The California Bankers Association (CBA) released the following statement today regarding the California Homeowner Bill of Rights legislative package introduced by California Attorney General Kamala Harris and legislative leaders:

“During the past several years we have seen historic efforts by the government, financial services industry and consumer groups to help millions of borrowers stay in their homes. In California, the CBA has worked with the legislature to enact no fewer than four dozen mortgage-related bills that address everything from loan origination to post-foreclosure practices.

“While much of the specifics beyond the materials provided during today’s press conference have not been shared with us, we nevertheless are prepared to be a part of the conversation and we welcome that opportunity. We are uncertain, and look forward to understanding, how these solutions, which we understand will apply to all mortgage servicers – banks and nonbanks – will interact with, or conflict with, what has already transpired at the federal level, including:

• The recently announced mortgage settlement agreement. The executive summary outlines a number of new servicing standards, including that “borrowers must be thoroughly evaluated for all available loss mitigation options before foreclosure referral, and banks must act on loss mitigation applications before referring loans to foreclosure.”
• A 2010 enforcement action from federal regulators contains significant revisions to certain residential mortgage loan servicing and foreclosure processing procedures, which include improved communications with borrowers, a single point of contact for borrowers so they are dealing with one person throughout the loan modification and foreclosure process, and also requires servicers to ensure that foreclosures are not pursued once a mortgage has been approved for a modification. Additionally, the order provides remediation for borrowers who have suffered financial injury from wrongful foreclosure.
• As part of the Dodd-Frank Act, the new Consumer Financial Protection Bureau has been tasked with developing national servicing standards, encompassing foreclosure processes.

“We must be mindful of the impact that additional layers of legislation will have on future home ownership opportunities. A well-intentioned effort to help distressed borrowers may further restrict access to credit in the future. This is a particularly important consideration given the federal government’s intent to wind down Fannie Mae and Freddie Mac, which currently originates the vast majority of residential mortgages, and the recent announcement of premium increases borrowers will pay on FHA loans.

“As long as California continues to struggle economically and have high unemployment rates, foreclosures will unfortunately continue to be a reality for some homeowners because they cannot afford their mortgage, even if modified. Advancing legislation that creates additional procedural hurdles for loan servicers, without addressing the borrower’s underlying financial condition, misses the mark of resolving core economic issues, and will ultimately prove unsuccessful at solving this complex problem. Economic recovery in California will be a critical component of any long-term solution to California’s foreclosure crisis, and this is where our focus should be.”

About the CBA

Established 121 years ago, the California Bankers Association (CBA) is one of the largest state banking trade associations in the country. CBA leads the way in developing relevant educational and legislative solutions to some of California’s more pressing financial and banking issues, including adult financial empowerment, identity theft, financial privacy, and financial elder abuse. CBA’s membership includes nearly 200 of California’s commercial, industrial and community banks and savings associations. For more information, visit www.calbankers.com.

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