Calif. Mortgage Overhaul May Raise Preemption Challenges

Law360 -- As the remaining homeowner protection measures proceed through the California Legislature, experts say the legislation that would make the state the first in the U.S. to put most of the national mortgage settlement with several banks into law is likely to face challenges in court claiming it is preempted by federal law.

Adding more regulations is also likely to make the foreclosure process slower and more cumbersome, which eventually could drive up costs for borrowers in California, according to Norm Miller, a professor at the University of San Diego's Burnham-Moores Center for Real Estate.

If the U.S. ever decides to move toward a risk-based pricing system where borrowers who are more likely to default would have to pay higher mortgage rates, states like California that delay foreclosure and make the process more costly will end up seeing higher mortgage rates because the homeowner protections would need to be priced into the cost of lending, he said. (Full Story)

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