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Monday, July 07, 2008

California Foreclosure Reform Bill Clears State Assembly

SB1137, which is designed to reform the foreclosure process in California for the benefit of homeowners trying to retain their homes, has passed the Assembly with bi-partisan support and the two-thirds majority required for passage.

The bill, sponsored by Sens. Don Perata, D-Oakland; Ellen Corbett, D-San Leandro; and Michael Machado, D-Linden, requires lenders and servicers to contact borrowers (or engage in a prescribed process to do so) to schedule telephone or in-person meetings on restructuring options before beginning the foreclosure process; requires a 60-day notice to be given to tenants of buildings facing foreclosure before they can be removed from a rental housing unit; and allows fines of up to $1,000 a day for owners of foreclosed properties that fail to adequately maintain them.

The legislation will take effect immediately if signed by Gov. Arnold Schwarzenegger, R-Calif., though the provision requiring servicers to contact borrowers before starting the foreclosure process will have a 60-day implementation period before it goes into effect, notes the Center For Responsible Lending, which supports the bill.

"SB1137 will help stem the foreclosure tide in California," says Kevin Stein, associate director of California Reinvestment Coalition. "At the same time, Attorney General Brown's lawsuit against Countrywide underscores the need for the legislature to also put in place strong consumer protections to ban the kinds of abusive practices engaged in by Countrywide and other lenders, which have harmed so many families and fueled the current crisis."

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