Wednesday, May 16, 2012

Federal Housing Finance Agency opposes California foreclosure bills

SACRAMENTO -- A pair of controversial bills in the California Legislature that would give homeowners more rights to fight foreclosures is being opposed by the nation's principal home loan regulator.

The Federal Housing Finance Agency on Tuesday expressed that criticism in a letter to a six-person legislative conference committee. The first bill would prevent borrowers from being foreclosed on when they have applied for a loan modification. The second proposal would guarantee that borrowers have a single point of contact when dealing with a mortgage service company.

The Housing Finance Agency doesn't like the measures, saying they could unduly delay the foreclosure process and add to overall lending costs. Such delays could harm the recovery of a still fragile housing market, the agency said. The agency regulates Fannie Mae and Freddie Mac, government entities that hold about three-fifths of California mortgages.

The federal regulator also criticized a provision in the bills -- dubbed the Homeowner Bill of Rights -- that would allow borrowers to sue banks, saying it would slow the handling of legitimate foreclosure procedures.

The chief backer of the bill of rights, California Atty. Gen. Kamala D. Harris, was surprised by the federal position.

"This legislation is being carefully crafted to provide these homeowner protections while discouraging frivolous litigation and its associated costs," Shum Preston, a spokesman for Harris, said in a statement. Each avoided foreclosure will save families, local governments and neighborhoods approximately $40,000, he said.

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