Assembly Democrats Call for Special Session, Introduce Broadbased Legislative Package to Help Address Subprime Mortgage Foreclosures

Bills Will Help Preserve Homes and Minimize State Budget Crisis

SACRAMENTO – Speaker Fabian Núñez (D-Los Angeles), Assembly Banking and Finance Committee Chair Ted Lieu (D-Torrance), Assembly Judiciary Committee Chair Dave Jones (D-Sacramento), and other Assembly Democrats today called for a special session to address the state’s subprime mortgage foreclosures as they unveiled an important legislative package that will help minimize the financial crisis caused by the foreclosures.

“If you look at where the foreclosures are happening, this is clearly neither a Democratic issue nor a Republican issue,” Speaker Núñez said. “Given the hole this could blow in the state budget, we simply don’t have the luxury of partisanship.”

They were joined by Assembly Labor and Employment Committee Chair Sandré Swanson (D-Oakland), Assemblymember Kevin de León (D-Los Angeles), Assemblymember Tony Mendoza (D-Artesia), Assemblymember Lois Wolk (D-Davis), Carlos Villegas, a Sacramento homeowner who is losing his home, Denise Carruth, a Roseville homeowner who is facing foreclosure, Martha Lucey, President and CEO of the Consumer Credit Counseling Service of Central Valley, Los Angeles, Mid-Counties, and Sacramento, Faith Bautista of the Greenlining Institute, Jennifer Harris, Executive Director of the Home Loan Counseling Center, and Alan Fisher of California Reinvestment Coalition, an expert on the California subprime crisis.

According to the Center for Responsible Lending, nearly 180,000 California homes will be lost to foreclosure from the 826,900 subprime loans made in 2005-2006 alone. California could lose nearly $3 billion in property tax revenue and another $1 billion in sales and transfer tax revenue.

“In California, lenders filed more than 72,000 notices of default last quarter alone,” Assemblymember Lieu said. “We’re not interested in happy talk -- we’re going to demand real action.”

The Democratic package institutes a number of important reforms, including:

• Identifying at-risk borrowers and determining what lenders have done to assist them;
  
• Adding consumer real estate mortgage loans to the list of consumer contracts subject to California civic code translation requirements, protecting potential homeowners for whom English is a second language;
• Banning prepayment penalties that essentially prevent borrowers from refinancing;
• Ending incentives and kickbacks that spur lenders to push subprime loans onto prime-qualified buyers;
• Increasing counseling that can protect consumers from bad loans and help them find potential avenues for keeping their homes; and
• Toughening income verification regulations and requiring lenders to consider an applicants ability to repay over the life of a loan.

According to Realty Trac, for the third quarter of 2007, five of the top ten areas with the highest foreclosure rates in the country are in California, including Stockton, Riverside/San Bernardino, Sacramento, Bakersfield, and Oakland.

No corner of the state is immune from the subprime mortgage crisis:

• One out of every 88 homes in California currently faces foreclosure.
• Home price declines in California will range as high as 16%.
• Each foreclosure within an eighth of a mile of a single-family home results in a 1% decline in the value of that home
• Tens of thousands of California families are in danger of losing their homes, and working- and middle-class neighborhoods are especially in danger of being blighted due to abandoned homes.
• Nationwide, the Congressional Joint Economic Committee anticipates $71 billion in house wealth directly destroyed by foreclosures, with more than $32 billion in housing wealth indirectly destroyed by the spillover effect of foreclosures which reduces value of neighboring properties.

Assembly Democrats have established a website that will provide resources to troubled borrowers, as well as, provide others with an ongoing update of the crisis and its impact on California. It can be found here: http://democrats.asm.ca.gov/issues/MortgageCrisis.

Here are links to audio of Speaker Fabian Núñez and Assemblymembers Lieu, Jones and Swanson:

Speaker Fabian Núñez says California is being hit extremely hard by the foreclosure crisis.

Speaker Fabian Núñez says thousands of California families are being hurt by the problem.

Speaker Fabian Núñez says the foreclosure crisis is hurting the state budget as well.

Speaker Fabian Núñez says the Governor should call a special session to deal with legislation on the issue.

Assembly Banking and Finance Committee Chair Ted Lieu (D-Torrance) says the foreclosure crisis will get worse unless action is taken.

Assembly Judiciary Committee Chair Dave Jones (D-Sacramento) says the foreclosure crisis is turning the American dream of home ownership into a nightmare.

Assembly Labor and Employment Committee Chair Sandré Swanson (D-Oakland) says the middle class and the economy are being drag down by the foreclosure crisis.