On Feb 29, with much fanfare, California Attorney General Kamala Harris, along with Senate President pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez, unveiled a "California Homeowner Bill of Rights," a package of six bills designed to ease the pain of homeowners caught in the state's foreclosure crisis.
The six bills would require more rigorous documentation on the part of banks when foreclosing on properties; prohibit foreclosure when the homeowner has filed for a loan modification; impose a fee on lenders every time they file a notice of default; and in general do a lot of other stuff that no self-respecting financial leviathan would ever swallow without an army of lobbyists going to code red.
Still, a casual observer may have thought that with the backing of a rising Democratic star like Kamala Harris, plus the leadership of a Democratic caucus enjoying a large majority, taking on the banks -- nobody's favorite industry, these days -- would be a slam dunk.
As it turned out, more of an airball. Last month, as Harris was scheduled to testify before the California Assembly's Senate Banking and Finance Committee, two of the bills were pulled by committee chairman Mike Eng of Monterey Park -- a Democrat. Since then, in hopes of rescuing the plan, the leadership shuffled the package to a joint conference committee, which held hearings this afternoon.
Yesterday, to find out just what the hell happened, I turned to John Myers, Political Editor at News10 in Sacramento and our former colleague here at KQED. Here's his take:
JON BROOKS: So here you had a Democratic Attorney General, a big Democratic majority in both houses, and an issue that would seem to be can't-miss with the public -- holding the banks more accountable during the foreclosure process. So what happened?
JOHN MYERS, NEWS 10 POLITICAL EDITOR: The bills, so far, have run into the most familiar of legislative hurdles: powerful lobbyists. The banking industry is a brawny fighter in Sacramento's inside political game, and it's pushed back in a big way on these bills -- bills pushed not only by Harris, but also by Assembly Speaker John Perez and Senate President pro Tem Darrell Steinberg.
JON BROOKS: What was the big impediment to passing the bills?
JOHN MYERS: The major sticking point seems to be the banking industry's assertion that the mortgage crisis was a one-time thing and thus permanent new rules (some which would codify the national settlement Harris helped negotiate) are an overreaction. A number of moderate, business-friendly Democrats in both houses seemed sympathetic to the banking industry's position.
JON BROOKS: Any indications by Harris on a willingness to compromise? And how bad does it look for her that she announced the thing with such fanfare and then couldn't get it done?
JOHN MYERS: Today's hearing will be the first test since last month's abrupt switch by Democratic leaders to a plan B strategy. I think the last few weeks have been eye-opening for Harris, whose experience is the courtroom and the settlement table...not the Capitol. I saw her before last month's hearing, camped out in the hallway with staff trying to count votes. The roadblock seemed to surprise her.
JON BROOKS What's the outlook now?
JOHN MYERS:The bills were rescued by Perez and Steinberg by placing them in a joint conference committee. That way, there's only one step (one committee) before floor votes, versus multiple committee votes where they could be picked off, one by one.
JON BROOKS: And how bad would this look for Democrats that they can't get this passed?
JOHN MYERS There's still a lot of time left before the Legislature adjourns in August, so never say never. The real question is whether the package of bills -- bans on robosigning, forcing more transparency during foreclosure, etc -- will be amended as a concession to the financial industry, and whether amended bills are better than no bills.
Below is an ad by the Courage Campaign that attempts to put pressure on Assemblyman Felipe Fuentes, a Sylmar Democrat, to vote for the bills. Fuentes told the Sacramento Bee, for an article about how the issue has split Democrats, that he was "disappointed that they misconstrued and outright lied" in the video. The Bee writes...
Rick Jacobs, founder and chairman of the Courage Campaign, said his organization took down the video, but posted it again after Fuentes didn't say whether he'll vote for the regulatory changes.
And here's what the California Bankers Association has to say about the whole thing:
The CBA wishes to reconfirm its willingness to participate in the debate regarding four legislative measures promoted by California Attorney General Kamala Harris, dealing with dual-tracking (AB 1602/SB 1470), single point of contact and “robo-signing” (AB 2425/SB 1471). We are, however, concerned with the avoidance of the typical legislative process that would involve policy and fiscal committee hearings, as well as floor debates throughout the legislative year, which ends in August.
“Despite public declaration of the desire to produce a legislative product within a ‘few weeks’, we encourage the committee to give full and complete consideration to the importance of these issues and deliberate methodically. These issues and the people of California deserve thoughtful discourse given the consequences if done incorrectly.
“We strongly believe that in promoting these measures in advance of national servicing standards the Consumer Financial Protection Bureau (CFPB) intends to release this summer with an effective date of Jan. 1, 2013, California risks setting itself apart from the rest of the nation to the detriment of future borrowers. We intend to be an active participant in the conference committee process, but we strongly feel that the most problematic areas of the legislation, outlined below, must be addressed and resolved before the committee refers any bill to a full vote of the Legislature. We believe the elements of a reasonable solution include:
-Non-approval notice provided to borrower detailing reason for non-approval of loan modification or foreclosure avoidance post-notice of default, but prior to the notice of sale (NOS). Consideration of a loan modification is contingent upon the receipt of a complete loan modification application from the borrower prior to the NOS.
-Language that there is no right to a loan modification and no corresponding California legal requirement to offer a modification or have a modification program.
-Eligibility qualifiers. The current measures fail to narrowly target at-risk borrowers. Legislation should apply only to residential 1-4 properties that are owner occupied and serve as the primary residence of the borrower. No investors, speculators or strategic defaulters.
-Consistent point of contact, who serves as the primary contact, provided at the request of a borrower who is potentially eligible for loss mitigation.
-Language that acknowledges and allows for CFPB federal servicing standards (to be promulgated this summer), enforcement orders or settlements to override state law.
-No private right of action. Legal devices should not be used to unduly delay the inevitable when other foreclosure avoidance options have been exhausted.
-Provide a right to cure upon notice without court intervention.
-Exemption for mortgage servicers who signed, or subsequently sign, the national mortgage settlement.
-Sunset date to coincide with the end of the national mortgage settlement (3½ years from the date entered into.)
“California’s banking industry will continue to seek and advocate for reasonable solutions that provide meaningful consumer protections that avoid long-term damage to the marketplace, cause industry to exit residential lending and increase the cost of credit. We look forward to the upcoming debate and discussion.”