Our Attorney General Kamala D. Harris is a rising Democrat star. She is no stranger to politics, as the former girlfriend of San Francisco Mayor Willie Brown and one of President Obama’s top surrogates in California. Harris recently introduced a package of legislative bills she calls the Homeowners Bill of Rights which, according to her office, is an attempt to remedy deceptive housing practices.
Who could object to a “Homeowners Bill of Rights?” Everyone deserves to have rights and privileges and other stuff guaranteed by our government. Not even Republicans could vote against homeowners having rights. Well, with due respect to the Attorney General, whenever I read about our elected leaders creating legislation promoting more rights to a certain category of people it usually means more regulations or cost on another group of people. The process is the redistribution of rights.
Homeowners don’t need more rights. They need a stable housing market that is not continually subjected to the knee jerk reaction of lawmakers and regulators tinkering with the housing market. Over the last three years Congress, federal regulators and our own state legislators have adopted quite enough homeowners rights that ended up costing taxpayers, borrowers and homeowners billions. All these rights bills are killing real estate deals and penalizing the very homeowners the regulations were supposed to help.
The Appraiser’s Bill of Rights put 50,000 appraisers out of work, raised the cost of an appraisal by 30 percent and all but eliminated the appeal process for “low ball” appraisals.
The “Dodd-Frank Wall Street Reform and Consumer Protection Act” erased 200,000 employees from the financial services business, eliminate thousands of self-employed from qualifying for a mortgage and eliminated hundreds of institutional private investors from investing in mortgages.
What is so imperative as to require more regulatory changes now, when the housing industry is still reeling from the effects of changes made a year ago? Let’s look at a few of Harris’s emergency proposals:
One item in the Homeowners Bill of Rights reduces the homeowner’s rights to evict a tenant delinquent on their rent. The new regulations would require purchaser of foreclosed homes to give occupying tenants at least 90 days notice before starting an eviction notice. Tenants already have a number of rights, including court adjudication to delay their eviction after a foreclosure. Many tenants will simply not pay their rent, knowing that their home has been foreclosed upon. Delaying the eviction to a non-paying tenant increases the cost to the lender and, ultimately, to the taxpayer. Foreclosed properties need to be listed for sale as quickly as possible. If the tenant isn’t paying rent let the new owner evict them like they would for any other property.
Imposing a $5,000 a day fine against owners of blighted foreclosed properties is another homeowners rights issue. There are already a number of existing laws and monetary penalties at the city, county and state level that address neglected foreclosed homes. Another law is redundant. Do we really want a Blighted Property Enforcement Division at the state’s Attorney General Office?
What’s “dual tracking” and why is it targeted for elimination?
After Molly was 6 months delinquent on her house payments the lender began the foreclosures process utilizing a third-party processing company. In response Molly contacted her lender’s loan modification department. Over the next few months Molly supplied the lender with her financial information in anticipation of a loan modification. Unfortunately, based upon the federal guidelines, the lender rejected Molly’s loan modification. About the same time the lender’s foreclosure processing company completed the foreclosure and Molly lost her house. Another “right” in the Homeowners Bill of Rights prevents lenders from foreclosing and negotiating a loan modification at the same time. If passed, the result will likely be fewer loan modifications and more lengthy delays when foreclosing.
Many delinquent borrowers only apply for a loan modification when faced with a foreclosure. Their objective is to remain in the property as long as possible without making a single payment. Lawmakers continue to pass laws that have the effect of postponing foreclosure against delinquent borrowers. The foreclosure process has become so convoluted that the average time required to complete a foreclosure is nearly a year.
Another silly “rights law” would make it illegal for a delinquent borrower to talk to more than one party at the bank about their delinquent mortgage. Getting the bureaucratic run around from a lender is frustrating, time-consuming and irritating but do we need a law requiring a lender to provide a “single point of contact” for a borrower who is in breach of their legal mortgage obligation?
The Homeowners Rights Bill is a disguised attempt to dictate how lenders conduct their business. The banks are not without fault. There have been abuses and mistakes but dictating the day-to-day operating practices of privately owned financial institutions will eventually cost homeowners and borrowers by subjecting lenders to increased litigation from disgruntled delinquent borrowers.
According to Rodney K. Brown, president of the California Bankers Association, “Our industry cannot support legislation that promotes meritless litigation in an environment where our court system is already overburdened and that will ultimately have no impact on the underlying financial condition of the borrower who cannot afford to stay in their home.”
Ken Calhoon is a real estate broker in El Dorado County. He can be reached through his Website at kencalhoon.com.