Fate of Mortgage Reform in California May Be Decided This Afternoon in State Senate Banking Committee--Are They Listening to Us?

“While the Assembly understands that and has passed a package of bills, senators on the banking committee have been overly cautious. They seem to think that the federal government can take care of California's mess.”

The Bee then points out that most of the problems stem from state regulated institutions and pokes hole in the sham arguments based on the dodge that California should wait for the federal government to act. Talk about waiting for Godot! The Bee lists the figures for the numbers of foreclosures in the very districts that banking committee members are supposed to represent in the State Senate. They then forcefully make the point that we had made two weeks ago in an article that this is not the time to water down these bills:

“The Senate banking committee not only needs to pass the Assembly package of bills (Assembly Bills 69, 512, 529, 1830 and 2359) today, it needs to strengthen them. And it should steadfastly resist the temptation to further water down these bills.

“The big problem is unregulated lending practices in California that, as many have observed, are unsound at best and abusive at worst. These bills attempt to prevent a repeat of the current disaster in the future. For example, AB 1830 would require lenders to assess the ability of borrowers to repay their loans and to pay their property taxes and insurance. It also would limit incentives for brokers to push borrowers into higher-cost loans. Other bills shine a light on industry practices through disclosure.”

We’ve written about this earlier this month, when the committee had been scheduled to hold hearings and vote on these bills—in “The Difficulties of Navigating Effective Legislation on the Subprime Mortgage Mess and Foreclosures Through the Gauntlet of the California Senate Banking Committee.” Here’s a bit of what we said then:

“There’s something amiss in the state of Sacramento—and it has something to do with the state’s banking and lending institutions and the stacking of committees that deal with them with legislators that are either weak kneed or just a bit overfriendly with the industry that they should be protecting us from. …

“Well, this afternoon, the Senate Committee on Banking, Finance, and Insurance, Chaired by Senator Michael Machado of Stockton, will be hearing two bills that have been gutted down behind a closed door process such that today’s public proceedings on them may amount to little more than a sham.

“Much of this committee’s work deals with an issue in the headlines of newspapers and critically affecting California’s economy, including ripple effects on the state budget, and putting a lot of Californians in a lot of pain. One would think that Machado, given how his district is one that has been hammered by mortgage foreclosures and is referenced in dozens of news articles on the subprime mortgage mess, would be a bit more willing to curb some of the abuses of the industry.

“It’s difficult enough to get bills passed through the Assembly Banking Committee and the Assembly floor when going up against the behemoth banking industry which has a lot of spare change to throw around in legislative races and many high paid lobbyists scurrying about the Capitol.”

Strong words from us, the Bee, and consumer groups. We will be watching to see what the Senate does on these bills and what, if anything emerges from the legislature on this important issue.