Legislation Making Servicers Play Fair Faces Tough Fight

Bill would protect homeowners when servicers make devastating mistakes

OAKLAND, Calif., May 28 /PRNewswire-USNewswire/ -- Thousands of troubled California homeowners, like Kathryn Winogura of Lafayette and Zachary Norris of Oakland should have their fingers crossed for foreclosure legislation being considered in Sacramento next week.  

SB 1275, the bill sponsored by Sens. Mark Leno (D-San Francisco) and Darrell Steinberg (D-Sacramento), would level the loan modification playing field and hold servicers accountable for their errors. The bill is up for consideration in the Senate Banking, Finance and Insurance (SBFI) Committee sometime next week, most likely Wednesday  

The bill has two major provisions:

• Prohibiting servicers from starting the foreclosure process until a homeowner has received an up or down decision on their modification, if they requested one;
• Providing limited remedies to those homeowners whose homes were lost due to serious servicer errors.

"A foreclosure that starts because a servicer's left hand doesn't know what the right hand is doing is the most preventable foreclosure of all," said Paul Leonard, director of the California office of the Center for Responsible Lending.  "And when those foreclosures end with homeless borrowers, simple fairness dictates that servicers right those wrongs."

SB 1275 could be heard as early as Tues., June 1.  If it passes, it will need to be approved by the full Senate by Fri., June 4. The legislation faces opposition primarily from select lawmakers who oppose allowing wronged California homeowners from pursuing claims against lenders and servicers.

"It's unacceptable that when servicers lose faxes and lose payments, some Californians lose their homes," said Caryn Becker, policy counsel with the CRL California office.   "At nearly 1 million foreclosures and counting, we need to prevent every unnecessary foreclosure we can."

The Center for Responsible Lending is a research and policy organization dedicated protecting homeownership and family wealth by eliminating abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions which serves California through its Self-Help Federal Credit Union.

SOURCE Center for Responsible Lending