California Assembly Speaker Proposes State-Appointed Monitors to Ensure Homeowners and Lenders Modify Loans

On September 9th, just prior to the end of the current California Legislative Session, California Assembly Speaker Karen Bass (D-Los Angeles) introduced AB 1588, the Monitored Mortgage Workout (MMV) Program, which, according to the Speaker “would provide for state-appointed monitors to ensure homeowners have a chance to work out with their lenders a plan to prevent home foreclosure.”

AB 1588 is jointly authored by Bass, Assembly member Ted Lieu and Assembly member Pedro Nava, Chair of the Assembly Committee on Banking and Finance.

This bill is surely to be a major matter legislatively that UTA will contend with in 2010.

According to Speaker Bass’ Press Release, the Monitored Mortgage Workout Program would provide for the following:

• Any borrower who receives a Notice of Default (NOD) is eligible to participate in a MMW Program administered by the California Housing Finance Authority (CHFA).
  
• The borrower must communicate to the CHFA his or her intention to participate in the plan within 30 days of the NOD.
  
• If a borrower elects to participate, a Monitor is appointed to oversee the loan modification process.  The Monitor shall have certain minimum enumerated qualifications.
  
• Once the MMW Program has been initiated, no further steps may be taken to foreclose until the MMW Program has been completed.
  
• The Monitor shall assist the parties in assessing the affordability of any loan modification and analyzing the net present value economic effect on the lender of modification (versus foreclosure). 
  
• If the parties are unable to modify the loan bilaterally, the Monitor shall prepare a reasonable loan modification proposal that satisfies the guidelines in the President’s Plan, if such a proposal is feasible.
  
• If the lender rejects the proposal or has acted in bad faith during negotiations as determined by the Monitor, the borrower may seek to enforce the Monitor’s proposed loan modification in an expedited court action. 
  
• If the borrower rejects the proposal or has acted in bad faith as determined by the Monitor, the foreclosure process will resume pursuant to existing state law.

Read Speaker Bass’ Press Release on the introduction of AB 1588

Read a copy of AB 1588, as introduced.