
The most important bill from a South Bay lawmaker this year was AB 260, by
Ted Lieu, which regulates the subprime mortgage market.
Lieu has been working on this issue for a couple years. When the foreclosure crisis began in early 2007, Lieu proposed using state proposition funds for a bailout. Those were the days. That idea didn't pass, and if it had it seems likely that the magnitude of the problem would have very quickly overwhelmed the state's ability to address it.
Last year, Lieu proposed a series of mortgage reforms that were intended to at least prevent such a problem from happening again. AB 1830 would have banned some of the more irresponsible lending practices -- steering, yield-spread premiums, negative amortization loans -- and put a cap on pre-payment penalties. The governor vetoed that one, objecting to the so-called "private right of action," which would have allowed borrowers to sue their lenders. (Too much of a giveaway to the trial lawyers, apparently.)
This year, Lieu came back and passed AB 260, which is the same bill, except without the private right of action. Without that provision, enforcement will be up to the attorney general. And late last night the governor signed it.
There are two pieces to this puzzle, however. Mortgage reform is one, and the other is foreclosure mitigation.
Earlier this year, Lieu passed a bill to impose a foreclosure moratorium on banks that did not create a comprehensive loan modification program. Though some have said the bill lacked teeth, he believes the bill is part of why modifications are way up.
Lieu, who is running for attorney general, is trying to build on the momentum and pass AB 1588, which would compel banks to submit loan modification requests to a form of arbitration. The banks can be expected to fight that one to the bitter end.