Friday, September 26, 2008

Maybe We SHOULD Recall Him

The Guvernator struck several blows in defense of his friends, the mortgage brokers, lender servicers and landlords who brought you the mortgage crisis. In a stirring defense of the right of mortgage brokers to behave like the used car salesmen to whom they are kin, the vetoed AB 1830, which would require that mortgage brokers regulated by the state meet certain quite minimal requirements. Schwarzenegger asserted (I will not call his statements "arguments") that requiring those working for entities regulated by the state to meet these requirements would put these organizations at a disadvantage with respect to federally-regulated mortgage dealers. Well, given that 60% of the subprime mortgages issued in California were issued by state-regulated entities, it might be a good start. But Schwarzenegger got even sillier when he stated that allowing the plaintiff who sued a miscreant broker to recover attorney's fees if she prevailed in a lawsuit was an onerous burden. Uh, Gov, lots of legislation allows the prevailing party to recover attorney's fees--it's part of winning. And it's an additional deterrent to making a loan that is in the interest of the broker's commission, but is potentially dangerous to the borrower, a loan which is then sold into the secondary market, packaged in a mortgage-backed security, sold a bunch of places...and then...and then...costs the taxpayers $700 billion.

Alas, the Governor didn't stop there. Perhaps he didn't know how often tenants who demand their rights face harassment from lenders and their realtor representatives, and how important it is to have specific laws detailing exactly what these people cannot do in dealing with tenants in foreclosed properties. But it's much more likely that he saw how much the realtors, mortgage brokers and lenders had contributed to his campaigns, and decided that tenants just weren't all that important.

So he vetoed both AB 1333 and AB 2586, which would have provided clear recourse for tenants facing the harassment of utility cutoff. His assertions in defense of the vetoes ranged from ones that were irrelevant--tenants already have the right to utilities--to the offensive--if someone's gotta lose money, it should be tenants, because it would be too much of an onerous burden to lenders or landlords. You can read his veto messages here and here.

With respect to security deposits, the guy doesn't know the law. Some years ago the rules on security deposits were revised to prevent just this kind of theft of security deposits. The State Legislature, not a known defender of tenants' rights, was convinced to make clear that the entity that owned the building when a tenant moved was required to return the tenant's security deposit. On any transfer of the building, the landlord was required to either transfer the deposit to the new landlord or return the deposit to the tenant. And if the deposit was not returned, the tenant could assume that the deposit had been transferred. And if the new owner hadn't received the deposit, that was not the tenant's problem. So if you read his veto message, you'll note that he doesn't understand the law as written. Yeesh!

(This actually had nothing to do with foreclosures, but the bad habit of landlords failing to return security deposits when buildings had been sold, sometimes several times, during a tenancy, where the landlord died and the probate court failed to transfer the deposit to the new owner etc. The Legislature determined that tenants shouldn't have to figure out where the money went. If you owned the building when the tenant moved, and the deposit hadn't been returned to the tenant, you paid the money.)

And as for tenant harassment, uh, Governor, I don't have a short section on my Tenants and Foreclosure blog for fun, explaining that if tenants are threatened or assaulted, they should call the police. It's because I've had people write to me who have suffered abuse at the hands of the lenders and their agents. Utility cutoffs are only the beginning of their bad behavior. So, should you be so inclined, feel free to call the Governor's office at 916-445-2841 and tell him what you think.

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