Complacency still prevails among the state's political leaders when it comes to the housing mortgage crisis.
The Assembly's signature legislation, Assembly Bill 1830 by Assemblyman Ted Lieu, had been diluted to nothingness. Now it has been revived and strengthened – a little.
It's not as strong as it should be, but it's a start. The renewed AB 1830 has passed out of the Senate Judiciary Committee and will be heard by the Senate Banking and Finance Committee this morning. Let's see no shenanigans, please.
Pass this thing, minimal as it is, and get it to the Senate floor.
The bill does have some important features:
• A Federal Reserve study found that consumers falsely believe that mortgage brokers have a duty to find them the best deal. That belief leads to misplaced borrower trust in the loans they're offered. AB 1830 would create a broker "fiduciary duty": The economic interest of the borrower comes first.
• A major problem in the current marketplace is that brokers steer borrowers to loans that are riskier and more expensive than those for which they would otherwise qualify based on their income and creditworthiness. AB 1830 directly prohibits steering.
• Another problem is lenders allowing high-risk borrowers to take on loans intended for people with high seasonal incomes. These "negative amortization" loans result in low initial payments that increase the outstanding balance of the loan over time. AB 1830 bans these loans for borrowers in the subprime market.
Legislators seem content to settle for little action now, though it surely presages worse troubles ahead. But little action is better than no action in this crisis. Senators should pass AB 1830 today.
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