The Difficulties of Navigating Effective Legislation on the Subprime Mortgage Mess and Foreclosures Through the Gauntlet of the

[courtesy of California Progress Report]

By Frank D. Russo

There’s something amiss in the state of Sacramento—and it has something to do with the state’s banking and lending institutions and the stacking of committees that deal with them with legislators that are either weak kneed or just a bit overfriendly with the industry that they should be protecting us from.

What else is new?

Well, this afternoon, the Senate Committee on Banking, Finance, and Insurance, Chaired by Senator Michael Machado of Stockton, will be hearing two bills that have been gutted down behind a closed door process such that today’s public proceedings on them may amount to little more than a sham.

Much of this committee’s work deals with an issue in the headlines of newspapers and critically affecting California’s economy, including ripple effects on the state budget, and putting a lot of Californians in a lot of pain. One would think that Machado, given how his district is one that has been hammered by mortgage foreclosures and is referenced in dozens of news articles on the subprime mortgage mess, would be a bit more willing to curb some of the abuses of the industry.

It’s difficult enough to get bills passed through the Assembly Banking Committee and the Assembly floor when going up against the behemoth banking industry which has a lot of spare change to throw around in legislative races and many high paid lobbyists scurrying about the Capitol.

It looks like AB 69 by Assemblymember Ted Lieu, originally a great bill, has been amended since it left the Assembly—and before today’s hearing—such that the Center for Responsible Lending, a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices, initially listed in support, has withdrawn that position.

A couple of days after amendments were taken to the bill, CRL sent a letter to the Senate Committee with the following passages:

“The current bill would do nothing to change current practices of the Department of Corporations….

“The promise of the original version of AB 69 lay in two features that would have strengthened the Department’s existing efforts: 1) making mandatory, rather than voluntary, licensed servicer provision of loss mitigation data and 2) requiring that the data be made public on a lender-specific basis. Neither of these features remains, and without them, the bill would do nothing to enhance the Department’s current practice. As a result, CRL must withdraw its support of the bill.