Friday, September 02, 2011

Only in California: A Ballot Proposal to Prohibit Foreclosures and Shut Down the Mortgage Industry

Here is some of the language below from a ballot proposal in California called the "Foreclosure Modification Act," scheduled to go on the November 2012 ballot if supporters get the required minimum 800,000 voter signatures.  It was approved in late July by the California attorney general for signature collection.
  • Makes home ownership a fundamental right for every Californian.
  • Prohibits lenders from foreclosing on any California citizen's personal home.
  • Requires lenders to assist California borrowers not making payments on home loans due to financial hardship or illness.
  • Requires lenders to reduce mortgage principal to reflect any drop in local property value of more than 10 percent, and to reschedule payments, reduce interest rates, and/or refinance without new credit review.
  • Requires lenders to refinance home loans at a minimum cost within 45 days of request if loan has been maintained for three years.
  • Provides back property tax assistance to homeowners from local governments (counties, cities, townships, etc.)
Here's a news report in Business Law Daily about this citizen's initiative that would basically eliminate all new private mortgages in California.  

HT: Morganovich

38 Comments:

At 9/02/2011 2:57 PM, Blogger Highgamma said...

And when all of the mortgage lenders close up shop, the government will have to step in and provide the loans, which, of course, will never be paid back. And when all of the taxpayers leave the state, the last one is allowed to shut off the lights.

 
At 9/02/2011 3:01 PM, Blogger Mike said...

I actually hope it passes. I would hate to see people hurt by not getting a home when they need/want it, but watching every lender pull their business out of California might be an eye-opener for the left-leaning folks who aren't nuts. This is the kind of craziness that may cause a fissure between the left and the leftards.

Might be a boon for real estate in western Arizona, Nevada and southern Oregon.

 
At 9/02/2011 3:07 PM, Blogger Junkyard_hawg1985 said...

Shouldn't the headline read, California initiave to eliminate mortgage industry in California. Only cash buyers can purchase homes.

 
At 9/02/2011 3:09 PM, Blogger Mark J. Perry said...

Good idea, I changed the headline.

 
At 9/02/2011 3:25 PM, Blogger Che is dead said...

Requires lenders to reduce mortgage principal to reflect any drop in local property value of more than 10 percent ...


Those reductions are going to come hard and fast since there will be absolutely no way for a buyer to finance the purchase of a home. What effect do you think this will have on the federal governments massive mortgage portfolio?

The machinations of the left would be comical if the real world consequences weren't so terrifying.

 
At 9/02/2011 3:27 PM, Blogger AIG said...

They should pass it. We need an incubator of goofy left ideas to show what a catastrophe they will be.

Oh wait, we have Detroit.

 
At 9/02/2011 3:28 PM, Blogger MaggotAtBroad&Wall said...

This illustrates perfectly why states need to amend their constitutions to make referendums illegal. Referendums are pure democracy. Plato warned 2500 years ago that pure democracy is nothing more than mob rule, and that once "the mob" figures out how to vote themselves the treasury, they implode.

The threshold to get this on the ballot looks like a minimal burden. With the California population approximately 37 million, 800,000 signatures is only slightly more than 2% of the population. Granted, only a fraction of the 37 million are registered voters, but it still seems like an incredibly easy hurdle to get on the ballot.

Scary stuff.

 
At 9/02/2011 3:29 PM, Blogger morganovich said...

mike-

the astounding knock on effect if it passes would probably destroy the whole nation's banking system.

consider:

without mortgages, real estate prices would fall 80-90%.

under the new law, banks would have to write down the principal balances on those loans. (assuming anyone ever bothered to make another payment)

this would be an 80-90% write down of the entire state of califoria, which is around 15% of the whole country.

there is pretty much no plausible scenario under which banks could absorb that.

these people would be hilarious in their delusional entitlement is they weren't able to vote.

 
At 9/02/2011 3:30 PM, Blogger aorod said...

Obviously, this is a political ploy. Promise them anything...

 
At 9/02/2011 3:39 PM, Blogger Methinks said...

Why only in California?

This is not a new idea. Foreclosures were prohibited during the Great Depression as well. With predictably poor outcomes for new home buyers.

A paper from the St. Louis Fed on the subject:
http://tinyurl.com/3txyeaq

 
At 9/02/2011 3:42 PM, Blogger Mike said...

Morgnovich,

Maybe it's just my silly optimism, but I don't think it would ever be enacted if it passed and it may still have some of my desired effect on the passive electorate.

 
At 9/02/2011 3:43 PM, Blogger Methinks said...

Incidentally, I predict there will be a significant increase in the number of people who are suddenly "ill" or facing "financial hardship". Allergies to electricity and employment will skyrocket.

 
At 9/02/2011 3:53 PM, Blogger МаксимК said...

Do I understand correctly, that America is becoming a socialist society (like the USSR)?

 
At 9/02/2011 4:05 PM, Blogger Mike said...

Mak,
No. Nothing to worry about... I think it's more like Venezuela :)

 
At 9/02/2011 4:12 PM, Blogger Methinks said...

по моему, да. Так Кажется.

 
At 9/02/2011 4:52 PM, Blogger Ron H. said...

Actually, this isn't as bad as it looks. Reaffirming everyone's natural right to life, liberty, and property seems like a good thing. :)

While it's obviously a disaster for lenders and prospective buyers, it appears to give existing homeowners free houses. Not only would mortgages become basically noncollectable, but if I understand it correctly, so would property taxes, as no government agency could infringe a homeowners right to their property. Most zoning laws and CC&Rs would be out the window also.

As banks aren't allowed to fail these days, I assume taxpayers will willingly jump up to prevent any problems for them.

So, what's the problem?

 
At 9/02/2011 4:56 PM, Blogger Ron H. said...

"Requires lenders to reduce mortgage principal to reflect any drop in local property value of more than 10 percent "

As a lender, I would have no problem with this if I could also increase mortgage principal to reflect any gains in property value since the loan was initiated.

 
At 9/02/2011 5:02 PM, Blogger Ron H. said...

по моему, да. Так Кажется.

Sadly, many of us agree.

 
At 9/02/2011 5:09 PM, Blogger Ron H. said...

"This illustrates perfectly why states need to amend their constitutions to make referendums illegal. "

Absolutely. That, or quit wasting money electing legislators.

 
At 9/02/2011 5:32 PM, Blogger Methinks said...

Ron H., I knew you speaka mah language, but I didn't know you really speaka mah language :)

 
At 9/02/2011 9:14 PM, Blogger Ron H. said...

"Ron H., I knew you speaka mah language, but I didn't know you really speaka mah language :)"

Well, I have to confess, I cheated.

 
At 9/02/2011 11:43 PM, Blogger NormanB said...

What, no clause to give double-special benefits to minorities? Where have we gone wrong in this 12% unemployment state?

 
At 9/03/2011 2:07 AM, Blogger Ron H. said...

"Ron H., I knew you speaka mah language, but I didn't know you really speaka mah language :)"


Er...I mean:

Ну, я должен признаться, я обманул.

 
At 9/03/2011 1:41 PM, Blogger Andy said...

So basically this just gives everyone with a mortgage a free house?

 
At 9/03/2011 2:31 PM, Blogger morganovich said...

methinks-

я говорю на русском языке также!

russian nanny, lithuanian mother.

i remember a children's story about the гиппопотам.

 
At 9/03/2011 10:36 PM, Blogger julie said...

This is a really bad idea. This punishes those who continue to pay their mortgages and rewards those who do not. I am awarebthat some people were conned into getting a bad lan, however, there is something good about letting go and starting over. It gives people the ability to recognize the mistakes they made and make changes to their past behaviors and do the right thing in the future. If this bill passes we all lose!

 
At 9/04/2011 4:54 AM, Blogger juandos said...

Well now anyone want to take a guess at how much higher California's unemployment numbers will be if this bit of nuttiness becomes the law?

 
At 9/04/2011 8:54 AM, Blogger Hans said...

All excellent comments, indeed...

I suggest that the state capital be closed and the legislative process be moved to a three ring circus..

I agree with AIG, let this proposal be enacted as this is just an Enviro ploy to depopulate the golden state..

 
At 9/04/2011 4:04 PM, Blogger Ron H. said...

"Well now anyone want to take a guess at how much higher California's unemployment numbers will be if this bit of nuttiness becomes the law?"

The aggregate numbers may not change much but the composition of the workforce could change dramatically, as thousands of lawyers are employed by lenders attempting to wring just a few more dollars out of existing mortgages when people stop paying.

 
At 9/04/2011 8:19 PM, Blogger Methinks said...

Morganovich,

with a name like "Morganovich", I had my suspicions :)

Ron H., hardly a lie, more like a little help.

That technology has gotten a lot better, I see.

 
At 9/05/2011 3:12 AM, Blogger Ron H. said...

"Ron H., hardly a lie, more like a little help.

That technology has gotten a lot better, I see.
"

Yes, it has. I don't expect to be fluent anytime soon however, all the Russian I know so far is on this page. :)

I think It's too late for me to learn another language at my age, as my hearing is starting to fail. I would have a lot of trouble with some sounds.

Now I sometines even have trouble communicating with people when they speak English.

Sometimes that can be a blessing as I can just ignore what I don't feel like responding to. If someone makes a stupid comment I'm not inclined to ask that it be repeated. :)

 
At 9/06/2011 12:24 PM, Blogger az_lender said...

I'm a private lender. Just knowing that this ballot initiative is under consideration is sufficient reason for me to reject any new loan requests in CA.

 
At 9/06/2011 12:24 PM, Blogger az_lender said...

I am a private mortgage lender. Just knowing that such a ballot proposition is under consideration is sufficient reason for me to reject any new loan requests in CA.

 
At 9/06/2011 1:55 PM, Blogger JJ said...

How about they add something in there that says if a home value goes up then the lender can add that extra value to the loan. I mean it should go both ways... if home values go down and lenders have to right off, then they should also be able to do the opposite.

 
At 9/06/2011 1:56 PM, Blogger JJ said...

How about they add something in there that says if a home value goes up then the lender can add that extra value to the loan. I mean it should go both ways... if home values go down and lenders have to right off, then they should also be able to do the opposite.

 
At 9/06/2011 4:52 PM, Blogger KK Hubbs said...

This completely undermines the idea that private ownership incentives the owner to take some basic responsibilities. If people have a "right" to a home without truly owning it or taking the steps to earn it, all those incentives disappear. Real owners will be left paying for others to remain in their homes which then reduces the incentives for private ownership further.

 
At 9/06/2011 10:24 PM, Blogger beana said...

Instead of bailing out home owners, take the money and start work projects, so they might be able to pay for that dream home. Why lose more jobs. This will only lead to new taxes, and personally I'm trying to pay for the one I homw I have.

 
At 9/07/2011 1:29 AM, Blogger Ron H. said...

"If people have a "right" to a home without truly owning it or taking the steps to earn it, all those incentives disappear."

I didn't see any assertion that there's a right to a home. I think the statement is that people have a right to purchase and own a home. That part is fine. It only restates the natural right to life, liberty, and property.

Everyone already has this right, just as they have a right to purchase and own a hamburger. There's no guarantee they will be ABLE to buy a home or a hamburger, or that anyone will make one available to them, only that they have that right.

The rest of the initiative is beyond ridiculous.

 

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