BILL ANALYSIS
AB 1639
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Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1639 (Nava, Bass and Lieu) - As Amended: April 12, 2010
Policy Committee: Banking and
Finance Vote: 7-5
Judiciary 7-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes the Meditated Mortgage Workout Program
(MMWP) for borrowers facing foreclosure of their primary
residence, where the borrower can request to participate in
mediation sessions with their lender to examine mortgage loan
modification options or foreclosure alternatives. Specifically,
the bill:
1)Provides mortgage borrowers two separate opportunities to
request mediation - first, when the servicer notifies the
borrowers that they are delinquent on their mortgage, and
second, when the loan becomes in default. Notices of
delinquency and default would be required to include
information regarding the borrower's right to request to
participate in the MMWP. The notices would include the
telephone number, email address, and Internet Web site for the
administrator.
2)Specifies the administrator of the Mediated Mortgage Workout
(MMW) shall be appointed by the governor and confirmed by the
Senate, and establishes procedures, fees, timelines, and
reporting requirements for the program.
3)Provides that the foreclosure process is suspended during the
time the borrower is participating in the program, so long as
certain conditions are met.
4)Requires the mediator to make all reasonable efforts to ensure
that each MMWP session is completed within 60 calendar days of
the mediator's appointment.
AB 1639
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FISCAL EFFECT
1) Annual costs for newly appointed administrator,
associated staff, and overhead to administer the MMW
program, ranging from $500,000 to $1 million. Costs of the
administrator partly or fully covered by fees collected
from lenders and borrows.
2) Mediators paid an hourly rate by lenders and borrowers.
3) Annual costs to the Department of Corporations of about
$40,000 to respond to borrower inquiries and complaints, to
develop a protocol for examining licensees for compliance
with the new requirements, and add the new protocol into
routine examinations (special fund).
4)Potential state-reimbursable mandated costs to local
governments, probably minor, related to recording of
additional information with notices of default.
COMMENTS
1)Rationale . This bill, sponsored by Los Angeles Mayor Antonio
Villaraigosa, is intended provide means for borrowers facing
foreclose to negotiate modified loans. The authors assert that
existing federal efforts have been less than successful, since
they rely on the benevolence of the lenders, and that mediated
sessions will produce better results. The authors also assert
that foreclosure mediation is working in other jurisdictions
outside of California.
2)Opponents . The bill is opposed by trade associations
representing bankers and others in the lending industry who
contend that the bill is unnecessary, flawed, and unhelpful.
They contend that requiring them to participate in discussions
regarding loan modifications will be costly and will further
prolong the economic crisis precipitated by the collapse of
the financial services markets related to residential lending.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081