The Federal Housing Finance Agency issued a letter to the California state legislature raising concerns on proposed mortgage reform bills under the proposed California Homeowner Bill of Rights. Several portions of the bill are pending before the California state legislature and at least one has passed the legislature and is waiting to be signed into law (see May 15, 2012 Alert).
The FHFA raised a number of issues. First, the FHFA stated that the bill, which imposes civil penalties for "robosigned" documents, among other things, is "disconnected from the issues first giving rise to the practice [of robosigning], goes beyond anything in the National Mortgage Settlement, and poses significant risks for the housing market." In particular, whereas the National Mortgage Settlement did not define "robosigning," the bill contains "overly broad" definitions of "robosigning." The FHFA also expressed concern that the bill, which incorporates protections granted to tenants under the federal Protecting Tenants in Foreclosure Act into California law, could "encourage fraud and abuse of the foreclosure process." In particular, the FHFA noted that unlike the federal PFTA, the proposed California version does not contain a bona fide lease requirement; thus allowing property owners to "game the system." Click here for the letter.
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