The California Association of Realtors plans to renew its fight next year for a mortgage bill that was recently vetoed by Gov. Arnold Schwarzenegger, CA-NAR officials said.
The Orange County Register reported that Gov. Schwarzenegger killed SB 1178, saying he believed the measure "would encourage borrowers to strategically default on loans they have the capacity to repay."
The measure sought to protect homeowners from having to repay the full amount of their loan if the home is sold in a foreclosure sale for less than they owe.
Under current law, a borrower's liability is limited to the sale amount in a foreclosure involving the loan used to buy the home. But borrowers lose that legal protection when they refinance into another loan.
The Realtors group sponsored the proposal, saying that people who refinance their loans should have the same protections they had under their purchase mortgages. The group maintains that the protections are needed even though lenders rarely exercise their right to sue for a loan "deficiency."
Gov. Schwarzenegger said in his veto message that changing the law now would revoke terms of already agreed-upon contracts.
