Governor Schwarzenegger Vetoes “Foreclosure Prevention” Legislation
California Governor Arnold Schwarzenegger signed 10 bills designed to prevent foreclosure by reining in the mortgage industry. The one bill that he did veto was designed to create a “fiduciary duty” for mortgage brokers to borrowers.
While the Center for Responsible Lending will likely point to these new regulations as fundamental reasons why high-risk loans will have tapered off, the fact is that these loans are already in steep decline.
And no regulation was required to make them go away.
Most of the knee-jerk legislation that’s sprung from the foreclosure crisis does little to nothing to prevent foreclosure.
And, if we’re going to target anyone, mortgage brokers were the LAST link in the chain that led to the problems we now face. While there were plenty of unscrupulous practices taking place. the fact is that the mortgage brokers were selling what was available.
After the deluge of Lending Tree and “…lost another loan to Ditech!” commercials, I think it’s safe to say that most people understand that the mortgage broker is not working on the borrower’s behalf.
If we’re going to force sellers to work on behalf of buyers, I suppose we could focus on more ubiquitous purchases: the car salesman, the grocer, the gas station, the electronics store, sporting goods?
It’s more than a little ridiculous to expect a mortgage broker- who’s paid by the seller of the goods- to work on behalf of the buyer. It’s a little on the disingenuous side, as well.
To say that it’s the mortgage brokers’ fault that this insanity occurred is ridiculous. Did they contribute to the foreclosure crisis? Yes.
But to say that we would have fewer borrowers trying to prevent foreclosure if this bill had been in place is completely insane.
This bill also sought to ban adjustable-rate mortgages in California. We’ve gotten completely carried away with this country, using “predatory loan” as a synonym for “subprime mortgage.”
In 2007, 27% of car purchases were leases. Personal finance guru Dave Ramsey calls them “fleeces.” Just as auto leasing may be a lousy idea for most of us, it works for some segment of the buying population. Just because it’s a ripoff for many, doesn’t mean nobody should be allowed to do it.
By the same token, it’s irrational to “outlaw” adjustable-rate mortgages. If we’re seriously interested in using this logic to prevent foreclosure, then we should ban home sales in California, Florida, Texas, Michigan and Ohio.
If you need help with your foreclosure prevention efforts, you don’t need to wait for your local politicians to outlaw what you’re already waist-deep in… get in touch with our office to see what we can do for you.
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