New foreclosure rules blessed by Senate banking panel

April 8, 2010

Legislation to give California homeowners more protection as they modify their loans is moving through the state Senate. Senate Bill 1275 has won passage in the Senate Banking committee and is now headed for the judiciary panel.

Paul Leonard, director of the California office of the Center for Responsible Lending, calls the bill a “modest proposal” that would do a “world of good for Californians who are faced with losing their homes.”

The bill would require all lenders in California to follow procedures the Obama administration recently announced for lenders who are part of the federal Home Affordable Modification Program (HAMP). Among other things, those rules require loan servicers to evaluate a borrower’s eligibility for a loan modification before they begin foreclosure proceedings.

The measure would also require loan service companies to file a “declaration of compliance” certifying that the company has followed all state procedures required before foreclosing on a home. If the company does not file the notice or misrepresents its actions, those failures could be grounds for financial penalties or even reversing the sale of a foreclosed home.

The bill is being carried by Sens. Mark Leno and Darrell Steinberg.

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