Foreclosure reform bill deserves Assembly nod

last updated: April 29, 2008 01:56:39 AM

The state Senate has approved a bill that could help reduce the number of mortgage foreclosures, which one study suggests haven't hit their peak.

The bulk of nontraditional, adjustable-rate loans will reset to higher monthly payments in 2008 and 2009, continuing until late 2011, according to a report from the Pew Center on the States. In California, 1 in 20 homes could go into foreclosure in the next two years. In fact, Pew estimates that California could see 355,682 foreclosures. By comparison, California had 84,375 foreclosures in 2007.

Last week, the Senate approved a bill that is intended to help families avoid foreclosure and to help neighborhoods avoid the blight of vacant, unkept homes. The bill was approved 28-10, on a vote that crossed party lines.

An earlier version of the bill failed by one vote in January. The sponsor, Sen. Don Perata, D-Oakland, was willing to talk to some of the opponents and reach an amenable compromise. Sen. Jeff Denham, R-Atwater, who opposed the bill in January, supported the revision. The two are engaged in a bitter political feud, with Perata backing efforts to recall Denham.

The bill still had the support of the Consumers Union, the Center for Responsible Lending and other organizations that have been advocating assistance for home buyers in trouble.

The revised version requires lenders and mortgage servicers to contact borrowers who are behind in their payments to assess the borrower's financial situation and explore options for avoiding foreclosure. This early contact between borrowers and lenders should help reduce unnecessary foreclosures.

It also provides for renters to get 60 days' notice prior to being evicted because of a foreclosure.

SB 1137 also goes a long way toward helping communities crack down on blight. Owners of vacant, foreclosed homes must maintain the property or face civil fines and penalties of as much as $1,000 a day. Owners would have 14 days after getting notice to clean up the property.

SB 1137 won't help people who've already lost their homes, but it contains strategies to aid home buyers headed for trouble, as well as renters and communities. It deserves the approval of the Assembly and the signature of the governor so it can go into effect as soon as possible.