Gov. Schwarzenegger came to Merced — the heart of California's foreclosure meltdown — to sign eight laws that protect homeowners and consumers from mortgage fraud and abusive lending practices.
"Merced County, just the other day, ranked fourth in the foreclosure crisis in the United States," Schwarzenegger said at Monday's event. "We know that the foreclosure crisis continues across California and the country. This is not going to solve all the problems, but it will help."
During the past three years, nearly 48,000 homes have been lost to foreclosure in Stanislaus, Merced and San Joaquin counties. The combined value of those defaulted loans is nearly $18 billion, according to just-released data from ForeclosureRadar.com.
"What we're doing today with these bills is saying that never again will a crisis of this magnitude hit the Central Valley or California," said Assemblyman Ted Lieu, D-Torrance, who sponsored one of the bills. "We're sending the message to Wall Street that California will no longer be the Wild West of uncontrolled predatory lending practices."
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
The governor was flanked by several state legislators and local leaders during the ceremonial bill signings.
The laws include provisions that will:
Make it illegal for loan modification firms to collect up-front fees
Establish standardized licensing requirements for mortgage lenders
Enact new consumer protections related to reverse mortgages
Make it a felony to commit fraud in connection with a home loan application
Require mortgage documents be made available in several languages besides English
Mandate that buyers of foreclosed homes be allowed to choose their title and escrow companies
Assemblywoman Cathleen Galgiani, D-Livingston, who sponsored the title insurance and escrow company buyers choice bill, said that law will help home buyers and businesses in Merced.
"This bill was truly born in our community," Galgiani said.
Since the foreclosure crisis began, many banks selling foreclosed homes have required that buyers use Southern California escrow offices, rather than those in the Northern San Joaquin Valley. That has caused numerous local title and escrow offices to close.
Consumer advocates praised the new regulations.
The law that requires loan documents be translated into languages other than English "arguably holds the most promise in its potential impact on future home buyers," said Paul Leonard, director for California's Center for Responsible Lending.
"The bill requires that if negotiations took place in one of five languages other than English, then the lender must provide the borrower a summary of the loan's key terms and features in that language," Leonard explained. "Until now, all other California contracts were held to this standard — except the contracts governing a family's single-most important purchase of their lives."
Leonard also lauded the law that forbids up-front fees from being charged by those who promise to help homeowners facing foreclosure.
"The field of loan modification consultant scams has been growing rapidly in California and the nation," Leonard said. "This change will prohibit the most pernicious problem: charging borrowers thousands of dollars in advance, then failing to deliver any meaningful assistance."
ClearPoint Credit Counseling, which doesn't charge for its services, said the laws are needed.
"Every day at ClearPoint we provide help for consumers who have been victimized by fraudulent mortgage practices," said Martha Lucey, ClearPoint's western region president. "This legislation is necessary in order to protect homeowners at a time when they are most vulnerable."
Lucey said Merced County residents have been hit hard by the housing crisis. She said nearly one out of every 27 homes in the county is in the process of being foreclosed.
Assemblyman Lieu said Merced also is among the California communities most abused by predatory lending practices.
"Fraudulent mortgage practices have not only devastated California's economy and caused record unemployment, they have also triggered a national and international financial meltdown," Lieu said in a statement.
Bee staff writer J.N. Sbranti can be reached at email@example.com or 578-2196.