California will get tighter Restrictions on Lenders

The State of California will get tighter restrictions on Lenders in January. Arnold Schwarzenegger, the Governor of California has signed seven new laws that will provide protection to the consumer in regard to lending in the state.

The bill AB 260 that was introduced by Ted Lieu (D-Torrance) will tighten restrictions regarding mortgage brokers. The bill limits mortgage brokers from navigating the borrowing public into high risk interest loans when the borrower qualifies for a mortgage loan program that is less expensive and less of a risk. The bill also prohibits mortgage brokers from receiving monetary amounts on those high risk loans that would only profit the lender but ultimately harm the borrowing party who was placed in a loan they could not afford.

Negative amortization is also prohibited on loans that offer low monthly payments that would increase the principal over time under the AB 260 bill. Penalties in regard to repayments are also limited under the bill to no more than two percent of the loan balance and still allow state regulators to enforce Federal Lending Laws.

The California Association of Mortgage Brokers, The California Mortgage Association and the California Association of Realtors opposed the bill.

The bill is designed to force agents and lenders in the mortgage industry to conduct fair and honest business practices and not to take advantage of the borrowing community.

RealtyTrac, a company that tracks foreclosures recorded that ninety two thousand three hundred twenty six homeowners received foreclosure notices in the month of August alone.

Ted Lieu (D-Torrance) issued a statement saying it took two years but that he was pleased to have been able overcome the powerful interests blocking reform. He stated that future generations will not have to endure this type of crisis base on the passage of this bill.

Governor Schwarzenegger also signed the following bills:

SB 237 which creates a registration programs for appraisal management firms.

SB 239 which makes committing fraud on a mortgage application a felony.

SB 36 which allows for licensing requirements of all residential loan originators doing business in the state.

AB 329 which requires lenders to provide detailed and clearly defined information in regard to reverse mortgages.

AB 957 which allows home buyers of properties that have been foreclosed on to choose a local escrow officer instead of the escrow officer chosen by the selling party.

AB 1160 states that mortgage loan documents must be in the same language as any verbal negotiations were conducted in.


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