Merced Sun-Star
Gov. Arnold Schwarzenegger vetoed a proposal Thursday that would have imposed tougher restrictions on mortgage brokers, such as banning them from issuing exotic loans to subprime borrowers that cause balances to grow rather than shrink over time.
The Republican governor signed several other bills dealing with mortgage lending, but his veto of Assembly Bill 1830 blocked what consumer groups considered the most significant state housing-related proposal on his desk.
Lawmakers wrote a multitude of mortgage bills this year in the midst of a battered housing market in California, whose problems have been partly blamed on irresponsible lending practices.
The bill by Assemblyman Ted Lieu, D-Torrance, would have banned subprime borrowers from obtaining "negative amortization" loans, agreements that offer low initial payments but increase the principal balance over time, boosting interest costs and making them difficult to pay off.
AB 1830 also would have specified that mortgage brokers owe a "fiduciary duty" to borrowers. It would have prohibited brokers from steering borrowers toward higher risk loans than they would qualify for based on their income and credit.
