California Senate Passes SB 94 Legislation, Now Up To State Assembly

The California State Senate has passed Senate Bill 94 (“SB 94”), legislation proposed by Sen. Ron S. Calderon (D-Montebello), Chairman of the Banking, Finance & Insurance Committee. The senate passed the bill on May 21, 2009, by a vote of 21 to 14. It is now in the state assembly where it has been read once and “held at desk,” which means that it’s awaiting referral to a committee.

Here’s my take on where it stands and what’s ahead…

Normally, the California State Assembly will assign a proposed bill to the same committees that reviewed the bill in the senate, so I expect to see SB 94 assigned to the Judiciary Committee and then to appropriations before going to a vote by the California Assembly.

The question is really one of timing. It’s no secret that the California legislature has a lot on its mind this summer, what with the state’s budget crisis, so the question is… will SB 94 make it to a vote before the summer recess begins on July 17th? Here’s how it looks to me:

  1. May 29th is the last day for fiscal committees to hear and report bills to the floor, and the last day for fiscal committees to meet before June 8th, so it’s unlikely that anything could happen this week, beyond the bill being assigned to the Judiciary Committee of the Assembly.
  2. No committees may meet between June 1 – June 5, and June 5th is the last day to pass bills originated in the house.
  3. Committee meetings resume on June 8th, but the state’s Budget Bill must be passed by midnight on June 15th, so if things continue as they’ve been going budget-wise, it won’t be surprising if little else happens before then.
  4. July 10th is the last day for policy committees to hear and report bills, so that leaves 18 days for SB 94 to pass through the judiciary committee and appropriations… assuming that the state’s budget passes on time by June 15th, which is at least somewhat unlikely. If, however, the Budget Bill does pass on schedule, then 18 days is probably sufficient time for SB 94 to pass the Assembly’s Judiciary Committee.
  5. IMPORTANT NOTE: California’s state constitution requires that the budget pass by a two thirds majority, and at this point with a state budget deficit projected to hit $21.3 – $42 billion for the budget year beginning July 1, 2009, it’s not going to be an easy task. Deep cuts are going to be required no matter what, and to give you an idea of where things are, the latest proposal by the Governator involves selling state owned assets including the L.A. Coliseum.
  6. July 17th to August 17th is summer recess (again assuming the Budget Bill is resolved) and August 28th, which is a Friday, is the last day for fiscal committees to meet and report bills to the Floor. So that leaves 9 days for SB 94 to pass through appropriations, assuming it has passed through the judiciary committee in June, and that is probably adequate time for that to occur.
  7. No committees may meet for any purpose between August 31st – September 11th, and September 4th, another Friday, is the last day to amend bills on the Floor.
  8. Tuesday, September 7th is Labor Day and September 11th is the last day for any bill to be passed this year, and October 11th, is the last day for the Governor to sign or veto bills passed by the legislature on or before September 11th.
  9. Bills signed into law by the Governor on or before October 11th, take affect on January 1, 2010.

In my view, the problems with SB 94, as written include:

1. It was created to protect consumers from loan modification “scammers” who charge distressed homeowners up front fees and deliver nothing in return, but it was written without the benefit of accurate data on the contribution being made by the legitimate loan modification industry in California. Without knowing how many homeowners the private sector loan modification firms save each month, or the sustainability of the modifications obtained by the private sector, it would not be possible to design a solution in the best interests of homeowners and the state’s economy.

2. The SB 94 bill, as written, is based on a fundamental misconception. As stated in the in bill’s narrative:

“It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender or servicer. You may call your lender directly to ask for a change in your loan terms. Nonprofit housing counseling agencies also offer these and other forms of borrower assistance free of charge.”

While both of these statements are technically true, this language ignores the fact that there are also reputable private sector firms that homeowners may choose to hire to help them negotiate with their banks when seeking a modification of their mortgages. Private sector firms, including those licensed by the state’s Department of Real Estate and/or law firms offering that such services, have helped tens of thousands of California homeowners get their mortgages modified. With the number of foreclosures continuing to increase each month, it would seem clear that the state’s homeowners would not benefit from any legitimate avenue being overlooked or unfairly maligned.

3. Defrauding a homeowner has always been against California law, so in that sense, SB 94 is redundant. When you consider that “scammers” who did in fact defraud consumers in conjunction with the promise of a loan modification, did so in violation of existing law, it would seem that a new law making it illegal to charge an advance fee when offering to assist a homeowner with a loan modification would be unlikely to prevent future scammers from attempting to do the same.

4. Legitimate firms offering to assist troubled homeowners could be regulated and monitored, without requiring these firms to operate at a financial disadvantage by disallowing advance fees. The process of obtaining a loan modification is not similar to other real estate transactions in several key ways:

  1. The process can take six weeks, or six months… and in some cases even longer. The lenders and servicers are not consistent in how loan modifications are handled or on what basis they are granted.
  2. There is no escrow, or objective standard for “satisfaction,” in conjunction with a loan modification transaction, and therefore there is no assurance that a company would receive payment from the homeowner once the mortgage has been modified.

The California Assembly is made up of 80 representatives, 51 are Democrats and 29 are Republicans, and with Democrats generally in favor of SB 94’s passage, it’s important that those in opposition take action and make their views known.

In terms of contacting an elected representative, the most effective contacts are those made by a representative’s actual constituents. In other words, write to your own elected representative and secondarily, to a committee’s chair or vice chair. Sending letters or emails to representatives outside your district will likely not be read or fall on deaf ears, and calling is almost always worthless.

Be sure to address elected representatives of the California Assembly properly, as shown:

The Honorable Jane Doe

California State Assembly

Sacramento, Ca 94249-0001

Dear Assembly Member Doe:

Here are some other tips to follow. Ignore these at your peril:

  1. Be as brief and concise as possible.
  2. Make sure your representative knows you’re a constituent living or doing business in his or her district.
  3. Explain how the proposed SB 94 legislation would affect your business. Don’t attempt to give “expert” opinions. Just explain how the legislation would affect your business, based on your own personal experience and knowledge.
  4. Refer to the bill’s number: It is still “SB 94” even though it is being considered by the State Assembly.
  5. Ask for your representative’s support in opposing the SB 94 proposed legislation as written.
  6. Avoid emotional arguments. If you use figures or statistics, source them or be extremely realistic.
  7. Ask the legislator what his/her position is, don’t assume to know unless you’re certain you do.
  8. Be friendly and respectful. Thank your representative for considering your views.
  9. Write on your personal or business letterhead if possible, and sign your name over your typed signature at the end of your message.
  10. Be sure your exact return address is on the letter – not just the envelope. Envelopes sometimes get thrown away before the letter is answered or considered.
  11. Be reasonable. Don’t ask for the impossible. Don’t threaten. Don’t say, “I’ll never vote for you unless you do such and such.” That will not help your cause… IT WILL MORE THAN LIKELY HARM IT.
  12. Be constructive. SB 94 deals with a problem that we all know does exist, but we believe the bill is taking the wrong approach. Describe what you feel the right approach is.

The list below contains the names and contact information for the members of the California State Assembly, Committee on Judiciary, which is the committee that will be reviewing SB 94 in the Assembly. Remember, if none of these members of the assembly are your representatives, write only to the Chair, The Honorable Mike Feuer, or Vice Chair, The Honorable Van Tran.

Mike Feuer – Chair, Dem-42

Van Tran – Vice Chair, Rep-68

Julia Brownley, Dem-41

Noreen Evans, Dem-7

Dave Jones, Dem-9

Steve Knight, Rep-36

Paul Krekorian, Dem-43

Ted W. Lieu, Dem-53

William W. Monning, Dem-27

Jim Nielsen, Rep-2

The loan modification industry still has a chance to makes it’s voice heard in Sacramento, but time is running out. If you’d like more information about how you can support the Mandelman’s March initiative that is fighting to, at the very least, modify SB 94, please contact me as soon as possible. We are compiling data on the industry’s contribution to the foreclosure crisis in California and need both your participation and support. Your knowledge and information can’t help you if you’re the only one who knows it.

Email me at:… today would be good. Yesterday would have been better.

Stay tuned to Mandelman Matters… updates from other states and from the federal level coming soon… Follow “Mandelman” on Twitter – the fastest way to know when I’ve posted something new.

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