(Please welcome Assemblymember Ted Lieu to Calitics.  UPDATE: Ted had to run to the floor for a vote but he will come back at some point to respond to any questions he missed. – promoted by David Dayen)

I want to thank Calitics and the community for this opportunity to interact and discuss some of the most pressing challenges facing us today.  As some of you may be aware, I authored the California Foreclosure Prevention Act, which passed the legislature and was signed into law despite massive Wall Street opposition.  I would be happy to discuss the mortgage and foreclosure crisis and any other issues you have.

UPDATE:  It is 12:25 pm and I need to go to the floor of the Assembly now.  Thank you very much for your great questions.  I really appreciate the public service Calitics provides in disseminating vital, timely, and Democratic information to our residents in the greatest state on earth.

Next Tuesday morning, Asm. Ted Lieu (D-Torrance) will be dropping by to take some of your questions. In addition to being a friend of Calitics, Lieu has been focusing on fighting the housing and banking crisis. You can find his assembly site here to get more information on his legislative agenda.

Obviously, as ground zero for the foreclosure boom, this is a very important issue to California, one where there has been spirited debate.  Asm. Lieu, who is also one of the many candidates for California Attorney General, will be here on Tuesday morning at 11:30 to answer your questions about the housing crisis and anything else you have on your mind.  Feel free to post your questions here or just ask them on Tuesday.  

For some reason, Attorney General has become the most coveted job in California.  I’m counting EIGHT Democratic candidates either announcing or strongly hinting toward announcing for the primary.  There’s Kamala Harris and Ted Lieu and Alberto Torrico and Pedro Nava and Joe Canciamilla and Rocky Delgadillo among the announced.  There’s Chris Kelly, the chief privacy officer for Facebook (the website that keeps trying to invade your privacy), hinting at an announcement.  And now my city councilman Bobby Shriver is talking about getting in.

Bobby Shriver, the nephew of President John F. Kennedy and the brother of California first lady Maria Shriver, is mulling a run for state attorney general next year, according to his political adviser […]

“There’s been a wide variety of people who have come to him and who he has used as a sounding board to talk about the job of attorney general and the role it takes, the profile it has in terms of moving California forward,” said Harvey Englander, a Democratic political strategist who managed both of Shriver’s successful runs for Santa Monica City Council.

Englander, who described himself as “very close” to Shriver, called the role of California’s top cop “a very powerful position” and one that is “closest to fitting his profile.”

I should say that Shriver is not seen as a progressive ally on the city council.  The Santa Monica Democratic Club did not endorse him in his run for re-election, and nor did Santa Monica for Renter’s Rights.  I wouldn’t say he’s been terrible on the council, but he doesn’t have a grassroots base.  He has been quite good throughout his career on environmental issues, and his vote to reject the proposed Toll Road through the Trestles while on the state parks board earned him removal from his brother-in-law, Arnold Schwarzenegger.

In such a crowded field, his name may help with low-information voters.  It will not help, according to other campaigns in the race with winning the overall primary:

As for Shriver, with whom (Torrico campaign consultant Phil) Giarrizzo said he has worked on environmental issues, “he’s a talented, bright, articulate person, but we’ve seen many times, in the sense that ‘he’s a Kennedy,’ that people look to accomplishment, they look to a record,” Giarrizzo said. Primary voters tend to be very discerning, he noted, and “it doesn’t work that you can just pass along a family name; he will have to run on his own merits … a level of experience he’ll have to communicate. I don’t think we look at him as ‘a Kennedy’ – I think we look at him as Bobby Shriver, an activist and city councilman.”

I would look to leadership in assessing these candidates.  You have Ted Lieu traveling to Washington to meet with Administration officials and get them to raise the threshold on homeowners underwater in their homes eligible for help from the Obama housing plan.  You have Alberto Torrico trying to get oil companies to actually pay for the natural resources they take out of our ground.  And of course, there are the key issues that will face the next Attorney General, particularly in ending the prison crisis through responsible leadership instead of insane “tough on crime” policies that fail our state.  I don’t much care for names and profiles as much as I do leadership.

This week, Barack Obama announced the details of his plan to save up to 9 million homeowners facing foreclosure from losing their residences.  The goal is to place a floor on foreclosures and help people whose rates have reset to work out loan modifications with their lenders.  The federal legislation that passed the House which would allow bankruptcy judges to modify the terms of loans, which gives homeowners a powerful stick to force the lenders to pre-empt a cramdown from the judge, will also help this.

Unfortunately, the class of homeowners who would be left behind in this plan are those who are “underwater” on their homes; that is, they owe more on the principal of the home than the current value.  And that’s an accurate depiction of a very large segment of California homeowners.

The Obama administration’s plan to stave off foreclosures could fall flat in California, where nearly one-third of mortgage holders are underwater on their loans — many of them by amounts that would disqualify them for government-sponsored refinancing.

The problem is likely to be especially acute in areas like the Inland Empire, where homes have lost more than 40% of their value in the last year and nearly half the homeowners owe more on their loans than the properties are worth.

“They’re underwater by six figures in many cases,” said Greg McBride, a senior analyst with Bankrate.com. “Many homeowners in Southern California are left to twist in the wind.”

Under the Obama plan, people who are current on their mortgages could obtain new loans with lower rates for as much as 105% of the value of their homes. That means people could borrow $315,000 against a home worth $300,000.

The problem is that in California, many people owe far more than 105% on their homes, McBride said.

The thinking may be that stopping the worst foreclosures from occurring and lowering the overall rate will stop the dramatic slide in home prices and give those who are underwater a chance to make up the difference.  But we may not have that kind of time, as so many are drowning in debt with seemingly no hope to dig out.  In addition, the 10.1% jobless rate here (and rising in February, to be sure) will mean that a substantial number of honeowners will simply be unable to pay no matter what kind of modification can be worked out, and so the wave of foreclosures will continue.

Into this troubling situation has stepped Ted Lieu, the legislature’s point person on the housing crisis.  He is calling on the Obama Administration to do more.

“Many distressed homeowners in California are underwater by more than 5% on their home loan, which makes them ineligible to apply for refinance assistance,” said Lieu, author of a state foreclosure moratorium law that Gov. Arnold Schwarzenegger signed last week.

Lieu said he would meet next week with administration officials to discuss his proposed changes […]

Lieu said that whatever its flaws, the Obama plan addresses a root cause of the nation’s economic woes by trying to help homeowners rather than “following the Bush administration policy of just throwing money at the banks.”

Nonetheless, he said, the refinancing limit should be raised, perhaps to 115%, to help more people obtain cheaper loans.

“Otherwise, you’re just going to end up helping a lot of people outside California,” Lieu said.

It’s just hard to put a single national standard on the plan when the circumstances are wildly different depending on the region.

Let’s also note that Lieu’s own housing legislation will begin to kick in shortly.  This is from a press release:

My legislation, the California Foreclosure Prevention Act, will now compel a lender to modify a loan well before a homeowner should need to seek a solution from a bankruptcy court.  Beginning in May, California will impose a 90 day foreclosure moratorium unless a lender offers a comprehensive loan modification program based, in part, on criteria set forth by the Federal Deposit Insurance Corporation. By adding a strong disincentive if a lender refuses to modify home loans, California’s action not only compliments the President’s plan, but gives him another stick to stabilize the real estate market and this economy.

It’s worth praising those lawmakers who are taking the lead, especially on a problem of this magnitude which is such a major contributor to the overall economic meltdown in California.

If you tune in to the CalChannel right now, you’ll see an Assembly hearing regarding HR 5, Asm. Ammiano’s Resolution opposing Prop 8. After twenty minutes of some heartbreaking stories from LGBT families, it was hard to see it move on to the opponents.  There were stories of children questioning whether their families were real because their wasn’t a marriage involved. There were stories of LGBT children being brutalized.

Apparently the only opponents to marriage equality are from Antioch and Petaluma, as it seems the first half of marriage equality opponents came from those two Bay Area cities. The arguments were the typical, don’t disenfranchise us, there are more of us than there are of you, typical ridiculousness. One of the richest arguments, just littered with irony:

We cannot allow the minority to rule against the people. I’m sorry if it doesn’t go in your favor…I ask that you support the people.

I actually think this speaker, one Florence Cusick, meant to give this speech to the Republican Senate caucus regarding the budget.  It’s amazing the hypocrisy, it just burns. She spoke of the persecution of her Irish ancestors, and the persecution of her minority.

It really is amazing how one minority seeks to push down another once they have moved up the ladder. The repeated invoking of allowing a majority to oppress a minority. They gloat of prevailing, cry of disenfranchisement. And of course, the slippery slope argument leads to pedohilia, thanks to a pastor named Chauncy Gillings of Salinas. Why the Yes on 8 folks can’t fathom the distinction, one of consent.

But in the end, democracy can only go so far. Democracy can only go so far as the tyranny of the majority does not

Asm. Ted Lieu (D-LA County) made quite a powerful speech.

Ten years ago I did not support marriage equality. I am a proud co-author of HR5, and proud to support Sen. Leno’s marriage equality bills. To me the issue is very simple, it’s about love. You never see the words love in the constituion.  And that’s precisely the point. Government ought not to be regulating the most sacred private parts of loving indivisuals. I love my wife, but there is no reason that love takes any precedence over Asm. Ammiano’s love, or Sen. Perez’s love of his life. There is nothing unique about my love that qualifies my wife and I to get a piece of paper that says marriage, that Tom Ammiano can’t get for the love of his life.

No matter where you believe love flows form Jesus CHrist, as I do, or from Allah or from the human condition, you believe that love is the most sacred part of life. … For government to choose winners and losers as to which love qualifies for what, is the ultimate offensive notion of what we are ll about. The issue isn’t about your beliefs, it is about whether you think the government should be regulating in this most sacred area.

My view is that government should not pick winners and losers. We need to treat everybody equally. Government should stay the hell out of regulating this most sacred institution.

The video should be up on the CalChannel’s recent activity page soon.

Friend of Calitics Ted Lieu has shown a lot of leadership during the housing crisis, attempting time and again to hold the mortgage brokers responsible and get sensible legislation passed that protects homeowners.  It’s been his signature issue the past two years.  Now he’s going to run for Attorney General.

Democratic Assemblyman Ted Lieu, D-Torrance, filed paperwork this week to run for attorney general in 2010.

Lieu is the third Democrat to make the move, following San Francisco District Attorney Kamala Harris, who announced she was exploring a run in mid-November, and former Assemblyman Joe Canciamilla, who filed in July.

Harris and Lieu and Canciamilla can answer one question for me that would help me in my decision for 2010.  Do they feel they can keep stonewalling the Federal Prison Receiver, as Jerry Brown has, and refusing to comply with providing prisoners an environment that doesn’t violate their Constitutional rights, or do they feel that the failure in leadership over 30 years of wrong-way sentencing and “tough on crime” nonsense needs to be stopped.  Solving the prison crisis ought to be the foremost issue for the state’s top cop.

The big story today continues to be the Bush/Paulson bailout bill, which is now being debated on Capitol Hill.  In calling my representatives yesterday, Rep. Waxman seemed very wary of giving away $700 billion dollars to the Treasury Dept. without oversight or judicial review.  Sen. Boxer’s statement still buys into the “need for speed” that is accelerating this legislation in an effort to sneak through something very bad, but she does hit the real genesis of the crisis.

In addition, we must get to the root of the housing crisis and work to keep people in their homes through refinancing; if we don’t, housing prices will continue to freefall and we will still be in a mess.

In California, we have more foreclosures than any other state-in August more than 101,000 Californians received foreclosure notices and more than 33,000 lost their homes.

If the American taxpayers come to the rescue in this financial crisis, you have to provide assurances that they aren’t just taking on bad debt and further jeopardizing their future.

The housing crisis is the first mover here.  Lenders and financial industry actors had an extreme need to get people into mortgages, no matter their income or ability to pay, and they sweet-talked them into teaser rates and ARMs with no money down and low opening monthly payments.  The idea was to accumulate as many mortgages as possible to package them into mortgage-backed securities to sell overseas.  It was a bad bet predicated on perpetual growth in the housing market, and when it crashed there was no flight to safety.  

The most important protection for taxpayers comes with protection from the types of lending schemes we saw in the housing market, and that starts not just on Wall Street, but in the states.  Aggressive regulation of the housing market in California will go very far to protect against such a crisis from happening again.  The legislature passed AB1830 to address exactly this issue, and today Asm. Ted Lieu, the author of the bill, writes Governor Schwarzenegger urging him to sign it.

As you have said in advocating for budget reform, “Enough is enough!” Similarly, the past few years have shown the consequences of a system that failed to effectively regulate and reign in the out of control subprime mortgage industry. The laissez-faire policies previously advocated by much of the industry have turned out to be disastrous. As with budget reform, we need effective mortgage reforne. “Enough is enough!”

To much of the industry’s credit, many within the industry and Wall Street recognize that they need better regulation. That is why the following major industry institutions (collectively representing thousands of financial institutions) have all gone neutral on this bill and many of them have contacted your office asking you to sign this bill: The California Bankers Association, California Mortgage Bankers Association, California Independent Bankers, California Credit Union League, and the California Financial Services Association […]

AB 1830 provides consumer protections for subprime loans while maintaining access to credit and homeownership. This carefully crafted bill is the product of dozens and dozens of meetings and discussions with industry and consumer groups over an eight month period. Through our efforts to craft a balanced approach the leading organizations in the financial and banking industry have gone neutral on this bill. Although a minority of groups still oppose, such as the mortgage brokers and realtors, we have taken several of their suggestions and have worked hard to try to accommodate their concerns.

AB1830 would put mortgage brokers themselves on the hook for their predatory practices, imparting to them a fiduciary duty which would subject them to potential civil suits and loss of license were they not to put the economic interest of the borrower first.  It would end the practice of yield spread premiums, which actually financially incentivized brokers to put borrowers into riskier and more costly mortgage options.  It would prohibit steering prime borrowers into subprime loans, a common practice.  It would ban “negative amortization” loans that would cost the borrower more for the loan even after their initial payments.  It would increase enforcements, put caps on prepayment penalties, and go very far to prevent the kinds of abuses that led to this crisis in the credit markets.

It’s essential to the future of your stock portfolio as well as the future of the state’s economic picture to pass AB1830.  The Governor should do so as soon as possible.