CA Assembly Democrats Press Gov for Mortgage Reform

By: Judy Lin AP
By: Judy Lin AP

SACRAMENTO (AP) - Assembly Democratic leaders sent a letter Friday to Gov. Arnold Schwarzenegger, urging him to address California's high rate of foreclosures as part of an anticipated special legislative session on the budget.

"Four billion dollars of last year's budget deficit is attributable to the foreclosure crisis and billions more will be lost this year if nothing is done to address this crisis," according to the letter signed by three Democrats, including Speaker Karen Bass of Los Angeles. "The special session would be an appropriate time to address California's mortgage system."

Schwarzenegger is expected to meet with legislative leaders Monday to discuss how to deal with an unexpected $3 billion drop in revenues this year that will likely continue to fall. He has not set a date for the special session.

California has been particularly hard hit by the mortgage crisis, with thousands of foreclosures and median home prices falling sharply. According to foreclosure listing service RealtyTrac Inc., California alone makes up more than a quarter of all U.S. foreclosure filings.

The governor has said in recent days that state government should try to help struggling homeowners avoid foreclosure and put billions of dollars in voter-approved infrastructure bonds to use to help resuscitate the economy.

"We're going to address the current-year deficit and also be putting together an economic stimulus package" that includes helping people stay in their homes, gubernatorial spokesman Aaron McLear said Friday.

Schwarzenegger has previously said the federal government should
enact a second economic stimulus package to help homeowners stay
out of foreclosure.

Assemblyman Ted Lieu, D-Torrance, who signed Friday's letter as chairman of the Assembly Rules Committee, said the governor hasn't
done enough to change predatory lending practices and provide relief for homeowners struggling to stay out of foreclosure.

Last month, Schwarzenegger vetoed one of Lieu's bills that would have banned some of the lending practices advocates say contributed
to California's troubled housing market.

Among other things, the legislation would have prohibited so-called negative amortization loans, in which homeowners pay less than the interest on their loan and can end up owing more than their homes are worth.

The governor said he vetoed the bill because it would have applied only to state-regulated lenders, not federally regulated ones. He said that could have led to unequal protections for consumers. He also said it could have prompted unfair lawsuits against lenders.

It was one of several bills related to the housing crisis sent to the governor's desk, some of which he signed.

Assembly Minority Leader Mike Villines, R-Clovis, said Republicans are open to a discussion about mortgage protection but would like to craft an economic incentive package that will encourage businesses to grow.

Villines said tax credits for businesses and sales tax holidays for consumers should be tossed in the mix especially as lawmakers begin to receive dire news about a growing deficit. Citing figures being given to lawmakers, he said sales tax collection estimates are down by 35 percent for the current fiscal year.

Meanwhile, capital gains tax estimates could fall by as much as 55 percent due to heavy investment losses on Wall Street, Villines said.

"Nobody could have planned a downturn this big," Villines said.

He said reducing the tax burden for businesses would expand commerce and create more jobs that contribute to the state coffer.

Schwarzenegger's finance spokesman, H.D. Palmer, said he could not confirm those revenue estimates because the administration won't release its projections until the new year.

(Copyright 2008 by The Associated Press. All Rights Reserved.)

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