SACRAMENTO, Calif., June 1 - The assembly has seized the opportunity
to be one of the first states in the country to significantly rein in
the abuses of the home lending industry by passing AB 260. While the
fate of similar federal legislation in D.C. is uncertain, California is
leading the charge against the bad loan products that helped create the
meltdown.
“The products this bill regulates are some of the
riskiest that consumers have access to” according to Pedro Morillas
CALPIRG Legislative Advocate. “These products made it possible for
brokers and banks to make toxic loans to unqualified borrowers.”
AB 260 will:
-Remove incentives for brokers to steer borrowers into a more expensive loan in return for a kickback from a bank.
-Regulate
the product that prevented many borrowers from refinancing out of loans
before the interest rates ballooned out of control.
-Outright ban loans that get more and more expensive even if the borrower is making the minimum payments.
This bill is almost identical to AB 1830, which was passed by the
legislature last year and vetoed by the Governor. It will be heard in
Senate Banking, Finance and Insurance, and Judiciary committees. If
history is any indication, the Senate Banking, Finance, and Insurance
will be this bill’s biggest hurdle.
We are hopeful that the
chair of the committee, Senator Ron Calderon, will remain consistent
with his vote on the floor of the Senate last year and pass the bill
out of his committee without any weakening amendments. Similar to last
year, industry opposition is heavy.
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