Senate Committee Approves Trio of Mortgage Reform Bills
SACRAMENTO, Cal., June 9 - The Banking, Finance, and Insurance committee passed three mortgage related bills today aimed at preventing future abuses in the home loan industry.
The bills aim to rein in dangerous loan products inappropriate for most consumers, ensure consumers can understand what they are getting in to, and curb the predatory practices of some loan modification services.
“Even millions of foreclosures later, the mortgage industry is still fighting these reforms,” said Pedro Morillas, CALPIRG Legislative Advocate. “It’s incredible that lenders are still arguing that the mortgage market place is a safe place for consumers to do business.”
“To protect consumers, restore stability to the economy, and restore faith in the home buying industry we need to make sure there are rules in place to stop the financial slight of hand that got so many borrowers in trouble,” added Morillas.
AB 260 will rein in bad actors by removing the incentive for brokers to put consumers into unsuitable loans to pad their commissions. The bill will also make it more difficult for consumers to get their hands on loan products that are risky even for the most savvy borrowers.
Specifically the bill will:
- Spell out that brokers have to do what is in their clients’ best interest.
- Make kickbacks from banks for more expensive loans illegal.
- And stop lenders from trapping borrowers in unmanageable loans with penalties for paying early.
AB 764 will curb the egregious practice of companies preying on those currently in trouble by offering loan modification services for an upfront fee. Consumers are offered loan modification services and charged up front with no guarantee of a successful modification. This bill will allow the services to continue, but prohibits payment until the modification is made.
AB 1160 requires that mortgages are written in the same language they are negotiated in. Loan documents are difficult to decipher even if you can read the language they are printed in. Consumers cannot be expected to make an informed decision about a financial product without understanding the documents the terms are written on.
“This policy committee was a huge hurdle for these bills, and the fact that all three made it out is a good indication that the senate is serious about reforming a broken market,” said Morillas. The next steps for these bills are one more policy committee, the senate floor, then to the governor’s desk.
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