For Immediate Release: Contact: Aaron McLear
Monday, October 19, 2009 Kira Heinrichs
Transcript of Gov. Schwarzenegger Highlighting Mortgage Protection Legislation
Time: 10 a.m.
Date: Monday, October 19, 2009
Event: Press Conference, Lobby of Merced City Hall, Merced Civic Center, 678 West 18th Street, Merced, California.
All right. Welcome to Merced and I'm extremely happy that the Governor is here today to sit at this table and sign some of these bills. You know, as you know, Merced has been called ground zero in the foreclosure market. These bills will help many, many people.
And now, before the Governor speaks, I'd like to introduce a few of the people who are here today. First of all, obviously, the Governor. And second, the mayor, Ellie Wooten. (Laughter) Assemblymember Cathleen Galgiani. Lift your hand, because some of them do not know who you are. (Applause) Assemblymember Ted Leiu. (Applause) Senator Ron Calderon. (Applause) Senator Jeff Denham. (Applause) Assemblymember Paul Fong. (Applause) Assemblymember Mike Feuer. (Applause) Preston DuFauchard, commissioner, California Department of Corporations. (Applause) I hope I pronounced the last name close. (Laughter) Jeff Davi, commissioner, Department of Real Estate. (Applause) Larry Morse, district attorney, Merced County District Attorney's Office and member of the California District Attorneys Association. (Applause) Marjorie -- excuse me. Marjorie Murray, vice president, California Alliance for Retired Americans and I believe she's tucked over there. (Applause) Richard Dahlgren, chair, Merced County Area Agency on Aging and member of the California Senior Legislation. (Applause) Michael Richard, associate state director, AARP of California. (Applause) Prescott Coe, senior staff attorney, California Advocates for Nursing Home Reform, several AARP members that are in red shirts. (Applause) There's one, there's one. (Applause) We also have City Councilmember Michele Gabriault-Acosta, who is now the president of the Board of Realtors. Raise your hand, please. (Applause) Mayor Pro Tem John Carlisle. (Applause) And from the Merced County Board of Supervisors we have Supervisor Kelsey. (Applause)
And you know, you always miss someone. So if I missed someone, raise your hand. (Laughter) OK, then I'm not chasing you.
At this time it gives me great pleasure to introduce to you the Governor of the great state of California, Arnold Schwarzenegger. (Applause) Thank you, Governor.
Well, thank you very much, Mayor Wooten, for the nice introduction. And I'm so glad that I can eliminate my two cards that has all the names on it, (Laughter) because you already mentioned everybody, so I'm not going to do it again. But thank you very much.
Before I begin I just want to take a moment to pay tribute to an outstanding woman that I have admired every since I've met here and I'm talking about Carol Tomlinson-Keasey. Carol died nine days ago and she left an amazing legacy here in Merced. Carol was the founding chancellor of UC Merced and we know that the campus exists today because of her great leadership, her great determination and great perseverance. Carol actually led the effort to build UC Merced and proudly gave me a personal campus tour. And even though she passed on, we will never forget the great contributions that she has made to the state of California and also to the education system, so we want to thank her.
Now let's talk about why we're here and this is I'm very happy to say that we have some good news here for homeowners in California. We're taking action to give people the tools to stay in their homes and to end abusive lending practices and to promote home ownership. We know that the foreclosure crisis continues in California and all across the country, so many Californians are suffering because of these difficult economic times and my heart goes out to all of them. Merced County, where we are today, ranks fourth in the foreclosure crisis in the United States.
We must do everything we can to protect the homeowners and so today we move forward with eight new laws that will provide critical home mortgage protection. These laws will fight fraudulent mortgage practices that have arisen because of the national foreclosure crisis and they will also give law enforcement the necessary tools to investigate the mortgage fraud and give consumers more protections.
I'm also very happy to say that the way this came about was because everyone worked together. The people that are behind me here are responsible for that. They were the law enforcement -- I should say government consumer groups, the lending industry, everyone here worked together.
Now, let me give you the bills.
• SB 94 by Senator Ron Calderon, which bans loan modification firms from demanding up-front fees. Now, there was one similar bill like that, I should let you know, that I vetoed because it was not perfectly written and it was incomplete. This one is the perfect bill and this is why I will sign this bill. (Laughter) Well, it's always important to know why sometimes I veto a bill even though I like the idea but I veto it because it was not really perfectly done or executed.
• So Senator Calderon, of course, has been very passionate about this subject in general. He has several bills. Senator Calderon authored two other bills, which are SB 36, standardizing licensing for loan originators and then also SB 237, which creates a registration program for appraisal management companies. So we want to thank him for the great work that he has done. (Applause)
• And then there is AB 260 by Assemblyman Ted Lieu which authorizes California's mortgage regulators to apply federal lending laws and so let's give him a hand for that wonderful bill. (Applause)
• And then SB 239 by Senator Fran Pavley makes it a felony to commit fraud in connection with a mortgage application. She is not with us today but also a terrific legislator that always does good, good legislations.
• Then we have AB 329 by Assemblyman Mike Feuer that provides senior homeowners with greater consumer protection, so let's give him a hand also for his great work. (Applause)
• And then AB 957 by Assemblywoman Cathleen Galgiani, which allows choice in the use of escrow offices. Let's give her a big hand also for her great work. (Applause)
• And then AB 1160 by Assemblyman Paul Fong, which requires mortgage loan documents to be translated in many different languages. Now, he's not here with us -- oh, he is? Oh yeah, he's here. OK, great to have you here. (Applause) OK, thank you very much. Man, I wish they would have had that when I bought my first apartment building, to have the loan application in German. (Laughter) They did not, you were not around then, so I mean -- now this is really good, to have it in different languages.
Now, these are all fantastic bills and I want to congratulate again the lawmakers for doing such an outstanding job. And thanks to their hard work and to the hard work of all the people, like I said, that stand behind here, California homeowners will have now a brighter and a much more secure future. And I just want to add here -- it's very important that this is not going to solve all the problems, as always, you know, because there are many other reasons why people are in trouble. People are in trouble because sometimes they overextend themselves. You know, they are too -- they are emotional buyers and sometimes they jump into a purchase and they don't make a good investment, or they live beyond their means. So there are many other reasons why people are in trouble.
And then, of course, no one can predict that all of a sudden you get hit by a crisis like this that is the biggest, you know, economic crisis since the Great Depression, so this is another thing that sometimes you cannot avoid, that's not in our power as a state. But these bills will really help a lot and a lot of different people, so we want to thank again everyone for working.
And now I would like to bring out Assemblyman Ted Lieu to say a few words about his bills. Thank you very much. (Applause)
Thank you. Thank you, Governor Schwarzenegger, for your leadership on these mortgage and foreclosure issues. Today is an example of the legislature and Governor coming together on a bipartisan basis to find solutions to help the people of California. And with the signing of Assembly Bill AB 260 we're sending the message to Wall Street that California will no longer become the wild west of uncontrolled predatory lending practices. These practices hurt the people of the Central Valley, they hurt the people of California. And as all of you know, four to five years ago any of you could have gotten a home loan based on one condition. If you breathed oxygen, you got a home loan.
This bill bans some of the worst practices in the subprime industry in addition to enforcing the laws and allowing tools for law enforcement to do so.
• It directly bans steering, where a broker, or a bank acting as a broker, would take you, the consumer and put you into a higher interest rate, riskier adjustable subprime loan, even though you had qualified for a traditional fixed rate prime loan because they got more commission in their pockets. That was morally wrong. Now it is illegal, with the Governor signing this bill.
• It also imposes fiduciary duties on the broker so that the consumer's interest has to take precedence over those of the financial industry's interest.
• It bans negative amortization loans, which is a loan that gets bigger the longer you hold it,
• And finally, it provides penalties for people who break these laws.
And what we're doing today with AB 260 and the rest of these bills is to say never again will a crisis of this magnitude hit the Central Valley or hit California, for us or for future generations.
So let me again commend Governor Schwarzenegger and the other legislators here for the great work that they have done. Thank you. (Applause)
You were supposed to introduce the next speaker but I'll do it for you, don’t worry about it. (Laughter) Senator Ron Calderon, please come up. I mean the Assemblyman.
I'd rather have you in the Assembly, it's always good (Inaudible) (Applause)
Well, thank you. Thank you very much for being here today and sharing this day with us. I think it's important to note that although the legislature has recently been getting a little bit of a bad rap it's important for everybody to realize that, you know, while we're all holding our bucket, our budget buckets, bailing the water out of our sinking revenues, we still manage to save the crew, save the passengers and steer this California in the right direction and manage to protect consumers after all that's happened. And it brings us here today to thank the Governor for his leadership throughout the year and in signing three of my mortgage bills, Senate Bills 36, 94 and 237.
• Senate Bill 94 is very important because it cracks down against scam artists who have preyed on frightened borrowers desperate to keep their homes, taking the borrower's money and their hopes away and leaving them worse off than they were when they sought the help.
• Senate Bills 36 and 237, they continue the process begun by the Governor in 2007 of putting protections in place to ensure that California again experiences -- never experiences a mortgage crisis like the one we're going through right now.
We could not be in a better location to demonstrate the importance of these bills, particularly SB 94. If you drive through Merced -- it's hit hardest by the foreclosures -- you'll see advertisements from loan modification consultants, many of them who are out to collect large up-front fees, sometimes as much as $4,000, from borrowers, money these borrowers often don't have. SB 94 is an urgency bill that prevents the collection of advance fees by fee for service providers and foreclosure avoidance assistance. The bill allows these consultants to receive a payment for their services but requires them to perform all of the tasks before they receive or collect any of their pay.
SB 94 also ensures that borrowers know that they don’t have to pay for help to get their loan modified. In fact, the bill requires that all fee for service providers, foreclosure avoidance assistants, to give borrowers a notice translated in the borrower's native language -- even German, Governor -- if the borrower is non-English speaking. That notice informs the borrower that free assistance is available from nonprofit HUD-certified housing counseling agencies and tells borrowers how to locate the HUD counselors nearest to them.
And then, briefly, SB 36 will improve the state's regulation of mortgage brokers and mortgage loan officers. This law will allow Mr. DuFauchard and Commissioner Davi with the Department of Real Estate, the Department of Corporations, to identify all mortgage loan originators that they regulate.
Finally, SB 237 will ensure the integrity of the real property appraisal process by giving California's Office of Real Estate Appraisers the ability to regulate appraisal management companies.
I want to thank all of you again for being here, for your support, for the Governor and the legislators working together to bring this package forth. And next I would like to introduce Assemblymember Michael Feuer. (Applause)
Thank you, Senator, very much. I’m here to discuss the Reverse Mortgage Elder Protection Act of 2009. This is a specific kind of mortgage that is exploding in the mortgage market. In three years we've seen a 250 percent increase in the number of reverse mortgages obtained by senior citizens and in March of this year we saw the most reverse mortgages ever written in the history of the United States. So this is a growing practice, to provide reverse mortgages and those mortgages can be very beneficial to seniors who are equity rich but cash poor.
However, they also contain serious risks and there have been a number of reports recently of abuses relating to reverse mortgages. And I should tell you, the National Consumer Law Center issued a report this month saying that reverse mortgages could be the next subprime mortgage crisis in the United States. So what are we going to do about this problem, which has a very human face? There was just a story last week in the Chronicle in San Francisco about a woman who saw all the equity in her home be erased by the reverse mortgage that she had.
So this bill, the Reverse Mortgage Elder Protection Act, is going to do two key things that will protect consumers, protect senior citizens.
• The first of those is to assure that consumers have the information they need by having a checklist be provided to each of them. They have to go through counseling under this bill with a selection of one of at least 10 different counselors who are objective and approved by HUD. When they go through that process there has to be a checklist that reviews the risks associated with reverse mortgages and the alternatives to those mortgages.
• And second, the bill extends very important federal protections for senior citizens to reverse mortgages here in the state of California. It's an important bill, especially at a time when we know senior citizens are particularly vulnerable and concerned about cash as they've seen their retirement funds diminish and look desperately for other ways to make ends meet.
I'm very happy to be here and it's my privilege now to introduce the hometown member of the Assembly, Cathleen Galgiani, representing the 17th District. (Applause)
I was going to say something nice about you first. You see, Cathleen walked up here too quickly. I want to just say this much. Especially here in Merced, there is no advocate in Sacramento for their districts who is more passionate about assuring her district receives the benefits it needs and the protection it deserves than Cathleen Galgiani, my friend. (Applause)
Well, thank you so much. I have a lot of people here to thank for this today, for Assembly Bill 957, because this bill was truly born from this community and it was first brought to my attention by our Mayor Ellie Wooten and Bob and Evie Ayers and Don Kinney from Transcounty Title, our only locally owned title company in Merced County. And this bill, Governor, was literally hatched on a napkin at a crab feed in Atwater with a local realtor Andy Krotik from Atwater, who understood the problem. And we took the language to legislative counsel, got the legal help that we needed and we began the process of putting this bill together.
What we were finding, because we are ground zero of the foreclosure crisis, was that banks were directing all of their title and escrow business to certain companies in southern California, a very few number of companies and as a result business was drying up in this region and as we found out later, throughout the state, for many of the smaller businesses, the title companies and escrow companies. Because at that time the only game in town was foreclosures, real estate owned properties and that's because buyers knew that they could buy foreclosures at half the price that they would normally pay for a home.
And so we were seeing people starting to lay off their employees, companies were shutting their doors. And so, in addition to the economic crisis that we had and the foreclosure crisis that we had, the problem continued to spiral because now we had businesses going under.
AB 957 seeks to protect consumers and small business owners in the title and escrow industry because it prevents banks from continuing this practice. It prevents banks from directing business to companies of their choice, which is anti-competitive and a violation of anti-trust laws. It's actually a violation of the federal RESPA Act. But in the chaos of the foreclosure crisis this practice was occurring and it was going unchecked until we introduced this bill. It was a practice not out of malice. It was a practice that was occurring out of expediency, because the banks, like others, were trying to cobble together and fix a situation that was spiraling out of control.
AB 957 will protect consumers, it will protect small business owners. I'm grateful that the Governor has signed it and I'm grateful to all of my colleagues for their help with this as well.
And I'd now like to introduce Senator Jeff Denham, who is a co-author with me on this bill and who jockeyed this bill in the Senate and shepherded the votes that we needed to make sure of its passage with a two-thirds vote in the Senate so that we could assure that it takes effect immediately. Thank you. (Applause)
Well, Governor, thank you for your leadership on this. We certainly have seen our challenges here in our home county of Merced. We feel this every day. We are in a situation here in Merced County -- we're not only the highest foreclosure rate in the state but we're among the highest foreclosure rates in the nation. We need to do everything that we can to keep people, keep families in their homes, get those that have lost their homes back into a home.
And make sure that we're protecting jobs at the same time; we also one of the highest unemployment rates in the state. This bill will not help the consumers and the families but it will also help to keep those jobs here as well.
It has been by pleasure to work with Assemblymember Galgiani on this bill as well as many others. But when we work together we fight for the Valley. Thank you. (Applause)
And now I'd like to introduce my good friend Paul Fong. Paul, Welcome. (Applause)
Thank you, good morning. I’m honored and proud to be here today with my colleagues who have worked together in protecting consumers in the real estate market. This bill signing brings to light the ability of the legislator to work across party lines to address a problem. The crash of the real estate market vastly contributed to California's economic meltdown but I'm happy to say that AB 1160 was a piece of very well written mortgage reform package. Individuals and families invested their lifesavings into purchasing a home, only to find high and adjustable interest rates which forced many into foreclosure and bankruptcy.
For non-English speakers the process to purchase a home is even more confusing. AB 1160 provides non-English speakers the tool to fully understand the terms of their contract. Providing consumers the ability to have a written summary in the language they speak is simply a matter of fairness.
I want to thank Governor Schwarzenegger for his ability to recognize a major inequity and take steps to correct the problems. I also want to thank my colleagues for the dedication in protecting California consumers and the hope that we can continue to move forward in making the state even better. When so many parties work together towards a similar goal anything can happen. Thank you very much.
And now, Governor, time to sign the bills. Please sign mine first. (Applause)
(Bills signed, Applause)
GOVERNOR: All right. Again, thank you very much, all of you, for your great, great work. And I think this is a perfect example of how Republicans and Democrats can work together and when they all work together great things come out of it. And I hope we get the same thing done very quickly and very soon on water, the water infrastructure, which is the next big thing that we are working on.
So if you have any questions about these legislations and the bills that were just signed, we have all the experts here. It's very rare that you get the authors right there that can answer all the detailed questions, if you have any, to write your good stories and to do your reporting. If you have any other questions, feel free to ask. We are here for exactly a minute and a half more. (Laughter)
QUESTION: Moving ahead, what's next, to end this crisis?
GOVERNOR: You're talking about water now?
GOVERNOR: I think that we are in the middle of writing legislation right now, because like I said, negotiations have gone well in the past and so we can now write legislation. Then they are going to bring the legislative leaders, because we're in a special session, they're going to bring back the legislators that are traveling on various different missions all over the country and all over the world and they will be coming back probably this week sometime. And then they will have a day where they're going to vote. It could be next week. You know, I don't make those decisions for them upstairs in the Capitol but I'm looking forward to a vote.
And I think again it's one of those things, if Democrats and Republicans continue working together on this and the give and take, that's what it takes, you know, then we will get a historic water package that will really be so comprehensive -- it's something that hasn't been accomplished in 40 years. So I think that the legislators can be then very proud of this great accomplishment, that they have done something that previous legislators and governors couldn't get done. And now we have a chance of getting it done.
And this means, you know, the water storage, above the ground and below the ground. It means that we're going to fix the Delta, we're going to build the canal, we're going to fix the ecosystem in the Delta and we're going to go and monitor groundwater and make sure that the water rights are in place. And clean the groundwater, which is so important, because our groundwater is not the cleanest in the world, so it needs a lot of cleaning.
So there is a lot -- it's very complicated, a lot of different issues have to be addressed there that have not been addressed for years and decades. And so I think that the Capitol and the legislators so far have done a great job in moving the thing, a very complicated issue, forward.
Any other question?
QUESTION: I have a question.
GOVERNOR: Thank you very much. Yes?
QUESTION: I'm sorry, I just --
GOVERNOR: Which paper or magazine do you write for?
QUESTION: I’m an independent media producer.
GOVERNOR: Oh, producer? I love that.
QUESTION: Think About This, Laugh About That, is my show. I just heard -- and I'm sorry, I just got here late, that you said this -- someone told me that you're passing a bill where you're going to require people to recycle all their gray water.
GOVERNOR: The recycling is all part of the water conservation program, because one of the things we know is we have a limited amount of water.
GOVERNOR: And we have an increase in population. The water system that is now existing is for 18 to 20 million people, which was built under Governor Brown, who was a great visionary. And what we are doing is basically kind of finishing his job, because the canal was planned then already in the '60s and was part of his plan and also to restore the Delta. The only thing is then California ran out of money and so they didn't finish.
So now we are kind of picking up. And then, of course, now doing everything for not only 38 million that we are right now but actually for 50 million, which will be the population when this whole project is finished, because it will take 15 to 20 years to finish this whole project.
And part of that is water conservation, to reduce the water usage by 20 percent and recycle more the water and start thinking about when we build our communities to not just waste water and let it run out in the ocean but to keep that water and use it again. So that's why it's very complicated, this whole thing.
And also to monitor. A lot of California is not -- they don't do monitoring of how much water we actually are having now, or are using right now. So the only way we know there is a 20 percent reduction in water usage is if know what we're using right now. So that's why, you know, there has been -- but it's a very controversial thing, again, because there are people that say, "Wait a minute. Are there government people with their big trucks coming up with helmets on and monitoring the water and invading my privacy?"
So you have to do it in a way so you can please, you know, everybody, so you can do the monitoring but without invading someone's privacy and being too oppressive about it. So all of those things take time to negotiate and so we are bringing everyone together, all the different forces. All right?
QUESTION: I have one more. This is really controversial but --
QUESTION: I've been covering this story up in Mendocino, because of the pot production up there. It's being run by the cartels right now and the district attorney prefers not to prosecute, that's her statement. For example, they busted the Russian-Bulgarian cartel, (Inaudible) Kovolo he's Mendocino, with 97,000 plants. That sucks up about, every plant, five gallons of water a day at harvest time. And I'm thinking that -- I know, I'm sorry. A lot of people here wouldn't agree -- if the marijuana was legalized for adult recreational use, like it is for medical use, that it would eliminate the criminalized aspect of the production that's going on right now, which would very much help our water situation.
GOVERNOR: I have not heard that spin. (Laughter) But it maybe works, you know? Who knows. As you know, I am basically against legalizing marijuana but I also made it very clear that I'm looking forward to an open debate on the issue, because I think everything -- even though I may not agree but it may be a good idea. So I think that we should have the debate. And I also invited the legislative leaders to be part of that debate when the pros and the cons come in and talk about that. That's something to think about in the future. But like I said, I personally have been against it.
QUESTION: (Inaudible) consideration in that issue --
GOVERNOR: Exactly. Thank you very much. Thank you.
QUESTION: Governor, getting back to (Inaudible) foreclosures, what's the next bill you have after these bills?
GOVERNOR: Well, we are working on various different things, which is education bills that, you know, we are in a special session also for education. It's very important that we are competitive and there is $4.3 billion available in federal money for education reform. Now, we need every penny, because every penny we get we can keep a teacher on and teach, or hire extra teachers. So this is why we want to get those hundreds of millions of dollars.
But California is not yet competitive enough, because we have passed some of the laws just this past legislative session but there are still some laws that we need to pass, like for instance the cap on charter schools. We will never be able to compete if we don't lift our cap on charter schools. That's just one of these things. So we're going to work on education reform also.
And then, of course, energy reorganization, which is a very important thing that we do. And then there are general reforms that we are working on.
And of course, as you know, the Tax Commission just came in with their findings and we're going to start having that debate also, how do we redo our tax system and keep it revenue neutral but at the same time go and create a tax system that is not as volatile as we have it now, because we are relying too much on income tax right now so that -- and a lot of it comes from wealthier people. So when they, of course, invest on Wall Street, so when Wall Street takes a dive we take a dive here with our revenues, whereas our economy actually is not as bad. Because if you think about it, our economic activities have increased by 2 percent instead of 5 percent, which is normally the case. So it has increased by 2 percent, so it's not like it's devastating. But our revenues are devastating, they have dropped by $30 billion. So this is why we need to redo the tax system and rethink this.
So I think that the legislators and me, we are all into one thing and that is when something is broken, let's fix it. Now, that's easier said than done, because it's very complicated. The tax system has been in place for 100 years and so now to undo that will take a lot of effort. But, you know, I have trust that we can do it. So those are the kinds of things that are our challenges in the future.
OK? Absolutely. Thank you very much. Thank you. (Applause)