It prohibited the kind of mortgage that allowed homeowners to pay less than the interest on their home loan so the amount they owed grew, instead of fell, every month. The bill was the cornerstone of California lawmakers’ efforts to address the risky mortgage practices that led so many Californians to lose their homes.
According to our friends at the California Reinvestment Coalition, the bill would have also protected consumers by:
- Holding brokers to a fiduciary duty to serve the economic interests of borrowers (instead of placing their own profits first).
- Prohibiting brokers from steering borrowers into costlier loans than they qualify for.
- And, capping the amount of prepayment penalties that could be charged to borrowers seeking to get out of bad loans.
Who could be against a plan that would have helped prevent a future foreclosure crisis and protected consumers from unconscionable practices? The banking industry and mortgage brokers who made big bucks off those deals until the market went sour. They don’t want to lose their chance to do it all over again once taxpayers bail them out and things go back to normal.
Did that opposition turn the governor against protecting California homeowners? The $15.2 million in campaign contributions he collected from the financial services industry over the years couldn’t have hurt.