Gov. Arnold Schwarzenegger signed nine housing bills into law this week. One in particular, Senate Bill (SB) 94, consumer advocacy groups are calling a clear victory for California’s many troubled homeowners facing foreclosure.

The bill, sponsored by Sen. Ron Calderon (D-Montebello) aims to reduce fraud against desperate borrowers looking to save their homes. It bans all foreclosure consultants, including loan modification firms and attorneys who specialize in loan mods, from asking for any fees or compensation before fully completing the services for a loan modification, whether the mod is successful or denied by the servicer.

Because it was labeled an “urgency measure,” the bill is effective immediately. It remains in effect until January 1, 2013. One local paper in Sacramento said the government’s swift action on the issue follows a colossal number of complaints made to the state’s Department of Real Estate by borrowers who said they paid up to $4,000 upfront to firms that abandoned them.

According to the Del Mar-based American Mitigation Law Group, the new law will force many loan modification companies to close their doors, while many others will scramble to come into compliance.

Assembly Bill (AB) 260, by Assemblyman Ted Lieu (D-Torrance), takes effect January 1, 2010, and caps yield spread premiums so mortgage brokers can’t “steer” borrowers into high-risk, high-interest loans. It also outlaws negative-amortization mortgages and limits prepayment penalties to no more than 2 percent of the loan balance.

The governor vetoed similar legislation last year at the urging of several industry trade groups, but Lieu successfully argued this go-around that the measure was now more important than ever to stem the tide of foreclosures in California.

According to Walnut Creek, California’s PMI Mortgage Insurance Co., a third bill – SB 291 – could provide regulatory relief to residential mortgage insurers in the state, as well as support the recovery of housing markets in California and nationwide.

The measure, which takes effect in California January 1, 2010, is similar to legislation enacted by Arizona last month and North Carolina in July 2009. It gives the state’s insurance commissioner added flexibility in assessing the strength of mortgage guaranty insurers, with discretion to permit such companies to continue to transact new business if capital falls below government-prescribed levels. Prior law required mortgage insurers to automatically cease conducting new business if they failed to meet the mandated capital levels.

Other mortgage-related bills signed by Schwarzenegger:

• SB 36, by Calderon, establishes standardized licensing requirements for all residential loan originators.

• SB 237, by Calderon, creates a registration program for appraisal management companies (AMCs).

• SB 239, by Sen. Fran Pavley (D-Agoura Hills), makes it a felony to commit fraud on a mortgage loan application, punishable by up to a year of jail time.

• AB 329, by Assemblyman Mike Feuer (D-Los Angeles), requires lenders to provide seniors with “a clear and informative” written disclosure of the risks and suitability of reverse mortgages.

• AB 957, by Assemblywoman Cathleen Galgiani (D-Livingston), allows buyers of foreclosed homes to choose local escrow officers, rather than being forced to use the company chosen by the seller.

• AB 1160, by Assemblyman Paul Fong (D-Cupertino), requires that mortgage loan documents be translated into the same language used in verbal negotiations.