A legislative bill in California which would have helped address problems of foreclosures and distressed properties for sale has been rejected by the state Assembly. The bill, which was designed to provide foreclosure protection to homeowners while they are in the process of seeking mortgage modification, was defeated 36-30 at the Assembly.
Senate Bill 1275 was supposed to contribute to efforts to lower the number of California foreclosed homes for sale and has been heavily campaigned for by consumer groups. However, the banking industry of the state opposed the proposed measure, particularly because it would have required banks to provide borrowers with a considered mortgage modification option before any foreclosure step can be taken.
The bill was also designed to allow homeowners to file a lawsuit against lenders if their properties are included in a bank owned property listing without lenders offering a mortgage modification decision. This provision of the bill is considered an advantage when compared with federal mortgage modification initiatives which are mostly voluntary and do not have legal enforcement mechanisms.
Housing market data from California showed that at least one household out of 10 has not paid their loans for at least two months, making it highly possible that the number of distressed properties for sale in the coming months will further increase in the area. Almost 35% of mortgage holders in the state also have homes that are worth less than their mortgage loans.
The author of the bill, Senator Mark Leno, has vowed to continue to find a way to help lower the number of foreclosed homes for sale in California come the next January legislative session. He expressed disappointment about the defeat of the measure and has stated that it would have justifiably held banks accountable for their actions.
Meanwhile, a spokesperson from the California Mortgage Bankers Association has stated that they were pleased that the legislation, in its current form, has failed to pass the state Assembly. According to them, the measure would have allowed owners of distressed properties for sale to file lawsuits against banks for technical violations and would have delayed the process of foreclosure even in situations when a borrower is not qualified for a mortgage modification.
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