The Federal Housing Finance Agency issued a letter to the
California state legislature raising concerns on proposed mortgage
reform bills under the proposed California Homeowner Bill of
Rights. Several portions of the bill are pending before the
California state legislature and at least one has passed the
legislature and is waiting to be signed into law (see May 15, 2012
Alert).
The FHFA raised a number of issues. First, the FHFA stated
that the bill, which imposes civil penalties for
"robosigned" documents, among other things, is
"disconnected from the issues first giving rise to the
practice [of robosigning], goes beyond anything in the National
Mortgage Settlement, and poses significant risks for the housing
market." In particular, whereas the National Mortgage
Settlement did not define "robosigning," the bill
contains "overly broad" definitions of
"robosigning." The FHFA also expressed concern that
the bill, which incorporates protections granted to tenants under
the federal Protecting Tenants in Foreclosure Act into California
law, could "encourage fraud and abuse of the foreclosure
process." In particular, the FHFA noted that unlike the
federal PFTA, the proposed California version does not contain a
bona fide lease requirement; thus allowing property owners
to "game the system." Click
here for the letter.
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