Foreclosure Reform in California: An Economic Analysis
California ‘Homeowner Bill of Rights’ Harms Current and Future Homeowners, New Study Finds

Press release Beth Mills

The vast majority of California homeowners will not be helped by several foreclosure and mortgage reform bills currently making their way through the state Legislature, according to a study released today by a consortium of financial services organizations.

The analysis finds that the proposed regulations—which would slow the foreclosure process and make it more costly for loan servicers—are unlikely to help more than a tiny fraction of homeowners who are behind on payments, but are likely to slow the housing recovery, ulitmately reduce home values, and diminish the future availability of credit for California home buyers.

The study was conducted by independent research firm Beacon Economics, LLC and commissioned by the California Bankers Association, California Credit Union League, California Mortgage Bankers Association, California Mortgage Association, MERSCORP Holdings Inc., and United Trustees Association.

“However well intentioned, these bills are unneeded in a housing market that has just begun to find its footing and is starting to recover from one of the worst crashes in history,” says Beacon Economics’ founding partner and the study’s lead author Christopher Thornberg. “These kinds of interferences that lengthen foreclosure processes have been shown to do little for current borrowers who are behind on payments and can actually incentivize some to default, increasing foreclosure rates. They have also been shown to be detrimental to new borrowers because they result in reduced availability of credit. ”

The bills are part of a legislative package sponsored by State Attorney General Kamala Harris—collectively entitled the California Homeowner Bill of Rights (CHBR)—that push the state towards the type of lengthy judicial foreclosure process that exists in places like Florida and New Jersey.