U.S. home loan regulator opposes California foreclosure bills
SACRAMENTO -- A pair of controversial bills in the California Legislature that would give homeowners more rights to fight foreclosures is being opposed by the nation’s principal home loan regulator.
The Federal Housing Finance Agency on Tuesday expressed that criticism in a letter to a six-person legislative conference committee. The first bill would prevent borrowers from being foreclosed on when they have applied for a loan modification. The second proposal would guarantee that borrowers have a single point of contact when dealing with a mortgage service company.
The Housing Finance Agency doesn’t like the measures, saying they could unduly delay the foreclosure process and add to overall lending costs. Such delays could harm the recovery of a still fragile housing market, the agency said. The agency regulates Fannie Mae and Freddie Mac, government entities that hold about three-fifths of California mortgages.
The federal regulator also criticized a provision in the bills -- dubbed the Homeowner Bill of Rights -- that would allow borrowers to sue banks, saying it would slow the handling of legitimate foreclosure procedures.
The chief backer of the bill of rights, California Atty. Gen. Kamala D. Harris, was surprised by the federal position.
“This legislation is being carefully crafted to provide these homeowner protections while discouraging frivolous litigation and its associated costs,” Shum Preston, a spokesman for Harris, said in a statement. Each avoided foreclosure will save families, local governments and neighborhoods approximately $40,000, he said.
The bills currently are in a conference committee made up of three members from the state Assembly and three from the state Senate. No vote by the committee is expected before the end of May.
The bills are backed by the Democratic leaders of the Legislature and a variety of consumer and fair-lending groups. Banks and mortgage servicing companies strongly oppose them.
[For the record, 6:05 p.m. May 15: An earlier version of this post contained a quote attributed to California Atty. Gen. Kamala D. Harris. The quote should have been attributed to her spokesman, Shum Preston.]
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