New Mortgage Laws Protect California Home Buyers
Late Sunday night, CA Governor Schwarzenegger signed AB 260 by Assemblyman Ted Lieu (D-Torrance). The measure, which takes effect Jan. 1, tightens restrictions on mortgage brokers so they cannot steer borrowers to riskier, higher-interest loans when they qualify for less-expensive ones.
The new law also bans so-called negative-amortization loans, which offer the option of monthly payments so low that the loan amounts can actually grow over time.
The law also limits prepayment penalties to no more than 2% of the loan balance and allows state regulators to enforce federal lending laws.
The governor vetoed similar legislation last year at the urging of some groups in the mortgage and real estate industries.
The California Assn. of Mortgage Brokers, the California Mortgage Assn. and the California Assn. of Realtors unsuccessfully opposed this year’s version of the bill.
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