This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

California Is Playing With Mortgage Fire

Stocks in this article: BAC C JPM WFC

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), JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), 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

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs