SACRAMENTO — Democrats who control California's Legislature have come up with a new plan to regulate the state mortgage industry that gives homeowners more leverage against their lenders.
The draft legislation, provided Friday to The Associated Press, would bar banks from foreclosing on homes while loan modifications are pending, let homeowners sue mortgage providers who break state law and require lenders to provide a single point of contact to borrowers.
The plan is an extension of a national settlement that imposed new restrictions on the five largest U.S. banks. Under the bill, which a special legislative committee will consider next week, all California lenders that process more than 175 foreclosures per year would have to adhere to the new regulations.
Previous efforts to reform California's mortgage industry have stalled amid stiff opposition from banks and other lenders, and from Republicans and moderate Democrats who were concerned more sweeping restrictions might raise borrowing costs and further stall the recovery of the state housing market. The latest plan came after weeks of negotiations.
Sen. Ron Calderon, a moderate Democrat from Monterey Park who opposed the original legislation, now supports the compromise after helping negotiate key concessions. The changes include giving lenders the chance to fix problems before consumers can file lawsuits, limiting costly nuisance lawsuits, and exempting small lenders from some of the requirements.