Citizen-Led Movement in California Proposes to Outlaw Foreclosures

[The Straight Story]

Citizen-Led Movement in California Proposes to Outlaw Foreclosures

In Sacramento, California, one citizen is taking on the lenders directly, using his “Foreclosure Modification Act” to demand that lenders provide principal and interest rate reductions in order to keep borrowers in their homes<1>. And according to the author of the proposal, David A. Benson, the best way to make this happen is to leave banks with no other option for dealing with delinquent homeowners by simply outlawing foreclosures in the state. His amendment states:

“Any home loan shall be able to be refinanced without credit review or penalty at minimum cost within 45 days of being requested by the original loan borrower or homeowner” as long as the property has been owned – and the loan maintained - by the borrower for at least three years. Benson calls the right to modification and principal reduction a “fundamental right.” The proposal has already been cleared by California’s secretary of state, but still needs 807,615 signatures in order to be listed on the ballot. Although many support the bill, it may conflict with provisions in both the U.S. and state constitutions as well as federal laws and regulations governing federally chartered lenders, warn the nonpartisan legislative analysts and the California governor’s director of finance<2>. Additionally, it could cost local governments billions in revenues from property taxes and other fees and assessments.

http://realestate.bryanellis.com/4915/citizen-led-movement-in-california-proposes-to-outlaw-foreclosures/

[Lance_Boyle]

1. The right to nullify a contact *is* fundamental.

It's built into the mortgage contract - a borrower can nullify it by not paying and getting foreclosed on, or by paying the borrowed amount back in full (usually plus some penalty). The right to re-negotiate a mortgage contract on demand is simply non-existent, and should remain so.

Good luck, CA. Pass this piece of sheer nonsense into law and no mortgage lender will ever do business in the State again.

[michreject]

2. If this happens

I think everybody should be prepared to pay cash if they want a house.

I can't see a lender loaning money to someone who could change the terms after the deal has been consummated.

[frazzled]

3. Oh great, we can all just stop paying our mortgages, then.

Free housing for all. Think I'll upgrade to a million-dollar place.

[FreeJoe]

4. Sounds great...

...if you already own a home with a loan on it. For people wanting to buy homes, this would be a big problem. By substantatially reducing the value of the loan collateral to the lender, you are effectively making mortgages unsecured loans. The last time I checked, unsecured loan rates were much higher than mortgage rates.