This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

California Is Playing With Mortgage Fire

NEW YORK ( TheStreet) -- New rules by the California State Legislature and municipalities in San Bernardino County could greatly increase the cost of mortgage loans over the long term for the Golden State.

Two new mortgage servicing bills passed by California lawmakers and a possible radical use of eminent domain to force loan modifications signal a painful new round of challenges for mortgage lenders, loan servicers and investors.

California governor Jerry Brown is expected soon to sign into law two bills passed on Monday by California's Senate and Assembly, which will make permanent key protection rules for mortgage loan borrowers that were set to expire after three years, under the $25 billion settlement between federal regulators, 49 states' attorneys general, and the largest loan servicers -- including Bank of America (BAC - Get Report), JPMorgan Chase (JPM - Get Report), Wells Fargo (WFC - Get Report), Citigroup (C - Get Report), and Ally Financial.
California Governor Edmund G. Brown, Jr.

The two bills will permanently require most lenders or loan servicers "to establish a single point of contact and provide the borrower with one or more direct means of communication with the single point of contact," while also prohibit "dual tracking," which is the practice of continuing to pursue foreclosure while simultaneously negotiating new terms with a residential loan borrower.

While Bank of America and JPMorgan Chase declined to comment on the new California rules, Vickee Adams -- the Vice President for external communications for Wells Fargo Home Mortgage -- says that the lender has been complying with both rules for some time.

Adams says that Wells Fargo's "1:1 Model" was initiated in June 2010 "to assign one point of contact within the organization to handle their loan all the way through modification and resolution to avoid foreclosure," adding that "we are almost 3-4% lower in our foreclosure rates than our competitors so we believe our modification order has been very successful."

The single point of contact for borrowers facing foreclosure became the industry standard for the largest mortgage servicers in April 2011, when the Office of the Comptroller of the Currency, ordered eight national servicers -- including subsidiaries of the "big four" U.S. banks listed above, as well as subsidiaries of HSBC (HBC), MetLife (MET), PNC Financial Services Group (PNC) and U.S. Bancorp (USB) -- to cure various servicing deficiencies. The April 2011 OCC order also prohibits servicers from continuing foreclosure proceedings "once a mortgage has been approved for modification."
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $17.48 0.23%
C $54.21 0.24%
JPM $67.17 0.46%
WFC $55.39 0.31%
AAPL $117.81 -0.19%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs