quarter foreclosure rates for 100 metropolitan areas across the nation reported in RealtyTrac’s November 14, 2007 press release did not bode well for California. The list of the Top 10 metropolitan areas for foreclosures lists five in California. Stockton is in Rank 1, with one foreclosure filing for every 31 households. Also in the Top 10 are Riverside/San Bernardino (Rank 3), Sacramento (rank 6), Bakersfield (Rank 9) and Oakland (Rank 10). For the entire listing, visit RealtyTrac’s Website.