Doofus Of The Day #516

Today's award goes to the people behind a proposed ballot initiative in the state of California. I'm struggling for words adequate to express my disbelief - no, my mind-boggled incredulity - at this report in Business Law Daily.

California could ban lender-initiated home foreclosures, under a proposed amendment to the state’s constitution that would make home ownership a fundamental right.

Initiative 11-0014 could appear on the ballot in November 2012, if supporters submit more than 800,000 voter signatures necessary to qualify the measure.

The Foreclosure Modification Act, a proposed citizen’s initiative, would ban mortgagees from foreclosing on owner-occupied dwellings in the Golden State. It would further require banks and other lenders to help mortgage borrowers struggling amid financial hardship or illness.

Additionally, lenders would be required to reduce loan principal amounts to reflect a drop in local property values of at least 10 percent. Payments would be adjusted without a new credit review, the proposal states.

Lending institutions would have 45 days — from a borrower’s requests — to refinance a loan maintained for at least three years, the proposal seeks to mandate.

If enacted, the initiative would state a finding that “foreclosure has become a method of increasing a lending institution, loan servicer, mortgagee, trustee and beneficiary’s bottom line and profits by turning borrowers out of their homes.”

David A. Benson of Sacramento brought the ballot question on behalf of himself and other California homeowners. On June 7, he requested a ballot title and summary from the attorney general’s office. The documents are required for the secretary of state to set filing deadlines for the initiative.

If approved by two-thirds of ballots, Article I of the California Constitution would be amended, in part, to add Section 31, declaring: “It is a fundamental right for every Californian to purchase and own a home and real property. As such no township, city, county, municipality, corporate entity, the Legislature or agents thereof shall infringe on this given right of the State of California to its citizens.”

. . .

The Department of Justice’s analysis of the bill submitted to Bowen found that some of the initiative’s provisions could be unconstitutional and possibly clash with federal statute and regulations for federally chartered banks, which are supervised by the Office of the Comptroller of the Currency (OCC) through Title 12 of the Code of Federal Regulations.

Adjusting loan amounts would cost local governments billions of dollars in lost revenue from property taxes and other assessments, DOJ noted.

Potential state costs are “up to the low billions of dollars annually” because constitutional provisions require the treasury to replace the loss of property tax revenue to cities and counties.

That’s partly because local tax coffers are used to meet education-funding requirements for K-12 public schools and community colleges. Minimum schools’ funding provisions were placed in the California Constitution in 1988, with voter approval of Proposition 98.

There's more at the link.

When I finally figured out that this report was serious, and not some belated April Fool joke, I could only shake my head in appalled disbelief. Have the moonbats behind this monstrosity ever thought about a few basic facts?

• If a lender knows he won't be allowed to foreclose on a defaulting customer, what incentive does he have to make the loan in the first place?
• If a lender must reduce the principal amount of the loan, even though he's already paid out that amount to purchase the property, he's basically guaranteed a loss on the transaction - so why would he undertake the transaction at all?
• If it becomes a constitutional right to 'purchase and own a home', this necessarily implies that failure to grant the necessary loan to buy a home is discriminating against an individual's fundamental rights - which means that normal loan criteria such as credit history, income, ability to pay it off, etc. are all to be trumped by the applicant's 'rights'. What lender with any sanity will continue to offer home loans in such a state?

I bet the shade of Ayn Rand is smiling grimly right now . . .





Peter