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Calif. lawmaker wants to fine banks for foreclosures

April 19, 2011 12:00:00 AM PDT
One California lawmaker said each foreclosure in the state costs local government and homeowners on average nearly $20,000 for blighted property, public safety, and trash removal.

Now there is pending legislation to fine the banking industry for foreclosures.

A home in Canoga Park has been foreclosed not once but twice. And even though it still looks appealing, neighbors said it's appealing to the wrong crowd.

"There was a whole bunch of people over here and they were writing graffiti on a dumpster down the street," said neighbor Tessie Reyes Dunn. "The police were called."

Problems like that prompted Assembly Member Bob Blumenfield to propose legislation that would fine the banking industry $20,000 for every foreclosure.

"Taxpayers are subsidizing part of the foreclosure process," said Blumenfield at a news conference. "Yet lenders create this foreclosure process by making bad loans. So it makes sense that they should bear part of this burden."

Blumenfield said a foreclosure not only brings down neighboring property values, but because it doesn't bring in property taxes it affects public safety also. A portion of the fines would be used to offset that.

"We're closing every day in Los Angeles 22 fire companies, nine ambulances," said L.A. City Firefighter Pat McOsker. "We are closing three battalion teams. We are closing two hazardous materials units. So we have fewer resources to respond to emergencies."

Even though everyone at the news conference would like to see the bill passed, Blumenfield agrees it is not going to be easy.

"The banking industry doesn't want to pay this," said Blumenfield. "They don't want to pay the cost to the community of foreclosure. So they are going to fight it tooth and nail. It is a very formidable foe."

Roland Weedon of Essex Mortgage in Orange believes the fines will end up costing consumers.

"At the end of the day we need a banking system," said Weedon. "The banking system won't exist if the banks don't make money. So at some point the cost would have to be passed back to the consumer."

The chances of Blumenfield's bill getting through are slim. But homeowners in his district are not giving up.

"This bill is a very reasonable bill," said homeowner Greg Solkovits. "It provides a financial incentive to banks to do the right thing. What the federal government gave them billions of dollars to do to begin with."