Battles in California over Mortgages

State legislators in California are considering a bill that would redefine the obligations of many defaulting homeowners, the New York Times reported yesterday. The legislation introduced in the winter by the real estate lobby would have largely shielded foreclosed homeowners from debt collectors. However, by the time it passed the state Senate on June 3, the banking lobby had succeeded in scaling it back. Now the bill goes to the state Assembly, where a committee will take it up next week, and bankers intend to continue lobbying. The original legislation said that borrowers who took cash out of their houses would be shielded as long as they used the money for home improvements. In its current form, the proposed law is not quite so forgiving. The bill that passed the California Senate by a lopsided vote of 30 to 4 would protect former homeowners up to the amount of their original loan. Lenders in California rarely chase foreclosed borrowers for deficiency judgments. Pursuing such cases in court can be an arduous process, and few of those in foreclosure have the assets or incomes to make it worthwhile. However, by raising the possibility of a court fight, they can negotiate favorable terms when agreeing to loan modifications and workouts, surrenders of deeds and sales for less than the full amount owed.



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http://www.nytimes.com/2010/06/22/business/22default.html?adxnnl=1&ref=business&src=me&pagewanted=print&adxnnlx=1277305269-YPE5VDn+sC+Au7bXKEZjuQ