7 On Your Side
Foreclosure reform bills: Why did they fail?
Foreclosures rose sharply in California last month to the highest level in a year. Bank of America more than doubled its foreclosure rate. Already in California, more than three-quarters of a million families have lost their homes, yet efforts to stem the tide have failed in Sacramento.
In the legislative session that ended last week, a package of foreclosure reform bills was strongly supported by housing advocates, but opposed by the financial industry. Despite our huge foreclosure crisis, all three bills were handily defeated.
Demonstrators marched through San Francisco's Civic Center last spring declaring their support for the package of mortgage bills. The grassroots effort failed miserably against the heavy lobbying of the banking and financial industry.
Members of the California Reinvestment Coalition were among those at the rally that day.
"The reality is that the banks' influence in Sacramento and in Washington, D.C., for that matter, is too great," said Kevin Stein with the California Reinvestment Coalition.
Pamela Heisey is with the Berkeley-based political money tracker, MapLight.
"The financial services industry has spent over $70 million influencing Sacramento over the past four years -- $23.3 million of that was spent on lobbying and $46 million of that was spent on campaign contributions to try to influence legislators' votes," explained Heisey.
But the California Bankers Association sees it differently.
"We really felt that the three bills that were in the Legislature this year, SB 729, AB 1321 and AB 935, really did very little to address the reason that borrowers are facing difficulty staying in their homes," said Beth Mills with the California Bankers Association.
SB 729 would have required servicers to decide on loan modifications before starting foreclosure proceedings.
"We hear stories of people who get a modification letter -- 'Congratulations, you're accepted for a loan modification' -- the problem is their house was foreclosed a week before," said Stein.
"From our perspective SB 729 really just sought to extend the foreclosure proceeding process in California which currently takes over 300 days to complete," said Mills.
The bill died by a vote of 3-3 in the Senate Finance and Banking Committee. The failure of Sen. Alex Padilla, D-Van Nuys, to cast a vote is seen as killing the bill. MapLight says Padilla received more money from banks than any other committee member.
"It just shows how well placed contributions can be," said Heisey.
However, MapLight also found that Padilla actually received more money from interest groups that support the bill. A spokesperson for Padilla told 7 On Your Side he tried unsuccessfully to work with the author of the bill, and will introduce his own bill as early as January
MapLight says other legislators who opposed the other two bills received heavy support from the banking and financial industries as well.
"The problem is you have some homeowners that simply cannot afford a mortgage payment," said Mills. "Some of them have lost their job, they're underemployed."
"If we're looking at the last legislative session, I guess they would get an 'F,'" said Stein.
Housing advocates say they haven't decided yet whether to reintroduce the package of bills again next year. They say they will take some time to regroup before making a decision.
foreclosures, real estate, bills, 7 on your side, michael finney
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