Mortgage Home Laws In California That You Should Know

Loan legislation that took into effect last year and sponsored by Gov. Schwarzenegger that went into effect as of 2010 that will affect the Santa Maria real estate market as well mortgage home loanss, will hopefully increase the level of professionalism in the industry as well as provide more consumer protection.
Especially since the last few years millions have lost their homes and some of those that homeowners that did lose their was because of the actions of less than honorable individuals in the industry.
We all hoped that with the end of this recession or as I see it a Depression, which has caused so many problems with home loans, that there would come a time when some new and much needed legislation would be created to protect the consumer, affected by these bad loans, as well as the consumer looking to get a loan in the future.

Former Gov. Schwarzenegger during his office did sign seven new mortgage laws that are geared towards providing protection for consumers regarding home loans. I will briefly explain which bills these are and what they entail.
The first one is AB 260.

This offers protection to an applicant who is applying for a home loan and keeps them away from riskier, more expensive, higher interest rate loans when they may qualify for a less expensive loan. This bill also bans “negative amortization” loans. If you do not know what negative amortization means, well that is when you make a minimum payment on your loan but its not enough to cover the interest so the interest is then added to the principal of the loan. So the homeowner can actually be making payments and at the same time the balance of the loan can be continue to increase. Although these loans have been around forever they were usually sold to higher more sophisticated borrowers that understood that you should not be making the minimum payment and that these loans were and should be only temporary loans. But the loans were instead sold to everyone that can qualify for them. As well as the minimum payment was sold to the borrower without fully explaining the down side of the loan. The other thing was that these loans paid more to the banks making the loans, so that created a financial incentive for loan officers to steer clients to these type of loans even if they were not in the best interest of the consumer.

The second is SB 36
which makes if mandatory for every loan originator to be licensed. This is unbelievable and hard to understand why it took so long to even become a law. There were individuals in the industry that one day were breaking cement and the next day were doing home loans and handling personal confidential information as well as guiding one of the biggest most personal investment decisions that most families make their entire lives. Not that there is anything wrong with breaking cement but to be able to go from something that is non-related no real training no real idea of what you may be doing other than push a certain type of loan because you can make a certain amount of money. At least now you will have to complete some educational courses and pass an exam and do it every year, which should not only raise the level of professionalism in the industry but insure that the consumer is dealing with someone that knows something about loans and not just dressed up as someone that knows something about loans. So if you are not sure if you are working with a legit person you check their status, they first of all should have their license number on their business card or you can pull them up and verify their status with the NMLS system.

The third is SB 239,
making it a felony if you commit fraud on a loan application. Okay this is not just for the loan officer that did a little fudging so the client can qualify for a loan. This also pertains to those individuals that provided false information so that they can qualify for a home loan as well. Before it may have been a slap of the hand and you should of know better or maybe the bank took someone to court to recoup any loses. Now they can still take you to court but you may also be facing some jail time and now have a record and just some minor misdemeanor but a felony record which can haunt and follow you for the rest of your life.
The fourth is SB 329
making lenders give a thorough explanation to those interested in getting a Reverse Mortgage. This will help protect a lot of seniors even more, although it may make the process a little more encumber some and lengthy due to having to receive even more literature than they were already getting as well as having to attend or call in a counseling session before they can proceed with the loan. The reality is reverse mortgages can be a little confusing especially when presented with all the features that some loans come with, but first and foremost is understanding that you are giving up your right to the equity in your home for the right to continue to live there with no payments, that being said the interest rates will continue to be added to the principle. I you have any questions regarding getting a reverse mortgage do not hesitate to call me. But they still do provide quite a bit of peace of mind to those that need it where other options would not be available to them.

The fifth bill is SB 237
makes it necessary for appraisal firms to completely register to operate as such. This just creates more transparency for the rest of us for this companies or appraisers to clearly state that is what they do.
The sixth is AB 957
gives the option to the buyer of a foreclosed home to choose a local escrow company if they wish. Sometimes buyers are made to use a certain escrow company that might be out of town, making it difficult to close a transaction. It can also be more expensive. This was a true annoyance where a bank can dictate to the person buying the home who they were going to use for escrow, and many times that escrow was from out of town somewhere. This was truly a disservice to the public since that escrow company and those at that location where not really in the business of building long term relationships many times the service was far from bad. I would call multiple times for an answer on an escrow I was working on and more than enough times my calls were met with attitude with who ever it is that I spoke with. So just keep in mind that YOU as the buyer on a foreclosure can choose who you want it can no longer be part of the condition of your purchase contract that you choose who they want.

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