Mortgage Relief May Be on the Way Soon for Californians as State Senate Passes Legislation With Two-Thirds Vote

[courtesy of California Progress Report]

By Frank D. Russo

Legislation by Senate President pro Tem Don Perata providing immediate relief to homeowners caught in the mortgage crisis passed the Senate yesterday. It passed with one vote to spare, 28-10 on a largely party line vote with 4 Senate Republicans joining in with Democrats. A two-thirds vote in the 40 member Senate was needed because the bill is an “urgency” measure—meaning if it passes the Assembly and is signed into law by the Governor, it will take effect then, rather than in 2009.

“Californians need our help, and they need it urgently,” Perata said. “It is in everyone’s best interest for lenders to work with borrowers to modify loans, refinance homes, or take other steps to help keep homeowners in their houses.”

SB 1137 would give notice to property residents that the foreclosure process has begun, provide tenants additional time to move from a foreclosed property, and mandate maintenance of foreclosed properties to diminish the impact on the value of neighboring homes.

A previous version of this bill, SB 926, failed on the Senate floor in January when it fell one vote short of passage and faced opposition from the financial services industry. Since then, Senator Perata has addressed industry concerns and produced a more workable bill that has broad support and no known opposition.

Before the Senate floor vote, Perata opened the debate, saying: “California now leads the nation in foreclosures. It started in the Central Valley and Inland Empire. It’s now spread almost evenly, although some reas are being hit harder than others. They still estimate that there will be between 350,000 and 400,000 families losing their homes.”

He pointed out the amendments taken. “This is a bill that has been worked, reworked, and reworked. To resolve the opposition concerns the bill has been amended to remove the notice to borrowers of pending mortgage payment changes. The bill no longer requires a face to face meeting. Instead, it allows a phone meeting. The scope of the contact requirements are limited so that it only applies to loans made between January 1, 2003 and December 31, 2007. It deletes the request that the tenant notice information be on the outside of the envelope.”

In closing, he said, “The primary purpose is still very simple. We want to do in California to make sure people don’t lose their homes. I’m happy to more that all opposition, at least formal opposition, has been removed. We’ll find out if all opposition has been removed in a second.”

Only one other Senator spoke on the bill, Republican Jeff Denham, who blames Perata for a bitter recall election he is facing. Denham spoke in favor of the bill. He was joined by fellow Republican Senators Cox, Maldonado, and Wyland in voting for the bill.