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Schwarzenegger vetoes bill that revamped mortgage rules
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More from Local NewsSACRAMENTO — On the same day that congressional leaders were scrambling to reach a deal on a proposal by President Bush to try to rescue the economy from the calamitous effects of the mortgage crisis, Gov. Arnold Schwarzenegger vetoed a bill Thursday that consumer advocates say would have protected Californians from future mortgage abuses.
"The governor has just abdicated his responsibility to protect California homebuyers," said Ginny Green, spokeswoman for the Center for Responsible Lending. "The one bill that would have helped homebuyers, the governor left on the cutting room floor."
Schwarzenegger took action on a number of mortgage- and foreclosure-related bills, signing nine and vetoing five.
But the centerpiece of the Legislature's reforms was the vetoed AB1830 by Assemblyman Ted Lieu, D-Torrance.
The measure would have prohibited mortgage brokers from steering customers toward higher-priced loans if they qualify for lower rates, prohibited brokers from receiving financial bonuses for including prepayment penalties in subprime mortgages and required brokers who traffic only in high-priced loans to disclose that fact to borrowers at their initial
meetings.
In addition, the bill would have capped prepayment penalties, a feature of subprime mortgages that consumer advocates say prevented distressed borrowers from trying to find better deals.
Many provisions in the bill piggybacked on new federal regulations adopted this summer by the Federal Reserve Board, rules that will take effect Oct. 1, 2009.
In his veto message, Schwarzenegger wrote he lauded the bill's objectives but feared it would have had unintended consequences, such as creating an uneven playing field for state-regulated lenders that must compete with federally regulated lenders.
Echoing concerns of the California Association of Realtors and the state Association of Mortgage Brokers, Schwarzenegger objected to a provision that would have allowed plaintiffs to recover attorney fees if they sued mortgage brokers and won their cases, but would not have allowed winning defendants to do the same.
Main Street lost today'
In his message, Schwarzenegger said he would attempt to implement administratively "appropriate portions of the bill," but did not specify what those portions might be.
The bill had passed the Senate on a party-line vote with majority Democrats in support and had received bipartisan support in the Assembly with a 51-26 vote.
"Wall Street won and Main Street lost today," Lieu said in response to the veto. "AB1830 was a balanced compromise that fixed a dysfunctional mortgage system, was nonideological and would have helped all of the people of California, not just the minority of industry groups that opposed this bill."
One of the key provisions was a cap on prepayment penalties, which were a fixture in nearly all the subprime mortgages issued in the final months of the housing boom.
These penalties required borrowers to pay as much as a year's interest if they refinanced loans. Consumer advocates say the penalties were designed to trigger more fees for lenders and brokers because most borrowers would have had to refinance loans before built-in higher interest rates kicked in.
Easier for renters
The new federal regulations ban those penalties if payments can change within the first four years of the loans. On those loans in which payments are constant for at least four years, penalties are allowed if the loans are refinanced within two years of origination.
AB1830 would have capped those fees at 2 percent of the loan principal during the first year and 1 percent of principal during the second year.
Other vetoed measures included a bill that would have made it easier for renters who are evicted from foreclosed properties to recover their security deposits and one that would have required lenders to give more advance notice to borrowers before a higher adjustable rate kicked in.
Schwarzenegger included the bills in a news release that listed 10 bills on a variety of issues he acted upon Thursday. The governor's office put out a long news release, however, heralding the fact he signed nine housing-related bills that make relatively minor changes in mortgage practices, such as requiring real estate agents to disclose their license numbers to potential clients.
Posted by worldfxr on September 26, 2008 at 6:23 a.m. (Suggest removal)
Mr. Tim Herdt, what part(s) of this bill are you not discussing in your article that really made Arnold not sign this bill. Or what is the real picture. Be thankful this guy is there to stop the socialist liberal machine. The Assembly and Senate are full of liberal socialist left wing radicals that are fundamentally destroying this state. Once again, Arnold is surrounded and over whelmed with the pressures from this communists and is the only one to stop bad legislation. Good luck to us all as we are loosing ground and will continue to.
Posted by USA_ROCKS on September 26, 2008 at 8:47 a.m. (Suggest removal)
The whole loan debacle started with Carter and has been protected be the Democrats ever since. The real joke is trying to portray the current administration as being at fault. What about the personal responsiblity for signing up for loans that people knew they wouldn't be able to afford? Now that is a real joke.
Posted by mikeb6804 on September 26, 2008 at 9:06 a.m. (Suggest removal)
vwhunter--the people knocking the administration and supporting subprime borrowers have no concept of personal responsibility. Not as long as there are taxpayers to support their escapades.
Posted by eruiz on September 26, 2008 at 9:09 a.m. (Suggest removal)
Yeah you silly Democrats dont you remember all those people losing homes during the CARTER and CLINTON admin's... Geez get your facts right... here let me show you...
Oh Wait hmmmm S&L failure during Reagans Admin oh and wait heres MCCAIN something about Keating 5... oh and people lost homes! ummm ok forget REAGAN...
Lets see during Bush years we were prosperous oh wait hmmm seems to be alot of foreclosed homes oh and wait we're seriously in debt to China??? is'nt CHINA a communist country??? Why would we borrow money from them hmmm...
Does'nt make since im perplexed under Republicans we seem to be socializing Wall Street... im confused!
Republicans, they say anything... C'mon Republicans show some Balls and admit TRICKLE DOWN ECONOMICS DOES NOT WORK!!! I say fat middle class=fatter upper class remember the Clinton years...
OBAMA 08 - Working for middle class AMERICA!!!
Posted by eruiz on September 26, 2008 at 9:17 a.m. (Suggest removal)
hey mikeb6804 how about the personal responsibility of a president that should be looking out for the American economy while its currently in the tank??? OR the responsibility of the GOP to be for Open Markets while at this very moment socializing Wall Street???
All you're doing is spewing the ReCOMMIcan talking points...
Give me facts this personal responcebilty BS should start at the top dont you think???
Posted by 2wheelsguy on September 26, 2008 at 9:49 a.m. (Suggest removal)
Carter? Republicans just can't accept responsibility for the mess they've made for this country, so they have to dig up their favorite bogeymen from the past.
George Bush and the republican morons in congress are squarely to blame for the mess we're in. Their effort to blame a president who served almost thirty years ago is ridiculous and demonstrative of their desperation. Let's vote these clowns out in November!
Posted by CAtruckdriver on September 26, 2008 at 11:19 a.m. (Suggest removal)
Hey Arnold, thanks for allowing the CA residents to be further screwed beyond belief. I'm all for people making $$, just not screwing a person trying to find the "best deal" on a mortgage & having a predatory lender lie & charge more.. BECAUSE THEY CAN!
Posted by banana2_868 on September 26, 2008 at 11:38 a.m. (Suggest removal)
"The one bill that would have helped homebuyers, the governor left on the cutting room floor."
Are you kidding me right now?? That one bill would have helped homebuyers, just that one? Right because he vetoed it, all hope is lost for homebuyers... Seriously face reality. So many people were either screwed or were just too stupid...now that we've seen the consequences, are homebuyers really going to just rush into a homebuying scenario without checking every option and making sure there are no prepayments if they don't want one? We should have learned our lessons by now. Not to mention, so many people have LOST their jobs in that industry...And besides, not EVERY mortgage broker is a crook, the bad ones gave us a bad rep, but not everyone out there should have to bend over. The good brokers that remain actually want to help people and yeah we make money off of it but so does everyone else providing a service.
Posted by rebel123 on September 26, 2008 at 11:46 a.m. (Suggest removal)
I'm still laughing at this: "Be thankful this guy is there to stop the socialist liberal machine." That's hilarious. We've seen the biggest bank collapse in history and the governator won't sign a bill requiring oversight. Yet fanatics still think it's a liberal socialist plot. Get real. Countrywide CEO walks away with $121 million dollars after he drives that institution into a ditch. Other CEO's from collapsed financial institutions that have dragged our economy into the dumper are doing the same. Yet you worry about socialism?? I guess it's ok with you that these guys operate without any rules at all then take their money and run, leaving the rest of us to pay the piper for their greed. I never fail to be amazed at the level of stupidity. It's not a liberal plot to want controls over the rampant abuses by institutions that have the power and ability to ruin the economy and rape my rather conservative retirement savings!!
Posted by USA_ROCKS on September 26, 2008 at 11:48 a.m. (Suggest removal)
Actually personal responsibility should happen at all levels. Liberals have a deserved reputation for taking advantage and seeking the votes of those who want more for free.
I do not care for bail outs, but the alternative at this time would be devastating.
CEOs need to be subject to a vote of no confidence by shareholders. The ability to control compensation based on company performance would go a long way to preventing future mass calamity.
Of course our government needs to stop subsidizing everything, and promoting financial decisions based on need instead of ability.
Posted by USA_ROCKS on September 26, 2008 at 12:01 p.m. (Suggest removal)
Remember that our government and so called regulations incentives have provided the environment for this financial crisis.
Posted by USA_ROCKS on September 26, 2008 at 12:06 p.m. (Suggest removal)
Well guess what 2wheelsguy, it was Carters admin that started this process. It didn't happen overnight and certainly not in eight years. The liberal politicions have been blocking regulation of Fannie/Freddie for years while accepting all their money and support.
Posted by THX1138 on September 26, 2008 at 12:07 p.m. (Suggest removal)
Has anyone even read or reasearched the bill[?]. Unless you've read the bill yourself, why jump to conclusions[?].
The media isn't going to go into great detail and list everything that prompted the veto.
The issue in Washington is a bi-partisan mess...
Posted by mtlm on September 26, 2008 at 12:40 p.m. (Suggest removal)
The governor is right to veto a bill that would give unfair advantage to federally chartered financial institutions over state-chartered institutions. It would also give people the false assumption that every mortgage broker and bank located in the state was bound by these rules.
CA continually runs off businesses that don't want to be regulated out of profit and then ends up losing revenue from these companies.
Posted by Timmy2 on September 26, 2008 at 1:02 p.m. (Suggest removal)
Ah Eruiz,
forgetting something? Let`s recap,
Thousands lost homes during Carter. As a matter of fact I`m sure people lost their homes throughout our nation`s history for many different reasons nice moot point to bring up however. Many elderly lost homes to high property taxes, which led to prop 13.
Yeah I remember Carter well
12% unemployment. 70% tax rate, misery index. Gas shortages. great times! Which led to Reagan`S 49 state landslide. SNL Failure? you forgot the other 4 Democrats. Yeah I remember Bill Clinton. Here`s what he said the other day, Bill Clinton on Thursday told ABC's Chris Cuomo that Democrats for years have been "resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac" nice try, thanks for playing!
Posted by jamaro099 on September 26, 2008 at 1:38 p.m. (Suggest removal)
Here is a MUCH better bailout---written b4 the $700 billion bailout so our share could be much more!
I'm against the $85,000,000,000.00 bailout of AIG.
Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.
To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+. Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billion that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
Of course, it would NOT be tax free. So let's assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00. What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - a great boost to new grads
Put away money for college - it'll be there
Save in a bank create money to loan
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for medical insurance - health care improves
Enable Deadbeat Dads to come clean or else
Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.
If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ( "vote buy" ) economic incentive that is being proposed by one of our candidates for President.
If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!
As for AIG liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here's my rationale. We deserve it and AIG doesn't.
Sure it's a crazy idea that can "never work."
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC.
And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned
instantly in taxes to Uncle Sam.
Thanks to some person called Birk for the idea!
Posted by jamaro099 on September 26, 2008 at 1:40 p.m. (Suggest removal)
ha ha ha - I didn't actually do the math until now. ;-)
Posted by Comments on September 26, 2008 at 1:58 p.m. (Suggest removal)
Ah here are some folks name calling again in the hopes that it will somehow validate their positions. The following comment by Worldfxr, "...liberal socialist left wing radicals..," is almost funny. Why is it that whenever someone takes a position a republican may not agree with (even if it's a position that's dead center) they immediately go to "liberal left wing radical?" Ridiculous. And yes, calling a republican a "right wing nut job" doesn't do anyone any justice either. However, in this particular instance the comment is laughable. Socialist? Er, last I checked it was the current administration run by Mr GWB that was proposing the the most blatant socialist bailout this country has ever seen. Talk about socialist. Whatever happened to republicans being the party who were for minimal gov't intervention in our lives?
Hey, Jamaro, I posted a very similar comment yesterday as I too was wondering why if the gov't had so much money to toss about they didn't just toss it our way :). I figure if there is 700 billion dollars lying around then they should just go ahead and give each American a million bucks. It would certainly go a lot farther than the pittance they threw the public's way last year.
Posted by insideedge on September 26, 2008 at 2:15 p.m. (Suggest removal)
Jamaro,
That's exactly what I was thinking. This bank bailout is NOT going to do anything for the ecconomy at all. Give the $$$ to US.
Posted by mtlm on September 26, 2008 at 4:37 p.m. (Suggest removal)
The government didn't just hand $85 billion to AIG, it essentially purchased an 80% share of the company for that amount. Also, the $700 billion would be used to purchase loan pools that currently have no set value so banks can't liquidate them.
These bank failures are caused by the inability to liquidate assets or borrow against those assets to fund their daily operations. If you don't have enough money to pay your bills but own a ten million dollar home, a fleet of cars and a vault full of jewelry that no one will buy, you are essentially insolvent and would have to declare bankruptcy.
The government is stepping in to purchase those assets at a reduced price and will sell them piece by piece, eventually getting their money back and hopefully even turning a profit.
Posted by jamaro099 on September 26, 2008 at 5:35 p.m. (Suggest removal)
"The government is stepping in to purchase those assets at a reduced price and will sell them piece by piece, eventually getting their money back and hopefully even turning a profit."
That is a BIG assumption. The government is buying near worthless assests in order to infuse cash into the credit markets with the HOPE that they will make some money back.
Do you really think the financial institutions are going to offload any profitable assets? Any mortgages/loans that can make money will be kept by the companies. They'll only offload the real losers.
But, if you really believe in the plan, I have a few items in my garage that I think are worth over $100k, but I'm having trouble selling. The items can only go up in value so if you buy them from me now, I'll let them go for only 20k. Deal? ;-)
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