The US economy continues to plummet and with it, comes the decimation of the housing condition in the country. One of the states that suffered from the mortgage crisis is California. To lessen, if not completely eradicate, the housing dilemma in the locality, CA Governor Arnold Schwarzenegger signed and approved seven Loan Modification California Bills in the hopes of organizing the mortgage procedures and practices in the state. These laws also contain provisions to protect homeowners and consumers against fraudulent activities rampant in this time of the economic downturn.
One of the bills, AB 260, is slated to take effect on the first quarter of 2010. The said bill aims to restrict mortgage companies and lenders from giving loans with higher risks and interests to borrowers. It also aims to prevent the practice of giving mortgage packages that will increase the interest of a loan over time like offering negative amortization mortgages. Penalties for late payments will also be kept at a minimum of 2% of the total balance of the mortgage. This loan modification California bill will also give the state government more power to enforce lending laws set by the federal government.
But the issue here becomes the questionable efficiency of the law to protect and uphold the rights of homeowners in California.
“Although AB 260 will prove to help California homeowners, the Bill has lots of loopholes that if not addressed properly, could really affect the insurance practices in the state. In fact, a handful of private housing sectors groups in the real estate sector do not approve of AB 260. The California Mortgage Association is just one of the major groups that expressed opposition to this legislation. “
The Bill and the process of modifying loans in general have been under close scrutiny because of the maligned practices of many mortgage restructuring companies. According to those who are opposing the bill, the state should focus more on tightening restrictions on the “middle men” or the third party companies that process borrowers loan modification requests instead of giving mortgage brokers the stick.
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