Governor Schwarzenegger Had a Busy Weekend...And I get to RANT!

Last Sunday evening the Governor was busy proving that his pen is mightier than his muscle ever was.  As the current session of State Legislatures is ending the Governor signed 7 bills into law - that I believe will all take affect on the first of the year.

Perhaps the most controversial bill, AB 260 by Assemblyman Ted Lieu (D-Torrance) eliminates many of the loans that got us into the trouble we are in today. 

Part of this bill makes perfect sense - it prohibits loan officers from steering borrowers to riskier, higher interest loans when the borrow would otherwise qualify for a less expensive-loan.

The same law also prohibits a negative amortization loan - you know they type...pay less than the interest and your principal goes up every month.  Now, for the most part these loans won't be missed because they were grossly overused for all the wrong reasons.  However, in the hands of a financially sound borrower who would like the option to manage cash flow - particularly self-employed and real estate investors, these loans were God Sends!  Unfortunately the irresponsibility of the majority requires a nanny state to regulate us to protect us.  Why don't they make a high school diploma for a mortgage instead...maybe we won't have as many problems, especially if that diploma actually means the holder knows something.  (but that is a completely different story.)

The final provision of this bill that has had public debate is probably a good thing for the consumer...but not the lender.  The prepayment penalty is now capped at 2%.  Also of note, the state regulators are now authorized to enforce federal lending laws.  Just not on Fridays, when they all have the day off because we can't afford to pay them for the jobs they were hired for in the first place...but we can give them more work that can't be paid for, either.

The California Realtor Association (CAR) and the Association of Mortgage Brokers and the California Mortgage Association all bonded together to oppose this bill from becoming law.  They were successful fighting similar legislation last year, but this year the socialists won.

SB 36

This bill was introduced by Sen. Ron Calderon (D-Montebello).  I'll sign on that this was probably a good bill to pass.  It requires that all originators of residential loans be licensed.  Currently in California we have a system where a lender can be regulated and licensed by the Department of Real Estate and are actually issued a license to sell real estate, or they work for a company that is regulated by the Department of Corporations - such as the banks and such.

I'm not sure of the details on how it will play out - but I would like to see a lender with a license to lend and save the real estate sales licenses for those of us who sell.  This would prevent a major problem of some in the profession of earning as many as 3 commissions form one transaction.  I could never figure out how that is anyone's best interest except the guy going to the bank with the commission check at the close of escrow.  I sell houses - that's my job.  No way can I ever know as much about loans as I do houses - nor would I want to.  The two may go hand in hand but it is tow separate positions.  If you went in for Open Heart Surgery, you would not want your surgeon doubling up as the anesthetist would you?  I hope not, so why let your lender sell you a house or why let your real estate agent make you a loan?  I don't get it.

What this definitely does though is makes sure everyone out there writing home loans has a license and is regulated.  In this case I believe this regulation is way over due.

SB 239

This has got to be the scariest legislation signed into law.  Introduced by Sen. Fran Pavley (D-Agoura Hills this is the law that will make it a FELONY to commit fraud on a mortgage application

OK, on the surface it sounds great...but what is fraud on a mortgage application.  Any thing that is not 100% accurate, that you knowingly put on that application.  The question may be simple - "How long at present residence" and you have been there 23 months - so you put down 2 years!!!!!   PACK YOUR BAGS FOR A TRIP TO THE STATE PENN - YOU JUST COMMITTED FRAUD!!!

If you don't know what fraud it - its simple - anything but the truth - the whole truth.. I suppose you could even commit fraud by omission, if you don't answer something because you know the lender won't like your answer - FRAUD - Go To Jail. - Lose Your Right To Vote - Never Get a Good Job Again.  Fraud - Never be trusted by anyone. Fraud.  Wear it like a Scarlet Letter.  Just Tattoo it right on your forehead - FRAUD.

In case you didn't pickup on it, I think Fraud is the worst non-violent crime there is.  It attacks your credibility and your word. How can anyone ever believe you again...once you have been convicted of FRAUD!

AB 239

This bill that was originally introduced by Assemblyman Mike Feuer (D-Los Angeles), just requires that lenders don't mess with our Seniors and makes the language clearer and more thorough when it comes to Reverse Mortgages. 

I understand the principal of these loans, but they confuse the heck out of me, so I can only imagine what they will do to your grandparents.

So, I say this bill is probably overdue for any good nanny state - we must protect our feeble minded seniors.

SB 237

This bill was also introduced by Sen. Ron Calderon (D-Montebello), who successfully also required that appraisal management firms be regulated as well. 

Personally, I'm not against this - I believe this industry should be regulated and licensed.  Then again I also think that our legislatures should have some sort of minimal requirement to run our State and Federal Governments.  Apparently, these guys will never be regulated...after all, they write the regulations!

AB 957

This is the one that I have the most problem with.  Introduced by Assemblywoman Cathleen Galgiani (D-Stockton), this gives the buyers of bank owned homes the opportunity to negotiate for the selection of the Title and Escrow in the transactions.

Now, a couple of years ago, I actually thought the current system was pretty poorly run, as I would have escrow officers from over 100 miles away, at times.  However, with a couple of years of experience, the escrow companies, like the listing agents, have got it down to a science now. And my fear is we are going to be ending up with small escrow companies that have not done any or very little REO escrows and everything is going to be delayed and even screwed up.  We are too deep in this game to start with a new learning curve - there are player who play very well and when they mess up, there are replacements who have been groomed for the replacement position.  Now, I fear it will be a free for all...one that I am not looking forward to.

AB 1160

I have never been accused of being politically correct, so why start now.  On the surface, this bill sounds like a good idea, and when Assemblywoman Cathleen Galgiani (D-Stockton) introduces the legislation, I am certain his intentions were more than honorable when he mandated that loan documents be prepared in the same language that the verbal negotiations were conducted.

Great, but who is paying for the translation?  Who pays for the DMV books to be printed in 400 languages (OK, maybe an exaggeration)?  Who pays for our voting material to be mailed out innumerous languages.

By Golly, this is STILL AMERICA and ENGLISH is still our official language.  My thought if someone who can't speak our language want to buy AMERICAN REAL ESTATE then they should pay for their own certified interpreter to explain what they are getting themselves into - why is this a pass-on cost being passed on to every tax paying citizen or every custom of that lender, who has to have their documents prepared in numerous languages...it makes not sense to me...none what so ever.

A FINAL THOUGHT

As I reflect back on legislation that will greatly impact my business next year, I am in awe that our Republican Governor signed all of these bills into law - all introduced by Democrats.  I really don't want to start Democrat bashing, but come on Governor, we threw one Governor out of office because you led a revolt for a recall.  You promised us change.  You were gong to make things right in Sacraments, and look at us now.... worse then we've ever been.  Can't you do anything for your party?  Anything at all?  Otherwise my grand kids wont be getting Arnold Action toys this Christmas, no, well just give them Arnold sock puppets.