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Risk of foreclosure looms over 700,000 Californians

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Report finds nearly 100,000 Bay Area homeowners delinquent on mortgages

California’s housing crisis isn't over, with 11 percent of borrowers in the state at risk of foreclosure, according to a new report released this week by the nonprofit Center for Responsible Lending, a Washington-based think tank.

The report found nearly 700,000 California homeowners were at least 30 days delinquent on their mortgage payments. That number includes nearly 100,000 Bay Area homeowners, about half who live in the East Bay. In Los Angeles County, more than 180,000 borrowers are delinquent.

In an interview, Paul Leonard, the center's California director, said his organization timed the report's release to coincide with last-minute lobbying efforts aimed at legislation that Attorney General Kamala Harris calls the "Homeowners Bill of Rights." Harris, who successfully negotiated $18 billion in relief to California homeowners as part of a settlement with banks charged with mortgage fraud, has pushed hard for the legislation, which she says is designed to protect Californians at risk of losing their home.

“There are those who say just rip off the Band-Aid because the economy is starting to get better, but there is a big number of households that are still at risk,” said Leonard.

On Wednesday morning, a special legislative committee approved two key pieces of the legislation: one that would increase penalties on banks that fraudulently foreclose on homeowners and another that would require that lenders provide a single point of contact to individual consumers. Consumer groups have pushed hard to ban the current practice of "dual tract" foreclosures, which allows one part of a bank to renegotiate the terms of a delinquent loan even as another part of the same bank forecloses on the property.

The bills now go to floor of the full state Assembly and Senate, where votes are expected early next week.

The banking industry is stepping up its months-long effort to defeat the legislation. On Monday, the California Bankers Association, the California Chamber of Commerce and six other business groups sent a letter to members of the committee, arguing the bills “reflect an overly-complicated approach” to banking and “will encourage frivolous litigation.” 

The banks have spent heavily lobbying against Harris' legislation. In the first three months of this year alone, the California Bankers Association racked up $214,000 in lobbying expenses, while the California Mortgage Bankers Association spent $33,000. Bank of America, Wells Fargo and JPMorgan Chase spent a combined $150,000.

Those expenditures essentially mirror the banks' lobbying activity last year, when a similar package of legislation failed to get out of its first legislative committee.

But Lynda Gledhill, a spokeswoman for Harris, said she remains optimistic that things will go differently this year and that the bills will eventually become laws.

“This is very significant,” she said. “The goal here is to help people who need just a little bit of help who are trying to find someone to give them answers.”

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