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With California disproportionately impacted by national fluctuations in the housing market, Governor Schwarzenegger announced today that he will sign three bills to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities.

“It is critical that we continue to take steps to protect Californians against unscrupulous lending practices and to ensure that consumers can make informed decisions,” said Governor Schwarzenegger. “That is why I am pleased to sign these bills, which increase transparency and accountability in the lending market that will help homeowners preserve their American dream.”

• SB 223 by Senator Mike Machado (D-Linden) will make it a crime for licensed appraisers to engage in any appraisal activity that is connected to the purchase, sale, transfer, financing or development of property if their compensation is impacted by the final price generated by the appraisal.

• SB 385 also by Senator Machado permits state agencies involved with residential mortgage lending and brokering to adopt emergency measures and new policies to ensure that all mortgage lenders and brokers are subject to federal guidelines on non-traditional mortgages. This law impacts the Department of Financial Institutions (DFI), the Department of Corporations (DOC) and the Department of Real Estate (DRE).

• AB 929 by Assemblymember Sharon Runner (R-Lancaster) increases the amount of affordable housing in California by raising the total debt that the California Housing Finance Agency (CalHFA) can carry by $2 billion. CalHFA issues bonds to finance housing for low and moderate-income families.

Governor Schwarzenegger is taking additional actions to protect Californians, who are at the forefront of the national downturn in the housing market. The state's foreclosure rate is more than twice the national average and the Mortgage Bankers Association is reporting that the state's homeowners hold 20 percent of the nation's subprime adjustable rate mortgages, a record number of which are expected to result in foreclosure.

“It's absolutely crucial that Californians facing the threat of foreclosure reach out to their lenders and discuss available options to save their homes," said Governor Schwarzenegger. “The worst thing someone can do is nothing – most lenders would prefer not to foreclose, but 50 percent of borrowers who lose their homes never return calls from their lenders.”

Today the Administration announced the following actions and resources to help homeowners that are facing financial distress or foreclosure as a result of non-traditional mortgages:

• California’s licensing departments will adopt regulations to strengthen California’s underwriting and consumer disclosures, in order to ensure that consumers have the tools to fully understand the ramifications of taking out a sub-prime loan. As part of this effort, licensees will use a new, multilingual consumer disclosure form to illustrate worst-case payment scenarios.
• Licensing departments will continue to work closely with law enforcement to discipline lenders and brokers who take unfair advantage of consumers.  These departments are also currently training consumer counselors, non-profits and legal aid societies to help identify licensees who have defrauded consumers or otherwise violated state law, so enforcement actions can be taken against their licenses.
• State agencies will continue to partner with local legislators in the areas hit hardest by foreclosures to connect borrowers with non-profit counselors who can help them negotiate with their lenders. The state has already held events in Stockton, Riverside, Sun Valley and La Quinta.  Another event will be held in Los Angeles on October 20th in cooperation with the Los Angeles Neighborhood Housing Service.  For more information on this service call (213) 381-2862.
• The state will continue to promote two key state resources for homeowners:
  • The “HOPE Hotline” (1-888-995-HOPE or www.995HOPE.org), which provides free mortgage counseling 24 hours a day, seven days a week. 
  • And, the recently launched, Spanish and English language mortgage websites:  http://www.yourhome.ca.gov and www.sucasa.ca.gov.

Earlier this year, the Governor directed his Cabinet to form the Interdepartmental Task Force on Non-Traditional Mortgages. In September, he made $1.16 million in Community Development Block Grant funds available to counties for consumer counseling and urged Congress to provide more funding for these programs in California. He also called on Congress to raise federal loan limits so that more California families can take advantage of these secure products, rather than relying on subprime loans.