Schwarzenegger Vetoes Ban on Nonjudicial Foreclosure

SACRAMENTO, CA – Although it had wide bipartisan support, Gov. Arnold Schwarzenegger Thursday vetoed a bill that would have stopped California’s 37,000 homeowner associations from foreclosing on homes for small debts.

The bill, triggered by outrage over the case of a Calaveras County couple whose $285,000 home was auctioned off to recover a $120 debt, would have stripped away a tough debt-collection tool called nonjudicial foreclosure. Unheard of in traditional neighborhoods, it’s used by thousands of private communities in California and elsewhere in the nation to collect overdue homeowner assessments.

Schwarzenegger praised by the bill’s intent, but his veto message called it “overly broad” and something that could cause higher assessments for residents who pay their bills on time.

However, he said he’s asked state agencies to refine the foreclosure practice in California “so all homeowners are treated equitably and foreclosure only occurs after every reasonable alternative is exhausted.”

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