SACRAMENTO, Calif. (Legal Newsline) -- An idea that began in California as a grassroots appeal from beleaguered working-class homeowners has spurred national loan modification legislation and a new state foreclosure moratorium bill signed into law by Gov. Arnold Schwarzenegger.

One of the architects of the California Foreclosure Prevention Act, Democratic state Assemblyman Ted Lieu, D-Torrance, is also joining forces with California groups pushing for foreclosure modification at both the state and national level.

Lieu, who is running for attorney general in 2010, has said foreclosure relief and banker accountability will be primary aspects of his campaign platform.

"I am biased, I do believe this is a landmark bill," Lieu said in an interview with Legal Newsline. "There was no other bill like this in the nation. It actually compels loan modification, which is what we need to stabilize home prices and keep foreclosures from happening. Until you stabilize home prices any economic recovery is an illusion."

But opponents and supporters alike agree a comprehensive solution to the nation's housing crisis, of which California is Ground Zero, remains an elusive goal.

No sooner did Schwarzenegger sign the foreclosure act did critics attack the law for having too many loopholes.

Such is the nature of this complex financial problem, says Robert Gnaizda, general counsel of the Greenlining Institute, an activist group based in Berkeley, Calif., that has pushed the foreclosure freeze movement from its roots in San Diego all the way to Washington.

"The criticism of the legislation is legitimate, but perplexing," Gnaizda told LNL. "Sure there are loopholes because there is only so much the state can do when the federal government has refused to do what it should have done months ago, namely institute a national foreclosure moratorium."

Gnaizda said the role of investors who hold many of the mortgage securities from banks that own the mortgages will continue to slow progress toward a lasting and meaningful solution.

State Sen. Ellen Corbett, D- San Leandro, agreed that federal banking regulations limited the bill. Corbett's Senate version was identical to Lieu's House version, both of which were signed by the governor.

"I would have liked to have written a much stronger bill," she said.

But Gnaizda said the bill was the best that could gain passage at the present time.

"Ted Lieu is skilled at crafting legislation that will actually pass," Gnaizda said. "By just getting Schwarzenegger to sign this he has accomplished something remarkable."

Greenlining Institute will meet with national economic leaders in March, a trip Lieu said he'll join so he can present his work on foreclosure relief to the Obama administration and members of Congress.

"Ted isn't leaving it to just the legislation, he's offering leadership." Gnaizda said. "That's what a great leader does, more than legislation."

The Obama administration has come under criticism of its own for the president's plan to spend $75 billion to assist up to 9 million homeowners. Housing Secretary Shaun Donovan defended the plan on Sunday, saying it would aid "responsible" borrowers, not deadbeats or speculators.

But critics said some will get help while others won't and there was no way to protect from the wrong people being assisted.

Donovan told CNN that "flippers, investor-owners or scammers" won't be eligible for Obama's plan.

Reports in California offered another potential problem, namely that as few as 10 percent would qualify for the plan, Gnaizda said. But the Obama administration said scrutiny is needed to ensure the right people get relief.

"We're going to check everybody's income when they come into this program. We're going to make sure that people are paying their bills. And more than anything, we're targeting the folks who are playing be the rules," Donovan said.

The administration's proposal builds on the framework of other programs, notably tying payments to a percentage of income as advocated by Federal Deposit Insurance Commission Chairwoman Sheila Bair.

But the Greenlining Institute would like to see a greater effort in the plan to assist low-to-moderate income level homeowners.

"The foreclosure proposals by the president were, on the surface, excellent," Gnaizda said. "But as we've dug into the details, problems have risen. That's the nature of this complex problem."

Gnaizda said he hopes to use the high-profile meetings in Washington with the likes of FDIC Chairwoman Sheila Bair, Secretary of the Treasury Timothy Geithner and Chairman of the House Financial Services Committee Rep. Barney Frank, D- Mass., to advocate a national six-month foreclosure moratorium.

He also wants to urge President Barack Obama to use his leadership skills to negotiate with the chief executives of the nation's banks to begin to solve their problems cooperatively.

"We are going to talk about how the Obama plan can be strengthened and still secure some support form the banking industry," Gnaizda said. "The president has to call the CEOS in, personally, much like he did with Congress (on Monday). He should call them in privately and tell them they are putting at risk the future of the banking industry. It is up to them to propose matters that government can not mandate."

Gnaizda said a similar effort by JP Morgan in 1907 saved the banking industry then.

"It was not Teddy Roosevelt who brought the bankers together, it was JP Morgan," Gnaizda said. "He told them what he was going to do, and what he expected the rest of the them to do as well. That's how he saved the industry and some say the country at that time. That's how President Obama can save it again this time."

Still solutions will be hard to come by, Gnaizda admitted.

"There is no absolute answer," he said, which explains why critics on both sides will have plenty of fuel for their fire. Still he acknowledged tremendous satisfaction with how far the foreclosure freeze movement has come since it first began with a small protest against Countrywide's predatory lending practices in San Diego in 2007.

"We've come a long way and we are a long way from finished," he said, "but at least we now have a president who understands the matter, and has more non-legislative skills of any president since Franklin Roosevelt to get things I done."

Lieu said he's looking forward to meeting with the Obama administration, so he can push for a national foreclosure plan, and to advocate for his home state.

"I'd like them to recognize that California is unique," Lieu said. "We account for one-third of all foreclosure filings. The scale is unbelievable."

Lieu said foreclosures is the most inefficient of solutions, with investors losing a large percentage of the money, families being kicked out of their homes while the price of homes drop for those still in the declining neighborhoods.

"If you can mitigate that, it's good policy," he said.