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Homeowner Bill of Rights

Page history last edited by spencer.graves@prodsyse.com 8 years, 1 month ago

     The California Homeower Bill of Rights is a collection of proposals for changes in law to make it easier for California residents to defend themselves against actions of questionable legality by predatory banks and other financial actors.  Key components of this were contained in AB278 / SB900 that passed both houses of the legislature on July 2 and was signed into law on July 11, 2012.  

 

     Arguably the most important issue in this legislation is a "private right of action", which "would authorize a borrower to seek an injunction of a pending trustee's sale if a notice of sale has been recorded and the borrower reasonably believes that the mortgagee, trustee, beneficiary, or authorized agent failed to comply with specified requirements."  Without this right, banks are violating the law with impunity or with penalties that are negligible relative to what they are making by violating the law (see below).  

 

     The Homeowner Bill of Rights was originally conceived as a collection of six different bills covering (1) fairness, (2) transparency, (3) blight, (4) tenants, (5) enforcement, and (6) a grand jury, as outlined below.  The Fairness and Transparency bills became stalled in the Assembly and Senate on April 16 and 17.  To get around this, two completely unrelated bills, AB278 and SB900, were "amended" to replace the entire text with language taken from the "Fairness" and "Transparency" bills.  Their passage was secured by a major citizens' lobbying campaign organized by organizations like Courage California (www.couragecampaign.org), Home Owners for Justice (hofj.org), and People Acting in Community Together (pactsj.org).  

 

ECONOMICS

 

     The current international economic crisis seems largely a product of deregulation since the Carter administration, which saw the profits of the finance industry increase from 14% of US domestic corporate profits (1934-1985) to 33% (2000-2010).  This increase has netted the US finance industry roughly $200 billion (half of their $400 billion income) each year,[1] as return on their roughly $500 million annual investment in lobbying and campaign contributions 1998-2008.  That's roughly $400 for each $1 invested in lobbying and campaign contributions.  The one-time $25 billion included in the National Mortgage settlement is small change compared to several years of excess profits of $200 billion per year.    

 

BACKGROUND 

 

     California Attorney General Kamila Harris and others produced a series of 6 bills (6 in the Assembly, 5 in the Senate), covering (1) fairness, (2) transparency, (3) blight, (4) tenants, (5) enforcement, and (6) a grand jury, as outlined below.  The most important of the six are the first two, which have been stalled since April 17.  Apart from SB900 and similar bills, the main thrust of the Homeowner Bill of Rights has been the following:  

 

 

     Of these, the two most important appear to be the "Fairness" and "Transparency" bills, as these contained language regarding the "private right of action", allowing homeowners to sue financial institutions for violations of law.  These provisions are highly unpopular with the finance industry for obvious reasons.  There are senate and assembly bills for each of these two topics, and hearings on all 4 bills were cancelled April 16-17 "by author".  These cancellations were skirted by "amending" two completely unrelated bills (AB278 and SB900), replacing title and text with identical compromise language produced by a conference committee, unprecedented in that it acted before the passage of legislation in either house.  

 

     The standard legislative procedure starts with a bill being referred to committee(s) of the assembly and senate for consideration and possible revision.  After appropriate committee action, a bill may be approved in one or both houses.  If the version approved in the senate and assembly are different, they go to a joint conference committee to reconcile the language before being sent back to the two houses.  Once both houses approved the same language, the bill goes to the governor for signature.  If the governor signs the bill, it becomes law.  Otherwise, it may go back to the two houses for an attempt to override the veto.  Bills die at each step of this process:  They may never get scheduled for committee action.  Committees may hold hearings but never release a recommended bill.  A bill may be approved by some committees but not others or never come to a vote for other  reasons.  Or it may be approved in one house but not the other, etc.  The Homeower Bill of Rights is following a different procedure, which started with a joint Legislative Conference Committee, whose reconciled language is the sent to the two houses for processing as just described.  The following table summarizes the information I could find on the status of these six bills.

 

  Assembly bill    
Senate bill   

Fairness AB1602 /

SB1470

Canceled by author Eng, replaced by AB278, signed July 11.     Canceled by author Leno, replaced by SB900, signed July 11.   
Transparency AB2425 / SB1471

Canceled by author Mitchell, replaced by AB278, signed July 11

  Canceled by author DeSaulnier, replaced by SB900, signed July 11.     
Blight AB2314 / SB1472 Approved by Gov. Brown Aug. 27, 2012.  
(Inactive, but AB2314 passed.)   
Tenants AB2610/ SB1473 Presented to Gov. Brown, Sept. 10.  
(Inactive, but AB2610 passed.)    
Enforcement AB1950  Presented to Gov. Brown, Sept. 6.   

 

(no senate bill)    
Grand Jury SB1474 / AB1763 (Amended Aug. 23 to a different purpose.)     Presented to Gov. Brown, Sept. 10.     

 

     A major blow to California homeowners was delivered May 11, 2012, by Alfred M. Pollard, General Counsel, Federal Housing Finance Agency in a letter to members of the California Assembly and Senate, claiming that a private right of action would raise costs for borrowers and slow the housing recovery.  The impact of this letter is unclear, since the "Fairness" and "Transparency" bills had already been on hold since April 16-17.  

     However, Pollard is an attorney and an expert on international affairs.  He is NOT an economist and is not qualified to comment on such issues.  His letter provided no "meaningful substantive analysis" and instead largely copied a May 10 press release by the California Bankers Association. Fourteen members of the California Congressional delegation were extremely upset by Pollard's action, insisting that it constituted lobbying on behalf of the industry in a way that "directly contradicts the FHFA’s statutory mission of protecting the public interest."  

 

POSSIBLE NEXT STEPS:  

 

  1. Try to find a way to leverage this legislative victory into a grass roots movement that activates more people who have been through foreclosure or are facing it.  There large numbers of people impacted by this suggests that there should be more people willing to do more about this issue.  The major obstacle to such activism so far may have been the embarrassment and shame foreclosure victims typically feel from having accepted legal contracts that in retrospect were clearly so negatively biased against them.    
  2. Research the economics literature to looking for evidence supporting or refuting the claims of Alfred Pollard, General Counsel of FHFA, (see above) that a private right of action would raise costs for borrowers and slow the housing recovery.  If such evidence can be found and if it contradicts Pollard's claims, it may be quite valuable in securing greater action against the banks internationally.   

 

NOTE:  ADDITIONAL INFORMATION REQUESTED:  If you have any information in addition to this, please let me know (spencer.graves@prodsyse.com) -- or edit this page directly.  (If you do not have permission to edit this page, please click "Log in" in the upper right and "Request access".)  

 

Footnotes

  1. Table 6.16, National Income and Product Accounts, US Bureau of Economic Analysis, http://bea.gov/iTable/index_nipa.cfm

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