Governor Schwarzenegger Signs New CA Law Today With Focus to Curb Irresponsible Subprime Lending Practices

New California law with focus to Limit Predatory Lending Practices was signed today, October 12, 2009, by our Governator (Assembly Bill 260 - Lieu).

This new law covers CA state-regulated independent mortgage brokers.

The policy stated and purpose of this law was to restrict California mortgage brokers by requiring them to act in a borrower's best interest. This law would prohibit them from steering borrowers to loans worse than those they qualify for and limits subprime prepayment penalties (fees for paying off or refinancing a loan early).

This new law (AB 260) grants power to state agencies, the Attorney General, and injured borrowers to enforce violations of the law and pursue relief. What this new law could possibly do:

• Limit prepayment penalties and prohibit broker compensation for arranging a higher priced loan with prepayment penalties.
• Confirm by law that mortgage broker owes a fiduciary duty to a borrower and requires mortgage broker to place economic interests of the borrower ahead of his own.
• Make a licensed person who violates any of provisions liable to borrower in amount of borrower's damages, and would authorize court to award court costs and attorney fees to a prevailing plaintiff.
• Prohibit CA licensed mortgage broker from making false, deceptive, or misleading statements or representations in connection with higher-priced mortgage loans.
• Limit mortgage broker from steering borrower to accept a loan at a higher cost than that for which the borrower could qualify.

Other stated policy consideration by the author of this Assembly Bill 260: Some subprime lending has helped millions of people achieve the American Dream. It is irresponsible subprime lending that needs to be eliminated. AB 260, with its strong focus on preventing misconduct by brokers and lenders-seeks to eliminate irresponsible subprime lending, while preserving access to homeownership.

Click here for link to text of this new California lending law. California law with focus to Limit Predatory Lending Practices was signed today, October 12, 2009, by our Governator (Assembly Bill 260 - Lieu).

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Harrison K. Long, Realtor and broker, Explore Group, Coldwell Banker Previews, Irvine, CA. CA DRE 01410855. ExploreProperties@gmail.com.