SACRAMENTO — California's attorney general is seeking to build on a recent nationwide bank settlement over home foreclosures by lobbying state lawmakers to advance a package of mortgage-protection bills, which faces critical tests in legislative committees this week.
The proposals by Attorney General Kamala Harris would provide additional safeguards for homeowners while giving her office more freedom to investigate financial crimes.
Harris, a Democrat, has made combating mortgage fraud and protecting homeowners a centerpiece of her 16 months in office. She was instrumental in negotiating a settlement with the nation's top five banks in February that will bring $18 billion in relief to California, one of the states hardest hit by the mortgage crisis.
More than 500,000 Californians have lost their homes to foreclosure since 2008, more than in any other state.
Her 11-bill package would ban some of the worst practices that contributed to the housing crisis. It would write the terms of the national agreement into state law and apply them to every lender.
"A lot of the reform that we're talking about was agreed to by the banks in the national foreclosure settlement, but it only has a life of three years," Harris said in a telephone interview. "Let's not go back to the days of robo-signing. Let's not go back to the days of having dual-track systems that confuse and kind of handicap people. Let's learn from our mistakes."
She plans to testify before legislative banking committees Monday and Wednesday as she promotes what she is calling the California Homeowner Bill of Rights. Other bills in the package also face their first committee hearings this week.
The banking industry is opposing the key elements in Harris' proposals, including her core legislation to increase homeowners' due process rights and to expand terms of the national settlement for all California homeowners.
The industry particularly objects to letting individual borrowers go to court if they feel they have been wronged. Allowing that would "result in a de facto moratorium on foreclosures," the California Bankers Association said in a statement last week. Letting borrowers sue to halt foreclosures could "unduly delay the inevitable" and result in some homeowners being awarded monetary damages when they suffered no real financial harm.
"This just allows for an excess of litigation that is just going to stall progress in California and stall the housing recovery," said Dustin Hobbs, spokesman for the California Mortgage Bankers Association. "You can guarantee that future loans would be expensive, more expensive than they are now. For some homeowners, that will price them out of the market."
Harris responded that if lenders act properly to begin with, delinquent borrowers won't be able to block a lawful foreclosure.
"Robo-signing certainly expedited things — that was the problem. ... There were homes that were foreclosed on that shouldn't have been," she said.
Although she has the backing of Democratic leaders who control the Senate and Assembly, previous efforts to reform the mortgage industry have failed in the Legislature or been rendered toothless.
Enactment of the bills cannot come too soon for Ethan Hoff.